situation had not as yet, the Minister said, entirely disappeared, although the fertility of the country and the repairing of the damage wrought by the volcanic disturbances in 1902 had already produced a certain mprovement. In the course of 1903, with a view to p tecting the country against possible foreign aggression, the largest and best equipped army ever raised in Guatemala had been mobilised. In order to provide for the cost of this mobilisation and also for administrative expenditure, five loans, producing a nett sum of $5,000,000 currency, had been contracted with the Banco de Guatemala.

The Minister also remarked that the state of the finances had prevented the Government from giving effect to its desire to resume the payment of interest on the Public Debt, but pointed out that the existing administration had, since it came into power, liquidated a portion of the debt contracted previous to 1898 by its predecessors.

GOLD DEBT.

The gold liabilities of the Republic are stated to have amounted to $9,649,104 on the 31st December, 1903.

With regard to this sum, it must be noted that the principal and arrears of the External Debt, which it includes, are estimated in the Finance Minister's Report at £1,741,103, the true amount at the date named being £1,779.360. The difference is due to the Minister having reckoned interest from 30th June, 1902, to 30th June, 1903, at per cent., and from 30th June to 31st December, 1903, at 3 per cent., instead of at the full rate of 4 per cent. The Report contains no information with regard to the funds which, under the Contract of 16th May, 1902 (see Council's Report for 1901-2, page 185), were to be

deposited with the Banco de Guatemala for the service of the Debt, in accordance with the Law of 15th May of the same year.

INTERNAL CURRENCY DEBT.

The total currency liabilities amounted to $43,465,759 at the close of 1903.

BONDS OF THE INTERNAL DEBT PROPer.

The amount of these Bonds in circulation at the end of 1903 was $3,609,641 currency. The increase in capital, as compared with the amount outstanding in December, 1902, was only $2,700; but, on the other hand, the arrears of interest increased from $1,868,511 to $2,299,656.

COFFEE WARRANTS.

On the 16th October, 1903, a Decree was promulgated fixing the Export Duty on Coffee at $1 gold per quintal. In the preamble to the Decree it was stated that the rise in the rate of exchange occasioned great difficulties to the Treasury, that the Revenue receipts were insufficient to provide for the cost of administration, and that the high price of Coffee would enable the exporters to pay an equitable tax, which being levied in gold, would give stability to the rate of exchange without seriously affecting their interests.

A further Decree, dated 19th October, 1903, provided for the issue of warrants to the value of $1,000,000 gold, and, on the same date, the Government concluded, with an

American Syndicate, a Contract of which the following were the principal provisions :

:

The Syndicate to purchase from the Government the $1,000,000 gold of Coffee Warrants to be issued in respect of the 1903-4 crop at 80 per cent. of their face value.

The Warrants to bear 8 per cent. interest on current account and in addition to the Export Duty on Coffee, the 30 per cent. of the Import Duties payable in gold to be applied to their amortisation so soon as the assignment of these duties to the Banco de Guatemala should terminate.

No Coffee to be exported except after payment of the Duty by means of the Warrants held by the Syndicate's local representatives, and the Syndicate to have the right of causing the fiscal account books to be inspected at will to assure themselves with regard to the proper payment of the Duty.

The principal and interest of any Warrants unredeemed on the 31st August, 1904, to be paid by the Government on that day, either at the option of the Syndicate, in Warrants in respect of the 1904-5 Coffee crop (on the same conditions as in the present case), or in American gold or approved gold bills.

So long as the Warrants and the interest thereon are not fully paid, the Government not to suppress, alter, or assign to other parties either the Export Duty on subsequent Coffee crops or the 30 per cent. of the Import Duties payable in gold.

The Government under no circumstances to consolidate the Warrants, such Warrants and the Revenues assigned for their payment being the absolute property of the American Syndicate.

A duplicate of the Contract to be deposited at the United States Legation at Guatemala, and the Syndicate to have the right to appeal to the United States Government for protection in the event of any violation of its terms.

Concerning the above increase in the Export Duty on Coffee to $1 gold, the Minister stated that the Government would have been glad to avoid making any change in the amount of this tax. Several other sources of revenue were, however, pledged for the amortisation of debts, and it had proved impossible to satisfy the many

requirements of the public service with the product of the old tax ($6 currency per quintal), more especially in view of the unjustifiable rise in the rate of exchange, which could only be attributed to the cupidity of speculators. The Contract with the American Syndicate had been entered into without prejudice to the conclusion of an arrangement for the liquidation of the amounts (for which this duty had been assigned as security) due to the Banco de Guatemala and the Banco de Occidente, and steps were being taken to arrive at a settlement.

CONTRACT OF AUGUST, 1899.

In the course of 1903 the outstanding liability to the Banks under this Contract was reduced from $5,029,859 to $4,980,590 currency.

CONTRACTS OF AUGUST, 1902, WITH THE BANCO DE

OCCIDENTE.

The first of these Contracts was for the purchase by the Bank of the $4,800,000 currency of Coffee Warrants issued in respect of the 1902-3 crop at 85 per cent. of their nominal value. The second related to a Loan of $4,705,882 currency also negotiated with the Bank at 85 per cent. and secured upon the Stamp and certain other Revenues.

According to the Minister's Report, the amounts due by the Government to the Banco de Occidente on the 31st December, 1903, under these Contracts were respectively $2,008,761 and $5,914,504, but no explanation is given of the fact that this latter sum exceeds the original amount of the Loan by over $1,200,000.

CONTRACTS WITH THE BANCO DE GUATEMALA.

In the course of 1903 five Contracts of similar tenour, dated respectively 28th January, 14th February, 19th March, 15th April, and 25th June, were concluded between the Government and the Banco de Guatemala. Each Contract provided for a Loan to the Government of $1,300,000 currency nominal at 85 per cent., less 2 per cent. commission. The rate of interest was to be 8 per cent., and the security in each case $2 currency on every quintal of Coffee exported. These Contracts contained various other stipulations which need not be reproduced here, for, as will have been gathered from the summary of the Finance Minister's remarks given above, the repayment of all five Loans would appear to have become the subject of special negotiations in consequence of the Government having, as shown above, subsequently entered into a Contract with an American Syndicate.

REVENUE AND EXPENDITURE, 1903.

The returns of Revenue and Expenditure given in the Minister's Report for 1903 include for the first time both gold and currency items. In the case of Revenue the gold Receipts are, in the Report itself, reduced to currency, and the total returns in currency show a slight falling off as compared with the corresponding figures for 1902. In the case of Expenditure, however, no such reduction is made. If, however, the gold items under the head of Expenditure are converted at the rate which has apparently been adopted by the Minister for the conversion of the Receipts,