An indemnity tendered by Mexico as a gracious act for the murder in 1887 of Leon Baldwin, an American citizen, by a band of marauders in Durango has been accepted and is being paid in installments.

The problem of the storage and use of the waters of the Rio Grande for irrigation should be solved by appropriate concurrent action of the two interested countries.  Rising in the Colorado heights, the stream flows intermittently, yielding little water during the dry months to the irrigation channels already constructed along its course.  This scarcity is often severely felt in the regions where the river forms a common boundary.  Moreover, the frequent changes in its course through level sands often raise embarrassing questions of territorial jurisdiction.

Prominent among the questions of the year was the Bluefields incident, in what is known as the Mosquito Indian Strip, bordering on the Atlantic Ocean and within the jurisdiction of Nicaragua.  By the treaty of 1860 between Great Britain and Nicaragua the former Government expressly recognized the sovereignty of the latter over the strip, and a limited form of self-government was guaranteed to the Mosquito Indians, to be exercised according to their customs, for themselves and other dwellers within its limits.  The so-called native government, which grew to be largely made up of aliens, for many years disputed the sovereignty of Nicaragua over the strip and claimed the right to maintain therein a practically independent municipal government.  Early in the past year efforts of Nicaragua to maintain sovereignty over the Mosquito territory led to serious disturbances, culminating in the suppression of the native government and the attempted substitution of an impracticable composite administration in which Nicaragua and alien residents were to participate.  Failure was followed by an insurrection, which for a time subverted Nicaraguan rule, expelling her officers and restoring the old organization.  This in turn gave place to the existing local government established and upheld by Nicaragua.

Although the alien interests arrayed against Nicaragua in these transactions have been largely American and the commerce of that region for some time has been and still is chiefly controlled by our citizens, we can not for that reason challenge the rightful sovereignty of Nicaragua over this important part of her domain.

For some months one, and during part of the time two, of our naval ships have been stationed at Bluefields for the protection of all legitimate interests of our citizens.  In September last the Government at Managua expelled from its territory twelve or more foreigners, including two Americans, for alleged participation in the seditious or revolutionary movements against the Republic at Bluefields already mentioned; but through the earnest remonstrance of this Government the two Americans have been permitted to return to the peaceful management of their business.  Our