_Report from the Council of State_ Sire: Your Majesty was pleased to order that the enclosed reports from the Council of the Indias and that of Portugal be examined in the Council, and that they should make such recommendations as they deemed proper; and having examined them, the members gave their opinions as follows: The chief comendador [40] of Leon, in a meeting held at Valladolid, insisted that it was not desirable that there should be trade from Nueva Espana to the Filipinas on account of the great drain of silver thus caused; it is occasioned by the large profits obtained by investing the silver in the merchandise which comes to those islands from China--partly through the cheapness of these goods, and partly through the great value of silver. He also stated the difficulties which are presented, in that, through this trade, the need for the merchandise from these regions would cease, and with it the dependence of those colonies, which it is so important to preserve. It should be considered that, although the trade of Nueva Espana with China should be prohibited, this would be of no use if trade with the Philipinas were left open; for by that means the Chinese will have an outlet for their merchandise. Accordingly it seemed best that this should be prohibited, so that there would be no trade from Nueva Espana with the Philipinas. But, as it must also be considered that the total prohibition thereof would cause a hindrance to conversion and would put an end to settlement, he thought it best, in order to maintain both the one and the other, that two merchant ships should be permitted to go each year from Nueva Espana to the Philipinas, of the capacity and under the conditions which are at present in use there. Since, if the people of the Philipinas are able to trade with Macan, there will be the risk of their introducing through that channel a trade with China, and consequently a drain of silver from Nueva Espana, it seems best not to give an opportunity for this. On the contrary, the decree should be observed which was despatched in the time of the king our lord (who rests in glory), prohibiting the trade between Macan and the Philipinas, for it is to be believed that this was issued after mature deliberation and reflection; for that conduct would be greatly to the satisfaction of the Portuguese, and we would avoid the difficulties of opening that port to the trade from China, as it is so important for these kingdoms to maintain what they hold in Peru and Nueva Espana. But it would be very desirable to order that there shall be considerable understanding and correspondence between the governors, so that in case the ships from one region make port at the other, driven by the weather, they may be well received and treated; and also that they may help each other in times of need, with money and whatever shall be necessary of provisions, munitions, and other supplies pertaining to the defense of the land and operations against the enemy.