File No. 819.77/70.

The American Chargé d’Affaires to the Secretary of State.

No. 174.]

Sir: Referring to previous correspondence concerning the bids for the construction of the Panamá-David railroad, I have the honor to inform the Department that as all three of the American bidders found objection to the limitations and lack of elasticity in the law covering the conditions under which the bids were to be made, and as the President of the Republic, on his part, found none of the three bids satisfactory, by a mutual agreement between the several bidders and himself President Arosemena has called a special session of the National Assembly to convene on the 25th instant for the purpose of modifying the law.

The only feature definitely known wherein it is proposed to change the law is to make possible the selling of bonds to cover the cost of the railroad at a price less than par, the present law forbidding the sale of such bonds below par.

One of the bidders, Mr. L. E. Myers, with whom is affiliated Rollins & Sons, bankers, of Boston, has allowed it to be publicly supposed that he is returning to the United States, having definitely finished his connection with the bids for the construction of this railroad, but in confidence he has informed me that he has an understanding with President Arosemena that he will return and bid again if the law is changed as above.

In the Star and Herald of this morning it is announced that another of the bidders, Mr. Knowlton, is also returning to the United States, having withdrawn from the competition.

A British subject, Mr. Gillingham, spoke to me yesterday, saying that he was prepared to make a bid for the bonds to be issued, of 98. This will be considerably higher than any American bid, undoubtedly. Mr. Myers, for example, has been considering offering 92. Mr. Gillingham asked me whether I was able to tell him if the United States Government could, and if so, whether it would, prevent the Government of Panama from pledging as security for these bonds the principal which they have invested in real estate mortgages in the United States of $6,000,000. I told him that I was unable to say, officially, that they would, but that I was quite certain the convention between the two Governments was such as to enable the American Government to do so if it wished.

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In this connection I wish to quote, on the authority of Mr. Myers, a remarkable statement made to him by Mr. Nicanor Obarrio, who is, beyond question, one of the most prominent and wealthiest Panamans. Mr. Obarrio said that there was a considerable opinion existing in Panama that the Government of Panama ought to spend the $6,000,000 above referred to in the construction of this railroad, saying that it was their money to do with as they pleased. As he is a very responsible person, it is probable that he really voiced a sentiment, concealed but existing.

I have [etc.]

Wm. Whiting Andrews.