My predecessor having accepted the office of arbitrator of the longstanding Missions boundary dispute, tendered to the President by the Argentine Republic and Brazil, it has been my agreeable duty to receive the special envoys commissioned by those States to lay before me evidence and arguments in behalf of their respective Governments.

The outbreak of domestic hostilities in the Republic of Brazil found the United States alert to watch the interests of our citizens in that country, with which we carry on important commerce.  Several vessels of our new Navy are now and for some time have been stationed at Rio de Janeiro.  The struggle being between the established Government, which controls the machinery of administration, and with which we maintain friendly relations, and certain officers of the navy employing the vessels of their command in an attack upon the national capital and chief seaport, and lacking as it does the elements of divided administration, I have failed to see that the insurgents can reasonably claim recognition as belligerents.

Thus far the position of our Government has been that of an attentive but impartial observer of the unfortunate conflict.  Emphasizing our fixed policy of impartial neutrality in such a condition of affairs as now exists, I deemed it necessary to disavow in a manner not to be misunderstood the unauthorized action of our late naval commander in those waters in saluting the revolted Brazilian admiral, being indisposed to countenance an act calculated to give gratuitous sanction to the local insurrection.

The convention between our Government and Chile having for its object the settlement and adjustment of the demands of the two countries against each other has been made effective by the organization of the claims commission provided for.  The two Governments failing to agree upon the third member of the commission, the good offices of the President of the Swiss Republic were invoked, as provided in the treaty, and the selection of the Swiss representative in this country to complete the organization was gratifying alike to the United States and Chile.

The vexatious question of so-called legation asylum for offenders against the state and its laws was presented anew in Chile by the unauthorized action of the late United States minister in receiving into his official residence two persons who had just failed in an attempt at revolution and against whom criminal charges were pending growing out of a former abortive disturbance.  The doctrine of asylum as applied to this case is not sanctioned by the best precedents, and when allowed tends to encourage sedition and strife.  Under no circumstances can the representatives of this Government be permitted, under the ill-defined fiction of extraterritoriality, to interrupt the administration of criminal justice in the countries to which they are accredited.  A temperate demand having been made by the Chilean Government for the correction of this conduct in the instance mentioned, the minister was instructed no longer to harbor the offenders.