BANCROFT LIBRARY 
 
7 
 
 
 
 THE 
 
 J 
 
 MORGAN-HONDURAS 
 
 LOAN 
 
 SECOND PART 
 
 THE EXTERNAL DEBT OF HONDURAS 
 
 ANS: 
 
 ji Co., Ltd., Printers 
 1912 
 
TH1 
 
 MORGAN-HONDURAS 
 
 LOAN 
 
 SECOND PART 
 
 THE EXTERNAL DEBT OF HONDURAS 
 
 NEW ORLEANS: 
 
 The L. Graham Co., Ltd., Printew 
 
 1912 
 
goaczoft U 
 
 0> 
 
 > INTRODUCTION. 
 
 m After the publication of the history of the Morgan Loan 
 
 2 scheme in November last, I now deem it necessary, in this second 
 
 iij Volume, to give to the public the history of the External Debt of 
 
 ^ 
 
 <f Honduras, basis of the Morgan proposition. 
 
 JUAN E. PAEEDES. 
 
 4* 
 
 5* New Orleans, La., January, 1912. 
 
The Honduras Problem. 
 
Before presenting our case we want to define our position 
 in 'regard to general policies, so that misunderstandings may be 
 avoided. 
 
 In the first place, we want to declare that stability of Govern- 
 ment,, order, peace, and credit, are indispensable for the develop- 
 ment of our country, for the welfare of our people and for the 
 maintenance of friendly relations and commercial intercourse with 
 foreign countries. 
 
 Secondly, we must frankly admit that the trouble with us in 
 the past has been that we have very seldom abided by our written 
 constitution, in so far as liberty of the press, freedom of speech, 
 fair elections and presidential terms are concerned; and that 
 party strife very often wipes out all constitutional barriers, estab- 
 lishing in their stead dictatorships and military rule. 
 
 And furthermore, it is an undeniable fact that the two old 
 political parties of Central America, called the Liberals (radicals), 
 and the Conservatives (clericals), have often waged wars against 
 each other, which have given us a bad name before the civilized 
 world, which hears so much of the Revolutions of Central America. 
 But, in the true sense of the word, we have no international 
 wars : our political contests are kept on party lines, regardless of 
 state boundaries, as we do not consider the Central American 
 States as foreign countries, but as temporarily separated sections 
 of one nation. Indemnization of war, seizure or cession of ter- 
 ritory are never contemplated in our peace treaties, or in the 
 adjustment of our differences. Our partisan struggles are family 
 quarrels, confined only to a change of administration and policies, 
 as we all regard Central America as our common country, as is 
 Spain to an Asturean, Italy to a Sicilian, France to a Gascon. 
 
 The Independence and Union of the Central American States 
 are our common inheritance, and we cherish both of them as a 
 sacred legacy from our ancestors. 
 
 And we believe, and sincerely believe it, that the reunion of 
 the Central American States is the only logical solution of our 
 political and economical problems; that the consolidation of the 
 five States under one administration is the only safe way to assure 
 a stable, orderly and just government, permanent peace, sound 
 
finances, popular education and industrial and commercial 
 development. 
 
 \\'r trust in our I'nioii: our destiny is a United Central America 
 under the \Vliitt' mnl Hlur- ilag. And we expect that, sooner or 
 later, we will he one Xation, as the United Germany and the 
 United Italy of these day-. 
 
 In the meantime, we have to deal severally with the individual 
 States' problems. 
 
 In regard to Honduras, we may say that we have always wel- 
 comed anything that we deem contributory to the development of 
 the country and to the welfare of its people, but never have enter- 
 tained any idea, suggestion or proposition which might endanger 
 our national sovereignty and independence, or prevent the reunion 
 of the Central American States, to which we are solemnly pledged 
 by the first article of our constitution. 
 
 Although wo duly appreciate the importance and influence of 
 the investment of foreign capital in the development of the natural 
 resources of our country, we understand that the mere exploitation 
 of ihrni without any other consideration does not contribute to the 
 material growth and strength 'of the nation. If new people do 
 not come to stay and settle in our land, to live with us and to 
 become naturalized and raise their families, it would mean a mere 
 renunciation of our resources for the benefit of strangers. By 
 turn in;: over the natural resources of our country to foreign hands, 
 leaving not hi MM- f,, r future generations of our own, we would 
 stultify ourselves to the utmost. 
 
 \\V mu-t follow the example set by the United States with 
 their new < -on-crvat ion policy, to preserve from waste the wealth 
 
 \>\ nature for all generations. 
 
 W- "iv not disposed to turn over our natural resource- and 
 the management of mir own a flairs to foreign hands, and thus 
 put Otirselvefi in bondage and in servitude under the so-called bene- 
 volent nr- the American-, the I'.ritish. or any other foreign 
 nation, under the pretext of rehabilitation of our credit and the 
 illusion of prOgre8, peace and pro-parity. We have no faith in 
 
 the benevolence of CM: rernmente, u we do not believe in 
 
 meihing I',,,- nothing. \Ve BBiped this kind 
 
 aevolence, ami we doubt this BOrl of philanthropic proposi- 
 
 ///'/. Morocco 'mi/ Persia an object lessons 
 
 ////V///.s In ill' I II III I III/ . 
 
Foreigners are welcome to our country with their capital, 
 industry, knowledge and experience, provided they come to invest 
 their capital and exert their activities under our laws. They must 
 come to work and trade on competitive lines of production and 
 exchange, as we do not believe in trusts or monopolies, but in free 
 competition and just distribution of wealth. 
 
 We are committed to the "Open Door" policy since 1853, whem 
 we granted the first concession for the building of the Inter- 
 Oceanic Eailway across our territory. We adhered to the same- 
 policies by public treaties with Great Britain, France, and the 
 United States, in 1856 and 1864. We maintain that policy and in- 
 tend to maintain it regardless of intervention, co-ercion or pres- 
 sure from the outside. 
 
 The mere suggestion of guardianship, tutelage or protec- 
 torate over a free people is offensive enough to create- resentment; 
 and we resent it indeed. 
 
 We are surprised by the change of attitude of the State De- 
 partment of the United States in its Central American policj'. 
 
 We recollect the Clayton-Bulwer Treaty of 1850, and all what 
 the United States did to prevent Great Britain from holding 
 territory in our country. We appreciated the good offices of "U- 
 cle Sam" at that time. 
 
 But when we see that under the pretext of helpfulness and 
 co-operation, the United States now is trying to take practical pos- 
 session of our country to be exlpoited by New York financiers and 
 promoters, taking from us not only our natural resources and our 
 own money, but our autonomy, too, converting us into vassals and 
 serfs of this new feudal system of Wall Street, then our love of 
 country and liberty demands of us to stand firm and united against 
 foreign greed. 
 
 In view of our attitude, the United States will have to come to 
 the open as conquerors, if they want to subjugate the Central' 
 American States. Then the United States would prove that the 
 Pan-American Union has been a farce ; they would then show their 
 ambitions, find prove the true meaning of the Monroe Doctrine; 
 and Europe would know that the object of the United States, in 1 
 excluding Europe from this continent, is only to preserve Latin- 
 America for the future prey of their greed. 
 
 We are not refractory to civilization, or blind to the signs- 
 
10 
 
 of the times. We know that we cannot stop progress, and we under- 
 stand the new conditions of the business world. We know that 
 lack of political stability and of transportation facilities are the 
 main objections for the settlement of immigrants and investment 
 of capital in Hondunis. We know that nobody dares to immigrate 
 to a country of daily political disturbances and without good 
 roads. We are well aware of these facts, and, for the very reason, 
 decided long ago to open the country to foreign capital and trade, 
 through the construction of an Inter- Oceanic Railway across our 
 territory. 
 
 We believe that the proper way to develope the natural re- 
 sources of our country and bring capital and population to our 
 poil, is by means of transportation, run by steam or electricity. 
 In tli is point our people are all in accord and feel enthusiastic 
 about it. 
 
 When the Americans, British, and French failed to comply 
 with their contracts to build the Inter-Oceanic Railway, from 1853 
 to 1866, we embarked ourselves in the same scheme authorizing 
 the i-sue of the famous Railway Bonds which serve to-day to the 
 speculators and promoters of the Morgan Loan scheme to' get 
 control of our Inter-Oceanic route and Customs revenues of the 
 country with the support and assistance of the United States 
 Government. 
 
 After the Railway fiasco of 1872, Honduras has made many 
 attempts to settle the Bonds question and to proceed with the 
 T?ailwav construction. The subject has proved to be a knotty 
 problem, and remains as the stumbling block in our path to progress 
 ami prosperity. From its limi! solution depends to certain extent 
 the industrial and commercial development of the country, and 
 the welfare of its inhabitants. 
 
 Our view of the importance and influence of the Inter- 
 l,'ail\\ay on the future reh;ihilitation of Honduras is that 
 it will revolutioni/e our social, political and economical conditions: 
 that it will open ihe country to foreign capital and trade: that 
 the investment of capital and employment of labor in biir enter- 
 will contribute to hrinir peace and stability, which we \n\\ 
 Mat the population ami wealth of the country will increase 
 c'noniioii.-ly hv iniriiiirranon. production and tratlic: that Bchooh, 
 
 libra: iraterworks, electric liirht plant-, factories, street 
 
11 
 
 cars and all the comforts of modern civilization will be the nat- 
 ural effect of new conditions. 
 
 We understand that transportation is the basis of big produc- 
 tion, big markets, good profits, high wages, comfort and educa- 
 tion. We do not see any chance or use for big production without 
 a corresponding market; and for reaching that market, means of 
 transportation are necessary. 
 
 For these reasons we consider transportation as the corner 
 stone of our material progress. 
 
 But our question remains unanswered. 
 
 How to get transportation ? 
 
 Many times we have attempted to get it, but every combina- 
 tion has met with failure, and the Inter-Oceanic Railway Bonds 
 continue to be a heavy cloud over the country. And although the 
 British Parliament, 1875, proved the innocence of Honduras in 
 the Railway Loans frauds of 1867, 1869, and 1870, nevertheless the 
 matter stands unsettled, and the Railway has not been built, the 
 old Bonds have not been cancelled or refunded, and the country 
 remains undeveloped. 
 
 Why? 
 
 What is the difficulty? 
 
 Where is the obstacle? 
 
 !Now we come to the point when we have to use plain talk. 
 
 A conspiracy of New York promoters have for years tried 
 to confiscate the Inter- Oceanic Railway and to take hold of the 
 Custom Houses of Honduras; but the British Bondholders have 
 always opposed their schemes, alleging vested rights to the Rail- 
 way which was built with British money. 
 
 The American Government have repeatedly supported the 
 American claims, and the British Government have firmly sup- 
 ported the Bondholders rights. Protests from both sides have 
 prevented any final agreement or understanding. 
 
 As a solution of the difficulty Honduras entered into an ar- 
 rangement with the Bondholders through H. B. M. Minister, 
 Lionel Garden; arrangement which was officially announced to 
 have been accepted, but which eventually was not carried out on 
 account of interference by the United States Government which 
 brought forth the Morgan Loan scheme. 
 
 Honduras has rejected the proposition for the following rea- 
 sons: 
 
12 
 
 1. The proceeds of the Loan will not benefit Honduras at 
 nil as one h;il I' will go to the speculators of the old Railway Bonds, 
 and the other half will be left in New York to be divided between 
 the promoters of the Loan scheme and the manipulators of the 
 Hail way and Wharf contracts. 
 
 B. According to the Morgan plan, only a small portion of 
 the Loan is to be applied to the Railway: that means that the 
 completion of the Inter-Oceanic Line cannot be accomplished 
 within 40 years, 
 
 0. The hypothecation of all the Customs Revenues, Rail- 
 way, and Wharf, will prevent Honduras from contracting with, 
 or .granting to, "third parties, the construction of the Inter-Oceanic 
 Railway, or negotiate a loan for that purpose. 
 
 1. No reciprocity treaties or concessions for new enterprises 
 are possible, as changes on the tariff or dispensation of duties can- 
 not be made without the consent of the Bankers. 
 
 5. Honduras cannot re-enter into the Central American- 
 1'n in. having her revenues tied up by Treaty and Contracts. 
 
 6. The drain of money from the country by monthly re- 
 mittances to New York will paralyse business and impoverish the 
 people. 
 
 7. ' The Custom Houses, Railway, and Wharf, being under the 
 direct control of the Bankers, and administered by their Agents 
 under the protection of the United States Government and beyond' 
 the control of Honduras, make such Bankers and Agents unac- 
 countable to Honduras for their acts; their responsibility cannot 
 be fixed by our laws: their abuses would be ruinous to Honduras 
 
 and 
 
 Phe linkers controlling the Custom Houses, the Railway 
 
 and Wharf and the revenues thereof will practically establish a 
 
 which will not only mean the restriction of trade, but will 
 
 make ;ib~olutelv impossible any competition in the country for all 
 
 concent not connected with the Morgan Syndicate. 
 
 ihe abo\. Qfl Honduras has rejected the proposed 
 
 in L an. ;ind declared her ^ood disposition to entertain a 
 new i 
 
 \Vluii kind of -ettlement would be acceptable and practicable, 
 and aatiifaetoi 
 
 \\Y >i ILrL r ( ^i three plan- : 
 
13 
 
 1. A plan of gradual amortization of the old Bonds., through 
 a Sinking Fund formed with a percentage of the Custom Revenues, 
 as was proposed by the Bondholders it 1903. 
 
 2. A plan of conversion of the old Bonds by issuing new 
 Bonds, bearing interest, with the guarantee of a percentage of the 
 Custom Revenues, as was proposed in 1897. 
 
 3. The plan proposed by Minister Garden in 1909. 
 Any of them is practicable.- 
 
 The fundamental objection being that the British will not 
 be allowed to control the Inter-Oceanic Railway or the Custom 
 Houses of Honduras, on account of the Monroe Doctrine, we are 
 disposed to settle the Bonds question by paying fixed annual in- 
 stallments to the British, and by letting the Americans construct the 
 Railway; but by no means will we give up the administration of 
 the Custom Houses to either the British or the Americans. 
 
Brief History of the Foreign Debt. 
 
17 
 
 BEIEF HISTORY OF THE FOREIGN DEBT. 
 
 As the Foreign Debt and the Inter-oceanic Railway are inti- 
 mately connected with the so-called Morgan Honduras Loan, I 
 now give a brief account of the origin of the Foreign Debt and of 
 the many attempts and efforts which Honduras has made to settle 
 the debt and to obtain an inter-oceanic highway. 
 
 The Honduras Foreign Debt originated from three loans, is- 
 sued in London and Paris in 1867, 1869 and 1870, -respectively, 
 for the construction of an Inter- Oceanic Railway from Puerto 
 Cortes, on the Atlantic, to the Bay of Fonseca, on the Pacific. 
 
 In connection with the foregoing loans was an issue of Bonds 
 in 1867 for 90,000 for the ostensible conversion of the so-called 
 Federal Debt, which in reality had been fully paid under formal 
 contracts and Treaty conventions. 
 
 Actually, Honduras was solvent with the world when these 
 Railway transactions began- but the Government was ignorant of 
 the details of the Federal Debt settlement. When discovered, a 
 Special Commissioner was sent to London to demand cancellation 
 and retirement of the Bonds. 
 
 The first Railway Loan was issued for a nominal amount of 
 1,000,000; the second for 2,490,108; and the third for 
 2,500,000. Total 5,990,108, reduced by amortization to 
 5,398,570. 
 
 The Interest and Sinking Fund of the three Loans together 
 originally required an annuity of 695,700, covering a period of 
 15 years. 
 
 When these Loans were contracted for, it was calculated by 
 the Bankers and Promoters that the earnings of the Railway 
 would cover their service. 
 
 In the meantime, and during the construction period, the 
 first payments would be made from the products of mines, Maho- 
 gany royalities and from the proceeds of the Loans. And, it was 
 so provided for, because Honduras had no financial resources to 
 pledge for the loan service. 
 
 In 1872 the whole structure collapsed : it was founded on quick- 
 sand. Frauds were committed in London and Paris : the Govern- 
 ment was misled : the Railway contractors defaulted : only 56 miles 
 of road were imperfectly constructed, and the works abandoned. 
 
18 
 
 In consequence the subscribers to the Loans found them- 
 selves the holders of such worthless paper, secured only by future 
 guarantees, that we might reasonably call them imaginary and 
 fictitious. 
 
 In 1873 the Bondholders decided and agreed to organize a 
 Joint Stock Company and change their Bonds into shares of a new 
 Inter-Oceanic Railway Company, and then issue new Bonds in 
 order to raise money to proceed with the work of construction to 
 complete the line. They made an agreement with the Govern- 
 ment of Honduras on the above basis, which, was duly ratified by 
 Congress. 
 
 In other words, the Bondholders agreed to accept the Railway 
 for the Debt, but the Company was apparently unable to raise the 
 necessary funds to carry on the construction of the line, incurred 
 debts, and returned the Railway to the Government, which paid the 
 debts. ' 
 
 In 1875, the British, Parliament ordered an investigation of 
 certain Foreign Loans which had gone into default. The Hondu- 
 ras Loans were a subject of severe criticisms on the part of the 
 Parliamentary Committee, on account of enormous frauds, mis- 
 application of funds and lack of adequate security. 
 
 From the select .Committee's report of 1875, it appears thai 
 only 53 miles of road were constructed, for which the contractor* 
 apparently received 689,745. The balance of the proceeds of the 
 LI KIMS were diverted to other purposes and wasted on commissions, 
 discounts expenses, salaries, interest, amortization, etc., etc., in 
 London and Paris. 
 
 Honduras and the bona-fide purchasers of the Bonds were 
 the victims. Tin- British (iovernment and the Committee of Bond- 
 holders exonerated Honduras from the moral responsibility of the 
 frauds. 
 
 ftbtlttt, Honduras has always been desirous of coming 
 landing with the Bondholders and luis always been 
 to make ;in arrai)L r eni<Tit on a fair and equitable basis for 
 the settlement of the Kail way Debt. 
 
 In 1 Wto granted to .1. L. llanre and John 
 
 J. Waterhury. of New York, to build the I nler-Oreanic Railway. 
 mg wan accomplished hv this contract. 
 In I**:, the <;\rniim'iit L'ranl.-d a OODeeftffofl to n Mr. Bin- 
 
19 
 
 ney, of London, who organized a new Company to construct the 
 Inter- Oceanic Eailway and settle the Foreign Debt. 
 
 Changes to the contract were proposed which were accepted 
 in 1890. 
 
 The Company was unable to raise the money required for 
 the R. Ed. Construction, and the concession expired in 1892. 
 
 From 1892 to 1896 the Railway was operated by Valentine 
 and Associates under leases. 
 
 In 1896, a contract was signed with the Honduras Railroad 
 Company, of New York, represented by Mr. Valentine, to the 
 same end and for the completion of the Inter-Oceanic Railway to 
 the Pacific. This Company subsequently transferred their rights 
 to the Honduras Syndicate. 
 
 In 1897, a contract was signed with the Honduras Syndicate 
 for the reconstruction of the first section of the Railway, for the 
 completion of the Inter-Oceanic line, the settlement of the Foreign 
 Debt and the establishment' of a Bank, the Syndicate being repre- 
 sented by Mr. Valentine, and by Henry L. Sprague, law partner 
 of Mr. Jennings. 
 
 This Syndicate was composed of the following prominent 
 New York Capitalists, Lawyers, Financiers and Promoters : 
 Chauncey M. Depew, W. Seward Webb, 
 
 John Jacob Astor, Benjamin F. Tracy, 
 
 J. C. McCullough, Frederick B. Jennings, 
 
 Geo. S. Scott, Nathaniel A. Prentiss, 
 
 Charles McVeigh, Melville E. Ingalls, Jr. 
 
 The Syndicate found out later on that this plan was im- 
 practicable, and disagreements arose. They failed to arrange the 
 Debt or build the Railway. 
 
 In 1900, the same Syndicate contracted again with the 
 Government for the construction of the Railway, from La Pimienta 
 to the Pacific, cancelling the obligations for the settlement of the 
 Foreign Debt and the Bank scheme, and absolutely terminating 
 the, contract of 189 7. The Syndicate and the Government obli- 
 gated themselves not to make or continue any reclamation, or exact 
 indemnization of any character, by reason of the Contract that day 
 terminated, in respect to any reclamation or indemnization relating 
 to failure of compliance or acts prior to that date. 
 
20 
 
 Tliis contract was approved by Decree No. 2, of the National 
 Congress, May 26th, 1900. 
 
 In 1902, the Syndicate asked for, and obtained from the 
 Executive, an extension of time of one year to carry out their 
 obligations, subject to the approval of Congress. 
 
 In order to obtain this extension of time the Syndicate, 
 through its legal representative agreed, that in case the National 
 Congress at its next session should not approve the extension of 
 time, or in case the time should expire and the Syndicate did not 
 comply meanwhile with the obligations of their contract, they 
 would peaceably surrender the Railway without reclamations for 
 indemnization, and renouncing arbitration. 
 
 In 1903, this extension of time expired, and the Syndicate 
 delivered the Railway to the Government in conformity with their 
 agreement of 1902. 
 
 The Syndicate then filed a claim against Honduras for $1,- 
 056,393. 
 
 In the same year the Council of Foreign Bondholders made 
 a proposition for the settlement of the Debt and completion of 
 the Inter-Oceanic Railway. Honduras was asked to pay $100,000 
 per year, rising by four-yearly increments of $20,000, in order to 
 cancel all the old bonds in 27 years retiring 200,000 Bonds per 
 year by a total payment of $4,200,000. 
 
 The United States Government objected to this arrangement 
 through its Legation by the following communication: 
 
 (Telegram.) 
 
 (iuatemala, July, 3, 1903. 
 
 Minir-h-r nf Foreign KVlat ions. Tegucigalpa: 
 
 "M Governmenl disapprove- of the terms of the proposal of 
 the Sijiiicr Svndicat". 
 
 "I am oppo^-d that an American Corporation shall be Ihe 
 
 medium of cclrl.iatinir an aiTaiiL r enirnt between Honduras and the 
 
 landholders with respect in a Debt relative to which is 
 
 illegalities and injustice. 
 the honor of a reply by idcLrraph to this 016881 
 
 . LESLIE COMB! 
 
 Mini-ii-r of tin- I'niled States. 
 
21 
 
 In 1904., Honduras signed an agreement, through Minister 
 Ugarte in New York,, with the Squier Syndicate to the effect 
 that the Syndicate should buy the first section of the Railway for 
 $500,000, paying proceeds to the Bondholders on account of the 
 Debt, and finish the Inter-Oceanic Railway, within a certain 
 period. Honduras was disposed to accept this proposal of the 
 Bondholders, and to pay $100,000 per year from the Revenues 
 collected at the Custom House of Puerto Cortes, for the amortiza- 
 iion of the balance of the old Bonds at 8% of their face value 
 without interest. In this manner the whole Debt could be cancelled 
 by paying $2,159,428 less value of Bonds amortized with the 
 proceeds of the Railway. 
 
 This plan was, however, abandoned on account of objections 
 raised by the United States Government. 
 
 In 1908, the same Squier Syndicate advanced a new proposi- 
 tion to the Government of Honduras, which was declared unac- 
 ceptable by the Bondholders. 
 
 In 1909, the British Minister to Central America, Mr. Lionel 
 Garden, arrived at Tegucigalpa for the purpose of making an 
 arrangement for the settlement of the Foreign Debt. On the 10th 
 of March, he presented to the Government a proposal which was 
 treated and finally agreed to on the following basis : 
 
 The amount of the debt was fixed at 452,000, discarding 
 all back interest of 38 years, but charging interest at 8.86% for 
 the following 40 years. 
 
 Principal and Interest cumulated for 40 years would amount 
 to 1,600,000, to be paid by annual installments of 40,000 each. 
 
 These annuities were to be applied to the amortization of old 
 bonds by drawings or by purchases. 
 
 For the payment of said annuities of 40,000, the Govern- 
 ment compromised itself and ceded to the Bondholders the 
 Revenues of the Railroad and Wharf at Puerto Cortes, and 15% 
 additional charge on the Import duties. 
 
 In order to put said Railway in a state of repair, to build 
 branches, and to extend the same to the south, the Government 
 and the Bondholders agreed that the Republic should issue new 
 Bonds to the amount of $500,000 (100,000), secured by the net 
 earnings of the Railway; thus constituting a preferential charge 
 on the same. 
 
22 
 
 The Government insisted on raising to $1,000,000 (200,000) r 
 i In- amount of the new Loan, and the Bondholders gave their 
 assent, with the approval of the British Government through the 
 British Legation. 
 
 (Telegram No. 14 v!.) 
 
 Guatemala, June 25, 1900. 
 His Excellency, President Davila, Tegucigalpa: 
 
 "T>y instructions received from my Government I have the 
 honor to advise your Excellency the acceptance on the part of the 
 Foreign Bondholders of London, of the Basis of arrangement of 
 the External Debt of Honduras proposed by your Excellency on 
 the llth of March, of the current year. 
 
 "At the same time I have the pleasure of expressing the satis- 
 faction with which the Government of H. B. M. has seen the 
 good disposition and conciliatory spirit displayed by the Govern- 
 ment of your Excellency in the negotiations due to which it was 
 made possible to arrive at a solution so satisfactory and honorable 
 for both parties. 
 
 i signed) BRITISH MINISTER. 
 
 It was also agreed that should the Revenues compromised in 
 the agreement not cover an annuity in any one year, the deficit 
 
 was to he paid only from the surplus of coming years. 
 
 Also, that should there be any surplus, or balance, in favor 
 of the (iovcnmicnt, it was to be applied to the extension of the 
 liailroad which remained the property of the Government. 
 
 Tlii- plan would have work"d out as follows: 
 
 REVENUES, 
 
 of I.'. I.M. gross -ani ings, yearly * 1 (i.SOO.on 
 
 of \Vharf groa earning, yearly 43.200.00 
 
 Of additional charges on 'Import Duties.... 108,000.00 
 
 10.00 
 
 hKI'.T 8EBVICE, 
 filtered on $I.IMII..IIIII) \,. u I'M, nds $ r.n.ooo.no 
 
 >:nking l-'inid 000,000 \.-w Bonds.... 10,000.00 
 
 fl<>. MIX! I 1 ,,,- amorii/ation Old I'.nmU. . ,000.00 
 
 80,000.00 
 
 M ear : 
 
23 
 
 This estimate of revenue is based upon actual products. But 
 with the extension of Railway to new banana fields the earnings 
 of same and Wharf would increase sufficiently to cover the deficit 
 within the next two years. 
 
 In order to remedy this feature of the agreement., and avoid 
 any temporary deficit, the Government was disposed, in recogni- 
 tion of the large advance made to improve- the Railroad, to fix a 
 certain amount from the Revenues collected at the Custom House 
 of Puerto Cortes, worth $800,000 silver a year equivalent to 
 $320,000 gold; and from its Customs the Government would dis- 
 pose of $150,000 a year. 
 
 In this way the annuity could be made out as follows : 
 
 40% gross earnings of Railroad yearly $ 76,300.00 
 
 90% gross earnings of Wharf yearly 43,200.00 
 
 Puerto Cortez Customs 150,000.00 
 
 Total $270,000.00 
 
 Surplus , 10,000.00 
 
 Any surplus to be applied to the Railroad construction. 
 
 It was agreed, and expressly stipulated, that the Government 
 and the Bondholders should contract with a third party for the 
 construction, equipment, maintenance and operation of said Rail- 
 road and Wharf, and that their net proceeds be applied to the 
 purpose aforesaid. 
 
 But nowhere in this agreement appears anything to show that 
 the construction of the Inter-Oceanic Railway was prevented. 
 
 The new Loan was only secured by the net earnings of the 
 Railway. 
 
 It was contemplated that at the time of drawing up of the 
 contract for the reconstruction and operation of the Railway, alJ 
 provisions would be made for the completion of the line to the 
 Pacific Ocean, leaving open the door for new propositions. 
 
 On account of the Claims of the Honduras Syndicate and W. 
 S. Valentine, the United States Government inter f erred to break 
 up this arrangement. The Morgan proposition was brought for- 
 ward by the United States Government and the Government of 
 Honduras was urged to accept it under heavy pressure. 
 
24 
 
 THE MORGAN PROPOSITION. 
 
 In July 1909, Mr. Morgan got an option from the Council 
 of Foreign Bondholders in London, to acquire the Honduras Bonds 
 at 15% of their face value, with their unpaid coupons attached, 
 provided that a settlement of the Honduras Debts could be ar- 
 ranged between the United States and Honduras prior to August 
 4th, 1910. 
 
 This option was subsequently extended to February 4th, 1911. 
 
 To carry this scheme through, the United States Government 
 on July 17, 1909, invited Honduras to deal with Messrs. J. P. 
 Morgan and Company, as may be seen by the following: 
 
 MEMORANDUM. 
 
 "Under instructions from my Government, which I have just 
 received by telegraph, I have the honor and the pleasure to inform 
 the Government of Honduras that the firm of J. P. Morgan and 
 Company has informed my Government that they are prepared to 
 agree on the arrangement of the Foreign Debt of Honduras, the 
 delivery of the Railway and Wharf of Puerto Cortes and the ad- 
 vancement of a substantial amount for internal improvements 
 which may be necessary, acquiring new bonds which must be duly 
 secured/' 
 
 "Messrs. Morgan and Company have notified my Government 
 that the Council of Foreign Bondholders had accepted the pro- 
 posal of Morgan and Company, who now have control of the 
 British and American securities, including the Railway and Wharf, 
 and that the Council of Foreign Bondholders, acting on behalf 
 of the holders of Bonds, have informed the British Secretary of 
 State for Foreign Affairs of the foregoing, and that the Secretary 
 ate for Foreign Affairs, having cordially approved the new 
 project has, by ic ( |u,^j of the Council of Bondholders, pven notice 
 Garden of the chan.Lre in the -ilualion. 
 
 "I ! met ions to manifest thai if the Government of 
 
 \v.uld send ;i special A'jent to I he Tinted Siaies with 
 full : in and Company. Hie ("Jovrrn- 
 
 : nited States would extend lo him all facilities. 
 
 "I beg to add thai ihe Gtavenunenl of ihe run a feels 
 
 itself happy to see, in the said proposals, the prospect of a good 
 
25 
 
 result and for a settlement upon a favorable basis for the amortiza- 
 tion of the National Debt which would be for the prosperity, tran- 
 quility and national strength of Honduras/' 
 
 (Signed) PHILIP BEOWN. 
 
 Surprised by this invitation in the face of an agreement closed 
 with creditors, and approved by the British Government, the 
 Government of Honduras, before complying with the indication 
 from the State Department, addressed the British Minister, to 
 know the situation, and received the following communication: 
 
 British Legation, Guatamala, July 31, 1909. 
 To His Excellency, Don Jose Maria Ochoa, 
 
 Minister of Foreign Eelations, Tegucigalpa. 
 Mr. Minister: 
 
 "Under instructions from H. B. M. Government I must mani- 
 fest to your Excellency, for the information of the Government of 
 Honduras, that the Council of Foreign Bondholders feels sorry 
 that (circumstances foreign to their will had obliged them to 
 abandon the agreements for the settlement of the Debt to which 
 they had previously consented. 
 
 "The Government of Your Excellency is therefore relieved of 
 the compromise made with the British Bondholders and is free 
 to enter into new arrangements. 
 
 "I have sent to-day, instructions by telegraph, to H. B. M. 
 Consul ad interim in Tegucigalpa to notify Your Excellency in 
 the sense above referred to. 
 
 "I avail of this opportunity to renew to Your Excellency the 
 protests of my most distinguished consideration and esteem." 
 
 (Signed) LIONEL CAEDEN. 
 
 The Minister of Finance of Honduras (Senor Juan E. 
 Paredes), was sent to New York as "Special Financial Agent" of 
 his Government, for the purpose of seeing what overtures Mr. 
 Morgan would make for the proposed settlement of the Debt. He 
 was accompanied by the Secretary to the President of Honduras 
 (Senor Valladares). 
 
 Mr. Paredes had two interviews with Mr. Davison, of J. P. 
 Morgan and Company, after which Mr. Frederick B. Jennings, 
 of the Law Firm of S'tetson, Jennings and Eussell, took up the 
 
26 
 
 subject with Mr. Paredes, in behalf of the State Department and 
 of the Bankers. 
 
 Mr. Ji-nnin(/s was a member of the Honduras Syndicate, wliO: 
 has a Claim agamst Honduras. He made the Drafts of the 
 proposed agreements and insisted on including the Claims in the 
 Contract, and did his utmost to prevent their discussion, in order 
 to force Honduras to yield to the conditions imposed by Morgan. 
 
 His plan was as follows : 
 
 "To issue $10,000,000 at 88% of their nominal value, with 
 5% Interest for Sinking Fund, to be redeemed in 40 years. 
 
 "The net proceeds of the Loan to be divided among the 
 Bankers (J. P. Moroni and Associates), the claimants Honduras 
 Syndicate (Frederick B. Jennings, Henry L. Sprague, W. S'. 
 Valentine, etc.), and the Railway and Wharf lessees (W. S. 
 Valentine, Geo. Scott, Henry L. Sprague, Frederick S'. Jennings, 
 etc.), and the remainder,, if any, to the Railway contractors. 
 
 "As security of the new Bonds Honduras must give up all 
 Customs Revenues, the Railway arfd the Wharf at Puerto Cortes, 
 to be administered by the hankers" own Agents, the products to 
 ]> remitted to the Fiscal Audit of the Loan at NVw York. 
 
 In this way Honduras would be deprived of its principal 
 revenues during \o years. The annual disbursements would be 
 as follow- : 
 
 5% Interest OB $10.000,000 Bonds $500,000.00 
 
 \% amortization on $10,000,000 Bonds 100,000.00 
 
 Customs collection expenses 40,000.00 
 
 Fiscal Agency Kxpenses 10,000.00 
 
 Total $(j:,0.(MM).on 
 
 COMPARISON. 
 
 Annuity as per Minim's proposition *i;:>i>.00(>.00 
 
 Annuity a- per Canlen's proposition '><;<. non. on 
 
 Mnouftl equivalent i |W5 t QOO.DO 
 
 silver a year, which n pn-enN the remainder .if total Custom* 
 uider the ( 'ardri: .-nj. which was absolute 1 
 
27 
 
 quired by Honduras to cover the annual expenses of the administra- 
 tion. 
 
 In 40 years, therefore, we would pay extra under the Morgan 
 plan, $15,600,000; but it is not only a question of paying in excess 
 this enormous amount, but that the country cannot afford to 
 pay $650,000 a year, as the total income from the government 
 revenues amounts only to $3,500,000 (silver), equivalent to 
 $1,400,000 gold. The balance left to the Administration for all 
 its different departments would be only $750,000, which is a ma- 
 terial impossibility. 
 
 As in the distribution of the proceeds of the loan only a 
 small portion is set aside for material improvements, the develop- 
 ment of the country is not assured, neither the increase of he 
 revenues; and if the actual income of the Government is reduced 
 to $750,000, then Honduras could not even maintain her exist- 
 ing status of progress. 
 
 To deprive Honduras of her Eevenues for the benefit of N"ew 
 York Bankers, means drawing away all the money in circulation 
 i-n the country, bringing poverty to her people and paralization 
 to her commerce. 
 
 It is incredible that the people of the United S'tates in view 
 of -such flagrant injustice, would consent to the spoliation of a 
 neighboring Eepublic on account of its being weak and powerless 
 to prevent such iniquity. 
 
 The ruin of Honduras would undoubtedly affect the business 
 
 y *^ 
 
 interests of all Americans who are looiring southward to increase 
 their trade. 
 
 Honduras is a good field for financial investments and busi- 
 ness enterprises on a sound basis, provided equal opportunities 
 are given to all competitors. 
 
 The country is rich in natural resources, unexcelled in 
 climate, and once she gets transportation her rapid development 
 will be an accomplished fact. 
 
 But, if a New York combination, composed of the represen- 
 tatives of the most formidable monopolies in existence, are allowed 
 to unjustly take control of the country and its" resources, then all 
 opporunity for competitive enterprises and legitimate investment 
 of capital by others will be forever destroyed. 
 
 Setting aside consideration of monetary losses and economic 
 
28 
 
 results for Honduras, its citizens must reflect over a more serious 
 aspect of the proposals embraced in the Treaty and Bankers' and 
 Fiscal Agents' agreements. 
 
 We must consider the loss of National Independence, and 
 when we become contractual vassals of the money powers and 
 monopoly, this heritage will be transmitted to our children instead 
 of the precious legacy of freedom handed down to us by our fore- 
 fathers. 
 
 It we become a consenting party, we commit a crime against 
 our country and against our posterity. 
 
DOCUMENTS. 
 
First 
 
 Honduras Railway Loan, 
 London, 1867. 
 
33 
 
 HONDURAS LOAN OF ONE MILLION STERLING. 
 LONDON, 1867. 
 
 HONDURAS GOVERNMENT RAILWAY LOAN. 
 1,000,000. 
 
 "In Bonds to Bearer, 100, 500, and 1,000 each, bearing 
 10 per cent. Annual Interest, payable half-yearly in sterling, 
 Issued at 80 per cent, and to be redeemed at par, in sterling, within 
 17 years, by Yearly Drawings, by means of an Accumulative Sink- 
 ing Fund of 3 per cent per annum. 
 
 "The first Drawing will take place on December 31, 1869. 
 
 "The payments by Subscribers will be as follows: 
 
 5 per ce 
 10 " 
 10 " 
 15 " 
 20 " 
 20 " 
 
 at. on 
 on 
 on 
 on 
 on 
 on 
 
 application 
 
 
 
 s. 
 
 d. 
 
 
 5 
 10 
 9 
 13 
 17 
 18 
 
 s. 
 
 
 10 
 8 
 10 
 2 
 
 d. 
 
 
 
 W* 
 
 9 
 
 6 
 
 allotment 
 
 
 
 
 January 1st, 1868, less int.. 
 July 1st, 1868, less int 
 January 1st, 1869, less int. . 
 April 1st, 1869, less int 
 
 
 1 
 2 
 1 
 
 9 
 11 
 10 
 17 
 
 3 2 
 
 6 
 
 80 per cent. 73 11 10V 2 
 
 "Interest will be payable on the 1st of July and the 1st of 
 January in each year, at the London and County Bank, and, for the 
 first installment of 15, will date from October 1, 1867. 
 
 "In default of payment of any of the respective installments,, 
 all previous payments will be liable to forfeiture. 
 
 "The installments may be anticipated at any time at Bank of 
 England rate. 
 
 "The Government of Honduras having agreed to appropriate 
 to the Subscribers a moiety of the net profits of the Railway dur-r 
 ing 15 years after the complete repayment of the present Loan,. 
 Subscribers will receive as bonus, within one month after allot- 
 ment, with each 100 Bond, one 10,000th deferred fully paid-up^ 
 Railway Share to Bearer, entitling the holder thereof to receive 
 his proportion of such net profits. 
 
34 
 
 PROSPECTUS. 
 
 "The President of the Republic of Honduras, being duly 
 authorized, has given full powers to Mons. Victor Herran, Minister 
 at Paris, and Senor Don. Carlos Gitlerrez, Honduras Minister in 
 London, to contract on account of the Government a Loan, to be 
 applied towards the construction of an Inter- Oceanic Railway from 
 Puerto Cabal los, on the Atlantic, to the Bay of Fonseca, on the 
 Pacific. 
 
 "To show the importance attached by the British Government 
 to the Honduras Inter-Oceanic Railway, it may be stated that the 
 line has been surveyed on the part of Her Majesty's Government, 
 by Lieutenant Solonel Stanton, R. E., and a detachment of Royal 
 Engineers sent- out for the purpose. Colonel Stanton reports, 'that 
 the harbors at both termini are unexceptionable/ and that the road 
 can be constructed without any sharper curves or heavier gradients 
 than are to be found on existing lines over which locomotives work 
 without difficulty. 
 
 "The new Treaty betwejen Honduras and Great Britain de- 
 clares that: 
 
 "In order to secure the construction and permanence of the 
 route or road herein contemplated, and to secure for the benefit 
 of mankind the uninterrupted advantage of such communication 
 from sea to sea, Her Britannic Majesty recognizes the rights of 
 sovereignty and property of Honduras in and over the line of the 
 said road, and for the same reason guarantees, positively and effica- 
 ciously, the entire neutrality of the same. And when the proposed 
 road shall have been completed, Her Britannic Majesty equally 
 engages, in conjunction with the Republic of Honduras, to pro- 
 tect the same from interruption, seizure, or unjust confiscation, 
 fnun whatsoever quarter the attempt may proceed. 
 
 'tied by the Honduras Government with France 
 
 siiii tin- Tinted States contain the same provisions, and the Frencli 
 
 "Government, consider-ini: the public utility of the Honduras IJail- 
 
 ! the offieiiil quotation of the Honduras Loan on 
 
 the Paris Bourse. 
 
 followini: official ivpor! l.v l.'ear-. \dmiral |)a\is. made 
 to tho Secretn n of tin- \a\\ of tin- Tnifed 8'tai nment, in 
 
 compliance with a resolution of the American CongTCflfl on ihe I'.Mli 
 
35 
 
 of March, 1866., demonstrates likewise the importance which the 
 United States Government attaches to the construction of the Hon- 
 duras Line : 
 
 "The reader who follows the course of the surveyors, natura- 
 lists, and geologist from the capacious, safe, and excellent harbor 
 of Puerto Caballos, through regions remarkable for their salubrity, 
 fertility, great variety of climate and productions, and valuable 
 mineral resources, to the waters of the splendid harbor of La 
 Union (Bay of Fonseca), cannot but regret that capitalists have 
 not found it to their interest to carry out one of the most promis- 
 ing and one of the least embarrassing enterprises of the day. 7 ' 
 
 "The Line of Railway has been carefully selected and surveyed 
 lv Mr. Trautwine (late Engineer-in-Chief of the Panama Rail- 
 way), and an efficient Staff; and a contract has been entered into 
 for the construction of the whole line, with Stations and Rolling 
 Stock, for a stipulated sum of about 8,000 a mile, including 
 every outlay, and the works are to be proceeded with in sections. 
 
 "From time to time, as the installments of the present loan 
 are received, the proportion to be applied to the construction of 
 the first section of the Railway will be handed to and held by 
 trustees, in trust to pay the contractor the installments on his con- 
 tract, as certified by the Government Engineer. The balance of 
 the Loan will be applied in clearing the forests, and in payment of 
 ^ engineering and other incidental expenses. 
 
 "The Interest and Sinking Fund are specially guaranteed by 
 a first charge upon the intended Railway itself and its revenue, 
 and also by a first mortgage upon the whole of the domains and 
 Mahogany forests of the State of Honduras, which, according to 
 to official report, are of immense value. 
 
 "It is arranged that the whole of the products of the above 
 mortgaged State Domains and Forests shall be consigned direct 
 to London by the Honduras Government, to Messrs. Bischoft'sheim 
 and Goldschmidt, who will pay over the proceeds of the sales to- 
 wards the Annual Interest and Sinking Fund, and the construc- 
 tion of .the remaining section of the Railway. 
 
 "It has been further arranged in the Contract, that, as soon as 
 any portion of the Railway is completed, the Contractor shall bring 
 down to the Terminus, free of charge, by the return empty wagons, 
 any produce of the Government Forests and Domains that may be 
 ready for shipment to England. 
 
36 
 
 inning at the harbor of Puerto Caballos, on the Atlantic,, 
 the Railway will proceed over the table-land of Honduras, in a line 
 of 230 miles, to the Bay of Fonseca, on the Pacific. 
 
 "The ports at either end are spacious,, safe, and easily accessible 
 for the largest ships. 
 
 "The steaming distances from Liverpool to S'an Francisco,, 
 touching at Jamaica, are : by way of Panama, 7,980 miles ; Nicara- 
 gua, 7,720 miles; Tehauntepec, 7,740 miles; Honduras, 7,320 miles. 
 
 "The distance between New York and San Francisco, by 
 Panama, is 5,224 miles; by Nicaragua, 4,700 miles; by Tehaunte- 
 pec, 4,200 miles; by Honduras, 4,121 miles a saving by way of 
 Honduras, as compared with Panama, the only line on which a 
 Railway is already constructed, of 1103 miles. 
 
 "The difference in actual distance, coupled with the superiority 
 of ports, the facilities of embarkation and disembarkation, and the 
 connection with the American coast lines, will effect a saving in 
 time, as compared with the Panama Route, of no less than five 
 days between the Atlantic and Pacific ports of the United States. 
 
 "This line will afford the easiest, safest, and speediest route 
 between Great Britain and British Columbia; it will also afford the 
 increased facilities of first-class ports for the establishment of 
 speedy intercourse with Australia and New Zealand, and will bring 
 /Jamaica, Belize, and other British Possessions in the West Indies, 
 into the direct line of communication. 
 
 Last year the dividend paid by the Panama Company was at 
 the rate of 24 per cent per annum on a capital of 1,600,000, in 
 ;;dd it ion to a bonus of 40 per cent from accumulated profits. The 
 Honduras Line will, in all probability, return as much profit as 
 the Panama Line, if not considerably more. 
 
 ^uflicient of the proceeds of the present issue will be applied 
 
 to th construction of the first section, from Puerto Caballos to 
 
 Santiago. This section will enable the exportation of the 
 
 Mahogany, etc.. t<> take, place, the means of transport now existing 
 
 \pcn-ive to he remunerative. Careful estimates have 
 
 I the Honduras Government that the surplus revenue of the 
 
 Stnt. hornain- and r'oiv>ts will be amply sufficient to complete the 
 
 whole line, without any further issue of stock; but in case it should 
 
 be found ad\ant;iLM'Mii-. <>n aeeount of i iicreasi nr traflic. In accelerate 
 
 tin- opening of ih.- li,iil\\;i\ from sea to Bea, by rai-ini: more money,. 
 
37 
 
 further Stock will be issued for the construction of the remaining 
 sections of the Bailway. 
 
 "The several contracts and other documents can be inspected 
 at the office of Messrs. Baxter, Rose, Norton and Company, Solici- 
 tors No. 6, Victoria Street, Westminister. 
 
 "Applications for the Loan will be received from Monday, 
 the llth of November, to Friday, the 15th of November, by the 
 London and County Bank, 21 Lombard S'treet, and Branches, where 
 Prospectuses and Forms of Application can be obtained; and in 
 Paris, by Messrs. Bischoffheim, Goldschmidt and Company, 26, 
 Hue de la Chaussee d' Antin. Payment on application for the 
 Loan can also be made at the Bank of France and Branches." 
 
Second 
 
 Honduras Railway Loan, 
 Paris, 1869. 
 
41 
 
 HONDURAS LOAN OF 207,509 BONDS OP 300 FRANCS 
 EACH. PARIS,, 1869. 
 
 INTER-OCEANIC RAILWAY CONNECTING THE 
 ATLANTIC WITH THE PACIFIC. 
 
 SECURED LOAN TO THE GOVERNMENT OF HONDURAS. 
 (CENTRAL AMERICA.) 
 
 Subscription, 207,509 Bonds. 
 
 Price of the Bonds, 225 francs, payable as follows: 
 25 francs on subscription With the right of paying one 
 
 50 francs on allotment or more of these installments in 
 
 50 francs on 1st June (1869) advance, and receiving a dis- 
 50 francs on 1st July (1869) count at the rate of 6 per cent 
 50 francs on 1st Aug. (1869) per annum. 
 
 Returns. Repayment, Participating Shares. 
 
 "Interest. Twenty francs a year, paid half-yearly on the 1st 
 of March and the 1st of September, at Paris, Brussels, Antwerp, 
 Geneva, in cash without -any tax or deduction, and also at Berlin, 
 Hamburg, Amsterdam, Frankfort, Genoa, New York, at the rate 
 of the day. The first coupon is due on the 1st of September next. 
 
 "Repayment. At par in seventeen years by half-yearly draw- 
 ings before a Notary at Paris; the first drawing will be paid in 
 cash on the 1st of September, without any tax or deduction what- 
 ever. 
 
 "Participating Shares. Each, Bond will be replaced as soon 
 as it is drawn by a Participating Share, which will entitle the 
 owner, after the repayment of the Loan, and during a period of 
 fifteen years, to a proportional share in the third part of the 
 revenues of the Line. 
 
 "This participation is estimated at a minimum of 50 francs 
 per annum. 
 
 "As the periods of the different payments and profits since the 
 first of March last reduce the price of the subscription to about 
 220 francs, the produce of the debentures, taking into consideration 
 the premium of repayment, exceeds 12 per cent, without reckoning 
 the value of the Participating Shares. 
 
42 
 
 <i I . Mi'ANTEES FOR THE DEBENTURES. 
 
 (a) Mortgage on the Railway and on its Revenue. 
 
 (b) Mortgage on the domains arid forests of the State,, of 
 which the annual revenue,, according to the official report of the 
 engineers, amply exceeds the sum necessary for the regular payment 
 of interest and redemption. 
 
 (c) Convinced of the commercial and political importance 
 of the Inter-Oceanic Honduras Railway, the Governments of 
 France, England, and the United States have, by international 
 treaties, specially guaranteed the inviolability and neutrality of 
 the undertaking, from the opening of the Line. 
 
 (d) A Commission has been appointed to superintend the 
 employment of the Loan, which is to be exclusively devoted to the 
 completion of the Line already in process of construction. 
 
 This Commission is composed of: 
 
 His Excellency, M. V. Herran, Officer of the Legion of Honor^ 
 President (0.) ; and MM. L. Pelletier, Chevalier of the Legion of 
 Honor, an eminent merchant (C.). 
 
 R, Bischoffsheim. 
 
 M. Scheyer. 
 
 (e) The execution of the Line is "entrusted, by contract, to 
 Messrs. Waring Brothers and MacCaudlish, of London. 
 
 Distance from New York to San Francisco: 
 
 My way of Panama 9,730 kilometres. 
 
 By way of Honduras 8,074 kilometres. 
 
 Thus the Honduras route saves 1,65(5 kilometres. 
 
 "Tin- proceeds of the Panama Line an 1 well known. The 
 annual traffic is about 200,000 passengers, and meivhandise valued 
 IT a thousand million franc-. 
 
 (f) Tin* statement of the Sinking Fund of the Loan, the 
 P8, the Intel-national Treaties, are deposited 
 
 in the Chancellor's OHier ,,!' tin- Legation. 1,'ne de la Chjiusse,- d' 
 Antin. where the puhlie may inspect them. 
 
 Y. IIKIM.'AN. 
 
 MniMT Plenipotentiary of I l.mdura-. 
 
43 
 
 "The subscription will be open on Wednesday the l'9tli, to 
 Friday the 28th of May, from eight in the morning until five in 
 the evening,, in the following towns: 
 
 Paris. At the Chancellor's Office of the Legation, and of the 
 Consulate General of Honduras, 10 Rue de la Chaussee d' Antin;. 
 at Messrs. Dreyfus, Scheyer and Company, Government bankers,. 
 Rue de la Grange Bateliere 16. 
 
 "Subscription may be paid at all the branches of the Bank 
 of where the Government has deposited the provisional and defini- 
 tive shares of the Loan. 
 
 "The subscription will also be opened at Brussels, Hanover,. 
 Berlin, Hamburg, Amsterdam. 
 
 "Subscribers who wish to pay up beforehand may send at 
 once the whole sum, 223 francs, 90 cents per share, less discount, 
 and the definitive shares will be delivered or sent to them. 
 
 "After the subscription is completed, even if before the 25th. 
 of May, no fresh subscription will be taken." 
 
Third 
 
 Honduras Railway Loan, 
 London, 1870. 
 
47 
 
 HONDURAS LOAN OF TWO MILLION" FIVE HUNDRED 
 THOUSAND POUNDS. LONDON, 1870. 
 
 1870. 
 
 "Honduras 10 per cent Government Railway Loan 2,500,000. 
 
 "In 25,000 Bonds of 100 each, bearing 10 per cent Annual 
 Interest, payable half-yearly, viz., on 1st of January and 1st of 
 July. 
 
 "Issued at 80 per cent, and to be redeemed at par, in Sterling, 
 v.'ithin 15 years, by Yearly Drawings, on the 31st of December in 
 each year, by means of an accumulative Sinking Fund of 3 per 
 cent per annum. 
 
 "The first drawing to take place on the 31st of December, 
 1870. 
 
 "The installments to be paid as follows : 
 
 15 per cent, on Allotment. 
 
 10 per cent, on 1st. of August. 
 
 10 per cent, on 1st. of September. 
 
 15 per cent, on 1st, of October. 
 
 15 per cent, on 1st. of Xovember. 
 
 15 per cent, on 15 of December, when definitive Bonds, 
 with a Coupon of 5 payable on the 1st of January at- 
 tached, will be given in exchange for scrip. 
 
 80 per cent. 
 
 "Interest will date from the 1st. of July. 
 
 "The installments may be anticipated at any time when an 
 installment falls due, under discount at the Bank of England 
 rate. 
 
 PROSPECTUS. 
 
 "His Excellency, Senor Don. Carlos Gutierrez, Minister 
 Plenipotantiary of the Government of the Republic of Honduras 
 to the Court of St. James, being authorized by full powers, dated 
 
48 
 
 the 14th. of March, 1870, to raise for his Government a Loan of 
 Two Millions Sterling net, for the completion from sea to sea of 
 the Inter-Oceanic Honduras Bail way. lias instructed the London 
 and County Bank to receive applications for same. 
 
 "The Loan will be represented by Bonds to bearer of 100 
 each, bearing interest, until redeemed, at the rate of 10 per cent 
 per annum, payable half-yearly on the 1st. of January and the 1st.. 
 of July in each year, at the London and County Bank. 
 
 "The whole Loan will be redeemed within 15 years by an ac- 
 cumulative Sinking Fund of 3 per cent per annum, to be applied 
 liy annual drawings, the said drawings to take place on the 31st. 
 of December in each year, in the presence of the Honduras 
 Minister in London, a representative of Messrs. Bischoffsheim and 
 Goldschmidt, and a Notary Public, and the Bonds so drawn will 
 be paid within one month thereafter. 
 
 'This Loan is raised to complete the Inter-Oceanic Railway, 
 and to place the Line from sea to sea in thorough and efficient 
 working order. As in the case of the previous Loan, the proceeds 
 of the present Loan will be paid into the hands of Trustees ap- 
 pointed for that purpose. 
 
 "The entire Railway and its revenues is mortgaged to the 
 Bondholders of all denominations, and the proceeds of the State 
 domains will be applied in a like manner. 
 
 "The first section is contracted to be finished next November. 
 Messrs. Waring Brothers and MacCaudlish have undertaken, under 
 heavy penalty, to complete the second section at the end of 1871; 
 and a new contract has been signed with them to complete the 
 entire Kail way from Puerto Cahallos, on the Atlantic Coa>t, to 
 the Bay of Fonseca, on the Pacific, and to deliver it over in etficient 
 working order in the Autumn of 1872. 
 
 'Tin- Railway is under the protection of the British (Jovern- 
 ni.'iit by a Treaty, which d< dares: 
 
 "In order to secure the construction and permanence of the 
 
 route or road herein contemplated, and also to secure for the benefit 
 
 of mankind the uninterrupted advantages of such communication 
 
 from sea t. sea, Her Kritannic Ma jest v reeogni/es the right- "f 
 
 \ and property of Iloiidiira< in and over the line of 
 
 the said road, and for the same rea-oii 'jiiarantees, positively and 
 
 on-!v. the entire iieutralitv uf the same. And when the 
 
49 
 
 proposed road shall have been completed, Her Britannic Majesty 
 equally engages, in conjunction with the Republic of Honduras, 
 to protect the same from interruption, seizure or unjust confisca- 
 tion, from whatsoever quarter the attempt may proceed." 
 
 Treaties signed by the Honduras Government with France 
 and the United States contain the same provisions. 
 
 "A general Bond, executed by His Excellency, Don. Carlos 
 Gutierrez, on behalf of the Government of Honduras, will be de- 
 posited at the Bank of England for security of the entire Loan, 
 and the Definitive Bonds of this Loan will be signed by His Excel- 
 lency, Don Carlos Gutierrez, on behalf of his Government, and 
 countersigned by Messrs. Bischoffsheim and Goldschmidt, agents 
 of the Government in England. 
 
 "Applications for the Loan will be received by the London 
 and County Bank, 21, Lombard Street, and Branches, where 
 Prospectuses and Forms of Application can be obtained. 
 
 "London, June 20th, 1870." 
 
Honduras Interoceanic Railway Company, Ltd. 
 1873. 
 
MEMORANDUM OF ASSOCIATION OF THE HONDURAS 
 IXTER-OCEANIC RAILWAY COMPANY (LIMITED). 
 
 1873. 
 
 1, The name of the Company is the Honduras Inter-Oceanic 
 Railway Company, Limited. 
 
 2, The Registered Offices of the Company will be in Eng- 
 land.. 
 
 3, The objects for which the Company is established are the 
 following : 
 
 (A) To obtain from the Government of the Republic of 
 Honduras and accept concessions or grants of all or any of the 
 following Railways,, works, lands, rights, powers and privileges, 
 viz: 
 
 (a) Such portion of the Honduras Inter-Oceanic Rail- 
 way as is already completed and open for traffic, 
 or is in course of construction, together with all 
 the Stations, houses, buildings, wharves, quays, 
 jetties, and appurtenances thereto belonging or at- 
 tached, or forming part thereof, together with all 
 the rolling stock, plant, machinery, rails, materials, 
 stores, equipments, and other effects belonging to 
 the Government, and used, or intended to be used, 
 for the construction, equipment, maintenance or 
 working of the said Railway with its appurten- 
 ances, or for* any of the purposes thereof. 
 
 (b) The land required for the completion of the said 
 Railway, from the Atlantic Ocean to the Pacific 
 Ocean, with all necessary and proper wharves, 
 quays, jetties, and other conveniences, 
 
 (c) Such lands, adjoining or near to the said Rail- 
 way, as may be agreed on between the said Govern- 
 ment and the Company, with such exclusive rights 
 of cutting and exporting timber grown thereon 
 free of duty and other charges, as may also be 
 agreed on. 
 
54 
 
 (d) Such of the mines belonging to the Government 
 
 of Honduras, and at present unallotted, and at 
 
 the disposal of the State, as may be agreed on 
 
 between the Government and the Company, subject 
 
 to such royality (if any), whether fixed or 
 
 fluctuating, as may also be agreed upon. 
 
 (B) To construct, complete, maintain, equip, and work the 
 said Eailway, and to work, let, manage, and grant licenses for 
 the working of all or any of the Company's lands, land rights, 
 timber, mines and mineral rights, and to export, sell, and dispose 
 of the produce thereof. 
 
 (C) To sell, demise, or otherwise dispose of, all or any of 
 the lands, mines, rights and privileges, or other property of the 
 Company (including the said Kailway, with its appurtenances). 
 
 (D) To acquire any other concessions, grants, or privileges 
 from the Government of Honduras, or any other foreign Govern- 
 ment, and to enter into any contracts with any Government, Cor- 
 poration, or persons, for any of the purposes of the Company. 
 
 (E) To obtain the incorporation of the Company as a. 
 Societe Annonyme, or Sociedad Anonima. according to the laws 
 of the Republic of Honduras, or any Foreign State, relating to 
 joint stock companies. 
 
 (F) To do all such other things as are incidental or condu- 
 cive to any of the foregoing purposes. 
 
 1. The liability of the members is limited. 
 
 5. The capital of the Company is 5,347,720, divided into 
 30,427 Shares of 100 each, to be called A Shares; 177,135 Shares 
 of 12 each, to be called B Shares; and S.D70 Shares of 20 each, 
 to be called C Shares. 
 
 The Shares may be issued as fully paid up to the holders of 
 the bonds of tbe Honduras (Jovernment Railway Loans, issued in 
 London, in ISI'M and 1*10, or tin- loan issued in Paris in the 
 year 1>.'.. or of thr Federal Debt of the State of Honduras i 
 in 1867, in exchange for their bonds in the proportion of one 
 share for even I' 100 in either of the said Loans, and so in pro- 
 jM.rtion for Umd- o|' any larger or l< B8er denominations. The Com- 
 IMII\ - lit from any of the Suh-rrihers of Iliis Memorandum 
 
 Und- of th -aid Honduras QOTeTl tnenl loans of ISC,;. lS(i! and 
 1870, or of the said TVdrral debt in or toward- payment of the 
 shar* 'ihed for !.\ them dv at par." 
 
55 
 
 APPENDIX TO THE MEMORANDUM OF ASSOCIATION 
 
 OF THE HONDUEAS INTER-OCEANIC RAILWAY 
 
 COMPANY, LIMITED. 
 
 ISSUE OF SHARE CAPITAL FOR CONVERSION. 
 
 THE HONDURAS INTER-OCEANIC RAILWAY COMPANY, 
 
 LIMITED. 
 
 INCORPORATED UNDER THE COMPANIES ACTS, 1862 AND 1867. 
 ISSUE FOR CONVERSION. 
 
 The Share Capital of the Company amounts to the sum of 
 5,347,720, to be represented by the conversion of the Bonds held 
 in the existing Honduras Loans. 
 
 29,638 "A" Shares of 100 each 2,963,800 
 
 8,970 "C" Shares of 20 each 179,400 
 
 To be exchanged for the outstanding Bonds of the 1867 and 
 1870 Loans. 
 
 177,135 "B" Shares of 12 each 2,125,620 
 
 To be exchanged for the Bonds of the 1869 Loan, French 
 Issue. 
 
 789 "A" Shares of 100 each . 78,900 
 
 To be exchanged for the outstanding Bonds of the Federal 
 Debt. 
 
 TRUSTEES. 
 
 Sampson Copestake, Esq. (Messrs. Copestake, Moore, Cramp- 
 ton & Co.). 
 
 Alderman Sir Thomas White, Ex-Sheriff of London and Mid- 
 dlesex (with power to add to their number) . 
 
 DIRECTORS (Pro Tern.) : 
 
 The Committee of Honduras Bondholders 
 
 (Specially re-appointed for the purpose). 
 
 BANKERS. 
 
 Messrs. Glyn, Mills, Currie & Co., 67, Lombard St., E. C. 
 
 AUDITORS. 
 
 Messrs. Deloittee, Dever, Griffith & Co., 4, Lothbury, London. 
 Messrs. James and F. Ford, 76 and 77 Cheapside. 
 
56 
 
 JOINT SOLICITORS. 
 
 John Tucker, Esq., 28, S't. Swithin's Lane, London, E. C. 
 
 Augustus Beddall, Esq., Baltic Chambers, 108, Bishopsgate 
 St., E. C. 
 
 CHIEF ENGINEERS. 
 
 Charles Seymour, Esq., M. Inst. C. E. (New York), Chief 
 Engineer of the Madisonville and Bowling Green Railway, the 
 Henderson Nashville Railroad, the Edgefield and Kentucky Rail- 
 road, etc., etc., and formerly the Chief of Staff on the Atlantic 
 and Great Western Railroad. 
 
 SECRETARY. 
 C. F. Denny, Esq. 
 
 OFFICES. 
 
 In London, 4, Westminister Chambers, Victoria Street, S'. W. 
 In Paris, 2, Rue Drouot. 
 
 PROSPECTUS. 
 
 First issue of 20,000, 10 per cent First Mortgage. 
 Debenture Bonds of 100 each at Par, 
 Being part of 25,000 which the Company have power to issue. 
 
 THE HONDURAS INTER-OCEANIC RAILWAY COMPANY, 
 
 LIMITED. 
 
 DEBENTURE CAPITAL 2,500,000. 
 
 "It is proposed to issue this Capital in Bonds of 100 each, 
 bearing interest at 10 per cent per annum. 
 
 "The Bonds to be redeemed at par by An MUM! Drawings, and 
 by the operation of a Sinking Fund, in 25 years. 
 
 "The first Drawing to take place on the 31st. of December. 
 1876, and the drawn Bonds will be paid on the next succeeding 
 15th day of January, when the interest thereon will cease. 
 
 "The Bonds will be issued to bearer, with Coupons, payable 
 half-yearly on the 1st. of January and the 1st. of July in eaeh year, 
 at the Offices of the Compnn\. 
 
 "The tir.-t payment of interest to take place on the 1st. of 
 July, is: 
 
57 
 
 The President of the Republic of Honduras to the Inhabitants 
 
 thereof. 
 
 Notice is hereby given: That the Sovereign Constitutent 
 Congress has decreed as follows : 
 
 The Sovereign Constitutent National Congress of the Re- 
 public. 
 
 Considering that the fresh negotiations entered into by the 
 Minister Plenipotentiary, Senor Don. Carlos Gutierrez, and the 
 Special Commissioner, Dr. Don. C. E. Bernhard, with the Limited 
 Company for the construction of the Honduras Inter-Oceanic Rail- 
 way, remove the great difficulties presented by the system adopted 
 for the completion of that undertaking; and considering that they 
 tend to promote one of the greatest interests of the Republic, the 
 Assembly, with the respective documents before it. 
 
 DECREES. 
 
 Art. 1. The Contracts concluded in London, on the 12th. 
 day of July of the present year, by the aforesaid Messrs. Gutierrez 
 and Bernhard, with the Limited Company, is approved, on the 
 same terms as it was approved by the Provisional Government of 
 the Republic, for the continuation and completion of the works 
 of the Inter-Oceanic Railway. 
 
 Art. 2. In order that the aforesaid Contract may have full 
 effect, and Honduras be bound to the Contracting Company, it is 
 indispensable that the members of the latter should authorize the 
 deed of the aforesaid Contract by the signatures of their legal 
 representatives, in the form and according to the regulations 
 prescribed by the laws of Great Britain for the execution and ful- 
 fillment of Contracts of this nature. 
 
 Given at Comayagua, in the Sessions Hall of the National 
 Constitutent Congress, on the 24th of December, 1873. 
 
 (Signed) R. MIDENCE, Deputy, President. 
 
 P. HERNANDEZ, Deputy, Secretary. 
 PEDRO RIVERA BUSTILLO, Dep., Sec. 
 
 Therefore, let this be promulgated and printed. 
 
 (Signed) CELEO ARIAS. 
 
 JEREMIAS CISNEROS, Minister for Foreign Affairs. 
 
 Comayagua, December 25, 1873. 
 
EXTRACTS 
 
 From the Bluebook, Containing the Report Issued by the 
 
 Select Committee of the British Parliament, 
 
 1875. 
 
61 
 
 The Parliamentary Select Committee said, on the 24th page 
 of their report : 
 
 "It will l)e seen that Honduras has thus become indebted in 
 respect of principal in a sum of 5,990,108 (approximately), m 
 return for which she has engaged to pay 695,700 annually, in 
 periods varying from fifteen to seventeen years. The interest 
 (apart from Sinking Fund) now in arrears amounts to 1,230,164. 
 Bonds of the nominal value of 692,879 have been paid off or 
 cancelled, leaving 6,527,393 now due for principal and interest. 
 In return -for this liability Honduras has secured an abandoned 
 section of a line of railway fifty-three miles in length, for which 
 the contractors have received 689,745" 
 
 The Parliamentary Committee utter these significant word* 
 on page 46 of the report: 
 
 "Your committee do not dwell on the transactions by which 
 such enormous sums have been abstracted from the Honduras 
 loans, and appropriated among those who were entrusted with 
 its management. Such acts have no more to do with foreign loans 
 than with any other transaction by which the money of one per- 
 son comes into the possession of another, and is converted to the 
 use of the depositaries. A remedy for such proceedings ought 
 to be found in the tribunals of the country." 
 
Bondholders' Proposition 
 
 For the Settlement of the External Debt of Honduras, 
 
 1903. 
 
 
65 
 
 Tegucigalpa,, January 28, 1903, 
 
 To the Hon. Council of Ministers of Honduras,, 
 
 Tegucigalpa. 
 
 Gentlemen: As the representative in Honduras of the Cor- 
 poration of Foreign Bondholders., which, in the name of the Bond- 
 holders, is charged with the arrangement of the Foreign Loans of 
 Honduras of 1867, 1869 and 1870, I have the honor to inform 
 you that following the instructions I have received from the 
 President last year, the Corporation, with the aid of the Squier 
 Syndicate, has been able to give a solution to the difficulties that 
 until this date have surrounded this matter. 
 
 I ha,ve the honor to submit herewith for your consideration 
 a project of law based in an agreement made in London, England, 
 on December 4th, 1902, between the Corporation of Foreign Bond- 
 holders and the Squier Syndicate, of New York. This project 
 of law includes the proposal for an arrangement, which I do not 
 doubt will be well received by the Government of Honduras, since 
 its terms are extremely liberal for Honduras, and it stipulates the 
 completion of the Inter-Oceanic Railway a most important work 
 for the Republic. 
 
 You will see that it also proposes to cancel the foreign loans of 
 Honduras at the rate of 200,000 per annum, in exchange for a 
 payment by Honduras to the Foreign Bondholders of the Railway 
 and other properties mortgaged to them, so that in twenty-six years, 
 the Foreign Debt of Honduras will be cancelled. 
 
 The first four annual installments of 20,000 each can be at 
 present easily payed by the country, and the surplus at the end 
 of each period of 4 years will be more than balanced by the in- 
 crease of the revenue of the country due to the great advance of 
 trade and progress in Honduras, which will be brought about by 
 the construction and operation of the Inter-Oceanic Railway. 
 
 The Squier Syndicate has made possible the projected arrange- 
 ment with the Bondholders through a payment to the 'Corporation, 
 as purchase value of the Inter-Oceanic Railway, at the rate of 
 2.10 in cash for each 100 in Bonds presented for redemption. 
 The amount required for the redemption of the total number of 
 Bonds at the rate of 2.10 is $650,000 gold, to be paid immediately 
 upon the completion of the arrangements. 
 
.60 
 
 .It is a pleasure for me to inform YOU that the President of 
 the Squier Syndicate, Mr. Frank Squier, is a brother of E. Geb. 
 Squier, who dedicated so many years of his life to the advance- 
 ment of the interests of Honduras, being instrumental for the 
 devolution of the Bay Islands to this Country. 
 
 Finally, I can say that the works of the Northern Railway of 
 Ouatemala, having been started again formally, it is of great 
 importance to establish the works of the Inter-Oceanic Railway of 
 Honduras before completion arises in the neighboring Republic. 
 With the highest consideration, etc., 
 
 (Signed) W. J. BAIN, 
 
 Representative of the Corporation of 
 
 Foreign Bondholders. 
 
 PROJECT OF LAW FOR THE SETTLEMENT OF THE 
 FOREIGN LOANS', WHICH THE NATIONAL CON- 
 GRESS OF HONDURAS SHALL ISSUE. 
 
 Article 1. Subject to the provisions of Article 10, of this, 
 ihe S'tate absolutely cedes and assigns to the holders of Bonds of 
 the Loan of the 10% (1867), of the Loan of 6 2/3% (1869), and 
 of the Loan of 10% (1870) which hereafter will be called Rail- 
 way Loans the Inter-Oceanic Railway of Honduras, from Puerto 
 Cortes, on the Atlantic Coast, to the Bay of Fonseca, on the 
 Pacific, with all its equipment and revenues, and also all the 
 domains and forest of the State with all their products and pro- 
 ductions, such as Mahogany and other woods, etc., as they are 
 described in the concessions of said Railway, granted in the years 
 of 1853 and 1865, and assigned and mortgaged for security of said 
 Railway Loans on the terms of their issue, and also said Conces- 
 sions and all thejr rights, in trusts, benefits and advantages by 
 them respectively granted. 
 
 Article 2. The Cession and assignment made in Ihe preced- 
 iHicle are made with the object that the holders of Bonds of 
 said L'ai n- IIIMV lr;in>!Vr or invest the same. Mini nil 
 
 proper t. concessions, riirhis. interests, benefits and advantages in 
 them involved or by them <le>rrihe<l to or in the Squire Syndicate, 
 of New York (which ha- nj.-rpd into agreements with the Govern- 
 ill. c..iiij.letioii l.v its appointees, or concessionaires, of 
 
67 
 
 said Railway), in exchange of the payments or security for the 
 payments by it to said Bondhiolderrs, prescribed by an agree- 
 ment made in London., the fourth day of December, of 1902, be- 
 tween the Syndicate and the Corporation of Foreign Bondholders, 
 the latter acting jointly with the Committee of Bondholders of 
 the Eailway Loans of the State of Honduras, and in representation 
 of said Bondholders. 
 
 The State by these presents agrees to and approves the absolute 
 investment in the Squier Syndicate of all the rights of the holders 
 of the Railway Bonds at the time and in the cases in them men- 
 tioned and established. 
 
 Article 3. For the Amortization of the Bonds of the Railway 
 Loans and of the 25% Loan of 1867, the Government will pay to 
 the Agents- of the Bondholders in Honduras the following amounts, 
 as follows : 
 
 (1) The sum of 20,000 in each one of the first four 
 years, which will begin and contains from the first 
 day of July of 1903. 
 
 (2) The sum of 24,000 in each one of the next follow- 
 ing four years ; and in the fifth and following years 
 equal annual sums increased by 4,000, after each 
 period of four years until it amounts to 40,000 in 
 the twenty, first year and continuing so and until 
 and while the amortization at a rate of 200,000 
 per annum is accomplished according as is provided 
 for in the following Article. 
 
 Article 4. The sum above mentioned shall be applied by said 
 Corporation for the redemption of the said Loans in such manner 
 that Bonds to the amount of 200,000 of one or more of said Loans 
 with all their unpaid coupons be cancelled in each year and de- 
 livered to the Government or its representative in London or 
 destroyed by incineration or otherwise as the Government may 
 order. 
 
 Article 5. The Corporation will be charged with the duty 
 of obtaining the Bonds and amortize them by offers of purchase or 
 .by drawing?. The amortization will be effected as soon as possible 
 after the funds are deposited every six months according to the 
 plan that the Corporation shall devise and be submitted to and 
 approved by general meeting of Bondholders which the Corporation 
 
68 
 
 will convene at London. The aforesaid plan shall make provision 
 for the repayment to the Corporation of all expenses for all facts 
 and external negotiations and for the execution of the arrangement. 
 ft must establish also the details to carry through the operation, 
 always subject to the condition that Bonds to the amount of 200- 
 000 be annually redeemed as above prescribed. 
 
 Article 6. For security of said annual payments the State 
 assigns and mortgages all the Customs Revenues of the Republic, 
 and said annual payments shall be a first and preferential obliga- 
 tion over any other payment. To this effect the collection of 
 Customs of Puerto Cortes is authorized and ordered irrevocable by 
 this law, and without necessity of new order from the Government 
 to pay every week to the agent of the Bondholders in Honduras, 
 who shall be appointed by the Corporation, the fifty secondth part 
 of the annual installment then in course, according to Article 3,. 
 of this law, besides (as per account rendered by the Agent from 
 time to time) the expenses made by him for remittances to London 
 and the exchange expenses. If at any time the income of the 
 Custom House of Puerto Cortes were not sufficient to provide the 
 amount required, the weekly payment will be completed from the 
 Custom House designated by the Government in accord with the 
 ( 'orporation of Foreign Bondholders. The Agent will remit to the 
 Corporation every two weeks the funds collected. 
 
 Article 7. If in any year the Customs Revenues giv" any 
 surplus after providing tl'e payment in gold of the annual sums 
 in Article 3. and alter selling aside $1,000,000 for the expenditures 
 of the Government, 25% of such superabit will be paid bv the 
 (iovernmeni to the Corporation and distributed as an addiiional 
 payment amonr the Bondholders, as shall he determined in the 
 plan mentioned in Article ". 
 
 Article S. The afore-aid payments will continue faithfully 
 and punctually, in peace or in war. and shall also lie free of tax&j 
 of ;iny charirc by the Stale. 
 
 Article !>. The (iovernmenl of Honduras will invite the Gov- 
 ernment- of (ireat Hrilain and the Tinted Mates to take -\ formal 
 note of tin- arrsmirements cMWicd hy this law. 
 
 Article 10. The arranvj-menl herein made will Infill to he in 
 and may he (.iterative ami binding "i> lite State ;md the Koiid 
 hold' "ii a- ihev are accepted hy a^ iv\ olul ion at a general 
 
69 
 
 meeting of the Bondholders, which the Corporation of Foreign 
 Bondholders will convene according to the laws and by-laws of said 
 CorDoration; a:ptf_which will take place in London, and when the 
 said '.re volution be approved then all the rights of the holders of the 
 Railway Loans, either by the obligation of the original mortgage or 
 the security given by the Bonds of said Loans, or by Article 1 of 
 this law, and by the same ceded and assigned, or that is expressed 
 to be so, will be absolutely invested in said Squier Syndicate, as 
 its own property and free of any pretension or claim on the part 
 -of the Bondholders. 
 
 AGREEMENT. 
 
 Agreement made this 4th day of December of 1902, between 
 the Squier Syndicate, of New York (hereinafter called "The Syndi- 
 cate"), of the one part, and the Corporation of Foreign Bond- 
 holders of London, acting in this in accord with the Committee 
 -of the holders of Bonds of the External Loans of Honduras, say 
 of the State of Honduras, and as representative of the holders of 
 said Loans (hereinater called the "The Corporation" and the 
 "Committee" respectively), of the other part. 
 
 Whereas, the external loans of the State of Honduras are the 
 following: Loan of 5% of 1867, of 10% of 1867, of 6 2/3% of 
 1869, and of 10% of 1870 the three last ones named hereinafter 
 "Railway Loans." 
 
 Whereas, the holders of Bonds of said external loans and the 
 "Corporation and Committee as their representatives, respectively, 
 are desirous to arrive at an arrangement in respect to the Claims 
 with the Government of said State of Honduras, and they have been 
 ^and now are negotiating with said Government with the end of 
 obtaining this object. 
 
 Whereas, the Bonds of the Railway Loans are especially 
 guaranteed by mortgage or charge on said Railway and domains 
 and forests of the State and other properties. 
 
 Whereas, the subject of this agreement has been under the 
 study of the Committee, which gave its approval .by resolution 
 passed on the 20th day of November of 1902. 
 
 Therefore, by the consideration hereafter consigned it has 
 been agreed between the Syndicate on one part and the Corporation 
 on the other part, to the following: 
 
70 
 
 1. The Corporation will use its best efforts to carry through 
 an arrangement about the foreign loans and for an agreement with 
 the Government on this subject, and for the approval by Congress 
 of the State of Honduras, of a law for the settlement of the ex- 
 ternal debt of the State, on the terms consigned in the project of law 
 contained in the draft attached, with such modifications (if any), 
 as the Syndicate and the Corporation may mutually approve; and 
 the Syndicate (as far as in its discretion may reasonably do and 
 when the Corporation may request from it), will co-operate with 
 the Corporation in its efforts to obtain the aforesaid object. 
 
 'I. The Syndicate will use its best efforts for obtaining from 
 the Government of Honduras, and in case the Government deemed 
 proof of the ability or capacity of the Syndicate, or its Agents, or 
 cessionaires necessary to complete said Railroad within a reason- 
 able time, and will use too its best efforts to make or carry through 
 a definitive and binding agreement with the Government (under 
 the condition of the approval of the law referred to in the Clause 
 1, and the approval of the Resolution of the Bondholders in a 
 General Meeting, and mentioned and prescribed in the next Clause 
 3, which must be held simultaneously and immediately before or 
 soon after the preceding clause), for the completion of said Rail- 
 way within a reasonable time and on account of the Syndicate, its 
 Agents or cessionaires; and the Corporation (as far as it is 
 reasonably able in its discretion, if the Syndicate demands it), will 
 co-operate with the Syndicate in its efforts to make or carry 
 through the proposed arrangement. 
 
 \Vhen the law mentioned in Clause No. 1 be approved, and 
 the arrangements mentioned in Clause No. 2, for the completion of 
 said Railway lie terminated and delivered to the Syndicate, and 
 tin- Syndicate has put in the hands of the Corporation tin- security 
 or rnaninty mentioned in the next following Clause No. 4, then the 
 Corporation shall convene, as soon as possihle. a General Meeting 
 ndholders of the Foreign Loans, in conformity with its rules 
 and reiMdations. which will he held in London, with the object of 
 approMni: a n>o hit ion accepting tin- arrangement provided by said 
 
 .ind hy li Mieiit : and shall also invite the Bondholders 
 
 to depo-h their I'.onds with the Corporation for the purpose of 
 ri^ out -aid arrangement : and the Corporation and the Com- 
 mittee -hall iveommciid and employ their best efforts to obtain its 
 
 appro 
 
71 
 
 4. When the law mentioned in Clause 1 be approved, and the 
 arrangement mentioned in Clause 2 for the completion of said 
 Railway be terminated, and before the meeting mentioned in Clause 
 3 takes place, it is agreed that the Syndicate will deliver to the 
 Corporation a security or guaranty by a Bank or firm established 
 in London to the satisfaction of the Corporation (subject to the 
 approval of the resolution by a General Meeting, as before stated) 
 to make the following payments to the Corporation on account of 
 the Bondholders of the Railway Loans in this form : 
 
 (1) The sum of 2.10 for every 100 Bonds of said 
 Railway Loans to be deposited with the Corpora- 
 tion in acceptance of said settlement, within three 
 calendar months after the issue by the Corpora- 
 tion of public notice inviting such deposit. 
 
 (2) The sum of 2. for every 100 Bonds of said Rail- 
 way Loans deposited, as has been already said, after 
 the expiration of three calendar months, and before 
 the expiration of three calendar months, of the 
 first publication of said notice. 
 
 (3) The sum of 1.10 for every 100 Bonds of said 
 Railway Loans to be deposited as hereinbefore 
 stated, at the expiration of six calendar months and 
 before the expiration of one year since the publica- 
 tion of said notice. 
 
 5. With the resolution of the Bondholders in General Meet- 
 ing aforementioned and established in Clause 3, being approved, 
 all the rights of the Bondholders of the Railway Loans and also 
 the first mortgage or guarantee given for the said Railway Bonds 
 or by said law to and upon said properties of the Railway and any 
 other properties, are to be transferred absolutely to the Syndicate 
 as its own property, released from all claims by or from the Bond- 
 holders, and the Syndicate will be authorized to take possession of 
 said Railway and properties accordingly, and the Corporation will 
 withdraw its claim in behalf of the Bondholders, and at any time 
 after at the request of the Syndicate, after the approval of said 
 resolution, will deliver to the Syndicate proof sufficient and 
 adequate .duly authorized) of the approval of said resolution, as 
 has been stated and mentioned at and established in Clause 10, of 
 the Project of Law consigned in the minute attached with the- 
 
72 
 
 certificates and copies duly drawn of said resolution, and the rules 
 and regulations of the Corporation of Foreign Bondholders, show- 
 ing that said resolution has been duly approved and in conformity 
 with them. 
 
 6. If this agreement does not become effective on or before 
 the 30th day of June of 1903 or at least on that date one of 
 both parties may, by notice in writing to the other, and sent by 
 mail to their respective offices in London and New York, terminate 
 this agreement and by that fact would be ended, and the rights of 
 the Bondholders will remain unaffected and in full vigor as if this 
 agreement was never celebrated. Taking into consideration always 
 that if this agreement is not made effective on or before the 30th 
 day of June of 1903, due directly or indirectly to War, Revolution, 
 or any circumstance which may be considered as "force m&jor" 
 then the period during which the same has not been terminated 
 under the option and benefit of what it contains it will be con- 
 sidered extended for such time as shall correspond with the time 
 of the continuation of the circumstances which had interfered in 
 this agreement not being effected; such period and the question of 
 efficiency in case of dispute between the Corporation and the Syndi- 
 cate will be decided by Arbitration in England, under the provi- 
 sions of the Arbitration Act of 1889. 
 
 (Signed) AVEBURY, 
 President of the Corporation and the Committee. 
 
 (Signed) ALBERT E. TURNKK. 
 
 Agent for the Squier Syndicate. 
 
 Authenticated by .hunt's P. Cooper, Secretary of the Corpora- 
 tion of Foreign Bondholders. 
 
 Approved by tin- S<|iiier Syndicate. New York, on the K>th 
 of December. 1!K)2. 
 
 .Tied) D. BROOKS CAKNSKY. Secretary. 
 1'1,'ANK SoriKlf. President. 
 
 \\IT\I 
 
 Signed) MKi:vi\ s. NKAU. JR., 
 
 Neu York Count \. N Y. 
 
Official Record, 
 1903. 
 
75 
 
 Official Record, 1903. 
 
 PROJECT "SQUIEK SYNDICATE." 
 ARCHIVES OF FOMENTO. 
 
 ADMINISTRATION OF PRESIDENT MANUEL BONILLA. 
 
 1903. 
 
 No. 1. "A" April 25th W. J. Bain, Agent of the Bondholders 
 to the President Manuel Bonilla. 
 
 "I have the honor to enclose to Your Excellency the Project 
 of the Law, traced by the Bondholders, for the extinction of the 
 Exterior Debt of the Republic, including- the Federal Debt guaran- 
 teed by the products of the Customs of Amapala." 
 
 "Furthermore, said arrangement is combined with an agree- 
 ment between 'The Squier Syndicate' and the Corporation of 
 Foreign Bondholders, by the terms of which they pay 2.10. in 
 cash for each 100 of Bonds and promise to complete the Rail- 
 way." 
 
 "This Troject for a Law 7 has been approved by the Govern- 
 ment of H. B. M., and as the basis is so favorable for the Govern- 
 ment of Honduras, no doubt that it will be well supported by 
 Your Excellency." 
 
 I am, Your Excellency's etc., etc. 
 
 No. 1 "B." Project for a Law for the arrangement of the Ex- 
 terior Loans that the Congress of the State of Honduras shall 
 emit. Articles 1 to 10. 
 
 No. 2. Project of the arrangement of the Foreign of Hondu- 
 Honduras and construction of the Inter-Oceanic Railway, as. sub- 
 mitted by Mr. W. J. Bain, the 1st of May, 1903. 
 
 Explanation of the generous conditions, with a Table demon- 
 strating the cancellation of the Debt in 27 years. 
 
 No. 3. Agreement made the 4th of December of 1902, be- 
 
re 
 
 tween the "Squier Syndicate'' of New York and the Corporation of 
 Foreign Bondholders of London. 
 Preamble and 6 Articles. 
 
 (Signed) AVEBTJRY, 
 
 President of the Corporation and 
 Chairman of the Committee. 
 
 BY SQUIER SYNDICATE. 
 
 Albert Turner, Agent. 
 
 " FRANK SQUIER, President. 
 
 " D. BROOKS GARXSEY, Secretary. 
 
 Witnesses to the signatures of the Rt: Hon: John Baron 
 Avobury and Albert Turner. 
 
 (Signed) JAMES P. COOPER, 
 Secy : of the Corp : of Foreign Bondholders. 
 
 Witnesses to the signatures of Frank Squier and D. Brooks 
 Garnsey, 16th December, 1902. 
 
 (Signed) MERVIX S. NEAR, JR., 
 
 Xew York County. \. Y. 
 
 No. I. Agreement of the 4th of December, 1902, between the 
 "Squier Syndicate" of Xew York, and the Corporation of the 
 Holders of Bonds, in English. Also the Project of Law. 
 
 No. 5. Agreement proposed between the Government of Hon- 
 
 luras. in ('. A., and the "Squier Syndicate" they acting under the 
 
 provisions agreement dated in London, December 4th, 190, with 
 
 < orporation of Bondholders, simultaneously, as supplementary 
 
 inenN. Arts. 1/22. 
 
 No. ('. Communication of Solomon Onlnncx, (Jeneral Min- 
 i-tT !' \\'. .1. Bain, over his powers. May .">, 1 ( .M):;. 
 
 No. *. ( 'oninninicat ion of Solomon Ordonex, Minister (len- 
 <-ral to \V. .1. Bain. May I'.Mli. 
 
 Mr. Bain to the Min. (i.-neral. May 1 1. I'M):;. 
 No. 9, Mr. Bam to ilie Min. (Irm-ral. Mav 1!'. l'.>>:;. 
 \o. M>. 'I'll.' (ii-in-nil Minister t the National ( 'oM'_ r iv. 
 uith all the document-. May g&, I'.M):;. 
 
 I 1. \\ . .1. Itaiii to IVeHdn.t lloiiilla, Mav 86, I'.Hi:;. 
 
 l.'.-ohitioti of National Cmi^ress that returns the 
 ' 
 
i i 
 
 Xo. 13. W. J. Bain to Sotero Barahona (personal), June \2 r 
 1903. 
 
 Xo. 14. W. J. Bain to Mr. President, June 2, 1903, with 
 copy of a letter to Mr. Barahona. 
 
 Xo. 15. W. J. Bain and E. A. Turner to Mr. President, June 
 (>, 1903, refers to an omission in the translation of the Project of 
 Law, Art. 2. 
 
 Xo. 16. Powers from W. J. Bain, as representative of the 
 Bonholders., on the 5th February, 1903. 
 
United States' Protest, 
 1903. 
 
81 
 UNITED STATES PEOTEST. 
 
 TELEGRAM. 
 
 Guatemala, June 3, 1903. 
 Minister of Foreign Kelations, Tegucigalpa: 
 
 My Government disproves the terms of the proposal of the 
 Squier Syndicate. 
 
 I am opposed that an American corporation shall be the 
 medium of celebrating an arrangement between Honduras and the 
 Foreign Bondholders, with respect to a debt relative to which i& 
 alleged grave frauds, illegalities and injustice. 
 
 I beg the honor of a reply by telegraph to this message. 
 
 (Signed) LESLIE COMBES, 
 Minister of the United States. 
 
Official Report 
 
 to 
 
 Congress, 
 1904. 
 
85 
 
 OFFICIAL REPORT TO CONGRESS. 
 
 Extract of memorial presented to the National Congress by 
 the Secretary of State in the Department of Improvements and 
 Public Works for the years 1902 and 1903. 
 
 Under the date of April 25th, Mr. W. J. Bain, as agent of the 
 Bondholders of the Foreign Debt of Honduras, presented to the 
 Government a "Project of Law" devised by the bondholders, pro- 
 viding for the extinction of the debt and for the holders of the 
 bonded debt to construct the railroad. 
 
 Should the arrangement be accepted, they would guarantee 
 themselves out of the proceeds of the customs of Amapala, 
 
 Regarding this project, the communication which crossed 
 between the Minister of Honduras and Mr. Bain and the rest of 
 the antecedents in the case, an account is given to Congress May 
 23rd and 28th of same year, who saw fit to turn it over to the 
 Executive, to whom it pertains at present, to treat regarding the 
 proposition, with the parties interested, and submit the agreement 
 at convenience to your knowledge, conformable to the requirements 
 -of the Political Constitution of Honduras. 
 
 In view of this resolution the" Government, in order to proceed 
 with the greatest thoroughness, nominated on June 9th, two of 
 the ablest Lawyers of the Country, Don. P. J. Bustillo and Don. 
 Angel Ugarte, in order that, in representation of the Government, 
 conferring conjointly with the representative of the Bondholders of 
 the Foreign Debt of Honduras and with those of any other Com- 
 pany or individuals, who hold any interest in the proposition, to 
 arrange the said Debt and the construction of the Inter-Oceanic 
 Railway across the territory of the Republic and also leasing the 
 section of same already constructed; giving equally ample powers 
 to Messrs. Bustillo and Ugarte, by which if they arrive at a 
 satisfactory conclusion they may from the Contracts which they 
 judge necessary, respecting the points previously explained, giving 
 account of those to the Government, by which they arrive at the 
 resolution which they believe convenient, and authorizing said 
 representatives that they can propose a Secretary and two clerks, 
 
86 
 
 which can be nominated for the Office, and which they can use, 
 in the fulfilling of their Commission, and of all the documents 
 which they can obtain in the National Archives and Public Offices, 
 concerning the matter with which they are charged. 
 
 The Conferences and other acts it will be the duty of Messrs. 
 Bustillo and Ugarte to put in a special record. 
 
 On June 15th, the representative of the Government held the 
 first conference with Mr. W. J. Bain; the latter being the repre- 
 sentative of the Bondholders of the Foreign Debt of Honduras, 
 and after three more days, 17, 20, 22 of the same month, in 
 which they met to discuss the Powers of Attorney of Mr. Bain. 
 The representatives of Honduras observed that the legal conditions 
 necessary to constitute him absolutely the representative of the 
 Bondholders : 
 
 (1) Because, being the corporation of Bondholders of Lon- 
 don, an anonymous society, it is indispensable that Mr. Bain 
 fills the requirements exacted by our laws, in order that he may 
 treat in the name of the persons who have conferred upon him the 
 power to compromise them. 
 
 (2) Because, speaking in the name of the Committee of 
 Foreign Bondholders, it is indispensable to produce the act in 
 which the Bondholders, in meeting convened for that purpose, did 
 constitute the Commission, of which he speaks, and the powers 
 which they conferred on him. 
 
 Mr. Bain answering the observations that were made, stated 
 that his powers gave him the authorization of the Corporation of 
 Bondholders, acting conjointly with the Committee of Bondholders 
 of the Foreign Bonds of Honduras, to represent the Corporation, 
 the said Committee, and the holders of Honduras Bonds; and to 
 act in favor of each of them respectively, and in their name nego- 
 tiate with the Government of Honduras an arrangement over the 
 
 in-ill printed and added to the written Power of Attorney, 
 jind upon the "Project of a Law," which in this agreement refer- 
 ence is made; and, in Lreneral, to negotiate with the Government 
 of Honduras an arrangement over the Foreign Debt of the Re- 
 public, ohli^atin'j liic corporation referred to, to ratify everything 
 thai w;i- le.L r al in respect to it: llial -aid Power has ant hori/cd him 
 
 iifonniiy with the laws and n-L-ulat ions of the corporations, 
 
87 
 
 as indicated in the final paragraph,, and indispensably requisite* 
 because it was signed by the President of the Corporation, which 
 gives it its Official character, and which already owes its existence 
 to an act of Parliament, and the signature of the President is 
 unquestionable, because the document is authentic. 
 
 The Power must be examined for the terms in which it was 
 conferred, not singly, but in relation to the printed Agreement, 
 which is attached, made in London, December 4th, 1902, and in- 
 flation with the "Project of Law/' to which this agreement refers, 
 which is also attached; which in Article 5, of this "Project of 
 Law" declare, that the amortization of the Bonds will be effected 
 conformably to a plan which the corporation outlined, and which 
 will be approved by a general meeting of Bondholders, convoked 
 by Corporation for verification in London, that Article 10 of said 
 "Project 77 establishes that those arrangements which are made will 
 not be effective, and will not obligate the State and the Bondholders 
 until they may be accepted by Eesolution of a General Meeting of 
 said Bondholders, which the Corporation will convoke conformable 
 to the laws and regulations, which binds it, and will take place in 
 London; which established -that Officially that the Corporation of 
 Bondholders represents by means of its President, the holders of 
 Bonds, and makes clear that the same President of the Corpora- 
 tion is the President of the Committee of Honduras, the representa- 
 tion conferred by the Power cited, is full, notwithstanding what it 
 does in the exercise of this power upon the "Agreement" and "Pro- 
 ject" presented, holds that it be approved by the Bondholders in 
 General Meeting; that the Corporation of Bondholders and the 
 Committee of Honduras has not been organized conformably to the 
 laws of Honduras regards anonymous societies, then it owes its 
 existence to English Laws, and these Laws at the same time that 
 they protect the rights of the claimants will be the safeguard of 
 the rights of Honduras, that an Official Corporation does not dare 
 to do wrong ; and that in consequence, hopes that holding the rep- 
 resentation good, true and perfect, it is in order to pass to the 
 study of the "agreement" and the "project"*presented to the Gov- 
 ernment for the ensuing results. 
 
 The representatives of Honduras replied : that for the terms- 
 of the Act or Decree of the English Parliament, copy of which 
 Mr. Bain presented, the Corporation of Bondholders is an anony- 
 
88 
 
 mous society, and that in conformity with the principles of Inter- 
 national Law and tlu> Legislation in force in Honduras, its repre- 
 sentatives cannot exercise any such act without being competently 
 authorized according to our prescribed laws; that it only required 
 that Mr. Bain complies with the laws of Honduras, so that he 
 can bind his constituents; that Mr. Bain has not produced the act 
 in which it is made clear that the Corporation of Holders of Foreign 
 Bonds and the Committee of Bondholders of Foreign Bonds of 
 Honduras have constituted a Committee; that which is not demon- 
 strated by the act, by which the President and Vice-President of 
 the Corporation of Holders of Foreign Bonds may be the same as 
 the Committee of the Holders of Bonds of the Foreign Debt of 
 Honduras, apparently the one and the other are distinct entries. 
 
 For these reasons, Messrs. Bustillo and Ugarte declares they 
 cannot treat with Mr. Bain regarding any business referring to 
 the Foreign Debt of Honduras. 
 
 Mr. Bain protested and the Representatives of the Government 
 did the same. 
 
 Mr. Ugarte went to the United States and Europe, commis- 
 sioned by the Government, for which reason Mr. Bustillo continued 
 alone studying the matters concerning our Foreign Debt. 
 
 Tegucigalpa, January 7, 1904. 
 
 (Signed) ALBERTO MEMBREXO. 
 
The Garden's Agreement, 
 1909. 
 
91 
 
 PROPOSAL OF BRITISH MINISTER GARDEN, 
 
 Tegucigalpa, March 10, 1909. 
 
 General Miguel Oqueli Bustillo, 
 
 Minister of Finance and Public Credit, City. 
 
 My Dear Friend: As I promised to His Excellency, the 
 President of the Republic, and to you last night, I have the 1 
 pleasure to herein inclose the data which I have used to form 
 the project for the settlement of the debt, which I have had 
 the honor to submit to the consideration of the Government of 
 Honduras. 
 
 The essential part of the project, as you know, consists in 
 the payment by Honduras of 1,600,000 in forty yearly install- 
 ments of 40,000 each. 
 
 To carry into effect these payments the Government assigns 
 to the Council of Foreign Bondholders the net proceeds (usu- 
 fructo) of the railway and wharf, besides an additional impost 
 of 15 per cent over the import duties, which will be payable 
 by means of special certificates, which shall be delivered to the 
 Council for sale in the several ports of the Republic. 
 
 Complying with these conditions, the Government has no 
 other responsibility if for any eventuality the collections from 
 the aforesaid revenues in one year do not produce enough to com- 
 plete the payment of said annuity of 40,000. In such case the 
 deficit shall be covered with jthe surplus of the following year or 
 years. 
 
 Herewith I inclose some tables which show the reasons that 
 I have to believe that the said revenues not only will give the 
 amount needed to cover the forty installments of 40,000, but will 
 leave a big surplus. 
 
 The table No. 10 shows the increase obtained in three of the 
 most important railways in Mexico, which proves what can be ex- 
 pected in Honduras-. 
 
 The table No. 11 shows the relation between the operating 7 
 expenses to the gross earnings of thirteen railways in several 
 countries of Latin America, which give an average of 60%. 
 
 The table No. 13 shows the products which may be expected' 
 of the existing railways, starting from the basis of actual earn- 
 nigs, to, say, 40,000 per annum. 
 
92 
 
 In the lirst of these tables the cost of operation is estimated 
 in <;5%, and in the second 70%. In both is subtracted the sei'- 
 vice of interest and sinking fund of an issue of 80,000 of rail- 
 way reronstruction bonds. 
 
 It has been estimated an annual increase of the gross earn- 
 
 f the railway of 10', in each one of the next nine years. 
 
 and 5% on the succeeding years. It may be noticed that this in- 
 
 crease per centum is calculated upon the products of the first 
 
 year instead of every preceding year, which is more favorable. 
 
 Table No. 1!) show* the products of the wharf (its increase 
 being calculated on the same basis), taken as a whole with those 
 of the railroad; calling vour attention to the fact that the last 
 ones are estimated upon the basis of a cost of operating of r..v ;- 
 of the gross earnings. 
 
 To figure out the difference in case the expenses of operation 
 would be 70% instead of 65%, one only has to reduce the figures 
 of the seventh portion. 
 
 Table No. !) shows the increase of the import duties in the 
 la-t ten years, which gives an average of 5.51%. 
 
 In in those years of war and revolutions there has been such 
 an increase, surely it is not Improbable to expect a continuance 
 in the future, even not taking into consideration the necessary 
 n Milt of the rehabilitation of Xational credit abroad. 
 
 This table shows, beside-, what, can be expected from the 1.")% 
 additional which it is proposed to establish on said customs 
 
 The first column of table *() shows the total expected prod- 
 
 of ra'lroad and wharf: the second one the !.">% additional 
 <":f the import duties; and the third one the surplus in fa\or of 
 the (iovermnent, sul t ract ing the amount of the annuities of 
 
 "i<>. \\hicb will be applied to the amort i/at ion of the debt. 
 
 I avail of tin- ppu t unit v to repeat to vou once more vour 
 
 Wend, v\ 
 
 3 -ned) UONKL GARDEN, 
 
93 
 
 BASIS WHICH THE GOVERNMENT OF HONDURAS AC- 
 CEPTED FOR THE SETTLEMENT OF ITS FOREIGN 
 DEBT IN MARCH, 1909. 
 
 Tegucigalpa, March 11, 1909. 
 
 Article 1. It is taken as a basis of settlement the sum of 
 452,000, as representative value of the external debt originated 
 from the four loans of 1867, 1869 and 1870, acknowledging on 
 that amount of the interest of 8.86% during the time of its amor- 
 tization, which is here fixed in forty years and installments of 
 40,000. 
 
 Article 2. The said annuities shall be applied by drawings 
 or by purchases to highest bidder to the amortization of the bonds, 
 in the following proportion: 
 
 1st Drawing of 1,000,000 at 20% 200,000 
 
 2nd Drawing of 1,000,000 at 25% 250,000 
 
 3rd Drawing of 1,000,000 at 30% 300,000 
 
 4th Drawing of 1,000,000 at 35% 350,000' 
 
 5th Drawing of 1,398,570 at 40% ......... 559,428 
 
 5,398,570 1,659,428 
 
 Article 3. The holders of bonds shall present their titles 
 to the Council of Bondholders in London within twos years, to- 
 be stamped in accordance with the present stipulations in order 
 to enter to the amortization. 
 
 Article 4. For the payment of the forty annuities of 40,000 
 referred to: 
 
 (a) The Government cedes and assigns to the bondholders 
 the usufruct (net earnings) of the Interoceanic Railway and 
 Wharf of Puerto Cortes for forty years, or until the debt is extin- 
 guished, if this can be effected before, the bondholders taking; 
 charge of its administration and opreation. 
 
 (b) The Government will issue bonds of first mortgage orr 
 the railway for the amount of 100,000 to provide funds which 
 will be applied to the necessary improvements, the Council of 
 Bondholders being obligated to contract their sales to best possible 
 rate. The service of interest and sinking fund of these bonds shall 
 be preferential charge on the net products of the railway. 
 
94 
 
 <(c) The Government will assign also for the payment of 
 the .annuities referred to the proceeds of an additional impost of 
 15% on the import duties which shall be established to this effect. 
 
 This import shall be collected specially and exclusively by 
 means of customs certificates, which shall be issued at the time 
 of signing the contract of the settlement of the debt, depositing 
 them in the hands of the? trustees, and delivering them to the 
 agents of the bondholders for their sale to the merchants accord- 
 Ing as they are needed. 
 
 Article 5. The products of the revenues referred to in the 
 preceding clause shall be applied by the Council of Bondholders, 
 in the first place, to the payment of the said forty annuities of 
 4.0,000, depositing the surplus, if any in any year, in a bank to 
 the order of the Government, but under the precise condition that 
 It must be applied exclusively for the payment of the contracts 
 that the Government makes for construction of railways. 
 
 Article 6. If for any eventuality the products of the reve- 
 nues of which mention is made in Article 4 would not suffice in 
 one year to complete the payment of the annuity of 40,000, the 
 deficit will be completed with the surplus of the next following 
 year, or years, without bearing interest. 
 
 (Signed) LIONEL GARDEN". 
 
 LETTER OF THE HONDURAS MINISTER OF FINANCE 
 TO MINISTER GARDEN. 
 
 Tegucigalpa, March 11, 1909. 
 Excellency Lionel Garden, Minister of H. B. M., City. 
 
 Dear Sir and Friend: Bein<: agreed upon the basis of a set- 
 tlement of the external deht, and though the President lias exact 
 idea of the important of tin- re-establishment of the credit of the 
 Republic by the payment of her debt. I am compelled to man- 
 ifest to you thai HUM not he overlooked the heavy burden which 
 will he imposed upon the nation with the annual payment of 
 I'M). (Hid win,-}, in the arlual state of poverty would he \erv onerous 
 io the Honduras worker. 
 
95 
 
 Taking into consideration this circumstance, the - President 
 believing that he cannot justify before the opinion of his fellow- 
 citizens the delivery of the railway and wharf, besides the over- 
 charge of 15% on the customs duties,, without receiving in com- 
 pensation other direct and immediate benefit besides the rehabilita- 
 tion of the national credit. 
 
 What other benefits could be offered to the Honduran people 
 in order that they may receive with delight the agreement of the 
 settlement of the debt? No other is so agreeable to the country 
 than the immediate reconstruction of the first section of the Inter- 
 oceanic Kailway, and the construction of the second section, be- 
 sides the construction of branches to exploit the fertile lands on the 
 hamelieon and Ullua Bivers, as the cultivation of bananas con- 
 stitutes the main industry of the people on the north coast, and this 
 would enable them to carry easily the burden imposed on them. 
 
 To your Excellency it is a matter of easy understanding the 
 high reason of public convenience of these remarks, and you may 
 calculate their transcendency. Therefore, if the Government agrees 
 that the country make sacrifices for the rehabilitation of her credit, 
 also has a right to expect, and even to demand, that the creditors 
 contribute to help Honduras to redeem her debt, promoting the 
 development of her resources and population. 
 
 His Excellency the President believes that besides the proposed 
 basis of settlement must be stipulated the obligation of the creditors 
 to improve and extend the existing railroad, and build branches, 
 wi'th the first mortgage, as with its delivery, the rights of the bond- 
 holders are guaranteed (secured, protected). 
 
 The Government would feel sorry that the creditors do not 
 understand the importance of these remarks, because a failure of 
 this arrangement before public opinion, and consequently before 
 the National Congress, would redound in detriment of the Govern- 
 ment and the creditors themselves, and that would retard indefi- 
 nitely any understanding. 
 
 By all above stated, and in order to assure to the negotiations 
 a final success, I consider necessary to let the bondholders under- 
 stand that the Government will demand, besides the obligation of 
 reconstructing the road and improving its equipment, to continue 
 the line to the south and build branches, investing 200,000 which 
 may be obtained with the first mortgage of the railway. 
 
96 
 
 Furthermore: the Government understands that at the time 
 of closing the settlement of the debt, the Government and the 
 bondholders in common accord will give the administration of 
 the railway and wharf to a person or company who -shall accept 
 the obligations and rights which shall be stipulated in the contract 
 to be celebrated to that effect; and that the Government and the 
 bondholders will appoint an interventor, each., to verify the accounts 
 of administration,, and supervise the collection and inversion of the 
 ea ruings of railroad and w T harf. 
 
 Finally, the Government believes that at the time of cele- 
 brating the contracts will be stipulated all those conditions which 
 will fix the mutual guarantees. 
 
 With my best distinguished consideration, it is a pleasure to- 
 remain your friend, 
 
 (Signed) MIGUEL 0. BUSTILLO. 
 
 BKITISH MINISTER TO PRESIDENT DAVILA. 
 
 N". 142 Cablegram. 
 
 Guatemala, 25th of June, 1909. 
 
 Received in Tegucigalpa 25th June, 10:30 p. m. 
 To His Excellency the President of Honduras, Tegucigalpa: 
 
 By instructions received from my Government I have the 
 honour to advise your Excellency of the acceptation on the part 
 of the Council of Foreign Bondholders of London of the basis of 
 the arrangement of the foreign debt of Honduras proposed by 
 your Excellency the llth of March of the current year. 
 
 At the same time I have the pleasure of expressing the satis- 
 faction with which the -Government of H. B. M. has seen the good 
 disposition and eonciliatorv spirit displayed by the Government 
 of \oiir Kxeelleney in the negotiations, due to which it has been 
 made possible to arrive at a solution so satisfactory and honorahle 
 for Until par; 
 
 (Si-ned) lilMTISH MIMSTKi;. 
 0, K. 11 I. 
 
The United States' Interference, 
 1909. 
 
99 
 
 MEMORANDUM OF MINISTER BROWN. 
 
 Under instructions from my Government,, which I have just 
 received by telegraph, I have the honor and the pleasure to in- 
 form the Government of Honduras that the firm of J. P. Morgan 
 & Co. has informed my, Government that they are prepared to 
 agree in the arrangement of the foreign debt of Honduras., the 
 delivery of the railway and wharf of Puerto Cortes, and the ad- 
 vancement of a substantial amount for internal improvements 
 which may be necessary, acquiring new bonds which must be duly 
 secured. 
 
 Messrs. Morgan & Co. have notified my Government that 
 the Council of Foreign Bondholders had accepted the proposal of 
 Morgan & Co., who now have control of the British and American 
 securities, including the railway and wharf, and that the Council 
 of Foreign Bondholders, acting in behalf of the holders of bonds, 
 have informed the British Secretary of State for Foreign Affairs 
 of the foregoing, and that the Secretary of State for Foreign Af- 
 fairs having cordially approved the new project, has, by request 
 of the Council of Bondholders, given notice to Minister Garden 
 of the change in the situation. 
 
 I have instructions to manifest that if the Government o (! 
 Honduras would send a special agent to the United States with 
 full powers to negotiate with Morgan & Co., the Government of 
 the United States would extend to him all facilities. 
 
 I beg to add that the Government of the United States feel 
 itself happy to see, in the said proposals, the prospect of a good 
 result and for a settlement upon a favorable basis for the amorti- 
 zation of the National debt, which would be for the prosperity,, 
 tranquility and National strength of Honduras. 
 
 (Signed) PHILIP BROWN. 
 Tegucigalpa, July 17, 1909. 
 
100 
 
 BRITISH MINISTER GARDEN TO MINISTER OF 
 FOREIGN RELATIONS, HONDURAS. 
 
 British Legation, 
 Guatemala, July 31, 1909. 
 Mr. Minister: 
 
 Under instructions from H. B. M. Government, I must mani- 
 fest to Your Excellency, for the information of the Government 
 -of Honduras, that the Council of Foreign Bondholders feel sorry 
 that circumstances foreign to their will had obliged them to aban- 
 don the agreements for the settlement of the debt to which they 
 had previously consented. 
 
 The Government of Your Excellency is therefore relieved of 
 the compromises made with the British bondholders and is free 
 to enter into new arrangements. 
 
 I have sent to-day instructions by telegraph to H. B. M. 
 Consul ad interim in Tegucigalpa to notify Your Excellency in 
 the sense above referred to. 
 
 I avail of this opportunity to renew to Your Excellency the 
 protests of my most distinguished consideration and esteem. 
 
 (Signed) LIONEL GARDEN'. 
 His Excellency Dr. Don Jose Maria Ochoa, 
 
 } Finister of Foreign Relations, Tegucigalpa. 
 
Morgan's Proposition, 
 1909. 
 
103 
 
 CIRCULAR OF THE COUNCIL OF FOREIGN BOND- 
 HOLDERS. 
 
 HONDURAS EXTERNAL DEBT. 
 
 Holders of Bonds of the Honduras 5% Loan (1867), the 
 Railway Loan of 1867, the 6 2/3% Railway Loan of 1869, 
 and the 10% Railway Loan of 1870, are invited to forthwith de- 
 posit their Bonds with the Council of Foreign Bondholders against 
 the issue of negotiable deposited Securities to Messrs. J. S. Morgan 
 and Company, against a cash payment of 15. for each 100 of 
 existing Bonds with unpaid coupons attached, provided a settle- 
 ment of the Debts of Honduras under the auspices of the Govern- 
 ment of the United States is effected by the 4th of August, 1910. 
 
 Lists with the conditions of Deposits can be obtained on ap- 
 plication. 
 
 (Signed) JAMES P. COOPER, Secretary. 
 17, Moor^ate Street, 
 
 London, E. C. 
 
 5th of August, 1909. 
 
 CONDITIONS OF DEPOSIT. 
 
 (1) The Council is constituted the holder for the time being 
 of the deposited Securities and is invested with all the powers of 
 the actual owners thereof, and is authorized to deliver the deposited 
 Securities to Messrs.* J. S. Morgan and Company, against payment 
 in cash of the sum of Fifteen Pounds (15) in respect of each One 
 Hundred Pounds (100) Bond and unpaid coupons thereon, if and 
 when an arrangement satisfactory to Messrs. J. P. Morgan and 
 'Company is concluded between the United States of America and 
 the Republic of Honduras for the settlement of the Debt, of which 
 the deposited Securities form part, provided that such payment be 
 made on or before the 4th day of August, 1910. 
 
 (2) Should payment not be made by the date named, the 
 'Council, in accord with the Committee of Holders of Honduras 
 Bonds, is authorized to extend the above period or to negotiate 
 .any other arrangement and to act generally as they may deem 
 
104 
 
 expedient in the interests of the Certificate Holders; but any such 
 extension of time or arrangement shall only be binding on all 
 Depositors, if, and when ratified by resolution of a General Meeting 
 of the Certificate Holders convened by the Council in manner 
 provided by its Eules and Regulations, the Holders of Certificates 
 issued in respect of Honduras External Bonds of all classes being 
 convened and voting together. 
 
 (3) No Holders of Certificates issued in respect of deposited 
 Securities shall be entitled to claim delivery of such Securities 
 except on a general re-delivery to be made when deemed expedient 
 by the Council and Bondholders' Committee. 
 
 THIRTY-SIXTH ANNTAL REPORT OP THE COUNCIL OF 
 
 THE CORPORATION OF FOREIGN BONDHOLDERS. 
 
 FOR THE YEAR 1909. 
 
 EXTRACTS. 
 
 General Remarks (page 13). 
 
 In the case of Honduras, a quite unexpected development has 
 taken place, proposals having been put forward by Messrs. J. S'. 
 an and Company to purchase the External Bonds, subject to 
 an arrangement being arrived at between the United State? and 
 Honduras for the issue of a new loan, and the collection of the 
 revenues under the supervision of the United States Government. 
 
 arafl ( page 15). 
 
 Karlv in IDO'.i ;l s< heme for the settlement of the External 
 
 Debt wa- submitted hy tin- Council lo the ({overnment of Honduras 
 
 through the irood ollir.- ,,f M r . I/mud Cardcn. II. M/fi Minister 
 
 in Central Amerirji. This seheme \vas approved by the President 
 
 in March, hut before tb- necessary -leps could he taken to submit 
 
 the I'ondholdeix tin- Council were informed that 
 
 -!! ai-i-aii-riiinii \vas not acceptable to the I'nilcd Stales 
 
 iinn-iil. as it did not pn>\ ide I'oi- the settlement. of the 
 
 ;m Claims againsl Il'ihdnra-. .\t the same time a ne\\ pro- 
 
 \\-.\-i put t'-.i-ward by Messrs. ,1. I*. Mnrirnn and Co. of New 
 York, for the purchase of the K\i.-nml Debt, subject to .erlain 
 
105 
 
 conditions. Negotiations thereupon took place between the Bond- 
 holders 7 Committee and Messrs. J. S. Morgan and Company of 
 London, and after careful consideration the Committee resolved tx> 
 recommend the Bondholders to deposit their securities with the 
 Council in assent to the following offer : That, subject to a satis- 
 factory arrangement being arrived at between the Governments of 
 the United States and Honduras within a, period of twelve months,, 
 and provided a majority of the securities is deposited in assent 
 to the scheme, Messrs. J. S. Morgan and Company undertake to 
 purchase the Bonds at the rate of 15 in cash for each 100 of 
 Bonds of the four outstanding Loans with arrears of interest. 
 
 On the 5th of August the Council issued notices inviting the 
 holders to deposit their Bonds against the issue of Certificates, 
 and at the close of the year nearly 2,000,000 of Bonds had been 
 so exchanged. On the 22nd December an official quotation on the 
 Stock Exchange of the Certificates representing negotiable Bonds 
 of the English Eailway Loans of 1867 and 1870 was obtained, and 
 the Council are of opinions that holders who have not yet deposited 
 their securities would be well advised, in their own interests, to 
 do so without delay. It is true that the terms of settlement are 
 disappointing, but the Council and Committee satisfied themselves 
 that it was impossible to obtain more, and a small sum in cash 
 is undoubtedly equal to a very much larger amount in Honduraean 
 promises. As the projected arrangement has the active support of 
 the United States Government, it ought to stand every chance of a 
 successful conclusion, and according to the most recent information 1 
 received, the negotiations which have for some time past been 
 proceeding at Washington, between the Finance Minister of Hon- 
 duras and the State Department, have made satisfactory progress. 
 Moreover, as the United States Government has intervened to 
 frustrate the consummation of the agreement of March, 1909 7 
 mentioned above, it is morally bound to secure the success of the 
 scheme which, in accordance with its own wishes, has been put 
 forward in its place. The arrangement will, it is presumed, have 
 to receive the approval of the United States Senate and the Hon- 
 duras Congress. 
 
Morgan Asks Extension of Time for His Option on the 
 
 Honduras Bonds. 
 
 1910. 
 
109 
 
 "HONDUBAS EXTEBNAL DEBT/' 
 
 Belay in settlement explained THE QUESTION ON COMPENSATION". 
 London "Financial Times/-' July 27, 1910. 
 
 A general meeting of the holders of Deposit Certificates repre- 
 senting Honduras Government Bonds, convened by the Council of 
 Foreign Bondholders., was held yesterday at their Office, 17 Moor- 
 .gate St., E. C. "for the purpose of considering the situation and 
 a proposal of Messrs. J. P. Morgan and Company to extend the 
 present arrangement for a further period of six months/' 
 
 The Hon. Sir Charles W. Fremantle, K. C. B., Vice-President 
 of the Council presided. 
 
 The Secretary, Mr. James P. Cooper, having read the notice 
 convening the meeting. 
 
 The Chairman said : Gentlemen : I am sorry to say that 
 Lord Avebury is prevented by illness from being present to-day. 
 I am sure we all regret his absence. He had expected until the 
 last moment to be able to come up, but I suppose the weather had 
 been against him and his doctor will not allow him to come. I 
 have received the following letter from him, which he desires me 
 to read to you. 
 
 Kingsgate Castle, Isle of Thanet, July 23, 1910. 
 
 "For the first time since I have had the honor of being Presi- 
 dent of the Council I fear that I shall be prevented by illness from 
 attending a meeting of the bondholders, though I will come up at 
 the last moment if I can. In these circumstances I have prepared 
 some remarks which I shall be glad if you will have read to the 
 meeting." 
 
 "The Bondholders' Committee is to meet on Tuesday, previous 
 to the general meeting, and circumstances may, of course, alter, but 
 I have every confidence in their judgment, and have little doubt 
 that were I able to be present I should concur with them. They 
 have given great care and attention to the subject, are themselves 
 largely interested, and I venture to hope that the meeting will 
 support them." 
 
 I will now ask the Secretary to read Lord Avebury's speech 
 to you. 
 
110 
 
 LORD AVEBURY, ON THE SITUATION. 
 
 The Secretary then read Lord Avebury's speech as follows : 
 "The present meeting is a somewhat unexpected event,, and 
 the circumstances under which the necessity for it has arisen are 
 undoubtedly disappointing. I dp not propose to occupy your time 
 with the past history of the Honduras Debt, or of the efforts which 
 have been made by your Committee to oring about a settlement. 
 It is sufficient to go back to the early part of 1909, when your 
 Committee, with the valuable co-operation of the British Minister 
 in Central America succeeded in arranging terms with the Govern- 
 ment of Honduras. Before, however, the proposals could be sub- 
 mitted to the Bondholders, the United States Government inter- 
 vened and substituted its own scheme, which contemplated the re- 
 funding of the entire indebtedness of the Republic. Negotiations 
 then took place with the Council and Committee, who were able 
 to secure a considerable improvement in the terms as originally 
 proposed, and it was agreed that, subject to the necessary arrange- 
 ment being made between the Government of the United States 
 and Honduras, Messrs. Morgan and Company should purchase the 
 Bonds of the External Debt at the rate of 15 cash for each 100 
 nominal bonds with all overdue interest. The agreement allowed 
 a period of one year 'for the arrangement to be effected, and the 
 Council thereupon, in accordance with Messrs. J. P. Morgan's re- 
 quest, invited the Bondholders to deposit their securities in asseni 
 to the scheme. A prompt and satisfactory response was given to 
 this invitation, the amount of bonds lodged with us and on 11\c 
 Continent being about 4,000,000, which constitutes a large major- 
 ity of the total debt said to be outstanding." 
 
 "The date fixed for the arrangement to be conclude*] nnl the 
 cash payment was the 4th of August next, but under the conditions 
 of deposit an extension of time could be granted if approved by 
 resolution of a general meeting of the holders of certificates issued 
 in respect of deposited bonds. The question which you have 
 to consider i- whether you are prepared to grant an extrusion." 
 
Ill 
 
 LETTER FROM MESSRS. MORGAN, GRENFELL AND 
 COMPANY. 
 
 We had confidently hoped that the 15 cash would be paid 
 on or before the 4th of August, but a few days ago we received a 
 letter from Messrs. Morgan, Grenfell and Company informing us 
 that their friends in New York were not prepared to make the 1 
 payment on that date. This letter is as follows: 
 
 22 Old Broad Street, London, E. C., July 18, 1910. 
 James P. Cooper, Esq., 
 
 Secretary, Council of Honduras External Debt. 
 
 "Dear Sir: Referring to the letter, of 27th July, 1909, from 
 our predecessors, Messrs. J. P. Morgan and Company, to yourself 
 with a view to an arrangement of. the External Debt of Honduras, 
 we beg to inform you that our friends Messrs. J. P. Morgan and 
 Company advise us that the arrangement between the United 
 States of America and the Republic of Honduras, contemplated 
 under the first condition of deposit, has not been concluded, and' 
 that consequently they will not be able to make payment mentioned 
 in the said condition of deposit on the 4th proximo. 
 
 "We understand from Messrs. J. P. Morgan and Company that 
 the negotiations are proceeding satisfactory on the other side. Thtr 
 Honduras Congress will meet in October, and if approved thereby, 
 the proposition for the seltloment of the debt will be subject to- 
 ratification by the Congress of the United States of America, 
 which meets in December. Should either of the Governments fail 
 to approve the project would have to be dropped, but in case the 
 matter should be definitely settled before the end of the current 
 year. 
 
 "Under these circumstances, Messrs. J. P. Morgan and Com- 
 pany are willing to extend the present arrangements for a further 
 six months say, till the 4th February, 1911, should the Council 
 of Foreign Bondholders wish to do so. 
 
 "Messrs. J. P. Morgan and Company inform us that from 
 advices received they are hopeful of a successful result from the 
 negotiations. 
 
 "We shall be glad if you will submit Messrs. J. P. Morgan and 
 
112 
 
 Company's proposal to your Committee and advise us of its deci- 
 sion as regards the extension of the agreement with the Bond- 
 holders for a further six months." 
 
 Yours faithfully,, 
 (Signed) MORGAN, GRENFELL AND CO. 
 
 "This letter contains the whole of the information which 
 Messrs. Morgan and Company have been able to give us. "While 
 we quite admit that it is disappointing that the matter has not 
 been settled within the time originally allowed, we think it must 
 be granted that it is impossible to prevent delays arising in deli- 
 cate negotiations of this .kind, and where two Governments are 
 concerned, and it is only natural that the United States Govern- 
 ment should wish the arrangement to receive full and formal ratifi- 
 cation by Congre-ss. It does not follow that the arrangement will 
 fall through, and it is, at any rate, satisfactory to note that Messrs. 
 J. P. Morgan and Compony state that the negotiations are pro- 
 ceeding with out any hitch, and that they are hopeful of a suc- 
 cessful result. It certainly would seem that as the United St<ifrs 
 Government liave intervened and substituted their own scheme in 
 the place of that negotiated by the Committee under the auspices 
 of the British Minister, they are bound to see the matter through, 
 and it is difficult to bolieve that they would have felt justified in 
 taking the action they did unless they had clearly seen their w<uj fo 
 bringing the matter to a definite conclusion." 
 
 THE QUESTION OF COMPENSATION FOR THE DEL AY. 
 
 "Your Committee met on the 20th inst., and, after earefully 
 considering Messrs. Morgan, Grenfell and Company's letter, eame 
 to the conclusion that they recommend YOU to irmni tin* extension 
 of six months propped ly MC--I-. Morgan, provided that inierest 
 at 5 per cent per annum, running f'-mn August llh, to the date of 
 payment, i- added to the U.~). This seems an eminently fair and 
 reasonable proposal, hut I regret t> sav ////// .1/fx.srx. Mort/nn nml 
 
 Company do n<>l '/////'>// j/.v^o.sw/ //* full in irifli II. It is therefore, 
 
 n-idrr \vhat COUTte you will adopt, whether you will 
 grant it without any </ni<f /<> </n<>: .,r whether \<m will irrant it 
 00 condition i n is <rj v( . n f,,,- |he delay, and if 
 
113 
 
 so, what, that compensation should be. As an alternative to the 
 payment of 5 per cent interest, another proposal has occured to us, 
 and it is this: The total of the External Debt said to he outstand- 
 ing is5,398 J 570, but owing to the long time the debt has remained 
 in total default, it is probable that the whole of this amount will 
 never be presented for payment. The suggestion is that one-half 
 of the saving effected owing to a smaller amount of bonds claiming 
 payment should go to the certificate holders in the form- of an ad- 
 dition to the very modest sum of 15,, which they are offered under 
 the present scheme. It would be quite possible when the 15 is 
 paid to give each holder a certificate entitling him to receive his 
 share of any such saving at the proper time." 
 
 *The Chairman: 
 
 "By no means. The fact of the matter is that certain formali- 
 ties are necessary before the scheme can be considered as final. 
 It is thought that during the next six months they will have been 
 able to conclude the arrangement, and that it will have been possible 
 to submit it to the Honduras Chambers and also to the Senate of 
 "the United States, which is necessary in the case of any treaty. 
 
 Mr. Watson: 
 
 "Do you think they are likely to accept the alternative sugges- 
 tion if they will not pay the 5 per cent from the 5th August to the 
 time of payment?" 
 
 The Chairman: 
 
 "It is difficult to say. There are precedents in favor of their 
 making some concession, and of course, the ordinary business 
 transaction would be that if you cannot pay on a particular date, 
 you must pay interest until the time for actual payment." 
 
 Mr. T. H. Wells: 
 
 "If we do not accept the delay what else is there to be done ?" 
 
 THE COMMITTEE'S SUGGESTION. 
 
 "The Chairman: 
 
 "That is for the Bondholders to decide. Perhaps I might 
 venture now to say what the Committee would suggest, which is 
 'that we should grant the delay, but that we should require some 
 ^compensation in respect of it. (Hear, Hear!). If you are pre- 
 
114 
 
 pared to agree to delay, we would suggest that you should leave- 
 it to the Council and the Committee to see what terms they can 
 make. (Hear, Hear!). We do not want to trouble you to meet 
 again in the month of August, which would be very disagreeable. 
 We hope that they will make some proposal to us, which perhaps 
 you might like to make to the council and committee, who have your 
 interests at heart, to decide upon. But that is, of course, for the bond- 
 holders to say. I will read you the resolution which we drew up. 
 thinking that possibly you might like to accept it. It. is as follows : 
 That this general meeting 1 of holders of deposit certificates rcpre- 
 $i'ntin(/ llnmhmis Government bonds, hereby authorizes the Council 
 of Foreign Bondholders and the Committee of Honduras Bo mi- 
 holders to grant an- extension of the time fixed by the first condi- 
 tion of deposit for six months; namely, to 4th February. 1911 
 provided that compensation for the delay is granted in such form or 
 manner as the Council and Committee may approve." (Hear, 
 Hear!). We should not, of course, be in a position to make an 
 arrangement with Messrs. Morgan without compensation except by 
 another meeting of the bondholders and hearing what their opinion 
 was. This will merely leave to the Council and Committee the de- 
 tails of any arrangement for compensation that might be proposed, 
 and which they might think acceptable to the bondholders/" 7 
 Mr. F. C. Home: 
 
 "I should like to point out to the Bondholders that we an 1 
 not really receiving compensation for the extension of the option. 
 We gave Messrs. J. P. Mrgan and Company an option for no/ linn/ 
 running to 4th of August. \Ylicn it expires they mail u*k for an 
 for six months withonf (/iring -a* compensation or niii/ 
 jn/>n'>nt for the r.rlcimon of the o/ifion : but as the du." 
 date on which payment should have been made is the 1th of August 
 we merely ask that it' they carry on the business, they should pay 
 interest from the 4th of August, as if they had paid cash, because 
 the Honduras Government should pay it, and it is no doubt through 
 their fault, that the delay has nceiired. If the business had been 
 settled thev would have had to pay inteiv-i <>n any new hondx 
 they issued from the 1th of AU.L'IM : therefore, in asking for this 
 payment of jnlervsi. we are reall\ only asking them to carry out 
 the C'ontraet, jrivin.i: them further time and the further option 
 to carry it out. and 1 am surprised that Messrs. Morgan should 
 
115 
 
 have so far refused it. I think that if they meet the Honduras- 
 Government and confer on the subject they will see that the- 
 amount is so small it is only about 12,000 that they will not 
 defer the arrangement on that account, if they mean to carry it 
 out at all. 
 
 "AN EXCELLENT PRECEDENT." 
 
 "There is, moreover, an excellent precedent in this matter. 1 
 was interested in the Santo Domingo Loan, and there we had ta 
 give one or two delays. It was in 1905-6, that the United States 
 intervened in the settlement of the debt of Santo Domingo exactly 
 in the same way as it has done- in that of Honduras, setting on one 
 side an existing arrangement, which, strange to say, had been made 
 under its own auspices in 1904, and under which rights of English 
 holders of Santo Domingo bonds were especially secured. Owing 
 to a delay of exactly the same nature as had occurred in the present 
 instance, the new arrangement was not carried into effect until 
 1908, but the bondholders received compensation by the addition 
 of interest to the principal amount agreed to be paid. I do not 
 see that one can have a better example. Although it has not a 
 direct bearing on the present case, I cannot help talcing this op- 
 portunity of saying that the English holders of Santo Domingo 
 bonds, of which I was one, were most unfairly treated under the 
 arrangement of 1908, as compared with the French and Belgian 
 holders of identically the same securities; and I must express my 
 surprise and regret that although hopes have been held out that 
 we should receive justice, so far nothing has been done. As regards 
 the present arrangement, I also wish to point out that Messrs. Mor- 
 gan state in the letter we have heard read that the negotiation 
 between the two Governments are still proceeding, so that there can 
 be no difficulty in making alteration in the terms. They have come 
 to practically no arrangement with the Honduras Government, and 
 if we hold out for the extra interest I think we shall probably get 
 it. If not, let them accept the alternative scheme, which will cost 
 them nothing. We should simply be participating in any bonds 
 which might be lost or destroyed. I think we should certainly 
 hold out for something in place of the interest which we are entitled 
 to if they will not pay the interest itself. 
 
11C 
 
 Mr. Watson: 
 
 "I think we cannot do better than fall in with the resolution 
 drafted. We should certainly have some compensation, and I shall 
 have much pleasure in moving this resolution, as I am satisfied 
 it is the right course to adopt." 
 
 Mr. Wells seconded the resolution and it was carried unani- 
 mously. 
 
 The proceeding them terminated. 
 
Morgan's Options to the Honduras Bonds Expired 
 February 4th, 1911. 
 
119 
 
 EXTRACTS' FROM THE THIRTY-SEVENTH ANNUAL 
 
 REPORT OF THE COUNCIL OF THE CORPORATION 
 
 OF FOREIGN BONDHOLDERS. 
 
 FOR THE YEAR 1910. 
 
 -General Remarks (page 12). 
 
 As to Honduras,, disappointing as the delay must be to the 
 Bondholders, there are, no doubt, many difficulties in the way; 
 but, as previously pointed out by the Council, the Government of 
 the United States, having intervened in order to substitute their 
 own scheme of settlement in the place of that negotiated in 1909, 
 by H. M/s Minister in Central America, are under the strongest 
 obligation to see the matter brought to a successful conclusion. 
 
 Honduras (page 16). 
 
 The period of twelve months, within which the arrangement 
 for the settlement of the External Debt was to be concluded, and 
 the agreed price of 15 Cash per 100 of Bonds paid, expired on 
 4th August, 1910; but much to the disappointment of the Council, 
 a notification was received from Messrs. Morgan and Company, 
 towards the end of July, stating that negotiations between the 
 Governments of the United States and Honduras had not been 
 concluded, and that they were therefore unable to make payment on 
 the date named. In these circumstances it was suggested that an 
 extension of time for six months should be allowed, although it 
 was fully expected that the matter would be decided one way or 
 the other, by the end of the year, as the arrangement was to be sub- 
 mitted to the Congress of Honduras during the month of October, 
 and to the United States Senate in December. A public meeting 
 of the holders of Certificates representing the deposited Bonds was 
 held at the Council House on July 26th, when it was resolved to 
 grant an extension of time for six months, viz, to 4th February, 
 1911, provided compensation was given for the delay in such form 
 and manner as the Council and Committee might approve. This 
 resolution was communicated to Messrs. Morgan and Company, 
 who, in reply, stated that they were not able to pay the Bondholders 
 anything more than the 15 per 100 of Bonds as originally agreed. 
 In answer to this, the Council pointed out that the conditions on 
 which the Bondholders were prepared to assent to the delay in pay- 
 ment was a reasonable and usual one, and that if the arrangement 
 
120 
 
 had been carried through in the stipulated time, the Government 
 of Honduras would presumably have had to provide interest from 
 August 4th, 1910, on the entire new Loan to be issued under the 
 Arrangement. Messrs. Morgan thereupon undertook to communi- 
 cate the Council's views to their friends in New York. The long- 
 protracted negotiations between the Governments of the United 
 States and Honduras were then resumed, but the year 1910 passed, 
 away without any definite results being arrived at, and without 
 even the submission of the proposed Arrangement to either Con- 
 gress. In reply to their inquiries, the council said, however, in- 
 formed that the negotiations were progressing satisfactorily, and in 
 his message to the United States Congress, on 6th December, 1910, 
 President Taf t made the following allusion to the matter : 
 
 "The Republic of Honduras has for many years been burdened 
 with a heavy bonded debt held in Europe, the interest, on which 
 long ago fell into arrears. Finally, conditions were such that it 
 became imperative to refund the debt and place the finances of 
 the Republic upon a sound basis. Last year a group of American 
 Bankers undertook to do this, and to advance funds for Railway 
 and other improvements contributing directly to the Country's pros- 
 perity and commerce an arrangement which has long been desired : 
 by this Government. Negotiations to this end have been under 
 way for more than a year, and it is now confidently believed that a 
 short time will suffice to conclude an arrangement which will be 
 satisfactory to the foreign creditors, eminently advantageous to 
 Honduras and highly creditable to the judgment and foresight of 
 the Honduranean Government. This is much to be desired, since, 
 as recognized by the Washington Conventions, a strong Honduras 
 would tend immensely to the progress and prosperity of Centra] 
 America." 
 
 On January 10th, of the present year, a Convention was signed 
 at Washington between the Representatives of the United States 
 and Honduras, and it was fully experted that the matin- would lie 
 concluded before Hie expiration of the six months extension of 
 time on February 4th, Hondura< had, however, in the meantime 
 become involve.] in a fn-<li revolution. and tlie \vlmlc of th< 
 ports on the Atlantic Coast fell into tin- hands of Crnrral Manuel 
 
121 
 
 Bonilla, the insurgent leader. The Loan Treaty appears to have 
 been submitted to Congress at the end of January, but owing, as 
 it is understood, to the disturbed state of the Country, it failed to> 
 pass. 
 
 On the 1st of February the Council received a communication 
 from Messrs. Morgan and Company stating that in consequence 
 of the ratifications not having been exchanged, they were as yet 
 unable to carry out the purchase of the Bonds, but expected shortly 
 to approach the Bondholders with an offer like the original one. 
 
 Messrs. Morgan and Company stated that the negotiations were 
 still proceeding, and as the United States have been invited to ar- 
 range an armistice between the opposing parties, it is hoped that,, 
 peace being restored, the arrangement will before long become am 
 accomplished fact. 
 
Thirty-Seventh Annual Report of the Council of the 
 
 Corporation of Foreign Bondholders 
 
 for the Year 1910. 
 
125 
 
 HONDURAS. 
 
 'External Debt, 
 
 Present Amount. Total. 
 
 Five per cent. Loan of 1867 78,800* 
 
 Interest (October, 1872, to October, 
 
 1910) 149,720 
 
 228,520 
 
 Ten per cent. Loan of 1867 900,700 
 
 Interest (July, 1872, to July, 1910) . . . 3,422,660 
 
 4,323,360 
 Six and two-thirds per cent. Loan of 
 
 1869 2,176,570 
 
 Interest (March, 1873, to September, 
 
 1910 5,441,425 
 
 7,617,995. 
 
 Ten per cent. Loan of 1870. 2,242,500 
 
 Interest (July, 1872, to July, 1910) . . . 8,521,500 
 
 10,764,000 
 
 Total '. 22,933,875 
 
 *The amount of the bonds in circulation is understood to be 60,- 
 900, the balance of 17,900 being in the hands of the Honduras Govern- 
 ment. 
 
126 
 
 HONDURAS COMMITTEE. 
 
 Eight Hon. LOED AVEBUBY, Chairman. 
 
 F. BUBT, Esq. 
 
 C. T. D. CREWS, Esq. 
 
 Hon. SIB C. Wl FBEMANTLE, K.C.B. 
 
 F. G. HOBNE, Esq. 
 
 ALFBED JAQUES, Esq. 
 
 A. PINTO LEITE, Esq. 
 
 GEOBGE METCALFE, Esq. 
 
 W. J. BEND ALL MOOBE, Esq. 
 
 His Honor, Judge SIB THOMAS SNAGGE. 
 
 H. T. TATHAM, Esq. 
 
 JAMES P. COOPEB, Esq., Secretary. 
 
 Area (Estimated), 46,000 square miles. 
 
 Population (census 1905), 500,136. 
 
 Capital, Tegucigalpa. Population, 34,600. 
 
 President, General Miguel B. Davila. 
 
 External debt, per head, including arrears of interest, 45, 
 17s. Id. 
 
 British Minister and Consul General for Honduras (resident 
 at Guatemala), Lionel Garden, Esq. 
 
 Agent of the bondholders at Porto Cortes, W. J. Bain, Esq. 
 
127 
 
 HISTORY OF THE DEBT (FOREIGN). 
 
 1827. Upon the breaking up of the Central American Federation 
 the proportion of the 6 per cent. Federal Debt (163,000) 
 alloted to Honduras was two-twelfths, or 27,200. No 
 interest was paid on this by Honduras. 
 
 1867. Five per cent., Conversion Loan. Amount, 90,000. Sink- 
 ing fund, 1 per cent. Specially secured on the customs 
 dues of the port of Amapala. This loan was issued for 
 the conversion of the above debt, amounting, with 
 arrears of interest, to 90,075, and for the liquidation 
 of other liabilities in London, amounting to 30,375. 
 . The holders of the old bonds received 55,000 new bonds 
 in satisfaction of their claims. The settlement was 
 affected as a preparation on the part of the Government 
 for floating a loan for the construction of an Interoceanic 
 Railway. 
 
 1867. Ten per cent. Railway Loan. Amount, 1,000,000. Issued 
 at 80 per cent, by Messrs. Bischoffsheim & Goldschmidt 
 for the construction of an Interoceanic Railway. The 
 interest was secured upon the railway and its revenues 
 and the produce of the mahogany forests. The Govern- 
 ment undertook to provide an annuity of 140,000 for 
 fifteen years from 31st December, 1869, for the service 
 of the loan, and promised the subscribers half the profits 
 of the proposed railway for fifteen years after its re- 
 demption. 
 
 1869. Six and two-thirds per cent. Govt. Railway Loan. Amount, 
 2,490,108. Issued in Paris by Messrs. Dreyfus & Co. 
 at 75 per cent. Redeemable at par in seventeen years by 
 half yearly drawings. Security, first mortgage on State 
 railway and forests. 
 
 1870. Ten per cent. Government Railway Loan. Amount, 2,500,- 
 000. Sinking fund, 3 per cent, by Messrs. Bischoffsheim 
 & Goldschmidt, on account of Mr. C. J. Lefevre, for the 
 completion of the Interoceanic Railway. Security, the 
 railway and its revenues and the produce of State 
 domains. 
 
 1872-73. All four loans went into default, the interest having been 
 paid out of the money borrowed. 
 
128 
 
 1875. The loans were the subject of investigation by a Parliamen- 
 tary Committee. 
 
 1887-93. A concession, which included a settlement of the Ex- 
 ternal Debt, was granted to Mr. Binney for the comple- 
 tion of the Interoceanic Railway. The existing bonds of 
 the Foreign Loans, with arrears of interest, were to be 
 exchanged for 100 shares in a new railway company to 
 be formed in London. The old bonds were to be lodged 
 in the Bank of England pending the completion of the 
 railway, upon which the Government was empowered to 
 cancel them. The company was formed in 1888, but the 
 Government declined to renew the concession when it ex- 
 pired in 1892. A similar concession was granted to an 
 American Company, which, however, contained no pro- 
 vision for the settlement of the debt, and was canceled 
 in 1893". 
 
 1896. A new concession for the construction of the Interoceanic 
 Railway, and embracing a settlement of the External 
 Debt, was granted to the "Honduras Railway Company/ 5 
 who appear to have been the successors of the company 
 formed in 1892. The terms proposed to be offered to 
 the bondholders were 15 in shares in exchange for each 
 100 of bonds with 23 years arrears of interest. The 
 committee declined to submit such a proposal to the 
 bondholders .and the concession lapsed. 
 
 1897. An American syndicate, styled the "Honduras Syndicate," 
 who were the successors of the "Honduras Railway Com- 
 l>;my." concluded a contract with the Government for 
 the building of the railway, the settlement of the foreign 
 debt, and the establishment of a bank charged with the 
 collection of the customs. Each 100 External IVbt 
 liond, with arrears of interest, was to be exchanged for 
 I' *.'") of new iy* per cent, bonds, redeemable within . ) ."> 
 years, and secured liy a guarantee from the hank and a 
 tirst charge upon the railway. The contract did not 
 ... specify the date at which interest on the new bonds 
 would hcLfin. nor the len-ili of time allowed for the con- 
 ton. All new bonds not claimed within the period 
 allowed by the Syndicate were to be divided between it. 
 
129 
 
 and the Government. The committee consented to nego- 
 tiate on the basis proposed, provided that they were satis- 
 fied with the security offered': that the interest com- 
 menced forthwith, and that -the conversion remained 
 open for a reasonable time. Disputes, however, arose 
 between the Government and the Syndicate, owing to the 
 latter having failed to carry out its contract as regards 
 both the construction of the railway and the settlement 
 of the External Debt, which led to the revocation of the 
 concession in 1900, 
 1900. A second contract with the "Honduras Syndicate" was 
 approved by Congress on the 26th of May, 1900. This 
 arrangement provided for a lease of the already con- 
 structed portion of the railway to the Syndicate for 25 
 years at an annual rental of $15,000 gold. Under pain 
 of forfeiting the lease, the Syndicate bound itself: 
 (a) To erect a bridge over the Ulua, and to reconstruct 
 that over the Chamlecon within two years from the 
 approval of the contract; (b) to reconstruct the exist- 
 ing line within four years, and (c) to build and open 
 to traffic the line from Ulua to Comayagua within five 
 years. It also undertook to construct 25 kilometres of 
 railway within two years, and to complete the line to 
 the Gulf of Fonseca within seven years from the same 
 date. The Syndicate also obtained a preferential right 
 to construct branch lines, and, for fifteen years from the 
 fulfillment of stipulations (a), (b) and (c), the right 
 to construct a line from the Northern Coast parallel to 
 the existing section. This contract contained no refer- 
 ence to the External Debt. 
 
 1902. The Syndicate, notwithstanding its failure to carry out the 
 conditions of the above contract, obtained an extension 
 of time of one year from the Government viz., to 26ijt 
 May, 1903. 
 
 1903. The "Honduras Syndicate" again failed to execute the 
 works required under its contract, and the Government 
 on 26th May took possession of the railway. 
 
130 
 
 1 903-0 j. Dr. Angel TTgarte was sent to Europe by the Govern- 
 ment as Special Commissioner in connection with the 
 settlement of the debt. The proposals made by Dr. 
 Ugarte were rejected by the committee as entirely 
 inadmissible. 
 
 1009. Proposals for a settlement were made by Messrs. J. S. 
 Co. (See page 16 of Report for 1909).* 
 
CONCLUSION. 
 
133 
 
 CONCLUSION. 
 
 By the documents herein published it appears that from 1867 
 to 1870 Honduras authorized four issues of bonds in Europe to 
 the amount of 6,080,108, of which only 681,538 have been 
 redeemed, and 5,398,570 are outstanding, with arrears of interest 
 to the approximate sum of 17,535,305 : 
 
 -Bonds Arrears of 
 
 issued redeemed, outstanding. interest. 
 
 1867, London . . . 90,000 11,200 78,800 149,720 
 
 1867, London ... 1,000,000 99,300 900,700 3,422,660 
 
 1869, Paris 2,490,108 313,538 2,176,570 5,441,425 
 
 1870, London . . . 2,500,000 257,500 2,242,500 8,521,500 
 
 6,080,108 681,538 5,398,570 17,535,305 
 
 According to the conditions of the prospectus, these bonds 
 should have produced enough to build the Interoceanic railway, 
 miles long, from Puerto Cortes to the Bay of Fonseca: 
 Second issue, 1,000,000 bonds at 80% 800,000 
 Third issue, 2,490,108 bonds at 75%-, 1,867,581 
 issue, 2,500,000 bonds *t 80%--^ 2,000,000 
 
 5,990,108 bonds 4,867,581 
 
 The c<m*t ruction of the railway was contracted with Messrs, 
 Waring Brothers & McCandlish, of London, for 2 3 230,000 ! 
 
 First section 53 miles 500,000 
 
 Second section 85 miles 930,000 
 
 Third section 92 miles, , 800,000 
 
 230 miles 2,230,000 
 
 The contractors received 689,745 and built only 53 miles of 
 the line. What disposition was made of the proceeds of the loans? 
 The Import of the Select Committee of the British Parliament, 
 which investigated these loans, gives a full and com])] etc account 
 of the many frauds committed in the issue and sale of the bonds, 
 and of the misappropriation of the funds. This report is pub- 
 lished in the Blue Book of the British Parliament of 1875. 
 
134 
 
 Notwithstanding the circumstances of the many illegal trans- 
 actions made in London and Paris in the name of Honduras, we 
 always have tried to settle this question on an equitable basis, and 
 never have thought of repudiating the debt. 
 
 We owe what we received. The amount has been fixed by 
 debtor and creditor to be 453,000, as per the Garden agreement 
 of March, 1909. 
 
 Xow that this arrangement has been broken on account of 
 the United States interposing, we have to deal with the problem 
 as it stands to-day. 
 
 Honduras needs the Interoceanic Railway for her industrial 
 and commercial development ; but the Railway Bonds are a burden 
 on the line, which cannot be carried to its completion unless they 
 are refunded or cancelled. 
 
 How to solve this problem? 
 
 How to settle the Railway debt? 
 
 How to build the Railway? 
 
 Must we have to borrow money? 
 
 How much can we borrow? 
 
 What is our borrowing capacity ? 
 
 What security can we give? 
 
 These questions can be answered as follows: 
 
 1. We need to arrange the external debt in order to free 
 the Railway from any mortgage and proceed with its construction. 
 
 2. To arrange the debt we need no loan at all, because Hon- 
 duras is able to pay annual installments proportionate to her 
 financial resources, provided a syndicate undertakes the construc- 
 tion of the railway. 
 
 3. If Honduras would make a loan to cancel af (tncc the old 
 Unids. the annuity would be more than if she agrees to the plan 
 of amorti/ation of the old bonds proposed by the bondholders in 
 !'.">:;. cancelling:- C.'nn.nnn bonds cadi year, at an increasing rate 
 of in to W% in the course of ->\ years, as follows: 
 
 1 years, I'-.'nn.nnn lionds each year.... at in<; 
 
 1 years, 200,000 Bonds ea< -h year.... at 1.", 
 
 4 years, 200,000 Bonds each year. . . .at 11', 
 
 4 years, 200,000 Bonds each year.... at 16% 
 
 4 years, 200,000 Bonds cadi year i\ L8$ 
 
 7 years, 200,000 Bonds ,,,,.1, year,,,, at . 
 
135 
 
 In this way Honduras would pay in 27 installments 840,000, 
 as follows: 
 
 4 annuities of 20,000 each 80,000 
 
 4 annuities of 24,000 each 96,000 
 
 4 annuities of 28,000 each... 112,000 
 
 4 annuities of 32,000 each 128,000 
 
 4 annuities of 36,000 each 144,000 
 
 7 annuities of 40,000 each 280,000 
 
 Total 840,000 
 
 4. By assuming the payment of the debt, Honduras may 
 grant a concession for the construction of the second and third 
 sections of the Interoceanic Railway. Any American syndicate 
 would be willing to have the first section with the obligation of 
 building the second and third within a reasonable time. 
 
 5. Instead of the Government financing the Interoceanic 
 Railway, Honduras would allow an American syndicate do it as a 
 business proposition. 
 
 6. Honduras has no means to pay the interest and sinking 
 fund of a big loan. She can spare some money from her actual 
 income for the amortization of the old bonds, relying on the 
 probable increment of the Government revenues through the in- 
 crease of business which the construction of the Interoceanic Rail- 
 way would assure. 
 
 7. Honduras could not give other security for a loan than 
 the Customs Revenues and the Railway. But the financiers want 
 to have the direct administration of the customs houses and Rail- 
 way under the protection of their Government. Honduras has 
 rejected this proposition, and is disposed to start new negotiations 
 for the settlement of the debt and the construction of the Railway.