SECTION IV-COMMERCE AND

MANUFACTURING

THE FOREIGN COMMERCE OF MEXICO

By CHESTER LLOYD JONES, Ph.D.

I. BEFORE DIAZ1

The Colonial Background: Commerce is the life-blood 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 within 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 otherwise 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 therefore necessary for an understanding of the present-day economic problems which confront the republic. They indicate the difficulties which 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 continues even the commerce of 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

1The substance of this discussion of Mexican Commerce appears in Chester Lloyd Jones, Mexico and its Reconstruction, New York, 1921.

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, 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.

Character of Colonial Commerce: Concerning the character and value of this early trade there are no satisfactory data. For the first fifty 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 only less unsatisfactory. There appears to have been a steady rise in the tonnage of the fleets sent in the last seventy years, which probably reflects an increase 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. But, in fact, trade followed much 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.

The Manila Trade: 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 which competed with her own manufactures. This was the trade through the galleons which usually sailed from Acapulco for the assistance of the unprosperous colony in the Philippines. The Spanish merchants always looked upon this commerce at best as an unavoidable evil. 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 regu lations 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, and 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.*

From 1778 to 1821: 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 and 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

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.

each other. Even in amount the trade was disappointing and showed no tendency to increase; the true economic development of Mexico was still unbegun.

Under the Early Republic: 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 was made.

What the trade developments were is further obscured by the shifting tariff system and by the fact that the customs house accounts were often completely neglected when revolutionary forces got control of the ports. There were, also, special rates collected in certain ports of entry and special remissions of taxes to persons and places. Within the country, moreover, 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 as 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.

Imports: 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 European countries. The United States trade was more varied, but

it suffered a sharp decline in the latter years of the period due to the political difficulties resulting finally 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 which any shipment might have to pay continued to make importation into Mexico a gambling business. The disturbing influence of the Free Zone established in 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 appeared, also, fairly reliable customs reports, the first of which was published in 1878.

Textiles were still the most important item imported. They made up at that date fifty-four per cent of the total. Hardware, machinery, and metal goods formed twenty per cent, and groceries and liquors sixteen. 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 date, 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 control of Mexican markets. In 1853 it appears that, of the total value of some 26,000,000 pesos of imports, Great Britain furnished almost fifty per cent, and France and the United States about seventeen per cent each. The German states then contributed about seven per cent. Thereafter, there were various ups and downs, in which the United States definitely forged ahead of France in the middle seventies. 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 which were now being planned in the north meant a steadily growing handicap in competition for Mexican trade.

Exports: 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 unsatis