the Colombian Government to the Panama Canal and Railroad companies for the appointment of agents to negotiate the cancellation of present concessions, etc., in which I informed your excellency that my Government considers that the treaty covers the entire matter, and any change would be in violation of the Spooner law, and not permissible. Your excellency asks me if any modifications in the treaty itself would be considered in violation of the Spooner law, as those other suggestions for special cancellation of the concessions of the companies have been so considered by my Government. I have the honor to say to your excellency that with the approval by the United States Senate of the treaty between Colombia and the United States, signed on the 22d of January, 1903, the Spooner law, which authorized the making of that treaty, was fully complied with, in the opinion of the Senate, so far as the Panama route is concerned. Hence, the said law went out of active existence with reference to Panama, and can only again become a subject for discussion, and then in reference to the Nicaragua route, in the event of the rejection of the treaty by Colombia. This is, of course, my personal opinion, which, unfortunately, I am unable at present to confirm by cable reference to my Government. But I consider it my duty to inform your excellency that I have no reason to believe that my Government will consider or discuss again any modifications whatever to the treaty as it stands. This strong impression I gather from a careful reading and study of the notes already in your excellency's possession, for, if in the case of the concessions of the companies my Government would consider their modification as violating the Spooner law, then, with much more reason, it would seem that the treaty itself, as the official interpretation of the law, can not be modified at all without violating that law. I shall, of course, submit your excellency's note to my Government as soon as it is possible to do so by the reopening of cable communication. I embrace this opportunity, etc., Instructions heretofore sent to you show the great danger of amending the treaty. This Government has no right or competence to covenant with Colombia to impose new financial obligation upon canal company and the President would not submit to our Senate any amendment in that sense, but would treat it as voiding the negotiation and bringing about a failure to conclude a satisfactory treaty with Colombia. No additional payment by the United States can hope for approval by United States Senate, while any amendment whatever requiring reconsideration by that body would most certainly imperil its consummation. You are at liberty to make discreet unofficial use of your instructions in the proper quarters. The Colombian Government and Congress should realize the grave risk of ruining the negotiation by inprovident amendment. HAY. No. 90.] Mr. Beaupré to Mr. Hay. LEGATION OF THE UNITED STATES, SIR: Mr. Spencer S. Dickson, British vice-consul at this capital, has prepared for his Government an interesting memorandum relative to the discussions in the Bogota press on the question of the proposed Panama Canal as a business concern, and has been good enough to furnish me with a copy, which I have the honor to inclose herewith. I am, sir, your obedient servant, A. M. BEAUPRÉ. [Inclosure 1.] Memorandum by Mr. Spencer S. Dickson, relative to the discussions in the Bogota press on the question of the proposed Panama Canal as a business concern. Since the news of the signing of the Hay-Herran treaty last February, the imagination of the Bogota public, as expressed in the local press, has been occupied with the question as to what is the extent of the pecuniary advantages which the Government of the United States is about to derive from the proposed undertaking. The articles written have so ridiculously exaggerated the possible takings, even from the most optimistic standpoint, as to render themselves unworthy of any notice whatever, were it not for an interesting answer they have called forth from the pen of Mr. J. T. Ford, the manager of the Cartagena Harbor, Railway, and River companies. Mr. Ford's article is principally directed against an article written by a Dr. Novoa Zerda, a prominent Bogota lawyer, who has published an elaborate statement in the Bogota press in which he proves, to his own satisfaction, that the Government of the United States are, by the terms of the Hay-Herran treaty, securing for themselves a net profit of $1,186,537,377 during the first term of the concession. My reason for transmitting this memorandum is that the statements made by Mr. Ford in his answer, based, as they are, on long experience and a thorough knowledge of the conditions ruling, merit attention and are, as far as I am aware, of a somewhat novel character, though on a question already so much discussed. Mr. Ford, M. I. C. E., a British subject, holds the position of consulting engineer to the Colombian Government, and has at various times been attached to the Colombian legation at Washington during the course of the negotiations which have taken place respecting the construction of an Isthmian Canal. He has brought his knowledge and experience to prove that the Panama Canal is not a profitable undertaking from a commercial point of view, and is valuable to the United States only because of its naval significance. Mr. Ford, in estimating the commercial value of the projected Panama Canal, has taken as a basis the experience gained by the Suez Canal. The traflic of the latter is regulated by an international convention, the terms of which the United States and Great Britain adopted when formulating the Hay-Pauncefote treaty, signed to substitute that known as the Clayton-Bulwer. These regulations establish a special tonnage measurement, which is neither the gross nor the net of the ordinary tonnages of Lloyd's. Nor is it the tonnage system of Germany or France. It is the Suez Canal system. The Suez Canal, in 1900, thirty-two years after being open to trade and with all the extra traffic produced by the Transvaal war and the intervention of the European powers in the Boxer attack on Pekin, has a traffic of 3,441 vessels of 13,699,238 gross tons, or 9,738, 152 Suez tons. @ Its gross product in money was. Resulting in a net income of............. Francs. 93, 451, 403 25, 648, 264 67, 803, 139 Supposing that Colombia rejects the Hay-Herran treaty and constructs the Panama Canal for its own account, so as to have the full benefit of all the takings. Take also for granted the absurd supposition that, in the first year of its being opened to public. traffic, this canal shall be able to show the same tonnage as that of Suez in 1900, @The later returns for 1901 show a still greater increase. thirty-two years after its opening. Taking the above tonnage only and the gross product of the canal in money, an average for purpose of comparison is deduced of 6.80 francs per ton (gross), or $1.36 American gold, by the Suez route. With regard to the question of population served by the two canals, the continents of North and South America together contain but one hundred and fifty million inhabitants. The canal will only be used by a portion of the trade of the western coast of the two continents, with part of the eastern coast, and with Europe. It is evident that trade can not in the first year reach the same figure as the total trade of Suez, which unites the continents of Europe and Asia, with twelve hundred million inhabitants between them. To do this, Panama must take from Suez at least one-half its trade. Suppose this second absurdity be regarded as a possibility, owing to the superiority of the Panama route between certain ports, admitting a certain amount of competition in freights from Europe to Australia, New Zealand, and to the islands of the Pacific, it is a question whether Great Britain would, without a struggle, thus allow the deviation of this important trade from its present established route. The immediate creation of the 3,000 new vessels necessary for the traffic deviated from the transcontinental railroads must also be taken as an accomplished fact. Against these hypotheses there is the following consideration-the shares of the Suez Canal are being sold at nearly ten times their nominal value. It is perfectly evident that this extraordinary company would certainly be well able to attempt to avert its ruin or injury and face competition by making some reduction in its tariff; but supposing that the Panama Canal has, by competing with the Cape Horn route and the transcontinental railroads, created for itself a trade equal to half the trade of Suez; also, that owing to its admitted superiority in certain voyages now made via Suez, Panama has taken away from Suez the half of its total trade, the Panama Canal would then have its 13,699,238 gross tons as above; but also, for the above-mentioned reasons of competion, the rate per ton would have to be reduced, probably, to say $0.70 gold to obtain that result in tonnage. This trade, on the same basis as above, would give to Panama a gross earning of $9,589,466. As to the operating cost, the country in which the Suez Canal is situated has a dry climate, without rains, and is so healthy that the same class of invalids as go to the Riviera and other sanatoriums of Europe make it their residence in winter. It is moreover a simple canal in a sandy plain without locks, or any other artificial works of importance. Panama, on the other hand, has a disastrously unhealthy climate. Very high salaries would have to be paid and a much greater number of employees would be required than at Suez. There are unforeseen damages to be provided for, owing to the torrential rains. Difficulties have to be faced in the management of locks and the maintenance of artificial works without parallel up to the present in the entire world, because of their monumental proportions. Mr. Ford, however, to err on the right side, assumes that the cost of operating the Panama canal will be no more than that expended at Suez. The gross cost of operation at Suez for handling the traffic of 1900 was 25,648,264 francs or $5,129,653 American gold. The Panama accounts, under these conditions, would be as follows: 13,699,238 tons at the above rate of $0.70 per ton would be... Cost of administration (the same as Suez in 1900) Net earnings..... $9,589, 466 5, 129, 653 4, 459, 813 The minimum figure for the cost of construction of the Panama Canal, with locks, including cost of French canal works and other contingencies, may be taken at $200,000,000, according to the best available estimates. Mr. Ford then assumes another favorable absurdity-that Colombia has a credit equal to the credit of the United States and that she could therefore obtain the $200,000,000 capital required for the construction at 3 per cent interest without initial discount. She would then have in hand the $4,459,813, the net earning of the canal, to pay the interest on the invested capital. The account then stands as follows: Three per cent on $200,000,000 ... Net earning.. Colombia would therefore have an annual deficit of..... $6,000,000 4, 459, 813 1,540, 187 a This, of course, is not the actual rate charged at Suez, since Mr. Ford has taken the gross and not the Suez tonnage, and the gross earnings include other charges beside the simple tonnage of the ships, but the above figure fully illustrates the point made. Mr. Ford again uses here his arbitrarily deduced average rate, and not the probable actual rate. instead of the net sum of $550,000 per annum, which she would receive under the Hay-Herran treaty, leaving to the United States the above-mentioned deficit, plus the $250,000 extra rent paid to Colombia. Mr. Ford then goes on to point out that should Colombia build a sea-level canal, costing $400,000,000 instead of $200,000,000, she would find herself with an annual deficit of $7,540,187, including the 3 per cent on the extra $200,000,000. In the discussions which have taken place, those opposed to the treaty have argued on the fact that in previous concessions made with private parties the terms for the Colombian Government have been much more favorable. To this Mr. Ford opposes the fact that those old contracts were signed in complete ignorance of the Suez undertaking and the enormous natural difficulties and cost of building a canal at Panama which would compare at all points with Suez, and before the experience gained through the working of that canal could throw real light on the profit and loss account of such an undertaking. The natural difficulties inherent to the working of the Isthmus of Panama, which were the cause of the failure of the French, even with their superior contract of 1878, were then all unknown. It is a mistake, says Mr. Ford, to suppose that the United States would make a contract similar to those made formerly when the same ignorance of conditions does not exist. The canal can not be a paying concern for any country except the United States, and for the United States it is a paying concern, not from a commercial standpointit will therein be a loser, but on account of its Navy. To show that this statement as regards its commercial value is not exaggerated, Mr. Ford refers to the map of the continents of America. The cordillera of the Andes, from Patagonia to Panama, the Sierra Madre of Mexico, and the Rocky Mountains of the North, which end in Alaska, are so situated that on the side of the Pacific there is only a small strip of territory, very narrow and comparatively sterile, whereas on the Atlantic disk and in direct communication with Europe (where the Panama Canal will never be needed) are situated seven-eighths of its one hundred and fifty millions of inhabitants and the whole of its productive lands, i. e., the Argentine, Brazil, Mexico, Colombia, Venezuela, the United States, and Canada to one hundred and fifteenth meridian west, approximately. As far as the above countries are concerned, their trade can never reasonably be expected to make use of the Panama Canal to any extent worth considering at present. SPENCER S. DICKSON, His Britanic Majesty's Vice-Consul. No. 26.] Mr. Loomis to Mr. Beaupré. DEPARTMENT OF STATE, SIR: I have to acknowledge the receipt of your No. 67 of July 1, last, concerning the Panama Canal. It is receiving consideration. There is an error in translation in the twentieth line of the second page of the note inclosed. "Dos compañías" has been translated two countries" instead of "companies. I am, sir, your obedient servant, FRANCIS B. LOOMIS, Acting Secretary of State. Mr. Beaupré to Mr. Hay. [Telegram.] UNITED STATES LEGATION, Bogotá, August 5, 1903. (Received 12.) Referring to my dispatch of April 24, containing your cipher telegram, April 7, I have received a note from minister for foreign affairs. aThree per cent on the $10,000,000 compensation under the treaty, plus the $250,000 annual rent. asking if "any modification in the treaty itself would be considered in violation of Spooner law, the same as suggestions for canceling concessions of companies had been considered by the Government of the United States." I replied July 22 substantially as follows: With the approval of the treaty by the Senate of the United States, the Spooner law, which authorized its making, was fully complied with, so far as the Panama route is concerned. Hence said law went out of active existence with reference to Panama, and can only become a subject of discussion, and then with reference to Nicaragua, in the event of rejection of the treaty by Colombia. This is my personal opinion, which I am unable at present to confirm by cable reference to my Government, but I believe it my duty to inform you that I have no reason to believe my Government will again consider or discuss any modification whatever to the treaty as it stands, which impression I gather from a careful reading and study of the notes already in your possession, for if in case of Concessions of the companies my Government would consider their modifications in violation of Spooner law, then with great reason it would seem the treaty itself as the official interpretation of (the law) can not be modified at all without violating that law. From conversations with prominent Senators I believe the Government does not consider my opinions as final or authoritative. I beg for an emphatic statement from you or instructions under my telegram of July 15. There is much danger that the treaty will be amended. BEAUPRÉ. Mr. Beaupré to Mr. Hay. [Telegram.] UNITED STATES LEGATION, Bogotá (dated 5th). (Received August 12, 1903.) August 5, 10 a. m. It is now apparent that the treaty will not be ratified without amendment, because the positive influence on the part of this Government can not be expected. There are but eight senators of the twenty-four in favor of it, but more than two-thirds are in favor of the report of the committee, which is as follows: First. In the preamble the references to the Spooner law shall be suppressed. Second. In article 1 the condition shall be introduced that the Panama Railroad and Canal Company shall be obliged beforehand to make arrangements with Colombian Government in which the conditions shall be established under which that Government will grant consent necessary to enable these companies to transfer their rights to the United States. It shall be expressed that Colombia shall recover ownership of all land grants which are at present in the possession of companies, without excepting any of such lands, to the end that the cities Panama and Colon may remain effectively and completely excluded from zone which is the subject of the concession. Third. Terms of articles 2 and 3 shall be modified in such a manner as to express clearly that Colombia grants the United States only the right of use of the zone and parts adjacent territory. It should be expressed with precision that the rights granted the United States are in nature of tenancy, excluding the idea of ownership, and establish |