1834. By the Convention of 1834, Ecuador was made responsible for 21 per cent. of the original Colombian Debt, or £1,424,579, upon which the arrears of interest amounted to £683,798. 1834-54.-No interest was paid by Ecuador during this period. 1855. In this year an Arrangement was made by which :

(1) The total Debt was fixed at £1,824,000, of which £400,000 was given in exchange for £1,000,000 of the arrears of interest.

(2) The balance of the arrears amounted to £1,482,120. Of this, £400,000 was cancelled, and Land Warrants (subsequently taken over by the Ecuador Land Company, Limited, now holding about 200,000 cuadras in the Pailon and at Atacamas), were issued against £566,120, whilst $860,000 in Peruvian Four and a-half per Cent. Bonds were given in satisfaction of the remaining £516,000. These latter Bonds were paid by Peru to Ecuador in liquidation of a debt contracted prior to 1834 with the old Republic of Colombia of which Ecuador then formed part.

(3) Interest on the New Debt was to be paid at the rate of I per cent. as long as the Customs Receipts at Guayaquil should not exceed $400,000 per annum. Of any excess over this sum the Bondholders were to receive one-fourth until the maximum rate of 6 per cent. was attained.

1868. The Loan went into default in May, 1868.

1888-9.--During this period various unsatisfactory proposals were made for the settlement of the Debt in default, which however led to no result.

1890.-In August, 1890, an Arrangement was drawn up for the conversion of the Bonds of 1855 (£1,824,000, with arrears of interest amounting to £422,560), into a New Consolidated Debt of £750,000 interest to be at the rate of 4 per cent.

for the first five years, commencing 1st January, 1891, 4 per cent. for the second five years, and 5 per cent. thereafter. A Sinking Fund of per cent. for 5 years, and I per cent. afterwards, was to be applied by Drawings at par. The proceeds of an additional 10 per cent. Import Duty were assigned by Congress as security for the service of the Debt; and it was further provided that, in the event of the sum received from this source not being sufficient to meet the half-yearly service, the Government would make good the deficiency from other sources.

This Arrangement was accepted by the Bondholders subject to the Old Bonds being deposited in the hands of Trustees, and cancelled only in the same proportion as the corresponding New Bonds were redeemed,

The Government refused to accept this stipulation.

1891-2.-A Company called the Ecuador National Railway Company, holding the concession for the completion of an important Railway in Ecuador under a Government guarantee, offered to give £15 in fully paid-up Railway Shares in respect of each £100 New Bonds, provided the Bondholders accepted the Arrangement of August, 1890, unconditionally. The Bondholders consented to this proposal, and in November, 1891, ratified the Arrangement of August, 1890, without the reservation above mentioned.

The existing Bonds of 1855 were converted at the rate of £40 New Bonds for each £100 principal of the Old Debt with all Arrear Coupons attached. The collection of the 10 per cent. additional Import Duties was ordered by the `Government to commence from 1st June, 1892, and interest on the New Bonds to run from that date. Certificates of claim for the seventeen months' interest unpaid from 1st January, 1891, to 31st May, 1892, were issued by the Council. The Government refused to provide for the expenses of the Debt service, which have to be borne by the Bondholders.

(The Concession held by the Ecuador National Railway Company has lapsed.)

1894.—In July, 1894, after the payment of the third half-yearly Coupon on the "New Consolidated Debt," Congress passed a Law suspending the payment of interest, and ordering that

the 10 per cent. additional Import Duties should be the only security for the service of the Debt. The maximum rate of interest to be reduced from 5 per cent. to 4 per cent., and a Sinking Fund of 1 per cent. on the nominal amount of the Debt to be a first charge on the funds remitted; the balance only being applicable to interest. Pending the acceptance of this Law the collections of the 10 per cent. surtax were to be placed in one of the Guayaquil Banks at six months' deposit.

The Bondholders, having no effective means of resisting the demands of the Government, resolved to accept the Law with the reservation that they relied on the good faith of the nation that, when Congress re-assembled, provision would be made for the payment of the deficiency of interest.

1895. The Government refused to accept this Resolution, and in February, 1895, the Bondholders accepted the Law unconditionally.

A new Arrangement was drawn up, and on this being signed, the Government handed over to the Bondholders' Agent the Deposit Notes for the proceeds of the 10 per cent. surtax lodged in the Bank from the middle of July, 1894, to the middle of February, 1895.

1896.-In March, 1896, the Government again suspended the service of the Debt pending a new Arrangement with the Bondholders, the proceeds of the 10 per cent. Import Duties being meanwhile ordered to be deposited, as before, in one of the local banks.

The Coupon due 1st May, 1896, was part paid at the rate of per cent.

1897.-A Concession was obtained from the Government in June, 1897, by an American Syndicate, afterwards incorporated as the Guayaquil and Quito Railway Company, for the construction of the Railroad to Quito. In October, 1897, an Arrangement was made between the Bondholders and the Railway Company for the purchase of the External Debt by the latter on the following conditions:

The Bondholders to receive $175 Six per Cent. First Mortgage Bonds of the Railway Company, carrying interest from 1st January, 1898, and a cash bonus of £2. 10s. in exchange for each 100 of External Debt Bonds with interest in

arrear. The Railway Bonds to be redeemable at par on Ist July, 1902. The Railway Company to give by the 1st May, 1898, a London Banker's guarantee, or other adequate security, to the satisfaction of the Committee, for the payment of the principal and interest of the Railway Bonds issued under the Contract. The External Debt Bonds to be held · by the Council as security, and to be returned to the Bondholders in the event of failure on the part of the Railway Company to carry out their Contract. The Railway Bonds to be delivered to the Council by 31st May, 1898, and meantime the Council to issue negotiable Receipts in the place of the Bonds deposited.

1898.-A Supplementary Agreement was made with the Railway Company on 30th April, 1898, as to the guarantee or security above mentioned. Under this Agreement the Railway Company undertook to deposit, during the year 1898, a sum in cash equal to one-half of the nominal amount of the Railway Bonds to be given in exchange for the Bonds of the External Debt, and if the guarantee was not given by 31st December, 1898, the Council were to apply the cash to the purchase at par of one-half of the Railway Bonds. The Railway Bonds to be delivered to the Council by 1st October, 1898.

The Arrangement was not carried into effect as regards the cash payment or delivery of the Railway Bonds (see below).

1898.-On 16th November, 1898, an Arrangement was entered into between the Railway Company and the Government of Ecuador, subject to ratification by Congress, under which the Government agreed to recognise the External Debt at 35 per cent. of its face value, to pay 4 per cent. interest and I per cent. sinking fund on the reduced amount, and to give the Railway Company, as holders of the Bonds of the External Debt, from the funds deposited in the Bank representing the 10 per cent. additional import duties assigned for the payment of the External Debt, the sum of £33,950. 10s. ; said sum being the amount of commission and interest already accrued and paid to the External Bondholders by the Railway Company. The Railway Company to deposit, as a

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guarantee, in Customs Bonds, or in Bonds of the External Debt at the rate of 35 per cent. of their face value, a sum equal to the amount advanced by the Government.

1899. The Railway Company having declared that they were not prepared to find the cash for the redemption of one-half of the Railway Bonds under the Agreement of 30th April, 1898, two further Contracts, dated 6th and 13th March, 1899, dealing principally with the question of security, were made between the Company and the Committee, and approved by a General Meeting of the Bondholders.

Under these Contracts the Railway Company undertook to place in a London Bank the sums to be provided by the Government of Ecuador under the Agreement of 16th November, 1898, for interest and sinking fund in respect of the Bonds of the External Debt, deposited for conversion into Railway Bonds, and held by the Council as collateral security. These payments to be accumulated and invested until sufficient to redeem at par the outstanding Railway Bonds issued in exchange for Bonds of the External Debt. The Railway Company unconditionally guaranteed that the amount to be paid each half-year on this account should not be less than £6,250.

The Railway Company to deliver to the Council for cancellation negotiable Receipts representing Bonds of the External Debt to the nominal amount of £114,000.* The Council to lodge with a London Bank £285,700* nominal of External Bonds, for the purpose of providing the guarantee of $500,000 American gold required by the Government of Ecuador for the due performance of the Contract between the Railway Company and the Government regarding the construction of the Railway.

The Railway Bonds to be delivered at latest by 20th September, 1899.+

1900.-A further supplementary agreement, dated 12th January, 1900, was made between the Bondholders and the Railway

The Railway Company subsequently delivered to the Council for cancellation an additional £9,300 of negotiable Receipts, and the amount of External Bonds lodged with the Bank was thus increased to £295,000.

† The Bonds were handed to the Council on the 20th December, 1899.