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Abstract
This study explores the financial performance and economic impact of British investment in the Colombian National Railway Company, the largest British direct investment in Colombia during the first period of globalisation. It aims to ascertain the railway’s impact on the regional economy and explain why it failed as a going concern. It explores three dimensions: the use of guaranteed railway bonds, the financial performance of the company, and the economic impact within different sectors of the local economy. The article implements existing methods such as financial analysis, internal rate of return, social savings, counterfactual analysis, and tailors these to a case study methodology for a micro business history of a single company. The article provides three main conclusions. Railway bond guarantees were critical to completion of the railway but detrimental to its long-term financial viability. The company was operationally profitable but stymied by construction delays. The railway contributed to growth of the export sector, internal agricultural trade, and government revenues. Contributions include tailoring the social savings method to a local rather than national focus, re-evaluation of the role of railways in Colombian economic growth, and exploring the influence of railways on internal trade within Latin American economies.
Supplemental data for this article is available online at https://doi.org/10.1080/00076791.2020.1844665.This article has been corrected with minor changes. These changes do not impact the academic content of the article.
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No potential conflict of interest was reported by the authors.
Notes
1 The Porfiriato is the period of Mexican history under the dictatorship of Porfirio Diaz (1876–1911) during which there was a rapid development of the Mexican economy supported in large part by foreign investment.
2 ‘Claim of the Colombian National Railway, Limited against the Government of the Republic’, TNA, FO55/415, f. 236.
3 Ibid, f. 244.
4 ‘Colombian National Railway Report of 1904’, Guildhall Library, Stock Exchange Reports, Box 879, f. 1.
5 ‘Colombian National Railway Report of 1907’, Guildhall Library, Stock Exchange Reports, Box 974, f. 1.
6 The original claim for compensation made by Henry Jenks was for £333,548, which combined with £165,000 of share capital and £21,000 of investment in Apulo, comes to £519,548.
7 The section had been constructed before the Colombian National Railway Company took over the railway, mostly by Cisneros, some under national administration. ‘Colombian National Railway Report of 1908’, Guildhall Library, Stock Exchange Reports, Box 1021, f. 1.
8 ‘Colombian National Railway Report of 1908’, Guildhall Library, Stock Exchange Reports, Box 1021, ff. 1–2.
9 The return on share capital is net receipts less debenture interest divided by outstanding share capital. The return on all capital is net receipts divided by all capital investment (debentures and share capital).
10 ‘Claim of the Colombian National Railway Company, Limited’, TNA, FO55/415, f. 236.
11 Odell to Mallet, 25 August 1902, TNA, FO 135/269.
12 The calculations are as follows: 20 years x 6% interest on £600,000 = £720,000; 13 years x 6% interest on £430,000 = £335,400; And 12 years x 6% interest on £450,000 = £324,000. This gives a total of £1,259,400.
13 Republic of Colombia, Colombian National Railway (1908) Customs Guaranteed 6% Debentures’, The Times, 26 October 1908.
14 ‘Claim of the Colombian National Railway Company, Limited’, TNA, FO55/415, f. 244.
15 Average transport costs are applied at $0.0625 per ton-km for the Facatativa cart road (Camacho Roldán, Citation1973 [1897], p. 23) and $0.31 and $0.58 per ton-km for the mule trail to Honda (Primmer, Citation2013, p. 46; Safford, Citation2010, p. 525). The average price for the period 1846–1865 is calculated using (Urrutia & Arrubla, Citation1970, pp. 97–98).
16 Average distance is ascertained by dividing the revenue received for the cargo by the tariff applied, and then dividing this figure by cargo tonnage.
17 a = freight revenue;
b = Railway Length; c = tonnage;
d = price 1
e = price 2;
p = % imported
18 Statistics presented in Figure 8 are compiled under the reasonable assumption that all intermediate cargo was domestic production. Population was centred in the capital, and towns and villages served by the railway were rural producers of food crops. Little economic incentive existed to import foreign rice in these areas, since it could be produced within the local area.
19 J.H. Johanet, La Industria, 5 April 1883.
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Andrew Primmer
Dr Andrew Primmer received his doctorate from the University of Bristol in 2019. He recently published in the Revista de Historia Económica - Journal of Iberian and Latin American Economic History. He is currently a British Academy Postdoctoral Research Fellow in the Economics department at the University of Reading working on British Overseas railway companies in Latin America and Sub-Saharan Africa.