per cent, and, on the other hand, in a slight rise of the percentage of agricultural laborers, which had been on the decline from 1870 to 1890.

In order to eliminate the influence of the discrepancies in the enumeration of farm workers upon the relative numbers of other social-economic groups, the table on page 214 shows the proportion of the latter groups in the total number of persons engaged in gainful occupations other than agriculture.

It is worthy of note that, while the total number of persons engaged in gainful occupations more than doubled in the thirty years, which had elapsed between the Ninth and the Twelfth censuses, yet the changes in the percentage distribution of the social-economic groups have been slow. The relative places of the several social-economic groups in the total productive population, exclusive of the farm workers, have scarcely shifted. The gain of the industrial wage-earners in the total productive population has been wholly at the expense of the farm workers; it should be noted, moreover, that the industrial wage-earners attracted only their proportionate quota of the decrease of the agricultural population, the rest being shared by other socialeconomic groups.

WASHINGTON, D.C.

ISAAC A. HOURWICH

[To be concluded in next number]

REFUNDING THE FOREIGN DEBT OF HONDURAS

Were it not for the banana industry, Honduras would be practically unknown to the outside world, yet it is only three and a half days from New Orleans and is actually closer to Chicago than is San Francisco. When its mineral, timber, agricultural, and pastoral industries are developed, however, Honduras will be of considerable trade importance to us. Its position in relation to the other republics of Central America is that of the central, or buffer state. Make Honduras a zone of quiet, peace, and industry, and the revolutionary "game" will soon disappear from Central America. To this end the refunding of the foreign debt is the most practical plan that has been put forth.

The history of the foreign debt of Honduras is an amazing example of international high financiering. The audaciousness of the frauds perpetrated, both upon the investors and upon the government of Honduras, by the unscrupulous promoters who engineered these loans in London and Paris, is almost unparalleled. It resulted in saddling a foreign debt which now amounts to more than $112,000,000 upon a little country with an annual revenue of less than $2,000,000, and with barely 600,000 inhabitants, most of whom are non-productive Indians. At the time the debt was created, the yearly revenue of Honduras amounted to barely $300,000, while the loans called for an annual interest charge of nearly $3,500,000. This huge debt has hung like a pall over the unhappy and distracted republic. Time and time again, the bondholders have checked attempts on the part of American capitalists to build roads or to develop the resources of Honduras, claiming that its government had no right to dispose of any of its assets without the settlement of these claims.

In the following pages the attempt will be made to show how these claims arose, what Honduras actually received, and what is the basis for the settlement that is now being effected.

In 1825, the Federal States of Central America negotiated

a loan in London of £163,000 at 6 per cent interest. On the dissolution of the federation in 1827 this debt was distributed among the five republics, the amount falling to Honduras being £27,200.

Between 1825 and 1861, Honduras became indebted to the British government, under the Mesquite Territory Convention, and to various British subjects, to the extent of £31,545. Deducting a small amount paid upon the principal of these debts, there was left in the year 1867 a total obligation upon the country, upon which no interest had ever been paid, of £120,451.

In 1853 the government of Honduras entered into a contract with Mr. George L. Squier, who represented an American company, for the construction of a railroad to be known as the Interoceanic, and to extend from Puerto Cortes, on the Atlantic coast, to the Bay of Fonseca, on the Pacific. Owing, it is said, to the opposition of those engaged in the construction of a line across Panama nothing was done with this proposed work. In 1857-58, Lord Clarendon organized a British company which made a careful study and survey of the proposed route, at a cost of approximately £50,000. The enterprise went no farther at that time on account of the wars that soon followed in Italy, the United States, and Mexico. In 1866 the matter was again taken up, and the president of Honduras gave his ministers in London and Paris full power to treat and to contract for the construction of the proposed road. They were to guarantee the payments upon any issue of bonds which the government might authorize by pledging the general revenues of the republic, the income of the railroad, and the unoccupied lands of the state.

Before a bond issue could be floated, it was necessary to take up the old federal debt, which now amounted, with accumulated interest, to £90,075. So it was arranged that the republic should issue in London £90,000 of 5 per cent bonds, pledging for security the receipts of the Amapala customs house. Of this amount £55,000 were to be delivered to the holders of the federal debt, in exchange for their £27,000 of 6 per

cent bonds and their £62,875 of arrears of interest. Of the £35,000 remaining, £15,000 were given to Messrs. Hart & Co. as security for their claim of £7,300, and £20,000 were issued for expenses and brokerage.

Of this original issue of £90,000, bonds to the value of £11,150 were redeemed with money taken from the proceeds of subsequent loans, £15,000 were redeemed by a payment to Hart & Co. of £6,000 obtained from the same source, and £2,900 were retained in the hands of the government commissioners, so that the outstanding balance proper was £60,950. There was English diplomacy back of this first loan to build the road, as there was also back of the Tehuantepec and other Isthmian roads.

Such was the financial situation of Honduras when Messrs. Bischoffsheim & Goldschmidt, of London, contracted with Señores Gutierrez and Herran, ministers of Honduras in London and Paris, respectively, to issue a loan, on commission, for £1,000,000, with 10 per cent interest and 3 per cent sinking fund. The issue price was to be 60 and the gross amount to be realized would, therefore, be £600,000. The avowed object of this loan was the construction of the first section of the Interoceanic Railroad across Honduras. The length of the line was to be about 230 miles, and the cost, as estimated by the British engineers, about £2,230,000. It was claimed that this line would save 1,103 miles on the distance between New York and San Francisco, as compared with the Panama route. It was also claimed that the construction of the road would open up for development a vast tract of country abounding in forest and mineral products sufficient to pay for completing the road after the opening of the first section. A small part of the loan was to be used for the development of the mines and forests.

The government of Honduras was anxious to see this project carried out but there were no funds available, from the ordinary revenues, to apply to such a loan, and it seemed that the railroad had to be looked to as an immediate success capable of yielding a large revenue. In spite of this situation, the government, upon the issue of the loan of 1867 upon the terms just

recited, undertook to pay the huge sum of £140,000 annual interest and amortization for fifteen years from December 31, 1869, at the end of which time it was to own the road outright and be entirely free from liability. The subscribers to this loan were further promised one-half of the profits of the line for fifteen years after the complete repayment of the loan.

It is said that the only application for this loan was for £10,000 sent in by the issuing house itself, but that by sending out false statements as to the amounts subscribed for, the public was induced, by June 30, 1868, to take as much as £49,500. In order to dispose of the balance, the bonds were quoted at a fixed price to a Mr. LeFevre, who proceeded to "make a market." In this way the total issue of the £1,000,000 loan of 1867 was disposed of as follows:

To the public through the prospectus.

Placed by Mr. LeFevre

....

To the railroad contractors

To Bischoffsheim & Goldschmidt for commissions and

£ 49,500 631,200

200,000

expenses

Drawn before issued and cancelled

108,500

10,800

£1,000,000

The proceeds of this loan were to be distributed as follows:

For the first section of the road.....

.£500,000

For the development of the mines and forests, for the engineers, etc. ....

100,000

Commission of 5 per cent to the syndicate for payment out of first money realized

50,000

£800,000

The net amount actually received from this issue was £620,035, and its disposition, neglecting a few items, was as follows: