them being Dreadnoughts and the rest cruisers, torpedo-boats and gunboats. Liberal orders for rifles and field artillery were also placed with German firms. It was denied on behalf of Brazil that she had any warlike intentions against her neighbours, and it was pointed out that she had a long coast-line to protect and unsettled boundaries in the interior which might lead to difficulties. The question whether this new and heavy expenditure for military and naval purposes is or is not justifiable, having regard to the state of Brazilian finance and trade, led to much discussion, and to a lively controversy in South America on the subject or what was called "Equilibrium of Armament." It also led to a decision by the Argentine Republic to increase her own naval and military equipment. The position at the end of the year was that Brazil had no navy other than a few obsolete vessels, and that the new fleet had yet to be built. At the opening of the National Congress in May President Penna declared that the international relations of Brazil were perfectly good and made the usual professions of amity and peaceful intentions; but the fact remains that the two chief States of South America have now entered upon a burdensome race in armaments which may conceivably imperil their peace. On the question of boundaries President Penna made the interesting statement that the source of the Cotinga River (British Guiana) had been found to be in the Roraima Mountains, not where it was assumed to be in the award by the King of Italy under the treaty of arbitration. This will necessitate a new and amending treaty. It should be observed, as throwing light upon Brazilian official declarations, that the new warships were not intended for use against the Argentine, that a treaty of arbitration was concluded between the two Republics. If acted upon there could be no war between them. The Budget for 1908 provided for an expenditure of 65,625,210 milreis gold, and revenue estimated at 91,493,713 milreis gold. The Presidential message gave the revenue for 1907 at 535,443 contos and the expenditure 525,722. According to the Jornal do Commercio, the consolidated external debt of Brazil was 34,697,300l. in 1898; in 1908 it was 72,133,3577. Notwithstanding this enormous increase the financial and trade facts of the Republic are so handled by the Jornal as to demonstrate a continuous expansion in the development of Brazil. The Government statistics of trade show that from January 1 to October 30, 1908, the value of imports of merchandise was 29,806,3791. as against 33,222,3791. for the corresponding period of 1907. The exports for the nine months were of the value of 34,263,4231. as against 46,857,6451. in the previous year. The total for the year was imports 35,491,4107, as compared with 40,527,6037. in 1907; and exports 44,094,9921. as against 54,176,898. That is how Brazil is "expanding," and that is the commercial basis on which Brazil intends to become a great naval power.

A National Exhibition to celebrate the centenary of the opening of Brazilian ports to foreign commerce was opened at Rio de Janeiro in August.

In February the United States fleet on its way to the Pacific was enthusiastically received at Rio, and escorted by an Argentine squadron through the Straits of Magellan. It was reviewed at Valparaiso by President Montt, and the torpedo flotilla called at Buenos Ayres and had an enthusiastic reception.

At the opening of the year the Argentine Republic was disturbed, and there was an attempt to assassinate the President, Señor Alcorta. Many arrests were made in connection with this incident and others, but the elections to renew half the personnel of the Chamber showed that the Government had the situation well in hand and was able to return its own candidates. In opening Congress in May, President Alcorta justified the measures he had taken for the preservation of the peace and for the termination of conflict between the Executive and the Chambers; the latter had declined to sanction the estimates for 1907. Because of this the executive had itself sanctioned the Budget, and withdrawn Bills and other matters from the Legislature. It appeared that the revenue for 1907 was 21,196,250ễ., an increase of 2,250,000l. above the estimate. The expenditure was 18,030,000l., or 2,000,000l. less than the sum provided. The external debt had been reduced to 63,902,5017., but the internal gold debt had increased to 11,101,140. The Budget Committee estimates for 1909 show a revenue of $66,700,433 gold and a small surplus. This result is obtained by an expectation of increased revenue and considerable diminution in expenditure. But there was to be an additional expenditure ($15,000,000) on the army and navy, and $3,000,000 for the cost of the Revolution Centenary in 1910. It was stated that the proposed armaments would be paid for out of revenue, not by new loans or new taxation. In the Government statements much optimism was expressed as to the economic conditions and future of the Argentine. It appeared that for the first half of 1908 imports were of the value of $131,273,361 gold, and exports $233,076,267. A comparison with the corresponding figures for the first half of 1902 shows that both imports and exports had more than doubled their value. This remarkable increase in prosperity was due to a succession of good seasons, an expansion of areas under cereals, and the growth of the cattle trade. The area under wheat was over 6,000,000 hectares, under linseed 1,500,000, and under corn 633,000. The harvest prospects at the end of the year were reported to be excellent. The number of immigrants in 1908 was 255,710, but there was an outflow of 85,000 steerage passengers.

Uruguay has had a peaceful year. The Customs revenue, which, in the absence of trade statistics, forms the best indication of the condition of the country, amounted to 2,807,4917. in 1907, or 70,556/. more than in the previous year. The revenue

GG

is raised from imports, and the duties, and consequent cost of living, are extremely high. A movement for tariff reduction was ineffectual. Progress has been made with the judicial reforms instituted in 1907, and judges have been appointed to conduct viva voce trials. A difficulty is pending with the British Government owing to an attempt to establish jurisdiction in River Plate waters beyond the three-mile limit, the Canadian Government claiming compensation through the Foreign Office for the seizure of a Canadian sealer, the Agnes Donohoe. President Williman continued in office, but late reports from the Republic indicated the probability of a revolution before the close of his term in 1911.

Chili is still suffering from the commercial disruption caused by the destruction of Valparaiso in 1906; the nitrate trade has suffered a set-back, and there have been frequent labour troubles. Exchange has been low, but the law for the conversion of paper money, which is to come into effect in January, 1910, is expected to lead to a revival in the affairs of the country. Meanwhile new paper has been issued and, except among Chilians who benefit by the low rate of exchange, there is dissatisfaction with President Montt's Administration. The Budget for 1908 estimated the expenditure at 3,623,938, and it was claimed that economies of over 1,000,000l. had been effected and that a surplus would accrue. The policy of the Cabinet was defined. as aiming at the removal of difficulties in the way of restoring a sound currency system, of carrying out reforms likely to develop the resources of the country, and of devising means for removing the causes of labour disputes. The Chilian naval programme covers the construction of a first-class battleship at a cost of something under a million sterling. During 1908 the Customs receipts at Valparaiso amounted to $40,000,000. The first Pan-American Scientific Congress met at Valparaiso on December 1. Peru has suffered renewed internal disturbances, and in August an unsuccessful attempt was made to assassinate President Pardo, who was succeeded on September 24, after revolutionary trouble and an unopposed election, by Señor Leguia. Proposals for new external and internal loans were made at the close of the year. A serious revolution occurred in Paraguay in July, resulting in the overthrow of President Garcia and the installation of Señor Emiliano Naveiro as President. The revolt was led by the military faction, which rose against Señor Garcia, and a British eye-witness of the scenes estimated the killed and wounded at from 600 to 1,000. Events have thus falsified hopes that the upheaval of 1904 would be the last of its kind, and have seriously checked the revival of prosperity. The imports in 1907 were of the value of 1,572,2557. and exports 647,2221. The revenue was estimated at 635,000l. and the expenditure 677,9821. The external debt (Dec. 31, 1907) was 792,2691. In Bolivia, Señor Fernando Guachalla was elected President on May 4 for four years from August 6. The country

has been in dispute with the Argentine Republic respecting a railway convention (May 18, 1907) committing it to the construction of a railway from Tupiza to Potosi, Congress overriding the convention on grounds of expense and substituting a line from Tupiza to Uyuni.

In Ecuador the Guayaquil and Quito Railway from the coast to the capital was at last opened on June 25, amid general rejoicings. As an engineering feat it has probably no parallel, unless it be the Oroya Railway in Peru. The engineers and promoters were American, and it was carried to completion by Mr. Archer Harman. Financially the line, which took over the State debt in 1897, has been unfortunate, but a settlement was effected with the bondholders in August through the secretary of the Corporation of Foreign Bondholders. Colombia gave promise of active development under the firm rule of President Reyes. A redivision of the country into new departments was announced to take effect on January 1, 1909.

The troubles of Venezuela continued throughout 1908 and culminated in December in the departure of President Castro and the formation of a new Administration. In June the situation was that the United States, France, Great Britain and Holland had serious difficulties with President Castro, the chief grievance of the two latter Powers being the seizure of trading sloops by Venezuelan coastguard vessels, apparently in retaliation for alleged harbouring of Venezuelan enemies of the President, in the Dutch and British possessions in the Caribbean. The dispute with Holland led to the expulsion of the Dutch Minister from Caracas and the Dutch Government thereafter sent gunboats to the coast. Early in December it became known that President Castro, who was reported to be taking a visit to Europe to undergo an operation and to settle difficulties with Holland and France direct, had left Venezuela under circumstances which ended his presidency. He landed at Bordeaux in the company of Señora Castro and some Venezuelan officials or ex-officials, and proceeded to Berlin, where he was at the end of the year. It was reported that he had amassed a fortune of 1,500,000l. sterling. Both in France and in Germany he was treated as a private person. Meanwhile, the Dutch navy had captured the whole of the Venezuelan "fleet." General Gomez, the Vice-President, protested against this aggression in a manifesto. "The national sovereignty is threatened and the territorial integrity, honour and dignity of the Fatherland are in danger." Meanwhile, there were antiCastro demonstrations in Caracas and a bonfire was made in the Plaza Bolivar of all the statues and pictures of the ex-herdsman that could be collected. Notwithstanding Venezuelan repudiation of himself Castro posed in interviews with French and German journalists as the ruler of the country on a diplomatic mission. General Gomez placed Castro's brother under arrest, seizing him with his own hands on an allegation of complicity

in a plot for his assassination. Other arrests of the ex-Dictator's partisans were made, and a proclamation issued declaring that a new Government had been formed. None of Castro's party was included in the new Ministry, which forthwith cancelled Castro's letters of credit and appointed Dr. Paul, an ex-Foreign Minister, to proceed to Europe to negotiate with France and Holland. The proclamation also revoked the decree against the admission of merchandise from Holland which had been transhipped at Willemstad, and thus showed a readiness to terminate the dispute with that Power. Moreover, it terminated trade differences of long standing with Colombia. The policy of the new Government was set forth in a proclamation by the Minister of the Interior, Señor Alcantara, to the State or provincial governors. It appealed for unity of action (there had been a futile effort to upset the new régime) and declared that the Government would aim at the restoration of Venezuelan credit and the improvement of her economic resources, so as to remedy the poverty of the people, the causes of which were apparent to all. "Venezuela," the proclamation continued, "wishes for frank and continuous friendship with all nations. We must, therefore, try to come to some definite conclusion regarding questions at issue, always consulting, however, the dignity of the nation and its inalienable rights.'

CHAPTER IX.

AUSTRALASIA.

I. THE AUSTRALASIAN COMMONWEALTH.

THE year 1908 saw the first check imposed upon the remarkable expansion of Australian trade that had continued ever since the break-up of the drought in 1903. Compared with the trade figures of 1907, both the imports and exports of 1908 reveal an appreciable falling off, as the following details will show :

Total.

:

£ 124,089,000

49,283,000

64,439,000 113,722,000

A decline of over 10,000,000l. in the oversea trade of the Commonwealth must be regarded as rather a serious set-back to Australian prosperity, especially as over 8,000,000l. of the total is accounted for by exports, due to a diminution in the quantities of wool, butter, and wheat sent away, and to the fall in the price of copper, lead and zinc. The year closed, however, with a promise of a record wheat harvest and the most gratifying reports of agricultural and pastoral production, so that 1909 should more than atone for the shortcoming of 1908.