Questions have arisen between the two Governments as to the right of New Granada to levy a tonnage duty upon the vessels of the United States in its ports of the Isthmus and to levy a passenger tax upon our citizens arriving in that country, whether with a design to remain there or to pass from ocean to ocean by the transit route; and also a tax upon the mail of the United States transported over the Panama Railroad.  The Government of New Granada has been informed that the United States would consider the collection of either of these taxes as an act in violation of the treaty between the two countries, and as such would be resisted by the United States.  At the same time, we are prepared to discuss these questions in a spirit of amity and justice and with a sincere desire to adjust them in a satisfactory manner.  A negotiation for that purpose has already been commenced.  No effort has recently been made to collect these taxes nor is any anticipated under present circumstances.

With the Empire of Brazil our relations are of the most friendly character.  The productions of the two countries, and especially those of an agricultural nature, are such as to invite extensive mutual exchanges.  A large quantity of American flour is consumed in Brazil, whilst more than treble the amount in value of Brazilian coffee is consumed in the United States.  Whilst this is the case, a heavy duty has been levied until very recently upon the importation of American flour into Brazil.  I am gratified, however, to be able to inform you that in September last this has been reduced from $1.32 to about 49 cents per barrel, and the duties on other articles of our production have been diminished in nearly the same proportion.

I regret to state that the Government of Brazil still continues to levy an export duty of about 11 per cent on coffee, notwithstanding this article is admitted free from duty in the United States.  This is a heavy charge upon the consumers of coffee in our country, as we purchase half of the entire surplus crop of that article raised in Brazil.  Our minister, under instructions, will reiterate his efforts to have this export duty removed, and it is hoped that the enlightened Government of the Emperor will adopt this wise, just, and equal policy.  In that event, there is good reason to believe that the commerce between the two countries will greatly increase, much to the advantage of both.

The claims of our citizens against the Government of Brazil are not in the aggregate of very large amount; but some of these rest upon plain principles of justice and their settlement ought not to be longer delayed.  A renewed and earnest, and I trust a successful, effort will be made by our minister to procure their final adjustment.

On the 2d of June last Congress passed a joint resolution authorizing the President “to adopt such measures and use such force as in his judgment may be necessary and advisable” “for the purpose of adjusting the differences between the United States and the Republic of Paraguay in connection with the attack on the United States steamer Water Witch and with other measures referred to” in his annual message, and on the 12th of July following they made an appropriation to defray the expenses and compensation of a commissioner to that Republic should the President deem it proper to make such an appointment.