regulations, and which hitherto have followed in their investments the rules of the obras pías, shall be by preference set aside for rewards bestowed for enterprises in agriculture, industry, and inter-island trade. Thus will be remedied the injury arising from the failure of those great funds to be in circulation; and the abuse of employing them in favor of foreigners and their commerce, under assumed names, will be corrected. Of the arsenal of Cavite [Bernaldez declares that the works of naval construction, etc., for the government can be accomplished for half the cost by means of private contracts awarded to the lowest bidder, which is proved by the history of all the enterprises which have been undertaken by the government in those islands, whether in agriculture, mining, or metal-working; "for, however great the disinterestedness and economy which can be ascribed to the officials who conduct the enterprise, in this direction nothing can take the place of the contractor's activity and vigilance." In the cutting and gathering of timber there is abundant cheating and graft, as that work is directed by Indian overseers, or by mestizos and Chinese; the latter have abandoned the system of day wages ("which the natural slothfulness of the Indian renders very costly"), and instead pay the natives so much for a certain amount of work (which they call paqueao). "In this way the Indians, who always are cheated in these calculations, have to redouble their efforts to gain the amount bargained for, thus allowing to the mestizo the benefit of at least one-third of the usual daily wages." After the timber is cut, its transportation, storage, and seasoning cost more when done by the government than by the mestizo contractor, and occasion much loss and damage. Ships of war could be built at Manila to great advantage, so far as the abundance and cheapness and location of the timber is concerned; but the lack of iron and copper there is a serious hindrance to such plans. There are mines of both metals in the islands, but they are not worked for lack of enterprising persons and suitable machinery. Bernaldez recommends: That the crown offer large rewards for the successful operation of the iron and copper mines in the islands, the supply therefrom of metal sufficient for the construction of ships and cannon, and the introduction of machinery for mining and iron-working. That arrangements be made for building war-ships each year, by contracts for the supply of timber and the manual labor. That competent engineers and constructors be sent from España, at good salaries; that necessary supplies and materials be secured by contracts, bid for in public; and that funds from the royal exchequer be set aside for this purpose to the amount of one hundred thousand to one hundred and fifty thousand pesos annually. That all the construction and repairing of war-ships for Filipinas be done through contracts, at public bidding; and that the arsenal of Cavite be reduced