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huge sum for that era.106 The loans and donations were used explicitly to
help ¬nance the wars of the monarchy. But an unanswered question refers
to the ¬nal destiny of the funds collected through the Consolidation Fund:
of¬cially, those monies were transferred to the Spanish royal treasury to pay
off domestic debt (in vales reales). In practice, however, the funds remitted
from New Spain between 1805 and 1809 served to meet a more diverse series
of ¬nancial obligations, including payments of provisions for the Spanish
Navy and Army, the service of foreign loans subscribed by the Crown in
Holland, as well as a series of subsidies to be paid to Napoleon as a result
of a secret treaty signed with Charles IV in late 1803.
Since some of these commitments were secret, both Finance Minister
Soler and the Director of the Consolidation Fund Espinosa did not dare
to inform anyone of the details except Viceroy Iturrigaray and his staff.

Manuel Sixto Espinosa at the request of the Napoleonic government, entitled “Resumen hist´ rico o
de la Real Caxa de Consolidaci´ n,” Archives Nationales (Paris), AF IV, 1608 B-2, p. 14.
106 We estimate that revenues from ecclesiastical tax branches transferred to the Crown treasuries (listed
in Table 4.1) produced at least 12 million pesos between 1780 and 1800. We add 7 million pesos
for the years 1800“1808, which includes the same branches as well as the new noveno decimal and
proceeds from additional sales of indulgences. To this must be added at least 5 million pesos in
donations and loans from the church for the Crown Wars during 1780“1808, as well as 2 million
pesos in “subsidios ecclesiast´cos,” plus 10 million pesos in funds taken for the Consolidaci´n. Fom
± o
the 36 million pesos total, we subtract 1 million pesos that can be ascribed to Indian communal
funds, which gives us a ¬gure of approximately 35 million pesos.
Royal Church and the Finances of the Viceroyalty 153

Thus, except for the viceroy and a small circle of utterly reliable of¬cers,
neither church authorities nor others affected by the Consolidation Fund
apparently knew that much of the money collected was not to go to the
metropolitan coffers of the Spanish monarchy, but rather to the treasury of
the Napoleonic empire! This clandestine transaction re¬‚ected the increasing
complexity of the international ¬nances of the Spanish monarchy at its most
critical juncture.
Napoleon and Mexican Silver, 1805“1808

Prime Minister Pitt agreed to collaborate in my operations. England
promised to supply four frigates to carry the piastres (silver pesos) from the
New World on behalf of Charles IV but in practice for Napoleon.
Gabriel Julien Ouvrard, M´moires (1826)1

After the Peace of Amiens, signed between Great Britain and France in
March 1802, Atlantic commerce received a welcome respite from several
years of exhausting maritime warfare.2 The pent-up demand for manu-
factured goods in all of Spanish America impelled a tremendous wave of
activity in transatlantic shipping. European imports were paid for with
large, accumulated stocks of silver in Mexico, Peru, and Chile or exchanged
for local exports such as tobacco and sugar from Cuba, cacao from Venezuela,
hides from the River Plate. Most of this trade continued to be handled by
Spanish shippers from C´ diz and a few other metropolitan ports, since the
old imperial trade monopoly basically remained in place. The importance of
this peaceful interlude should not be underestimated, particularly because
of the high volume of silver remittances that began to arrive in C´ diz fol-
lowing the cessation of hostilities. Indeed, 1802“1804 marked the peak of
American silver transfers in three centuries of colonial history. More than 100
million pesos of silver and gold were dispatched from Spanish American
ports to the metropolis in less than two and a half years.3

1 Gabriel Julien Ouvrard, M´moires, vol. I (Paris, 1826“1828), p. 110.
2 The conclusion of the First Naval War (1796“1801) with England inaugurated a surge in transatlantic
commerce. The intensity of naval and commercial movements was especially notable in the port of
Veracruz. More than 400 ships entered and departed in 1803, demonstrating the continued dynamism
of New Spain™s economy. See statistics in Javier Ortiz de la Tabla, Comercio exterior de Veracruz, 1778“
1821: crisis de dependencia (Sevilla: Escuela de Estudio Hispano-Americanos, 1978).
3 In his monumental study on silver and gold remittances from Spanish and Portuguese America in
the colonial era, Michel Morineau provides the ¬gure of 114 million pesos: M. Morineau, Incroyables
Gazettes, p. 454. S. Stein, “Crisis metropolitana, comercio atl´ ntico y descapitalizaci´ n colonial:
a o
˜ ˜
Espana y Nueva Espana, 1804“1808,” in Academia Nacional de Historia, Congreso bicentenerario de Sim´n o

Napoleon and Mexican Silver, 1805“1808 155

Of the total sum of silver and gold sent, an important portion (forty
million pesos) was delivered on account of the Spanish government, helping
to prop up the monarchy™s ¬nances. Colonial tax remittances and loans
helped cover de¬cits and boosted the market value of debt securities in Spain
which had tumbled during the naval war with Great Britain, especially
in the years 1798“1801. As on so many occasions, the colonies rescued
the mother country. This was demonstrated with startling clarity in the
Madrid Treasury accounts of 1802“1804, since remittances sent from the
royal treasuries in America contributed more than 30 percent of the regular
revenue of Spain™s national treasury.4 Initially, the Spanish government
took advantage of the renewed ¬‚ow of funds to pay off short-term debt
arising from military and particularly naval requirements that had pushed
overall expenditures upward. At the same time, service on the debt of the
most important domestic public bonds (vales reales) was guaranteed, and as a
result, the quotations on the Spanish debt increased notably. (See Figure 4.2)
But by the end of 1803, hopes of attaining ¬scal equilibrium were dashed
again as a result of new and huge, external ¬nancial demands forced upon
the Spanish crown by the French government, avid to obtain silver.
In October 1803, Napoleon Bonaparte obliged Charles IV to sign a
secret agreement known as the Subsidy Treaty (Tratado de Subsidios) which
exempted the Spanish government from participating in new French mil-
itary land campaigns in exchange for large annual specie payments. The
treaty committed the Spanish monarchy to deliver an annual payment of
192 million reales to the French Treasury (some 10 million silver pesos or
dollars). To avoid wiping out the reserves of specie in the Madrid coffers,
the royal authorities turned to consignments of Mexican silver to guarantee
most of these payments.5 Inevitably, however, this measure would aggravate
the already prolonged ¬nancial crisis that af¬‚icted the Spanish Treasury. On
the one hand, it implied a loss of autonomy over government ¬scal policy
that now became subject to Napoleon™s imperative requirements for funds.

Bolivar, vol. iv (Caracas: Academia Nacional de Historia, 1985), p. 204, reproduces a contemporary
British estimate, noting that between October 1801 and August 1804, 113 million pesos were sent
from Spanish America to Spain.
4 M. Morineau, Incroyables Gazettes, p. 454, estimates that 40% of all remittances were for royal ¬nance,
which coincides with C. Marichal, Bancarrota, p. 173. For additional details on gold and silver
exports, see Javier Cuenca, “Statistics of Spain™s Colonial Trade, 1792“1820: Consular Duties, Cargo
Inventories and Balance of Trade,” Hispanic American Historical Review, 61, 3 (1981), 381“428. On
consignments to the royal treasury between 1763 and 1810, see C. Marichal, “Bene¬cios y Costes
Fiscales”, 480“482.
5 The classic study on these operations is Andr´ Fugier, Napole´ n et l™Espagne, 1799“1808, 2 vols. (Paris:
e o
F. Alcan, 1930), Chapters 1 and 2. It is useful to compare this data with information in Marten G.
Buist, At Spes Non Fracta: Hope and Company, 1770“1815: Merchant Bankers and Diplomats at Work
(The Hague, Holland: Martinus Nijhoff, 1974), Chapters 9“12.
156 Bankruptcy of Empire

On the other, it tied the tax and ¬nancial machinery of the Spanish crown
to the French Treasury in ways that would have grave consequences.6
The treaty reinforced the Spanish crown™s chronic habit of mortgaging
its most valuable colonial ¬scal assets to pay for its enormous ¬nancial
and military commitments generated by direct or indirect participation
in international wars. The payment of the subsidy to France was formally
assigned to the treasuries of New Spain, beginning in 1805 with the issuance
of bills of exchange delivered to the powerful, French merchant banker
Gabriel Julian Ouvrard who operated in his dual capacity as war contractor
and navy supplier as well as agent of the Napoleonic treasury. These drafts,
signed by Manuel Espinosa, director of the Consolidation Fund (Caja de
Consolidaci´n), were payable only at the royal treasuries of Mexico.
But why was it necessary to resort again to the colonial treasuries? The
explanation is found in the growing dif¬culties facing the authorities in
charge of the Consolidation Fund in the metropolis, which as we have
argued had already become a kind of secondary treasury of the Crown. This
¬nancial agency had two main sources of income in Spain: the revenues
derived from the disentailment of religious properties and receipts from a
broad but rather motley array of taxes. Nonetheless, the administrators of
the Fund soon found that these receipts were no longer suf¬cient to cover the
totality of the obligations they were obliged to pay, which had multiplied
extraordinarily as they now included not only covering most of the internal
and external debt service but also covering a substantial part of the costs of
the navy, as well as substantial supplies for Spanish land forces.7 As a result,
they found it more expedient to assure payments to France by diverting a
part of the of¬cial silver shipped from Mexico.
Both the Spanish and the French governments hoped that the Mexican
funds would be sent as soon as possible from Veracruz in Spanish warships
to Europe. However, the outbreak of the naval war with England in Decem-
ber 1804 made this extremely dif¬cult, and after the catastrophic defeat of
the French“Spanish ¬‚eet at the battle of Trafalgar (October 1805), com-
munications and commerce between Spain and its American colonies were
interrupted due to the control of the British Navy over the Atlantic and
adjacent seas. Yet despite the war, not all trade was suspended. A vigorous
neutral commerce soon developed, as many traders and shippers from non-
belligerent countries plied manufactures to be sold in New Spain and the

6 The policy of requiring forced subsidies from allies was common practice of Napoleon™s ¬nancial
strategy, as shown in the study of John H. Sherwig, Guineas and Gunpowder. British Foreign Aid in the
Wars with France, 1793“1815 (Cambridge, MA: Harvard University Press, 1969).
7 According to one historian, “the Caja de Consolidaci´ n in Madrid probably was bankrupt by 1805”:
Jose Patricio Merino, “1805: La crisis ¬nanciera internacional y deuda espanola,” in M. Artola and
L. M. Bilabo, eds., Estudios de Hacienda: de Ensenada a Mon (Madrid: Instituto de Estudios Fiscales,
1984), p. 396.
Napoleon and Mexican Silver, 1805“1808 157

other colonies, in exchange for large quantities of silver and primary goods
dispatched to Europe between 1805 and 1808.8 The secret to this trade
was the issue of licenses to neutral shipping by the Spanish and British
governments since both desired the maintenance of transatlantic exchange
in the midst of international con¬‚ict.
For the Spanish crown the attractions of neutral commerce were manifest:
it allowed the mercantile and ¬nancial operations of the already tottering
imperial state to continue, including the shipment to Europe of the monies
collected in Mexico by the Consolidation Fund. For the British government
as well, neutral trade was a priority, for, as historian Francois Crouzet has
demonstrated, trade with Spanish America became indispensable to English
export industries, especially in the years of the Napoleonic blockade of trade
with continental Europe (1806“1813).9 More surprising was the fact that
the British authorities should have authorized the transfer of Spanish royal
funds (10.5 million silver pesos) from Mexico to Europe in the ¬rst years of
the blockade, when it was at war with both Spain and France. A second and
equally astonishing fact was that the ¬nal disbursements were not made to
the metropolitan Spanish government but to Napoleon™s treasury.
To transfer the Mexican silver across the Atlantic would involve col-
laboration between some of the most prominent and adventurous Spanish,
French, Dutch, English, and North American merchant bankers and traders
of the age. They were engaged in an extraordinary, secret compact in the
years 1805“1808 to carry the treasure from Veracruz in neutral ships and in
several British warships to Europe.10 The leading ¬gures in this grandiose,
clandestine operation included the Napoleonic banker, Gabriel Ouvrard, the
banking houses of Hope & Company of Amsterdam, and Baring Brothers of

8 On neutral trade, see John Lynch, “British Policy and Spanish America, 1783“1808,” Journal of Latin
American Studies, 1, 1 (1969), 1“30; J. Barbier, “Peninsular Finance and Colonial Trade,” 21“37 and
“Venezuelan Libranzas, 1788“1807: From Economic Nostrum to Fiscal Imperative,” The Americas,
37, 4 (1981), 457“479.
9 Francois, Crouzet, L™Economie Britannique et le Blocus Continental (1806“1813), vol. 1 (Paris: Presses
Universitaires de France, 1958), pp. 179“191.
10 A group of historians (Dutch, North American, Spanish, and French) have reconstructed part of
the complicated history of the transfer of Mexican silver to Europe in this naval war period in
the Caribbean and the Atlantic. The following studies are fundamental: A. Fugier, Napole´n et o
l™Espagne, who undertook the ¬rst explorations of the subject by revising French and Spanish archives;
Stuart Bruchey, R. Oliver, Merchant of Baltimore, 1783“1819 (Baltimore: The Johns Hopkins Press,
1956); and S. Stein, “Un raudal de oro y plata que corr´a sin cesar de Espana a Francia: Spanish
Mercantile Policy and Trade with France under Charles III,” paper presented in the International
Congress “Carlos III y la Ilustraci´n”, Madrid (1988), 80 pp.; M. G. Buist, At Spes Non Fracta; and
Guadalupe Jim´ nez Codinach, La Gran Breta˜ a y la independencia de M´xico, 1808“1821 (Mexico:
e n e
Fondo de Cultura Econ´ mica, 1991) chapters 4 and 5 which have much material from British
archives. Also of importance is John Alexander Jackson, “The Mexican Silver Schemes: Finance and
Pro¬teering in the Napoleonic Era, 1796“1811,” Ph.D. thesis, University of North Carolina, 1980,
based on primary sources to be found in the AGN, Mexico.
158 Bankruptcy of Empire

London.11 But equally fundamental was the collaboration of royal of¬cials
and merchant ¬rms in Mexico who facilitated the transatlantic expeditions.
This chapter analyzes three key issues with the purpose of clarifying the
complex mechanisms used to send the huge quantities of Mexican pesos
across the Atlantic in the midst of major, military con¬‚ict between Britain,
Spain, and France. First, attention is directed to the ¬nancial demands
of Napoleon and why he required silver. Secondly, we review the imple-
mentation of the Subsidy Treaty and in particular the agreements nego-
tiated between Madrid of¬cials in charge of the Consolidation Fund and
the extraordinary alliance of European bankers and merchants already men-
tioned. Lastly, attention is devoted to the analysis of the singular methods
used by the bankers, Hope and Baring, and their local agents to extract
various millions of pesos from the port of Veracruz during the years 1805“
1808. The analysis of these transactions (complicated because of their secret
nature) illustrates the ways in which a network of private banking and trad-
ing houses contributed to the maintenance of transatlantic ¬nancial and
commercial ¬‚ows at a time of total war between the European powers.

The Consequences of the Subsidy Treaty (1803) with Napoleon and
the Negotiations with the Banker, Gabriel Julian de Ouvrard
The reasons why Napoleon should have become so interested in silver ship-
ments from Spanish America were directly linked to the recommencement
of hostilities between France and Great Britain in May 1803. The new mil-
itary plans of Bonaparte required extraordinary ¬nancing. Most costly was
his projected invasion of England, which he had been planning for some
time and implied great naval and army expenses.12 The First Consul ordered
a vast and secretive program of shipbuilding in various French ports in the
summer of 1803 and, at the same time, began concentrating thousands
of troops in northern France with the intention of having his great army
cross the Channel on more than a thousand ships and barges. Nonetheless,
given the marked superiority of the British Navy “ the wooden walls of
Britain “ Napoleon had to assure that his amphibious force was large and
powerful enough to have a possibility of success in the projected crossing.


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