[Enclosure Translation]

Message of the President, delivered at Rio de Janeiro May 3, 1918

The National Congress, in adopting the measures recommended in the message of November 3 and other measures which their patriotism suggested to them, passed our declaration of war which, properly approved, was published under No. 3393, dated November 16, 1917. This law authorized the Government from that date until the 31st of December of the same year to establish martial law in those parts of the Union where the situation required it, and adopted other measures among which were, that contracts and operations realized with enemy subjects were invalid; that reprisals might be decreed, that public contracts and concessions, concerning government land, might be rescinded or revised; and authorized the dissolution and liquidation of partnerships and corporations in which enemy subjects were included. It established the basis upon which union, banks, factories, and storehouses could be considered enemy property; treated of double nationality and naturalization; the registration, inscription, fiscalization, sequestration, administration and eventual liquidation of enemy property; enemy life insurance companies operating in Brazil; and directed the deposit in the National Treasury of funds realized from any of the above operations with reference to enemy property. It gave approval to the steps taken by the Government under the provisions of law in accordance with decree No. 3361 of October 26, 1917. It authorized the opening of credit for the execution of the said law and put the law into effect immediately.

The outbreak of the war led the belligerent Governments of the Entente and the nations which were associated with them to unite and coordinate their assets against the common enemy with the purpose of effecting the triumph of the cause of liberty, justice, civilization and humanity. To this end interAllied conferences have been held, in which plans of campaign and other steps of common interest were determined,

The Brazilian Government was invited on the 13th of November to send a representative to the conference of that nature which was held in Paris on the 30th of that month and closed its sessions on the 3d of December. Dr. Olyntho M. de Magalhães, our present minister to France, was immediately designated of this representation and took part in the deliberations of that conference.

In January of the present year the Ministry of Blockade of the French Government asked the Brazilian Government to designate a delegate to participate in the work of the Permanent International Committee of Economic Action, created by the First Inter-Allied Conference of March 19, 1917.

In response to this courteous invitation the Government on the 26th of January designated our Minister in Paris to represent Brazil in this capacity on committees or inter-Allied conferences which might there be called together. Dr. Olyntho de Magalhães took part on the 23d of February in the first deliberation of the said Permanent International Committee of Economic Action.

With reference to the steps taken by the Federal Government for the prohibition of shipment of contraband merchandise and other interdictions imposed upon the enemy, our delegate was authorized to declare to this committee that our law authorizing the declaration of war prohibits the Germans from foreign commerce, whether of importation or exportation, and prohibits our national steamers from transporting enemy cargo, and to say that all merchandise consigned to them carried in neutral ships are held in Brazilian customhouses; that the same law does not permit the enemy to remit funds to foreign countries and has rescinded all contracts for public works or services which have been made with enemy subjects; that among other measures of reprisal and national defense it was also prohibited for them to obtain concession of land.

Our war measures follow the general lines of other belligerent countries with the exception that Brazil has not confiscated enemy property or stopped their internal commerce, which latter step is in accordance with the acts of the United States of America.

The Government of Brazil has endeavored to give practical expression to its entire accord with the Allied powers in the war in which they are all engaged against the German Empire and has so advised the British Government. The British Foreign Office in a note of the 21st of December, 1917, directed to our Legation in London, in thanking us for this communication, inquired if we

could send a fleet of fast cruisers and destroyers to cooperate at a certain point under the orders of the English vice admiral in command of the section.

On the 31st of December our Minister in London was authorized to communicate to the British Admiralty that in accordance with our desire to render substantial cooperation a fleet was being prepared of the scouts Rio Grande do Sul and Bahia, destroyers Parahyba, Rio Grande do Norte, Piauhy and Santa Catharina, which would proceed to European waters under the single naval command to the point designated and that those ships were prepared to arrive there upon a date to be determined.

Afterwards the Legation of His British Majesty in this capital, in a note of the 11th of February, advised that the British Admiralty considered that the units of the Brazilian Navy which expected to cooperate with the British naval forces would render better service to the cause of the Allies if they should proceed to a different point than that which had previously been decided upon and there cooperate under the command of a high-ranking British naval officer in conjunction with a detachment of the Navy of the United States of America, which at that time was stationed at the said point.

This new resolution could not fail to be agreeable to the Brazilian Government in view of which our warships and those of the United States would cooperate with the British naval forces for the purposes of protecting and maintaining the principal maritime routes between the two continents.

This will be the second instance of cooperation of the two navies of this continent since in the middle of last year the Brazilian Government entered into an agreement by which its naval forces would patrol the Brazilian coast in cooperation with the squadron of the United States of America.

I turn now to the very important matter of the relations of our commerce to that of foreign countries. I desire to refer to the policy of economic defense which the British Government and her allies have adopted against the common enemy in creating the black lists, which prohibited commerce of firms of their nationals with subjects of enemy countries, the principal of which is the British Statutory List created by the Trading with the Enemy Law of 1915. It is unnecessary to repeat what was said on this subject in previous annual messages, it is enough to add that important notes were exchanged on the 9th and 12th of August, 1916, between our Ministry of Foreign Affairs and the British Legation. The Ministry again reopened the matter in a note of September 3d, 1917, addressed to the said Legation and in which the previous notes were reviewed, recognition duly granted, and attention invited to the fact that this Government has always secured a modification of unjust or unduly severe measures, and proposed the following:

The situation, however, cannot be limited to the concession of favors. The successive and recent proclamations setting forth new additions to the statutory list, especially after investigation, require a corrective measure of a more or less general nature.

The suspension of commercial relations with Germany and the declaration that Brazil is no longer neutral in the war should define the situation and facilitate a consideration of this vital matter.

With the special fiscalization which the circumstances have imposed upon maritime commerce and navigation, the Brazilian Government believes it convenient to make a more rigorous examination of the methods under which those operations are carried on with the idea of avoiding, if possible, measures which affect adversely friendly countries, and in view of the fact that Brazil is no longer a neutral nation this examination cannot fail to interest and affect domestic commerce inasmuch as it provides the connection from which foreign commerce is derived.

To this end and without recognizing the principles upon which it was promulgated nor of having a statutory list of her own, the Brazilian Government desires and hopes that all cases individually will be submitted to it in which it is planned to take action.

After an exchange of explanatory notes, one from the Legation dated the 8th and one from the Ministry dated the 10th, stating that the names to be submitted to the Brazilian Government would be only firms or persons who were entirely Brazilian and that if the proposal of that Government were accepted it would take all the necessary steps for the defense of Allied commerce, the Legation communicated, in a note of the 12th of the same month, the provi

sional assent of its Government, pending an examination of the details of the Brazilian proposal and adding that the agreement would be effective as of the same date. Such a British-Brazilian agreement should have been concluded before the declaration of a state of war between Brazil and the German Empire. After this latter condition was recognized and proclaimed, therefore, the Foreign Office set forth these facts in a note of the 30th of November, addressed to the British Legation, the essential features of which are herewith reproduced.

This agreement, made before the declaration of a state of war between Brazil and the German Empire, is, for that reason, virtually void since it would be absurd to maintain it when the Brazilian Government has the greatest desire to supervise the acts of such firms and since it is so authorized to do by act of Congress. It would, therefore, not be proper for it to delegate its powers under the circumstances and in consequence of law 3393 of the 16th instant the Brazilian Government through the intervention of his excellency declares to His British Majesty, as a friend and ally, that it assumes as its duty the supervision of enemy firms without distinction of nationality in all Brazilian territory and that there is, therefore, no necessity for a function to be exercised here parallel to that of the Government and sovereignty of Brazil.

In the same terms and on the same date with the necessary modifications other notes were addressed to the Portuguese Embassy, and to the French, Italian and Japanese Legations.

The merchant ships anchored in Brazilian ports, the utilization of which was authorized by the national Congress and which have been under the control of the Brazilian Government since July 17, 1917, have been turned over to the Brazilian Lloyd with the idea of their being employed as the necessities of navigation and commerce should determine. The Brazilian Government received the courteous appeals which were directed to it from the French and United States Governments urging that a contract be entered into for the better utilization of these ships of the Brazilian Lloyd. The Ministry of Foreign Relations, with my authorization, took up the matter of the political and diplomatic negotiations necessary. The Legations concerned were advised that Brazil would show no preference between the Allied nations which were contesting for the control of the ships; neither would she alienate the ships which were taken in reprisal for the tonnage which the enemy had destroyed. When the conditions of the understanding had been decided upon, the United States Government withdrew in favor of France and the agreement solicited was made with the Government of the latter country. The ship transaction was thereupon transferred to the Ministry of Fazenda which fixed the clauses and conditions of the agreement after a study of their financial aspects. When a report had been submitted upon this matter I did not hesitate to approve the arrangement, being certain that the said agreement operated to the advantage, not only of Brazil, but of France and of the other Allied nations in whose name in all stages of the negotiations the latter country declared herself to be acting.

AUTHORIZATION TO FOREIGN VESSELS TO ENGAGE IN COASTWISE TRAFFIC IN BRAZILIAN WATERS

File No. 832.801/7

The Ambassador in Brazil (Morgan) to the Secretary of State

No. 1119

RIO DE JANEIRO, January 19, 1918. SIR: I have the honor to report that the Official Gazette of Rio de Janeiro, of January 16, published the text of a circular from the Brazilian Minister of Finance stating that the war has dislocated ocean transportation and prejudiced national commerce. Under the

91114-30-13

authority conferred by letter "f", Article 5, of decree No. 10,524, of the 23d of October, 1913, which provided new regulations for the merchant marine and coastwise trade, it has therefore been decided that during the continuation of the war foreign vessels shall be allowed to engage in coastwise traffic for the purpose of transporting cargoes between Brazilian ports.

The circular contained, in thirty-two clauses, the regulations which govern this new rule. An English translation of the text is enclosed herewith.1

I have [etc.]

'Not printed.

EDWIN V. MORGAN

CHINA

POLITICAL AFFAIRS 1

Conciliatory Policy of Acting President Feng Kuo-chang; Opposition of Northern Military Elements; Participation in the World War; Resignation of Sun Yat Sen as Generalissimo of Southern Military Government; Reorganization of Southern Military Government; Looting in the Province of Hunan by Northern and Southern Troops; Joint Protest of the American, British, and Japanese Ministers; Election of Hsu Shihch'ang as President; Peace Proposals; Encouragement by the American, British, French, Italian, and Japanese Governments to Settle Difficulties

File No. 893.00/2767

The Minister in China (Reinsch) to the Secretary of State

[Telegram-Extracts]

PEKING, February 11, 1918, 7 p. m. There is no change in the situation. The position of President Feng has grown weaker. There are indications of growing desire on the part of Tuan faction to displace Feng in favor of Hsü Shihch'ang. Arrival of money borrowed and arms bought from Japanese causes a show of resolution, but the tuchuns' activity so far confined to demanding more public money. The pardon of Liang Shih-yi and associates gives rise to talk of their early return to power with Tuan and Japanese support. None of these possibilities are acceptable to the South. Governor Li Shun is developing his national policy, being drawn more towards the South. The Southern leaders planning confederate commission for bringing about greater unity in the movement for constitutional government. The attitude of sections is shown by the fact that while diplomatic arbitration was recently suggested to me by influential Northerners the South is willing to arbitrate provided the Parliament is recalled, while Li Shun does not consider the time favorable for arbitration. This would seem to indicate that he hopes to rid China of the militarists.

It is indispensable that the Allies should give some attention to China in order to avoid surprises and dangers. The South will not accept militarist rule or restoration monarchy. Such steps would permanently divide China. The Allies can strengthen their cause and avoid disastrous consequences which continued inattention would inevitably entail. What has been done so far taken by itself is bad. Postponement of Boxer indemnity no real benefit without doing 'Continued from Foreign Relations, 1917, pp. 46-113.