Part 13

The capital employed in the railway having been 27,525:957$816 upon the 31st of December last, its net income of 1,422:434$402 during the last year represents a dividend of 5.16 per cent. upon its cost, which percentage should, when the Entre Rios traffic assumes a normal condition, rise to six per cent. in view of the greater number of stations now open, and if the Uniao e Industria freights pass over the line there can be no doubt that the percentage will exceed seven per cent. per annum.

The following table shows the progress of the railway since its commencement. The Macacos branch is excluded, it not existing in the first years:—

Year. Working. Revenue. Per Cent. 1859 606:870$492 720:900$443 84.18 1860 611:402 672 920:765 784 66.40 1861 688:506 150 1,073:731 050 64.12 1862 800:934 211 964:996 982 82.99 1863 849:421 671 969:621 542 87.60 1864 964:199 300 1,211:615 205 79.57 1865 1,088:133 594 1,756:148 520 61.96 1866 834:057 521 1,848:783 351 45.11 1867 1,082:283 327 2,506:836 961 43.17 Net revenue of 1867 1,422:434$402

The stations opened during 1867 were:—Uba on May 5, Parahyba do Sul on August 11, Entre Rios on October 13.

BAHIA RAILWAY.

The shareholders of this railway continue to suffer the consequences produced by the excess of expenses over receipts. Last year's balance showed an increase of 12:867$764 in receipts, and of 24:383$445 in expenses, giving a deficit of 218:630$092, more by 11:515$681 than the preceding year's.

This result is no doubt disheartening, but meantime I await the report of the commission I authorised the President of the province to appoint, whose investigations must have revealed the latent causes of this state of things, in order to take such measures as may be recommended for the purpose of placing the enterprise on the footing reclaimed by its and the public treasury's interests.

The construction of the feeding roads judged necessary for the improvement of the traffic could not be carried on rapidly owing to the financial condition of the province.

The register of cattle established at Alagoinhas is estimated to give the railway a further traffic of 24,000 bullocks and to augment the receipts by 40:000$.

In my opinion, however, the only measure which can save the capital employed in the railway is its prolongation, but unfortunately those causes subsist which counselled me to postpone surveys for the prolonging of this and the other railways, with the exception of the Dom Pedro II. line, whose existing conditions are different.

The debt of the Province of Bahia to the National Treasury for advances on account of the Two per Cent Guarantee was estimated at 1,516:862$220 up to the first half of last year, and at present must be more than 2,000:000$.

PERNAMBUCO RAILWAY.

Notwithstanding the elements of prosperity which the company already counts on, and those which the future reserves for it, its financial position is not at present satisfactory, nor have its shares been able to obtain in London quotations worthy of the destinies awaiting it. To such result that false position has contributed, besides other things, in which the company has been placed by the various operations through which the company sought to obtain its capital. As you know, part of this capital enjoys the guarantee of interest, another part was obtained by a loan effected by the Imperial Government, and finally, a third fraction, furnished by the shareholders, runs the risk of not realising the least return for a long time. The question of the increase of guaranteed capital, in discussion between the Imperial Government and the company, must indubitably have aided in augmenting the embarrassments in which the company flounders. It would be very proper to put an end as soon as possible to every question delaying the prosperity of an enterprise whose capital has contributed largely to the development and riches of the Province of Pernambuco. It is needful to give a definite settlement to that question of the increase of the guaranteed capital of this railway which has been submitted to your deliberation. The directory in London is constantly reiterating its reclamations for a final decision. As we do not possess the needful means for undertakings of this kind, it is of much importance to us that foreign capital, which comes to try and to explore, may obtain advantages that may encourage other enterprises.

On the other hand, it is of very great interest to the State that companies which enjoy a guarantee of interest may prosper in such a mode as to dispense with the guarantee. The company having to meet the next payment of debenture bonds, whose time was ending, and neither having funds in hands for it nor the power of raising them in London, it recurred to the Imperial Government, asking for a loan of £40,000, but this the Government could not grant, as it was not duly authorised.

The question of the prolongation to the city of Recife has occupied my attention, especially since the engineer of the company presented the plans and estimates for the realisation of the project. According to them the direction of the line should run parallel to the streets of Santa Rita, Nova, and Praia, and the cost is estimated at £5,000.

Although the company comprehends the advantage it should obtain by this prolongation it is not disposed to undertake the works without a guarantee on the capital expended, or without some other pecuniary assistance. The advantages which this work will produce for the agriculture and commerce of the province, and the small sacrifice which its execution asks from the public coffers dispose me favourably towards it, and if, as I hope, the examinations I ordered into those plans and estimates do not change my opinion, I will at a proper time authorise a contract for this improvement.

In accordance with the dispositions of the law I authorised the Imperial Legation in London to lend the sum of £15,000 to the company, to be employed in increasing the rolling stock. The company proposing, however, to accept the loan without interest, and to amortise the principal with the excess of revenue over seven per cent., I declared the proposal inacceptable.

The revenue diminished by 47:917$011 from that of the preceding year, it coming to 599:331$445. The expenses on the contrary rose from 364:134$259 in 1866 to 414:772$537, an increase of 50:638$270 occurring therefore in 1867. This double result is partly explained by the diminution of the traffic in consequence of bad harvest in the localities profiting by the road, and partly by the need to promptly carry out the repairs of the road. Although it is desirable that this result had not occurred, it should not suscitate serious apprehensions for the future of the railway.

SANTOS AND JUNDIAHY RAILWAY.

This line was inaugurated on the 15th, and opened on the 16th of February, 1866: this road at once commenced to show an extensive traffic, which, augmenting day by day as the planters became convinced of its superiority over ordinary methods, prognosticates most brilliant destinies to it. However, notwithstanding its evident inferiority, the common road still maintains a serious competition with the railway and takes from it a part of the products which are sent to Santos from the interior, inasmuch as, out of 1,004,779 arrobas, at which amount the total traffic is estimated, 611,818 go by the railroad, and 392,961 by the highway. Despite this competition, and the difficulties with which every enterprise struggles at first, however well organised, the gross receipts of the Santos and Jundiahy railway, since its opening, up to the end of 1867, rose to 1,236:423$702, thus giving more than 4¾ per cent. upon the capital employed. It maybe presumed that, when the short life competition referred to is overcome, and when the line is extended to Campinas, taking into account the natural increase of production in a province so favourably placed, the revenue would soon double, thus freeing the treasury from the onus of the guarantee of interest. The Santos and Jundiahy Railway is, therefore, one of those amongst us which promise best; and perhaps it may be considered the first industrial undertaking of the kind, if the serra service, by means of inclines, does not exact a constant outlay which will diminish the revenue.

During the past year the trains of the road transported 176,081 passengers, namely:

1st Class 19,078½ 2nd Class 26,033½ 3rd Class 130,952 Season tickets 17 ———————— Total 176,081

The plan of Engineer P. Fox for the extension of the line to Campinas having received the preference over the other traces presented to the ministry in my charge, the President of the province undertook to promote a company of planters and capitalists to carry this important benefit into effect. The company having the right of preference to the extension of the railway, I instructed our Minister in London to obtain an explicit declaration from the directory renunciatory of its right, in order that there might be no future doubts or reclamations. The directors replied that the company expressly desisted from the right, and, therefore, the association could proceed with its measures for the realisation of its object. In the opinion of Engineer E. Viriato de Medeiros the amount of capital expended up to the 30th of July, 1866, amounted to £2,548,434, but for payment of interest due it was estimated hypothetically at £2,650,000.

The provincial assembly not having empowered the President to pay the interest of two per cent. upon the guaranteed capital, to which the province had bound itself, it was necessary for the national treasury to take upon itself the satisfaction of the provincial promise. It is therefore requisite that the provincial assembly provide in the estimate of this year for relieving the public treasury from the charge upon its already too burdened coffers.

It will be seen from these reports that all the guaranteed railways are exposed to difficulties arising out of the special character of the relations existing between the various companies and the Government, and that Senhor Sobragy, the talented manager of the Dom Pedro Segundo Railway, has been sent to England to try to come to terms with the companies. In my opinion, however, nothing short of the Government taking over the railways, giving in exchange a guaranteed stock, can ever meet the requirements of the case, or bring these concerns out of their present unfavourable position. It would be useless to recapitulate here the causes of their failure. Certainly no fault can be laid to the charge of the Government, which has acted in perfect good faith towards them, and done probably more than any other Government ever did or would do to assist undertakings of this or any other kind. Rashness, ignorance, and bad advisers have led to most of their difficulties, and with such proofs of the mismanagement of railway directors on our home lines no one will be surprised at the unsuccessful result of their management of lines abroad.

As an evidence that railways can be made and properly managed by Brazilians I need only refer to the Dom Pedro Segundo, a line quite as important as any in the country. In separate chapters I have referred to this railway, and also to that in the province of San Paulo.

I believe it would be greatly to the advantage of the rising generation in Brazil if the young men were trained to become engineers, rather than lawyers or doctors, with which the towns and cities swarm. Brazilians are neither deficient in talent nor energy, if properly brought out, and the employés of the Dom Pedro Segundo are chiefly natives. The splendid road to Juiz de Fora furnishes an example of this, and I regret time did not permit me to make another visit there, which Senhor Mariano very kindly urged on me. Had it not been for the heavy expenditure of the Paraguayan war, the railway system of Brazil would doubtless have been much more extensively developed, and the provincial lines now in existence carried further into the interior, as it is impossible the latter can ever be productive of much revenue, or of much national benefit until they are prolonged to the chief centres of cultivation, which, as a general rule, lie upwards of one hundred miles from the coast. The provinces of Pernambuco and Bahia both attach great importance to railway extension to the river San Francisco, but it does not appear from the report of Captain Burton, who lately explored that river, that it is likely to yield so much traffic as is supposed. The want of population is the great drawback to railways, and until this want can be met by emigration of some kind, a large amount of internal wealth must lie waste.

My long detention in the southern part of Brazil and the River Plate prevented me visiting Bahia and Pernambuco, and judging from personal observation as to the state and condition of the railways there, or reporting on the new tramway from Caxioera to the interior, which promises to be of great utility to the country traversed by it, as well as remunerative to the shareholders interested in its future.

COMMERCE OF BRAZIL AND THE RIVER PLATE.

During the unfruitful dominion of Spain and Portugal, commerce with South America was limited to the exchange of commodities between the mother countries and the populations planted in the New World revealed to Europe by the daring genius of the great Genoese navigator and those bold spirits who after him traversed and explored strange oceans and seas unknown. The Courts of Madrid and Lisbon adopted the most stringent measures for the preservation of their monopoly and to prevent commercial intercourse with their colonies by the subjects of foreign States. So successful were the means taken to this end that very little was known with certainty in England concerning those immense regions until after the War of Independence freed them from the yoke under which they had so long groaned. I need not in this place indicate all the causes that led to this great revolution, but there can be no doubt the example of our own American colonists and the principles disseminated by the French Revolution exercised a potential influence in stirring the South American communities to liberate themselves from the oppressive restrictions with which they were fettered.

The marauding exploits of Admiral Drake, and the rich prizes captured on the Spanish main, had given our countrymen some notion of the incalculable wealth of Chili and Peru, the Brazils, and the Rio de la Plata; and their erection into separate and Sovereign States was hailed as the advent of a new and prosperous era for the commerce of both hemispheres. With a liberality and promptitude which will always be remembered by the various South American nations, the capitalists of Britain responded to their demands for pecuniary aid, and loans were freely subscribed to enable the enfranchised peoples to establish popular self-government upon solid bases. It may be said that this still remains to be accomplished, and the frequently recurrent revolutions in Bolivia and Peru, and in some others of the nascent Republics, are certainly no manifestation of executive stability; but it must not be forgotten that their antecedents, under the Spanish and Portuguese control, were not of a nature to fit them for a wise and temperate exercise of political privileges. Year by year, however, with the growth of intelligence and the spread of education, the respective States are becoming less subject to internal and civil convulsions; and in this respect the rapid development of industrial and productive activity gives promise of a still more satisfactory condition of things in the proximate future.

Since the abrogation of the monopolies of Spain and Portugal and the inauguration of free intercourse with South America the commercial movements between that part of the globe and the maritime nations of Europe have assumed imposing proportions, and are every year increasing in value and importance. As elsewhere, England holds a high place both in the Pacific and Atlantic markets, as an importer of products and an exporter of manufactured goods. Our Board of Trade Returns show the magnitude of British interests in those countries, and the necessity that exists for promoting the most cordial relations with the different Governments. But at present I must confine my observations to Brazil and the River Plate, and from a reference to the returns in question it will be seen that the former is our largest South American customer, taking commodities to the annual value of £5,822,918, while we in return receive Brazilian produce of the annual value of £5,902,011. The River Plate comes next in order, taking English goods of the annual value of £4,405,548, while it sends to us produce worth £2,146,079. It will appear, therefore, that the total movements between this country and Brazil and the River Plate are respectively of the yearly value of £11,724,929 and £6,545,627. And here I may state, without going into particulars, that the entire commercial movement between England and the whole of South America reaches the no inconsiderable sum of £34,566,405. The above returns are for the year 1867.[6]

The Board of Trade Returns, though they exhibit, in figures surpassing eloquence in their convincing power, the extensive character of our own trading relations with Brazil and the River Plate, of course convey only a partial idea of the commercial activity of the countries named.

Brazil and the Argentine Republic both carry on a large business with other European nations. With regard to the first it will be seen from the statistics we quote below that the Empire has large transactions with France and the Continent, as well as with the United States, to which the bulk of her coffee crop is shipped.

In the Budget of last year, submitted to the National Assembly by the then Finance Minister, Senhor Zacharias, I find the following:—

COMMERCE OF IMPORTATION, EXPORTATION, AND NAVIGATION.

The value of the import trade in 1866-67, according to the official data in the treasury, was 143,483:745$; 22,503:313$, or 18.6 per cent, more than the average of the five years 1861-2 to 1865-6, and 5,716:903$, or 4.1 per cent, more than 1865-6.

This importation took place in the various provinces in the following proportion, which is compared with that of 1865-6:—

1865-66. 1866-67. Over in '65-6. Rio de Janeiro 80,709:067$ 80,458:064$ Bahia 17,598:941 17,878:203 279:262$ Pernambuco 21,083:655 22,211:290 1,127:645 Maranhao 2,946:760 4,028:383 1,081:623 Para 4,613:218 5,396:706 783:488 S. Pedro 6,514:928 7,746:076 1,231:144 S. Paulo 1,295:948 1,546:755 250:807 Parana 154:083 237:278 83:195 Parahyba 26:067 99:446 73:379 Ceara 1,924:546 2,586:973 662:689 Santa Catharina 449:246 630:912 181:066 Alagoas 62:250 219:537 157:287 Sergipe 63:177 17:390 Espirito Santo 1:209 2:116 907 Rio Grande do Norte 30:853 171:654 140:801 Piauhy 293:157 252:957 ——————————— ——————————— ————————— 136,766:842 143,483:745 6,053:893

Diminutions occurred in Rio de Janeiro 251:003$, Sergipe 45:787$, and Piauhy 40:209$; total, 336:990$.

The countries whence the importation came in 1866-67 were the following:—

Great Britain and possessions 58,276:905$783 United States 4,300:628 878 France and possessions 22,023:196 953 La Plata 12,325:712 734 Portugal and possessions 5,580:451 780 Hanseatic Cities 4,340:509 479 Spain and possessions 805:919 990 Sweden 222:194 583 Denmark 34:134 495 Russia 12:277 800 Coast of Africa 151:773 425 Italy 468:789 695 Chili 537:023 100 Belgium 1,333:855 778 Austria 910:268 440 Holland 3:017 850 China 23:400 000 Peru 680 000 Ports of the Mediterranean 29:744 000 Ports of the Empire 1,354:734 000 Fisheries 1:381 200 Ports not mentioned 30,747:145 332 ——————————————— Total 143,483:745 290

The value of the exports of native production and manufacture to foreign countries was in 1866-67 156,020:906$, 21,516:502$, or 15.9 per cent. more than the average of the five years 1861-2 to 1865-6, and less by 1,066:652$ or O.67 per cent. than in 1865-6.

The countries whither the exports of 1866-7 went were the following:—

Russia 460:660$717 Sweden 773:111 068 Holland 80:356 944 Hanseatic Cities 4,816:242 458 Great Britain and possessions 37,283:974 040 France and possessions 18,582:278 631 Spain and possessions 165:387 149 Portugal and possessions 4,347:275 259 Belgium 328:0485$841 Austria 61:381 600 Italy 734:400 624 Chili 414:903 411 United States 31,188:066 047 La Plata 7,014:207 881 Turkey 149:347 716 Denmark 913:630 980 Coast of Africa 448:869 272 Channel 16,511:659 000 Ports of the Baltic and Mediterranean 1,363:562 864 Ports not known 30,335:659 000 Consumption 42:642 178 ——————————————— Total 156,020:906 766

The total of the direct importation and the national exportation abroad was in:—