VII. The obligation of Chile under Article IV is to be observed whether the guano be extracted by virtue of the contract for the sale of 1,000,000 tons, or by any other contract, or on account of the Chilean Government itself.

VIII. The Chilean Government, as regards nitrate, does not recognize lien of any nature whatever that can affect the territories acquired by this treaty. IX. The Lobos Islands to be held by Chile until the exportation of the 1,000,000 tons of guano referred to in Articles IV and VII is completed, and then to be restored to Peru.

X. The Chilean Government agrees to cede to Peru the 50 per cent of net proceeds of Lobos Islands guano, corresponding to the said Government.

The treaty containing these provisions was ratified by an assembly on the 8th of March, 1884. Meanwhile the constitutional Congress of the Republic had met at Arequipa in March, 1883, and elected Garcia Calderon the constitutional President, with Admiral Montero and General Cáceres First and Second VicePresidents.

After peace had been signed by the Peruvian commissioners and ratified by an assembly, the Chileans left the country, and Cáceres marched upon Lima to remove Iglesias. Having reached the capital on the 1st of December, 1885, he sent an appeal to Iglesias to join him in naming commissioners for the settlement of differences and the restoration of constitutional government without more bloodshed. "Let us remember," he said, "that we are Peruvians and not enemies." Iglesias was in his power and consented.

The patriotism of Cáceres was of the highest order. His prudent conduct secured the peace of his country. Patriotic citizens emulated their General in the exhibition of fraternal spirit, and past political offenses were cordially forgiven, so that men whose ambition had led them into treasonable attitudes were invited to return to their country and assist in raising it from the unhappy condition to which the war had reduced it. Under the liberal decree of a general amnesty exiled citizens returned to their beloved country; among them came General Prado. Iglesias

went back to his home in the mountain city of Caxamarca, and Cáceres had the satisfaction of seeing his country once more restored to peace, after having fought its battles incessantly for six years.

A constitutional Congress met at Lima on the 30th of May, 1886, and Cáceres was unanimously elected President of the Republic.

President Cáceres was called to a most distressing task. The country was utterly ruined; the pall of death covered every household; the repeated massacre of Indians and the loss of the flower of the country's manhood on the battlefield had greatly reduced the population. The treasury was empty. The country had been robbed of all visible means of recuperation. Only poverty seemed to thrive, and it stalked abroad in sullen pride. Cáceres began as Pardo had done before him, reducing the expense of administering the Government to the lowest terms. Recognizing the importance of the Indian element in the population, he issued a circular to the prefects, placing the Indians on an equal footing with the Peruvians of Spanish descent, and securing them the same rights and privileges.

The army was reduced to an effective force of 6 infantry battalions, with 2,400 men; 2 cavalry regiments, 600 men; 2 brigades of artillery, 500 men. For police there was a gendarmerie of 2,400 men. This small army, while ample for all the requirements of peace, was a smaller force than Pardo had thought necessary. The navy was reduced to two small steamers, the Peru and Santa Rosa. Both army and navy are in excellent hands, and form a school for rising officers that has no superior in the world in the practical ability and devotion of its professors, the patriotic officers who have already proven their public spirit in the battles of a terrible war.

Another duty falling to the new Government was the restoration of the various institutions of learning and art, which had

suffered much during the war. The public library, which had contained nearly 60,000 volumes in 1880, including rare editions of the Bible, Elzevir and Delphin editions of the classics; excellent collections of philosophy, history, and science, and a very complete assortment of works on American archæology, almost all of which were scattered to the winds, was partially restored by the eminent Peruvian poet and author, Ricardo Palma, after many months of severe labor, in which he was assisted by the loving hands of many Peruvians, public-spirited men, who employed themselves in gathering the scattered and flying leaves from the streets. Spain, Argentina, the United States, and Ecuador came forward with contributions of books, and on the 28th of July, 1884, the national library was solemnly reopened with 28,000 volumes.

Dr. Francisco Garcia Calderón, after suffering imprisonment that greatly injured his health, returned to Lima to become the president of the Senate and rector of the university.

The administration of General Cáceres was a constant struggle with adverse circumstances. But while it was not possible to so much as meet the interest of the foreign debt, he succeeded in restoring perfect order in all parts of the Republic and in every department of the Government. During his administration the famous Grace contract, by which Peru was relieved of the burden of her vast foreign debt, was discussed in successive Congresses and finally perfected to the satisfaction of her creditors and the advantage of the country.

On the 10th of August, 1890, General Cáceres surrendered the office of President, which he had held the legal term of four years, into the hands of his successor, Col. Remijio Morales Bermudez, as constitutional President of Peru, while Cáceres has been complimented with the honorable position of minister to Great Britain and France.

Remijio Morales Bermudez, born September 30, 1836, became at the age of 18 a sublieutenant under Castilla in a Tarapacá regiment; and was made a major for meritorious service in 1862. He served under Balta as commandante at Iquitos, on the head waters of the Amazon, and Pardo had made him subprefect at Truxillo. He did splendid duty for his country during the Chilean war, and finally attached himself to General Cáceres in the movement against Iglesias. His administration has been like that of his predecessor, one of patriotic devotion to his people. Peru, under him, was in possession of a firm and stable government, under the influence of prudent, far-sighted statesmen, who devoted themselves to the material development of their country and the elevation of the people.

Chapter III.

FINANCIAL CONDITION-SETTLEMENT WITH FOREIGN BONDHOLDERS-RAILWAYS AND THEIR PROPOSED EXTENSION_ NAVIGATION FACILITIES-LINES OF TRANSPORTATION-OROYA RAILROAD-TELEGRAPH AND TELEPHONE SYSTEMS.

At the close of the Cáceres administration the annual income and outlay of the Peruvian Government were as follows:

In administering the Government Cáceres has pursued the policy that characterized the administration of Pardo, reducing the expenditures to the lowest terms by the practice of honesty and economy. These amounted, during the year for which the income has been already stated, to $6,053,962, distributed as follows, viz:

Salaries of members of Congress

Civil departments..

Foreign affairs, missions, etc.

$253, 458

759, 533 220, 807