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According to the President's Message at the opening of Congress in May the finances were in a satisfactory condition, but the figures were complicated and confusing, even to experts in Argentine finance. The Budget for 1901, as voted, showed a total revenue in currency of $149,541,385, and total expenditure in currency of $149,917,646. According to official figures there was a deficit in 1900 of $9,833,084, and it was explained that but for extraordinary expenditure there would have been a surplus. While on the subject of finance it should be mentioned that Mr. Shaw Lefevre went on a special mission to the Argentine with the object of arriving at a settlement in the matter of certain municipal debts, and that the Deputies passed a bill replacing the Corporation of Buenos Ayres by a body of Government nominees.

Relations with Chili reached a critical stage towards the end of the year. The boundary question with that Republic was referred by mutual agreement to the arbitration of the British Government in 1898. Briefly speaking it may be said that this dispute, which has been in progress for more than half a century and is of great economic importance, especially to Chili, resolved itself into an effort on the part of Argentina to confine Chili to the west of the highest peaks of the Andean Chain, and of Chili to get beyond such a line through the passes and thus acquire cultivable territory. Early in 1899 a tribunal was appointed composed of Lord Macnaghten, a Lord of Appeal in Ordinary; Major-General Sir John Ardagh, of the Intelligence Department of the War Office; and Colonel Sir Thomas H. Holditch. It held a private sitting in March, 1899, and in April called upon the two Governments to present their evidence. Certain data were submitted, but this was held to be insufficient, and the intervening period has been utilised by the collection of maps and other information, the Argentine case being now presented in its complete and final form, but the Chilian case not having been submitted in its entirety by the end of the year. The delay in coming to a decision upon the dispute is not, therefore, due to the British Government, but to both parties. Pending the collection of evidence Chili is alleged to have made certain roads in the debatable region in the southern part of the Andean Chain; and continued evidences of Chilian activity in this matter produced uneasiness and some excitement in Buenos Ayres, where the view was taken by some that Chili was bent on war. In December the situation was strained and the news alarming, as it seemed that the war party in both countries would force the hands of the diplomatists. But on December 25 a protocol was signed, of which the principal points were summarised in the following statement forwarded by the Minister for Foreign Affairs at Santiago to the Chilian Legation in London :

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"With reference to the invasion by the Argentine police of the disputed territory of Ultima Esperanza, both Governments.

agree in maintaining the situation as it existed in 1898, withdrawing their police forces and regulating subsequently the police service that it might be necessary to establish in the territory in question. Any difficulty arising on this matter will be referred for arbitration to his Britannic Majesty's Government. In regard to the construction of roads, Chili declares that the only intention she had was to study the territory for delimitation. The construction of the roads was not authorised with any other intention than this, nor did it signify any act of occupation. Both Governments will agree to the construction of such roads as are considered necessary, and any difficulty which may arise on this point will be likewise submitted for arbitration to Great Britain.-YANEZ."

Though there was some trouble immediately afterwards, owing to an allegation that an important word had in bad faith been omitted from the text of the protocol, and though there was rioting in Buenos Ayres against the Government by those who were in favour of war, the settlement was not seriously endangered, and the New Year opened with the prospect of peace.

Chili. The political history of Chili during 1901 is so closely interwoven with the boundary question that what has been written on the subject in the preceding article on Argentina need not be repeated. The Republic had the misfortune to lose by death the services of President Errazuris. In July General Germen Riesco was elected by an overwhelming majority, and the significance of the choice of him was regarded as lying in the unification of all shades of Liberals. His programme was that of financial reform. The latest statistics show that the value of the foreign trade of Chili in 1900 was $296,212,777 -an increase of $26,846,286 over 1899. Exports figure at $167,674,635, and imports at $128,538,142. Great Britain is still at the head with 33'05 per cent. of the whole trade, but competition from Germany and the United States is increasingly severe. A project was presented to the Chamber of Deputies to postpone the Conversion Law, under which the Republic on January 1, 1902, was to resume a gold currency, in accordance with the law of July, 1898; and in Congress on November 16 a Ministerial statement was made to the effect that conversion would not be made on January 1, 1902, and that a bill would be presented to Congress to modify the form and period of the act. But assurances were given that conversion would be carried into effect. A matter that aroused some interest was the attitude of Chili in the Pan-American Congress held late in the year at Mexico. Chili accepted the invitation to the gathering only on the condition that resolutions should not be of a retroactive character, or include subjects, present or past, in which Chili had an interest. The object of this restriction was to exclude Chili from decisions of the Congress on questions such as that of international arbitration, thus leaving her a free hand

in regard to her frontier controversies with Argentina, Bolivia and Peru.

In the United States of Brazil peace prevailed during 1901, and the record is one of slow recuperation in the condition of the country and in the observance of foreign financial obligations. The Address of President Campos Santos at the opening of Congress on May 3 was the last he will deliver, his term of office coming to an end in November, and the election of a new President taking place in March, 1902. He referred with satisfaction to the settlement of the boundary question with France by the award of the Swiss Federal Council, advised further measures for military instruction, but urged the greatest economy so as to ensure the avoidance of fresh financial difficulties. The Government, he said, aimed at the purchase of the railways, the guaranteed interest on which amounted to 1,000,000l. sterling per annum, now paid by the Treasury without compensation. The crisis in the coffee industry had been ameliorated by the reduction of rates on the Government railways and similar reductions on private railways, secured by agreement with the State. There had been further development in mining, and he counselled improvements of the port of Rio de Janeiro by private enterprise, with State assistance. As for finance, he said the crisis in the affairs of the Bank of the Republic had from 1892 to 1898 absorbed 260,000 contos in emissions. The Government refused to authorise further emissions, and the bank, which is under official control, had paid its creditors, after having redeemed 34,000 contos. The Treasury would resume gold payments at the time agreed upon with Great Britain (June, 1901, the end of the Funding period), and had already deposited 2,300,000l. By December it was probable it would have encashed 1,800,000l. in addition, whereas payments during the second half-year would amount to only 1,200,000l. For future years the Government would have a reserve of 4,000,000l., without including the 1,000,000l. allotted to the paper money guarantee fund. The Budget for 1900 showed a surplus of 69,000 contos, and the first quarter of 1901 an increase of revenue in all branches. Old debts had been liquidated, and the Treasury was then in the favourable position of having no debts in circulation.

The resumption of specie payments of interest to the holders of Brazilian securities constituted the chief event of the year, and is the best current indication of the resources of Brazil and the competence of the Administration. The credit for this step towards the rehabilitation of Brazilian credit is divisible between the President and the Finance Minister, Dr. Joaquim Murtinho, and the latter was the recipient from the President of a bronze figure of Fame and a glowing autograph letter in recognition of his services to the country in this connection. Under the vigorous rule of Dr. Campos Santos the Monarchical party in Brazil has been powerless for mischief, and internal

tranquillity has been preserved. The twelfth anniversary of the proclamation of the Republic was celebrated on February 15 amid such general enthusiasm as would indicate complete satisfaction with the existing form of government. The relations of Brazil with its neighbours, as with other Powers, have been devoid of incident.

Uruguay.-Trade depression has been the characteristic of the year, coincident with political discontent and agitation. The Customs House receipts for the first nine months of 1901 amounted to $8,221,513. The Government of Señor Cuestas has added two new regiments of cavalry to the Army on the plea that the condition of the interior called for the increase. It was feared that the elections in the autumn would be attended by civil war, but the composition of the new Chamber is said to assure peace to the country for the next two or three years. A more hopeful prospect for Uruguay opened with the New Year.

VII. THE PAN-AMERICAN CONGRESS.

The Pan-American Congress, which was opened at the capital of the Republic of Mexico on October 22, delegates from North, South and Central American countries being present, was promoted chiefly by the United States with the object of discussing the questions of arbitration, trade relations, telegraphic and railway communications, professional qualifications, and similar topics of common interest. Underlying the project of the Congress was the idea of United States politicians, not only to encourage trade with the Southern Republics, but eventually to form some kind of Zollverein by which the United States would absorb the trade between the Republics and Europe. This ambitious project was not, however, materially advanced, and the principal subject dealt with at the Congress was that of compulsory arbitration, the delegates finally deciding upon an agreement as to arbitration based upon the Hague Convention, to which all the States represented at the Congress will become parties. It remains, however, for the States themselves to make the necessary treaties before the action of the delegates becomes operative. The decision as to arbitration was not reached without considerable difficulty. The Argentine Republic, for example, was willing to apply compulsory arbitration to all pending or future disputes, and in this had the support of Peru and Bolivia, but Chili and Ecuador, having regard to undetermined frontier questions, wished to restrict the principle to future disputes only. In the result, the Congress unofficially brought the States into line with the United States as a party to the Hague Convention. The Congress was therefore of academic rather than practical interest, and its chief work was the passage of a resolution affirming that the principles of the Hague Convention were part of the international law of the

States represented at Mexico. The committees to which the questions of an international railway, international bank, telegraphic communications and a common standard of professional qualifications were referred, were still sitting at the close of the year, and it was doubtful whether the practical difficulties inherent in them could be overcome.

H. WHATES.

CHAPTER IX.

AUSTRALASIA.

I. THE AUSTRALIAN COMMONWEALTH.

THE year 1901 marked the beginning of a new epoch for Australia. On January 1 the Australian Commonwealth came into existence. Henceforth the six Colonies, by their own act, were joined in one Federal Union, ceasing to be Colonies and taking the name of States-merging their separate existences into one dominion and one joint life under the broad flag of England, while preserving their individual constitutional liberties. For the first time in the history of man one nation occupies a whole continent.

This great work, so splendid a testimony to the self-governing capacity of the British race, was accomplished under the happiest auspices. On the first day of the new year and the new century the Federal Government was inaugurated at Sydney with the most imposing ceremonies and amidst immense enthusiasm. The presence of an Imperial contingent of soldiers, representing all branches of the service and all the leading races of the Empire-Guards, Highlanders, Infantry, Cavalry and Artillery, with detachments of Indian troopsnot the least picturesque and popular feature of the ceremony, gave extraordinary grace and éclat to the inaugural demonstration, and invested it with peculiar meaning and dignity. Such a sight was never before witnessed in the Southern Hemisphere, giving to the act of Australian Confederation that Imperial character which is at once the happiest omen for the future of the Commonwealth and the strongest assurance of its safety and integrity.

The new Federal Government, the composition of which had been previously determined, was announced on January 1. The Cabinet was formed to represent the various States as fairly as possible, having regard to the inequalities of extent, wealth and population. Mr. Edmund Barton, who had been foremost in promoting the scheme of federation in New South Wales, assumed the offices of Prime Minister and Minister of External Affairs; Sir William J. Lyne, late New South Wales Premier, was Minister for Home Affairs; Mr. Alfred Deakin,

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