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10 G. Valle Pav´ n, “Consulado de Comerciantes,” p. 616.
242 Bankruptcy of Empire

Table 8.2. Crown Loans and Donations Administered by the
Mexico City Mining Tribunal, 1777“1810 (in Pesos)

Year Loans Donations
1782 1,000,000
1793 1,100,000
1794 1,000,000
1798 500,000
1805 300,000
1808 200,000
subtotal 6,800,000 1,550,000
Note: See Appendixes III.1 and III3.2.
a Donation for royal shipworks.
b Donation for the prince and princess of Asturias.
c Donation for the war with Algiers.
d Tobacco loan.

Another privileged corporation which operated as ¬nancial intermediary
in the management and administration of royal loans was the Mining Tri-
bunal of Mexico (Tribunal de Miner´a de M´xico), representing the interests
± e
of the greatest mine owners in the viceroyalty. In toto, the Tribunal placed
four loans for the Crown, raising 6,800,000 pesos (at a 5 percent interest
rate) between 1782 and 1802, obtaining subscriptions from a broad range
of investors, including silver miners, landowners, merchants, and ecclesias-
tical institutions. Later the mining association ceased to participate in new
loans, although it continued to collaborate in various royal donations. (See
Table 8.2.)
One of the most important objectives of the Mining Tribunal, when it
was created in 1776, had been to promote silver production by facilitating
credits to small, medium, and large miners in the viceroyalty. But the major
part of the funds collected for capital accounts of the Tribunal (known as
the Fondo Dotal) was not channeled to mining but rather went to crown
loans and donations from 1782 on, as well as to cover interest payments and
the amortization of the loans issued. Investors relied on both the Mining
Tribunal and the royal treasury to guarantee the debt service.11

11 The Tribunal ensured that the royal treasury would pay the greater part of services on the credits they
arranged as well as the return of part of the capital up to 1810, after which payments were notably
reduced. For details, see E. Flores Clair, Las deudas del Tribunal de Miner´a, 1777“1823, passim.
Rebellion of 1810, Colonial Debts, and Bankruptcy of New Spain 243

An additional proof of the negative impact of the rise in government
debt was the short duration of the remarkable initiative launched by the
Mining Tribunal in 1784, the Banco de Av´o Minero (“Bank for Mining
Finance”), the ¬rst investment bank of the colonial period. Despite great
initial hopes, the ¬nancial institution was quickly burdened with royal
debts during its brief existence (1784“1787). As a result, the bank was not
able to operate properly and suspended its credit operations with the miners.
The distinguished director of the Mining College Fausto de Elhuyar later
commented on the ¬nancial failure of the bank and the miners™ association,
arguing that their assets had become a resource for the government instead
of a fund for the bene¬t of the miners.12 This opinion has been con¬rmed
by the recent research of historian Eduardo Flores Clair who writes:
The mining guild considered itself obliged to mortgage its fund to cover the interest
payments on the loans they had issued on behalf of the king. . . . The Tribunal™s
coffers were cleared out; the donation and loans (to the government) became yet
another tax and a fetter for the mining industry.13
Among all New Spain™s corporations it was the church that made the
greatest contributions to the Crown™s war loans and donations. An extremely
diverse range of ecclesiastical institutions participated in eleven loans and
¬ve donations, although the respective contribution to the Crown of the
different participants was variable. (See Table 8.3.) The largest were the
tobacco loan collected between 1795 and 1802 and the Consolidation Fund,
between 1805 and 1809.14
We have previously argued that the church loans for the monarchy weak-
ened the most important network of credit in the viceroyalty. The large
sums of money dispatched to C´ diz between 1781 and 1811 were never
to return and therefore caused a depletion of capital available for lending
and investment inside Mexico. In this instance, it would be appropriate to
speak of displacement of private creditors by the Crown. The application of
the Consolidation Fund (Consolidaci´n de vales reales) led to disentaliment of
many religious properties and to the impoverishment of a great number
of religious ¬nancial entities in all regions of Mexico. Perhaps most serious
was the fact that debt service to investors proved irregular before 1810
and discontinued afterward. Information about interest payments paid by
the government to ecclesiastical institutions is scarce, but it is established
that in the case of the more than ten million pesos ceded to the Con-
solidation Fund, the principal was never returned and interest payments

12 See Elhuyar™s text in W. Howe, Mining Guild, p. 383.
13 E. Flores Clair, Las deudas del Tribunal, p. 34.
14 As argued in Chapter 4, the delivery of funds for the Consolidation amounted, in effect, to a gigantic
loan, on which the Crown offered to pay 3% interest per year.
244 Bankruptcy of Empire

Table 8.3. Loans and Donations of the Catholic Church in Mexico to the Crown, 1782“1810
(in Silver Pesos)a

(a) Loans for the Crown
Church Total value Subscriptions/
Year Subscriptions of Loans Total Loan (%) Intermediaries
1782 353,000 1,000,000 35.3 Merchant guild
1782 226,000 1,000,000 22.6 Mining Tribunal
1783 460,000 523,376 88.0 Royal treasury
1793 1,320,000 84.7 Royal treasury
1793 160,000 1,000,000 16.0 Merchant guild
1794 477,500 1,000,000 47.8 Merchant guild
3,526,000c 9,272,264d
1793“1802 38.0 Mining Tribunal and
Merchant guild
1805“1808 9,571,800 92.7 Royal treasury
1809 173,000 3,176,835 5.4 Merchant guild
1809 1,393,500 22.5 Merchant guild
1810 997,300 2,010,000 49.6 Merchant guild
subtotal 17,578,600

(b) Donations for the Crown
Church Total Contribution/ Total
Year Contribution Donation Donation (%)
1782“1784 39,643 843,474 4.7
1793 141,000 460,714 30.7
299,000 f
1795 701,552 42.6
413,000 f
1798 2,118,914 19.5
100,000 f
1805 497,557 21.1
a In this chart, we include contributions by all the religious institutions, cathedral chapters, bishoprics,
chaplaincies, pious works, convents, religious colleges, seminars, etc.
b Interest-free loans.
c This is an estimate of the church participation based on the 38 per cent of church participation in

the interest-bearing loans of 1782“1794, which is clearly documented.
d This is the sum of the 1793 and 1794 loans administered by the Mining Tribunal and the tobacco

loan of 1795“1803.
e The sum of the Consolidation loan also includes 750,000 pesos contributed by the Indian towns.
f Estimates based on sources in Appendix III.1.

Sources: See tables in Valle Pav´ n (1997) as well as sources cited in Appendix III.2. On the donation,
see tables in Rodr´guez Venegas (1996) and Appendix III.2.
Rebellion of 1810, Colonial Debts, and Bankruptcy of New Spain 245

were extremely meager.15 The result was a virtual expropriation by the
metropolitan treasury of many of the principal sources of capital and credit
in the colonial economy.
What was the effect of the transfer of these funds on New Spain™s ¬nances
and economy overall? This question is not easy to resolve, not least because
reliable estimates of the stock of total investment and annual investment
rates are not yet available. However, it would seem perverse to argue that
the transfer of loan funds to the metropolis did not have an effect on the
investment path of the economy of colonial Mexico.16 Given the reduced
size of ¬nancial markets in this period, thirty million pesos drained from
elites and corporations cannot be considered a small sum.17 Our hypothesis
is that metropolitan ¬nancial demands debilitated the colonial economy “
through the constant borrowing in the form of royal loans “ and so depressed
private investment.18
Until the end of the colonial period, there had existed an extensive
credit system and a relatively complex (if not very deep) capital market in
Mexico. This is attested by recent work on the ¬nancial operations of the
merchant guilds of Mexico and Veracruz and the Mining Tribunal as well
as by studies on the numerous loans and credit extended by religious and
pious organizations to merchants, rentiers, landowners, and silver miners,
all of which provide testimony on the vigor of credit and ¬nancial markets
in New Spain.19 When the royal administration contracted the Mexico City

15 In Spain the monies obtained from the Consolidation were never returned to the church. See the
comments on unpaid debt service in J. Fontana, La quiebra de la monarqu´a absoluta, pp. 415“418.
J. Coatsworth, Or´genes del atraso, p. 109, considers that the reduced annual investment rate would have
amounted to a million pesos per month, which according to his calculations represented about 5% of
total annual investment. He discounts the cumulative effect of this ¬gure over a thirty-year period,
stating that the in¬‚ation would have minimized its economic contribution. Also see two articles by
David Brading “Facts and Figments in Bourbon Mexico,” Bulletin of Latin American Research, 4, 1
(1985), 61“64 and “Comments on ˜The Economic Cycle” that advance similar arguments.
R. Garner and S. E. Stefanou, Economic Growth and Change, pp. 12“14, and Richard Salvucci, “Eco-
nomic Growth and Change in Bourbon Mexico: A Review Essay,” in The Americas, 51, 2 (1994),
219“231, estimate the gross product of New Spain at 200 million pesos. But, what was the size of
the capital market? As yet there are no reliable estimates: contemporaries suggested that the total
capital stock of religious foundations at the end of the eighteenth century was around 40 million
pesos, although the majority was in the form of outstanding loans; to this should be added the funds
administered by nonecclesiastical corporations (such as the merchant guilds) and investors.
Economists use the expression “crowding out” which is considered prejudicial when government
expenditure re¬nances existing debt rather than making physical investments. Such was the case in
New Spain, with funds transferred to cover metropolitan debts and not invested in the viceroyalty.
See, among others: P. P´ rez Herrero, Plata y libranzas; G. Valle Pav´ n, “Consulado de Comerciantes”;
e o
M. Souto “Consulado de comercio”; G. Von Wobeser, El cr´dito eclesi´ stico en Nueva Espa˜ a; E. Flores
e a n
Clair Las deudas del Tribunal; D. Ladd, Mexican Nobility; and L. Greenow, Credit and Socioeconomic
246 Bankruptcy of Empire

Merchant Guild and Mining Tribunal as intermediaries for successive credit
operations, it contributed to a process of change in these markets as a result
of the introduction of new credit instruments and new practices for their
purchase and sale.20 The privileged corporations of New Spain, as well as
many wealthy individuals, invested their funds because the interest rates
were relatively attractive, although there were some exceptions as in the
case of non-interest-bearing loans, issued on various occasions in wartime
But since the viceroyalty™s ¬nancial markets were neither broad nor deep,
many of the government demands had a profoundly negative in¬‚uence.
This is documented in the extended protests against the Consolidation
Fund by merchants, miners, landowners, and farmers, as we have seen in
Chapter 4. The appropriation by the Crown of the loan capital of hun-
dreds of religious institutions was a clear example of the disadvantages that
the emergency ¬nancial policies of the Crown had for both entrepreneurs
and the church. In sum, the principal defect of the colonial debt was that
the collected monies were not spent in New Spain but were sent abroad.
Royal debt policy extracted private capital stock which could have been
invested productively, and “ we may add “ in Bourbon Mexico the number
of actual and potential investment opportunities was not negligible before
Finally, it is important to evaluate the impact of government debt on sav-
ings in the community funds (cajas de comunidad) of rural villages. The social
groups which suffered most from the ¬scal and ¬nancial demands of the
Crown were precisely those least prepared to resist the impact, namely, the
Indian peasant communities. Speci¬c case studies con¬rm the exploitation.
Studies by historian Dorothy Tanck and other colleagues illustrate how the
functionaries of the royal treasuries progressively took control of the com-
munal funds of peasant villages and towns throughout the viceroyalty. (See
Table 8.4.)
The greater part of the monies extracted was used to cover ¬nancial
demands of the monarchy in Spain.22 In the case of Yucatan, over a period
of thirty years, a total of 400,000 pesos was taken from Indian village

20 G. Valle Pav´ n, “Consulado de Comerciantes,” provides the most detailed analysis.
21 Investment in mines, estates and sugar mills, roads (especially between Mexico and Veracruz), as
well as the great program of public works and urban building at the end of the eighteenth century
are outstanding examples. Both R. Garner and S. E. Stefanou, Economic Growth and Change, and C.
Marichal, “La historiograf´a econ´ mica reciente” give full bibliographical references to useful studies
± o
on the evolution of different sectors in the Mexican economy during the eighteenth century.
22 D. Tanck, “Escuelas y cajas de comunidad,” analyses this process in the Yucatan and M Ter´ n,”Muera
el mal gobierno” for Michoac´ n, examining the diverse ways by which, from 1780, the royal of¬-
cials (“Intendentes” and Subdelegados) progressively took over the administration of the communal
treasuries of the Indian towns.
Rebellion of 1810, Colonial Debts, and Bankruptcy of New Spain 247

Table 8.4. Loans and Donations to the Crown by the Indian
Towns of Mexico, 1780“1810 (in Pesos)


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