Congress at the last session was kept advised of the progress of the serious and for a time threatening difference between the United States and Chile. It gives me now great gratification to report that the Chilean Government in a most friendly and honorable spirit has tendered and paid as an indemnity to the families of the sailors of the Baltimore who were killed and to those who were injured in the outbreak in the city of Valparaiso the sum of $75,000. This has been accepted not only as an indemnity for a wrong done, but as a most gratifying evidence that the Government of Chile rightly appreciates the disposition of this Government to act in a spirit of the most absolute fairness and friendliness in our intercourse with that brave people. A further and conclusive evidence of the mutual respect and confidence now existing is furnished by the fact that a convention submitting to arbitration the mutual claims of the citizens of the respective Governments has been agreed upon. Some of these claims have been pending for many years and have been the occasion of much unsatisfactory diplomatic correspondence. I have endeavored in every way to assure our sister Republics of Central and South America that the United States Government and its people have only the most friendly disposition toward them all. We do not covet their territory. We have no disposition to be oppressive or exacting in our dealings with any of them, even the weakest. Our interests and our hopes for them all lie in the direction of stable governments by their people and of the largest development of their great commercial resources. The mutual benefits of enlarged commercial exchanges and of a more familiar and friendly intercourse between our peoples we do desire, and in this have sought their friendly cooperation. I have believed, however, while holding these sentiments in the greatest sincerity, that we must insist upon a just responsibility for any injuries inflicted upon our official representatives or upon our citizens. This insistence, kindly and justly but firmly made, will, I believe, promote peace and mutual respect. Our relations with Hawaii have been such as to attract an increased interest, and must continue to do so. I deem it of great importance that the projected submarine cable, a survey for which has been made, should be promoted. Both for naval and commercial uses we should have quick communication with Honolulu. We should before this have availed ourselves of the concession made many years ago to this Government for a harbor and naval station at Pearl River. Many evidences of the friendliness of the Hawaiian Government have been given in the past, and it is gratifying to believe that the advantage and necessity of a continuance of very close relations is appreciated.