Hall to Presidential Palace , San José , July 13, 1883 . Approve the foregoing contract in every respect. Signed by his excellency the President of the Republic. SOTO, August 8, 1883

No. 29. Mr. Hall to Mr. Frelinghuysen.

Sir: I have the honor to transmit, inclosed, a copy of the Gaceta, the official newspaper of Costa Rica, of the 20th ultimo, containing the contract between Mr. Minor C. Keith, a citizen of the United States, and the Costa Rican Government, for the arrangement of its foreign debt and the completion of its Atlantic railway; a translation of the contract is also inclosed. The foreign debt of Costa Rica is estimated at about $18,000,000; the greater part of this sum arises from overdue interest. The principal was contracted in 1871 and 1872 with the object of constructing an interoceanic railway from Port Limon, on the Atlantic, to Punta Arenas, on the Pacific. A good part of the loan was spent in expenses of the negotiation and never reached Costa Rica; other sums, it is said, were appropriated* * * for other purposes than those originally intended. Mr. Keith, for himself or in the name of the company he proposes to organize, agrees to arrange with the foreign creditors for a reduction of the present rates of interest of 6, 7, and 8 per cent, to 2½ per cent.; after ten years’ payment of interest, the rate will be increased to 3½ per cent, per annum. To secure in part the payment of the principal and interest of the debt, the Government hypothecates the net revenues of the custom-houses of the Republic. These revenues were $440,000 in 1882, and will, no doubt, be increased considerably when the road is finished. The Government concedes to Mr. Keith or to his company the right of ownership for ninety-nine years of the railroad already constructed and to be constructed. Of theformer there are 71 miles of Atlantic Division, from Port Limon to Carrillo, in operation; of the Central Division, from Cartago to Alajuela, there are 26 miles in operation, and in the Pacific Division there are 13 miles, from Punta Arenas to Esparta. To connect the Atlantic and Central Divisions 30 miles of railway have to be constructed between Carrillo and Cartago, and to connect the Central and Pacific Divisions 50 miles of road are required between Alajuela and Esparta. It appears, therefore, that Costa Rica requires but 80 miles of railway to complete her interoceanic communications. The contract with Mr. Keith stipulates only for the construction of the 30 miles required to connect the Atlantic and Central Divisions.

In addition to the right of ownership of the railroad, the Costa Rican Government grants to Mr. Keith and his company 800,000 acres of public lands.

Eighteen months are allowed the contractor wherein to carry out the agreement. If the arrangement of the debt should not be completed in that time, the contract will lapse without penalty to either party. As proposals similar to the terms of the contract have heretofore been made to the Government by British and French creditors, it is believed that Mr. Keith will be able to carry it out successfully. In such event, the agricultural and commercial interests of the country will be greatly benefited.

The object of the Government is the completion, at any cost, of the 30 miles of railway, which will bring the capital and the most productive districts of the country into rapid communication with the Atlantic. Its realization cannot fail to contribute to the development of our commercial relations with that Republic.

I have, &c.,