From Silver to Cocaine: Latin American Commodity Chains and the Building of the World Economy, 1500-2000

From Silver to Cocaine: Latin American Commodity Chains and the Building of the World Economy, 1500-2000

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Demonstrating that globalization is a centuries-old phenomenon, From Silver to Cocaine examines the commodity chains that have connected producers in Latin America with consumers around the world for five hundred years. In clear, accessible essays, historians from Latin America, England, and the United States trace the paths of many of Latin America’s most important exports: coffee, bananas, rubber, sugar, tobacco, silver, henequen (fiber), fertilizers, cacao, cocaine, indigo, and cochineal (insects used to make dye). Each contributor follows a specific commodity from its inception, through its development and transport, to its final destination in the hands of consumers. The essays are arranged in chronological order, according to when the production of a particular commodity became significant to Latin America’s economy. Some—such as silver, sugar, and tobacco—were actively produced and traded in the sixteenth century; others—such as bananas and rubber—only at the end of the nineteenth century; and cocaine only in the twentieth.

By focusing on changing patterns of production and consumption over time, the contributors reconstruct complex webs of relationships and economic processes, highlighting Latin America’s central and interactive place in the world economy. They show how changes in coffee consumption habits, clothing fashions, drug usage, or tire technologies in Europe, Asia, and the Americas reverberate through Latin American commodity chains in profound ways. The social and economic outcomes of the continent’s export experience have been mixed. By analyzing the dynamics of a wide range of commodities over a five-hundred-year period, From Silver to Cocaine highlights this diversity at the same time that it provides a basis for comparison and points to new ways of doing global history.

Contributors. Marcelo Bucheli, Horacio Crespo, Zephyr Frank, Paul Gootenberg, Robert Greenhill, Mary Ann Mahony, Carlos Marichal, David McCreery, Rory Miller, Aldo Musacchio, Laura Nater, Ian Read, Mario Samper, Steven Topik, Allen Wells

Product Details

ISBN-13: 9780822388029
Publisher: Duke University Press
Publication date: 07/18/2006
Series: American Encounters/Global Interactions
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 384
File size: 2 MB

About the Author

Steven Topik is Professor of History at the University of California, Irvine. His books include The World That Trade Created: Society, Culture, and the World Economy, 1400 to the Present (with Kenneth Pomeranz) and Trade and Gunboats: The United States and Brazil in the Age of Empire.

Carlos Marichal is Professor in the Centro de Estudios Históricos at El Colegio de México. He is the author of A Century of Debt Crises in Latin America: From Independence to the Great Depression, 1820–1930 and numerous books in Spanish.

Zephyr Frank is Assistant Professor of Latin American History at Stanford University. He is the author of Dutra’s World: Wealth and Family in Nineteenth-Century Rio de Janeiro.

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Latin American Commodity Chains and the Building of the World Economy, 1500-2000


Copyright © 2006 Duke University Press
All right reserved.

ISBN: 978-0-8223-3753-9

Chapter One

The Spanish-American Silver Peso: Export Commodity and Global Money of the Ancien Regime, 1550-1800

Carlos Marichal

THE LEGACY OF the monetary regime of the Spanish Empire is not only an important chapter in world economic history but also key to an understanding of premodern monetary systems. The international diffusion of the Spanish-American silver peso between the sixteenth and eighteenth centuries transformed it into what could be termed an almost universal metallic money. The reasons for the global trade and circulation of this commodity money can be explained by the dynamics of supply and demand. On the supply side, the silver mines of Spanish America were the richest in the world and allowed for a voluminous and rising production of high-value bars and coins for several centuries. On the demand side, it is clear that silver and gold were long the most highly valued money commodities in ancien regime societies and economies, since metallic currencies tended to be dominant as media of exchange in a large range of transactions. In thisregard, analysis of the extraordinary historical and geographical trajectories of the silver peso in the Americas, Europe, the Middle East, and Asia between the sixteenth and early nineteenth centuries can elucidate important aspects of pre-modern processes of globalization.

Indeed, historians have clearly linked silver to the origins of a world trading system from the sixteenth century. As two researchers have argued: "Global trade emerged [in the late sixteenth century] when all important populated continents began to exchange products continuously-both with each other directly and indirectly via other continents-and in values sufficient to generate crucial impacts on all the trading partners. ... The singular product most responsible for the birth of world trade was silver."

Certainly this hypothesis may appear debatable, since in fact such products as silk, salt, spices, and gold had already been traded for centuries across Europe, the Middle East, and Asia. But there is no doubt that it was not until the New World exports of silver and gold began to generate large transatlantic and transpacific trade flows that the full circle of global commerce was joined, making world trade a reality. Given the key role of precious metals as both commodities and money, it is not altogether surprising that they should have played such an important role initially and should have continued to do so for centuries.

Silver and gold coins have always competed with other monies but were the most esteemed in practically all ancien regime societies because they fulfilled the three traditional functions of money most effectively. Their durability and high unit value allowed them to serve as an excellent medium of exchange. In addition, their universal acceptance made them the measure of most units of account, since most metallic monies came to be measured by relative weight of silver or gold. Finally, as a store of value, silver and gold were highly prized, and therefore had universal demand. It is well known that a large variety of monies were circulating in the world in the period under consideration (1500-1800), including metallic currencies minted by states, commodity money in the shape of products (cotton, tobacco, cowry shells, cacao, etc.), and bills of exchange created by merchant bankers. The varied nature of monies meant that many clients placed a premium on a money with an intrinsically high metallic value and a relatively stable value. In many states silver and copper coins were systematically debased and hence soon lost their attraction for international trade. In a few cases such as China, where there had been a large circulation of official paper money, the paper currency could not be used outside the Chinese Empire. In other cases-in Europe, the Middle East, Africa, and Asia-private monies issued by merchants (whether bills or promissory notes or tokens) were extremely useful to square accounts on trade yet had a limited or specific circulation outside of certain markets.

A premium, hence, tended to be placed on metallic currencies that were not debased. Indeed, perhaps the key reason for the international success of the Spanish-American silver peso was the fact that rising volume of production from the sixteenth century on was accompanied by maintenance of high quality, as assayers everywhere attested. Contemporary research testifies to this. Marie Thérèse Boyer-Xambeu and her colleagues concur, noting that "Spanish coins exercised their role as international monetary standard (reference point) all the better insofar as their quality and official exchange rates remained virtually fixed. This fixed value was absolute for the silver real from 1497 onwards and during three centuries."

High-quality (almost pure) silver and gold coins had extraordinary demand among several groups, in particular (1) merchants involved in long-distance trade, (2) international merchant bankers who sought profits in arbitrage as a result of differentials in silver/gold ratios, (3) states that needed precious metals for their own coinage and for payment of armies, and (4) producers of commodities with high international demand. From the early sixteenth century to the early nineteenth, the Spanish crown controlled the territories with the richest mineral resources in precious metals, although it should be recalled that Spain did not have a monopoly on silver. For example, silver mines in Central Europe were highly productive in the late fifteenth and early sixteenth centuries. Similarly in Asia, Japan provided China and India with a large supply of silver from 1540 to 1640. Nonetheless, Spanish America produced more silver, on a more regular basis and for a longer time, than any other region of the world.

The present essay begins with a look at key factors in silver production in Spanish America during the colonial period, including location of mineral resources, capital, labor, and technology. A second section focuses on the production of money in the Spanish-American mints. The remainder of the essay deals with the international trade in silver during the colonial era, demonstrating that the demand for the silver peso as commodity money was a worldwide phenomenon: the export of silver pesos from Spanish America to Spain and Western Europe was only one stage in a complex trajectory of the circulation of this universal money of the ancien regime. Many silver coins and bars also went to the Baltics, Russia, the Ottoman Empire, India, and China, the latter two states absorbing the largest volumes of silver. The precious metals also traveled for centuries across the Pacific Ocean via the Manila galleon to the Philippines and hence to China. Finally, it should be recalled that there was also widespread use of silver coin within the Americas, both in Spanish America and in the thirteen Anglo-American colonies. In fact, the United States dollar can be considered a descendant of the long-famous and once-dominant Spanish-American silver peso.


I have suggested that from the sixteenth century to the end of the eighteenth century, Spanish America provided the bulk of silver essential to the functioning of metallic monetary systems around the globe. According to the frequently cited estimates of the German scientist Alexander von Humboldt (published in 1811), total registered and unregistered silver production in the hemisphere between 1492 and 1803 probably surpassed four billion pesos. More recent estimates coincide: Denis Flynn and Arturo Giráldez argue that "Spanish America was the source of approximately 150,000 tons of silver between 1500 and 1800, comprising perhaps 80 percent of world production."

Spanish America and Brazil also produced a considerable volume of gold, but much less gold than silver and much less as a percentage of world production. During the sixteenth and seventeenth centuries the gold production of the western hemisphere represented only between 10 percent and 20 percent of world totals. The situation changed dramatically during the eighteenth century. For over fifty years (1720-70), Brazil was the world's largest producer and exporter of gold, providing close to 60 percent of global totals. In itself, this Brazilian gold boom constitutes an important chapter in world monetary history, as it has been linked to the early adoption of the gold standard by Portugal and Great Britain in the eighteenth century. However, the emphasis of the present chapter is not on gold but on silver.

What explains the fact that Spanish America became the world's main supplier of silver so rapidly? A first explanation is simple enough: factor endowments. Several of the mountainous regions of Mexico and Peru, in particular, were among the richest in the world in minerals with high silver content. Moreover, the exploitation of these resources was not limited by significant constraints. The technology for extraction was relatively simple: mine tunnels were dug by pick and shovel, assisted by powder explosions to blow apart large rocks. The refining of the minerals was carried out by traditional smelting methods but increasingly with mercury amalgamation, as developed in the mid-sixteenth century in Mexico and subsequently applied in Peru.

Capital for investment in the mines was made available consistently by merchants and entrepreneurs willing to risk money in what promised to be an extremely lucrative business. Peter Bakewell, David Brading, Louisa Hoberman, and Frédérique Langue, among others, have published extremely detailed and stimulating historical studies on the merchant and mining elites that were active in dynamic mining regions such as Potosí, Zacatecas, and Guanajuato. The rapidity with which the mining centers stimulated the development of regional economies and trade from the mid-sixteenth century was notable, as first demonstrated in a set of classic studies by Carlos Sempat Assadourian, which have given birth to an abundant historical literature. Provisioning of the mines with mules, food, salt, powder, mercury, and other products soon transformed the economic landscape of highland regions of the viceroyalties of Peru and Mexico that profited from silver literally for centuries.

There were few labor constraints to the development of the mines. In the first place, it should be emphasized that the workforces required for the functioning of the silver mines were relatively small: the greatest silver mine of all time, that of Potosí in Upper Peru (today's Bolivia), produced large quantities of precious metals in the late sixteenth century with a total of some 13,000 forced laborers. Subsequently, wage laborers also were hired to carry out the exhausting work in the mines situated at over 12,000 feet above sea level. According to the careful research of Enrique Tandeter, approximately half of the laborers in eighteenth-century Potosí were free workers who received wages, but half remained forced laborers, recruited by the Spanish officials using the colonial system of the mita, which obliged many Peruvian peasant communities to provide men for diverse tasks for which they received virtually no pay.

In Mexico, on the other hand, practically all mineworkers were paid from the mid-sixteenth century on. Nonetheless, in the eighteenth century, the total number of mineworkers in the most important silver producer, the viceroyalty of New Spain (Mexico), did not surpass 50,000 men, about 1 percent of the total population of this large territory. In 1790 the greatest silver mine of the viceroyalty, La Valenciana of Guanajuato, employed approximately 3,000 workers to produce more than 2 million pesos of silver per year.

In summary, in respect to resources, capital, technology, labor, and economic linkages, silver mining in Spanish America was a complex and quite sophisticated operation from the start. Moreover, in respect to profit/capital ratios, it was perhaps the world's most lucrative productive activity for decades, if not centuries. According to Flynn, the costs of production did tend to increase in relation to real value of silver production between 1540 and 1640, after which there was a three-decade decline in the industry. However, after 1670 many silver mining regions once again recovered and spurred production to new heights. By the end of the eighteenth century, Mexican mines were producing silver to the tune of some 20 million pesos per year, a higher average than at any time in the colonial era. And this was at a time when the prices of silver (in relation to the prices of other goods) were rising systematically, making it ever more profitable to exploit this mineral wealth.


One of the most striking features of the Spanish imperial monetary regime was the extraordinary stability of the standards and units of account of the metallic monetary system over a period of three centuries. Indeed, it was the high quality of the silver coins of the Spanish Empire that generated an intense and constant international demand for them. The monetary system of the Spanish monarchy was established by the monetary reform of 1497, which conserved the gold ducat as unit of account. But since gold had little circulation, the same reform conserved the silver real as standard money, valued at 34 maravedís; this ratio remained constant for over three centuries. This impressive continuity helps to explain the wide acceptance of the silver peso.

Marc Flandreau has offered a possible explanation for the success of the silver peso as a kind of universal money in the early modern period, suggesting that its quality and stability in value could have made it, in effect, almost a perfect money commodity of the age. The best coins in the ancien regime (such as the florin, ducat, and silver peso) were in much demand because of their quality (fineness), their standardized weight, and merchants' confidence in them. These characteristics were highly prized in a world where monetary circulation was basically metallic or in which letters of exchange were normally liquidated either by other bills or by metallic currency in silver or gold.

In the event, the most extensive state in Europe and the world, the Spanish Habsburg Empire, soon adopted the silver peso as standard currency. As the historian Guillermo Céspedes del Castillo has noted, by the mid-sixteenth century it is possible to note a tendency toward the consolidation of the silver peso, with a value of 272 maravedís, equal to 8 silver reales. In Spanish America, as Roberto Cortés Conde and George McCandless observed, "the most common silver coins were the real and its multiples: the real of two (later the peseta), real of four (half peso), and real of eight (the peso, an ounce of silver). Fluctuating over time, between 16 and 17 silver pesos were equivalent to one gold peso (one ounce of gold)."

One of the reasons for preserving the high quality of coins minted was the desire of the Spanish crown to systematically collect taxes on silver and gold production, avoiding evasion and debasement. Mints had to be places where miners and merchant bankers could take precious metals with confidence, and they had to be in major cities, where there was not likely to be a great deal of contraband. As a result, only a few mints were established in Spanish America: Mexico City (1535), Santo Domingo (1536), Lima (1565), Potosí (1572), Bogotá (1620), Santiago de Guatemala, then the capital of the captaincy general (1731), and Santiago de Chile (1743).

The norms of mintage varied over the centuries. The rather coarse techniques used in the sixteenth century stimulated much clipping of coins. Hence, silver pieces of eight were frequently cut literally into eight triangular pieces or, alternatively, into four pieces of two reales ("two bits") in the eighteenth century. It is extremely difficult to know exactly how much silver was exported from Spanish America in the form of coins and how much in bars or other forms, but over time, the volume of coins increased noticeably. Still in 1708, a French merchant captain noted after a visit to Mexico that he calculated that only half of the silver that went into the Mexico City mint was finally minted, as many traders preferred bars. Such a fact reflected clearly the interchangeability of silver as money and commodity.

Subsequently, however, coinage clearly came to dominate. The new machinery put into the Mexico City mint in 1733 permitted the stamping of almost perfect coins at the same time as assay reached a point of near perfection. The Spanish crown preferred the new system, as it allowed for greater fiscal control. Mintage of coins increased from an annual average of 4 million pesos in 1691-1700 to over 9 million coins in the 1730s. And by the end of the century, the Mexico mint was producing 24 million silver pesos a year, as indicated in Table 1.


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Table of Contents

Introduction. Commodity Chains in Theory and in Latin American History / Steven Topik, Carlos Marichal, and Zephyr Frank 1

1. The Spanish-American Peso: Export Commodity and Global Money of the Ancient Regime, 1550–1800 / Carlos Marichal 25

2. Indigo Commodity Chains in the Spanish and British Empire, 1560–1860 / David McCreery 53

3. Mexican Cochineal and the European Demand for American Dyes, 1550–1850 / Carlos Marichal 76

4.Colonial Tobacco: Key Commodity of the Spanish Empire, 1500–1800 / Laura Nater 93

5. The Latin American Coffee Commodity Chain: Brazil and Costa Rica / Steven Topik and Mario Samper 118

6. Trade Regimes and the International Sugar Market, 1850–1980: Protectionism, Subsides, and Regulation / Horacio Crespo 147

7. The Local and the Global: Internal and External Factors in the Development of Bahia’s Cacao Sector / Mary Ann Mahony 174

8. Banana Boats and Baby Food: The Banana in U.S. History / Marcelo Bucheli and Ian Read 204

9. The Fertilizer Commodity Chains: Guano and Nitrate, 1840–1930 / Rory Miller and Robert Greenhill 228

10. Brazil in the International Rubber Trade, 1870–1930 / Zephyr Frank and Also Musacchio 271

11. Reports of Its Demise Are Not Exaggerated: The Life and Times of Yucatecan Henequen / Allen Wells 300

12. Cocaine in Chains: The Rise and Demise of Global Commodity, 1860–1950 / Paul Gootenberg 321

Conclusion: Commodity Chains and Globalization in Historical Perspective / Carlos Marichal, Steven Topik, and Zephyr Frank 352

Contributors 361

Index 365

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