The rate of exchange in Salvador to-day is a very high one—nothing like that of Colombia, it is true, but at time of writing gold is at 160 per cent. premium. Here, however, it must be remembered there is no official currency of paper whatever, the banks which issue notes being subject to rigorous inspection and compelled to maintain silver coin to an extent which reduces their issues of notes to a mere matter of public convenience, rather than a source of profit to the banks themselves. All this is of great moment to the welfare and the future of the Salvador Railway, and has more than once been explained at length by the capable and experienced Chairman, Mr. Mark J. Kelly, at the meetings of the shareholders held in London.

The financial condition of the Salvador Railway is to-day a steadily improving one. We see that for the last year (1909-10) the gross receipts were better by £6,921; while the ratio of expenses was also satisfactory, namely, 51·81 as against 54·68, a decrease of 2·87 per cent. Improved good-traffics were also met with, and worked out at 1s. 1d. a ton in excess of previous figures. After providing interest and redemption upon both classes of Debentures, and interest at 5 per cent. per annum upon the Terminable Notes, the amount available for distribution amounted to £8,565 13s. 9d., out of which was made a payment of 3 per cent. upon the Preference shares for the year, leaving a balance of £1,065 13s. 9d., carried forward to the credit of Net Revenue Account. Prior Lien Debentures amounting to £3,600, and Mortgage Debentures to another £9,000, have also been redeemed this year, making the total redemption £62,200 to date of the accounts.

In June of next year (1912) the Terminable Notes, amounting to £45,000, will be either paid off or converted into Debentures probably bearing 5 per cent. interest. The exact financial position of the company stands as follows:

Authorized Share Capital:
Preference shares, £250,000 (in £10 shares).
Ordinary shares, £250,000 (in £10 shares).
Of these, the whole amount has been issued, viz. £500,000
Debentures:
Authorized (5 per cent. Prior Lien) £250,000
(5 per cent. Mortgage)660,000
£910,000
Out of which a balance still remained unpaid off 847,800
Five per Cent. Terminable Notes Authorized and
including cost of issue 45,000
Thus the company has a total liability outstanding of £1,392,800

Few of the States in Central America offer greater opportunities or inducements for railway extensions than Salvador, and this in spite of the fact that the country is generally mountainous, and is more than well supplied with rivers, most of which for railway purposes have to be bridged. It must be remembered, however, that Salvador is the most densely populated of all the Central American Republics; the country has therefore been very carefully surveyed, with the idea of railway extension upon a considerable scale.

In the year 1891 the United States Government despatched an Intercontinental Railway Commission to make surveys and explorations, not only in Salvador, but in Guatemala, Honduras, Nicaragua, and Costa Rica. The result of such enterprise has been the publication of a voluminous Report, which was issued in 1898, five years after the Commission's return to the United States. The Report is altogether favourable for railway extension in Salvador, and it speaks very highly of the enterprise of the Salvador Railway Company, of which a description will be found in the preceding pages. Previous to the despatch of the American Commission, the Salvador Government had had a survey of the eastern portion of the country made by Mr. Charles T. Spencer, an English engineer of great experience, and who is now General Manager of the Salvador Railway. There can be very little question that at some time in the near future further railway construction will be proceeded with, since the country is so rich in agricultural produce that a means of transportation in addition to and other than that in vogue must be introduced. In many parts of the country the ground is quite favourable to railroad work, the soil being largely decomposed volcanic ash, which stands well in cuttings, although there are numerous spurs to be cut through in many of the districts surveyed; these are in general all lava rock or conglomerate, offering good material for ballast. In but few localities are any grades found steeper than 2 or 3 per cent., or any curves sharper than 12°.

A Government concession for the construction of a railway from La Unión to the Guatemalan frontier was granted on June 15, 1908, to Mr. René Keilhauer, who was authorized to construct a line to extend from the port of La Unión, on the Gulf of Fonseca, to a point on the Guatemalan frontier. The line as projected leaves the port of La Unión, and passes or connects with the cities of Usulután, San Vicente and Cojutepeque, unites with the line already built between the capital and Santa Ana, and proceeds to the Guatemalan frontier to make connection with the Atlantic Railway of that country, and which was inaugurated towards the middle of 1908. A branch line will eventually, it is supposed, also run from La Unión to San Miguel, the most important town of the eastern section of the Republic of Salvador, and connection will be made with Ahuachapán to the west, thus furnishing railroad links with all the principal Departments.

The total length of this line will be 360 kilometres, and the contract carries with it the construction of a wharf at La Unión of steel and iron, to be erected in connection with the railroad, and capable of accommodating the freight handling of steamers. The stipulation is made that the survey of the line shall begin "within sixty days of the signing of the contract," and that the La Unión-San Miguel section be completed "within eighteen months"—that is to say, by the end of 1910; but this stipulation obviously has not been carried out. Of the remaining sections of the railroad, 20 kilometres annually are to be put into commission. Government assistance is guaranteed, and free entry for all material at the Customs-house is assured.

Previously Mr. Keilhauer had been granted a concession for the construction of a line of railroad from Santa Ana to the Guatemalan frontier, the duration of such concession being ninety-nine years, and carrying with it a Government subsidy of 3 per cent. per annum of the cost of each kilometre, which was fixed at $20,000 (=£4,000).