Trade is the lifeblood of this kingdom, and from it flows the prosperity of the realm.
Viceroy Cerralvo, 1634104
Colonial Mexico engaged in extensive trade with the mother country and emerged as the center of a large trading region including the Caribbean and extending south to Peru and west to the Philippines. The Crown structured Mexico’s foreign trade to benefit Spain, disregarding and sometimes directly opposing the needs of the colony. The then-dominant mercantilist economic doctrine served to formulate trade policy. Mercantilism, in vogue from the fifteenth to the eight eenth centuries, held that national well-being required a continuous inflow of precious metals, or goods that could be exchanged for them. The mercantilist emphasis on trade surpluses led to severe restrictions on trade between the colonies and the rest of the world.105
Mercantilist thought influenced shipping regulations. For most of the colonial period, the Crown allowed only one port in Spain to trade with the colonies and required that trade to be carried in Spanish-built ships. Generally, Spanish colonies could not trade directly with each other or with other nations and their colonies. Shipping regulations limited the amount of goods sent to the New World and led to the shipment of luxury goods to maximize profits from the limited space available. Mercantilist regulations and the merchants’ monopoly made commerce enormously profitable and solidified the merchants’ dominant position in New Spain.106
During the sixteenth century, Spain supplied Mexico with food. As Creoles began to produce their own wheat and adapted to the indigenous cuisine, clothes, weapons, hardware, and tools replaced food imports. Clothing constituted roughly half of all imports. Other imported items included iron, steel, paper, honey, oils, cloth, liquors, medicines, olive oil, linen, brandy, beeswax (for candles), and spices such as cinnamon and pepper.107
Silver dominated Mexican exports to Spain. For 300 years, cochineal dye was the second most important Mexican export. This dye, extracted from an insect that feeds on the prickly-pear cactus, produced a brilliant red in fine fabrics used by popes, princes, nobles, and military officers. Ships returning to Spain also carried condiments, spices, sugar, leather, extracts, and purgatives.108
For most of the colonial period, the Crown required vessels carrying goods between Spain and Mexico to sail in convoys. Initially the convoys served as a defense against pirates and later they became a means of regulating trade and ensuring that New World silver arrived in Spain. A single convoy of from sixty to a hundred vessels would leave Spain each year. En route, it would divide, with ships sailing for various Spanish American ports. Between 1757 and 1776, ships arriving in Veracruz carried an annual average of 2,487 tons of merchandise.109
Roughly 1,000 muleteers would meet the convoy. They then hauled the merchandise to a giant trade fair, often in Jalapa, fifty miles northwest of Veracruz and 4,700 feet above it, safely removed from tropical disease. Merchants from Mexico City bought the goods in large lots and stored them in Mexico City warehouses. They then sold their purchases through their own outlets or to other retailers and street vendors.110
In order to increase the tax base and undercut smugglers, the Bourbons eliminated the requirement that ships sail in convoys. Between 1765 and 1776, the centuries-old prohibition on trade between Spanish colonies was also abolished, ushering in what was referred to as “free trade.” Between 1784 and 1795, five times as many ships arrived in Veracruz as had arrived before the elimination of these restrictions. This resulted in an unprecedented influx of European goods, which soon saturated markets and caused a rash of merchant bankruptcies.111
Despite these reforms, heavy taxes remained on goods shipped from elsewhere in Europe to Spain and then from Spain to Mexico. This caused these items to be non-competitive with similar items shipped illegally. The price of a cask of brandy shipped from Barcelona to Veracruz rose in price 183 percent due to duties and taxes. Spaniards, who were the only merchants who could legally ship to the New World, would declare goods to be Spanish when they had in fact been produced elsewhere. This allowed such goods to avoid the 33 percent limit placed on the shipment of foreign goods to the colonies. Foreign traders often not only supplied the goods shipped but the financing, leaving the Spanish “merchants” as only front men. Ship captains failed to list foreign goods when presenting cargo manifests and then colluded with customs guards who boarded their ships on their arrival in Veracruz.
Heavy taxes and limited local production not surprisingly led to widespread smuggling. This smuggling provided colonials with inexpensive goods and colonial officials with bribes, but made local production less attractive and deprived the Crown of revenue. Estimates of contraband in the Atlantic trade ranged from 10 to 100 percent of registered cargo in the years between 1670 and 1700. Smugglers were well organized and savvy. They often appeared just before the arrival of the convoy from Spain, so they could take advantage of pre-convoy scarcity and increased prices.112 Humboldt commented on the smugglers’ efficiency:
A few days and frequently even a few hours are sufficient for the crews of fishing vessels to form connections with the inhabitants, for the sale of English goods, and to take in ladings of copper, Peruvian sheep, quinine, sugar and cacao. This contraband trade is carried on between persons who do not speak the same language, frequently by signs, with a fidelity very uncommon to the most polished people of Europe.113
Foreigners engaged in smuggling by illegally bringing goods to New Spain. Often goods arrived tax-free by being shipped directly from English ports to Jamaica and then being routed clandestinely to New Spain. Silver smuggled to Jamaica to pay for these goods avoided the legally mandated taxes and duties of 10.5 percent. In other cases, Spanish American merchants illegally shipped goods up and down the Pacific Coast of the Americas. Colonial subjects rationalized such illegality, noting it was better to provide local markets with needed goods at just prices than it was to pay taxes to a corrupt empire.114
Imperial reform, the general growth of Atlantic trade, and colonial prosperity created a shipping boom that lasted until 1795. New Spain’s trade with the mother country increased in value from
13.3 million pesos in 1787 to 20.6 million in 1795. At the end of the century, the commercial sector comprised 16.7 percent of Mexico’s GDP—more than that of mining. After 1795, Spain’s European wars caused a decline in trade between Mexico and Spain.115
The Bourbon reforms undermined the old commercial elite. Mexico City merchants had grown comfortable with rules limiting their number, with restricted supply, and with high prices and high profits. When faced with real competition and provincial merchants being allowed to legally purchase goods in Veracruz for the first time, they petitioned the Crown to reestablish the convoy system and the requirement that goods be shipped through Mexico City. Viceroy Revillagigedo responded that eliminating convoys had produced a notable increase in trade and prosperity. He also noted that some individuals had suffered due to ignorance, poor financial administration, and poor mining investments, but that free trade should not be abandoned because of such individual misfortune. Many established merchants moved their capital into agriculture and mining rather than facing real competition, and were replaced by an increased number of more competitive merchants.116
Finally, it was a misnomer to describe the replacement for the convoy system as “free trade.” Strict volume limits kept the fabulous potential of trade with Asia in check. Spanish merchants feared they would lose control of trade with Spanish America entirely and successfully lobbied against unlimited trade with Asia. Even more importantly, the prohibition remained on trading outside the Spanish empire, despite the North Atlantic’s emergence as the hub of world commerce. These prohibitions were an obstacle to trade with the rest of the world and therefore seriously constrained Mexico’s growth.117
Free trade reversed the seventeenth-century trend of entrepreneurs producing for the internal market. Instead a trans-Atlantic focus reemerged, retarding continued internal development. Increased taxation resulting from the Bourbon reforms also slowed internal development. Tax collection decreased coinage in circulation, thus complicating business transactions.118
During the early colonial period, given the extreme scarcity of mules and horses, Indian bearers (tlamemes), as in pre-Conquest times, hauled freight. Carlos V felt such a practice to be inhuman and banned it, even if the Indians worked on a voluntary basis. However, Indians continued to haul freight since no replacement for them existed. The Crown later accepted this and tried to prevent abuses. Finally, in the seventeenth century, an increased supply of mules and burros allowed the replacement of human carriers.119
After 1550, carts were introduced, although since they required good roads and bridges, they did not replace mules. In the north, flat land and the small number of rivers permitted the extensive use of carts. Bad roads elsewhere limited their use. A contemporary observer commented on the highway between Mexico City and Veracruz, the most important road in the colony: “It is a disgrace to the Spanish nation, that at the end of two centuries and half, this road continues to be as neglected as at the time of the Conquest, full of dangers, embarrassments, and a thousand inconveniences.” The deplorable condition of the roads resulted from the great differences in altitude and torrential rains falling on areas that the roads crossed and from the Crown’s failure to understand the vital role roads played in economic development.120
Since carts could not traverse the roads, mules carried freight from the ports of Acapulco and Veracruz to Mexico City. At the close of the eighteenth century, 75,000 mules plied the Acapulco—Mexico City route and 70,000 hauled cargo between Veracruz and Mexico City. These beasts of burden competed with humans for available corn. Some haciendas specialized in breeding mules and growing fodder for them.121
Mule teams became a feature of the Mexican landscape. Indians and castas found that becoming a muleteer was one of the few routes open for an Indian commoner to accumulate wealth. Each mule carried roughly 350 pounds. Having to follow routes that provided water and pasture slowed mule trains. The trip by mule train from Veracruz to Mexico City required sixteen to twenty days.122
This reliance on expensive mule transport prevented the formation of an integrated market system, added to the cost of Mexican exports, and greatly increased the prices of goods sold in
Mexico. Transporting imported wine from Veracruz to Mexico City added 70 percent to its price. A third to a half of the cost of grain used in the mines of Zacatecas resulted from transport charges. Transport costs precluded the shipment of low-cost agricultural products much beyond a hundred miles. Only luxury products and high-value goods could be sold colony-wide. In addition to silver, goods transported for sale over long distances included leather and suede produced in Jalisco and woolens from Guanajuato. Further to the north, the main trade items were leather, livestock, and silver.123
Only in the eighteenth century, with technical improvements in shipbuilding, did shipping around the southern tip of South America became commonplace. As a result, for 250 years before that, from 1565 to 1815, it was Mexico that linked Spain with the Philippines, then a Spanish colony. Goods and personnel would cross the Atlantic to Veracruz, travel by land to Acapulco, and continue to the Philippines. In addition to its transshipment of cargo to and from Spain, Mexico supplied goods to the Philippines and consumed goods shipped from there. To prevent an excessive loss of silver to the Orient and unwelcome competition with Spanish products, the Crown taxed these shipments heavily, limited the amount that could be carried, and only permitted one or two galleons to sail from Mexico to the Philippines each year. Colonists unsuccessfully lobbied for the removal of restrictions on trade with the Philippines (and Peru). As with Atlantic shipping, the Crown could not prevent colonists from engaging in widespread smuggling.124
Each year the ship or ships known as the Manila Galleons would leave Acapulco carrying church and government personnel, along with mail, silver, Spanish wine, Saltillo wool, cochineal, and cocoa. Upon arriving in Manila, these products would be exchanged for goods, most of which were brought to Manila from around Asia on Chinese junks. The Galleons, built in the Philippines from local teak, returned to Mexico laden with silk, brocades, linen, porcelain, furniture, cottons, velvets, satins, damasks and taffetas, jewelry, ivory, furniture, pearls, gold - and silverwork, and spices from the East Indies. When the Galleons returned, the population of Acapulco would swell from 4,000 to 9,000 as merchants flocked in to snap up the imports.125
The Spanish colonization of the New World accelerated globalization. Asian-African maritime trade had persisted for centuries before Europeans rounded the Cape of Good Hope. Then, in 1498, Portuguese sailor Vasco de Gama reached India, and his countrymen began trading with Africa, India, and China. Beginning in the sixteenth century, silver, largely obtained in Peru and New Spain, linked Portuguese and Spanish commerce. The Portuguese paid for textiles in India with silver and then traded the textiles for African slaves who were brought to the New World. Later in the sixteenth century, ships sailing between Acapulco and Manila added a trans-Pacific component to globalization. New World silver also facilitated the expansion of intercontinental trade in which the main participants were England, France, and the Netherlands.
The Spanish silver peso, which circulated in the Americas, Europe, and Asia, became the first truly international currency. In its role as both commodity and currency, the peso facilitated the rapid expansion of world trade. Given its ubiquitous nature, the Congress of the newly independent United States adopted the Spanish peso, under the name “dollar” (which comes from the German Thaler), as its unit of currency.126
World History
