# Mexico and its reconstruction/Chapter 15

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CHAPTER XV
THE FOREIGN COMMERCE OF MEXICO: BEFORE DIAZ
Commerce is the lifeblood of governments. Without it public revenues and public works are impossible. Through all of Mexico's history as a colony and through much of her independent existence this truism was not appreciated. Through practically the entire colonial period the mother country sought to stifle the economic development of the great region to which it had given its name, or at least to confine it to such narrow, prescribed channels that no commerce could develop proportionate to the great latent possibilities of the territory.
The first half-century of independence brought little improvement, for though the policy of throwing the country open to world commerce was adopted, its domestic troubles and the disasters of its foreign relations shut off the development that might have occurred. Foreign capital was unwilling to trust itself in the midst of the revolutionary storms, and domestic enterprise did not have a chance to show its abilities.
A consideration of the unfortunate commercial conditions, which prevailed before the Diaz régime, is necessary for an understanding of the present-day economic problems that confront the republic. They indicate the difficulties that faced the new government in its efforts ​to shake itself free from the past, and they show the origin of many of the limitations under which commerce continues even to the present day.
Like other colonizing nations of the age of discovery, Spain sought to keep for herself all the advantages of her new possessions. To do so, she shut out all but Spaniards, and even trade with Spain was allowed only under strict regulation. Seville and Cadiz were made the only ports of entry in the home country, and only through Vera Cruz could the commerce pass into Mexico. This system of control lasted, with few exceptions, for about two and a half centuries. There were violations by large numbers of smugglers, but in theory there was but one recognized door through which the regular trade of Mexico could pass. Boats first went out singly, but later, for mutual protection against pirates and to avoid frauds in the revenue, they were required to sail in fleets. Not until the so-called ordinance of free commerce issued by Carlos III on October 12, 1778, did the old system nominally come to an end.
Concerning the character and value of this early trade there are no satisfactory data. For the first 50 years little more than an average of one boat a year went to Mexico, taking a cargo largely made up of supplies and armament and returning with native products about the character of which there is little available information. For the two centuries preceding 1778 the records are almost equally unsatisfactory. There appears to have been a steady rise in the tonnage of the fleets sent in the ​last 70 years, which probably reflects a rise in the value of the commerce. Precious metal shipments from Mexico increased. There are lists of the goods carried by some of the later fleets. The last fleet under the old monopoly system, which arrived in 1776 and returned in 1778, carried to Mexico a cargo in which the chief elements were quicksilver, iron, and iron manufactures. The exports from Mexico in this year were—first of all—silver, to the amount of over 1,680,000 pesos on the king's account and 9,800,000 pesos for individuals. There were sent 232 tons of copper and some gold, tin, sulphur, red ochre, indigo, wood, cotton, wool, and hides. Two and a half centuries of Spanish rule had developed in Mexico only one important resource—metals—among which silver, which has been even up to our own day the connotation of Mexican commerce, easily held first rank. Other raw materials played an unimportant part, and local manufactures then, as in all the previous history of the country, were conspicuous by their absence.
The legal position of Mexican commerce in the closing years of the colonial period was much more favorable than before. To be sure, free commerce did not mean what the words mean to us, but the trade was opened during these years to more than a dozen cities of Spain; Vera Cruz ceased to be the only port of entry; and the restrictions on coastwise trade were relaxed. Trade, however, followed much in the old channels. Local society had not been leavened by the conquerors. The coastwise trade did not develop; trade with the world at large was not yet free; and Vera Cruz, that "unwholesome town" with its "disagreeable anchorage among ​shallows" continued to be the port at which all but a small part of the foreign commerce entered and from which the exports of chief value were shipped.
One other branch of Mexican trade in the colonial era deserves mention—the commerce with Asia, which the mother country always looked upon with jealousy but which it felt it necessary to allow in spite of the fact that it drained off part of the highly valued silver production of Mexico and brought back from the East textiles that competed with her own manufactures. This was the trade through the galleons, which sailed usually from Acapulco for the assistance of the unprosperous colony in the Philippines. The Spanish merchants always looked upon this commerce as an unavoidable evil at best. In 1593 a royal decree confined the trade to two ships a year, in which not more than 500,000 duros of silver could be sent in return for the Chinese goods which they brought to Mexico. Except as to the number of ships, the government's regulations of this trade were always observed in the breach. The officials in Manila and in Mexico lent themselves to all sorts of evasions. Shipments of as much as 4,000,000 pesos in a single year are reported to have gone to the Philippines.
After the middle of the eighteenth century the ​restrictions on trade were gradually relaxed but the commerce between Mexico and the Far East was never prosperous in the colonial era, nor did it cover even as wide a range of articles as the trade with the home country. Silver went westward, also some iron, cochineal, cocoa, wine, oil, and wool. Eastward the cargo was chiefly of silks. Smaller quantities of spices, china, and other Oriental wares were imported.
Almost a half-century passed between the ordinance of free commerce of 1778 and the establishment of the republic, but the actual development of commerce under the new conditions was disappointing. Statistics are incomplete and the totals were probably greater than the official returns show, but they were far from satisfactory. In the latter portion of the period, 1796 to 1820, the average announced value of imports was 10,000,000 pesos, that of the exports about 11,000,000. The continuance of the policy of shutting out foreigners, the troubles of the government at home, international conflicts, and an illiberal policy in Mexico itself prevented the growth that might have occurred.
The main characteristics of foreign commerce were unchanged. Trade went by Vera Cruz to Acapulco. It continued to go in fleets. The exports were silver plus some raw materials; the imports were ​manufactured goods. Foreign trade did not touch the Mexican people in their daily lives. There was nothing to indicate that the trade of Mexico with the more advanced countries would soon assume the character of their trade with each other. Even in amount the trade was disappointing and showed no tendency to increase; the true economic development of Mexico was still unbegun.
The statistical record of Mexican commerce for the first half-century of independence is highly fragmentary, due partly to a failure to realize the importance of such a record and partly to the disturbed conditions in the life of the republic. Plans for publications, bravely undertaken, were seldom continued for more than a few years. For the period 1828-53, a quarter of a century, no publication of a commercial balance of the trade of the republic occurred.
What the trade developments were is further obscured by the shifting tariff system and by the fact that the customs house accounts were often neglected completely when revolutionary forces got control of the ports. There were, moreover, special rates collected in certain ports of entry and special remissions of taxes to persons and places. Within the country also the internal customs houses collecting the octroi taxes, historically known as alcabalas, were a burden on commerce, the effect of which it is impossible to estimate.
The new republican government threw open more ports than the colonial administration and allowed the general entry of foreign owned ships. On the other hand, the general tariff policy, if that phrase can be used in connection with anything so capricious and illogical ​as the early Mexican tariffs, was as distinctly illiberal as the navigation policy was progressive. Revenue had to be raised and the import dues were the main reliance. Protection of industries existing and to be born was also alleged to be a motive back of the customs charges. As a result the customs taxes were high, so high in many cases as to prohibit honest importation, lessen the income to the public treasury and make smuggling a highly profitable and not disgraceful business. Some lines of goods, and for a time the list showed a tendency to grow, could not be imported at all. Of these there were 245 items in the tariff of August 14, 1843. In spite of the "protection" thus afforded, local manufacture did not grow. The only industry which did take root was cotton manufacture, which began in a small way under the stimulus of a special subvention included in the tariff laws of April 6 and October 16, 1830.
A careful estimate of the average annual import trade for the first quarter-century of independence puts the figure at 20,000,000 pesos. The chief countries contributing were Great Britain, which apparently sent over half of the total; the United States, which sent one-fifth; and France, which sent about one-eighth. Textiles were the most important item from Europe. The United States trade was more varied. It suffered a sharp decline in the latter years of the period due to the political difficulties which finally resulted in war.
Import trade in the second quarter-century of independence was still far from prosperous. Revolutions, ​frequently changing tariffs, and the uncertainty of the rates that any shipment might have to pay continued to make importation into Mexico a gambling business. The disturbing influence of the Free Zone established on the northern border was added to the already complex trade problems after 1858, and the French intervention made conditions, if possible, still worse. Only with the coming of the Diaz government were fairly stable rates of customs established. Then also fairly reliable customs reports appeared, the first of which was published in 1878.
Textiles were still the most important item imported. They made up, at that date, 54 per cent of the total. Hardware, machinery, and metal goods formed 20 per cent, and groceries and liquors 16. Great Britain still led in textiles, which were the great bulk of her exports to Mexico. Local manufacture, however, under the high protection and unusual prices obtainable during the American Civil War, had established itself and, in certain lines widely used by the common people, was driving the foreign goods out of the market. Metal manufactures still came almost exclusively from abroad. Railway iron and steel came from England, engines and cars from the United States. The latter, even at this early time, took the lead in the shipment of agricultural machinery, and Germany led in hardware. The groceries trade had already found the channels in which it has to a large degree remained. Flour, breadstuffs, and canned provisions, at the end of the pre-Diaz period, came chiefly from the United States, wines and spirits from France, and olives and olive oil from Spain. ​The quarter-century before the Diaz régime saw a lively international contest for Mexican imports. In 1853 it appears that, of the total value of some 26,000,000 pesos. Great Britain furnished almost 50 per cent and France and the United States about 17 per cent each. The German states then contributed about 7 per cent. Thereafter there were various ups and downs in which the United States definitely forged ahead of France in the middle '70s and in 1878 passed ahead of Great Britain, never again to be overtaken. France, meanwhile, fell to the position of a minor competitor. For her and for Great Britain the advance of the railways, then being planned in the north, meant a steadily growing handicap in competition for Mexican trade.
Turning now to the export trade during the first half-century of Mexican independence, we find statistics as unsatisfactory as in the case of imports. They are, in fact, so unsatisfactory that the best method of arriving at the character and value of the goods that were sent abroad is to study the returns of imports from Mexico as published by her chief customers: Great Britain, France, and the United States. The shipments in the first quarter-century of independence were unimportant, except for precious metals and cochineal. In the second a better showing was made. A greater variety of articles made their appearance—earnest of what would occur once the country was opened up to foreign commerce.
Between 1850 and 1878 a sharp international rivalry went on between Great Britain, the United States, and France for the control of both of the branches into which ​Mexican exports naturally fall. In buying merchandise from Mexico the countries ranked in the order named at the beginning. Under the stimulus of the high prices obtainable during the American Civil War the trade of the first two was greatly increased, and Great Britain shot far ahead of her competitors. At the end of the conflict trade values fell again and in 1867 the three were in the same relative positions as a decade before. Two years later, however, the United States passed Great Britain, taking a lead which was to be greatly accentuated by the opening of the railway era. By 1881 the United States held a share almost as great as that of the other two nations combined.
In the bullion and specie trade the United States took the lead earlier for reasons largely connected with the monetary policy of the country. In fact, by 1857 the bullion purchases of Great Britain and France were almost negligible. During the Civil War period the American share declined rapidly and the monetary legislation of the various countries in the years following made the course of silver shipments highly unstable. Beginning with 1876, shipments to the United States regularly exceeded those to either France or Great Britain.
Compared to the total import and export trade at the end of the first quarter-century of Mexican independence, the showing in the early '70s was satisfactory. Imports were somewhat less than 30,000,000 pesos in ​1872-3. The exports to the three chief customers averaged about $27,000,000 for the five years ending 1876. But, though the relative gain was good, the actual increases in both lines were unsatisfactory. Fortunately fibers, coffee, hides and skins, and valuable woods were increasing in importance in the export figures foreshadowing a time when the products saleable abroad would have greater variety.
It is hard for us to realize now the handicaps under which commerce was carried on in Mexico in the pre-Diaz period. Goods could be transported only at great expense. Only those that combined high value with small bulk could stand the cost of carriage for any great distance and the most important of even these were so heavily burdened with transportation costs and internal taxes that production for more than local use was profitable only under the most favorable natural circumstances.
The commercial situation was like that of the pioneers who settled beyond the Alleghanies in the early years of the United States and found that the cheapest way for them to market their corn was to change it into whiskey so that transportation charges might be as low as possible. The conditions were similar except that there existed in Mexico no navigable rivers that might serve as natural highways by which to reach the sea and the outside world. Even after the middle of the century litters carried by mules or men were used for passenger travel between Vera Cruz and interior points and ​reliable diligences were still rare. In 1878, long after the resources of her northern neighbor had been tapped, there was still no railway net and the local highways were seldom worthy of the name. Transportation by pack mules, or at best by wagons drawn by mules or oxen, was slow and costly but the only means available.
Those who had dealings requiring the shipment of money long distances, and this included, of course, all engaged in foreign trade, found the transfer of credits a great handicap. Exchanges by draft were not generally understood or used. A fair average of the expense for interior remittances from Mexico City cited in 1878 was eight to ten per cent to Chihuahua, five or six to Morelia, and four or five to Oaxaca. If money went abroad, the charge was still greater. In 1868 the taxes and cost of transportation of silver sent from Mexico City to the Bank of England were 25 per cent of the value of the shipments.
Conditions were rapidly developing to the northward which were sure to bring great impetus to Mexican trade, and at least partially remove its disadvantages. The United States was beginning to come into the market for raw products and to sell her manufactures. Regular steamship communications, discontinued during the Civil War, were reestablished in 1868 and the railroads at the close of the pre-Diaz régime were breaking their way through the southwest toward the northern frontier of Mexico. To assure a great increase in the import and export trade of Mexico only the establishment of order and a better system of communications within the country were needed.
* ↑ Miguel Lerdo de Tejada, Comercio esterior de Mexico desde la conquista hasta hoy, Mexico 1853, p. 8.
* ↑ For discussions of the commerce of this period see: Alexandre de Humboldt, Political Essay on the Kingdom of New Spain, London, 1814, 2d ed., vol. 1, p. cxvii, and vol. 3, p. 492; Chappe D'Auteroch. Voyage to California, London, 1778, pp. 20-1; Henry Ker, Travels Through the Western Interior of the United States from the Year 1803 up to the Year 1816; with a particular description of a great part of Mexico, or New Spain, Elizabethtown, N. J., 1816, pp. 222-224; Miguel Lerdo de Tejada, op. cit., passim.
* ↑ Chester Lloyd Jones, "Spanish Administration of Philippine Commerce," Proceedings of the American Political Science Association, vol. 3, 1906, pp. 180-193. The intercolonial trade from Mexico to South America was negligible. Shipments of cocoa were made in later years from Caracas to Mexico and some traffic developed with Cuba.
* ↑ Ibid., p. 52 et seq.
* ↑ Exports of metals, like imports, doubtless would have shown a much better total but for the unfortunate taxing system—one that discouraged honest enterprise and encouraged smuggling.
* ↑ Calculated from the import returns reported for the United States, Great Britain, and France.