With Brazil and the Republics of Central and South America some steps have been taken toward the development of closer commercial intercourse.  Diplomatic relations have been resumed with Colombia and with Bolivia.  A boundary question between the Argentine Republic and Paraguay has been submitted by those Governments for arbitration to the President of the United States, and I have, after careful examination, given a decision upon it.

A naval expedition up the Amazon and Madeira rivers has brought back information valuable both for scientific and commercial purposes.  A like expedition is about visiting the coast of Africa and the Indian Ocean.  The reports of diplomatic and consular officers in relation to the development of our foreign commerce have furnished many facts that have proved of public interest and have stimulated to practical exertion the enterprise of our people.

The report of the Secretary of the Treasury furnishes a detailed statement of the operations of that Department of the Government and of the condition of the public finances.

The ordinary revenues from all sources for the fiscal year ended June 30, 1878, were $257,763,878.70; the ordinary expenditures for the same period were $236,964,326.80, leaving a surplus revenue for the year of $20,799,551.90.  The receipts for the present fiscal year, ending June 30, 1879, actual and estimated, are as follows:  Actual receipts for the first quarter, commencing July 1, 1878, $73,389,743.43; estimated receipts for the remaining three quarters of the year, $191,110,256.57; total receipts for the current fiscal year, actual and estimated, $264,500,000.  The expenditures for the same period will be, actual and estimated, as follows:  For the quarter commencing July 1, 1878, actual expenditures, $73,344,573.27; and for the remaining three quarters of the year the expenditures are estimated at $166,755,426.73, making the total expenditures $240,100,000, and leaving an estimated surplus revenue for the year ending June 30, 1879, of $24,400,000.  The total receipts during the next fiscal year, ending June 30, 1880, estimated according to existing laws, will be $264,500,000, and the estimated ordinary expenditures for the same period will be $236,320,412.68, leaving a surplus of $28,179,587.32 for that year.

In the foregoing statements of expenditures, actual and estimated, no amount is allowed for the sinking fund provided for by the act approved February 25, 1862, which requires that 1 per cent of the entire debt of the United States shall be purchased or paid within each fiscal year, to be set apart as a sinking fund.  There has been, however, a substantial compliance with the conditions of the law.  By its terms the public debt should have been reduced between 1862 and the close of the last fiscal year $518,361,806.28; the actual reduction of the ascertained debt in that period has been $720,644,739.61, being in excess of the reduction required by the sinking fund act $202,282,933.33.