Government Revenue and Economic Trends in Central America, 1787-1819

In September, 1821, Central America peacefully separated itself from Spanish rule and became independent. The traditional view of the causes of this event stresses two factors: 1) The Creole reaction to the oppressive regime of the Captain General, José de Bustamante (1811-1817), and the weakness of his successor, Carlos Urrutia y Montoya (1817-1821); and 2) the effect of the Mexican movement for independence led by Augustín de Iturbide, which strengthened the hand of those who favored a similar move for Central America.

Although these factors undoubtedly influenced the independence movement, they were not the sole important causes of separation from Spain. A political explanation that ignores economic conditions is never complete. Unfortunately, the economic historiography of the period is deficient. Although the structure of Central American trade has been established, there exists no detailed examination of economic fluctuations in this epoch. Yet, the conditions of Central America in the period previous to independence are critical to an understanding of some of the causes for that movement.

One of the reasons for this gap in Central American history is the lack of sufficient data. Central America was a “backwater colony.” Its lack of great resources and population, and its distant geographical position from established trade routes, explain its abandonment by not only most commercial houses, but by the Crown itself. With the Napoleonic Wars and the Spanish-American Wars of Liberation, the condition of the Central American colony became even less important to Spain. Thus, for this turbulent period continuous economic reports were either never prepared or were lost. Without detailed economic testimonies to the Crown, the historian is hard pressed to develop a sophisticated view of the area’s economic condition. Some materials exist, however, that can contribute important information on these matters.

Within the colony itself, there were few contemporary published reports. Domingo Juarros penned a history of the region in 1810, without much discussion of the contemporary economy.¹ Alejandro Marure wrote in the 1830s of the political events that had occurred since 1811, but he, too, failed to discuss the economic condition of Central America at any length.²

During the past 15 years some American historians have begun to take an interest in the area. Murdo J. Macleod explored the conditions of Central America in the sixteenth and seventeenth centuries.³ The Guatemalan, Manuel Rubio, along with Robert S. Smith and Troy S. Floyd, tracing the rise of an economic boom in the latter part of the eighteenth century, have discussed also the structure upon which it was built.⁴ Ralph Lee Woodward, Jr. examined the structure and practices of the merchant class in the late eighteenth and early nineteenth centuries, and explored the merchants’ involvement in political movements.⁵ The production of indigo, and the dominance by a strong Guatemalan merchant class of all affairs of the colony were the hall-marks of this late colonial period. It would be these factors that would establish the bases for the movement towards independence and the subsequent post-independence troubles. Yet they have not been explored in depth.

This historiographical gap poses some interesting questions: How critical were the economic problems of Central America? Was there an economic basis for what became the worst regionalism in all of Latin America? What was the effect of the decline of tax revenue on governmental strength? And why, when independence was peacefully declared, did not the local colonial government take more forceful action to suppress it, as happened elsewhere?

Lacking any obvious economic data, we must find the solution to these queries elsewhere. Extensive reports are available from the records of the Administración General de Hacienda in the Archivo General de Guatemala. The use of this data, combined with the few reports that exist, yields important information for the economic history of Central America. The importance of historical data derived from fiscal reports in colonial Latin America has not yet been fully understood. Herbert S. Klein, however, has recently delved into this area by examining tax collection in Buenos Aires in one specific year.⁶ He provided a perfect case study to be used for broader analysis throughout Latin America. The approach is a significant one: lacking sufficient contemporary reports, the historian can support other evidence (such as contemporary testimony) with fiscal data.

In Central America, the colonial government depended upon four major sources for its revenue: its share of the church tithe; income from governmental monopolies, such as tobacco, liquor, playing cards, etc.; the Indian tribute; and taxes on trade and commerce. Records from church collection are scarce, and procedures differed between the four dioceses in the region. Data on the monopolies and tribute do not adequately measure the national economy: the former are too easily influenced by such variables as social needs (e.g., when is the desire for liquor and tobacco the greatest?), and the prosecution of (or allowance for) contraband. The tribute is based solely upon Indian population. But tax collection on commercial transactions provide us with sufficient evidence, both throughout a long span of time and from specific areas, from which to draw useful conclusions.

The collection of tax revenue was centered in the Administración General de Hacienda, or central treasury office, in Guatemala City, with sub-administrations, after 1786, located in Salvador, Chiapas, Honduras, and Nicaragua (the latter including Costa Rica). Within each specific region collection houses were maintained, which reported to the sub-administration, which, in turn, compiled all data and passed them on to the General Administration. Almost complete figures exist for the period 1790-1819 from all regions.

There are some difficulties in using treasury figures as measures of economic progress. A decline or rise in government income could be attributed to changes in tariffs, to good or bad administration, or to the presence or absence of illegal, contraband trade.

But in spite of these important problems, the fiscal data remain important. The tariff changes that were made were not substantial. They were limited to promoting such goods as primary (or flor) indigo, of which production was insignificant in the nineteenth century (see below). Efficiency, be it good or bad, in the collection of revenue remained much the same during the epoch, for the same director administered the collection of revenue from 1799 until after independence. And, as shall be seen later, the trend in declining revenue is fairly constant throughout the entire region and would, thus, require a conspiracy much too large to possibly exist. Although under- or over-collection might have caused distortion during a few years, it would not disturb the overall trend for all regions during the entire period.

The problem of contraband was more critical. British influence in the region developed more and more as the period progressed.⁷ Concomitantly, Guatemalan merchants pressed, in their actions as well as their statements, for the establishment of “free” trade. But distinct trends in production can still be discerned. The overall trend in tax revenue — from the smallest, interior Guatemalan region through all major provinces — was one of decline. This drop in government income occurred both in areas directly affected by external trade (such as Guatemala City) and those regions far removed from direct (and contraband) traffic in the distant interior of the province. As will be seen later, contemporary testimony supports the conclusion that there was a general and constant decline in the economy.

The decline in government receipts measures a decline in government power. A state that lacks fiscal resources has no power to enforce its rules. We are, thus, studying not only the decline in the economy of Central America but also that of governmental power.

Although data has been heretofore lacking on the flow of the Central American economy at the end of the colonial period, its structure has been well described elsewhere.⁸ There were three basic goods for internal and external trade: indigo, silver, and cattle. All were controlled in the same manner. The dominant merchant class in Guatemala City possessed most of the financial wealth of the kingdom and maintained a monopoly on exports to Spain. Salvadoran indigo producers, Honduran miners, and Honduran and Nicaraguan cattlemen were forced to go to these merchants for financing of their production, to receive goods (like quicksilver) or tools, and to export their commodity. As a result, despite opposition from the Crown, prices were chiefly set by these comerciantes. The merchants enjoyed the larger share of the profits, while the producers were forced to suffer the vicissitudes of getting their produce to Guatemala.

Prosperity in Central America arrived suddenly in the last half of the eighteenth century with a rise in the world demand for indigo. Earlier, the growth in the production of British textiles combined with the withdrawal of East Indian production to raise the price of the dye. Despite competition from various parts of the Americas, Central America easily dominated the market, due to the high quality of its dye. As a result, there developed a brief 30-year period (1765-1795) of prosperity for the merchants in the capital city.⁹

At first, the Guatemala City traders dominated the collection of tax revenue. Until 1765, all alcabala or sales taxes were gathered throughout the colony by the merchant-controlled ayuntamiento of the capital. From that year, until 1786, a struggle was fought by the royal authorities against the comerciantes to wrest the domination of Central American fiscal activities from the merchants’ control. This dispute was settled by the introduction of intendants in Salvador, Comayagua, León, and Ciudad Real with full responsibility over tax operations subject only to the supervision of Administración General de Hacienda.¹⁰

The establishment of the sub-administrations of Hacienda in Salvador, Nicaragua, Honduras, and Chiapas in 1786 was marred at first by jurisdictional disputes that underlined the already prevalent regional loyalty feeling. The Chiapan sub-administration was originally placed in the Spanish city of Ciudad Real but subsequently was switched to Tuxtla because the latter city was on the Camino Real, and through it passed much of the province’s commercial traffic. In Honduras, the fiscal office was placed in the diocesan seat of Comayagua but soon after moved to the mining center of Tegucigalpa. Similarly, the Guatemalan towns of Quezaltenango, Totonicapán, Sololá, and San Antonio were originally administered by Chiapas, while Chiquimula and Omoa were given to Comayagua, and Sonsonate to Salvador. It was not until the intendancy reforms in 1786 that these towns were placed under Guatemalan jurisdiction.¹¹ The effective administration and reporting of figures did not really commence until 1790.

The categories under which funds were collected varied from region to region. In Salvador, for example, the alcabala was separated into that paid on indigo, that paid on goods deriving from Guatemala City, and that paid on goods deriving from other areas (other Central American provinces, New Spain, and Peru). On the other hand, León and Tegucigalpa placed all taxes into one alcabala category.

The alcabala figures listed in all areas pertain only to the region in and around the central sub-administration. All other areas within the provinces were listed under Interior Collection Houses (or receptores). The figures listed here are important in ascertaining the dependence of each province on the revenues originating in the interior, or in the central city.

The Salvadoran situation was the most important factor for the economic well-being of Central America. A decline in indigo production or prices meant a loss not only for the producers, but for the dominant Guatemalan merchants as well. Without the profits gained from indigo, the merchants could not finance other sectors of the economy, and a depressing effect would occur on all areas tied to the comerciantes.

The economic expansion caused by the increase in indigo production peaked during the 1780s and began to decline soon after. In 1786 a representation of commercial businessmen complained that during the years 1784 and 1785 three million pesos were sent to Spain “leaving this Kingdom and its commerce in such a state that its individual citizens are exhausted of finances.” Ships from Peru rarely arrived, it was claimed, and there existed “a lack of silver coming from the provinces.” The production of indigo was said to be falling into decay.¹²

The data shown in Figure 1 trace the effect of the economic decline in Salvador. From 1790 until 1795 tax receipts were not recorded separately, and one must rely upon the funds transferred to the royal coffers for this period. Nevertheless, from 1797 onward, there is a fairly constant decline in all categories, with receipts from the interior alone remaining relatively constant. The ultimate indicator, however, is the funds passed to the royal coffers. Here a severe drop occurred, with annual receipts of 1805-1819 averaging some 32 percent lower than those of the preceding 15 years (1790-1804).

The causes for this decline are multiple and must be discussed at length to understand the economic collapse of the region. Throughout the previous 50 years, “Guatemalan” (in reality Salvadoran) indigo was sought after because of its quality. The prosperity of the Guatemalan merchant class could be attributed to the high prices this quality product brought on the world market, in contrast to lower-quality indigo from other American countries. However, in 1780 the situation began to change for the British started to promote indigo culture in Bengal. Large imports from Bengal first appeared on the European market in 1800. Between 1805 and 1815, the average Indian export reached 5.5 million pounds per year, an amount “higher than all the combined annual sources of New World indigo at any time in the eighteenth century.”¹³ The massive influx of the East Indian product thus caused prices to drop.

Whenever rivals had developed in the past, Central America had depended upon the quality of its indigo to maintain its position on the world market. But greed was now causing a decay in production standards. Indigo was classified into three categories: the high-priced flor; the lower-quality, sobresaliente; and the ordinary corte. Beginning around 1780, a controversy emerged between the merchants and producers over the labelling of the indigo. The comerciantes claimed that the quality of the commodity was declining, while the farmers countered that indigo that had earlier been classified as flor and sobresaliente was now being called corte at the local market and later sold at flor prices in Europe. The producers thus found it much easier to produce more and more of the lesser quality indigo, rather than spend time, energy, and funds attempting to produce a higher-quality product that would probably yield only the lesser price. In 1779, 1780, and 1781 there were produced, respectively, 133,666; 111,352; and 111,254 pounds of flor. Between 1796 and 1798, only 6,174; 7,982; and 19,780 pounds of flor were said to have been annually purchased at the fair. Thus, the quality product so sorely needed to compete on the world market was moving toward extinction.¹⁴

At this critical moment, the Napoleonic Wars limited Guatemalan access to the European markets. In November 1798, all trade ceased from Vera Cruz and commerce was halted from Havana soon after. In 1799, a local paper claimed that over three million pounds of Guatemalan indigo was in storage in Havana, Vera Cruz, and Guatemala, and that “production is in decline.” According to Humboldt, the indigo trade in Mexico remained suspended until 1802. The president of the audiencia in Guatemala issued repeated pleas for the opening of commerce with the United States, though this produced little results.¹⁵

At a time when the quantity of indigo production was at its lowest point, world competition was rising, and disputes were being waged regarding the quality of the Central American product, a serious locust plague hit. In 1802, the insects descended from Mexico and remained — off and on — for three years. Attracted by the moist bagasse, they invaded the province of Salvador and caused great damage to all agricultural areas. Workers were forced to leave their towns and milpas to travel to the haciendas and work “día y noche” to save the indigo harvests. In the capital of Salvador, food was so scarce that the populace was compelled to go to the mountains to dig for herbs, yucca, and other roots. An official of the ayuntamiento of Guatemala declared that the “plague of locusts has caused a general ruin that affects all classes of the state.” The síndico of the same city’s consulado would later assert that the Napoleonic Wars and the locusts had caused the destruction of the “most opulent haciendas, reducing their harvest to a fifth of what they were earlier.”¹⁶

Thus the 27-year decline shown in Figure 1 as beginning in 1792 was the result of an accumulation of problems. Despite good indigo harvests in the years 1808-1811, production never reached the levels of the most prosperous years of the eighteenth century. By 1811, with prices down on the world market, tax receipts showed a renewed and severe drop, especially in the area around the capital. Throughout the next decade, revenues declined still further, reflecting the troubled economic condition of the province.

It is interesting to note the corresponding influence of the decline in indigo production on other sectors of the Salvadoran economy. With a lack of income, trade between Guatemala and Salvador (labelled “Goods sent from the General Administration”) also declined. The last two years when tax revenue was over 10,000 pesos in this category were 1797 and 1798. Only eight times in the subsequent 21 years did income exceed 50 percent of the revenues of these earlier years.

Goods from other areas remained fairly constant and even increased during the war years, to make up for the slack in trade with Spain. Nevertheless, the economic difficulties were cumulative and eventually disturbed this trade too. Between 1812 and 1819 average annual income (3,676 pesos) represented a severe drop from the 1797 to 1811 period (6,991 pesos).

The effect of the drop in indigo production aroused discontent. In November 1811, a month after the annual indigo fair, a group of Salvadorans revolted. Although the conspiracy was nominally directed by the hacendado, Manuel José Arce, the covert leader was the province’s leading prelate (and Arce’s uncle), Matías Delgado.

Reaction within the province illustrated the prevalent regionalism. Some towns near the capital immediately voiced support for the rebellion, while the distant, indigo-producing areas of San Miguel, Santa Ana, and San Vicente announced to the president in Guatemala their intention to unite forces to fight the Salvadoran rebels. At the same time that the Delgado, Arce, and Aguilar hacendado families led the fight in Salvador, the largest landholder, Gregorio Castriciones, had to flee for his life. The response from Guatemala was moderate. The powerful ayuntamiento in the capital prevailed on the president to send a detachment commanded by the merchants, José Aycinena and José María Peynado, to restore the province to Spanish rule. Both had large interests in Salvador and a stake in maintaining order. When the troops arrived in the rebelling city, they met no resistance, deposed the rebels, and confined them to their homes. A new ayuntamiento was chosen, and Peynado was named intendant.¹⁷

The origins of the revolt were obvious to the newly installed Ayuntamiento: “The result of 20 years of war, of locusts, of ruins caused by earthquakes, and of political calamities has brought this Province to such an extreme that … the moment has arrived in which one has nothing to occupy one’s hands with.” The new intendant similarly declared that, “these numerous populations have nothing to defend themselves against vagrancy if one does not substitute another type of agriculture.” He claimed that there were “innumerable people” who daily came in search of relief from their debts, all nearing insolvency, “así propietarios como jornaleros.” The solution to this problem, according to both the ayuntamiento and Peynado, was to permit the growing of tobacco in place of indigo. They suggested that if tobacco production were begun, the government might raise the price paid for tobacco to make it profitable enough for the producer.¹⁸

For the remainder of the decade, fiscal income in Salvador dropped severely and political unrest grew apace. Although the original plotters of the 1811 revolt were caught, they had been placed merely under house arrest. Two years later, in January 1814, the same clique launched a new revolt, which was quelled on the eve of its projected outbreak. This time the plotters were imprisoned.¹⁹

The effect of the declining economy was to reduce the number of Salvadoran landholders. Most producers were mortgaged to the Guatemalan merchants, who advanced loans for production. Once the recession set in, the merchants seized the indigo holdings for nonpayment of debts. In particular, the important Aycinena family of Guatemala took over large tracts. Despite their own poor monetary situation (no doubt, due in part to the failure of the debtors), the Guatemalan merchants still owned large areas of Salvador land. This not only increased interprovincial hostility between Creoles but also provided the merchants with still another source of wealth when a relative upturn in indigo prices occurred after independence.²⁰

Economic difficulties had additional ramifications throughout Central America. The provinces of Nicaragua, Guatemala, and Honduras all produced indigo, though in much smaller quantity than Salvador. But what was more important, the dye provided the means to pay for European imports and to provide Guatemalan merchants with the funds needed to finance other aspects of the economy. Honduran miners, for example, required financing to purchase quicksilver and other materials vital in the extraction of silver. In order to advance loans to these miners, the merchants required the funds that were chiefly earned from indigo. Moreover, the Guatemalans controlled the interprovincial trade in cattle and textiles. Without funds, these businesses would also decline. The effect on each province’s economy depended on how closely it was tied to the capital city.

The decline in indigo production created still another problem. The dye provided by far the largest single contribution to the government coffers in terms both of export taxes and through import taxes on the goods purchased in Spain with the indigo. With a reduction in government revenues, the colonial administration became more and more weakened, and could do little to forestall contraband (which, in turn, generated a greater decline in tax revenue).

Each province also suffered as a result of conditions specific to it. Nicaragua experienced a devastating economic decline equivalent to that of Salvador. At the end of the eighteenth century, it was reported that Nicaraguan cacao annually yielded 220,000 pesos, and that the province produced 160,000 pesos in indigo, 100,000 pesos in cattle, and 89,000 pesos in diverse products.²¹ But Nicaragua’s indigo production dropped as severely as in Salvador, while the locust plague and continual strong competition from Guayaquil and Caracas forced cacao production to decline. Finally, with the loss of many indigo plantations in Salvador, land there was converted into large cattle haciendas, which competed with the Nicaraguan haciendas for the Guatemalan market.

Figure 2 illustrates this nineteenth-century decline. Alcabala revenue was steady until 1804, when a sudden and dramatic collapse occurred. Only twice in the subsequent 15 years would revenue exceed 10,000 pesos. Though income in the interior varied from that in the capital, such receipts also visibly declined. The figures reveal the large proportion of interior revenue upon which the capital city of León depended. In particular, the port city of Granada — much to its displeasure — furnished a large percentage of Nicaraguan income. Granada consistently provided, along with the port of Realejo, Masaya, Managua, Costa Rica, and other towns, 50 percent of all funds collected, and 75 percent of all income, passed to the royal coffers. With the economic decline, the irritations this caused became acute.

When news reached León of the Salvador rebellion in late 1811, a revolt broke out, aimed at overthrowing the local intendant. Within a period of days mediation by the local bishop persuaded the city to return to order. Nevertheless, news of this outbreak spread to the cities of Granada, Segovia, and Masaya, and their citizens also revolted. The latter two towns returned to order along with León, but Granada remained rebellious against Spain’s and (perhaps more important) León’s political predominance. For four months forces from León laid siege to Granada with assistance from the Guatemalan central government. When Granada finally capitulated, most of it lay in ruins. Members of its leading families were placed in chains, and the deep seeds of regionalism were even more firmly entrenched.²²

The province of Costa Rica (included in León’s internal tax receipts) was equally depressed. Cacao and tobacco had been the area’s leading products. The former was cultivated chiefly in the Marina Valley, where raids from the Mosquito Indians constantly harassed the farmers. These skirmishes, added to the same problems that afflicted Nicaraguan cacao, destroyed production. Tobacco, on the other hand, had been a stimulant to the weak economy on the Costa Rican meseta after production had been licensed by the Crown in 1765. However, in 1796, this permission was rescinded, causing a collapse in the trade, and severe hardship to the province. When news reached Cartago of the Salvador and Nicaraguan rebellions, disorders erupted, with the governor momentarily losing control of the area. The cause of the rebellion, according to the governor, was the removal of the tobacco licensing and the state’s control of tobacco and aguardiente sales. To pacify the people, he suspended the state monopoly and allowed free trade of the two products. Order was thus restored.²³

The province of Honduras was, by far, the most administratively anarchic in the colony. Annual figures deriving from either Tegucigalpa or Comayagua are erratic, frequently mathematically wrong, and sometimes never compiled. The basis of these deficiencies was the regionalism that plagued the area. At first, Comayagua had been granted the control of tax collection, based upon its historical hegemony as head of the diocese. But the realization that the richness of the area derived from Tegucigalpa mines led to the transfer of the hacienda administration to that locality. This control was maintained until 1811 when Comayagua was restored as the seat of authority to collect the province’s finances.

An erratic decline is quite obvious (see Figure 3) in the collection of alcabala at the sub-administration and in the interior, and in the payment of funds to the audiencia. An inexplicable spurt during the war years of 1801 and 1802, possibly caused by the diversion of contraband trade away from the usual British market, is the only bright development in a dismal economic picture. The gap in 1812 and 1813 is undoubtedly due to the administrative chaos caused by the switch from Tegucigalpa to Comayagua. Decline continued until 1819, the worst of all recorded years. Finally one is struck by the paucity of income in Honduras, which is only comparable to Chiapas in poverty.

There was, however, another factor inherent in the declining situation at the time. During the first half of the eighteenth century, Honduran minerals represented the leading export from Central America. This faded with the development of indigo, but nevertheless the mines still existed. With the rise of British and North American contraband trade at the turn of the century, silver was needed to pay for the great inflow of British textiles. The commercial onslaught did not begin immediately, but once started, it developed swiftly so that by the decade before independence a regular contraband flow had begun between Honduras and the British areas of Jamaica and Belize. Nevertheless, in 1813, the President reported that the Honduran mining industry was in “total decay.” Thus, the lack of reported fiscal income here indicates administrative and political anarchy as much as poverty.²⁴

In 1812, a rebellion erupted in Tegucigalpa when the Comayagua ayuntamiento attempted to name an alcalde mayor to the former city. The local Tegucigalpa priest acted as mediator and pleaded with Comayagua that his town would never accept the naming of “alcaldes españoles.” Nevertheless, the president in Guatemala sent troops to Tegucigalpa to restore order and maintain Spanish colonial dominance.²⁵

Petty localism was also present in the province of Chiapas. Originally, Ciudad Real was named to collect funds, but it was quickly replaced by Tuxtla located on the main road. In 1806 Ciudad Real was restored to its former place as the collection of cacao, and other agricultural taxes lost importance.

Decline is also evident in Chiapas. From 1790 until 1804 funds transferred to the royal coffers were never less than 7,000 pesos (see Figure 4). From 1805 until 1819 revenue surpassed that amount only three times. A second, more important, point is the large predominance of Mexican over Central American trade. In those years when income from goods coming from the General Administration and from Mexico were separately reported, Mexican trade easily predominated. This predominance was particularly strong during the years when shipping with Spain was suspended and commerce with Mexico absorbed some of the slack. Vigorous trade with New Spain continued even through the period of the Mexican Revolution (data for the years 1812 and 1813 are, unfortunately, lacking). Nevertheless, a declining trend appears in the last part of the period. Finally, one can see in Figure 4 the importance of those funds sent to the Audiencia in comparison with the general receipts. This illustrates net income after expenses (costs remained stable: 6 percent of all income went to the local tax collectors for their services during the entire period). As elsewhere, the general trend reached its low point near the time of independence. With freedom from Spain, Chiapas would separate from Central America and join Mexico. Although the act may not have been voluntary, an economic foundation for such a move can be seen in the pre-independence trends.

The sums gathered under the jurisdiction of Guatemalan Interior Collection Houses represent receipts from all areas outside the capital but from within the general area now comprising the nation. The regions differed in climate, populations, and produce. Sonsonate was an area that produced indigo predominantly, while the economy around Antigua Guatemala and Quezaltenango was based mainly on textiles. Still, the Guatemalan interior was integrally tied to the “national” economy. The indigo and cattle regions of Guatemala, Salvador, Nicaragua, and Honduras displaced areas originally reserved for food production. Thus, there was a tendency towards famine. The north and west of Guatemala furnished foodstuffs and textiles to the south, in exchange for dye and meat. When commerce declined and indigo lost its “power,” the interior of Guatemala suffered. A further problem was the introduction of contraband into Central America, mostly in the form of cheaper, British textiles. After independence it was claimed the collapse of the industry could be blamed on the “frightening chasm” that had opened beneath its feet. Competition became too stiff, and the artisan populations around Antigua and Quezaltenango, along with a far larger population of cotton farmers who depended upon the trade, suffered accordingly.²⁶

Nevertheless, one can see the overwhelming fiscal predominance the Guatemalan interior held over the provinces of Honduras and Chiapas. When taken with those of the capital city (see below), receipts exceeded those of all other areas in Central America combined. But much like these other regions, income in the interior of Guatemala dropped drastically during the first 20 years of the nineteenth century. The annual average income for the decade prior to independence was half that of the years from 1790 to 1803.

The problems and complexities of tax collection were represented in greatest detail in the capital city. Here taxes were more specifically delineated, and the difficulties in fiscal analysis more apparent. Ever since the adoption of the Bourbon fiscal reforms, the colonial government was plagued on one hand by the constant appeals and disruptions of resisting Guatemalan merchants, and on the other by periodic changes in the reporting methods demanded by the Metropolis.²⁷ Typical of these changes in reporting was the attempt to institute a “new system” in 1787. For one year, the new method was followed, and subsequently abandoned, only to be reinstated—permanently — in 1796. Thus, returns for 1787 are provided in my Appendix Table G, along with the reports for 1796-1819, while those for the years 1788-1795 are given in Table F. The 1787-1819 period can be treated as a unified whole, despite the two systems. Based upon the reforms instituted with the adoption of intendancies in 1786, tax levies remained roughly the same throughout the epoch.

The major exception to this was the almojarifazgo and introducción custom taxes. The former was supposed to be charged at 2 percent on all entering goods, while the latter paid an additional 2 percent on products deriving from a non-Spanish country. Resistance to these levies had always been strong, after their institution late in the sixteenth century. With the Bourbon reforms, disputes developed that postponed their actual adoption until the intendants were firmly in place. Although I have included these taxes in the Appendix, I have omitted them from Figure 6 because graphing would have been impossible: regular collection only lasted five years, and was only periodically charged in future years. On June 30, 1807, a real orden was enacted, decreeing the enforcement of these taxes at 4 percent and three percent, respectively. The attempt to reassert the royal prerogatives met with stiff resistance again. After many “complicated extortions and expensive judicial actions” the president ruled some 15 months later that frauds would be severely punished but that errors in collection committed in “good faith” would be respected. It wasn’t until late 1810 that the audiencia ordered enforcement of the president’s decree and the tax. The first sizeable receipts from these two measures in over a decade were collected in 1811. But the usage was quickly ended. In 1818, a description of royal finances being collected by the treasury listed the almojarifazgo as a 4 percent tax on wool that derived from other American ports. After independence, the term was eliminated, with “alcabala exterior” employed to denote the customs tax.²⁸

The alcabala sales tax (see Figure 6) was charged at 4 percent on all non-Indian goods. During the years 1787-1795, the indigo produced within Guatemala, and the alcabala on goods deriving from Europe and from other areas, were reported separately. They were later merged (after 1796) and are here reported together. (However the distinctions have been maintained in Appendix Table G below.)

Figure 6 illustrates a difficulty in the exact assessment of commerce. “Annual debts” were recorded each year, but no distinction was made as for what these outstanding funds were due. Thus the exact determination of the receipts in each category is impossible. Nevertheless, disregarding the “annual debts," the alcabala tax annually represented more than 90 percent of total income in the General Administration, and it is thus likely that most of the annual debts compiled were owed for this same levy.

The trend of the annual debts shows that loans reached their highest level in prosperous years, and ceased to be available as the level of the economy declined. Thus, the debts were not a sign of merchant poverty but indicate a preference for remaining in debt to the government, rather than pay back those funds that could be put to better use in commerce.

The trend in government income was the same in the General Administration as in the interior. The alcabala sales tax fluctuated from 1787 until 1811 and then declined below 100,000 pesos, a point it never again reached before independence. Funds passed to the Audiencia equally declined.

The “Entry Tax” into Guatemala City was charged by weight, and the levy depended on the product introduced. Its receipts (see Figure 7) almost consistently declined from 1800 onward. Curiously, only the 1 percent “Indian Tax” (or barlovento) on goods brought from and sold to Indians, maintained previous levels during the decade before independence. Nevertheless, after 1793, there had not been any boom years for receipts. The fairly constant level suggests that the local Indian economy was only marginally affected by the fluctuations in Creole commerce.²⁹

There are, thus, two distinct trends that can be discerned from the Central American fiscal reports. First, in the provinces, a large amount of funds originated in the interior of each area rather than in the regions around the provincial capitals. In Salvador, Nicaragua, Honduras, and Chiapas (see Figure 8), contributions from the interior averaged over 50 percent in the years between 1797 and 1819. From 1810 to 1819 the interior contributed almost 67 percent in Salvador. Thus, the same resentment that the provincial capitals constantly voiced towards Guatemala, was felt by the interior towards the provincial capitals. In addition, the collection of funds in the interior is evidence that the colonial government maintained some degree of sovereignty over these distant regions, even on the eve of independence.

Secondly, a constant decline in government income reflected the failing Central American economy. Without exception, income sent to the Crown from each region declined dramatically. (See Figure 9.) From 1812 onward, the trend is either downward or stagnant. Table I reveals the difference between the first and second halves of the period under study. Total annual revenue declined by almost one-third between 1805 and 1819, in comparison with the earlier period. Figure 10 demonstrates the overall trend in income throughout the entire period.

The effect of the economic decline was twofold. First, with a rapidly declining economy both Guatemalan merchants and interior producers became rebellious. Those families in the provinces who had earlier resented Guatemalan domination became even more disaffected as many lost their farms and mines to merchant foreclosures. The Guatemalan comerciantes themselves resented the dependence on the Spanish market and began to look for new outlets to sell their goods, and for new political structures. On the eve of independence, a report was sent to Spain declaring that “the discontent that reigns is due to the poor economic condition of Central America.”³⁰

Secondly, without fiscal income one could not finance the defense — or control — of the region’s politics or economy. The weakness of the government in the captaincy general was obvious. In 1810, an attempt was made to purchase rifles to defend the colony against a potential French attack. It was reported that there existed but 7,350 rifles in a “good state” and 1,791 more in “fair condition” throughout the entire colony. The audiencia proposed the purchase of 10,000 rifles, 1,000 swords, and 2,000 pistols. But the treasury reported that such a purchase would cost 150,000 pesos, and since there remained but 31,121 pesos in the coffers, the move was impossible to consider.³¹

That same year, a list of all government revenue (from monopolies, the church tithe, tribute, and taxes), expenses, and debts was drawn up, which revealed a bankrupt situation. Annual income and expenses were said to be 1,484,538 and 1,903,451 pesos each, leaving a deficit of over 400,000 pesos. Past debts still owed by the government exceeded four-and-a-half million pesos.³²

The Napoleonic Wars and the effect of the liberal Spanish revolution caused still greater financial need. With the French invasion of Spain the government issued repeated “requests” for gifts and loans to aid the embattled Metropolis. The “donations” came chiefly from the Guatemalan merchants.³³ The subsequent Uberai reforms increased governmental expenses: deputies had to be sent to the cortes, and their passage and expenditures had to be financed. The Indian tribute was eliminated, causing the loss of some revenue.³⁴ The colonial administration attempted to raise taxes, but the impoverished condition of Central America prohibited it. The increasingly autonomous local ayuntamientos repeatedly rejected higher levies, and the administration fell into greater fiscal trouble.³⁵

Weak government cannot adequately tax. Without adequate taxes, political administration becomes even weaker. Once government loses its “legitimacy,” this spiral effect will destroy it. If the loss in revenue meant diminishing power, it also meant a greater inability to cope with the contraband trade. As the administration grew weaker and weaker, the illegal trade grew stronger. The Guatemalan merchants actively, and to some degree openly, participated in contraband trade. Although, it was semi-overt, tax could not be collected because of its illegality. The ayuntamiento of Granada suggested in 1811 that free trade be established so that the government could gain some profit from it. In 1813, the caja matriz attributed the decline in its revenue to the “general misery caused by the obstruction of commerce, and particularly by clandestine trade which imports foreign effects.”³⁶ Finally, in 1819, Captain General Urrutia (in a move without any royal approbation and almost certainly illegal) allowed British traders access to Central American ports. Soon after, this gesture was followed by Guatemalan traders openly traveling to the British colony of Belize. Thus “free trade” became a reality.³⁷

As the central Guatemalan government lost its ability to control its traders, so, too, it became impotent to deal with rebellious, regional factions. On the eve of independence, local areas were governing themselves without consulting the capital. When Provincial Deputations were re-established in Guatemala, Chiapas, and Nicaragua in 1820, Comayagua revolted and established its own council. For virtually a year Guatemala attempted to persuade the Hondurans to abandon their revolt, but without success. The lack of military power caused by the lack of revenue meant the lack of hegemony.³⁸

Economic decline and weak government combined with other factors to create a revolutionary situation. The ideology of the movement was expressed — as elsewhere in Latin America — in terms of the Age of Enlightenment. A Franciscan monk, José Antonio Goicoechea, originally introduced the ideas into Central America. His students and disciples would disseminate the French thought and become central figures in the independence struggle. José Barrundia, the son of a prosperous merchant, participated in early conspiracies for independence and would later be a president of the Central American Federation. A prelate, Antonio Larrazabal, was closely related to the highest aristocratic families in Guatemala and was imprisoned by Ferdinand VII for his radical statements in the Cadiz Cortes. A physician, Pedro Molina, published a radical newspaper on the eve of independence and would later serve in the leadership of the Federation. José Cecilio del Valle at first opposed independence but was acknowledged by all to be the nation’s greatest savant. He was eventually elected President of Central America.³⁸

In the face of spreading revolutionary movements throughout Latin America and the outbreak of the sporadic revolts within Central America, President Bustamante led a regime of repression that created additional animosity among the Creole population. The aristocratic rebels from Granada were treated like common criminals after their surrender, despite the repeated pleas of the Guatemalan ayuntamiento. Bustamante equally persecuted those merchants known to be trafficking in contraband. The leading Guatemalan, the Marquis de Aycinena, successfully led a campaign at the court of Ferdinand VII to gain Bustamante’s recall. The new Captain General, Carlos Urrutia y Montoya, was forced to apologize publicly to the Guatemalan merchants as his first official act. Nevertheless, the traders still felt that they could not “yet consider [themselves] to be free of all the effects” of Bustamante’s regime.³⁹

Finally, and perhaps most important, was the successful revolutionary movement of Agustín de Iturbide in Mexico. The tendency to revolt against Spanish rule in Central America had been discouraged at first by the victories of loyalist forces against Father Hidalgo and José María Morelos. But with the growth of the subsequent Creole rebellion in Mexico, Central American patriots became more active. The boldness of Pedro Molina’s tracts, and that of the ayuntamiento of Guatemala, grew with every victory by Iturbide’s forces.⁴¹

The economic depression, the resultant government weakness, and the discontent produced by financial disaster combined with the ideology of the age of Enlightenment and the political reality of the period to culminate in independence in September, 1821. Among all the cabildos in Central America, there was little opposition to the movement: only some of the Spanish officials in the capital and, for a brief period, the ayuntamiento in León expressed resistance.

The last 25 years of Spanish rule in Central America become a classic example of a decline in power caused by economic recession. The lack of government funds meant a lack of government enforcement, which, in turn, permitted disgruntled merchants and landed families to revolt with impunity. During the last five years of Spanish rule, Central America rested in a netherworld, between Spanish unitary rule on one hand, and freedom and dissolution on the other. When, peacefully, the local ayuntamientos proclaimed their freedom, they were only legitimizing a reality already created in the previous decade.

Author notes