of the proceeds of Quicksilver from the Almaden Mines. Extinguished in 1900.

1871. Three per Cent. Bonds. Amount, £19,654,900. Issued under the provisions of a Law which authorised the contracting of a Loan to produce £6,000,000. The Government attempted to put a tax of 18 per cent. on the interest of the whole Debt, Internal as well as External, but the measure was abandoned.

1872.-A temporary Arrangement was accepted by the Bondholders in May. It was agreed that the fourteen Coupons, June, 1872, to December, 1879, should be paid two-thirds in cash and onethird in 5 per cent. Bonds, redeemable at par by a 1 per cent. Sinking Fund. Changes of Ministry occurred, however, immediately, and the new Government modified this Arrangement considerably by insisting that the ten Coupons on the Debt from the 31st December, 1872, inclusive, were to be paid, two-thirds in cash and one-third in Three per Cent. Stock at the price of 50 per cent. The Coupons due 30th June, 31st December. 1873, and 30th June, 1874, were not, however, paid.

1872. Three per Cent. Bonds. Amount, £32,968,700. Issued to produce £10,000,000.

1875.-The Coupons overdue to June, 1874, were ordered by the King to be liquidated, as to 30 per cent. of their value in Rio Tinto Five per Cent. Bonds, and as to the remaining 70 per cent. in Spanish External Bonds at 40 per cent. The Rio Tinto Bonds were issued against Coupons by the Rio Tinto Company, in discharge of Pagarés given by them to the Government as security for the payment of an annuity of £176,000 for twenty years from 1875. They were extinguished in 1882.

1876.--In June of this year the Council, on behalf of the Bondholders, accepted a Provisional Arrangement of the Debt on the following bases :

Interest on the outstanding External Debt to be paid at the following reduced rates :

Coupons payable 30th June, 1877, at per cent. for six months.

Coupons payable 31st December, 1877, to 30th June, 1881, at I per cent. per annum.

Coupons payable 31st December, 1881, to 30th June, 1882, at 1 per cent. per annum.

The half-yearly Coupons due 31st December, 1874, to 31st December, 1876, to be paid in New External Bonds, bearing 2 per cent. interest, and redeemable in 15 years at 50 per cent.

1881. Four per Cent. Redeemable Debt.

Amount, £72,000,000,

redeemable in 42 years. Its object was the conversion of a variety of Internal Bonds. It was not quoted on the London market.

1882. The holders of the Consolidated Three per Cent. Internal Bonds having accepted, during the course of this year, a proposal for the conversion of their Stock into Four per Cent. Perpetual Debt at £43. 15s. per cent., a similar proposal was made to the holders of the Consolidated Three per Cent. External Bonds, which was rejected. A compromise was, however, shortly afterwards effected, by which the External Bondholders were to receive a further commission of per cent. conditionally upon their Bonds being deposited during the first two months of the six allowed for conversion, thus bringing the rate at which the Bonds were converted to £44. 12s. 6d.

Until June, 1883, when the full rate of 4 per cent. came into force, the interest on the new stock was 24 per cent., corresponding to 1 per cent. on the old 3 per cent. Bonds.

The foregoing arrangement was accepted by the Bondholders subject to the new Bonds being free from Spanish taxation, a condition which was embodied in a special Declaration, signed by the Spanish Ambassador in London on behalf of the Minister of Finance and by the Chairman of the Council on behalf of the Bondholders.

1898-9.- By a Law dated May 17th, 1898, the Government were authorised to convert the Exterior Debt into Interior Debt with a bonus of 10 per cent. This Conversion was to be voluntary. Under the same Law, and Royal Decrees dated

June 20th and 25th, and August 9th, 1898, the Coupons due October 1st, and subsequently, on the Exterior Debt were only to be paid in francs, marks, or sterling in respect of Bonds which could be proved to be the bona fide property of other than Spanish subjects. All such Bonds were to be registered and sealed. The further sealing of Exterior Bonds was discontinued by a Royal Decree of May 13th, 1899. The interest on Exterior unsealed Bonds and on sealed Bonds held by Spanish subjects, was to be paid in pesetas.

1899. Under a special Law passed in June, the Coupons due 1st July, 1899, on the unsealed Four per Cent. Exterior Debt, Four per Cent. Interior Debt, and the Four per Cent. Redeemable Debt, were paid in pesetas less a tax of 20 per cent. The Coupons on the sealed Bonds of the Exterior Debt were paid in full in francs, marks, or sterling under the provisions of the above-named Law and Decrees.

In August a general Law was passed authorising the Government to impose the above 20 per cent. tax on the interest of the Internal Debt, and to negotiate a modification of the Declaration of 1882 with the Council of Foreign Bondholders, in order that the Coupons of the Sealed Exterior Bonds might be subjected to the same tax.

The amortisation of the Four per Cent. Redeemable Debt was suspended.

1900.-In March of this year the Law of August, 1899, was confirmed by a further enactment containing similar provisions as regards the Sealed Exterior Bonds. In virtue of these Laws the Spanish Government sent representatives to London to negotiate with the Council, with a view to obtaining the abrogation of the Declaration of 1882. The Committee declined to entertain the proposal, and the Government thereupon invited the various Committees representing the Bondholders to send Delegates to a Conference in Paris. An ad referendum agreement was drawn up which provided for the reduction of the interest to 3 per cent. and the institution of a per cent. accumulative Sinking Fund, to be applied by drawings at par. Further, in the event of the tax on the interest of the

A A

Internal Debt being decreased or suppressed, the interest on the External Debt was to be increased proportionately up to a maximum of 4 per cent. The arrangement was accepted by the Bondholders, but not having been approved by the Legislature within the stipulated time, viz., January 1st, 1901, the proposals lapsed. The Government have. however, continued to pay the full interest of 4 per cent. 1901-In August a Royal Order was published providing for the sealing of such Exterior Bonds belonging to foreigners as had been purchased before May 13th, 1899, up to October 31st. In November a Law was passed for the forced conversion, before February 1st, 1902, of the Unsealed Exterior Bonds into Four per Cent. Perpetual Internal Stock, with a bonus of 10 per cent.

1902. By a Decree promulgated in June, it was provided that the Coupons of the Sealed External Debt might be exchanged at the Financial Delegations abroad against Customs Certificates of like value, which would be receivable for Customs Duties payable in gold.

REPORT.

The Service of the Spanish External Debt has been carried out with entire regularity during the past year.

Comparatively few events of importance have occurred in connection with Spanish Finance since the publication of the Council's last Report, In October, Señor Villaverde, the then Premier, introduced into the Cortes a Bill, which had for its principal objects the improvement of the rate of exchange and the liquidation of the Colonial Floating Debt. The Bill itself was preceded by an elaborate review of the whole exchange question. Owing, however, to the resignation of the Villaverde Ministry early in December last, this Bill was

not proceeded with, and the table of exchange given below shows that the tendency of the rate has, on the whole, been in an upward direction during the last seven or eight months.

The Council cannot but feel that any amelioration in the situation by the introduction of the various artificial measures which have been suggested from time to time can scarcely be durable. Any real improvement should rest upon the solid foundation of restored public confidence and increased investments in reproductive industries.

In the new Cabinet formed by Señor Maura, Señor de Osma was appointed Minister of Finance. For the moment, Señor de Osma's efforts appear to be more especially directed towards a partial readjustment of the burden of taxation calculated to afford relief to the poorer classes. In the course of a note prefixed to the Statement of Accounts for 1903, the Budget for 1905, etc., Señor de Osma drew attention to the various circumstances illustrating the progress achieved by Spain, amongst which were the continuous growth of the Revenue. Receipts and the development of national wealth, and he asserted that the solvency of the country could not be called in question. At the same time, he pointed out that in international commercial relations Spanish labour was at a disadvantage. The dearness of food was in many cases a severe strain upon individual resources and wages, inasmuch as the purchasing power of the latter had been diminished by the depreciation of the currency, and they had not as yet accommodated themselves to the new conditions which had already enhanced the price of articles of primary necessity.

As there is no doubt that a readjustment of taxation is