Attempted Economic Reform and Innovation in Bolivia under Antonio José de Sucre, 1825-1828

Much of Bolivian history, both before and after political liticai independence, has been bizarre or tragic. Colonial Potosí, the exploits of the unique General Mariano Melgarejo, and the futile Chaco War come to mind immediately. This essay, in contrast, deals with a period of Bolivian history which is neither bizarre nor tragic, and which has therefore attracted little attention. Today, however, when increasing interest is being focused on economic and social development, the administration of Antonio José de Sucre, 1825-1828, takes on new significance. No longer the exclusive preserve of the antiquarian, it now concerns those who want to understand the roots of the present-day economic and social problems which plague Bolivia and Latin America as a whole.

The meaningful economic development of Bolivia began late in the nineteenth century. A growing world industrial market for metals and increasing international investment brought the development of Bolivian silver and tin mining on a large scale. Industrialized mining was followed by railroad expansion, growing urban centers in need of modern services, increased financial contact with the outside world, the beginnings of industrialization, labor organization, and limited social reforms.

But there had been much earlier attempts to start this sort of economic development in Bolivia, attempts which have been largely ignored until now. The first of these took place during the Sucre administration, which sought to transform the financial structure of Upper Peru, revive the silver-mining industry, and enact the social and educational reforms necessary to transform the erstwhile colony into a modern nation.

Bolivia’s first years of existence as an independent state were obviously important, for new governmental patterns, economic systems, and social and educational institutions took shape during this time. Leaders attacked the national problems with enthusiasm, innovation, and optimism, and even though chaos and disillusionment enveloped the Sucre administration before it ended, this was clearly a time of accelerated activity and change.

In early 1825, when General Sucre, as commander of the Liberating Army, assumed control of Upper Peru, two factors determined conditions there. The first was the colonial legacy, the economic and social institutions and attitudes inherited from three centuries of Spanish control; the second, the economic and social consequences of sixteen years of warfare, destruction, and chaos.¹

A rigid social structure and a homogeneous upper-class were the Bolivian heritage from Spanish domination.² Peninsular rule had been largely the story of white domination over a large, oppressed indigenous population and a relatively powerless mestizo element. This white aristocracy was narrow, complacent, and conservative, interested in preserving its economic and social hegemony and in opposing dangerous innovations such as economic change and social equality. The economic habits and attitudes of most Upper Peruvians were also a heritage of the past. These included a preference for static investment in land, a taste for conspicuous consumption in their mode of living—even in their religious devotions—and a predilection for sinecures, fees, and rents rather than profits from commercial or industrial activity.

Efforts at reform and modernization after 1825 were also frustrated by the economic prostration of Upper Peru resulting from years of intermittent warfare. By 1825 many of the important colonial mines were worked out and abandoned, while agriculture remained on a primitive subsistence level. During the wars for independence many of the silver-processing mills were destroyed, and agricultural production declined sharply as the Indians abandoned their fields to join or flee from the advancing and retreating armies.³ No one worked; people who had money buried it; and the common folk fled from the cities to avoid conscription. Both royalists and patriots plundered the royal mint and bank; crops and livestock were confiscated, and pillage and other lawlessness became commonplace.⁴

Such was Upper Peru as Sucre found it in 1825. His administration is the frustrating story of the conflict between creative reform on the one hand, and conservative, selfish particularism, on the other. The rational ideas of the European Enlightenment were pitted against centuries-old economic and social institutions, which the Upper Peruvian aristocracy masked with theatrical patriotism and democratic enthusiasm. An isolated, bankrupt nation with desperately poor human resources and a stubborn opposition was an unlikely place to attempt economic reform and development.

The greatest problem of the new republican government was where to find the resources necessary to build and sustain a new nation. A possible source of government revenue lay in restructuring the tax system. After 1825 tax reform became necessary for two reasons. It was imperative to simplify and modernize the complicated, inequitable, and inefficient colonial tax structure, to make it conform with republican principles. Equally important, tax reform was needed to provide for the growing costs of independent government, so that the new political institutions might survive the first critical years and that schools, hospitals, and other institutions might be established.

The republican government under Sucre was faced with many expenses unknown to the colonial administrators of Upper Peru. An army of 8,000 men stationed between the Desaguadero River and Potosí had to be paid, fed, and quartered;⁵ in addition, the first Bolivian congress, in 1825, voted it a million-peso reward, which had to be met.⁶ Other newly created government expenses were the salaries of congressmen, judges of the new court system, and diplomatic representatives in South America and Europe. Also the new government had to find resources to establish and support schools, hospitals, and charitable institutions.

The problems involved in simplifying and rationalizing the tax system and in meeting these extraordinary expenses were overwhelming. The government had to educate and convince people, especially powerful economic elites, to accept and support tax reform. An equitable and workable system of assessment and collection had to be devised. Sucre’s administration had to overcome the centnries-old popular habits of cheating the government, smuggling, corrupting public officials, and wasting public funds.

In general, the tax reforms were designed to reconcile the Bolivian economic structure with egalitarian and republican ideals. The most symbolic of these reforms was the elimination of the mita, which had been imposed upon the Indians since the conquest and even before. During his visit to La Paz in August 1825, Bolívar put into effect a decree which he had issued in Cuzco on July 4, 1825, abolishing the tribute of personal service, declaring that “equality among all citizens” should be the cornerstone of the republic.⁷

Other colonial taxes were also eliminated or reduced. The Banco de Tabacos, a government monopoly, was abolished. Medias anatas, a special source of Church revenue, were ended.⁸ All taxes on foodstuffs were reduced or abolished in February 1826, as an experiment to determine if direct means of taxation would be more effective.⁹ The tax on flour was reduced by fifty percent and its revenue kept apart for public instruction.¹⁰ In August 1826 Congress abolished the alcabala and reduced taxes on the sale of coca in the Department of La Paz and on manufactures and indigo in the Department of Cochabamba, hoping to stimulate production of these goods.¹¹

The tax reform which made the most radical departure from the past and aroused the greatest opposition was the abolition of the tribute which the Indians had paid in place of the various taxes levied on whites and mestizos. In a decree issued at Chuquisaca on December 22, 1825, Bolívar declared the tribute abolished as of December 31. In so doing he reasoned that, since it weighed heavily on “the most miserable class of society,” and since the establishment of independence and civil liberty in Bolivia had abolished the privileged class of society, the tribute should also be eliminated. In its place the Liberator established a contribución directa—a direct, universal levy consisting of a personal or head tax, a property tax, and an income tax for individuals engaged in “the sciences, arts, and industry.”¹²

The contribución directa was set up as a one-year experiment, to be later modified or eliminated according to the will of Congress. Its obvions precedent was a similar tax reform which Santander established at the same time in Colombia.¹³ The government newspaper, El Condor de Bolivia, acknowledged that no one could accurately foresee how much revenue the new tax system would produce.¹⁴ The head tax of three pesos was payable semiannually. Rural property was to be taxed four percent on its rental value or three percent on its agricultural production for the owner. Urban property was to be taxed three percent on its rental value, or if the property were occupied by the owner, two percent on its estimated rental value. The personal income tax for army officers and civilian employees of the government was to be withheld by the treasury from their monthly salaries.

Further details of the contribución directa were spelled out by Sucre’s resolution dated January 29, 1826, which established the methods of assessing and collecting the new tax. For the head tax a general roll was to be prepared, listing all the nation’s inhabitants by canton and province. For the payment of property taxes, a special commission designated by the government would make a general assessment of all rural and urban properties. In compensation for its labors, this commission was to receive three percent of the value of the property assessed. Both these taxes and the personal income tax were to be collected by a government tax agent. The resolution promised that if the revenues derived from the contribución directa were sufficient to meet government expenses, the remaining indirect taxes still in force would be abolished.¹⁵

Opposition to the new scheme soon materialized. Its critics, many of whom had never before paid taxes because of their privileged positions, complained that the law made them tributaries on the same level as the Indians.¹⁶ The government replied by asking why whites and mestizos should enjoy privileged positions over the Indians, especially in view of all the other advantages which they enjoyed.¹⁷ The government allowed the opposition to state its position in the pages of the official newspaper. A letter from one prominent reactionary called for the restoration of colonial taxes and the reestablishment of the mita, which, he said, was a measure designed for the Indians’ own benefit.¹⁸

At first President Sucre did not take these complaints too seriously. He attributed the resistance (disgusticos) to the fact that those in charge of making up the tax rolls had not adequately explained the provisions of the law and expressed confidence that the “best people” recognized the justice of the system.¹⁹

Part of the opposition, indeed, was due to mismanagement by some of the government officials in charge of putting the law into effect. An administrator in the Department of La Paz, who still apparently considered the Indians his slaves, ordered them to bring their livestock and other possessions to the provincial capital to he assessed. Naturally the Indians resisted. Some critics of the government, however, incorrectly reported the incident as a manifestation of resistance to the contribución directa.²⁰

By mid-1826 the growth of opposition to tax reform had become quite apparent. On July 1 Congress tried to answer the criticism with a new law providing for stricter government control of tax agents and prohibiting arbitrary acts such as embargoing property or livestock.²¹ Nevertheless, during the following month a projected law was presented to Congress which, had it been successful, would have immediately reestablished the taxes in effect before January 1826.²² Also, enemies of the government in the Department of Potosí set out to make the Indians believe that the tax assessment was designed to take away half of their property for the state.²³

Even in the face of this growing discontent, Sucre still believed that opposition to direct taxation could be overcome. He realized, however, that government solvency would require some changes in the new system, since public revenues for 1826 had dropped one-third by mid-July, compared with the same period in 1825, and since income from customs duties had also fallen by fifty percent.²⁴

By the end of July Sucre was beginning to lose patience with “the entanglements that have been created . . . over the contribución directa” and the lack of revenue for public expenses as a result of these entanglements.²⁵ On August 2 Congress passed a law which reflected the seriousness of the drop in public revenues. The preamble of the law acknowledged the delays and complications involved in preparing the tax rolls and the resistance to property assessments.²⁶ At the end of July only the Department of Santa Cruz, with the smallest population, had completed the necessary tax statistics and submitted them to the government.²⁷ The provisions of the law compromised the ideals of egalitarian reform and bastardized the contribución directa. First, the Indian tribute was provisionally reestablished. Also, other indirect taxes which had been in force along with the direct tax during the first experimental six months were made effective for the last six months as well. In this way Congress acknowledged that the experiment had foundered, that the contribución directa had not provided the government with sufficient revenue, and that it had caused discontent among the taxpayers.²⁸

These modifications, however, did not quiet the critics of tax reform. Argentine agitators and priests who resented the government’s anticlerical reforms were accused of exploiting the feeling against the contribución directa for their own seditious ends. Sucre complained to Bolívar in August that “the cholos don’t want to put themselves on a level with the Indians, who [in turn] have differences among themselves.”²⁹

The serious shortcomings of the system became glaringly evident even to its few remaining defenders. Taxes collected in the first six months of 1826, 714,146 pesos, were about 300,000 pesos less than those for the corresponding half of 1825.³⁰ By the end of the year, when congressional reconsideration of the contribución directa was called for, income from customs duties had been disappointing, and very little of the direct tax was actually in hand. Nothing at all of the head tax had been collected. Sucre complained to Bolívar in December that when the government tax agents appeared “the cholos . . . emigrate from the towns.”³¹

In late December and early January the final blows were dealt to tax reform. Congress passed a series of laws abolishing the contribución directa and returning, for all practical purposes, to the tax structure as it had been before January 1826. Owners of land, livestock, and other rural and urban properties were to make a declaration of their value to the government. If these estimates did not seem too low, property taxes would then be charged on the basis of the owner’s evaluation.³² On December 27 Sucre signed another law, to take effect in 1827. It exempted Indians from the head tax and their livestock and land from the property tax; in their places it reestablished the Indian tribute. To insure its wide dissemination, the law stipulated that all parish priests read it to their congregations every Sunday or be fined twenty pesos.³³

On the following day Sucre abrogated the income tax provision of the direct taxation experiment and in its place substituted the traditional patentes or business licenses. Instead of taxing income, the new law established seven fixed categories of licenses to be paid by doctors, lawyers, druggists, teachers, householders employing servants, cafe owners, artisans, owners of chicherías, and mayordomos, among others. The license fees varied from two to fifty-two pesos per year. Article Eight even required a patent of two pesos to be paid for the privilege of owning a riding horse or of firing rockets, for the right to appear in public in distinctive dress, and for tolling church bells five minutes longer than stipulated by law.³⁴ Such imposts unmistakably suggested a return to traditional tax practices.

These decrees and others passed in early 1827 gave the president discretion to readopt indirect taxation whenever and wherever it was impossible or impolitic to carry out the contribución directa,³⁵ The prefects of every department were instructed to call a junta of property owners and other “notables” to choose between direct and indirect taxation.³⁶ Most of these groups apparently decided on the old system, and only the Junta de Propietarios of Cochabamba elected to retain direct taxation.³⁷

The innovative tax reform of 1826 failed for several reasons. Some were technical—for example, it proved difficult to draw up tax rolls and make property assessments and downright impossible to calculate individual incomes accurately. But other obstacles lay in deep-seated prejudices. Powerful economic elements stubbornly resisted change and government interference in what were considered private affairs. The administrative difficulties and the popular opposition together reduced revenue and forced the government to turn back.

Sucre’s failure to reform the tax structure would not have been an insuperable obstacle to growth and development, if at the same time the government had managed to revitalize the silver mining industry. Such a recovery would have provided the revenue needed to rehabilitate the economic and social institutions of the society and to establish the base for long range development. Given the traditional orientation of the economic life of Upper Peru toward silver mining, it was quite logical that Sucre should try to revive it first in an attempt to place the new nation on a sound financial footing. The industry had undergone a gradual decline from the sixteenth century to the eve of independence. By 1825 the mines were either abandoned or destroyed as a result of the wars of liberation. In order to revive the industry, new capital was needed to improve exploitation techniques, to import machinery, to drain flooded mines, and to modernize refining methods.

At first prospects seemed good for the renewal of prosperity in the mining industry through introducing foreign investment and linking Bolivia with the international economy. Just when Latin America’s independence was being won on the battlefield, the end of the Napoleonic Wars made British capital available for investment in mining. In 1825 and 1826 the legendary mines at Potosí helped to bring on a speculative boom, but the ensuing collapse doomed revival to failure, and with it financial security for Sucre’s government. Because mining has always played a primary role in Bolivian history, and because the government might have derived great economic benefit from its revival in 1825, this aspect of Sucre’s administration deserves special attention.

Silver was first discovered at the famous Silver Hill of Potosí in 1545. During the sixteenth and seventeenth centuries Potosí attracted so many fortune seekers that in 1650 it was the largest city in the New World, with a population of 160,000. A booming, boisterous city with all the characteristics of a mining camp sprang up in what would otherwise have been an unpopulated, cold Andean wasteland.³⁸

By 1825, after the intensive working of the Cerro Rico in colonial times, there were more than 5,000 bocaminas (mine mouths) in the hill,³⁹ but most of these were abandoned, flooded, or caved-in. In 1790 only 300 bocaminas and open pits were being worked, and these only irregularly, “as if it were merely for plunder.”⁴⁰ By 1825 the number had fallen to 50 or 60. The lower part of the cone-shaped hill was not being worked at all, for springs had filled the shafts with water and inundated the richest veins of ore. Only the introduction of European science and capital could make possible the exploitation of these ore deposits.⁴¹

The methods used for working the mines were extremely primitive. In the 32 principal mines being worked in 1825, the average depth of the shaft was only 425 varas.⁴² All of the laborers in the mines were Indians. In colonial times as many as 20,000 Indians were subject to the annual mita,⁴³ but by 1825 this number had undoubtedly dwindled. With the decline of the mita the laborers were compensated by allowing them to work the mines from Saturday night until Monday morning for their own profit. The silver extracted under this system, called capchas, was then sold to the mine owners⁴⁴—an unscientific and inefficient method of exploitation which continued after 1825 despite efforts to abolish it.⁴⁵ The mines were generally entered on hands and knees, and the ore taken out in sheepskin aprons.⁴⁶ A German mining expert described the tools used by the miners as “badly contrived and unwieldy.” Thick tallow candles wound with wool supplied the only illumination.⁴⁷ Very few of the mines were timbered, because timber was inaccessible and expensive. In 1790 a sixteen inch square beam, 34 feet long sold for 200 pounds sterling.⁴⁸

The silver ore extracted from the Cerro was refined in one of the many mills (ingenios) at Potosí.⁴⁹ These mills, which pulverized the ore, were driven by large overshot water wheels, fed by streams from one of the 37 lagunas, or reservoirs within a ten-mile radius of the city.⁵⁰ Both the ingenios and the lagunas had suffered from colonial neglect and from war-time destruction. Expensive machinery was destroyed, the ingenios plundered and dilapidated, and their owners forced to contribute to military chieftains on both sides of the independence struggle.⁵¹ The lagunas were also neglected. Some had dried up because of scarce rainfalls, and the channels which conducted the water to the ingenios and to public and private fountains in the city were blocked and in disrepair.⁵² An English visitor in 1826 wrote: “No where has destruction been more mischievously active, more complete, and more manifest than in the property of the azoguenos (mine owners) of Peru.”⁵³ A few years prior to the revolution 40 ingenios had been active in Potosí, producing about 8,000 marks (half pound) of silver per week. In March 1826 only 15 of these were operating, on a reduced scale, yielding a total of 1,500 marks per week, a yearly production worth 125,000 pounds sterling.⁵⁴

Like the mines the refining mills were extremely outmoded and inefficient. A member of the German mining mission which the Spanish Crown sent to Peru in 1790 commented on the extreme ignorance of those who operated the ingenios and smelters, for they could recover only two-thirds of the silver in the ore, and in the process lost much of the mercury used to separate the silver. “All the operations in the mines at Potosí,” wrote Anthony Zachariah Helms, Chief Assayer of the mines and mint at Cracow, “are conducted in so slovenly, wasteful, and unscientific a manner, that to compare the excellent method of amalgamation . . . practised in Europe, with the barbarous process used by the Spaniards, would be an insult to the understanding of my readers.”⁵⁵

The decay of the mining industry was noticeably reflected in the decline of the Upper Peruvian towns which depended for their existence on silver mining. At the height of its glory in the seventeenth century Potosí had been a “boom town supreme,” whose citizens built extravagant houses, fought bitter civil wars, and built sumptuous churches. Both its vice and its piety were on a vast scale.⁵⁶ But by the late eighteenth century the population had fallen to less than 50,000.⁵⁷ With the decline of silver production, royal interest and authority in Potosí also slackened, and in 1790 the royal militia numbered 500 men “of a most wretched appearance,” without uniforms, cannons, or sufficient muskets.⁵⁸ The end of the wars for independence found the city still further decayed, for one traveler estimated the population in 1826 at only 12,000. Although he found the streets clean and the large houses in good repair, the famous colonial churches were plundered and dismantled, and the suburbs of the city ruined and abandoned.⁵⁹

Despite the decayed condition of the mining industry, in 1825 there was considerable hope that a general reform of the whole mining system would bring about increased silver production and profit.⁶⁰ A few remembered that the German mining mission which had visited Potosí in 1790 had attempted general innovations, digging conduits to drain some of the mines, installing modern machinery at several of the ingenios, and giving lessons in metallurgy. Unfortunately, the scope of the task, the shortage of timber, mercury, and other supplies, and above all the resistance of local officials had completely frustrated these reform efforts.⁶¹

After independence the first step toward reviving the silver mines was to make them available to interested foreign capitalists under favorable conditions. On August 2 at Pucará (Peru) Bolívar issued a decree in his capacity as Supreme Executive over the five provinces of Upper Peru. In this decree Bolívar ordered that all caved-in, flooded, or abandoned mines should revert to the state and be rented or sold at public auction for the payment of national debts.⁶²

By virtue of this decree, many of the Bolivian mines abandoned during the revolution became public property—the British consul at Lima estimated their value at five million pesos.⁶³ The Bolivian government planned to sell some of the mines to foreign speculators and dispatched commissioners to Europe, via Buenos Aires.⁶⁴

Interested parties soon appeared. In June 1820, prior to Bolívar’s decree, an organization in Buenos Aires with a nominal capital of eight million pesos made a proposal to Sucre for working the mines in Upper Peru.⁶⁵ Later in the year a fever of speculation broke out in the United Provinces and in Peru. Associations were formed in Buenos Aires, Salta, and Arequipa to get the legal possession of Bolivia’s mines and resell them to European investors.⁶⁶ But Sucre and Bolívar considered the bids made by these associations to be too small, and the government decided to await better offers from Europe.⁶⁷

In addition to making Bolivian mines available to foreign investors, Sucre took more active measures to revitalize the mining industry in Potosí. In March 1826 Sucre visited the Villa Imperial to overhaul the local government and increase silver output. In Potosí, he inspected the lagunas, ordered the procurement of quicksilver for the ingenios, and tried to stimulate copper production.⁶⁸

Sucre also took steps to reform the Casa de la Moneda, the former royal mint, and the Banco Real de San Carlos, the state mining bank which bought silver and gold from the mine owners, and resold it to the mint.⁶⁹ These once powerful institutions reflected the general decrease of economic activity in the mining industry. In order to provide the mine owners a better market for their production, Sucre revived and recapitalized the bank. By May 1826 he proposed to increase its capital from 35,000 to 100,000 pesos⁷⁰ and that of the mint from 18,000 to 40,000 pesos.⁷¹

The combination of administrative reorganization, foreign investment, and the return of a peace-time economy resulted in a respectable increase in silver production after 1825.

Potosí, which led the world in silver production during the sixteenth and seventeenth centuries, had fallen to third place in silver coinage by 1790. In addition to the metal coined at the mint, it was estimated that from one-third to one-half again as much was used to make utensils or was smuggled out of the country.⁷² According to General William Miller, the first prefect of Potosí, between 1810 and 1825 an annual average of 500,000 pesos was produced in the mint at Potosi.⁷³ This estimate disagrees with that of Sucre, who wrote in May 1826 that between a million and a million and a half pesos per year had been minted since 1815.⁷⁴ Whether we accept the estimate of Miller, or that of Sucre, it is clear that coin production during the war years had dropped sharply.

After 1825 the recovery in coin production was almost as impressive as had been the war-time decline. During the first five months of republican government over a million pesos were coined in the Villa Imperial.⁷⁵ In May 1826 Sucre wrote to Bolívar that total production for that year would reach 2,500,000 pesos, and he predicted an output of four million for 1827.⁷⁶

Sucre’s optimism was shared by other observers. An English resident of Potosí wrote that in 1826 the mining bank purchased from the mine owners 177,127 marks of pure silver, valued on the London market at 350,000 pounds sterling. He added that with moderate capital, good judgment, and skill in mining, the figure could be easily quadrupled.⁷⁷

The year 1825 was “an all speculating year”⁷⁸ in Britain, the only country in the world with a large surplus of capital. Eager to invest in foreign ventures,⁷⁹ speculators formed twenty-six mining associations in 1824 and 1825 for the purpose of exploiting in Spanish America gold and silver mines, newly accessible and highly tempting.⁸⁰ The promoters of these hasty ventures had little knowledge of mining or of the situation in Latin America, and their “blind ardour” received suitable reward when the panic of December 1825 destroyed the speculators’ market in London. As one contemporary critic put it, the boom and crash formed “a remarkable, and we are sorry to add, disgraceful era in our commercial history.”⁸¹

One of the British mining companies formed during this period of feverish speculations was the Potosí, La Paz, and Peruvian Mining Association, created in mid-1825 to work the mines at Potosí and “sundry others in Peru.”⁸² Its authorized capital was one million pounds, but of this only five percent was paid in.⁸³ It was the most important group of British investors to speculate in Bolivian mining at this time, and an examination of its efforts will help to explain why Sucre’s attempt at economic reform in Bolivia failed.

In late September 1825 four representatives of the Potosí Association left Falmouth on the royal mail packet Frolic, bound for Buenos Aires. The chief commissioner of the Association was General James Paroissien, former officer in the army of José de San Martin.⁸⁴ Paroissien was accompanied by one Baron H. Czettritz, “chief of the mining department,” a Mr. Scrivner, “a young gentleman of the mineralogical department,” and Edmond Temple, secretary to the establishment at Potosí. Two domestics, and a cocker spaniel named Carlo completed the party.⁸⁵

In Temple’s words, the Association was founded on an extensive and prodigal scale. For their nine-week voyage to Buenos Aires the travelers were provided with every convenience, including “gingerbread nuts and peppermint drops to comfort us on our journey.”⁸⁶ Nor was the Association any less generous in providing for its representatives’ comfort on the long trip from Buenos Aires through Córdova to Potosí. The party traveled to the foothills of the Andes at Salta in a large-wheeled coach called a galera, accompanied by two baggage carts bursting with food, supplies, and scientific equipment, and by nine peones and a capataz or foreman.⁸⁷

On April 26, 1826, General Paroissien and his party arrived at Potosí, where the prefect and local authorities enthusiastically received them.⁸⁸ Six days later Paroissien set out again for the Peruvian port of Arica, there to await the arrival of a ship sent out from England with machinery, tools, quicksilver, furniture, supplies, and company personnel.⁸⁹ The cargo, calculated to exceed 3,000 mule loads, was to be carried from the coast to Potosí on mule back.⁹⁰ Baron Czettritz also left Potosí to survey other mines in the region around Lake Titicaca, while Temple remained in the city to set up the Association’s establishment. In June he rented a large house, “among the very good houses in America,” to receive the people and cargo from the Association’s ship. The house, which boasted a rare second story and glazed windows in all the principal apartments, rented for 850 pesos a year.⁹¹

Government cooperation and popular enthusiasm marked the Association’s reception in Bolivia. When the chief commissioner presented a memorial to President Sucre in May, requesting guarantees for the Association’s operations, Sucre replied with encouraging reassurances. The Association would enjoy the protection of national laws; it might purchase mines, ingenios and other properties; and it would receive the full privileges and exemptions granted to azogueros and immunity in time of war from government confiscation.⁹² As Sucre wrote to Bolívar, he realized that it was in the country’s best interests to promote and protect mining ventures.⁹³

In Potosí the arrival of the Association officials spurred enthusiasm and optimism. They received offers for the sale or joint working of mines, and proposals to supply fuel, timber, and forage.⁹⁴ In early August the news that the company’s ship had arrived produced a sensation in Potosí “from the prefect [down] to the meanest person in town.”⁹⁵

Unfortunately the optimism and enthusiasm were premature, for the speculative crash in London and dissension within the Association cut short the promise of a mining revival. In late June and early July 1826, letters arrived from England informing the company’s representatives that the London money market had collapsed and that some of the company directors could not meet the regular installments on their shares in the Association. At the same time the Association’s financial agent in Buenos Aires notified Temple that, because his drafts on London were being returned unpaid by the Association’s bank, he would no longer accept bills of credit written by the company’s representatives in Bolivia. When this news reached Potosí, it prompted a halt in mine working and a retrenchment of expenses as far as possible.⁹⁶

In early September more bad news arrived from London, informing the agents in Bolivia of a financial disagreement among the directors of the Association over costs of the chartered ship sent to Arica with equipment and supplies.⁹⁷ As a result of this dispute, several of the directors had requested that an embargo be placed on the ship’s cargo at the Peruvian port.

The Peruvian courts complied, tying up the cargo in a legal dispute which lasted several months and even included the mules brought by the company to take the cargo to Potosí.⁹⁸ For an additional complication the agent in Buenos Aires requested and received a re-embargo on the shipment, in an attempt to recover the £12,000 which had been drawn on the Association’s account in Buenos Aires and not honored in London. Finally the owner of the mules, which the Association had been forced to sell in the interim, put forward a claim to half the cargo as damages for the company’s failure to keep the exact terms of the sales contract.⁹⁹

While waiting for the Peruvian court to resolve the double embargo, the Association’s agents in Arica and Tacna were reduced to selling their clothing, watches, and jewelry.¹⁰⁰ The judge in Arica finally ruled that the first embargo was invalid, and that the cargo should be delivered to the company’s commissioner, Paroissien. To his anguished frustration, however, the second embargo, originating in Buenos Aires, immediately fell on the shipment.¹⁰¹

When the controversy was finally settled to the satisfaction of all of the Association’s creditors, the cargo had been sold and scattered in all directions. Out of the entire shipment of machinery, supplies, and other goods (valued at £30,000, including freight charges), “not so much as a two penny tack was applied to the object for which it was purchased,” the development of silver mining in Bolivia.¹⁰² The company representatives broke up their establishment in Potosí and gave notice to all employees. All claims against the Association, except for the year’s rent on the house which served as its headquarters, were settled by the end of 1826, whereupon the secretary, Temple, filed his last report to the directors in London and prepared to leave Bolivia for Buenos Aires.¹⁰³

The reasons for the failure of the Potosí, La Paz, and Peruvian Mining Association were legion. To be sure, it faced unexpected problems caused by the dispute of the directors in London and by the double embargo of its shipment of mining equipment and supplies. But in a broader sense the Potosí Association shared the same weaknesses and shortcomings that characterized other mining ventures of this time in Latin America. None of the English speculators had any idea of how much damage the mines had sustained during the late wars or of how much it would cost to bring them into production again. They knew nothing about the problems involved in improving centuries-old mining techniques, about the shortage of skilled labor, or about the political problems of confronting entrenched bureaucrats with a stake in the status quo.¹⁰⁴

The Association failed also because the importation of machinery and supplies absorbed too much capital and because Bolivian mining centers were isolated from the coast, with no ports or connecting roads for bringing in these supplies. The instability of political conditions and the ill-disguised hostility of Peru also hampered the development of Bolivian silver mining with foreign capital.

Still another important reason for the failure of the Potosí Association was the extravagant nature of the venture. The company paid £10,000 in salaries for one year alone. Another £60,000 went for the shipment of machinery and supplies, the establishment in Potosí, and the purchase of mules, forage, and other supplies.¹⁰⁵ Although the speculation failed, in part, because of mismanagement and back luck, the “extraordinary spirit of the times” should not be overlooked as an underlying explanation. In England the speculation fever ran rampant during 1824 and 1825, while in Bolivia the people expected that the Association, founded with the widely reputed British solidity, would act as “levers of industry and prosperity.”¹⁰⁶

The extravagance and bad faith of this “wild goose expedition” in no way lived up to the expectations of either party. Both were victims of their own enthusiasms and illusions.¹⁰⁷ In this vein Temple reported with some satisfaction Sucre’s comment in April 1827 on the whole mining fiasco: “Los señores Ingleses must have been reading the story of El Dorado with a little more credulity than it deserves, if they imagined that the precious metals were to be obtained without labour and expense; for, although it is true that they abound in this country, they cannot be had for nothing, any more than the materials with which we build our houses.”¹⁰⁸

Even before the collapse of the Potosí Association the Bolivian attempt to revive the mining industry had begun to fail, in spite of considerable official encouragement. In an effort to stimulate ore production, the government abolished export duties on lead and copper and taxes on mine inspections.¹⁰⁹ A law of December 1826 provided for mining banks in three principal cities and converted the old mining bank of San Carlos into a government ore-purchasing agency, but the law was never carried out.¹¹⁰ The government also took steps to secure the importation of mercury for the ingenios, and to encourage the development of a quicksilver mine discovered in the Department of La Paz during September 1826.¹¹¹ In November an effort was made to establish a national directory of mining in Potosí, patterned after that in Mexico.¹¹²

With the final dissolution of the Potosí Association, however, most of the hope for a revival of silver mining disappeared, and Sucre recognized the dim prospects of receiving government revenue from Bolivia’s silver mines.¹¹³ Although a small company was formed with Bolivian capital in June 1827 to work two concessions in Potosí,¹¹⁴ the revival of the silver industry did not take place until fifty years later. Only in the last two decades of the century did Bolivian silver production briefly recover some of its past importance, thanks to the coming of the railroad from Antofagasta. Meanwhile, in the absence of the financial stability promised by the revival of silver mining, no government could successfully undertake the economic and social reforms necessary to transform backward Bolivia into a modern nation.

The three-year administration of Antonio José de Sucre in Bolivia was a time of accelerated change. This is reflected in government efforts to reform and rationalize the existing tax structure and to revive silver mining by attracting foreign capital and technology. Other evidence of Sucre’s innovative nature is to be found in aspects of his administration not considered in this essay—his efforts to promote agriculture and manufacturing, improve communications, foster commercial activity, and establish educational, cultural, and charitable institutions.

These reform measures formed a direct challenge to the economic and social patterns inherited from the colonial past. In this conflict between nineteenth-century liberal ideas and established interests and institutions, Sucre suffered a greater defeat than he had ever encountered on the battlefield. Many of the people who had most warmly welcomed the hero of Ayacucho in 1825 became his most convinced enemies during the next three years. On April 18, 1828, Sucre was wounded during a mutiny in Chuquisaca and resigned the presidency in favor of his cabinet. Not four months later he left the city which was later to adopt his name, wounded and alone, with no ceremony and no hope for the future of the nation that he had created. “I am convinced,” he had written Bolívar on January 27, “that in the long run [Bolivia] will become inflamed like the rest of America, and I don’t want to be the victim, when, knowing the causes, I see that the solution is impossible. . . ”¹¹⁵

A kinder fate might have enabled Bolivia to enjoy economic and political stability. If the Potosí Association had been better managed and luckier, its machinery and supplies could have been put to work in the silver mines in Potosí. Silver production might have risen, insuring the success of the venture and demonstrating the value of improved mining techniques. This, in turn, might have stimulated foreign trade and Bolivia’s contacts with the international economy, thus insuring the survival and expansion of Bolivia’s new Pacific port, Cobija, established during Sucre’s administration.

A revival of the mining industry would have provided more government revenue for roads, public works, and schools. It would have relieved the pressure upon Sucre’s government which had been caused by the reduction in tax revenues resulting from the contribución directa experiment of 1826. The government might thus have been able to lower taxes, making allies of the powerful land owners, and endearing itself to the Indians and common folk.

All this, of course, is conjecture. Sucre’s reforms in social and religious institutions so seriously offended powerful persons and institutions that they alone might have doomed his experiment. At the same time, the pronounced hostility of both Peru and Argentina was a constant threat to Bolivia’s internal stability and development. Finally, the growing hostility against Sucre and many in his administration as foreigners cannot be overlooked in discussing the reasons for his downfall.

The most important reason, however, for Sucre’s failure to jar Bolivia out of its backward economic and social patterns was the bankruptcy of the nation. The funds to create and sustain the revolutionary institutions needed to transform Upper Peruvian society simply did not exist. Without these funds the revolutionary institutions and the transformed society could never be more than dreams in the minds of Sucre and his supporters and their far-seeing laws nothing more than archival curiosities.

Author notes