Referringto the problems raised by the house correspondence of business firms, historian Robert Greenhill wrote, “No merchant willingly admits that he is doing well: he is much more likely to grumble about goods badly sold than to offer praise when they go off well.”1 The nature of the correspondence between British merchants stationed overseas and their consuls was no different and hardly could be, considering the function of consular agents. The picture of trade with Mexico from the 1820s to the 1860s, as gleaned from Foreign Office documents, is indeed bleak: trade was stagnant, imports did not pay, contraband drove prices down, debts private and public went unpaid, merchants suffered all manner of injustices and operated at the mercy of weak and corruptible governments, commercial houses skirted bankruptcy.
It is not always easy to draw a line between exaggeration and reality.2 The situation in newly independent Mexico was uncertain, frequently turbulent, and, it would appear, hardly conducive to a flourishing trade. Constraints to the growth of external trade pervaded the import-export process and included physical, social, economic, and political barriers. Rugged terrain, climate, and the primitive state of transportation slowed down commercial transactions, influenced the location of merchant houses, and mandated a wide network of commercial relations.3
The scarcity of circulating currency and the lack of a national monetary system fostered numerous forms of payment. Credit was inevitable; intense speculation with specie was just “another branch of business.” British merchants attached the greatest importance to market and tariff limitations. Excessively high trade duties and frequent rate alterations were, according to the merchants, a major impediment to the establishment of a stable commerce. Tariff regulations, together with duties, determined the role of North American shipping and warehousing in the Anglo-Mexican trade, on the one hand, and, on the other, encouraged illegal practices that became incorporated into everyday business routine. Finally, merchants attributed the persistence of adverse factors to the political turmoil of the postindependence years; and, inevitably, politics and political strife did strongly influence the course of economic events.
The epoch of the British commercial houses in Mexico lasted some 35 years, roughly from the 1820s to the 1850s, during which time these merchants virtually controlled the external and wholesale trade.4 Trade conditions changed little over these years. This does not mean that trade was static; commercial relations between the two countries oscillated strongly according to the impact of internal political movements, unexpected tariff alterations, epidemics, and international economic trends, at least as far as legal trade figures show.5 Nevertheless, British houses in Mexico did a thriving business. The wealth of two houses, Manning and Mackintosh and Barron and Forbes, reached almost legendary proportions, and even the luxury in which lesser merchants lived left foreign visitors to Mexico duly impressed.6
Such success would appear to contradict the adversity the British described, but, merchants first and last, in the name of profit they manipulated the available conditions to turn the country’s seemingly permanent state of political and financial crisis to their advantage. That included reshaping business methods, operations, and tactics; extending trade-related functions; diversifying investments; and adopting less orthodox practices, ranging from simple bribery to contraband and speculation with government finances. Above all, close relationships with eminent political figures were essential in the endless negotiations with government officials either to procure special concessions or to conserve those already accorded.
An Early Awakening
To British merchants, Mexican independence spelled rich silver mines and new markets. They did not wait for the diplomatic niceties of formal recognition and commercial treaties to begin setting up import establishments.7 By 1821-22 several houses had already done so (although it is highly probable that agents had been sent over earlier to appraise the situation and to seek local alliances). By 1826 at least 17 houses were operating in Mexico, 14 of them in Mexico City.8 Guadalupe Victoria, president from 1823 to 1827, appeared to hold out the promise of stable government. Enthusiasm was riding high, fired by pamphlets and the reports of merchants and special commissions (sent over by the British government to judge the feasibility of permanent independence), all praising the country’s enormous wealth and potential. Imports flooded the country, mining companies were formed, foreign capital investments flowed in. And the Mexican government obtained some 14 million pesos from loans contracted with two British banking houses, Goldschmidt and Company and Barclay, Herring, Richardson and Company.9
By 1827, however, the fire had been quenched. Two years earlier, most of the mining ventures in Mexico and other Latin American countries had failed. These failures led to the London market crash toward the end of 1825, which in turn brought down a large number of business concerns and banking houses, including Goldschmidt and Barclay. British investment in Mexico contracted drastically.10 In 1827 imports took a plunge. From 1823 to 1826 they had spiraled upward, financed by the inflow of foreign capital; but this tendency proved misleading as a still unexplored market was inundated with products, many of which would prove to be unsalable. These factors caused a number of the first British houses in Mexico to close.11 In 1827, the Mexican government spent money still available from the Barclay and Goldschmidt loans to put down a number of uprisings, and for the first time suspended payments on the British debt. Externally, 1827 was the start of a long period of diplomatic wrangling over the foreign debt, and it marked the end of Mexico’s creditworthiness abroad. Internally, it signaled a prolonged period of political and economic instability.
Yet despite the diminished market expectations, foreign commercial houses continued to arrive. By 1831, more than 20 British import-export houses were in operation. Between 1832 and 1835, approximately 30 new houses set up business (the number includes new partnerships, branches, and agents). Two years of austerity and relative political stability under the Bustamante-Alamán regime (1830-1831) probably encouraged the inflow: attempts were made to bring security to the roads and introduce some rationality into fiscal policy, and once again, trade seemed to be picking up.12 Thomas Kinder, a merchant, mentions 11 houses in Mexico City in 1834; “Of these, four have been set up within the last three years. Six others have been ruined and broken up with great loss,” including his own.13 That same year, eight houses, all agencies or branches of import-export houses, were set up in Laguna de Términos, Campeche, in response to the growing importance of local dyewoods as an export product.
The stream of major new firms slowed during the second half of the 1830s. On the British side, the years 1836-1842 were a period of contraction and deepening depression. Conditions in Mexico did little to alleviate the crisis. In 1836, several houses stated that trade had never been in a more depressed state and “failures were of almost daily occurrence.”14 The Texas War in 1836, followed by the “Pastry War” and the French blockade in 1838, did little to reactivate commerce. And a 10 percent surtax imposed in 1839 on foreign goods circulating in the country caused outrage among the merchant community and brought trade to a standstill. Nevertheless, some 20 new establishments made their appearance during this period, although most of these were individual proprietors or shopkeepers. At least 9 of the new firms made Matamoros their base of operations as the contraband trade at that port became more and more rewarding.
New houses and partnerships appeared more infrequently in the 1840s. Ten new names appear in 1842; surprisingly, 5 in 1847; and 20 in 1848. These houses may have been the result of a fresh British impetus to trade, with the repeal of the Corn Laws and a surplus of capital once again available for outside investment. Internal conditions were certainly not propitious: uprisings in 1839 and 1840, Santa Anna’s return to power in 1843, the multiplication of pronunciamientos across the country between 1843 and 1845, and the Mexican-American War of 1846-48. Two censuses taken by Mexico City consul Ewen Mackintosh show 32 British houses operating in Mexico in 1842 and 39 in 1849.15
Approaching the Markets
In spite of prevailing conditions, the Mexican market, or markets, continued to offer sufficiently attractive prospects. To make the most of the existing potential, however, merchants learned to overcome or bypass countless obstacles. One of the more obvious problems at the outset was distribution, given the immensity of the country and the lack of reliable communications. Mexico was segmented into various economically and politically semi-independent regions, so merchants found themselves dealing with a number of small, isolated local markets rather than with a unified national economy. Thus the British houses’ notable concentration in Mexico City initially preoccupied Henry G. Ward, first British minister plenipotentiary in Mexico. Supplying such a vast country from one central point only incurred overland transport expenses and brought unnecessarily high selling prices for European goods. It also meant that a large share of British products was passing through the hands of the North Americans, who had, according to Ward, already established houses in the north, and who were “in almost exclusive possession of the trade of the country.”16 Ward’s fears were dispelled: by the end of the 1820s, commercial houses, branches, or agents were in Tampico, San Luis Potosí, Monterrey, Zacatecas, Guanajuato, Guadalajara, Aguascalientes (all the mining districts were covered), Monterey (Upper California), Oaxaca, San Blas, and Mazatlán; and a few years later in Matamoros and Laguna de Términos, in addition to Mexico City and Veracruz.17 With respect to the North Americans, his fears were, for the time being, largely ungrounded. The United States’ interest in external commerce began to fall off in the 1830s as northern industrialists stressed the internal market and pressed for protectionist tariffs. The controversy over Texas in particular led to a “precipitous decline” in trade with Mexico, which would not revive for several decades.18
The isolation of these vast regions, the enormous distances to be covered, the hazardous roads (due as much to bad conditions as to the dangers of assault), tariff regulations, and particularly the alcabalas charged for bringing merchandise from one state to another all contributed to raising the cost and risk of conveying goods. In addition to at least one branch house, commercial firms developed a complex network of correspondents and agents across the country. An example is Watson, MacViccar and Co., with five partners, one residing in Zacatecas and one in Liverpool, and branch houses in Tampico and Aguascalientes. Houses established in Mexico City had branches or agents in Veracruz; the converse existed between Tampico and San Luis Potosí and later, Matamoros and Monterrey.19 One business established itself away from the principal trade axis and, facing little competition, thrived: the House of Barron and Forbes on the west coast (first established in San Blas and soon moved to Tepic) dominated the Pacific trade and became one of the wealthiest and longest-lived of the British commercial houses, surviving from 1824 to 1893. In 1831 it was responsible for 91 percent of imports, both legal and illegal. Eustace Barron earned himself the title of local cacique, or lord.
Nevertheless, the Mexico City-Veracruz axis would continue to carry the weight of the trade and, in spite of the country’s fragmented economy, the tendency of European merchants to establish themselves in Mexico City would persist throughout the period. Economic and political activity focused on the capital; the country’s population was concentrated in and around Mexico City. The only other city to rival the capital slightly was Monterrey. Mackintosh’s 1849 list of British commercial establishments showed the number of houses in the interior and along the coasts to have increased, at the cost of those in the capital. This trend could be attributed to the stricter enforcement of trade duties and regulations along the Mexico City-Veracruz axis, the retracing of the northern border following the war with the United States, the contraband facilities at Matamoros, and (in 1855) the lowering of import tariffs by 40 percent in the northeastern region.20
Business Structure and Organization
The very structure of the commercial house was in itself an asset. It was well suited to the traditional import-export business in places where trade was meager, capital requirements limited, and the environment hostile. Based on the partnership, it provided sufficient flexibility to be inherently adaptable. Partnerships, considered by one historian to be a “product of risk avoidance,” were comparatively easy to “create, supplement, and terminate according to needs and changing circumstances; ownership and management were unified to ensure interest in building up a steady business. And flexibility could be considered a basic ingredient to a successful business, especially where overseas operations were involved.21
The basis of commercial transactions was the commission business, which might also be considered an outgrowth of risk avoidance. This did not preclude independent operations, “general business,” as they were termed. Importing or exporting on a house’s own account could be far more lucrative, but because it presented greater risks and required large amounts of capital, it was not the preferred form of business. Most British houses in Mexico were consignment-commission establishments acting as agencies or intermediaries for a firm or group of firms in England. Working on commission reduced cash outlays on purchases and transferred many of the hazards of slow turnover and capital investments tied up over long periods to the manufacturer or consigner. One-time business ventures on joint account were another resort, especially if the prospects were particularly promising, but the Mexico-based house lacked the necessary capital to undertake the business single-handed.
British merchants, on the whole, were concerned only with the initial bulk sale of their merchandise, either to intermediaries or directly to retailers. Whether this was another deliberate response to risk avoidance or a natural form of organization that arose “spontaneously,” the British preference for restricting commercial activities to the wholesale business had several explanations. In the words of Stanley and Barbara Stein, “Urban and retail trade remained in Spanish hands because of linguistic advantage, superior knowledge of domestic patterns of distribution, and greater readiness to accept the rigors of life in the interior.”22 This is one side of the story. The other is that the British houses arriving on the Mexican scene represented large European houses or banks, with ample experience in overseas trade and the necessary access to credit and contacts to enable them easily to dominate Mexico’s external and wholesale trade. (The local traders lacked those elements after centuries of relative isolation from the rest of the commercial world.) Therefore the British took their place on the top rung of the distribution ladder, selling to the “Iberian middlemen who, in turn, supplied the retailers of the cities, the commission agents or factors of state owners, and the pack peddlers and shopkeepers of the interior,” thereby avoiding some of the pettier details of internal distribution.23
Money, Sales, and Credit
A shortage of circulating medium was a chronic headache for these exporters. It both perpetuated an antiquated credit system and stimulated multiple new means of payment. Scarcity varied by time period and by region. In the 1830s, even the nation’s capital and main commercial center found itself “deficient even of the supply requisite for its own circulation. The reason, according to one contemporary source, was that since mints were established near the mining districts, specie no longer passed through Mexico City (although the capital “continued to be the market in which it was chiefly saleable”).24 The scarcity of specie was probably felt most intensely on the coasts, when guarded convoys of silver periodically failed to arrive and duties had to be paid.
The prevailing conviction was that the export or smuggling out of specie was responsible for the deficiency. A number of elements combined to maintain a permanent shortage, however, including the export of coined specie on various accounts and hoarding by groups of importers at the first sign of political upheaval.25 The situation alarmed the traders and brought pressure on the government to solve the problem. But the government’s various ineffective attempts, such as putting copper coins into circulation (1823, 1829, 1835) or prohibiting the export of gold and silver bullion, did more harm than good and contributed to the general atmosphere of mistrust and wariness.26
The deficiency in specie brought into use various forms of payment. On the international level, accounts were settled by payment in goods and bills of exchange. Although the use and importance of the bill of exchange increased with the growth of international trade, it was a costlier and more vulnerable option for servicing credit accounts because its value fluctuated widely. In the absence of other exportable products, silver and, for a time, cochineal were the most common means of making payments in Great Britain because they could be sold at a profit. But by the late 1830s cochineal had lost all importance, and even silver was becoming less profitable. Internal transport costs and export taxes increased, only minted silver could be exported, and the competition of Her Majesty’s Commissary—buying up silver for the British colonies with libranzas (promissory notes) payable in London—all drove the cost of silver up.27 With few other means of remittance, a combination of specie and bills continued for awhile as the normal means of feeding overseas credit.
Internally, the means were multifarious. Bills of exchange (the internal use of which was introduced by the house of Baring Brothers) and promissory notes were the most common. These could be endorsed several times. They circulated on the market at a discount or premium according to the house’s credit and the payment terms, which varied at the discretion of the parties concerned. The value of a note greatly increased when it was drawn on a house with an overseas account and contacts, because it offered greater security and lower interest rates. In the 1870s, firms working with European capital charged 4 percent interest, while money in Mexico carried anywhere from 10 to 24 percent.28 The “direction of spatial change” also influenced the value of a note: as it moved toward the coast it was sold at a discount.29 Political and economic factors also encouraged fluctuations in both notes and specie; for example, when communications with the coast were suspended and the transmission of money delayed. Political instability and default on the public debt undermined confidence in bills and compelled merchants to hoard specie.
In addition, all manner of paper—public debt bonds, tobacco bonds, customs house certificates—was utilized in internal transactions, although its acceptance was purely a matter of speculation. Landed property was also considered a medium of exchange, and as such changed hands frequently.30 In a credit-based economy, estate ownership was vital as the only acceptable security for a loan. And by the 1840s, mining stock was also acting as security in debt contracts.
Whatever the means of payment, wholesalers extended credit as a matter of course, and cash sales were a rarity. Terms were generally two to three months for petty sales. For larger sales, payment was stipulated partly in cash (20 to 30 percent) and the remainder in monthly installments of four to six months, although operations of greater value generally required six to eight months’ credit.31 One-term contracts between retailers and small, itinerant regional traders were common, particularly in the north. But retailers more frequently established long-term accounts with major wholesalers and received provisions on a regular basis. Because of the limited size of their business, retailers could not have sustained their small provincial shops without credit allowances. As Penny and Co. wrote in 1841, “The major part of retailers are sustained by foreign capital. The extended credit taken by or conceded to the shopkeepers alone enables them to carry on business.”32
Such credit arrangements had their disadvantages. One merchant complained that in spite of generous terms, installments were seldom paid when due. Tayleur, Jamieson and Company noted their powerlessness to recover debts: “The individuals to whom we sell can at any time rob the whole with impunity and no justice can be obtained from the laws. A debtor in Durango acknowledges having more money than he owes, but as he says, all the judges of the place are in his pay and therefore he can defy our making him pay the $35,000 he owes. Of late, several of these instances have taken place.”33 Unpaid bills of exchange or promissory notes—letras or libranzas—were presented to the debtor in the presence of a public notary almost as a matter of course. Once the ritual protests had been registered, the creditor had the right to take legal action.34 But the judicial system was inefficient, and when possible, foreign merchants preferred to avoid it and the costs involved.
Although default always threatened during this period, nonpayment occasionally flared to epidemic proportions. One such moment occurred in 1827 with the expulsion of Spaniards. The number of Spaniards actually leaving the country and the amount of capital they took with them has been discussed elsewhere.35 But whatever the statistics, the threat of expulsion alone was enough to create a climate of uncertainty and distrust, in which letters of credit were dishonored and commerce severely impaired.
Credit arrangements were tightened following the war with the United States, but the system of long-term credit continued for many years to be the “universal practice.” After most British commercial houses had withdrawn from the country, a U.S. merchant referred to the system as one of the major impediments to the establishment of an extensive trade between Mexico and the United States: “The interior merchants who come to this city always buy on credit, which is usually fixed at 8 months, with no interest added, and often runs to 10 or 12 months. . . . To the U.S. merchant, who must conform to the shorter credits and higher rates of interest prevailing in the United States, it will be found a serious objection.”36 The ability to extend long-term credit was one of the factors that allowed the British to dominate foreign trade, in Mexico and elsewhere, for much of the nineteenth century. Other foreign merchants despaired of ever being able to match such “generous” terms.
At the other end, British merchants in Mexico had to answer to the incessant and impractical demands of their correspondents in the United Kingdom for rapid turnover and timely payments. The England-based firms did not comprehend the need for such long credit terms.37 When appealing to Baring Brothers for a credit unrestricted by time limits, the house of Manning and Marshall stressed the amount of time needed to complete a sales cycle. Because its vessel was delayed at Liverpool by heavy winds (another hazard of the times), the goods would not reach its warehouses as planned. It had agreed to reimburse the credit within six months, but now did not expect to have funds from consignments any earlier than seven to nine months, even under the most favorable of circumstances. In all likelihood, a whole year would elapse before any sales results would come in.38 Not meeting overseas obligations on time undermined a firm’s European credibility and weakened its position, particularly in international exchange operations.
Meeting commitments punctually in Great Britain, however, was also complicated by the inevitable delays in transmitting specie to the coast. Government escorts, or conductas, were required by law to set out at regular intervals, but schedules were not always kept. Delays raised the value of money in Veracruz and the other ports and occasioned distrust and alarm in England.39 Political disturbances were the usual interruption; not only was the escort suspended, but roads and ports fell into the possession of rebel forces, thereby threatening the convoys. Yet in spite of the problems and inconveniences of the conducta system, merchants recognized the necessity of such an escort and objected when, in 1855, Santa Anna decreed that individuals were free to send their money to the ports however and whenever they wished. Because of its bulk and value, the only safe way of sending specie to the coast was with the strongly guarded conductas.
The Importance of Timing
The timely arrival of merchandise on any market was basic to realizing a worthwhile profit. And for the merchant stationed abroad, timing was even more critical, given market size and limitations. Overseas trade in itself, with the distances involved, presented obstacles. Slow communications led to misunderstandings between suppliers and agents regarding market conditions. Errors in the type and quantity of goods were not infrequent, and demands regarding remittances could be unrealistic. Mexican trade conditions and regulations conspired to make the merchant’s task even more difficult.
Mexico’s commerce was seasonal, influenced by the climate. The rainy season lasted roughly from April to September. During these months nortes (north winds and storms) lashing the Gulf coast made anchoring dangerous, especially as most harbors were shallow and unprotected. The heat and humidity of the summer months also made the Gulf coast, particularly around Veracruz, an unhealthy place to stay for any length of time. The coastal lowlands were avoided at all costs by foreigners, who seemed particularly susceptible to the vómito, or yellow fever. Rains made the roads nearly impassible and slowed down internal communications considerably. The preferred time of arrival for vessels and their merchandise was therefore the dry winter months of October through March.
For the same reasons, the most important annual fairs or markets, at which “immense quantities of foreign manufactures were disposed of,” were held during the dry season.40 The first of these traditional fairs took place at the end of September; the last during the first week of February. The largest was that of San Juan de los Lagos, held in December, lasting eight days, and drawing merchants from all over the republic. One merchant wrote of the occasion, “Nearly all the British merchants of Mexico have left town for the great annual fair of San Juan de los Lagos, Jalisco, which is to take place in a few days. This is the greatest fair of the year, and buyers from the most distant parts of the Republic attend to supply themselves with stocks of British cottons and French articles of taste. About £200,000 of British goods are annually sold. . . . The dealers in the interior are, generally speaking, out of stock.”41
Timing was also crucial to prices, especially where small markets absorbed minute quantities of foreign goods with difficulty. Consumer limitations meant that an early arrival on the market was highly desirable, as it gave the merchant a certain leeway in setting prices. Late arrivals risked running up against a well-stocked market and depressed prices. With no bonded warehouse system or general storage facilities, however, merchants could not always withhold goods until more favorable conditions came about.42 They were frequently forced to release their wares prematurely and at a sacrifice to pay off duties and meet overseas commitments.
Timing and prices became even more problematic with the frequent alterations to the commercial code. Rumors of tariff changes alone could raise or lower prices and thereby affect demand. Given a modification favorable to merchant interests, correspondents in Great Britain were instructed to order goods and detain cargoes until after the enactment of the new law. If higher duties or prohibitions were imminent, imports of the affected article were speeded up but, when possible, release on the market held off until a scarcity had been created. If the goods arrived after the law took effect, a merchant faced almost certain loss. In the case of a prohibition, the merchandise was subject to confiscation. Merchants in Mexico could avoid such setbacks if they received adequate advance notice of modifications, which they seldom did.
The Tariff and Business Ethics
British merchants found cause to grumble at every daily step of the import-export process, but the Mexican tariff inspired the largest volume of commercial correspondence to the Foreign Office. British merchants viewed the tariff system as irrationally protective and aimed at accomplishing little more than to raise serious obstacles to the free exercise of commerce and the penetration of foreign merchandise. Tariff regulations, besides being ambiguous and unreasonably and arbitrarily applied, went against the grain and norm of “international trade practices.” Eight general tariffs were published between 1821 and 1867. And although historians now distinguish three different periods, based on the degree of protectionism, the British saw little to distinguish one from the other.43
Their major objections could be summarized as follows: import duties were far too high and frequently exceeded the value of goods, especially where textiles were concerned, by as much as 100 or even 150 percent.44 Excessive taxation on foreign imports was in itself considered offensive and ludicrous in a country with no industry to protect (the textile industry was, in the opinion of the British, best left undeveloped) and with a government so in need of revenue. Furthermore, rates bore little relationship to reality, because valuations were outdated and unsystematic. Nomenclatures were long, detailed, and consequently rigid. The introduction of a hitherto unspecified article caused confusion. Valuations of such articles were left up to the “discretionary powers” of the customs vista, or inspector, which opened up opportunities for fraud, bribery, and evasion of payment. The process of obtaining a valuation was slow and tortuous; customs officials “strained every point to have the question decided against the importer.”45 Appeal of a decision (including unfair valuations, document errors, accusations of contraband, confiscation of goods) was costly, time-consuming, and next to useless.46
Eustace Barron, vice consul at the port of San Blas in 1825, explained the severity of the tariff as reflecting an attitude inherited from the colonial period: “Those in office have been taught to look upon every stranger entering this country with jealousy and even horror as a smuggler and a heretic. . . . The authorities look upon every vessel entering the port as an interloper and put all kinds of vexatious difficulties and restrictions on their free intercourse with the shore.”47 As to the disposition of those applying the law, it is just as likely that miserable salaries compelled customs employees to enforce duties and regulations in an irrational and unduly harsh manner so as to invite a bribe for looking the other way.48
The bitterest opposition to the tariff centered on the inconsistency of tariff rates and their application. Tariff legislation changed with bewildering frequency as successive governments and their even more transient finance ministers strove frantically to increase revenue, fight the evils of the contraband system, and placate whichever private interest looked most immediately threatening (or promising).49
Irregularities in the application of the tariff were also a function of distance. The amount of duties paid varied from one port to the next, raising indignant cries of unfair competition from merchants who did not directly or immediately benefit from lower rates. Numerous factors contributed to a highly uneven situation. The isolation of most ports from the interior placed them out of the reach of successive politically and economically weak national governments. Contraband combined with the willingness of poorly paid customs officials to abet fraudulent practices. Those ports open to overseas trade, which took in tariff revenue, were strategically important to the national economy; with external trade the country’s main economic activity, customs revenue was its major source of income.50
Taxation of foreign trade was nominally the exclusive prerogative of the central government, but local authorities—political or military, progovernment or rebellious—frequently were just as desperate for funds. (Military leaders, for example, had to feed and equip their troops.) They seized the customs houses, appropriated whatever proceeds were there, and offered tariff reductions to entice more commerce to that port.51
However little the official tariff was heeded, it could still be said to have had direct influence, though in a negative or inverse sense. Trade organization and routine were built around evading or breaking the law. The merchants’ ready response to the tariff system’s inherent barriers was to commit fraud. High duties and prohibitions were an obvious and unequivocal incentive, but cumbersome regulations and their rigid application were enough to make would-be smugglers consider the risk worthwhile. Whether it was simple bribery or outright contraband, most merchants felt that any such activity was completely justified, and they laid the blame on the Mexican government for imposing such an unreasonable tariff. Regarding the smuggling of specie on board Her Majesty’s ships, Consul Barron openly stated his approval of the whole system of illegal shipments insofar as it protected British interests.
Merchants take measures such as they think best for putting it on board. Now the question is, Ought the Commander of a Man of War, when a boat comes alongside with treasure, to refuse to receive it without Customs House documents? Is it to be required of the British Commander that he will become the assistant of the Mexican Customs House? Is it consistent with the duty of a British officer to enter into fiscal questions with the British merchants or is it just that the property of the British subjects should be jeopardized and sent from under the guns of the Men of War into the clutches of a rapacious Customs House officer?52
To Barron, the term smuggling did not apply to the merchants “in the ordinary meaning of the word.” And the merchants felt so completely in the right that they carried on their smuggling blatantly. One Times correspondent wrote, “their high-handed proceeding is but a type of the system which the foreign houses on the Pacific and especially the British have for years been carrying on.”53 Even Mexican officials, while deploring the situation, did not all blame the merchants, and admitted that the culprit in such large-scale smuggling was the tariff system. In his report of 1835, the customs administrator at Mazatlán opined that the tariff was an inducement to fraud, as exorbitant duties left the merchants with little choice but to act illegally or face ruin.54
Contraband ranged from late-night deposits on isolated beaches and clandestine shipments along miles of unprotected frontier to less dramatic, more refined methods. These included modifying merchandise, chiefly textiles, to change its tax category (which required the collaboration of the England-based manufacturer), or establishing textile factories near the coast where “made in Mexico” was stamped on foreign clothes. Barron and Forbes were reputed to have one such factory, La Jauja, in Tepic. They were said to use the La Jauja textile mill to cover up such practices.55
Contraband was further abetted by three tariff regulations in particular. One required that a ship’s entire cargo be unloaded at a single point, whether or not all the goods were intended for that market. A subsequent related tariff levied duties on all goods, confiscated prohibited articles, and permitted no refund on unmarketable items to be reexported. Another statute prohibited foreign vessels from coastal trading.
Although the British initially feared the competitive threat from the North American carrying trade, by the 1830s they had fully realized the benefits it provided. The U.S. role as transporter and reexporter of European merchandise provided a very accommodating answer not only to the regulatory obstacles but also to the problems of small and easily saturated markets, the scarcity of exports, and the inadequate warehousing and port facilities.56 It was easier and cheaper for the British to deposit their wares at the port of New Orleans or New York and reexport them in chartered bottoms to the Mexican ports along the Gulf coast.57 Both U.S. ports provided depots for storing merchandise until the Mexican markets looked favorable for foreign goods. Likewise, Mexican exports were shipped north and stored until a sufficient volume accumulated to load one of the larger European vessels.
The type of vessel used in the North American merchant marine also signified certain advantages. It was generally smaller than the overseas ships, and thereby better suited to the shallow waters of the Mexican ports and rivers. Because of closer proximity, more frequent trips were viable. All these features represented, in addition, virtues that were particularly useful in smuggling.
Given the insecurity of the market, contraband was a means of survival; but the risks were high, and outright smuggling was not always feasible or realistic for all merchants. Monetary seduction took several forms and could be effected at several levels. For bribery, a close working relationship with customs officials, built up over the years, was useful. Any break in the relation—for example, on several occasions the government attempted to rid ports of corrupt administrators—was, at the very least, extremely annoying to the merchants. The current popularity of a port, particularly on the Pacific coast, seemed to depend entirely on customs employees willingness to cooperate with importers by waiving duties or greatly reducing rates.58 British consul Barron fully exploited the “survival instinct” of poorly paid customs employees by regularly paying their salaries. This put them under a certain obligation to him and had the additional advantage of placing the government in his debt. He and Manuel Escandón, one of Mexico’s most prominent and unscrupulous financieros, were reputed to have the entire Pacific coast customs administration in their pay.59
Another unorthodox practice entailed direct negotiations with upper government echelons, either the minister of finance or the president himself, for substantial rebates on customs duties. This strategy took into account the government’s permanent state of insolvency by promising to pay duties well in advance.60 Because installments on duties were not due until sometime after foreign goods had entered the country, and given the absolute urgency for immediate cash, discounts of 30, 40, even 45 percent were granted for advance payment on cargoes that had not yet arrived. Repayment was guaranteed by orders on the customs houses, issued and signed by the National Treasury, which the merchants were then to present as full or partial payment (negotiable) of future duties. The advantages for the merchants did not end with the actual rebates. The merchants were allowed to include in their payments a certain portion (again negotiable) of public bonds, which they purchased on the market at a value as low as 5 to 10 percent, and which the government was forced to accept at par.61
Such mechanisms helped boost trade profits. By avoiding customs duties, ship owners and merchants not only eliminated the risk and vexation of incurring unduly harsh penalties for insignificant errors in documents; they also cut down the considerable delays in clearing customs. This speeded up the commercial cycle, increasing the likelihood of somewhat quicker turnovers, and reduced the worry of not having enough specie in time to pay duties. Merchants found such evasive moves necessary if they wished to ensure returns on their cargoes and generally protect their trade. By eluding partial payment of duties, they reduced outlays, and thereby the real costs of importation.
At the same time, the moment one house received a substantial discount on duties it forced other firms to seek similar advantages. As early as 1827, Henry G. Ward was already commenting that those merchants who did pay the full amount on a cargo would face stiff if not ruinous competition, to the point of “being obliged to sell their goods at a loss of 50 to 60 percent in order to realize something.”62 Thirty years later, Vice Consul Thomson at Mazatlán wrote that it was not uncommon “to find in the same market, goods of equal European cost which, sold at the same cost here, give to one mercantile house a gain and to another a loss, arising solely from unequal taxation.”63 Merchants attempted to counteract the uncertain conditions of the Mexican market and reduce the possibility of a loss by paring down costs. And through these arrangements, merchants gained a larger margin of maneuverability in terms of time and prices. Even the most honest merchants were occasionally driven to some form of illegality in order to resist the fierce competition of those who defrauded the government without compunction.
Merchants and Government Finances
The advances on import duties could be considered a disguised loan. Outright loans to the government, or negocios, as they became known, were likewise highly instrumental in successful trade. From the merchants’ perspective, lending to the state contained an element of inevitability. Examination of one firm’s business records led David W. Walker to conclude that even “commerce in such mundane articles as striped cloth from Germany was necessarily related to flamboyant and risky dealings with the Mexican government.”64 The benefits, however, were not limited to trade alone, but extended to profit making in general. Customs revenues guaranteed government obligations, which made debt speculation a fairly secure investment during the 1830s. But as both its own credibility and disposable customs proceeds declined, the government was forced to tie its borrowing to additional economic concessions. These ranged from special permits to import raw cotton or export silver bullion to the tobacco monopoly, the Tehuantepec grant to build a channel across the Isthmus, tax exemptions, and even administration of state finances. Between 1821 and 1867, at least 9 of the 11 government-controlled mints were farmed out to merchant houses and mining companies.65
The merchants’ strength lay in their access to liquid capital, along with the government’s chronic state of poverty and the absence of banks and foreign credit. The merchants used these elements to bind short-term credits to highly usurious terms and to such privileges as those already mentioned. Such leverage brought the financiers-turned-speculators, or agiotistas, considerable political influence. To nurture their wealth and power, foreign as well as native speculators proffered financial support at their convenience, when circumstances looked favorable, and when the beneficiary served their interests. Inevitably, extending or denying credit thereby became a form of political manipulation. A government needed money particularly to maintain its army, and withholding support reduced a government’s chances of survival.66Agiotistas were accused of fostering or deliberately prolonging pronunciamientos, knowing that they could more easily impose gratifying terms. According to Guillermo Prieto, writer, deputy, and several times minister of finance in the 1850s, speculators manipulated existing antagonisms and even “boasted of having provided both sides of the battlefield with resources in order to prolong the situation and obtain benefits.”67 Such tactics enabled speculators to protect their interests from changes in government administrators and ensured some return on their investments, whatever the immediate political outcome.
The government, however, was not easy prey to such ruthless manipulators. Its very insolvency constituted a defense mechanism, which it used to buy time and more money. Constant bargaining between government officials and merchants became very much a part of the financial game. Between the 1820s and the 1860s, the government’s suspension of debt payments with the plea of inability to pay was a frequent occurrence, designed to pressure the state’s creditors. Merchants, so they themselves wrote, submitted to these maneuvers because they feared exposing themselves to a “variety of vexatious disappointments and oppressions if they didn’t.” Large houses, engaged “in transactions of a magnitude likely to yield no little profit,” acquiesced in order to protect their claims.68 On the one hand, the additional impositions actually represented no more than a slight reduction in the overall profit expected from the transaction.69 On the other hand, the government was ultimately the weaker party, and creditors were confident that it could not afford to antagonize them for too long, because it had no other means of obtaining money.
Although the exhausted state of the National Treasury was the usual pretext, a change of president or finance minister frequently signaled a halt to payments or to the acceptance of customs house orders. The new administrator would profess disagreement with a predecessor’s activities and the need to reorganize state finances. In reality, the government was taking the opportunity to bargain for better terms and obtain more cash.70 The internal debt was consolidated on several occasions, with special funds from the customs revenue assigned to pay creditors. But the government was unable to honor even these more formal arrangements. Renegotiation of terms became common practice. Resettlement usually required new cash advances, which became so conventional they inevitably entered the speculator’s calculations. Manning and Marshall referred more than once to the difficulties encountered in placing their orders with the customs houses. Cash had to be held in reserve specifically for the purpose of facilitating the acceptance of customs certificates.71
Government default seldom took creditors by surprise. They took these delays and extra bids as routine and gave them ample consideration when weighing risks. But if political and economic conditions were not ripe, then speculators refused to comply, even under the threat of force. This was clearly evinced by the government’s frequent failure to raise intended sums, even after resorting to threats of embargo and imprisonment.
Speculation with the public debt was, indeed, not a uniformly lucrative activity.72 The late 1820s and the 1830s were a particularly prosperous period: little risk was involved, and fortunes were easily made. But several legal measures of the 1830s eliminated small moneylenders and allowed a powerful group of native and foreign speculators to emerge.73 In the 1840s, the government’s inability to meet its obligations became more and more apparent, although influential houses still managed sizable negocios. But by the end of the decade and throughout the 1850s, political anarchy was reaching a peak while the government’s insolvency remained intractable. Mexican speculators and politicians worried increasingly about the large cut of customs revenue assigned to foreign debtors. Divisions between foreign and native agiotistas were evident. While congressional antagonism toward foreign speculators grew, British creditors turned increasingly to their consuls and ministers to intercede with the Mexican government. They complained of outrageous shows of favoritism and constant procrastination before settling any claim, however justified. Indemnity payments from the U.S. government and money from the Mesilla Valley purchase afforded short-term relief to both the Mexican government and its creditors. But despite the settlement of some government obligations, a wave of merchant bankruptcies was beginning.74 It overtook some of the largest houses, many of them foreign: Montgomery and Nicod (in the late 1840s), Manning and Mackintosh (1851), Martínez del Río Hermanos and the house of Jecker (early 1860s). A leading cause of all these failures was the overextension of investments in very high risk government loans, although other factors inevitably contributed.
One of those factors was the alienation of key figures in the Mexican economy. The estrangement between Ewen Mackintosh and Manuel Escandón sometime before the Manning and Mackintosh bankruptcy is an extremely suggestive example.75 By contrast, the exact date Escandón and Eustace Barron began working together is unknown, but the relationship was firmly secured by intermarriage, and it survived the death of both men (Barron in 1859, Escandón in 1862); their respective firms continued to cooperate in a number of undertakings. Such well-established connections were among a foreign house’s major assets.76 Mexican politicians were an indispensable mediating element: they arranged contacts for obtaining major government contracts and were fundamental in procuring satisfactory debt agreements. They provided firsthand information from political inner circles as well as a deeper understanding of the country’s economic and political functioning, factors that were vital to gauging market conditions or the ripeness of the moment for a government loan.
Such ties extended into the social and economic spheres, and the most prominent men in the foreign merchant community married into Mexican families. Mackintosh married the daughter of a wealthy Veracruz land-owner; Barron’s daughter married Escandón’s brother. Patrick Milmo, principal of Milmo and Company, based in Monterrey, became son-in-law to General Santiago Vidaurri, caudillo of the northeast. Even in a period when foreign and native speculators were beginning to disagree over the country’s resources, the British still relied on Mexicans to pull strings. Francis Falconnet, merchant and agent of the Bondholders Committee, writing to Baring Brothers in 1854, commented on the difficulty of venturing into any substantial undertaking without first securing the cooperation of financieros like Escandón, Francisco Iturbé, Juan Bautista Jecker, and Isidoro de la Torre, as they were needed “to do away with the daily and petty difficulties which present themselves in any business with this Government.”77
The tactics that fostered the British houses’ uninterrupted and successful operation in Mexico were not limited to the reorganization of trade ethics and practices. Most firms inevitably found themselves extending or multiplying their business activities. They supplied ancillary services normally performed by specialized companies in Europe but absent in Mexico, such as acting as agents for European shipping or insurance companies or offering warehouse facilities. They all offered banking services to a lesser or greater degree. They provided capital on credit to finance trade and manufacturing ventures, took in deposits, and performed exchange operations.
In addition, most British houses made investments in diverse, unrelated businesses. The house of Barron and Forbes, with its sustained, perhaps atypical success, demonstrates the extremes to which diversification can go. With its business basis in the Pacific coast trade, the firm participated in the sale of the Philippine Missions, a national Mexican property, and bought up pearls along the California coast for a lucrative European export sideline. By the 1840s, exports may have become a marginal activity as the burgeoning firm provided banking services, notably to the government—although, possibly due to astute managers, its name appears on no large government contracts. It paid customs employees’ wages, which placed the government in its debt. Credit services to the private sector led to possession of large real estate properties following a client’s bankruptcy. By the early 1850s the powerful firm’s banking activities extended throughout the country. It was named agent for both the British and the internal debt and, in 1858, the British and Spanish conventions.
The firm’s incursion into industry began in 1838 with the first and largest of its textile factories, La Jauja (which was still operating in the 1890s). Sometime in the 1840s, La Restauradora Company was formed to exploit uncultivated lands. In 1845 Barron and Forbes acquired the rights to the New Almaden quicksilver mine in California and established the Bolton and Barron Company in San Francisco to administer mining operations. (It lost the mine after the Mexican-American War.) About the same time, Forbes, Oceguera and Company was formed to manage another mining operation, Sociedad Exploradora de Metales de Sonora. In the early 1850s, Barron and Forbes joined Blume and Augspurg (German) and J. Aguirre (Spanish) to run a sugar plantation, and by 1857 Barron’s house was running a cotton mill in Tepic and three in Guadalajara. Also that year, Barron and Escandón were the two major partners in the Mexico-Veracruz Railway Company. Barron later bought shares in the Real del Monte Mining Company, in which Escandón was a major shareholder. Other more or less constant activities throughout the firm’s lifetime were the buying and selling of ships and urban and rural real estate.78
Whether as a result of foreclosed mortgages, perceived opportunities, or idle capital, most houses thought it prudent to keep a number of small investments to cushion a potential failure in any one venture, trade or otherwise.79 Industrial or manufacturing investment outside the textile industry, however, was not overly popular among the British (or among native entrepreneurs). The insecurity of Mexico’s prevailing political and economic circumstances did little to induce compromising or permanent investment in a venture that would take some years to generate profits.80 On the other hand, speculation with government finances, with its far more alluring prospect of substantially higher returns in a short time, did much to divert capital from potentially more constructive areas. There were exceptions: a beer factory possibly owned by Mackintosh, one or two paper and crystal factories run by nonmerchant British. Within the textile industry, the British owned and operated some seven mills in the 1840s. All were erected on credit provided by British firms, although only two, possibly three, were actually owned by merchants.81
Mining continued to be an alluring prospect, in spite of the failures of the 1820s and the unpredictability of mining ventures. By the mid-1830s, few British firms resident in Mexico did not own stock in at least one mining company.82 During the first three postindependence decades, mining was practically a British and German domain, although Mexican capital was not lacking. By the end of the 1840s, Mexican speculators were taking an active interest. This led to a new tendency, for the next two decades, in the formation of companies: new concerns were based on alliances between Mexican and resident foreign capitalists, with the Mexican associates increasingly predominant. These arrangements attracted the Mexican investors because private capital was available from previously successful public debt speculations, and industry, with its numerous failures, particularly in the textile sector, was not an attractive objective. Meanwhile, British merchant houses began closing up business in the second half of the 1850s and probably sold off their mining interests to Mexican investors.
The wealthiest of British merchant houses, however, were those that became heavily—but judiciously—involved in government negocios. Even a moderate return here was generally larger than what trading or industrial activities could offer.83 Managing government loans and its corollary, buying up public debt issues, were secondary, and on occasion primary, activities for numerous houses, as dictated by the political and economic climate. Successful speculation was nevertheless confined to the wealthy and powerful, native as well as foreign; and long-term success fell to those firms that ultimately withdrew from such engagements and invested in other areas.
Moreover, very few British commercial houses survived into the second half of the nineteenth century. Those that did underwent what Bobert Greenhill terms a “familiar development,” from commerce into banking and from banking into agriculture and industry.84 Patrick Milmo, who arrived in the 1840s, owned large tracts of land in three Mexican states and was investing in livestock and agriculture in the 1860s, while never letting up on his commercial activities or on banking services to the private sector. He would begin investing in industry in the late 1880s.85 Eustace Barron, whose house carried on until 1893, was ultimately known as a banker, not an importer.
By the late 1850s, British merchant houses were pulling out of Mexico; by 1863, reportedly only three import houses were left in Mexico City and two branch houses in Veracruz.86 The reasons for their withdrawal ranged widely. Mexico’s internal situation, with a civil war raging, became intolerable: many merchants could not withstand the double pressure of stagnant trade and multiple tax demands from two governments. Revolutions in transportation, communication, and technology rendered the commercial house obsolete: with telegraph and steamship services the pace of commercial transactions accelerated, and merchandise could be ordered, dispatched, received, and paid for in a fraction of the time formerly required. This made it easier for European manufacturers to begin dealing directly, through their own agents, with overseas clients to purchase raw materials or sell finished goods. On the whole, this meant a safer trade and eliminated the intermediary role of the merchant house and the consignment system.87
The Final Balance
The record of the British commercial houses over roughly four decades of operations shows little significant contribution to Mexico’s economic development. British merchants brought Mexico into the world market and, for a brief period, into Britain’s economic empire (territorial claims were formally rejected). As agents of an industrially and financially advanced country, the merchants represented a potential force for change. But they actually did little more than reinforce existing tendencies and feed the political and financial chaos of the period.
When they first arrived, British merchants’ professed interest was to secure markets and expand trade. But these were only immediate goals. The merchants’ activities over time demonstrated either a lack of foresight or simply the relative absence of competition or pressing need. The British made few attempts to improve Mexico’s infrastructure, which would have brought them a long way toward increasing access to different regions, unifying markets, and stimulating agriculture and the exploitation of raw materials. They made no investment in the production of export goods except for silver, which would have helped pay for imports and improve Mexico’s balance of payments. At the same time, it must be remembered that the British and other European markets did not yet provide much of an outlet for Latin American products.
Extensive contraband activities, particularly with cloth imports, furthered the disintegration of local textile manufacturing. And the smuggling out of large quantities of silver, Mexico’s only paying export product, was a tremendous drain on the country’s meager wealth. Fraud abetted the corruption of customs and other government officials. Both fraud and contraband increased the country’s financial disorder by, on the one hand, depriving the government of a substantial sum in tax revenue and, on the other, increasing its need to borrow under extraordinarily detrimental terms. Full-scale speculation with government finances swelled both the internal and external debts and laid the country open to foreign pressure and invasion.
What little industrial investment the British did engage in showed no attempt at innovation and only confirmed the native entrepreneurs’ preference for the textile industry. Mining could be considered an exception; but capital outlays during this early period were insufficient, and little was achieved other than to lay the foundation for the future productivity of this sector.
Mexico’s unsettled state between the 1820s and the 1860s was far from conducive to expanding investment or trade. In defense of the British merchants, it could be said that they only adjusted to available opportunities and acted according to circumstances. The government’s financial and political weakness and the resulting insecurity determined a British preference for short-term investment, which meant that capital was not tied up in any long-term project and that withdrawal from the country could be relatively quick and painless. British interests and capital sought to profit from the country’s financial crisis. The consequences were fatal to stability and growth: Mexico’s political system weakened, national finances deteriorated, the country’s poverty increased, and its productive capacity and market potential remained largely unexploited.
Robert Greenhill, “Merchants and the Latin American Trade: An Introduction,” in Business Imperialism, 1840-1930: An Inquiry Based on British Experience in Latin America, ed. D. C. Manuel Platt (New York: Oxford Univ. Press, 1977), 186.
John D. French refers to the foreign merchants’ tendency to depict themselves as victims, playing up the “Mexican threat” to convince their governments that coercion was the only means of effectively dealing with the Mexicans. French, “Commercial Foot Soldiers of the Empire: Foreign Merchant Politics in Tampico, Mexico, 1861-1866,” The Americas 46:3 (Jan. 1990), 301. The British on several occasions would lament their own consuls’ lack of forcefulness compared to the agents of other foreign countries.
John H. Coatsworth, Obstacles to Economic Growth in Nineteenth-Century Mexico," American Historical Review 83:1 (Feb. 1978), 91.
German and other foreign houses, however, continued to draw supplies from Great Britain, enabling the British to retain a major but diminishing share of the Mexican market for the next two decades. See Alfred Tischendorf, Great Britain and Mexico in the Era of Porfirio Díaz (Durham: Duke Univ. Press, 1961), 87, 128-29; and Inés Herrera Canales, El comercio exterior de México, 1821-1875 (Mexico City: El Colegio de México, 1977), 83-85.
A closer look at contraband would probably show that overall trade volume fluctuated less than official statistics indicate, because contraband goods covered deficiencies and met market demand when legal trade could not.
See Leopoldo Zamora Plowes, “Notas históricas”, in Quince Uñas y Casanova aventureros, ed. Maclovia Zamora Plowes de Salinas (1st ed. 1945; reprint, Mexico City: Editorial Patria, 1984); Jan Meyer, “El cielo y sus primeros favoritos: Barron, Forbes y Cía.,” Nexos 40 (Apr. 1981), 27-37; Rosa María Meyer, “Los ingleses en México (1824-1852),” Historias 16 (Jan.–Mar. 1987), 57-72; Barbara Tenenbaum, “Merchants, Mischief, and Money: The British in Mexico, 1821-1862,” The Americas 35:3 (1979), 317-39.
Diplomatic recognition became formal in December 1824; the Treaty of Amity, Commerce, and Navigation was not fully ratified until 1827. Jaime E. Rodríguez O. discusses the complicated negotiations and the interests involved in the whole process of recognition. Rodríguez, El nacimiento de Hispanoamérica (Mexico City: Fondo de Cultura Económica, 1980) [Spanish version of The Emergence of Spanish America: Vincente Rocafuerte and Spanish Americanism, 1808-1832 (Berkeley: Univ. of California Press, 1975)].
Among the first known houses to arrive were those of Daniel O’Ryan, 1820 (Guadalajara); McCulloch, Hartnell and Co., 1822 (Monterey); and Barron, Forbes and Co. (Tepic). Eustace Barron already had years of experience in the Pacific coast trade. See David W. Walker, Parentesco, negocios, y política. La familia Martínez del Río en México, 1824-1867 (Mexico City: Alianza Editorial, 1991), 49 [Spanish edition of Kinship, Business, and Politics: The Martínez del Río Family in Mexico, 1824-1867 (Austin: Univ. of Texas Press, 1986)]; Hubert H. Bancroft, “Pioneer Register and Index,” in History of California, 1825-1840, 5 vols. (San Francisco: The History Company, 1886; reprint, Wallace Hebberd, 1966), 3:777; Zamora Plowes, Quince Uñas, 545.
For details of the two loans, see Rodríguez, El nacimiento, 125, 145; and Jan Bazant, Historia de la deuda exterior de México, 1823-1846 (Mexico City: El Colegio de México, 1968), 25-37. Bazant examines how the money was used. Bazant and Rodríguez disagree on the amount received. Bazant states that Mexico received $504,000 from the Barclay loan; Rodríguez puts the amount at $11,333,298. One explanation of this difference is that Rodríguez includes money Barclay retained for interest and amortization payments or spent directly in England to purchase arms and ships. The total recognized debt amounted to 32 million pesos (the exchange rate during that period was roughly 5 pesos to the pound sterling).
Leland Jenks, The Migration of British Capital, to 1875 (New York: Alfred A. Knopf, 1927; 2d reprint ed. London: Nelson’s University Paperbacks, 1971), 47. British capital turned inward at this time, finding an ample outlet between 1830 and 1850 in railway construction; this was an important factor in the temporary arrest of market expansion and development. For an explanation of early mining failures see Robert Randall, Real del Monte: una empresa minera británica en México (Mexico City: Fondo de Cultura Económica, 1977) [Spanish edition of Real del Monte: A British Mining Venture in Mexico (Austin: Univ. of Texas Press, 1972)].
Among these: Nolte, Wilson, and Drake; Robert Staples and Co.; and Hartley, Green and Ruperti.
Brigida von Mentz et al., Los pioneros del imperialismo alemán en México (Mexico City: Centro de Investigaciones y Estudios Superiores en Antropología Social, 1982; reprint Casa Chata, 1983), 95.
Thomas Kinder to [?] Brougham, London, Nov. 22, 1834, Brougham Manuscripts, London Univ. Library. Kinder’s comment suggests a rapid turnover of merchant firms, which was, however, the norm for that period. The lack of sufficient data makes it difficult to determine how much more susceptible to turnover the Mexico-based foreign houses were.
Richard Pakenham, Minister Plenipotentiary, to Ortiz Monasterio, Minister of Finance, Mexico City, Oct. 21, 1836, Archivo Histórico de la Secretaria de Relaciones Exteriores, Mexico City, L-E 1364. The British minister was protesting the forced loan the Mexican government was exacting from all foreign houses to raise money to send troops to Texas.
Ewen Mackintosh, Consul at Mexico City, May 1849, London: Public Record Office (hereafter PRO), FO 50/232, pp. 45-46. The original list is not complete; it excludes branch houses and the whole of the Pacific coast region, Eustace Barron’s district, a possible reflection on the not-too-cordial relationship between the two men.
Henry G. Ward, México en 1827 (London: Henry Colburn, 1828; Spanish ed., Mexico City: Fondo de Cultura Económica, 1981), 430-31.
The fragmentation of the country also obeyed historical processes that began well before separation from Spain. For the role played by postindependence commerce in the formation of new economic and political enclaves, see Stanley J. Stein and Barbara H. Stein, The Colonial Heritage of Latin America: Essays on Economic Development and Perspective (New York: Oxford Univ. Press, 1978), 152; Enrique Florescano and Isabel Gil Sánchez, “La época de las reformas borbónicas y el crecimiento económico, 1750-1800,” in Historia General de México, ed. Daniel Cosío Villegas (Mexico City: El Colegio de México, 1981), 543-51; and Alejandra Moreno Toscano and Enrique Florescano, “El sector externo y la organización espacial y regional de México (1521-1910),” Cuadernos de Trabajo del Departamento de Investigaciones Históricas (Mexico City: INAH, 1974), 1:79-81.
Karl Schmitt, Mexico and the United States, 1821-1973: Conflict and Coexistence (New York: John Wiley and Sons, 1974), 43-44. See also Miguel Lerdo de Tejada, El comercio exterior de México desde la Conquista hasta hoy (Mexico City: Imprenta de Rafael y Rafael, 1853), Table 24 (n.p.) [reprinted, Mexico City: Banco Nacional de Comercio Exterior, 1967]; Herrera Canales, El comercio exterior.
As a rule, Veracruz received the larger transatlantic vessels arriving from Europe with large consignments, which agents would then forward to the main commercial houses in Mexico City. Vessels arriving at Tampico and Matamoros were generally smaller, North American ships bringing down smaller cargoes that had been warehoused in New Orleans or New York. Merchants established their headquarters at these two ports, as opposed to Veracruz, and from them supplied surrounding districts.
This measure was dictated by General Santiago Vidaurri, powerful governor and caudillo of Nuevo León, who in addition declared that tariff revenue would remain in the state in order to maintain the northern army. For the new frontier’s effect on Monterrey’s growth and development, see Mario Cerutti, Burguesía y capitalismo en Monterrey, 1850—1910 (Mexico City: Claves Latinoamericanos, 1983). See also Francisco López Cámara, La estructura económica y social de México en la época de la Reforma (Mexico City: Siglo Veintiuno, 1961), 155: Isidro Vizcaya Canales, Los orígenes de la industria en Monterrey: una historia económica y social desde la caida del segundo Imperio hasta elfin de la Revolución (1867-1920) (Mexico City: Librería Tecnológica, 1971), xi-xiii; and Ronnie Tyler, Santiago Vidaurri and the Southern Confederacy (Austin: Texas State Historical Association, 1973), 110.
On partnerships, see P. L. Payne, British Entrepreneurship in the Nineteenth Century: Studies in Economic History (London: MacMillan, 1974), 17; and John Kicza, Colonial Entrepreneurs and Business in Bourbon Mexico City (Albuquerque: Univ. of New Mexico Press, 1983), 152. All partners, whether contributing capital or not, received a share of the profits, which gave them a moral stake in the business. On flexibility, see Vera Blinn Reber, British Mercantile Houses in Buenos Aires, 1830-1880 (Cambridge: Harvard Univ. Press, 1979). 86.
Stein and Stein, Colonial Heritage, 153. See also Emiliano Busto, Estadística de la República Mexicana. Estado que guardan la agricultura, industria, minería y comercio (Mexico City: n.p., 1880), 371.
Stein and Stein, Colonial Heritage, 154. The fact that the Spanish were “almost exclusively the internal traders” was on numerous occasions confirmed by British merchants; for example, Pakenham to [?] Dudley, Dec. 24, 1827, PBO, FO 50/36, p. 215.
Edward Coffin to James Stewart, Vice Consul, Nov. 17, 1835, PRO, War Office 62/19.
José Antonio Bátiz Vázquez, “Aspectos financieros y monetarios, 1821-1880,” in México en el siglo XIX (1821-1910). Historia económica y de la estructura social, ed. Ciro F. S. Cardoso (Mexico City: Nueva Imagen, 1980), 167, 183.
Frederick Shaw, “Poverty and Politics in Mexico City, 1824—1854,” (Ph.D. diss., Univ. of Florida, 1975), 7, 24. See also Pakenham to Viscount Palmerston, British Foreign Secretary, Mar. 4 and Apr. 3, 1837, PRO, FO 50/106, pp. 19, 103; Randall, Real del Monte, 212—13; Gilberto Argüello, “El primer medio siglo de vida independiente (1821-1867),” in México, un pueblo en la historia, ed. Enrique Semo, 2 vols. (Mexico City: Nueva Imagen, 1981-82), 2:97.
Walker, Parentesco, 148-49.
Isidoro de la Torre, “El caso de un empresario azucarero,” in Formación y desarrollo de la burguesía en México, ed. Ciro F. S. Cardoso (Mexico City: Siglo Veintiuno, 1978), 170. The legal rate, 6 percent yearly, was effective only in mortgaged loans. See also Busto, Estadística de la República, 371.
Walker, Parentesco, 134.
See Cardoso, Formación y desarrollo. All the case studies in this book underline the importance of land ownership.
Justus Charles William Ruperti to Charles O’Gorman, Consul General, Mar. 1, 1825, PRO, FO 203/4, p. 258. See also Jules Doazan, La vida económica en México en la época de Juárez (Mexico City: Secretaria de Comunicaciones y Transporte, 1972), 91; and O’Gorman, “On Certain Usages in Sales,” Mar. 1825, PRO, FO 203/3, p. 138, according to whom sales paid for in cash or previous to the agreed terms were allowed corresponding discounts.
Penny and Co. to Pakenham, Aug. 30, 1841, PRO, FO 50/145, p. 108.
Tayleur, Jamieson and Co. to Pakenham, Apr. 14, 1837, PRO, FO 50/117, p. 31.
Based on notarial documents in the Archivo General de Notarías, Mexico City.
Harold Sims, La expulsión de los españoles de México (1821-1828) (Mexico City: Fondo de Cultura Económica, 1974), 104-5; Jenks, Migration of British Capital, 109; Argüello, “Primer medio siglo,” 97.
John Foster, Trade with Mexico: Correspondence between the Manufacturers Association of Northwest Chicago and John W. Foster, Minister plenipotentiary of the U.S. to Mexico, pamphlet (Chicago, 1878), 26, in PRO, FO 50/435, p. 15.
Reber, British Mercantile Houses, 86.
Manning and Marshall to Baring Brothers, Sept. 22, 1827, Baring Archives, London (hereafter BA), HC184.108.40.206b. William Skinner Manning and Robert Marshall arrived in Mexico in 1824 as agents for the house of Barclay. Manning and Marshall became Manning and Mackintosh in 1843.
British merchants to Pakenham, Oct. 15, 1827, PRO, FO 50/36, p. 16.
Brantz Mayer, Mexico: Aztec, Spanish, and Republican (Hartford: S. Drake and Co., 1852), 2:103.
Times (London), Jan. 8, 1846.
For the uncertainties of an unstructured market and wide price fluctuations in short time periods, see Walker, Parentesco, 128.
The three periods are 1821-36, 1837-46, and 1847 to the 1870s. See Robert Potash, El Banco de Avío. El fomento de la industria, 1821-1846 (Mexico City: Fondo de Cultura Económica, 1959), 189 [Spanish ed. of Mexican Government and Industrial Development in the Early Republic: The Banco de Avío (Amherst: Univ. of Massachusetts Press, 1959)]; and Charles Hale, El liberalismo mexicano en la época de Mora (Mexico City: Siglo Veintiuno, 1978), 19 [3d Spanish ed. of Mexican Liberalism in the Age of Mora (New Haven: Yale Univ. Press, 1968)]; and Daniel Cosío Villegas, “La cuestión arancelaria en México,” in Historia de la política aduanal mexicana, 3 vols. (Mexico City: Ediciones Centroamericano de Estudios Económicas, 1962), 3:92. Other authors extend the middle period, which was the most protectionist, to 1856, when a liberal government was installed. See Sergio de la Peña, La formación del capitalismo en México (Mexico City: Siglo Veintiuno, 1977), 126; and Herrera Canales, El comercio exterior, 52.
Foreign merchandise was further burdened with a series of internal taxes that could more than double the total amount of revenue paid. Of these, the most onerous were the internación and consumption taxes and the alcabalas. These last were state taxes, the proceeds of which belonged to the local governments. Attempts to eradicate them (1824, 1846, 1857, 1861, 1866) met with vigorous resistance, and it was not until the 1890s, when the states accepted other viable means of taxation, that these taxes were eliminated. See Moreno Toscano and Florescano, “El sector externo,” 88-89.
Pakenham to Palmerston, Aug. 30, 1841, PRO, FO 50/145, p. 108.
British merchants played down, according to convenience, the fact that numerous cases of “injustice” were brought directly to the government’s attention through the intervention and pressure of British consuls and ministers.
Eustace Barron to George Canning, Jan. 1825, PRO, FO 50/17, p. 363. Cosío Villegas comments that Mexican tariff legislation illustrated extremely nationalistic and xenophobic attitudes. “La cuestión arancelaria,” 34. Stein and Stein emphasize the persistence of colonial structures and attitudes well into the independence period. Colonial Heritage.
Francisco R. Calderón, La vida económica, vol. 2 of Historia moderna de México, ed. Daniel Cosío Villegas (Mexico City: Hermes, 1955), 280. Guillermo Prieto describes an old customs employee who viewed all merchants as thieves and took great joy in decommissioning a cargo on the pretext of a missing comma in the ship’s manifest. Memorias de mis tiempos, 1828 a 1853 (Viuda de Ch. Boueret, 1906; 6th ed., Mexico City: Editorial Patria, 1976), 102.
Due to pressure from the merchant community, the tariff of 1827 included a clause requiring six months’ notice before any modification could be added. The merchants held that three to six months were required to advise European correspondents of alterations. The provision was frequently disregarded, and British representatives intervened on various occasions (1830, 1837, 1839, 1845, 1856, and later) to insist on respect for the provision and to claim damages.
Toscano Moreno and Florescano say that one of the principal economic and political concerns of the period was to maintain control over the ports and customs houses, because the regime’s economic stability depended on it. "El sector externo,” 76.
The state of Jalisco tried on several occasions to force merchants to pay local import taxes on foreign merchandise. Yucatán issued its own tariff in 1841. In 1845, General Mariano Arista, in open rebellion against the central government and in an effort to provide for his troops, offered a 40 to 45 percent reduction on goods that entered through the ports of Tampico and Matamoros. From 1855 to 1864, General Vidaurri imposed his own foreign trade policies, including a 40 percent reduction on import taxes and the opening of ports along the border of the northeastern states of Nuevo León, Coahuila, and Tamaulipas. Even the central government on occasion was forced to compete with regional forces for what was rightly its own. In 1832, President Anastasio Bustamante offered a 15 percent discount on duties paid directly into the National Treasury rather than to the port of Veracruz, which was then in the hands of an insurgent Santa Anna. See Potash, Banco de Avío, 197-201; and Mario Cerutti, Economía de guerra y poder regional en el siglo XIX. Gastos militares, aduanas, y comerciantes en años de Vidaurri (1855-1864) (Nuevo León: Archivo General del Estado de Nuevo León, 1983), 68.
Barron to Lord Aberdeen, Jan. 10, 1846, PRO, FO 50/202, p. 80.
Times (London), Nov. 16, 1859.
A. Palacio Miranda, Customs Administrator at Mazatlán, “Informe del administrador de la aduana marítima de Mazatlán,” in Diario del Gobierno (Mexico City), Dec. 19, 1835. For estimates of the extent of contraband trade, see Foster, Trade with Mexico, 36; Calderón, La vida económica, 99; Lerdo de Tejada, El comercio exterior, 52; John Macgregor, “Commercial Report,” Oxford, Parliamentary Papers 1846, 48:266; and Diego López Rosado, Historia económica de México (Mexico City: Pormaco, 1965), 2:105.
On the modifications, see Pakenham to Palmerston, Oct. 22, 1839, PRO, FO 50/126, p. 248; also Herrera Canales, El comercio exterior, 55. Such practices were a possible reason the government was continually revising import categories. On the coastal factories, see Roberto Sandoval, cited by Margarita Urias Hermosillo in “Manuel Escandón: de las diligencias al ferrocarril, 1833-1862,” in Cardoso, Formación y desarrollo, 44. Ey considering installations, quantities of raw material, and numbers of workers, Sandoval shows that the earnings of the Jauja factory (and another owned by Manuel Escandón) far exceeded output capacity.
Charles Mackenzie, Consul at Jalapa, to Canning, July 24, 1824, PRO, FO 50/7, p. 204; Stewart to Canning, July 25, 1825, PRO, FO 50/17, p. 350. See Schmitt, Mexico and the United States, according to which U.S. interest in external commerce began to fall in the 1830s as northern industrialists focused on the internal market and pressed for protectionist tariffs. In particular, the controversy over Texas led to a “precipitous decline” in its trade with Mexico, which would not be revived for several decades. See also Reber, British Mercantile Houses, 83; and Herrera Canales, El comercio exterior, 100. Both refer to the U.S. role as reexporter in the Argentine and Mexican trades.
O’Gorman to Pakenham, July 21, 1834, PRO, FO 50/89, p. 109. O’Gorman reports that by far “the largest quantity of goods intended for Mexico are sent to New York and New Orleans to be reshipped to the Mexican coast.”
In 1834, Consul Barron reported a popularity loss for San Blas, the major Pacific port until the 1840s, due to “a new set of officers who have not yet acquired the dexterity to admit goods by contraband.” Barron to Pakenham, June 14, 1834, PRO, FO 50/87, p. 173.
Urias Hermosillo, “Manuel Escandón,” 44; J. Meyer, “El cielo,” 34.
Pakenham to Palmerston, Aug. 30, 1841, PRO, FO 50/145, p. 122. The government introduced the procedure in 1827 as an emergency measure in view of its deteriorating finances. Congress approved a project in which the following year’s revenue was anticipated through the sale of orders on the customs houses. Six months later permission to sell orders was renewed, and thereafter it became routine practice. See Bazant, Historia de la deuda exterior, 44.
Manuel Payno, México y sus cuestiones financieras con la Inglaterra, la España, y la Francia (Mexico City: Imprenta de Ignacio Cumplido, 1862), 62; [?] Lettsom, Chargé d’Affaires, to Lord Clarendon, Secretary of Finance, June 2, 1855, PRO, FO 50/278, p. 49.
Ward to Canning, Sept. 21, 1827, PRO, FO 50/41, p. 164.
[?] Thomson, “Report on Trade,” Oxford, Parliamentary Papers 1857, 16:427.
Walker, Parentesco, 89.
In 1847, Ewen Mackintosh, who was already managing the mints of Guanajuato, Culiacán, and Guadalupe, signed a ten-year contract with the government for the lease of the Mexico City mint. Although the mint probably produced some $1 million worth of coins a year, the government agreed to receive $174,000 administered over the contract’s duration. Special import licenses (a variant of duty rebates) were issued to a select few and were the object of fierce and sordid competition. See Randall, Real del Monte, 214, 215; Bátiz Vázquez, “Aspectos financieros,” 182; and Barbara Tenenbaum, México en la época de los agiotistas, 1821-1857 (Mexico City: Fondo de Cultura Económica, 1985), 82, 141-42.
For the role of the army and its negative effects on state finances, see José Maria Mora, México y sus revoluciones (Mexico City: Editorial Porrua, 1977), 1:358, 366; Josefina Zoraida Vázquez, “Los primeros tropiezos,” in Historia general de México, ed. Daniel Cosío Villegas (Mexico City: El Colegio de México, 1981), 2:788; and Cardoso, Formación y desarrollo, 60.
Prieto, Memorias, 300. See also Zamora Plowes, Quince Uñas, 68; and French, “Commercial Foot Soldiers,” 300.
O’Gorman to Pakenham, Oct. 20, 1829, PRO, FO 50/55, p. 278. And because they could well afford to. Indeed, such setbacks were fully taken into account. Percy Doyle, minister plenipotentiary, wrote in 1853 that should those persons entering “contracts of a scandalous nature realize little more than half of the sum agreed upon, they would still be more than overpaid.” Doyle to Lord Russell, July 3, 1853, PRO, FO 50/260, p. 47.
See Manuel Payno, Historia de la deuda de México (Mexico City: Imprenta Económica, 1866), 63. One of the commonest practices during the period was the refacción, a sort of revalidation fee that required a fresh sum in cash and paper paid to the government to ensure that the original claim was respected. Finance Minister Manuel Payno was the first to describe and openly acknowledge the refacción as part of the government’s strategy to extract more money.
In 1829, newly appointed finance minister José María Bocanegra ordered customs officials to reject all orders, at which time O’Gorman grumbled that it appeared to be the regular practice. O’Gorman to Pakenham, Oct. 22, 1829, PRO, FO 50/55, p. 123. In 1843, Mackintosh observed that the finance minister had suspended payments on all the consolidated funds “as a prelude to the course to be followed by the new Cabinet.” Mackintosh also stressed the absolute normality of the procedure. Mackintosh to [?] Bankhead, Minister Plenipotentiary, Feb. 17, 1845, PRO, FO 50/184, p. 122.
Manning and Marshall to Baring Brothers, Oct. 6, 1832, BA/HC220.127.116.11; Mar. 3, 1837, BA/HC18.104.22.168; June 2, 1842, BA/HC22.214.171.124. Further cash advances were effected at several levels and could take the form of a refacción, a fresh loan to the government, or a direct bribe to customs officials to persuade them to accept orders.
For a discussion of the periodization of agiotismo, see Tenenbaum, México en la época de los agiotistas; idem., “Banqueros sin bancos: el papel de los agiotistas en México (1826-1854),” in Banca y poder en México (1800-1925), eds. Leonor Ludlow and Carlos Marichal (Mexico City: Grijalba, 1985), 83-88; and Walker, Parentesco. The nefarious practice took hold in 1827 when the government stopped payment on its external debt and was forced to turn inward for its financial support.
The alliance between financiers was precarious at best, because they had not yet reached a consensus on political strategies.
Cardoso, México en el siglo XIX, 85; Guillermo Prieto, “Informes leídos en la Cámara de Diputados por el Secretario de Hacienda sobre el Estado que guarda el erario público (1854), Colección Lafragua, Biblioteca de la Universidad Nacional Autónoma de México, Mexico City, vol. 482, p. 40.
Tenenbaum, in “Merchants, Mischief, and Money,” does not mention the falling-out between Mackintosh and Escandón. Mackintosh in fact alienated everyone around him, not only Mexican politicians but British merchants and the current British minister to Mexico. Shortly before his failure, he also lost the support of Baring Brothers. Hilarie J. Heath, “British Commercial Houses in Mexico, 1821-67” (Ph.D. diss., London School of Economics, 1988), 360-69.
Walker, Parentesco, discusses the Martínez del Río failure in these terms, emphasizing in particular the politicization of the Mexican economy and the importance of kinship networks, political influence, and family prestige.
Francis de Palesieux Falconnet to Baring Brothers, Jan. 1, 1854, BA/HC4.5.25. Benefits from ties between natives and foreigners were probably fairly mutual, particularly at the outset. Mexicans sought out British houses for their contacts with European banking firms and manufacturers and for their access to capital and credit. They also sought to take advantage of what they perceived as British immunity by putting their property and contacts under British firm names. In particular Mackintosh, whose wealth and backing by the Baring Brothers, coupled with his position as British consul, made him a powerful figure, was accused of lending his name to this sort of practice.
Compiled from J. Meyer, “El cielo”; PRO, FO correspondence; Barron, Forbes and Company’s Claims, Archivo Histórico de la Secretaria de Relaciones Exteriores, Mexico City, L-E 2192; and Zamora Plowes, “Notas históricas,” in Quince Uñas, vols. 1, 2.
Greenhill, “Merchants and the Latin American Trade,” 183. Putting money into local businesses often provided an outlet for “idle funds,” especially when exporting specie was unprofitable or unsafe. But to entice the British into a foreign investment, the enterprise had to yield at least 10 percent; otherwise, the British preferred a safer but lower 7 percent in their own country.
Coatsworth lists inefficient economic organization—the absence of adequate laws and practices—as the second major obstacle to economic growth. “Obstacles to Economic Growth,” 91.
See Potash, Banco de Avío; Linda Colón, Los orígenes de la burguesía y el Banco de Avío (Mexico City: El Caballito, 1982); Dawn Keremitsis, La industria textil mexicana en el siglo XIX (Mexico City: SepSetentas, 1973), 60; and Mexico, Ministerio de Fomento, Industria agrícola, minera, fabril, manufacturera y comercial, y estadística de la República mexicana (Mexico City: n.p., 1854), 18-19.
See Rosa María Meyer, “Los Beisteguí: especuladores y mineros, 1830-1869,” in Cardoso, Formación y desarrollo, 126. Documents in the Archivo Histórico Notarial de la Ciudad de México also provide ample evidence of this tendency.
Estimates of profit rates varied from a low of 15 to 20 percent—higher than returns offered on any other business undertaking—to as much as 500 percent and higher. See Walker, Parentesco, 221; Tenenbaum, “Merchants, Mischief, and Money,” 51; and Bazant, Historia de la deuda exterior, 44, 193.
Greenhill, “Merchants and the Latin American Trade,” 182.
See Mario Cerutti, “Patricio Milmo, empresario regiomontano del siglo XIX,” in Cardoso, Formación y desarrollo, 252-57.
Francis Giffard, Consul at Veracruz, to Leslie Wyke, Secretary of Legation, Sept. 17, 1863, PRO, FO 50/377.
See Tischendorf, Great Britain and Mexico; and D. C. Manuel Platt, Latin America and British Trade, 1806-1914 (London: Adams and Charles, Ltd., 1972). Although British imports into Mexico continued to grow, Britain’s share of the market was diminishing by the 1860s. The break in diplomatic relations from 1867 to 1884 probably accelerated the process, but on the other hand, it was inevitable that Mexico would be drawn into the U.S. sphere of influence.