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as far as it has been in their power, they have consistently striven to secure a better and more efficient system of administration of the finances.

Mr. Corbett, the British Representative on the Com. mission, has been appointed a member of the Caisse de la Dette at Cairo, and his place has been filled by Mr. H. P. Harvey, C.B.

The Council take this opportunity of recording their high appreciation of Mr. Corbett's eminent services to the Bondholders, and their personal thanks for much valuable information supplied to them through his courtesy.

The funds for Sinking Fund No. 2, which ECUADOR were not provided by the Guayaquil and

Quito Railway Company on the 5th July of last year, were paid over to the Council in the following September. Those required for the same Sinking Fund on the 5th January and 5th July of the present year have not been forthcoming, nor has the substitution of Security Bonds in accordance with the terms of the last Agreement been effected. Proposals have recently been made to the Committee by the representative of the Railway Company, and a new Agreement has been entered into, which, under all the circumstances of the case, the Committee think the Bondholders would be wise to accept. Under this Agreement the amount of security to be substituted is considerably less than was originally provided for under the Agreement of April 1901, but it must be remembered that in the interval the amount of the Special Series Bonds has been very considerably reduced by the action of the Sinking Fund. The Government of Ecuador also undertake to apply preferentially the sum of $90,000 per annum to the purchase on the market of the Special Series Bonds. As

the total amount of these Bonds outstanding is only $580,000, it is evident that they should be redeemed in a very few years. The new Agreement now awaits the approval of the Bondholders.

Although peace has at last been restored, COLOMBIA. the condition of Colombia appears to be

anything but satisfactory. In addition to the damage to commerce and industry entailed by the long civil war, the currency is in a deplorable state, there being some $650,000,000 of paper money in circulation. The Government has, however, expressed itself determined to resume payment of its External Debt at the earliest possible moment, and in February last remitted a small sum to complete the amount due in respect of the August, 1899, instalment of the Debt Service. Unfortunately nothing more has since been paid. The whole attention of the Government has been recently devoted to the question of the Panama Canal Treaty with the United States of America, with regard to which serious difficulties have arisen. Should the Treaty become an accomplished fact, the Council hope that Colombia will devote at any rate a portion of the considerable accession of funds she would receive to the payment of the External Debt, and they have done their utmost to urge this on the attention of the Government.

The two years' suspension of the Debt COSTA RICA. Service asked for by the Government of

Costa Rica has now expired, and the Council have urged upon the Government the necessity of resuming payment on the Debt. The Council have been informed by the Government that a proposal will shortly be placed before them.

CEDULAS.

The state of affairs in connection with this matter is extremely disappointing. It was

fully understood that the arrangement proposed by Mr. Bemberg in March of last year would be promptly dealt with by the Provincial Legislature. The negotiations, however, have practically remained at a standstill. The extraordinary delay that has occurred is (as will be seen from Mr. Bemberg's letter reproduced in the Appendix) due to the unfortunate condition of political affairs which has prevailed in the Province for some time past. The Executive and Legislative Powers have been diametrically opposed, and this has resulted in a complete impasse as far as any legislation is concerned. Intervention by the Federal Government became necessary, but the " Interventor” had no power to interfere in the fiscal concerns of the Province. A new Chamber has been recently elected, and, according to the latest advices, there seems reason to hope that the Council may shortly be in a position to lay a definite proposal before the Bondholders.

During the past year the Government GUATEMALA. has persisted in its attitude of total dis

regard of its external obligations. Having approved all the concessions demanded from the Bondholders under the Agreement made with its Minister in March, 1902, Congress refused to grant the conditions called for in return by the Committee in order to provide reasonable security against a fresh default in the future. A new Agreement was entered into with the Guatemalan Minister a few months ago, with modifications, as regards the security clauses, which, it was believed, would meet the objections of the Government. The Government,

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however, have as yet sent no reply to the Minister's communication, although the Executive has been given full power by Congress to effect a settlement with the Bondholders.

Finding that all efforts to arrive at an HONDURAS. understanding with the Honduras Syndi

cate were fruitless, the Committee in December last entered into a provisional agreement with an American Syndicate styled the Squier Syndicate of New York.

Negotiations with the Honduras Government were commenced at the end of last year, when another revolution broke out, and in a short time there was no Government with which to treat. On the restoration of peace the negotiations were renewed, but the new Government appear to have adopted an obstructive and unsatisfactory attitude, setting up objections, some of which it is difficult to believe they were serious in making. The proposals are extremely favourable to Honduras, and they provide for the accomplishment of the two great objects which the Government has so often declared to be its earnest desire to secure, viz. : the completion of the Railway and the arrangement of the Debt.

It is to be hoped that wiser counsels will in the end prevail, and that the time and labour which have been expended in connection with the proposals now before the Government will not have been in vain.

After duly paying four of the arrear coupons on the Debentures, in accordance with the arrangement made by Mr.

Klingelhoefer, the Railway Company defaulted on the payment due on 26th September last, the

ITUANA

RAILWAY.

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reason given being that the Company had been thrown into a state of forced liquidation at the suit of the Banco da Republica, acting under the orders of the Federal Government. As the Committee could get no satisfactory answer to telegrams of enquiry addressed to the Brazilian Government, it was determined to place the Debentureholders' interests in the hands of Dr. Pires Brandão, an eminent Rio lawyer, and to forward the whole of the Debentures to Brazil.

A requisition has been addressed to the Council by an influential body of the Debenture-holders with regard to laying the facts of the case before the Committee of the Stock Exchange, and unless a prompt settlement is made it will be necessary to consider whether action in this direction should not be taken.

The Council have again to express their regret that the Federal Government, who are so much interested in the matter, have not taken more active steps to see that the Debenture-holders' claims were promptly satisfied.

As the result of the negotiations which NEW ZEALAND took place between Mr. Seddon, the

Premier of New Zealand, and the
Debenture-holders' Committee in August

last, the former agreed to recommend his Government that the offer of £110,000 suggested by the Special Committee of the Colonial Legislature should be increased to $150,000. This offer was approved by a meeting of the Debenture-holders in September last. It was, therefore, with much surprise and regret that, when the Act of Parliament dealing with the matter was received in this country some months later, the Committee found that the payment of £150,000 was to be made in Three

MIDLAND

RAILWAY.

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