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of the empire lay in the sustained functioning of what was a complex,
transatlantic ¬scal machine.
There were two strategic monopoly branches in this vast ¬scal system that
maintained major commercial and ¬nancial activities across the Atlantic.
The ¬rst was the great and extensive tobacco monopoly which operated
throughout the Spanish empire and was composed of a great number of
interrelated units. The tobacco monopoly was not only a money machine
for the extensive network of imperial treasuries but, in practice, also a
powerful transatlantic enterprise. During the last third of the eighteenth
century, it became one of the most important sources of revenues for the

1 “Representaci´ n presentada por el Consulado de Veracruz a la Suprema Junta Central de Espana”
(document dated March 1, 1809), AGN, Consulado, 252, exp. 5, f. 4.

Royal Treasury and the Gordon & Murphy Consortium, 1806“1808 185

entire royal administration. A second ¬scal branch of strategic importance
was the mercury monopoly that supplied silver mines throughout Spanish
America. The mercury extracted principally from the Almad´ n mines in
southern Spain was shipped to the colonies from C´ diz in warships and
merchant vessels on a regular basis, but during naval blockades the drop
in exports could throttle the enormously important silver production in
the American colonies.2 By the end of the eighteenth century, tobacco
and mining together supplied at least half of the total net income of the
treasuries of the viceroyalty of New Spain and a similar proportion in the
case of the viceroyalties of Peru and New Granada.3 As a result, continuance
of the wide range of transatlantic transfers of both monopolies was vital to
the ¬nancial solvency of the empire and of the monarchy itself.
From the late 1790s, successive naval wars with Britain threatened to
interrupt the transatlantic operations of the well-oiled ¬scal machinery of
the Spanish empire. The suspension of mercury shipments threatened with
undermining silver mining in Spanish America, the effects of which would
be potentially devastating for both public and private economies. Moreover,
the possible breakdown of the tobacco monopoly “ a leading source of
revenues for the royal administration in Spain, New Spain, Cuba, and New
Granada “ also presented a grave menace to the imperial economy. These
potential dangers became a reality after the decisive defeat of the combined
Spanish and French naval forces at the battle of Trafalgar (October 1805).
To ensure that royal trade with the royal monopolies in New Spain
could continue despite naval defeats, the minister of ¬nance at Madrid
arranged a series of private supply contracts in 1806 with various inter-
national merchant houses “ among which the Anglo-Spanish commercial
house of Gordon & Murphy was outstanding. The contracts made these
merchants responsible for of¬cial shipments to Mexico and, at the same
time, provided them with permits for exports of bullion from Veracruz,
to be sent to Europe and the Spanish General Treasury.4 In contrast to

2 The fundamental source is Rafael Dobado Gonzalez, “El trabajo en las minas de Almad´ n, 1750“
1855,” Ph.D. thesis, Universidad Complutense de Madrid, 2 vols., 1989.
3 For comparative information on Peru, see H. Klein, The American Finances, Chapter 2 and on New
Granada, J. Jaramillo, A. Meisel, and M. Urrutia, “Continuities and Discontinuities in the Fiscal
and Monetary Institutions of New Granada, 1783“1850,” pp. 414“452. Between 1795 and 1799
tobacco and mining taxes provided 57% of ¬scal income in New Spain: see Table 2.1.
4 On Gordon & Murphy™s operations with New Spain in these years, see the pathbreaking work of
Guadalupe J´menez Cudinach, “An Atlantic Silver Entrepot: Veracruz and the House of Gordon and
Murphy,” paper presented at Simposium Atlantic ort Cities, 1650“1850, Johns Hopkins University,
1986 and by the same author, Gran Breta˜ a y la independencia de M´xico, Chapter 6, as well as references
n e
in Stanley Stein, “Crisis metropolitana” and 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, pp. 215“226.
186 Bankruptcy of Empire

the transactions of the Baring/Hope consortium (analyzed in the previous
chapter), designed for payment of the Crown™s international debts during
the years 1805“1808, the activities of their commercial rivals, Gordon &
Murphy, had the complementary but distinct aim of ensuring the continued
operation of the imperial ¬scal system of the Spanish state in the most adverse
The mercantile agreements analyzed in the pages that follow are of inter-
est because they show how the Spanish government avoided the interruption
of the royal treasury™s transatlantic lines of communication and commerce.
Such a breach would have drastically reduced the ¬‚ow of silver from the
colonial treasuries and undermined the ¬nances of an increasingly menaced
monarchy. But before examining the complex business of the Gordon &
Murphy conglomerate, we shall focus on the interdependence that tradi-
tionally existed between colony and metropolis with respect to the principal
state monopolies of the Spanish crown.

The Import Dependence of the Colonial Fiscal Monopolies
The tobacco monopoly was one of the most lucrative of ¬scal branches of
the Spanish empire but relied on a set of important and varied transatlantic
trade transactions that had to be carried out on a regular basis. The size and
variety of these exchanges demonstrates that the Spanish tobacco monopoly
was one of the most complex economic organizations in the Western world
at the time.5 From the 1760s until 1810, its operations included an inter-
connected set of ¬scal administrations in metropolis and colonies, including
a group of factories in Spain, Cuba, New Spain, New Granada, and Peru, as
well as thousands of sales points in these and many other territories.6 The
Spanish tobacco monopoly also operated commercially in Buenos Aires,
Chile, Guatemala, Puerto Rico, Santo Domingo, Venezuela, Louisiana, as
well as in the Philippines. Historian Susan Deans-Smith af¬rms that at the
end of the century, the tobacco factories in New Spain alone employed more
than 13,000 workers, apart from several thousand commercial and admin-
istrative employees in the viceroyalty. To these should be added the 2,000
workers in the Havana factory, the 5,000 in the Seville tobacco factory,
and fewer numbers in other parts of the empire. In fact, it is unlikely that
there was any manufacturing enterprise in Europe, at this time, which had
an equivalent number of employees. The only commercial enterprise that

5 S. Deans-Smith, Bureaucrats, Planters and Workers, p. 159. On the early history of the monopoly, see
Jos´ Manuel Rodr´guez Gordillo, La creaci´n del estanco del tabaco en Espa˜ a (Seville: Fundaci´ n Altadis,
e ± o n o
6 For a broad, comparative analysis, see L. Nater, “El tabaco y las ¬nanzas del imperio espanol: Nueva
Espana y la metr´ poli, 1760“1810,” Ph.D. thesis, El Colegio de M´ xico, 1998.
o e
Royal Treasury and the Gordon & Murphy Consortium, 1806“1808 187

exceeded the size of the Spanish tobacco monopoly in the late eighteenth
century was the British East India Company.7
The performance of this Spanish imperial company depended strategically
on a series of trading and ¬nancial operations carried out between the royal
treasuries of Spain, Mexico, and Cuba.8 These included the shipment of
large quantities of paper from Valencia, Malag´ , and C´ diz to Veracruz since
a a
this commodity was an essential input for the manufacture of cigarettes at
the tobacco monopoly™s great factory in Mexico City and smaller manu-
facturing establishments in other cities. The annual consignments of tens
of thousands of reams of paper sent from Spain were fundamental for the
monopoly™s smooth operation.9 If supplies were not received, manufacture
and packing would be disrupted, sales would fall, and there would be a
reduction in the monopoly™s large, annual ¬nancial surplus sent from New
Spain to the tobacco administrations in both Cuba and Spain.10 To guar-
antee the provision of paper for the great tobacco factories in Mexico, the
Spanish government signed contracts with international trading ¬rms that
were to send dozens of ships from Europe to Veracruz in the years 1806“
The productivity of the tobacco administration in Mexico in¬‚uenced
other units of the monopoly across the empire. The Cuban tobacco admin-
istration, for example, depended on regular ¬scal transfers (known as the
tobacco situados) from New Spain that ¬nanced a large proportion of costs
associated with the annual tobacco harvest in the island. In the second half
of the eighteenth century, New Spain yearly sent between 500,000 and
750,000 silver pesos to the of¬cers of the tobacco monopoly in Havana
so that they could acquire the tobacco leaf from local producers.11 In turn,
Cuban tobacco output was vital for the monopoly™s metropolitan operations.
Havana was already famous as the source of the best cigars and snuff in the
world and it also provided much raw tobacco for manufacture in Spain. A
great volume of tobacco leaf (tobacco en rama) was shipped annually from
Havana to C´ diz: this was the essential raw material for the Spanish state
tobacco factories, especially for the famous establishment at Seville that

7 “The Mexican monopoly played a pivotal role in the ¬nancing of an empire-wide tobacco monopoly.”
S. Deans-Smith, Bureaucrats, Planters and Workers, p. 61.
The tobacco monopoly also carried on trade between Louisiana and New Spain and between the
different branches of the tobacco monopoly in South America. For references, see L. Nater, “El
tabaco y las ¬nanzas del imperio espanol,” Chapter 5.
Most of the paper came from factories in Barcelona, Arag´ n, and Valencia, generally being sent to
M´ laga and C´ diz for transshipment to the Americas. For useful references on the paper trade, see
a a
S. Deans-Smith, Bureaucrats, Planters and Workers, pp. 101“105.
By regulation the net income from the tobacco monopoly in New Spain was sent to the metropolis
and, in smaller proportion, to Cuba.
On the tobacco situados for Cuba, see C. Marichal and M. Souto, “Silver and Situados.”
188 Bankruptcy of Empire

Silver coin
Mercury Mercury Mercury Mine
Silver Mercury
Mexico Port of Havana Cádiz
City Veracruz Cuba
Paper Mercury
Mercury, paper
Royal Tobacco
Factory, Valencia
paper Mexico City Spain

Other Tobacco

Flow of fiscal commodities of state monopolies

Figure 6.1. Flows of Fiscal Merchandise and Silver between the Royal Treasuries of Spain,
Cuba, and Mexico, (circa 1790).
Source: Drawn by Carlos Marichal.

supplied the bulk of cigars, cigarettes, and snuff consumed throughout the
peninsula. In effect, by remitting tobacco leaf, the Cuban tobacco monopoly
provided a valuable subsidy in kind to one of the most important revenue
sources of the metropolitan treasury at the end of the eighteenth century:
tobacco produced close to 30 percent of total ordinary revenues of the royal
tax administration in Spain.12 The complexities of the transatlantic transfers
are illustrated in Figure 6.1.
The importance of the tobacco monopoly for imperial revenues was
exceeded only by silver mining, which, in turn, depended to a consid-
erable degree on mercury (quicksilver) imports from Spain. The use of large
quantities of mercury for silver amalgamation and re¬ning in the colonial
mining centers was not new, having begun in the mid-sixteenth century
in Mexico. Although it was possible to process the silver minerals without
mercury, the alternative procedures were time-consuming and inef¬cient,

12 C. Marichal, “Bene¬cios y costes ¬scales” offers an estimate of the minimum ¬gure, but it is necessary
to undertake more detailed research on the monopoly™s cost structure in Spain. On deliveries of tobacco
leaf from Cuba to Spain, see the classic work of R. de la Sagra, Historia econ´mico-pol´tica y estad´stica,
o ± ±
pp. 240“265.
Royal Treasury and the Gordon & Murphy Consortium, 1806“1808 189

a phenomenon especially noticeable in the larger mines.13 Indeed, the level
of silver production in New Spain depended to a remarkable degree on the
amounts of mercury shipments. Richard Garner has demonstrated the close
relationship between the two during the eighteenth century: the annual
increase in minting of silver in Mexico grew by 1.4 percent per annum,
almost identical to the annual increase in mercury imports.14
The provision of a growing amount of supplies of quicksilver for the
mining establishments in Spanish America was one of the objectives of the
administrative reforms of the early Bourbons.15 The supply of quicksilver
had a fundamental importance for colonial exchequers and economies. An
increase in the annual silver yield tended to increase the money supply
and stimulate overall production and popular consumption, with a positive
impact on ¬scal resources, including direct taxes (on silver) as well as sales
taxes and monopolies.16 In the 1720s, Spain exported an annual average of
little more than two hundred thousand pounds of mercury per year to the
Americas, but by mid century, mercury exports to the colonies had tripled
and by the end of the century reached two and a half million pounds per
year.17 These exports had a positive effect on silver mining, as is witnessed
by the volume of minting in Mexico between 1780 and 1810, when silver
coinage reached the highest levels in all colonial history.18
During periods of naval con¬‚ict the maintenance of a regular supply of
mercury posed especially dif¬cult challenges for the imperial administra-
tion. For almost three centuries, the Spanish government had organized
regular remittances of mercury as a crown product that was carried in

13 An alternative smelting method (plata de fuego) had been developed in the second half of the sev-
enteenth century (when deliveries of mercury from Almaden were scarce). However, this method
required large amounts of charcoal, resulting in forest devastation around mining zones. In the
eighteenth century, the mercury amalgamation method became dominant.
R. Garner and S. E. Stefanou, Economic Growth and Change, pp. 112 and 132.
The decline of mercury production at Almad´ n in the second half of the seventeenth century and its


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