The high opinion which the London Market entertains regarding Salvadorean Government securities is shown by the price at which they are quoted; and although judged upon their merits, these same securities are rather too cheaply priced, they form a marked contrast to some of the neighbouring States' foreign loans, such, for instance, as Costa Rica and Honduras. As a matter of fact, the Salvadorean Governments of successive years have strictly and faithfully performed their foreign obligations; and it has been the firm policy of past Presidents, as it is of the present Executive, to maintain their foreign credit upon an unassailable basis. It is possible to speak very encouragingly of the Salvador 6 per cent. Sterling Bonds, which were issued in March, 1908, at 86 per cent., and which are at the present time of writing quoted at or a little above par. Their desirability as an investment depends upon the standard of security they afford—on the probability, that is, that Salvador will faithfully fulfil its obligations. The Salvador Government 6 per cent. Sterling Bonds (1908), amounting to £1,000,000, were issued to meet the cost of certain public works and to repay certain local loans contracted at a higher It may be interesting to trace the whole history of Salvador's foreign indebtedness, which commenced as far back as 1827. The record—by no means an unworthy one—is as follows: 1827: Of the debt of the Central American Federation—which was composed of Salvador, Guatemala, Costa Rica, Honduras, and Nicaragua, and amounting to £163,000—the proportion which was assumed by Salvador was one-sixth, £27,200. 1828-1859: No interest was paid during this long period of turbulence and strife. 1860: Salvador compromised her share of the debt for 90 per cent. paid in cash. 1889: A loan for £300,000 was issued, bearing 6 per cent. interest and 2 per cent. accumulative sinking fund. It was offered by the London and South-Western Bank at 951/2 per cent., and was specially secured on 10 per cent. of the Customs duties and the rights of the Government on the railway from Acajutla to Ateos (thirty-five miles), and in the proposed extension to San Salvador. Out of the proceeds of the loan a mortgage of the Government's interest in the portion of the railroad already constructed (Acajutla to Sonsonate), amounting to £183,000, was paid off. The extension of the railway was only continued for a distance of seven miles from Ateos to La Ceiba. 1892: Bonds for an amount of £500,000, bearing 6 per cent. interest and 1 per cent. accumulative sinking fund, were created by the Government and issued by Messrs. Brown, Janson and Co. to the contractor Mr. A. J. Scherzer, in pursuance of a contract made by the Government with Mr. Scherzer in 1891, for the purpose of the extension of the railway. These bonds were specially secured on 10 per cent. of the Customs duties, and also by a first mortgage on the railway line from Ateos to Santa Ana (thirty miles) when built. These bonds were not issued to the public, but were delivered from time to time to the contractor, against the engineer's certificates, as the works proceeded. 1894: A company called the Central American Public Works Company was registered by Mr. Mark J. Kelly in London, and Mr. Kelly was associated with Mr. Scherzer in carrying out this contract, and in the month of April a concession was obtained from the Government under which the contract of 1891 was cancelled. The Central American Public Works Company undertook to complete the line to Santa Ana; to build a branch from Sitio del NiÑo to A change of Government took place almost immediately afterwards, and, owing to the differences which then arose between the Government and the Company, the concession was declared void. But in December a supplementary contract was entered into between the Company and the new Government, by which it was agreed that—(1) The £70,000 of shares of the Public Works Company were to be delivered to the Government by May 31, 1895 (this was done, and the Company took possession of the completed portion of the line and commenced the construction of the remainder); (2) the duration of the concession was shortened from ninety-nine to eighty years; (3) the guarantee was reduced from £48,000 a year to £24,000 during the construction of the line to Santa Ana, £36,000 during the construction to San Salvador, and the full £48,000 was not to be paid until the railway was entirely finished. 1898: In this year a new company, called the Salvador Railway Company, Limited, was formed to take over the concession from the Central American Public Works Company. Proposals were laid before the holders of the 1889 and 1892 loans to convert their bonds into mortgage debentures of the railway company. 1899: On February 8 of this year a further contract was entered into between the Government and Mr. Kelly, representing the Central American Public Works Company, of which the following were the principal provisions: (1) The company was to hand over to the Government for cancellation the outstanding 1889 and 1892 bonds (in round figures amounting to £725,000) within six months from the date of ratification of the contract by Congress. The company might, however, leave outstanding £60,000 of the bonds if they could not make delivery of the whole of them, but on these they were to pay on their own account the same interest (6 per cent.) and amortization (2 per cent.), as the Government was under obligation to do. (2) The Government was to pay the company for eighteen years from January 1, 1899, The railway company engaged themselves to complete the line to the Capital by June 30, 1900. If the bonds of the external debt were not handed over within the period stipulated, the Government was to have the right, subject to existing hypothecations, to take possession of the railways. In April, 1899, an agreement was entered into between the Council of Foreign Bondholders, acting in conjunction with the Committee of 1889 bondholders, and the Central American Public Works Company, for the transfer to the Salvador Railway Company of the railways and concessions held by the Works Company, including the subsidy payable under the contract of February 8, 1899, on such terms as might be agreed between the Works Company and the railway company. The railway company were to issue (1) Prior lien debentures to the amount of £163,000, forming part of a total authorized issue of £250,000, and bearing 5 per cent. interest and 1 per cent. accumulative sinking fund, to be applied by purchase or drawings at par. Such issue to be for the purpose of providing the funds for the completion of railway, repairs, working capital, and expenses; (2) 5 per cent. mortgage debentures to the amount of £660,000, to provide for the cancellation of the outstanding bonds of the 1889 and 1892 loans, the debentures of the Public Works Company (£150,000), and other claims. These debentures were to be redeemable by an accumulative sinking fund of 1 per cent. per annum, commencing from August 15, 1906, to be applied by purchases or drawings, at the price, in the case of drawings, of £103 for each £100 of debentures. The holders of the 1889 bonds were to receive, in respect of each £100 bond, £100 in mortgage debentures of the railway company, bearing interest from August 15, 1899. The 1889 bonds were deposited with the Council against the issue of negotiable receipts, with two coupons of £2 10s. each attached, payable out of the first two instalments of the subsidy in respect of the coupons on each bond of £100, due February 15 and August 15, 1899. This arrangement was accepted by the holders of the bonds of the 1889 and 1892 loans, who by the necessary majorities authorized the trustees of the loans to release the respective mortgages. It was also approved by the holders of the debentures of the Public Works Company, and was duly carried into effect. STATEMENT OF REVENUE AND EXPENDITURE FOR THE LAST TEN YEARS.
It will be observed that, while the general revenue of the Republic had expanded considerably during the past decade, having, indeed, increased about 50 per cent., the expenditure had, unfortunately, expanded also, and to a greater degree, leaving an annually increasing deficit to be met. The reason for this during the latter few years is clear—the unfortunate political troubles which were thrust upon the Republic by the acts of certain revolutionists instigated by the evil genius of Central America, ex-President J. Santos Zelaya, and which turned what might have been a fairly profitable period into a disastrous one, from a financial aspect. Nevertheless, there is no reason to adopt a despairing view of the Salvadorean national finances, since the resources of the country are very elastic, and their development is but in its infancy. It is much to the credit of the Government, both the present and that which was lately in office, that the situation should have been so boldly and frankly met, the whole position being explained and true reasons given. Everyone must think the better of the authorities for their honesty in dealing with the nation, an honesty which is, unfortunately, rare, not alone among Latin-American States, but also among European Governments of much older growth and wider experience. Don Manuel Lopez Mencia, the ex-Minister of Finance, who is a thoroughly capable and experienced financier, fully grasped the necessities of the situation, and before retiring from office freely criticized his own Department, offering many valuable and timely suggestions for improving it and for placing the finances of the country upon a more satisfactory basis. I believe that the present year (1911) In regard to the general financial conditions of Salvador, which are at the present time in a much more satisfactory state, the following particulars will be of interest: PUBLIC DEBT. The composition of the Public Debt on December 31, 1909, stood as follows:
The Public Debt of the Republic of Salvador on December 31, 1901, amounted to $10,666,584 (gold) = £2,133,517, and $6,207,059 (silver) = £517,256. Reduced to the silver unit, the total Debt amounted to $32,873,520. The Customs Revenues for 1910 show a small decline over those of 1909, the difference being $3,784.00.
The Government's whole Revenue during the first half of 1910 amounted to $2,972,501 (gold), and its expenditure to $2,677,431 (gold). The total import and export duties for the two years 1909 and 1910 are as follows:
The estimates for the financial year 1910-11, approved by the National Assembly, and published in the Diario Oficial of June 6, 1910, The details are shown below:
In regard to this Estimated Deficit, which in any case is very small, it is to be mentioned that in November of this year (1911) an additional export tax upon coffee, of 30 cents (gold) per 100 kilogrammes comes into effect, although only for two years, and it is expected to produce $180,000 (gold). This additional revenue will wipe out the small anticipated deficit, and leave a considerable surplus, for the present year. ditto Artillery |