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CORPORATION OF FOREIGN
BONDHOLDERS.

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1. THE Council have the honour to present their Nineteenth Annual Report to the Members of the Corporation.

2. The Balance Sheet, made up to the 31st December, 1891, is herewith submitted to their consideration.

3. The Appendix contains much financial and statistical information respecting the countries whose External Debts have formed the subject of negotiation and arrangement in the past ten years. It calls here for no remark beyond the notable fact that, notwithstanding the difficulties under which most of the Spanish American Republics have laboured, the arrangements effected with them by the Council have so far been maintained. This is specially satisfactory in regard to some of the Central American States, where serious political disturbances have aggravated the situation, and exceptionally so in the case of Paraguay, whose obligations under the Arrangement of 1885 have been fulfilled, notwithstanding an acute economic and financial crisis.

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4. The pancial difficulties of the Argentine Republic have engaged the serious attention of the Council and of the Com

mitice appointed for the protection of the vast interests, involved. No practical result has been arrived at, nor was any as yet possible, so far as the National Government is concerned, in view of the arrangement effepted by the Committee formed under the auspices of the Bank of England. But a mass of statistical information has been collected and carefully tabulated, which will indicate the complexity and magnitude of the problem which awaits solution. This information is given in the Committee's Report published in the Appendix.

As regards the Provinces and Municipalities of the Confederation very little progress has been made towards the settlement of the various loans, though this has not been owing to any lack of diligence on the part of the Committee. The cause of the delay must be sought in the intensity of the crisis and the unfortunate disorganisation of all branches of the Administration, local as well as national. So much has this been the case that in some instances it has not been found possible to induce the Provincial and Municipal Authorities to consider, much less formulate, any equitable proposal for the settlement of their Debts. Political agitation and discontent, always inseparable from economic disturbances in South America, have, in the case of Argentina, largely contributed to complicate and intensify the crisis; but it is to be hoped that these disturbing elements will disappear after the approaching Presidential election, and that the National and Provincial Governments will devote their earnest attention to the restoration of their finances and the fulfilment of their obligations to their Creditors.

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A Special Committee of Bondholders has recently been constituted by the Council to deal with the Buenos Ayres 1883 (Ensenada) Loan, and the latest information with regard thereto is given in the Appendix at page 88.

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URUGUAY.

5. Another and hardly less important matter which has claimed the attention of the Council has been the negotiation with the Government of Uruguay. The difficulties under which that Republic had been labouring for some time past are too recent and notorious to require recapitulation here. In Uruguay, as in Argentina, an excessive abuse of credit has been attended with the usual consequences, although the absence in Uruguay of an inconvertible and depreciated Paper Currency is a redeeming feature. The situation was alarming and precarious, and it was not possible to ignore it without running the risk of seeing the Government involved in additional difficulties and without exposing the Bondholders to greater sacrifices. The Council had to choose between the alternatives of a suspension of payments for probably a lengthened period, or an arrangement by which the engagements of the Government would be reduced.

In the face of this dilemma, and at the request of many influential Bondholders who desired that timely measures should be taken to avert the impending catastrophe, a Committee exceptionally qualified to deal with the question was appointed in the beginning of July, and entered immediately on the exercise of its functions. The Committee thoroughly investigated the financial condition of Uruguay, and after an arduous negotiation, concluded an Arrangement which was accepted on the 31st of August by

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a General Meeting of Bondholders, confirmed by the Uruguayan Legislature on the 7th of October, and ratified by the Special Commissioner of the Republic on the 27th of November last. The text of the Arrangement is given in the Appendix to this Report, together with the statistical information on which it was based. It will be seen that the amount of Bonds deposited for Conversion up to the 14th of March under the Arrangement is nearly 93 per cent. of the whole External Debt.

That an Arrangement dealing with Loans of such importance, some of them of recent origin, should have encountered opposition and proved disappointing to many Bondholders, is only natural. No settlement with a Government, the effect of which is to reduce the rate of interest on its Debt, can be altogether satisfactory, and neither the Committee, nor the Council have ever regarded the arrangement in any other light than that of a choice of evils. In the interests not only of the Bondholders, but also of Uruguay herself, they endeavoured to confine the reduction of the Interest to a limited period, with a return to full payments after a reasonable delay. The Council regret that this proposal was not accepted by the Uruguayan Government, but under the circumstances they thought it the wiser course to recommend the Bondholders to accept the terms offered, and thus avert a ruinous and probably a long default. The suspension of payments in this instance only lasted a few months, and the arrears for that short period have been funded at an equitable rate.

VIRGINIA.

During the past year a settlement of the long outstanding Virginia Debt has been effected. The negotiations which have resulted in the Arrangement accepted by the Public

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