and has founded the town of Arévalo in Panay. Another new town is being
established--Nueva Segovia, in Luzon. Peñalosa has sent an officer
to Maluco, and the Jesuit Sanchéz to Macao, to pacify the Portuguese
there when they shall learn of the change in their rulers--the dominion
over Portugal having passed to the crown of Spain. He criticizes the
administration of his predecessors, saying that they followed no plan
or system in disbursements from the royal exchequer.

The governor thinks that the customs duties heretofore levied in the
islands--three per cent on both imports and exports--are too small;
and he has decided to raise the rate to five per cent for merchants in
the Philippines, and seven for those in Mexico. He is endeavoring to
extend the commerce of the islands, and for this purpose is sending
ships with goods to Panama and Peru. He has sent one piece of heavy
artillery to the viceroy of Peru, who asks Peñalosa for more; this is
for the defense of the Strait of Magellan. The commerce between the
Philippines and New Spain is increasing. Peñalosa commends the Jesuit
missionaries who have come to the islands, and advises that more of
them be sent thither. He is building forts and ships for the defense
of the islands. He remonstrates against the recent royal decree which
ordered the liberation of all Indian slaves held by Spaniards in the
Philippines; and closes by asking some personal favors.

By the same mail which conveys the governor's letter is sent
an account of the islands and their people, written by a soldier
named Miguel de Loarca, Who was one of the earlier conquerors and
settlers there. Beginning at Cebú, as the first settlement was made
therein, he describes each island then known to the Spaniards in that
group--noting its size, contour, and population; and enumerating
the encomiendas assigned therein, the officials in the Spanish