Research on the functioning of rural estates and other agricultural ventures in colonial and nineteenth-century Latin America has pointed to the importance of debt agreements or debtor-creditor relationships in the agricultural economy. The fact that debtors at all levels of society owed money, goods, or labor service is irrefutable, and evidence of debts of large and small landowners, tenant farmers, and rural workers is overwhelming. Only recently have there appeared systematic studies of credit markets in general, and agricultural credit markets in particular, to provide a context in which to evaluate social and economic dimensions of debt agreements and the performance of debtors.1 Lindley and Van Young, building on earlier work by Brading, have examined the credit linkages among members of the elite in eighteenth-century Guadalajara.2 Bauer’s work on nineteenth-century Chile is more general in scope, but the results are only partially comparable to those found for Mexico, because the formal banking institutions so important in Chile were not developed in Mexico until very late in the century.3 In the most exhaustive study of early Latin American credit markets to date, Greenow has described the Guadalajara mortgage market in the eighteenth and early nineteenth centuries. With the appearance of these and other works, it has become possible to assert that credit markets indeed existed, and to assess the roles of institutions, individuals, and groups in them.
These studies have established that ecclesiastical bodies, clerics, and merchants were the principal sources of capital for agriculture in the eighteenth century.4 Mercantile and clerical groups were, after all, those with the greatest liquid assets. Even the crown depended on their resources to finance some industries producing royal revenues.5 Also well established is the prominent role urban properties played in securing ecclesiastical debts. Borrowing secured by houses and other urban properties became progressively more prominent over the eighteenth and nineteenth centuries so that by the time of the Reform, urban properties dominated ecclesiastical investment.6
While research on credit in the eighteenth century has shown the importance of credit to enterprises of all kinds, including agriculture, the comparative analysis of the terms and results of credit contracts of large and small landowners, merchants, and other groups is still incomplete. It is not clear how debtors in general fared in their ability to get loans, which of their lands and properties they had to mortgage to get credit, and how well they repaid their debts, especially in the nineteenth century. This article will look at credit conditions in Orizaba and Córdoba in the state of Veracruz—the volume of transactions, the properties used to secure repayment, the purposes of loans and debts, the sources of credit, and repayment behavior—in order to assess conditions of credit to hacendados and rancheros.7
The chief aims of this exploration are empirical, but the evidence casts some light on three interpretative questions in nineteenth-century Mexican economic history: (1). Why did entrepreneurs of all kinds invest in agriculture, and did agricultural investment represent a drain on resources generated in other sectors?8 (2). Did hacendados enjoy “advantages” in “access to outside credit” not shared by smaller landowners,9 and was estate ownership necessary to get credit?10 (3). Did credit charges represent a “burden” on agricultural enterprises?11 This study examines credit markets that affected all kinds of enterprises, including haciendas and ranchos, asks if debts of hacendados and rancheros were fundamentally different from those of others in the nineteenth century, and argues that they were not. This amounts to an analysis of the behavior of all kinds of debtors in an environment of high transport costs, institutional instability, and intermittent warfare.12
Orizaba and Córdoba lie on the eastern slope of the mountains that separate Veracruz and Puebla, in a valley that widens and merges into the broad coastal plain.13 Lying on the southern route across the mountains, the region was part of a major transport and communications link between Mexico City, Puebla, and the coast.14 The streams and rivers of these narrow valleys provided permanent and abundant water for irrigation and water-power, making Orizaba one of the earliest mill towns in Mexico: its flour mills supplied Mexico City and Veracruz, and some of the earliest Mexican textile mills were established there with the help of government financing in the 1840s.15
Although Orizaba has been associated closely with the early development of industry and working-class movements in Mexico, and Córdoba is often contrasted with it as a rather less advanced agricultural town in its shadow, both had long experience in commercial agriculture by midnineteenth century.16 The development of agriculture was linked to three commercial crops—tobacco, sugar, and coffee—as well as the subsistence cultivation of foodstuffs. Until the arrival of the railway, tobacco was most important: Córdoba and Orizaba offered an ideal setting for supervised and controlled movement of goods, and were chosen as the legal growing region for the tobacco monopoly of New Spain in the 1770s.17 Before Independence, tobacco was a growing source of income for large and small growers, producing annual incomes of up to $940,000 in Orizaba, and $370,000 in Córdoba.18 Even after the monopoly was abolished in 1856, tobacco continued to be grown by rancheros and hacendados, as well as by small cultivators who rotated tobacco and chile with corn and beans in small plots.19 Sugar and coffee were also important to both the Córdoba and Orizaba jurisdictions, although sugar had declined after Independence. Neither surpassed tobacco until late in the century.20
The region was not dominated by the large haciendas associated with central and northern Mexico. The largest hacienda in Orizaba measured 7,728 hectares; most were much smaller than the vast estates of the central plateau.21 In contrast, both towns were surrounded by small ranchos, many in Córdoba on plots of less than one caballería leased from the Ayuntamiento.22 By the end of the century, substantial development of haciendas had taken place, including the renovation of abandoned sugar properties, but smaller properties continued to play an important role.23 The mix of property sizes and commercial crops means the region was not typical of Mexican development in the nineteenth century; but it does allow a detailed comparison of the terms and availability of credit to a variety of landowners, making possible an analysis of the importance of large landholding in access to credit sources.
Borrowing and Lending
In order to discover whether large landlords had preferred access to credit markets, the properties used to secure debts must first be examined. What is clear for this region is that urban properties, especially urban houses, were the most important assets securing loans and debts. Large debts secured by haciendas or industrial properties account for a large percentage of total debt, but these properties were rarely used to secure loans. Agricultural loans were remarkably similar in size and length to other loans, and were secured by a similar distribution of properties; access to credit markets did not require ownership of large estates. In fact, most large properties were themselves purchased on credit; so, far from being a source of liquid capital as Lindley has suggested, agricultural property purchases were one of the principal causes of indebtedness.24
The volume of credit associated with all mortgages and agricultural mortgages in Orizaba, and loans in Córdoba and Orizaba, is displayed in five-year moving averages in Figure 1. The amount of mortgage debt recorded in Orizaba in the forty-seven years between 1822 and 1868 was $4,894,100, an average of $104,130 per year. The total volume fluctuated greatly from year to year, but the effects of warfare are apparent in the totals for the years during the War of the Reform and the first years of the French intervention. The contemporary view that things seemed to be improving in the early 1850s is clearly reflected in the totals; the most outstanding year, with $366,297 in total volume, was 1850, when Haciendas Tocuila, Tuxpango, and Jalapilia were sold.25 The lowest was $220 in 1824. For agricultural mortgages alone, the total amount for the same period was $1,582,606, or approximately 16 percent of the total number of mortgages in Orizaba, and representing about 32 percent of the total value. The total amount of loans recorded in Orizaba and Córdoba was $1,194,504, or about $37,330 per year for the period 1840-71. These were generally smaller, shorter-term obligations, but their totals closely followed the pattern of mortgage credit.
The most obvious characteristic of all these debts is the preponderance of mortgages on houses. As the data in Table I indicate, almost three-fourths of the mortgages in Orizaba were secured by houses, representing over 40 percent of secured debt. More than 40 percent of loans in Córdoba and Orizaba, and one-third of the total value, were secured by houses or a combination of houses and some other property, even though debts associated with house sales have been excluded. The importance of the house as a mortgageable asset was noticed by Bazant in his study of the disposition of church property in the Reform.26 The preferences of church lenders were not peculiar; they resembled those of debtors and creditors in general. Far more mortgages were secured by urban houses than by any other kind of property, and houses figured prominently as security for loans having a wide range of purposes.
This should not be surprising, since houses greatly outnumbered any other type of real property in a given region, and it was more likely for an individual to own a house than any other form of real estate.27 Urban property enjoyed a more stable market than rural or industrial property. Ecclesiastical bodies were not unique. They held mortgages on urban property for the same reasons private lenders preferred them—property was more easily supervised, less subject to deterioration or bad management, and easier to dispose of than rural or industrial property. As Lic. Eduardo Guevara explained his actions in administration of the estate of a deceased ranchero, the house should not be sold, because the decendent’s children only “have to receive rent” on it. The decedent’s rancho and store could be liquidated, because they were in the “risky” business of corn, tobacco and coffee, and suffered from the children’s lack of managerial skill, “falta de brazos,” death of cattle, theft, and transportation problems.28 In sum, urban properties were the most common form of mortgaged property because they were most commonly held, most often transferred and most commonly offered as security for loans. Even agricultural loans were routinely secured by urban houses.
Agricultural property was the second most common security for debt. This debt was concentrated: in Orizaba, more than one-third of the total value of mortgages on agricultural property ($567,199) was due to eleven hacienda mortgages larger than $30,000.29 Mortgages on ranchos were far greater in number, but they were significantly smaller. Other agricultural properties were mortgaged, including land, crops, “llenos,” and other properties, but almost always for relatively small amounts.30 About one debt in six was not secured by any particular property and was collectable against the total of the debtor’s assets in case of default.31 Unsecured debts were generally smaller than those secured by haciendas or ranchos, but were not significantly smaller than those secured by houses, crops, or land.
Orizaba’s place in the developing textile industry is evident in the relative importance of industrial mortgages in that town. Over half of the amounts in this group were liens on the Cocolapan textile mill,32 but the total included mortgages on flour mills, tanneries, and a printing press. It was almost inevitable that the transfer or sale of a property of the value of a textile or flour mill would give rise to a substantial debt for the buyer; hence their impressive totals. For example, when Carlos Saulnier, the French engineer who came to develop the textile mill and then expanded into grain and other businesses, sold his Molino Puente de la Borda to Manuel Fernández Puertas in 1853, the transaction included a short-term obligation of $69,000, recognition of two capellanías, and a long-term mortgage of $30,000.33 The size of this type of sale and the need for buyer and seller to finance one another account for the importance of industrial mortgages in the total. The same applies to hacienda sales, which were comparable in size and complexity to industrial property transfers. The result is that haciendas and industrial establishments together accounted for over 40 percent of the value of mortgaged property in Orizaba, even though, as is clear in the totals for obligaciones, it was relatively uncommon to use haciendas or industrial properties to secure loans.
What kinds of debts did these contracts represent? For mortgages, the most common purpose was to secure the unpaid portion of a property sale. The debt was generally owed by the buyer of the property to the seller, as in the example of Saulnier’s flour mill. Especially for larger haciendas and ranchos, a large proportion of sales involved some kind of financing by the seller. Of forty sales of haciendas and ranchos in Orizaba between 1840 and 1871, 43 percent were financed in part by the seller, including virtually all of the large hacienda sales.34 Thus access to credit was generally required for purchase of agricultural property, and the acquisition of large estates almost always involved substantial long-term debts of the buyer of the property to the seller. Landowners did not acquire land to get access to credit markets; they needed credit to assume ownership.35 The mortgage registry alone, however, does not give information sufficiently complete to indicate reliably the purpose of debts. For a comparison of the intended use of borrowed funds, the records of the local notaries must be consulted.36
Although it was common for a contract not to reveal the purpose of a loan, the purpose was nevertheless described in more than half the loan contracts (accounting for about 60 percent of the contracted value). The purpose most commonly specified, once property sales are eliminated, was for agricultural finance, or avío. A creditor, or aviador, advanced a sum under specific terms to a debtor, or aviado, to finance his rancho or hacienda. These contracts were common throughout Mexican agriculture, and were widely used in Córdoba and Orizaba to finance planting, cultivation, and harvesting of tobacco and coffee. Credit also financed labor costs in sugar and aguardiente production. Avío contracts accounted for about one-fourth of all obligaciones recorded. Contracts carrying forward a balance from the settling of accounts (liquidación de cuentas) and loans for other purposes made up about one-fifth of the contracts. In all, almost two-thirds of loans whose purposes were specified were agricultural.
Agricultural avío loans were almost identical to other loans in amount and kind of property secured. The average avío was a contract for $2,825, compared to $2,696 for all loans. Properties mortgaged for agricultural avío parallel contracts in general: one-third of avío contracts were secured by houses, half by agricultural property or crops, compared to 40 percent each on houses and agricultural property for all loans.37 Those needing short-term finance for crops borrowed in amounts similar to those of borrowers in general, and used much the same distribution of properties to secure them. Ownership of a large estate was not essential to gain access to credit markets, even for agricultural credit.
Borrowers and Lenders
Who was supplying credit to hacendados, rancheros, and other borrowers, and who was borrowing? Did terms of credit or security requirements differ sharply from one group to the next? These questions must be addressed in order to determine whether large landowners had preferred access to credit. It is not enough to observe that large landowners usually secured larger mortgages, because contracts hacendados used to buy properties from one another in the first place are included. The data indicate that large and small landowners differed little from one another in their ability to get credit, and displayed striking similarities in properties they mortgaged. Credit relationships did follow broader social hierarchies, however. The subordinate social position of small holders was reflected in the sources and terms of credit, as well as amounts available to them. The most noteworthy feature of secured borrowing was the importance of a house as a potentially mortgageable asset and the widespread use of houses as a source of cash, regardless of the debtor’s occupation or social position.
Three basic features of occupational distribution of credit are clear.38 First, hacendados were consistently involved in larger transactions, both as creditors and as debtors, than members of other groups. Almost 60 percent of agricultural mortgage debt in Orizaba was owed by hacendados, and over one-third was owed to them. Large landholders dominated mortgage markets almost by definition; the large amounts involved in the sales of haciendas account for the bulk of the total mortgage debt of hacendados. Second, merchants were clearly the largest single source of cash for landowners. Merchants supplied about 15 percent of agricultural mortgage credit and almost 60 percent of funds recorded in loans.39 Third, the role of the church as supplier of new capital to Orizaba and Córdoba landowners in the nineteenth century was negligible. This is in strong contrast to the situation in late colonial Guadalajara. The liberalism of Veracruz has long been noted in nineteenth-century politics, and there is no better measure of the difference between this region and Central Mexico than the reversed roles of clerics and merchants in supplying credit to landowners.40
If merchants dominated cash lending, rancheros dominated borrowing, at least in the number of transactions registered. About half of the loan recipients of known occupation were rancheros, who owed about one-fourth of all debt; and about 22 percent of borrowers of known occupation were hacendados, accounting for almost 40 percent of the total amount borrowed. Some 35 percent of borrowers could not be identified by occupation; they borrowed smaller than average sums. Although it is clear that hacendados and merchants were preferred in credit markets, in the sense that they borrowed greater amounts, small landowners were not excluded. Loans were certainly not restricted to debtors with large landholdings.
In fact, there is strong evidence that landowners preferred not to mortgage their ranchos or haciendas unless absolutely necessary; more often they used their houses to secure loans (see Table III). Fewer than 20 percent of the loans made to hacendados were secured by their haciendas, and almost one-third were secured by their houses or houses and other properties. Almost 40 percent of ranchero loans were secured by houses and only about one-fourth by their ranchos. Of course, larger amounts were secured by more valuable properties, but there is little or no evidence that ownership of a rancho or hacienda was what made a borrower creditworthy. The choice of property to mortgage to secure loans was remarkably similar for landowners of all sizes.
Despite these similarities, debt relationships did reflect social hierarchies. Studies of credit from the point of view of the individual or the family have revealed large amounts of intraelite or intraclan borrowing.41 This is part of the broader pyramid of credit shown above in Table II. Related by kinship or not, merchants and hacendados tended to borrow from one another, forming a net of large cash transactions in which examples of intraelite or intrafamilial borrowing are easy to find. Thus almost 40 percent of the total amount loaned between 1840 and 1871 in Córdoba and Orizaba was borrowing by hacendados and merchants from one another. Rancheros tended to borrow from rancheros, hacendados, and merchants, and resorted to other sources of capital as opportunities arose; however, their loans from merchants were limited to relatively small amounts.42 Professionals and churchmen formed part of the borrowing elite, though clerics appeared more often as lenders than borrowers. Persons without property, insofar as they appeared in formal mortgages and debts, were tied to credit markets through their ranchero and hacendado patrons.
This pattern of lending represents the top of a pyramid of credit relationships extending from indebted peons and tenant farmers through large and small landowners to the most prominent merchants, hacendados, and politicians in the region. At the top was the merchant-financier, who usually marketed crops outside the region and who had access to information on demand for the product. In the middle was the landowner, hacendado or ranchero, who either grew the crop himself, or contracted and financed production by small growers. At the bottom was the grower—the tenant farmer, peon, sharecropper, ranchero, or Indian villager—who harvested the crop and delivered it to the patron’s door.43
An avío contract between Tiburcio Núñez and merchant Ramón Ortiz shows how the system worked. Núñez received $200 from Ortiz and agreed to deliver 40 arrobas of tobacco at $5 per arroba to him the following year. Núñez’s debt was secured by Núñez’s own avío contract with Juan Limón, who had planted 40,000 tobacco plants on a part of Núñez’s Rancho San Lorenzo Sacatepec. Limón had agreed to receive $120 avío plus rent-free land for growing beans and tobacco. He was to deliver 120 arrobas of "tabaco principal” at 18 reales each, and to deliver lower grades of tobacco at a discount of 2 reales per arroba from the “price current among aviados” at the end of the harvest. So of the $200 Núñez was to receive from Ortiz, Núñez agreed to give $120 to Limón to finance his crop; Limón would then repay the $120 and receive at least an additional $150 from Núñez by delivering 120 arrobas of harvested tobacco at 18 reales per arroba. Núñez, in turn, was to repay Ortiz with 40 arrobas of tobacco, deducted from the avío at $5 per arroba, and would have the rest of the crop (at least 80 arrobas) to sell to Ortiz or on the market, at the price then current of $5.50 per arroba, for an additional $440. Ortiz would net $20, or 10 percent, on his eight-month investment of $200, Núñez would get $440 for tobacco harvested on his land, and Limón would receive the avío, rent-free land for his beans, and $150 cash.44
Though few avío contracts were so explicit, the structure of this one is typical, and illustrates how the credit pyramid worked. The merchant made a modest investment in the ability of the ranchero to deliver tobacco, and received a market return on his investment. The ranchero, as landowner-intermediary, used his access to land and connections with dependents to obtain a more impressive gain on this small transaction, but bore the risk that he would have to come up with a substantial amount of cash to repay the merchant. The grower, needing land for his crops, agreed to deliver tobacco at a hefty discount, less than half the market price, in exchange for access to land, some credit, and the possibility of earning cash on the side in the transaction.45
Credit relationships thus reflected broader social hierarchies. For borrowers high in status, access to merchants’ or hacendados’ credit was direct and routine; for borrowers at the bottom, access was often through some intermediary, or, if direct from merchants, for limited sums and purposes. At all levels, as Hyland has noted, credit was a mixture of business and trust.46 For mortgages on properties for given amounts of money, the requirements placed on large and small landowners were remarkably similar. The ability of small holders to get credit was not restricted, but their subordinate position in the regional economy and society limited the amounts available to them.
The most obvious indicator of differences in access to credit between groups would be the interest rates they paid. Contracts specifying interest charges greater than the traditional 6 percent rate, however, were illegal in Veracruz until 1867, so rates above that level did not appear in contracts.47 Actual interest costs were probably higher, in the form of hidden charges, reduced loan amounts, or discounted prices.48 A long-term rate of 8 or 9 percent on well-secured mortgages and a short-term rate of 12 to 40 percent appears closer to actual practice.
The strongest evidence of hidden interest charges is the dramatic rise in stated rates once restrictions were lifted. The average rate for agricultural mortgages and loan contracts was 4.9 percent, including the 10 percent of contracts written at an interest rate of zero. Once restrictions were lifted, typical rates quickly rose to 1 to 3 percent per month, between two and six times the previous legal rate. The stated rate on loan contracts in Orizaba and Córdoba, including those with no interest, rose from 3 percent per year for 1864-66 to 8 percent in 1867, 13 percent in 1868-70, and 17 percent in 1871.49 Of course there were new contracts being negotiated at traditional rates, but the same market forces that produced this rise must have been at work before 1867. The actual rates simply became legal and began to appear in contracts.
Scattered direct evidence indicates that for small holders with little property to mortgage, hidden charges were exceptionally high. Ranchero Pascual Pulido paid 21 percent on a short-term loan in 1840.50 When ranchero Pedro Torres could not deliver 50 quintales of coffee at the agreed price of $5 to his creditor, he was required to guarantee not only the delivery of the goods but also “profits which this sum ought to produce today,” or an additional $3 per quintal in cash.51 Such extraordinary charges were not limited to poor debtors, but the evidence indicates that like loan limits and security requirements, interest rates were related to risk.52 Since direct evidence is lacking to analyze risk through interest rates, the best direct evidence of the relative position of large and small holders is their ability to repay debts.
Repayment, Defaults, and Foreclosures
The conventional view of credit repayment is that debtors were lax, and collection was expensive and difficult. Andrés Molina Enríquez wrote in 1902 that hacendados “rarely” repaid their mortgage debts, in sharp contrast to merchants and industrialists who, Molina said, routinely paid.53 In this view, mortgages simply mounted up, moved from owner to owner, and constituted a progressively greater burden on agriculture.54 In this view, delay in payment was even more pronounced if creditors did not actively pursue payment. Ecclesiastical lenders paid more attention to payment of interest than principal, and their records were not always assiduously kept.55 When repayment of loans has been examined, the consensus is that most loans were either overdue or in default. Greenow refers to a “permanent state of indebtedness” among the Guadalajara population in the eighteenth century, and calculates that only 32 percent of the amount borrowed between 1721 and 1820 was ever repaid.56 Lindley notes that “long-overdue” loans were a “common feature of the credit landscape.”57
The notion that most debtors were delinquent is problematical. If it were the case that a creditor could expect no repayment, there would have been few loans in the first place. The data for Orizaba and Córdoba suggest that the impression of rampant delinquency may be because of peculiarities in the records rather than the behavior of debtors. While registry of contracts was required, notation of cancellation was not. If a debtor could produce a document to show a debt had been paid, it mattered little if the original contract had been noted as cancelled. For example, Col. Francisco Márquez paid $6000 on an 1846 debt to Orizaba merchant Leandro Iturriaga in 1851, but this was not noted until 1856, based on examination of a receipt.58 If a completed contract was unchallenged, or there were no subsequent legal disputes over it, notation of cancellation was neither necessary nor important.
In the case of the Orizaba mortgage registry, cancellation practice changed dramatically when the records were transferred to the public property registry in 1868. The percentage of contracts that remained uncancelled rose from 29 percent in 1840-65 to 42 percent in 1866, 63 percent in 1867, and 73 percent in 1868. There were also sharp differences between notaries in recording cancellation. In Orizaba, over 60 percent of mortgages and loans were cancelled in the original documents; in Córdoba, only one-third were so noted. If noncancellation were taken as evidence of default or delinquency, the implied default rate in Orizaba would be 38 percent, and about 68 percent in Córdoba, either of which would have destroyed the credit market. Lenders do not make loans under such circumstances.
To analyze repayment, two approaches are used here. First, characteristics of cancelled contracts are examined as if they represent all contracts, revealing uniform patterns of repayment across occupational and property types, and indicating that long-overdue loans were quite exceptional. Second, cases of known default are examined. With both methods, the evidence suggests that debts were routinely repaid and defaults were relatively rare.
The repayment data for cancelled mortgages and debts on properties are shown in Table IV. For all mortgages, the average length of time to cancel was 7.5 years. For agricultural mortgages in Orizaba, cancellations are noted in 57 percent of the contracts; the mean time to cancel was 7.1 years. Loans in Córdoba and Orizaba were generally shorter; the mean time to cancel was 3.7 years, and 52 percent were cancelled. Most mortgages were cancelled in this general time frame, with the exception of hacienda and industrial property mortgages, which were cancelled in 12 to 13 years, on the average.
The average times to cancel tell only part of the story, however. As is clear in Figure 2, for those contracts in which repayment data are complete, cancellation was usually much quicker. For all mortgages in Orizaba, half of those cancelled were repaid in three years or less; for agricultural mortgages, half were repaid in five years or less (these were larger and longer-term contracts); for loans in both towns, half were cancelled in two years or less. Payment patterns, in terms of time needed to repay debts, are virtually identical for agricultural and nonagricultural properties. Results for occupational breakdowns show similarly uniform results.59
Agricultural and nonagricultural debtors were also comparable in their ability to keep their agreements. In Table IV and elsewhere, “term” of a contract refers to the length of time agreed upon by the contracting parties for repayment. For agricultural mortgages, the average term was about two and one-half years, with many contracts for less than one year; for loans in Córdoba and Orizaba, the average was about one and one-half years. “Length” refers to the amount of time needed to repay the debt. It is calculated for contracts where cancellation has been noted in the mortgage or notarial registry. In both term and length, most mortgages were similar, with the exception of hacienda and industrial mortgages, which were significantly longer.60 If the ratio between length and term for each contract is calculated, the result is a measure of how well agreements were kept, called “delay” in the tables. This is a “deadbeat indicator,” showing the relative ability of debtors to pay within the time originally established.
An examination of “delay” reveals an underlying consistency in debtorcreditor relations not revealed by examination of either the terms or repayment of contracts alone. Greenow notes that few contracts in Guadalajara were fulfilled on time and asks why lenders “repeatedly” specified two-, three-, or four-year limits on loans “in the face of consistent delinquency by borrowers.”61 This analysis indicates that even if repayment were not always prompt or punctual, it was predictable, and borrowers and lenders recognized the difference between short- and long-term agreements. Both for agricultural mortgages and for loans, delay in payment followed similar patterns for large and small borrowers, and was not markedly different from debtors in general (see Figures 3 and 4). Most contracts were cancelled in less than twice the contracted term, and 15 to 30 percent were paid “on time.” Consistency in delay of payment also suggests that marketplace conditions were the obstacle to prompt repayment, rather than unreliability of borrowers, and that those conditions were the same for both large and small landowners. Borrowers and lenders, or buyers and sellers of property, must have known their ability to pay, and discounted risks of “delinquency” when they negotiated. Repayment was thus not a matter of “delinquency” at all, since repayment of debtors and buyers of property was so consistent. “Delinquency” would imply that there was some form of deviance. What is striking about debt repayment is that few deviants are evident, and few differences in repayment behavior are to be found.62
Foreclosures could result from unpaid debts, but they were not typical. Of the 443 obligaciones analyzed for Córdoba and Orizaba for the 1840-71 period, only 3.2 percent were cancelled by legal adjudication of the mortgaged property to the creditor in payment. The total amount of defaulted debt was $43,461, or about 4 percent of the total amount of debt contracted.63 Delay for adjudicated debts averaged 3.8, higher than for most contracts, but certainly all contracts with excessive delay of payment were not foreclosed. An alternative to foreclosing a contract was to subrogate it to another creditor, but there is no indication that this was generally used for delayed payments. The mean delay for subrogated contracts was 2.1, or about the same as for most other contracts.64
There were property cessions resulting from debts not previously registered in the notaries. There were thirty-one judicial property sales recorded in these notarial registers as payments for debts, totaling $120,495, or less than 3 percent of the total property mortgaged in the same period.66 If these are added to the judicial cancellations recorded in the loans analyzed here, the total number of judicial property transfers for debt payment (not including judicial sales to settle estates) still numbers only forty-four, or about three such sales every two years. Taking into account that the time period under study includes three major wars in the region, and the property losses and transport disruptions involved in them, this record is not extraordinarily high.66 The difficulty and expense of a judicial property sale may have been the chief reasons more debts were not foreclosed, but whatever the case, it was not expected that loaning money to a property owner who was unlikely to pay would result in a cession of the property. Foreclosure was apparently not an effective mechanism to acquire property.67
This analysis shows a functioning credit market in Córdoba and Orizaba, where the terms facing most debtors, the requirements of property to secure debts, and the ability of most debtors to meet those terms were well-defined and related to risk. Among all contracts, those secured by houses clearly predominated, and houses were commonly used even to secure agricultural loans to hacendados or rancheros; ownership of large landed estates was not required for access to credit markets. In value, the large, long-term mortgages used to finance the purchase of large properties such as industrial sites or haciendas were the most important single type; but the overwhelming number of contracts, both for property transfers and for loans, were smaller, short-term agreements. In contract cancellation, there was remarkable uniformity in the ability of debtors to repay their debts. This is not to say that the terms or results of debt contracts could not be harsh, nor their outcomes unfortunate. Steeply discounted crop prices for small debtors were common, and conditions imposed by creditors to ensure their profits and collect their debts could be rigorous. Nevertheless, most debtors paid their debts, and a surprisingly large number paid on time. Most debtors operated on a relatively equal footing (given the obvious differences in their property holdings), and most contracts were liquidated without foreclosure or judicial process.
Merchants, hacendados, rancheros, and other property owners thus faced about the same terms in contracting debt; and if ability to repay debts is an indication, their chances of success in agriculture were about as good as in anything else. Credit charges were an unavoidable fact of landownership, as they are today for most large assets, but current charges were not so burdensome as to prevent debts from being routinely liquidated. There is no evidence that making loans to farmers was much different from making loans to anyone else, nor that, from the point of view of resource allocation, agriculture was a drain on the resources of the region. Neither did making loans to agricultural enterprises necessarily result in lower returns or greater delays than loaning to other businesses. The consistent proclivity of merchants, miners, and other entrepreneurs to move assets into agriculture was not a drain on the economy, but rather simply another direction their resources took in a generally risky and unstable economic environment.
When Alberto García Granados wrote in 1892 that before the arrival of “la paz” (the Porfirian peace) no capitalist could invest in rural enterprise, except at usurious rates, because of high transport costs and risks of war, and that the only people seeking funds to borrow were “propietarios arruinados,” he was arguing more on rhetorical than factual grounds.68 Certainly the portrait painted here for the large and small holders of Córdoba and Orizaba was not so bleak. For most of the time before the railway was completed in the region, debt contracts for sale of property and for loans for agriculture were regularly liquidated, and repayments were predictable. Perhaps this picture would suffer by comparison with post-Porfirian credit structures, but certainly not because the behavior of individuals had improved nor because a new “progressive” landowner arose. Uniformity in length, term, and delay, as well as amounts borrowed, indicates that it was the general economic climate of high risks and transport costs that militated against the performance of agricultural enterprises, not a fundamental weakness of agriculture or landowners. That the market functioned as well as it did, despite warfare and economic chaos at the national level, is remarkable. That later writers would have an interest in portraying conditions as much worse than they had in fact been is not remarkable, because this version of the past provided one of the chief rationales for Porfirian economic policy.
The best work on the history of credit in Mexico is that of Linda L. Greenow, in two related works: Credit and Socioeconomic Change in Colonial Mexico: Loans and Mortgages in Guadalajara, 1720-1820 (Boulder, 1983); and “Spatial Dimensions of the Credit Market in Eighteenth Century Nueva Galicia,” in David J. Robinson, ed., Social Fabric and Spatial Structure in Colonial Latin America (Ann Arbor, 1979), pp. 227-279. Research on other regional credit markets figures in: Richard B. Lindley, Haciendas and Economic Development: Guadalajara, Mexico, at Independence (Austin, 1983); Eric Van Young, Hacienda and Market in Eighteenth-Century Mexico: The Rural Economy of the Guadalajara Region, 1675-1820 (Berkeley, 1981); Richard P. Hyland, “A Fragile Prosperity: Credit and Agrarian Structure in the Cauca Valley, Colombia, 1851-87,” HAHR, 62 (Aug. 1982), 369-406; and Marco Palacios, Coffee in Colombia, 1850-1970: An Economic, Social, and Political History (Cambridge, 1980). On the legal and institutional status of credit, see: Arnold J. Bauer, “The Church in the Economy of Spanish America: Censos and Depósitos in the Eighteenth and Nineteenth Centuries,” HAHR, 63 (Nov. 1983), 707-733.
Van Young, Hacienda and Market, Chap. 8; D. A. Brading, Miners and Merchants in Bourbon Mexico, 1763-1810 (Cambridge, 1971), Chap. 4 and 9; Lindley, Haciendas and Economic Development, Chap. 2.
Arnold J. Bauer, Chilean Rural Society from the Spanish Conquest to 1930 (Cambridge, 1975), pp. 92-101.
Greenow, Credit and Socioeconomic Change, pp. 59-60. On the nineteenth century, see: Michael P. Costeloe, Church Wealth in Mexico: A Study of the “Juzgado de Capellanías” in the Archbishopric of Mexico, 1800-1856 (Cambridge. 1967); and Jan Bazant, Alienation of Church Wealth in Mexico: Social and Economic Aspects of the Liberal Revolution, 1856-1875 (Cambridge. 1971).
Merchants and the church were financing cochineal and mining, with crown acquiescence. See Brading, Miners and Merchants, p. 180; and Brian R. Hamnett, Politics and Trade in Southern Mexico, 1750-1821 (Cambridge, 1971), pp. 148-149. Veracruz tobacco growers were also dependent upon such advances. The records of these loans are housed in the notarial archives of Orizaba, ANO, Primera Parte.
Greenow, Credit and Socioeconomic Change, p. 53, notes that the percentage of loans and mortgages secured by urban property in Guadalajara rose from 50.6 percent in 1721-40 to 90.3 percent in 1798-1820. The preponderance of urban property at the time of the Reform is detailed in Bazant, Alienation of Church Wealth, pp. 46-47, 75-76, 93-95, 117-118, 127-131.
This analysis is based on three sets of data extracted from three principal archives: the archives of the Registro Público de Propiedad of Orizaba, and the notarial archives of Orizaba and Córdoba (hereinafter cited as RPPO, ANO, and ANC, respectively). The RPPO data are mortgages registered in the Libros de Censos y Hipotecas of the Canton of Orizaba, which record debt contracts affecting property within the Orizaba jurisdiction. This is the regional equivalent of the registry Greenow analyzed for Guadalajara. Portions of a similar registry for Córdoba survive in ANC, but not complete enough for this analysis. Notarial archives were the source of loan records, or obligaciones por reales. The notarial archives of Orizaba are housed in the library of the Universidad Veracruzana in Xalapa, in two parts: the “Primera Parte,” consisting principally of judicial archives, and cited here by date and expediente number; and the Protocolos of Orizaba, which make up the “Segunda Parte,” cited here as ANOP. The notarial archives of Córdoba are in the hands of notary Lic. Salvador Zamudio, consisting chiefly of protocolos. Because of the volume of notarial records, data are presented for 1840-71; sale contracts for urban property are excluded. The assistance of the Centro de Estudios Históricos of the Universidad Veracruzana in obtaining and filming this documentation, especially that of Ricardo Corzo and Adriana Naveda Chávez-Hita, is gratefully acknowledged. Microfilm copies of the ANO and ANC documentation are deposited in the Centro.
This is the “hacienda was a sink” thesis of Brading in Miners and Merchants, p. 219, analyzed in greater detail in his Haciendas and Ranchos in the Mexican Bajío, Leon, 1700-1860 (Cambridge, 1978).
John H. Coatsworth, “Obstacles to Economic Growth in Nineteenth-Century Mexico,” American Historical Review, 83 (Feb. 1978), 87. Coatsworth compares estate agriculture to Indian villages with these words, but the sentiment on availability of credit to large landowners is more widespread. Bauer notes, for example, that in late nineteenth-century Chile “a good-sized property—much larger than a single family farm—was required to obtain a loan over $1000.” Bauer, Chilean Rural Society, pp. 93-94.
This is a central assumption of Lindley’s work. See his Haciendas and Economic Development, pp. 43-44.
Brading, Haciendas and Ranchos, pp. 91, 118. Costeloe, Church Wealth in Mexico, P. 95.
This is in the spirit of Coatsworth’s admonition to look at the “economy as a whole” rather than at single sectors in analyses of obstacles to economic growth in Mexico; Coatsworth, “Obstacles,” p. 88.
For history of Veracruz, see: Manuel B. Trens, Historia de Veracruz (Jalapa-Enríquez, 1947 50); and José Luis Melgarejo Vivanco, Breve historia de Veracruz (Xalapa, 1960). The basic work on history of Córdoba is that by Enrique Herrera Moreno, El Cantón de Córdoba: Apuntes de geografía, estadística, historia, etc. (Córdoba, 1892); for Orizaba, José María Naredo, Estudio geográfico, histórico y estadístico del Cantón y de la ciudad de Orizaba (Orizaba, 1898). See also: Mariano Ramírez, “Estadística del Partido de Córdoba, formada en 1840,” Boletín de la Sociedad Mexicana de Geografía y Estadística (Mexico City) (hereinafter cited as BSMGE), 4 (1854), 72-112; Vicente Segura, Apuntes para la estadística del Departamento de Orizava (Jalapa, 1831); and Manuel de Segura, “Apuntes estadísticos del Distrito de Orizava, formados el año de 1839,” BSMGE, 4 (1854), 3-71.
On the position of Córdoba and Orizaba in Mexico City—Veracruz transport, see: Peter W. Rees, Transportes y comercio entre Mexico y Veracruz, 1519-1910 (Mexico City, 1976). John Gresham Chapman, La construcción del Ferrocarril Mexicano, 1837-1880 (Mexico City, 1975) describes the building of the railroad through the region; and Arthur Paul Schmidt, Jr., “The Social and Economic Effects of the Railroad in Puebla and Veracruz Mexico, 1867-1911,” (Ph.D. Diss., Indiana University, 1974) analyzes its impact.
The early industrial development in the region is described in Robert A. Potash, Mexican Government and Industrial Development in the Early Republic: The Banco de Avío (Amherst, 1983), pp. 155-157. See also: Alice Foster, “Orizaba; A Community in the Sierra Madre Oriental,” Economic Geography (Worcester, Mass.), 1 (Oct. 1925), 356-372; and the general descriptions in Bazant, Alienation of Church Wealth, pp. 68-74.
On working-class movements, see: Bernardo García Díaz, Un pueblo fabril del porfiriato: Santa Rosa, Veracruz (Mexico City, 1981). This has been the subject of long-term research by John Womack, Jr.
On the history of the tobacco monopoly, see; Reseña histórica de la renta del tabaco tomada desde la época del Exmo. Sr. Conde de Revillagigedo (Mexico City, 1850); David Lome McWatters, “The Royal Tobacco Monopoly in Bourbon Mexico, 1764-1810” (Ph.D. Diss., University of Florida, 1979); David W. Walker, “A Fiscal History of the Mexican Tobacco Monopoly, 1764-1856,” unpublished ms., University of Chicago, 1978, and David W. Walker, “Business As Usual: The Empresa del Tabaco in Mexico, 1837-44,” HAHR, 64 (Nov. 1984), 675-705.
Archivo General de la Nación, Ramo de Tabaco, vols. 446, 532, 509, 38, 120, 414, 54, 96, 331, 77, for the years 1765-1809. Assistance of Lome McWatters in locating these data was invaluable. The figures are summarized in Walker, “Fiscal History,” p. 12. Monetary values here and elsewhere in this article are expressed in current pesos.
On tobacco cultivation, see: J. Rafael de Castro, “Dictamen de la Comisión Especial de Agricultura, BSMGE, 12 (1865), 74-76; Manuel A. Romero, “Apuntes sobre el cultivo y beneficio del tabaco,” Boletín de la Sociedad Agrícola Mexicana (Mexico City) (hereinafter cited as BSAM), 6, 4 (1883), 54 - 57; and A. Baker, “Informe sobre el cultivo y manufactura del tabaco en el Estado de Veracruz,” BSAM, 13, 25 (1889), 292-293, and 13, 28 (1889), 435-438. Detailed examination of early twentieth-century practice is in the report of Ing. Ramón P. Placencia on practice in Fortín at the time of the agrarian reform. See his report of Dec. 27, 1934, in the archives of the Secretaría de la Reforma Agraria, Mexico City (hereinafter cited as SRA), 23/5091 (Fortín), pp. 23-60.
Fernando B. Sandoval, La industria del azúcar en Nueva España (Mexico City, 1951). pp. 87-88. Two excellent studies of slavery associated with sugar in the region are: Patrick James Carroll, “Mexican Society in Transition: The Blacks of Veracruz, 1750-1830,” (Ph.D. Diss., University of Texas at Austin, 1975); and Adriana Naveda Chávez-Hita, “Esclavitud negra en la jurisidicción de la Villa de Córdoba an el siglo xviii” (Tesis, Maestro en Historia, Universidad Veracruzana, 1977). Vicente Segura, Apuntes, pp. 67-69, describes abandoned sugar estates in 1825. The sugar industry revived after the railroad was completed, and some of the Córdoba mills, particularly Potrero, became “model” haciendas of the Porfirian era. See: José C. Segura, “Cultivo de la caña de azúcar en el Estado de Veracruz,” BSAM, 7, 11 (1883), 166-170; 7, 12 (1883), 185-187; 7, 13 (1883), 199-205; and 7, 14 (1883), 211-214. On coffee cultivation, see: Vicente Segura, Apuntes, p. 57; and R. Herrera, “El café de Córdoba,” BSAM, 23, 4 (1889), 64-67. The general description of agricultural practice in Huatusco written in 1865 by Christian Carl Sartorius (called Carlos in local documentation), German immigrant and model hacendado from Huatusco, includes considerable detail on technical and organizational aspects of tobacco, sugar, and coffee cultivation in central Veracruz. See Carlos Sartorius, “Memoria sobre el estado de la agricultura en el Partido de Huatusco,” BSMGE, 2a. época, 2 (1870), 158-169.
Segura, Apuntes, pp. 33-58, describes Orizaba and Córdoba haciendas. The largest he mentions was Tocuila at one sitio de ganado mayor, one sitio de ganado menor, plus four caballerías, or about 3,487 hectares. When this hacienda was surveyed in 1888, it came to 2,665 hectares; Archivo de la Comisión Agraria Mixta, Jalapa (hereinafter cited as CAM) 249, vol. 1, pp. 167-168. The largest hacienda was Tuxpango, measured in 1923 at 7,728 hectares; CAM 180, vol. 1, p. 120. Most properties called haciendas in the Orizaba and Córdoba region were listed by Segura as fifteen to twenty caballerías, or 640-850 hectares. For equivalencies, see Manuel Carrera Stampa, “The Evolution of Weights and Measures in New Spain,” HAHR, 25 (Feb, 1949), 19.
Segura, Apuntes, p. 58. The records of Ayuntamiento leases are located in the municipal archives of Córdoba: Archivo Municipal de Córdoba (hereinafter cited as AMC), vols. 137, 163, 206, 219. The alienation of municipal property is described in Jan Bazant, Los bienes de la Iglesia en México (1856-1875) (Mexico City, 1971), pp. 82-84.
Naredo, Estudio, pp. 68-80.
Lindley, Haciendas and Economic Development, pp. 43-47.
In his 1857 Memoria, Veracruz Gov. Manuel Gutiérrez Zamora described recent agricultural expansion; Memoria leída por el C. Manuel Gutiérrez Zamora ... 21 Junio 1857 (Mexico City, 1857).
Bazant, Alienation of Church Wealth, p. 255.
An 1871 census of Córdoba listed 263 shops, 185 ranchos, and 11 haciendas; AMC, vol. 160, exp. 4. When the houses in town are added, it is clear why urban property mortgages outnumbered rural.
ANOP 1860, vol. 1, pp. 155-158.
Calculated from RPPO Libro de hipotecas y censos, 1882-68. The eleven hacienda mortgages ranged from $36,556 to $124,000 and took almost fifteen years to cancel on the average. The values in the totals for agricultural mortgages do not precisely match those for all Orizaba mortgages because multiple listing of individual mortgages has been eliminated—agricultural mortgages are tabulated by principal property they affected, not by all properties.
The term “llenos” refers to real property on a hacienda or rancho such as a house, barn, shed, or other structure, but not the land itself. Mortgages on llenos were common in cases where the debtor leased a rancho and held or constructed property on the land, but did not own the land itself. Such an arrangement was especially common in Córdoba where the municipality leased rural property to individuals virtually in perpetuity, and rancheros held title to the contents, or llenos, of the rancho, but not to the rancho itself.
Bauer, Chilean Rural Society, p. 89, discusses the general mortgages as an obstacle to the flow of credit. The general obligation was not widely used in Orizaba and Córdoba.
On Cocolapan, see: Dawn Keremitsis, La industria textil mexicana en el siglo xix (Mexico City, 1973), pp. 9-40; and Robert A. Potash, El Banco de Avío de México, el fomento de la industria, 1821-1846 (Mexico City, 1959), pp. 231-234.
ANOP 1853, pp. 54-57.
The subject of seller financing of land sales is treated more fully in related work by this author, “Agriculture and Enterprise in Nineteenth-Century Mexico: Córdoba and Orizaba, 1840-1871, ” Ph.D. Diss, in progress, University of Chicago.
Palacios found the same pattern in Colombia in the late nineteenth century—access to credit was almost always a prerequisite to estate purchase; Marco Palacios, Coffee in Colombia, pp. 38-39.
This position differs from Greenow’s. She analyzed the mortgage registry only. I found in Orizaba and Cordoba notarial registries a clearer indication of the purpose of both secured and unsecured debts. See Greenow, Credit and Socioeconomic Change, pp. 15-16.
Calculated from contracts specifying agricultural purpose in ANO, ANC Protocolos, 1840-71.
Occupational assignments are based on detailed information extracted from contracts, registers, and other published and unpublished sources for Córdoba and Orizaba. In all, approximately 3,000 observations of activities of 1,087 individuals were tabulated, and assignments were based on available evidence. Of the 1,087 individuals, merchants accounted for 12 percent; rancheros, 21 percent; hacendados and tenant farmers, 6 percent each; professionals, 4 percent; clerics, 3 percent; and others, 4 percent. No assignment could be made for 44 percent. John Tutino, in “Hacienda Social Relations in Mexico: The Chalco Region in the Eve of Independence,’ HAHR, 55 (Aug. 1975), 503, argues that in light of the mixture of enterprises members of the elite engaged in, “occupation” is an anachronistic concept. This is a good point, and much of the evidence presented here supports it. Lacking a precise alternative, however, I use the term here as a shorthand notation for the mix of socioeconomic status and property holding that defined social position in the nineteenth century.
The merchants in Córdoba and Orizaba included both Mexicans and foreigners. Most were small shopkeepers of Mexican, Spanish, or French descent. The grand financiers of Mexico who came from this region, including the Escandons and Miguel Bringas, scarcely figured in regional documentation except through family members or employees.
Greenow found that the share of clerics and clerical institutions in total lending was important, but declining, between 1721 and 1820 (from 71 percent to 25 percent over this period); Greenow, Credit and Socioeconomic Change, p. 40. Bazant, Alienation of Church Wealth, pp. 76-78, describes the relative unimportance of ecclesiastical contracts in nineteenth-century Córdoba and Orizaba.
Hyland, “Fragile Prosperity,” pp. 394-395; Lindley, Haciendas and Economic Development, pp. 47-53. Both Lindley and Hyland note borrowing within families, but do not extend the analysis beyond the individual families they analyzed to see if broader social practice is reflected. On the interlocking connections between economic and familial relationships, see: Charles H. Harris, A Mexican Family Empire, the Latifundio of the Sánchez Navarros, 1765-1867 (Austin, 1975); and Mark Wasserman, Capitalists, Caciques, and Revolution: The Native Elite and Foreign Enterprise in Chihuahua, Mexico, 1854-1911 (Chapel Hill, 1984). An interesting question, far beyond the scope of the present research, would be to what extent marriage, kinship, and compadrazgo relationships underlay credit relationships. Greenow found few kinship linkages in Guadalajara, but she did not look at ritual kinship. See Greenow, Credit and Socioeconomic Change, pp. 49-50.
The average value of merchant loans to rancheros was $1,547.52 (St. Dev. = 1,434.82, N = 78) compared to $5,810.71 (St. Dev. = 8,063.44, N = 78) for merchant loans to other known occupations. The ranchero loans are significantly smaller: T = 4.59, significant at .01 level.
Christian Carl Sartorius, Mexico about 1850 (Stuttgart, 1961), pp. 177-178, described credit in tobacco growing. Brading, Miners and Merchants, pp. 149-152, describes a similar relationship in mining.
ANC 1849, p. 263. The 40,000 tobacco plants would have required about two cuartillas of land, according to studies done at the time of the land reform. See agronomists’ reports in CAM, 126 (San José del Corral), pp. 206-207, and SRA Peñuela 23/5103, Dot. Loc., pp. 17-18. Rent on two cuartillas in 1849 would have been between $8 and $20 pesos per year, so the grower earned $160-170, plus the avío. For rental rates, see ANOP 1848, pp. 361-362, and ANOP 1847, p. 100. The market price is from ANOP 1850, pp. 619-621.
Sartorius reported that the principal benefit to the aviado in tobacco growing was his ability to sell the lowest grade of tobacco to contrabandistas. Sartorius, Mexico about 1850, p. 178. Other examples of layered credit transactions are: ANC 1840, pp. 68-71; ANC 1844, pp. 25-26; ANC 1844, pp. 124-127; ANC 1846, pp. 1-2; ANOP 1849, pp. 352-360; ANC 1855, pp. 5-6; ANOP 1857, vol. 2, pp. 463-466; ANOP 1860, vol. 1, pp. 122-155; ANC 1861 (Palma), pp. 4-7; ANOP 1864, vol. 2, pp. 16-18; and ANOP 1865, vol. 2, pp. 151-158.
Hyland, “Fragile Prosperity,” 405.
Two developments culminated in new civil codes in the 1860s. One was the French-inspired civil code completed in the first two volumes in 1867. See Helen L. Clagett and David M. Valderrama, A Revised Guide to the Law & Legal Literature of Mexico (Washington, D.C., 1973), pp. 64-65. The other was the Veracruz state code, the so-called Código Corona. See Enciclopedia de México, 12 vols. (Mexico City, 1968), III, 327. The code was published in 1868 and went into effect May 5, 1869. See Fernando de Jesús Corona, Código civil del estado de Veracruz-Llave (Veracruz, 1868). Interest rates above the traditional level appeared for the first time in 1867; there were two such contracts in 1867, two in 1868, and thirteen in 1869.
Obviously most contracts did not spell out such charges. Some examples are noted below.
Calculated from ANO, ANC Protocolos. There were thirty-six mortgages between 1867 and 1871, including five with an interest rate of zero.
ANC 1840, pp. 40-41.
ANC 1846, pp. 59-61.
Additional analysis of interest charges for all borrowers, based on discounting practice is found in related work of this author, “Interest Rates and Discounts in Nineteenth-Century Mexico,” unpublished ms., University of Minnesota, 1984.
Andrés Molina Enríquez, Los grandes problemas nacionales, (Mexico City, 1909), p. 94.
Brading, Haciendas and Ranchos, p. 91.
Costeloe, Church Wealth in Mexico, p. 78.
Greenow, Credit and Socioeconomic Change, p. 28.
Lindley, Haciendas and Economic Development, p. 41.
ANOP 1846, pp. 312-315.
For loans, the average merchant debt was 2.7 years in length; for hacendados, 4.8 years; for rancheros, 3.6 years.
Industrial mortgages in Orizaba were significantly longer than other mortgages; T = 2.08, significant at .05 level; for hacienda mortgages, T = 3.48, significant at .01 level.
Greenow, Credit and Socioeconomic Change, p. 54.
In calculating the delay variable in Table IV, five contracts have been excluded from the calculations. Of the ninety agricultural mortgages for which delay could be calculated, eighty-five showed delay of less than 10. Delay exceeded a value of 15 in five short-term contracts. Virtually all the variation of delay by property type, contract type, and occupation was due to these five outliers. The same contracts were excluded from the obligaciones por reales data, but all are included in the intervalized display of delay in Figures 3 and 4.
Ransom and Sutch, in their analysis of credit in the cotton South following the Civil War, took a 5 percent default rate to he a reasonable estimate of the actual rate. No study of actual repayment of debts to merchants was available to them. See Roger L. Ransom and Richard Sutch, One Kind of Freedom: The Economic Consequences of Emancipation (Cambridge, 1977), pp. 242-243. They, too, argue that failure to pay on time is not equivalent to default. See their “Credit Merchandising in the Post-Emancipation South: Structure, Conduct and Performance,” Explorations in Economic History (New York), 16 (Jan. 1979), 73-74.
This figure of 2.1 (St. Dev. = 3.0, N = 15) excludes one outlier where delay = 38.5.
The total value of property adjudications registered in the Córdoba and Orizaba notaries to pay agricultural debts was $120,495. The estimate of percent of property mortgaged is based on total value of mortgages in Orizaba of $3,853,321 between 1840 and 1868. This is a conservation estimate, because comparable totals for Córdoba are not available.
Protests over damages to crops or livestock were common, especially to tobacco, which represented ready cash to a passing army. Protests are recorded in ANOP 1847, PP. 338-340; ANC 1857, pp. 1-2; ANC 1858, pp. 229-230; ANC 1859, pp. 64-65, 67-69, 120-121; ANC 1860 (Palma), pp. 27-28; and ANOP 1866, vol. 3, pp. 1-17.
Harris, A Mexican Family Empire, pp. 154-155, describes the use of foreclosure as a land acquisition weapon by the Sánchez Navarros. The inefficiency of this mechanism is described in the case of that family’s dispute with the Elizondo family, pp. 155-161. As the smaller landowners of Córdoba and Orizaba did, the Sánchez Navarros preferred land purchase to foreclosure on loans to obtain the lands they wanted.
Alberto G. Granados, “Del crédito agrícola en México,” BSAM, 16, 47 (1892), 740.
Research for this study was supported by the Social Science Research Council and American Council of Learned Societies, and a Fulbright-Hays fellowship, with additional research grants from the University of Chicago, Virginia Tech, and the University of Minnesota Computer Center. The author would like to thank Ward Barrett, John Coatsworth, Friedrich Katz, Bob McCaa, Rus Menard, and Stuart Schwartz for comments on this project in its various stages.