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.