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Naval forces were concentrated at the port of Boulogne, and three army
camps were set up at Bruges, St. Omer, and Montreuil.13 At the same time,

11 For detailed information on the participation of these houses in this operation, see S. Bruchey,
R. Oliver, Merchant of Baltimore; M. G. Buist, At Spes Non Fracta; and J. A. Jackson, “The Mexican
Silver Schemes.”
12 An excellent source continues to be the classic work by Alfred T. Mahan, The In¬‚uence of Seapower
upon the French Revolution and Empire, 1793“1812, vol. 2 (London: Sampson Low, Marston, 1892),
pp. 111“139.
13 Alan Schom, Trafalgar: Countdown to Battle, 1803“1805 (New York: Oxford, 1990), pp. 122“126.
Napoleon and Mexican Silver, 1805“1808 159

French navy arsenals were ordered to build hundreds of ships and barges. All
this required enormous resources in the shape of supplies, food, materials
for shipbuilding, and military equipment. As expenses mounted, Napoleon
forced his principal war contractors to advance increasing amounts of money
to cover these necessities, but he was also obliged to mortgage tax revenues
to them. Eventually, it became clear that the French Treasury would not be
able to cover the bulging expenditures.
There were two main reasons why the Napoleonic regime had dif¬culties
in ¬nancing its war plans. The ¬rst was that the postrevolutionary admin-
istrations had considerable dif¬culty in raising new taxes. French society
looked askance at traditional, ¬scal resources which were identi¬ed with the
old regime, in particular sales taxes which had been the ¬rst target of the
populace in 1789 since they affected practically all food staples. By 1805
the principal revenues of the French government were direct taxes, mainly
on rural and urban real estate.14 A successful set of innovations had included
establishment of more precise cadastres and increased centralization of tax
administration. Customs duties, on the other hand, were a relatively small
item in the Napoleonic budgets “ a fact that may be attributed to the success
of the British naval blockades in reducing the maritime trade of France.
A second dif¬culty confronting the French ¬nancial of¬cers was the
growing lack of con¬dence of investors in public debt policies. After the
default of 1797 on two-thirds of public debt, the government could no
longer obtain long-term loans.15 Bonaparte relied on short-term advances
by syndicates of ¬nanciers and tax collectors (“receveurs generaux”), but
they charged high interest rates, averaging 15 percent annually, which
contrasted with the much lower costs of public debt in England.16 This
put the French war administration at a marked disadvantage vis-a-vis the
British government that was able to ¬nance rapidly increasing military
expenditures partly through increasing taxes and in part through issuing
debt which was absorbed without dif¬culty by the broad and deep ¬nancial
markets of England.17
Napoleon was inevitably obliged to devise new forms of war ¬nance. The
most obvious was emergency ¬nance, by which his troops were ordered to
live off the land. His armies also exploited the old ¬scal regimes in conquered

14 Archives Nationales (France) AF IV, vol. 1082, “Etats relatifs a la ¬n de l™an neuf: Tr´ sors publics,”
doc. 2, in particular annex titled “D´ penses et Recettes, 1806.”
15 F. Crouzet, La grande in¬‚ation, pp. 466“471.
16 See the correspondence of the French Minister of Finance, Barb´ -Marbois, with Napoleon, providing
him with details of current interest rates and of banker groups dealing with the French government.
Archives Nationales (Paris), AF IV, vol. 1082, “Etats relatifs a la ¬n de l™an neuf: Tr´ sors publics”
doc. 5.
17 Patrick O™Brien, “Public Finance in the Wars with France, 1793“1815,” in H. T. Dickinson, ed.,
Britain and the French Revolution, 1789“1815 (New York: St. Martin™s Press, 1989), pp. 165“187.
160 Bankruptcy of Empire

territories to the utmost and proceeded to extract forced loans and provisions
from local economic elites and from the church in the occupied Catholic
states. Napoleon further obliged his subordinate allies to provide monies
in the way of subsidies. In contrast to Great Britain, which based much
of its military strategy on the European continent by providing subsidies
to its allies, Napoleon demanded considerable ¬nancial assistance, including
annual subsidies paid to the French Treasury by the kingdoms of Holland,
Piedmont, Naples, and Spain, as well as by the duchies of Parma and Modena
and the Papal states.18
In the case of Spain, collaboration with France between 1796 and 1801
had come mainly in the form of putting most of the Spanish Navy at
the disposal of its powerful neighbor, including a large number of its
warships stationed at the port of Brest, which the Madrid government
was obliged to supply with provisions and salaries. But Napoleon wanted
more, and in 1800 he demanded that the Spanish authorities hand over
the vast territory of Louisiana, which he later proceeded to sell to the U.S.
government for 80 million francs to fund his military campaigns. Subse-
quently, as we have already indicated, Napoleon forced the Spanish monarch,
Charles IV, to sign the Subsidy Treaty in October 1803, insisting that the
previous Treaty of San Ildefonso of 1796 (by which Spain had agreed to
furnish military assistance to France) was still in force. The First Consul
claimed payment of a monthly subsidy of 16 million reales (1.6 million
silver pesos or dollars) from the Spanish government, retroactive to March
1803.19 However, it was not until the beginning of 1804 that the French
authorities made their demands felt with all severity. Furious, Napoleon
insisted that Spain was in arrears and owed him 160 million reales for the
subsidies which corresponded to ten months of the year 1803, arguing
that the Spanish government™s agents at Paris had delivered only a small
The recently crowned Emperor, however, was not the only one interested
in receiving funds. The urgency of accomplishing the transfer of Span-
ish silver was also of the greatest concern to the powerful Compagnie des
N´gociants R´unis, a leading syndicate of moneylenders and military sup-
e e
pliers to the Napoleonic administration, that wished to receive reimburse-
ment for their multiple advances to the French government and military

18 The classic study on British subsidies is J. H. Sherwig, Guineas and Gunpowder. An important source
on Napoleonic ¬nance is Louis Bergeron, Banquiers, n´gociants et manufacturiers parisiens: du directoire
a l™Empire (Paris: Ecole des Hautes Etudes en Sciences Sociales/Mouton, 1978).
19 The Subsidy Treaty was signed on October 19, 1803 but Napoleon demanded the subsidy be paid
retroactively from March of the same year.
20 The story is told in Andr´ Fugier, “Un ¬nancier diplomate: Jos´ Mart´nez de Hervas, charg´ d™affaires
e e ± e
d™Espagne a Par´s, 1803“04,” Revue des Etudes Napoleoniennes 23 (1924), 92“97; additional observa-
tions can be found in J. A. Jackson, “The Mexican Silver Schemes,” p. 54.
Napoleon and Mexican Silver, 1805“1808 161

forces.21 At this point the most important of Napoleon™s naval contrac-
tors, Gabriel Julien Ouvrard, proposed to the French Minister of Finance,
Francois Barb´ -Marbois, the possibility of opening informal negotiations
¸ e
with the Spanish government to devise a method of extracting the silver
subsidy from colonial Mexico.
Ouvrard and his ¬nancial associates of the Compagnie des N´gociants R´unis
e e
wanted to liquidate the payments owed to them by the Spanish Treasury for
having made large advances of money and supplies to the Spanish Navy, in
particular to the arsenal and squadron at the port of El Ferrol and to warships
stationed at Brest.22 The French merchant banker worked out an ambitious
plan of ¬nancial reforms to be proposed to the Madrid Cabinet for increasing
the monarchy™s extraordinary resources. This included a project to negotiate
a new loan in Holland and, at the same time, a singular scheme to obtain
funds from Spanish America by extending the scope of the Consolidation
Fund to the colonies.
Ouvrard hoped to convert himself into the architect of this complex
¬nancial strategy, but to do so he needed to ratify a series of new contracts
with the Spanish crown. To facilitate his negotiations with the Spanish
government, the banker agreed to make an advance on behalf of a part of
the Spanish subsidy owed to the French Treasury; in exchange, he received
authorization from the Minister of Finance, Barb´ -Marbois, in Paris to
negotiate a set of private contracts with Charles IV in Madrid. These accords
would allow the effective implementation of the Subsidy Treaty by creating
the necessary instruments to obtain the silver remittances from Mexico and
other Spanish American possessions.23
With this purpose ¬rmly in mind, Ouvrard embarked on a journey
to Madrid in September 1804, where he remained for three months,

21 This company, managed by the naval contractors, Ouvrard, Vanlerberghe, and D´ sprez, played
an important ¬nancial role for the Napoleonic government, advancing funds and discounting huge
amounts of commercial paper with the Ministry of Finance. This complex ¬scal and ¬nancial history,
between 1802 and 1806, is summarized in Maurice Payard, Le ¬nancier, G. J. Ouvrard (1770“1846),
(Paris: Acad´ mie Nationale de Reims, 1958) and Arthur L´ vy, Un grand pro¬teur de guerre sous la
e e
R´volution, l™Empire et la Restauration: G. J. Ouvrard (Paris, 1929). A more complete view can be found
in the correspondence of the French Ministers of Finance with Napoleon, especially ANF, AF IV,
vols. 1082 and 1087.
22 Ouvrard held a considerable number of bills of exchange drawn on Mexico for debts of the Spanish
Navy, which he had not been able to collect. With this aim, he had sent his brother, Francois (partner
of the Bordeaux merchant house), at the end of 1802 on a trip to Mexico (via the United States).
An interesting description of his trip and his impressions of Veracruz, Xalapa, and Mexico City in
1802 is found in Archives Nationales (Paris), AF IV, vol. 1211.
23 The terms of this contract had been established in prior negotiations between Jos´ Mart´nez H´ rvas
e ± e
(banker and representative of the Spanish government in Paris) and Talleyrand, French Minister of
External Affairs. See the essay by A. Fugier, “Un ¬nancier diplomate,” 81“97, and the references in
the more important work of the same author, A. Fugier, Napole´n et l™Espagne, vol. I, pp. 266“275.
162 Bankruptcy of Empire

negotiating ¬nancial schemes with the Prime Minister Manuel Godoy, the
Finance Minister Miguel Cayetano Soler, and the Director of the Consoli-
dation Fund, Manuel Sixto Espinosa.24 According to his memoirs, Ouvrard
breakfasted frequently with Godoy. On more than one occasion, the Spanish
prime minister invited Queen Mar´a Luisa to accompany them at morn-
ing chocolate, allowing the Prince of Peace (Godoy™s new title) to show the
French banker who was the true master in Spain.25 Ouvrard liberally show-
ered the Spanish prime minister with presents and encouraged him to
think about achieving the domination of Portugal (even including the Por-
tuguese crown) with Napoleon™s help. Grati¬ed, Godoy adopted the banker
as his con¬dent and very soon agreed to his ambitious proposals for ¬nan-
cial reform that depended, in great measure, on substantial remittances of
American silver.26
Ouvrard™s ¬rst agreement was embodied as a royal warrant to negotiate
a new Spanish loan in Holland with service payments guaranteed by bills
of exchange for eight million pesos to be drawn on the royal treasuries of
Mexico. The Dutch loan would help cover the Consolidated Fund™s debts
to the French Treasury, especially the arrears in the subsidy payments.27 To
guarantee the possibility of obtaining additional funds in Mexico, Ouvrard
helped convince the Spanish authorities to press forward with their plan
to extend the Consolidation Fund (and ecclesiastical disentailment) to the
Americas. Charles IV signed the royal decree on November 28, 1804, but the
royal order that speci¬ed how funds should be collected in the colonies was
rati¬ed only on December 26.28 The silver to be sent from New Spain would
serve various purposes: payment of the service on Dutch loans, liquidation
of advances made by Ouvrard to the Spanish Navy, the requirements of the
Subsidy Treaty signed with Napoleon, and a series of military expenses of
the Spanish crown. (See Figure 5.1.)

24 Ouvrard, one of the outstanding bankers of the revolutionary and Napoleonic regime, wrote his
own recollections: see G. J. Ouvrard, M´moires, 3 vols. (Paris), 1826“1828. There are also several
biographies: A. L´ vy, Un grand pro¬teur de guerre; M. Payard, Le ¬nancier; Otto Wolf, Ouvrard, Specu-
lator of Genius, 1770“1846 (New York: Barrie and Rockliff, 1962); and references in L. Bergeron,
Banquiers, n´gociants et manufacturiers, pp. 156“165.
Recounted in his M´moires, vol. I, pp. 92“93.
For the details of these complicated negotiations, see A. Fugier, Napole´n et l™Espagne, vol. I, Chapters
2 and 3 and vol. II, pp. 54“60; also see M. G. Buist, At Spes Non Fracta, Chapters 9 and 10.
This ten-million ¬‚orin loan was ¬nally issued in Amsterdam in November 1805 by the house of
Hope against the guarantee of bills of exchange for Mexico, sent by Ouvrard, valued at 8,484,375
pesos. Prolonged and complex negotiations eventually brought delivery of the bills of exchange to
Hope to be settled in Veracruz, the purpose being to use part of the funds to pay some of Ouvrard™s
debts with the French Treasury. For details of these operations, consult M. G. Buist, At Spes Non
Fracta, Chapters 10 and 11 and J. A. Jackson, “The Mexican Silver Schemes,” Chapter 3.
Spanish ¬nancial of¬cials had considered this possibility, but Ouvrard™s visit speeded up the arrange-
ments. For the texts of the decree and the order, see AGN, Reales C´dulas Originales, vol. 192, exp.
142, f. 348 and exp. 143, fs. 349“360.
Napoleon and Mexican Silver, 1805“1808 163

Supreme Junta
Consolidation Fund
Madrid Service of domestic debt in
“vales reales”

Payment of service on
Treasury of Royal Dutch loans
Royal Treasury
Consolidation Fund
Mexico City (Madrid)
Payment of
subsidy to Napoleon
Various fiscal branches in
Payment to suppliers of
Spain and sale of
Flows of money Spanish Navy such as Ouvrard
religious properties

Lines of authority

Figure 5.1. Royal Consolidation Fund: Flow of Funds, Mexico to Spain, 1805“1808.
Source: drawn by Carlos Marichal.

While the Spanish authorities proved willing to approve measures aimed
at complying with the exigencies of Napoleon and Ouvrard, they also asked
for a series of urgent concessions. In particular, they asked the French banker
and war contractor to help alleviate the grave agrarian crisis that had dev-
astated various provinces of Spain: from mid-1803 onward a series of bad
harvests had provoked starvation, pestilence, and epidemics, causing large
segments of the population to suffer.29 To reduce the impact of the crisis on
the most affected regions, the Spanish ¬nance minister asked Ouvrard to
import grain from France.30 The French banker responded quickly, nego-
tiating a large number of shipments of wheat to Spain. The immediate
result was a steep decline in wheat prices, forcing hoarders to begin selling
their abundant reserves.31 Scarcity was suddenly converted into abundance
of supply, and the ravages suffered by the most needy Spaniards tended to
The culmination of the set of agreements between the Madrid govern-
ment and Ouvrard was a broad-ranging contract, rati¬ed by Manuel Sixto


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