The preliminary steps in this matter can be entered upon in this capital, should Mr. Mathew be provided with the powers necessary for such transactions; otherwise at the Court of St. James, so soon as the representative of Mexico shall have presented his credentials. The Undersigned, &c.

G. B. Mathew, Esq.

FRANCISCO ZARCO.

No. 4.-Mr. Mathew to Lord J. Russell—(Received May 10.) MY LORD, Mexico, April 5, 1861. In a recent and prolonged conversation with Señor Zarco, Minister for Foreign Affairs, relative to British claims, that gentleman earnestly assured me of the desire entertained by his Government to meet my just demands on behalf of Her Majesty's subjects in every manner that the deplorable financial condition of Mexico would admit; and further expressed the readiness of the Mexican Government to do whatever your Lordship might deem proper for preventing a recurrence of the exactions lately suffered by British subjects from misinterpretation or deficiencies in the International Treaty, from which many of the existing reclamations have arisen.

I thought it therefore desirable to address him a brief note on these subjects, in order to be enabled to submit to your Lordship some definite proposals and views.

The unsettled condition and future prospects of Mexico, and the experience of the last 3 years render it, I feel convinced, of obvious importance that all articles of disputed interpretation in the Treaty should be clearly defined, and that such additions should be made to it as your Lordship may think conducive to the security of Her Majesty's subjects, and to the advantage of British interests.

I have much pleasure in being able to lay before your Lordship, by the inclosed translation of Señor Zarco's reply, the official declaration of the desire of the Mexican Government to meet these objects.

This Government, as your Lordship will observe, propose to refer all British reclamations, not yet recognized by it, to the examination and final decision of a Mixed Commission, and to assign for the gradual discharge of all English claims thus or previously admitted, a stated portion of their revenues.

It is distinctly understood that this proposal, which I have now to submit to your Lordship's consideration, has no reference to the special agreement already entered into by the Mexican Government for the repayment of the British money seized in the "conductas " at Lagos and Tampico, nor to the negotiation in progress between the Mexican Government and the agent of the bondholders for the restoration of the money plundered at this Legation.

Señor Zarco proceeds to state the willingness of his Government to define or extend, as your Lordship may think fit, in the usual manner the privileges to be mutually enjoyed by British and Mexican subjects respectively, and makes in the name of the Mexican Government the declaration, that they stipulate from the present moment for the extension of the right of exemption from forced loans, in Article X, to exemption from extraordinary con tributions, from which Her Majesty's subjects have so severely suffered.

He observed that he has proposed by a separate note (the subject matter of my despatch of the 26th of March), to secure to Her Majesty's subjects, by a separate Article, the free right of public worship, and he transmits a copy of the now existing law for that object, which I have the honour to inclose.

I think your Lordship will not disapprove of my having thus taken the earliest opportunity of bringing these matters to issue. I am not aware of any other points in the International Treaty calling for notice, except that of intestate estates, but I may at the same time bring to your consideration the questions affected by the late proposed and, I imagine, discarded Treaty with The United States, of any exclusive rights of transit for merchandize, or of Isthmus jurisdiction. I have, &c. Lord J. Russell.

GEORGE B. MATHEW.

(Inclosure 1.)-Mr. Mathew to Señor Zarco.

Mexico, March 22, 1861. THE Undersigned refers with much pleasure to his recent conversation with his Excellency Señor Don Francisco Zarco, respecting some proposed mode of liquidation, by mutual arrangement, of the heavy claims of British subjects against Mexico, and he would be glad to be enabled to transmit for the consideration of his Government the views entertained by his Excellency and the Mexican Cabinet.

The consideration of this subject naturally led to remarks upon certain alleged doubts with regard to the wording of the present international Treaty between Great Britain and Mexico, upon infractions of which many of the British claims are founded, which his Excellency Señor Zarco informed him had attracted the serious consideration of his Government.

The Undersigned would have great satisfaction at the same time, therefore, in laying before his Government any general suggestions which his Excellency Señor Zarco may think fit to communicate to him, with the view of securing beyond the possibility of doubt or question, in Great Britain and in Mexico, to the natives of each

country the rights and privileges to which the two Governments have declared them entitled in civil and religious matters. The Undersigned, &c.

Señor Zarco.

GEORGE B. MATHEW.

(Inclosure 2.)-Señor Zarco to Mr. Mathew.

(Translation.) National Palace, Mexico, March 27, 1861. THE Undersigned, &c., has the honour of acknowledging the receipt of the note which Mr. Mathew, &c., was pleased to address him, under date of the 22nd instant, in which, referring to a recent conversation he had with the Undersigned respecting British claims, he expresses a desire to know what are the intentions of the Mexican Government as to their liquidation and settlement.

The Undersigned, who has already expressed to Her Majesty's Chargé d'Affaires how sincere is the wish of the Mexican Government to offer every kind of security for faithfully complying with the Treaties, and to attend to all claims founded in justice, has also laid before him the great difficulties which at this moment impede an immediate and satisfactory settlement; difficulties which are the natural consequences of a 3 years' civil war, and by which the public Treasury has been drained, and the burthens weighing upon the revenue have been greatly increased.

The Undersigned has been gratified by perceiving that Her Britannic Majesty's worthy Representative has justly estimated the goodwill of the Mexican Government, and is not unconscious of the obstacles which are but superficially noticed in this note.

The Undersigned has requested from the Finance Department a circumstantial statement of the assignments of the duties of the maritime Custom-Houses granted for the payment of foreign claims, and as soon as this statement is made out he will have the honour of submitting it to Her Britannic Majesty's Chargé d'Affaires, in order that he may be pleased to take it into his consideration.

In the meantime, the Undersigned can inform his Excellency that the desire of the Mexican Government is to examine all British claims in order to ascertain their exact amount, to submit all that may be pending and not yet recognized (should Her Britannic Majesty's Government concur) to the scrutiny and decision, without appeal, of a Mixed Commission, whose organization would be the subject of arrangement between the two Governments, and to assign for the payment of all claims thus admitted all that part of the national revenues that can be disposed of, reserving only what is absolutely necessary for covering the estimated expenditure, into which every economy compatible with the existence of Government has been already commenced to be introduced.

The Undersigned would truly wish to be able to make more flattering promises to Her Britannic Majesty's Chargé d'Affaires, but he prefers (and thinks it more consonant with rectitude) to use only the sincere language of truth, and to state that only which is within the limits of possibility in the present circumstances of the country.

The Government of the Undersigned recollect with satisfaction that Mr. Mathew, on the day of his official reception, offered them the full moral support of Great Britain, and they confidently hope from the sentiments of justice and benevolence which animate the Government of Her Britannic Majesty that they will see in this statement a proof of good faith, and of the sincere desire of the Mexican Government to meet their just and well-founded recla

mations.

The Undersigned takes leave to observe that when peace has been consolidated in the Republic, and the Government has been enabled to direct their attention to the improvement of all the branches of the public administration, the increase of their revenues will be gradual and progressive, and the product, therefore, of whatever assignments may have been made of these revenues will be greater for the payment of British claims.

The Undersigned likewise observes, that a general arrangement and the formation of a common fund would have the advantage of offering a greater degree of equity to British claimants; for they would thus avoid preferences in favour of some and to the detriment of others, occurrences which might take place independently of the desire of the Mexican Government, and even of the British Legation, who occasionally recommend and give ear to certain cases without being able to do the same for all the cases of like nature.

As Mr. Mathew, in the note to which the Undersigned has the honour of replying, has been pleased to suggest the propriety of laying down the clear meaning of some of the Articles of the existing Treaty of Friendship between Great Britain and Mexico, the infraction of which has caused many of the reclamations, the Government of the Undersigned perceives no sort of inconvenience in making, with that of Great Britain, such declarations as may seem best suited to prevent for the future all species of doubt or questions of interpretation, so that the natives of each country may enjoy when resident in the other, clear and defined rights.

Although, in order to arrive at this result, it may be needful to open negotiations, and to give the proper instructions to Plenipotentiaries, the Government of the Undersigned declare that from the present moment they agree, with respect to the stipulations in the Xth Article of the Treaty of December 26, 1826, to extend the exemption from forced loans to extraordinary contributions, limiting

their obligation of paying to such contributions as may be legally established in accordance with the Constitution of the Republic, and to those which the States may impose in conformity with their particular laws and their municipal regulations.

The Government of Mexico are prepared, with regard to any explanation or modification of any other Articles of the Treaty, to take into consideration any proposals or suggestions male on the part of Great Britain; and in considering such they will entertain no other view than that of maintaining and of strengthening more and more the friendly relations that happily exist between the two countries, reserving to themselves the right of proposing on their part the modifications which, on a careful examination, they may deem conducive to the maintenance of these relations and to the legitimate interests of the Republic.

With respect to the question of granting to the natives of both countries reciprocally the right of religious liberty, the Undersigned has already made known to Mr. Mathew in his note of the 25th instant, that the Government of Mexico is willing to secure, by an Additional Article to the Treaty, the necessary stipulation for ensuring to British subjects the free exercise of their worship, and the right of adoring God according to the inspirations of their conscience.

Foreign residents in Mexico enjoy this right since the triumph of the legitimate Government, who have proclaimed, defended, and sustained, the great principle of religious liberty; and such is the desire of the Government to see it carried out fully into practice, that they have not awaited in proclaiming it for the suggestion of friendly Powers, and they will concede the liberty of worship to all mankind, even though they should know that on this point due reciprocity had been denied to Mexican citizens in any other country of the world.

In order that Mr. Mathew may form an exact idea of the principles which on this point serve as a guide to the Government of the Republic, and which he may communicate to that of Her Britannic Majesty, the Undersigned has the honour to inclose a copy of the Decree of the 4th of December last,* which regulates the liberty of worship in this country, and whose provisions the Undersigned hopes may be the basis accepted by the Government of Great Britain for the stipulation proposed by the Undersigned in his note The Undersigned, &c.

of the 25th instant.

G. B. Mathew, Esq.

FRANCISCO ZARCO.

No. 5.-Mr. Mathew to Lord J. Russell.—(Received May 28.) MY LORD,

Mexico, April 19, 1861.

A PUBLIC and religious ceremony having been announced to

* Vol. LI. Page 620.