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Sinking Fund of 3 per cent. The Import Duties of the
Republic were assigned as security for this Loan.

1876.-The Loans of 1856 and 1869 went into default.

1878.—One-third of the Coupon due 1st April, 1876, was paid in November this year, no payment being made on the subsequent Coupons.

1884.—An Arrangement was accepted by the Bondholders, but owing to political disturbances it was not carried out.

1887.-The Government issued a Decree providing for the Consolidation of the Internal Debts and also for a settlement of the External Debt on the following bases :-The principal and arrear interest to be funded at par into a new Four per Cent. External Consolidated Debt. A Sinking Fund of per cent. to be applied by half-yearly Drawings at par, to come into operation three years after the acceptance of the Decree by the Bondholders. As security the Government assigned a portion of the Maritime Duties (particulars of which were annexed to the Decree) which were to be paid by the Importer to a Committee consisting of three members representing the External Bondholders, the Internal Bondholders, and the Railway Companies respectively.

1888. The External Bondholders accepted the Decree of 1887, and New External Consolidated 4 per Cent. Bonds for £922,700 were issued by Messrs. Thomson, Bonar & Co. The Bondholders, having to provide the expenses of the operation, voted 28 per cent. of the arrear interest for this purpose. Each £100 Bond of the 1856 Loan. with £62. Is. 8d. interest arrears, was exchanged for £144. 14s. od. New 4 per Cent. Bonds, and each £100 Bond of the 1869 Loan, with £72. 10s. od. interest arrears, for £152. 4s od. New 4 per Cent. Bonds. The 1863 Loan was included in the above conversion. The conversion of the Internal Bonds into a New Consolidated Internal Debt, was effected upon conditions similar to those prescribed for the External Debt. The principal was redeemable at the rate of 16 per $1cO New Bonds by an accumulative Sinking Fund of 1 per cent., and the interest was payable quarterly, at the rate of 6 per cent. per annum, or £4. 16s. od. per $500 (£80) Bond

The security was the same as for the External Debt. These Bonds were issued in Guatemala, and were introduced upon the London market in 1888. The total thus introduced was $6,400,000.

1894.-Default took place upon both the External and Internal Consolidated Debts, and the Committee of the Public Debt was suspended.

1895. A new Arrangement was accepted by the Bondholders in May, 1895, on the following bases: Unification of the External Debt (amount outstanding £890,300) and the Internal Debt (amount outstanding $6,025,900, or say £964,144) into a New Consolidated 4 per Cent. Debt for £1,600,000. The External Bonds, with interest arrears from 1st January, 1894, to 30th June, 1895 (£53,262), to be converted at the rate of £75 New for £100 Old Bonds. The Internal Bonds, with arrears for the same period (£86,772) to be converted at the rate of £75 New for each $500 or £80 Old Bonds. A non-accumulative Sinking Fund of £15,000 per annum to be applied by purchases on the market. The Bonds to be secured by a special tax of six shillings on each quintal of coffee exported, fixed irrevocably at this rate for the next ten years, commencing Ist July, 1895, the proceeds to be paid to the Agent of the Bondholders at Guatemala. The interest on the New Bonds to commence from 30th June, 1895.

1895-96.- In the same year the Government negotiated a Loan with Messrs. Müller & Thomsen, of Hamburg, for £658,500, for the construction of the Northern Railway. The Loan was secured on the excess of the Coffee Warrants, after providing for the External Debt, the Government agreeing to hand over to Messrs. Müller & Thomsen the whole of the Coffee Warrants corresponding to the crops of 1895-6, 1896-7, and 1897-8. Messrs. Müller & Thomsen bound themselves to attend to the service of the Four per Cent. External Debt up to 30th June, 1898, leaving in the possession of the Bondholders' Agents the amount in Coffee Warrants necessary to provide for the service of the same. This Arrangement was made without consultation with the Bondholders, and necessitated the drawing-up of a special Contract between the Government,

Messrs. Müller & Thomsen, and the Council, defining the prior rights of the holders of the External Debt. Under the terms of this Contract the Government undertook to hand over direct to the Banco de Guatemala, the Agents of the Bondholders, the whole of the Warrants representing the Export Duty on Coffee; the Bank to hold the Warrants corresponding to each year, to provide in priority, out of the proceeds of the sale thereof, the amount required for the full payment of the service of the External Debt.

1897. In December, 1897, the Government, without reference to the Bondholders, entered into a further Contract with the Bank of Guatemala, as representing a German Syndicate, for an advance on the security of the Coffee Warrants, the Bank to set aside out of the sale of the Warrants the full sum required for the service of the Foreign Debt.

1898.-On 5th April, 1898, a Law was passed reducing the duty on coffee, which had been "irrevocably" fixed at $ış gold under the Contract with the External creditors in 1895, to $1 silver.

In November, 1898, an Arrangement was made with the Bondholders on the following terms :—

1. Interest on the External Debt during the next three years to be paid 2 per cent. in cash, and 2 per cent. in Certificates. The first Coupon of 1 per cent. (2 per cent. per annum) to be paid 31st December, 1898.

2. Full payment of 4 per cent. per annum to be resumed after the expiration of three years, viz., on the Coupon falling due 31st December, 1901.

3. The Certificates to be exchanged after 30th June, 1901, for Definitive Bonds bearing 4 per cent. interest, and similar to the existing Bonds.

4. Amortisation to be suspended for three years. From 30th June, 1901, to 30th June, 1908, the Sinking Fund to be £6,000 a year, and after 30th June, 1908, the full Sinking Fund of £15,000 per annum to be resumed. The Sinking Fund to be applied half-yearly, in the manner provided in respect of the existing Bonds, to the redemption in the first place of the new principal.

5. A Banking House approved by the Bondholders' Committee to guarantee the payment of 2 per cent. per annum for three years, so long as the sales of the Coffee Warrants representing the present tax of $1 silver per quintal for these three years are left in the hands of the German Syndi


1899. In June, 1899, the Government further reduced the Coffee Duty to $1 paper, and the German Syndicate failed to remit the funds for the payment of the December, 1899, Coupon at the rate of 2 per cent. per annum, as provided by the Agreement of November, 1898. The Duty was subsequently increased to $2 paper, but the additional amount, though claimed by the German Syndicate under their Contract, was applied by the Government to other purposes.

1900.-The Government ordered the product of the Coffee Warrants held by the German Syndicate to be paid into the Deutsche Bank, London, until it was decided by arbitration whether or no the Syndicate was liable to pay the December, 1899, Coupon on the External Debt. The Government subsequently ordered the Funds deposited in the Deutsche Bank to be paid to the "New" German Syndicate. It also handed over Coffee Warrants for $800,000 in respect of the current crop to the German Syndicate, and sold the balance to the Banco de Occidente, instead of depositing the whole of the Warrants with the Agents of the Bondholders, in accordance with the Contract of September, 1896. The Coffee Duty was increased in this year to $6 paper.

1901-2.-Negotiations were carried on with the Guatemalan Minister in Europe which resulted in the signing of an ad referendum Agreement in March, 1902. Under this Agreement the Coupons maturing 30th December, 1902, and 30th June, 1903, were to be paid at 1 per cent., and the subsequent Coupons at 3 per cent. All arrears to be funded into new Bonds. A Sinking Fund of 1 per cent. to come into operation from 30th December, 1906. As security, the Government to assign the entire Customs Revenue. One threehundredth of the total Debt Service to be paid daily by the Collectors of Customs direct to the Banco de Guatemala and placed to the credit of a Committee representing the

Bondholders. The Government to notify the contract to the Governments of the countries interested as constituting a binding engagement on Guatemala, and the Bonds to be endorsed with a memorandum to the effect that one or more of such Governments had taken note thereof.

This Agreement was submitted to the Guatemalan Congress, which mutilated it to such an extent, by suppressing the provisions with regard to security, that the Committee declined to recommend the Bondholders to accept it in its modified form.

1904. An ad referendum contract for the settlement of the Debt was signed in July (see Report below).


It will be remembered that the Agreement entered into with Dr. Cruz, the Minister Plenipotentiary of the Guatemalan Government, in March, 1902, failed to meet with the approval of Congress except in so far as it was favourable to Guatemala. Further negotiations were carried on early in 1903 with Señor Crisanto Medina, who had succeeded Dr. Cruz as Minister, which resulted in a new project of arrangement being drawn up. This was forwarded to Guatemala by Señor Medina, but it was not accepted by the Guatemalan Government.

At the end of June last Dr. Padilla arrived in London, having been specially commissioned by the President to make proposals for a settlement of the External Debt. The following letter was addressed by Dr. Padilla to the Council:

J. P. COOPER, Esq., Secretary,


LONDON, 4th July, 1904.

Council of Foreign Bondholders.

As my knowledge of the English language is not sufficient to admit of my discussing personally with the members of the Com

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