Walker, Bussines As Usual

Business As Usual: The Empresa del Tabaco in Mexico, 1837-44
Author(s): David W. Walker

Source: The Hispanic American Historical Review, Vol. 64, No. 4 (Nov., 1984), pp. 675-705
Published by: Duke University Press
Stable URL: http://www.jstor.org/stable/2514750
Accessed: 15-01-2017 00:09 UTC
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted
digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about
JSTOR, please contact support@jstor.org.
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
http://about.jstor.org/terms
Duke University Press is collaborating with JSTOR to digitize, preserve and extend access to The Hispanic
American Historical Review
This content downloaded from 200.10.244.14 on Sun, 15 Jan 2017 00:09:44 UTC
All use subject to http://about.jstor.org/terms
Hispanic American Historical Reviewc
64 (4), 1984, 675-705
Copyright ? 1984 by Duke University Press
Business As Usual: The Empresa del

Tabaco in Mexico, 1837-44
DAVID W. WALKER
HE royal tobacco monopoly in New Spain was created by

decrees in 1764 and 1765 as an emergency measure to
finance Spain's bankrupt treasury in the aftermath of the
Seven Years' War. The monopoly proved to be a fiscal bonanza, generat-
ing $120 million in net revenues between 1766 and i8io. With annual
gross sales sometimes exceeding $8 million, the monopoly was the largest
commercial and manufacturing enterprise in New Spain. As an agency of
the government, the monopoly minutely regulated every aspect of to-
bacco production and distribution. It restricted production to a select
body of planters; employed thousands of workers in large state-owned fac-
tories to manufacture cigars, cigarettes, and snuff; outlawed all retail sales
except those through licensed outlets; and recruited a sizable corps of bu-
reaucrats to manage its extensive operations.'
While a number of studies of the colonial monopoly have appeared in
recent years, the several conservative attempts to maintain and revive the
monopoly after independence have been neglected. This is unfortunate
for two reasons. First, the tobacco monopoly was one element in the
larger colonial legacy that hindered economic growth in nineteenth-
century Mexico. Second, the operations of the national monopoly nur-
tured divisive political conflicts that helped to keep the Mexican body
politic in a near continuous state of agitation.2 This article analyzes the
multiple controversies inspired by the Empresa del Tabaco, the largest
1. For an overview of the workings of the colonial monopoly, see David Lorne
McWatters, "The Royal Tobacco Monopoly in Bourbon Mexico, 1764-181o" (Ph. D. Diss.,
University of Florida, 1979); and Fabian de Fonseca and Carlos de Urrutia, Historia general
de la Real Hacienda, 6 vols. (Mexico City, 1845-53).
2. For the economic history of nineteenth-century Mexico, see John H. Coatsworth,
From Backwardness to Underdevelopment: The Mexican Economyy. i8i0o-190o (forthcomn-
ing); and idem, "Obstacles to Economic Growth in Nineteenth-Century Mexico," American
Historical Review, 83 (Feb. 1978), 8o- loo. For a study of the problems of doing business in
early national Mexico, see David W. Walker, "Kinship, Business, and Politics: The Martinez
del Rio Family in Mexico, 1824-1864" (Plh.D. Diss., University of Chicago, 1981).
676 HAHR I NOVEMBER I DAVID W. WALKER
and best organized of various joint-stock companies formed by private en-
trepreneurs to exploit exclusive rights to control the cultivation, manufac-
ture, and sale of tobacco and tobacco products in Mexico between 1830
and i856.3
The Contenders
Three groups with distinct and largely incompatible interests battled

to control the tobacco monopoly after Mexican independence in 1821.
Two of these, the planters and the bureaucrats, were progenies of the co-
lonial monopoly. The royal monopoly, the real renta, had restricted to-
bacco cultivation in New Spain to a few square miles of land adjacent to
the towns of Orizaba and Cordoba in a steep mountain valley located
along a major trade route in the intendency of Veracruz. During the last
decade of the colonial era, official delegations from those towns, the villas
cosecheras, negotiated annual contracts with the real renta and, on that
basis, assigned production quotas to individual planters and generally di-
rected life in the tobacco-growing districts. Faced with repeated confron-
tations over price and enforcement policies, the crown attempted to curtail
the influence of the planters' corporate body, the cornun de cosecheros; but
its efforts to replace collective bargaining with a system of individual con-
tracts always met with frustration. Like the planters, the monopoly's ad-
ministrators and other employees had the self-awareness and organiza-
tional resources (with or without formal political recognition) to act as
autonomous agents in defining, promoting, and defending their particular
interests.
The physical devastation and economic stagnation that accompanied
the struggles for independence crippled the operations of the tobacco
monopoly, drained its treasury, and adversely affected the fortunes of the
thousands of persons now dependent upon the institution. Even with
those setbacks, the planters and the bureaucrats mustered sufficient re-
sources in 1821 to thwart attempts to abolish the monopoly or to rent it to
private contractors. They failed, however, to prevent substantial reforms
in 1824.4 The restructured monopoly, a federalist experiment in which re-
3. This article is based on materials consulted in the following archives: Archivo Gen-
eral de la Naci6n, Mexico City; Archivo General de Notarfas, Mexico City; Archivo Judicial
del Tribunal Superior de Justicia del D.F., Mexico City; Archivo de la Secretaria de Rela-
ciones Exteriores, Mexico City; Archive of Carlos Martfnez del Rio, Mexico City; Public
Record Office, London (abbreviated hereinafter as AGN, AN, AJ, SRE, CMRF, and BFO,
respectively).
4. For the planters' complaints about the federal monopoly, see Vicente Prieto, Miguel
Ferndndez, and Jose Maria Mendizdbal, Manifiesto a la naci6n, sobre la renta del tabaco
(Mexico City, 1827).
THE EMPRESA DEL TABACO IN MEXICO 677
sponsibility for marketing tobacco products was shared between the states
and the national government, ended in bankruptcy in 1829. Lacking the
financial and administrative resources to manage the monopoly directly,
the Mexican state now solicited the participation of a new group formerly
proscribed from that jealously guarded domain. Armed with powerful ad-
vantages-access to venture capital, business acumen, and appreciable
political influence-private investors, the empresarios, successfully chal-
lenged the hegemony of traditional interest groups and assumed admnin-
istration of the monopoly in 1830.
Disenchanted with the new managers, the planters joined a liberal
crusade to extinguish the tobacco monopoly in 1833. Free trade, how-
ever, did not produce for the villas cosecheras the prosperity promised by
liberal ideologues. Far from developing an export market, Veracruz to-
bacco had difficulty competing at home. To their dismay, growers discov-
ered that Mexican consumers, if given a choice, overwhelmingly pre-
ferred imported Cuban and Virginia tobaccos to local products because of
their lower prices and superior qualities. Accustomed to an assured mar-
ket, the Veracruz planters had done nothing to improve their product,
nor could they quickly alter the character of Veracruz tobacco or lower the
costs of cultivation. The traditional cultivation areas near Orizaba and
Cordoba had few special advantages other than those bestowed by the
monopoly, and other locations on the Mexican Pacific and Atlantic slopes
could produce cheaper tobacco with the milder, more aromatic flavor pre-
ferred by many smokers. In addition to the glut of foreign imports and
new domestic production, a huge inventory of tobacco accumulated by
the monopoly before 1833 remained on the market to depress prices fur-
ther. As an added aggravation, certain states opted to continue local mo-
nopolies after 1833, and, ironically, the Veracruz planters sometimes
found their efforts to adjust to free trade stymied by regional barriers.
The planters complained that free trade had reduced the villas cose-
cheras to the "ultimate of poverty and misery," converting their "opulent
cities" into stark ruins.5 Because they believed change would cost too
much, the tobacco growers yearned for a return to the old system. Their
movement to revive the monopoly accompanied a larger conservative re-
action by other groups (including the church and the army) to the struc-
tural reforms proposed or implemented by the liberal regime of Valentin
Gomez Farfas in 1833 and 1834. In 1835, a military strongman from Ve-
racruz, General Antonio Lopez de Santa Anna, pronounced against the
5. Vicente Prieto, Manifiesto que el general Vicente Prieto hace de la importancia iy

ventajas que la renta del tabaco debe producir a favor del erario publico y de em111-pleados
y personas particulares (Mexico City, 1836), p. 2.
liberal government he had helped to install in 1833, and, in its place, in-
augurated a conservative shift toward economic policies based on the co-
lonial model.
Under those auspices, the Mexican National Assembly immediately
began debating the restoration of the tobacco monopoly. Denouncing the
"wretched" private company of 1830, General Vicente Prieto, a former
administrator of the monopoly in Orizaba who had been hired as an agent
of the coinan de cosecheros, worked feverishly to pressure the politicians
in Mexico City. Stressing the political costs of ignoring the planters' coun-
sel, Prieto, now a powerful military chieftain, warned the government
that it must disregard the "alluring propositions" made by the empre-
sarios. In a comprehensive campaign to educate the lawmakers, the lobby-
ist promised that if the government followed the advice of the planters-
whose only interests were those of "philanthropy and patriotism"-a
monopoly true to the colonial pattern would "guarantee public tran-
quility, cover the nakedness of many, improve morale, and eliminate the
greater part of the robberies and crimes committed in Mexico City and its
surroundings."" Like the planters, the multitude of managers and clerks
formerly employed by the colonial and federal monopolies looked eagerly
toward restoration of the institution as a means to rehabilitate their per-
sonal fortunes. As self-appointed spokesmen for these bureaucrats, Jose
Mariano Campos and Manuel Prieto offered to Santa Anna in 1835 their
own proposals for regulations governing a state-run monopoly.7 With very
different attitudes toward the problem of management, empresarios resi-
dent in Mexico City also supported a new tobacco monopoly if it were
administered from the capital and if they were not excluded from partici-
pation. With general commerce stagnant and the economy depressed, in-
vestors were anxious to shift their capital into ventures like the tobacco
monopoly. There, in the politicized sector, free-market principles were
suspended, supply and demand schedules fixed, and potential profits
unlimited.
Had Santa Anna remained in power, the Veracruz growers would have
been the principal beneficiaries of the monopoly's reestablishment. But,
owing to a disastrous military campaign in Texas, he was publicly dis-
credited and politically emasculated in 1836. The highly politicized Vera-
cruz group was left to fend for itself, a power to be reckoned with, but
now isolated. The new regime, headed by Anastasio Bustamante, was
plainly more susceptible to the influence of Mexico City empresarios.
6. Ibid., p. 18.
7. Manuel Prieto and Jose Mariano Campos, Manifestaci6n que Manuel Prieto y Jose
Mariano Campos tienen el honor de ernitir para las bases sobre que se debe fundar el nutevo
estanco de tabacos (Mexico City, 1837).
A measure that appealed to those interests in the center, the law ot Janu-
ary 12, 1837, returned the tobacco monopoly to the jurisdiction of the na-
tional government and assigned responsibility for administering the mlo-
nopoly to the newly created Banco Nacional de Amortizacion. With
revenue from the monopoly and from other allotted sources, the bank was
to amortize and withdraw from circulation the badly devalued copper cur-
rency minted by past governments. Enabling legislation, the decree of
April 15, 1837, prohibited the cultivation of tobacco in Mexico except for
the villas cosecheras in Veracruz and extended the ban on the manufac-
ture and sale of tobacco to include departments where local monopolies
had not been in effect after 1833. In these departments the bank began
offering to interested emnpresarios contracts to administer the monopoly
locally. Elsewhere it assumed administration of existing departmental
contracts. 8
The planters quickly appreciated that Mexico City business interests
were the principal beneficiaries of the new legislation. Using the city
councils in the villas cosecheras, the planters worked energetically to an-
nul it or to turn it to their own advantage. To negotiate with the national
government and the bank, the contntn de cosecheros of Orizaba employed
Rafael Argiielles, an attorney whose kin were prominent growers in the
villa. Cordoban planters counted on the services of notable Conservative
politician and influence-peddler Lucas Alaindn. To indemnify planters for
damages from past departmental contracts let by the bank without the ap-
proval of the comnun de cosecheros, Argtielles and Alamain proposed that
the Banco de Amortizacion should rent monopoly rights for the depart-
ments of Mexico, Puebla, Oaxaca, and Veracruz to a company organized
by the two agents on behalf of their clients. After hearing proposals from
other interested parties, the bank, in late September 1837, accepted in
principle a proposition submitted by Argiielles. As subsequently modified
by the bank, the plan called for simultaneous rental of the four depart-
ments with a minimal rent of $6o,ooo paid annually for a fixed five-year
term. After advertising those conditions, the bank scheduled a public auc-
tion of the four departments for October 5, i837.9
Argiielles expected to clinch the deal for the planters at the auction,
but in a spirited session, a Mexico City lawyer, Manuel Castafieda Najera,
8. Manuel Dubldn and Jose Maria Lozano, eds., Legislaci5n inexicatia 6 colecci6n corn-
pleta de las disposiciones legislativas expendidas dessde la independencia de la repfiblica, 34
vols. (Mexico City, 1876-1904), III, 361-363.
9. Address of Argiielles, Oct. 13, 1837; testimony of Banco de amortizaci6n, Oct. 23,
1837, Cosecheros de Orizaba y C6rdoba v. Banco de Amortizaci6n, 1837-1841, AJ, Tabaco;
El Diario del Gobierno de la Repablica Mexicanac (Mexico City), (hereinafter Diario del
Gobierno) Sept. 25, 26, Oct. 20, Nov. 4, 7, 1837.
68o HAHR I NOVEMBER I DAVID W. WALKER
outbid him with an offer to pay $8o,ooo in rent annually. Castafieda
Ndjera secretly represented a company whose actual partners were Felipe
Neri del Barrio, Benito Maqua, Manuel Escandon, Cayetano Rubio, and
Cosme Garay, all prominent businessmen with properties in Mexico City,
Guanajuato, and San Luis Potosi. Their good fortune was no coincidence.
Using the press to attack the Banco de Amortizacion for presumed com-
plicity with Alaman and for undue favoritism toward greedy special inter-
ests in Veracruz, these empresarios had shrewdly cultivated favorable
public opinion.'0 In fact, it was the empresarios, and not the planters,
whose interests were best represented in the appropriate public agencies.
The bank's vice-president and acting director, Francisco Fagoaga, de-
tested the planters, their agents, and their pretensions because of the
personal losses he had suffered as an investor in the 1830 company. More-
over, Barrio, a principal shareholder in the new company, was married to
Fagoaga's niece, and Barrio and Fagoaga were partners in a prominent
Mexico City commercial house.
Arguing that their historic participation in the monopoly entitled
them to special considerations, the villas cosecheras commenced a fierce
campaign to reverse the outcome of the auction. Even as the controversy
intensified, Fagoaga apparently used his influence in the Ministry of the
Treasury to discourage intervention from higher levels of government.
Brushing aside the planters' protests, the Banco de Amortizacion signed a
formal contract on November 7, i837, to rent the four departments to
Castafieda Ndjera's clients. Since Escandon and Maqua soon added to the
company their departmental contracts for Michoacdn and Guanajuato, its
jurisdiction extended over six departments. Christened the Compafifa
Empresaria de los Seis Departamentos, the enterprise began paying rent
and administering the monopoly on June i, 1838.11
In light of the bank's unwillingness to bow to informal pressures
brought to bear by the growers, Argfielles presented their grievances to
the Supreme Court, but no meaningful decision was forthcoming there.
Alleging that continued governmental indifference would reduce them to
serfs of the einpresarios, the cosecheros' last resort was a threat to revolt
if their interests were not protected. Veracruz authorities gave the pro-
testors complete support and flatly refused to publish and enforce na-
tional government decrees relative to the tobacco monopoly. In Orizaba
lo. La Limna (Mexico City) supported the empresarios; El Mosquito Mexicano (Mexico
City) sided with the planters; Diario del Gobierno followed a middle course and published
letters and manifestos front both sides.
11. Diario del Gobierno, Oct. 20, Nov. 7, 1837; Jan. in, 20, 1838; contract, Nov. 7,
1837, Protocolo del Banco Nacional de Amortizaci6n, notary 1no. 286, 1837 (hereinafter cited
as AN-286 (Banco):s.p. (Nov. 7); AN-286 (Banco)-1838:65 (Feb. 27); the company charter
is registered in AN-529-1838:44-48 (Mar. 2).
THE EMPRESA DEL TABACO IN MEXICO 68i
and C6rdoba, the growers continued openly and illegally to sell tobacco
destined for contraband trade. Neither threats of sedition and deliberate
disregard of the law nor copious promises of allegiance to Bustamante
won for the planters outright nullification of the auction. Their tactics did,
however, oblige the national government to intervene. Officials per-
suaded the planters and the company to accept binding arbitration in
January 1838 and staved off, at least temporarily, a dangerous political
confrontation with the department of Veracruz. 12 The settlement required
the empresarios to purchase tobacco exclusively from the comfin de
cosecheros, forbade the use of individual contracts, and, while allowing
for delivery of lower grades of tobacco, provided higher prices for to-
bacco, 6 to 12 percent more than those listed in the contract of November
1837. The empresarios demanded and received from the government
compensation for the added costs of the new concessions. The costs of
subsidizing public peace were high-rent for the four departments was
reduced from $8o,ooo to $35,000 annually, a sacrifice of $225,000 ill pO-
tential income over five years. 13
The Empresa
Although the Compania Empresaria lost money throughout 1838, its

partners sought to enlarge the company to include more departments.
They expected that a single large enterprise could negotiate more advan-
tageously with the powerful planters' organizations, might neutralize
other potential political opponents, and would encourage the government
to respect its interests. Purely economic considerations were also at work.
The partners hoped to promote economies of scale impossible with the
many separate, smaller companies doing business in monopoly tobacco
across the republic. Administrative and enforcement costs tended to be
fixed, and with increased volume should come increased efficiency and,
thence, added profits for investors. Facing imminent bankruptcy, the
Bustamante administration welcomed the emipresarios' proposals in Janu-
ary 1839 that they assume administration of a centralized tobacco monop-
oly whose jurisdiction would encompass all of the national territory (ex-
cept Yucatan and Chiapas). 14
12. For warnings of "very sorrowful consequences for the public tranquility," see letters
from "E.E." and "B.M." in El Mosquito Mexicano, no. ioo, 1837; an open letter from the
planters' organizations in Veracruz was published in Diario del Gobierno, Nov. 7, 1837;
the agreement to accept arbitration is registered in AN-286-1837:387-391.
13. The arbitration award of Jan. 19, 1838, was published along with a commentary on
the history of the dispute in Diario del Gobierno, Feb. 28, 1838.
14. M6xico. Camara de Diputados, Dictamen de la segunda comnisidiO de hacienda. le la
camara de diputados sobre que no se haga contrato algutno sobre la renta del tabaco sin
To administer this new contract, which took effect on April i, 1839,
the shareholders dissolved the Compafifa Empresaria and with its assets
created a new and better organized company, the Empresa del Tabaco. 15
Its founding partners were Felipe Neri del Barrio, Francisco Rubio,
Cayetano Rubio, Benito Maqua, Manuel Escandon, Juan Flores, and
Agiiero Gonzales y Cia. Barrio owned a quarter interest in the enterprise;
the others held one-eighth interest shares. While the partners of the
Compafifa Empresaria had themselves managed (or mismanaged) that
company, the Empresa was blessed with a more modern administrative
structure. 16 As members of a board of directors, the shareholders set gen-
eral policy for the company but they were expressly forbidden to meddle
in its day-to-day management. A director and a vice-director, elected an-
nually from the board, assumed that responsibility exclusively. To oversee
their activities and to make major policy and personnel decisions, the
board met regularly each Thursday noon at the Empresa's headquarters at
No. 8 Tacubaya in Mexico City. As representative for the company's mo-
nopoly rights, the Empresa's director was endowed with extensive state
powers. The minister of the Treasury decreed that the director enjoyed
all the "preeminence and prerogatives" of an officer of that ministry and
commanded the agency's employees to obey all the director's orders per-
tinent to the tobacco monopoly. Likewise, the Banco de Amortizacion
was obligated "to dictate whatever orders are asked for by the director
of the Empresa for the stability, development, and protection of the
monopoly." 17
The partners selected Manuel Montifar, an experienced adminis-

trator, as secretary for the company's central office, the direccion general.
A full-time salaried employee, Montufar managed the Empresa's routine
activities. Subordinate to the direcci6n general in the capital were the ad-
ministraciones principales, situated in the departmental capitals and ma-
jor ports. These agencies managed the principal divisions of the milonop-
oly and, through a "mercantile style correspondence," kept the company
headquarters advised of important developments. Their primary func-
autorizaci6n previa del congreso general (Mexico City, 1840), pp. 2-3; the 1839 contract
and pertinent correspondence and decrees are reproduced in [Empresa del Tabaco], Re-
estableciniento del estanco de la siembra y cultivo del tabaco en los puntos cosecheros; con-
trato sobre el banco national y la comrpailia emnpresaria de Mexico (Mexico City, 1839).
15. The charter for the Empresa is registered in AN-286- 1841:342-349 (Aug. 30).
16. The company's history and administrative and organizational structure are inter-
preted in Empresa del Tabaco, Memoria sobre el reestablecioniento 2 progress de la renta
del tabaco (Mexico City, 1841); company business policies and practices are also explained in
precise detail in the company charter.
17. Ministry of the Treasury decree, Feb. 1, 1839, article 2; contract, Janl. 15, 1839,
article 13, in Empresa, Reestablecimiento (1839), appendix.
TABLE I: Tobacco Sales Reported by the Real Renta del Tabaco and the
Empresa del Tabaco for Selected Years.a
Colonial Administration Private Company
Year Sales Year Sales
1766 $2,027,958 1838 $ 600,000'

1776 $3,845,742 1839 $2,724,520
1796 $7,336,539 1840 $3,447,724
1806 $9,116,392 1841 $3,600,000'
aColonial sales in silver; 1838-41 sales in copper.

1)Estimated sales.
tions were to deliver products to and collect revenues from their subordi-
nate offices, the administraciones, fielatos, and estanquillos that actually
marketed the monopoly tobacco. The heads of these lesser agencies
charged an 8 percent commission on their sales (as much as i 1 percent in
some departments). Under the terms of the 1839 contract, the govern-
ment fixed the retail price for tabaco en rama ("bulk tobacco") at 6.5 re-
ales (r.) per pound (up to i i r. in some departments). Prices for cigars and
cigarettes, usually 6 granos per package, were tied to the base price for
tabaco en rama. "
The Empresa marketed products of admittedly poor quality. A portion
of its inventory dated from the early 182os; some was probably harvested
before Mexican independence. Spokesmen for the company conceded
this tobacco was "blemished by its original poor quality, by the passage of
years, and by the carelessness of its preservation."'9 Critics used stronger
language to describe the Empresa's products: "the manufactures that
must be purchased are so very bad, totally bad, whether cigars or ciga-
rettes . . . that they cannot be smoked." 20
The Bureaucrats
For its middle-level management, the Compafifa Empresaria (and

later the Empresa) initially recruited personnel with experience in the
earlier state-run monopolies. Like many of their colleagues, Jose Mariano
18. Empresa to Minister of the Treasury, May 4, 1841, Juan N. Pereda v. Empresa del
Tabaco, 1843, AJ, Tabaco.
19. Ibid.
20. La renta no debe ser administrada por empresas particulares (Mexico City, 1840) in
Reflecciones sobre la inconveniencia del contrato de compafia para la administracion p gir70
de la renta del tabaco (Mexico City, 1849), p. 9.
Campos and Manuel Prieto obtained such employment-Campos as
manager of the Mexico City tobacco factory and Prieto as inspector gen-
eral for the district of Mexico. The shareholders' insistence on moderniz-
ing management practices quickly produced recurring confrontations
with managers accustomed to more traditional methods. Resenting trans-
fers or reductions in their subordinate staffs, the latter particularly dis-
liked innovations such as production incentives or merit-based salary in-
creases. Job security became a pivotal issue as well, since the "mercantile
style" promoted by the impresarios was characterized by a streamlined
administration-implying an absolute reduction in managerial positions
and salaries. For the shareholders, this was an economic imperative as
they continued to lose money in the venture throughout 1839. Whether
necessary or not, innovations at the workplace provoked unrelenting hos-
tility from the traditional bureaucrats, who now fervently prayed for the
dissolution of the Empresa and a return to a government-administered
monopoly.
Evaluating the political effectiveness of this group is difficult. The bu-
reaucrats' most valuable asset was probably an ability to communicate
their unhappiness to comrades employed in government agencies and in
the military. Likewise, pensioners and surplus military men and civil ser-
vants, released because of the government's worsening finances, were es-
pecially attentive to arguments that private administration of the monop-
oly restricted employment opportunities. The traditional managers could
also draw upon their considerable influence among the workers of the to-
bacco factories and with other employees under their immediate supervi-
sion. Neither the supervisors nor the workers were prepared to accept
renovation of traditional arrangements at their own expense. Campos's
problems with the Empresa in the summer of 1839 demonstrate the frag-
ile nature of those relations among capital, labor, and the managers. Pass-
ing over Campos, who was next in line for promotion, the company
picked Jose Azcutnaga from its Guadalajara offices as the new principal ad
ministrator for the Mexico district. Outsiders like Azcuinaga, who had
never worked in the state-run monopoly, were a source of constant irrita-
tion to the old-timers. When, as an economy measure, the new admin-
istrator ordered the Mexico City factory to reduce its output of sixteen
classes of cigars and cigarettes to three, Campos quit his job in protest.
The next day five thousand workers in the Mexico City factory rioted in
response to rumors that Azcuinaga intended to fire half of the labor force.
To pacify the "excited ones," Barrio was obliged to bring Campos back to
the factory. There the rioters greeted his entrance with tumultuous ap-
plause, and order was quickly restored. Subsequently, the board of direc-
tors fired Azcuinaga and persuaded Campos to withdraw his resignation.
Campos failed, however, to obstruct implementation of new work regula-

tions and, when Azcuinaga regained his position soon afterward, Campos
resigned permanently 21
The Planters
The arbitration accord of January 1838 brought only a brief respite in

the noisy political war waged by the planters against the empresarios.
The growers' militant response to the businessmen's unexpected coup at
the auction in October 1837 had won for the Veracruz group an important
concession-the imposition of collective contracts. It was, however, a
Pyrrhic victory since, in exchange, arbiters required that the planters
consent to private administration of the monopoly. That reversal, com-
bined with the failure of legislative initiatives to create a governmental
purchasing agency, left all consequential decisions to the discretion of the
e'inpresarios. Unlike a state agency, a private company not only was un-
likely to employ excess personnel, but also might not be persuaded by
political pressures to buy tobacco that had no immediate market. Bulging
with an overstock of tobacco accumulated after purchasing $i.6 million in
existing department inventories in 1838 and 1839, the Empresa sharply
reduced the legal allotments for tobacco crops in Veracruz. Growers in
Orizaba complained bitterly in 1839 that their quota of 12,000 tercios was
not "half the tobacco that the Spanish government employed in the mo-
nopoly. " 22 Further cutbacks in production were imposed in 1840 and
1841, worsening the already serious economic crisis in the tobacco towns.
All the interested parties acknowledged that since independence the
market for monopoly tobacco had continued to shrink, but there was no
agreement about who or what was responsible. Pointing their fingers at
the emnpresarios, the planters charged that unholy deviation from the
Spanish model caused sales to plummet even though more people smoked
tobacco than ever before. For corroboration, the growers needed only to
turn to the bureaucrats, who earnestly endorsed suggestions that the
monopoly suffered from gross mismanagement. Complaining that over-
production in the tobacco districts only encouraged the contraband trade,
21. Jose Mariano Campos, Motivos queJose Marianio Canmpos ha. tenido para renutnciar
e insistir en, la renuncia que hizo de la addinistraci6n de la frbrica de tabacos labrados
(Mexico City, 1839), pp. 4-5, 28-31; for Prieto's misadventures with his job, see statements
and testimony in Empresa del Tabaco v. Felix Doral, 1841 - 1844, AJ, Tabaco,
22. Jose Maria Tornel, Manifestaci6n presentada por el general Jose Maria Tornel,
apoderado de las diputaciones de tabaco de las ciudades de Jalapa y Orizaba, pidiendo la
reprobaci6n del aicuerdo sobre la amortizaci6n de la moneda del cobre por mnedio del estan-co
en aquel raino (Mexico City, 1841), p. 8; Empresa, Memnoria, p. 15; Comniin de Coseclheros
de Orizaba, Con venio (Orizaba, 1840).
the empresarios blamed their marketing problems on the failure of suc-
cessive weak national governments to enforce the law.23
Feared and despised with a pathological intensity, foreign tobacco was
the great bogey of the Veracruz planters (although illicit cultivation else-
where in Mexico was a more immediate threat), and they blamed all their
woes on unfair foreign competition. Perhaps they were aware that while
the Empresa spent $4.65 million for tobacco between 1837 and 1841, only
about half that sum reached the villas cosecheras. While a large portion of
the balance went to pay owners for existing stocks of tobacco in the other
departments, some also was destined to purchase foreign tobacco. To sat-
isfy a pronounced demand for special tobacco products, the Empresa regu-
larly imported appreciable quantities of Chiapan tobacco and Campechano
cigars. For customers with more discriminating tastes, the company spent
$50,ooo annually on cigars from Havana and on snuff and related products
from New York, New Orleans, and Paris. The colonial monopoly had mar-
keted these items with few protests from the planters, but in an era mani-
festd.,y prosperous for the Veracruz growers. In a time of hardship, when
the company's declining volume of purchases threatened to destroy forever
a comfortable way of life, the sale of foreign tobacco provoked frenzied
reactions. Obsessed with fear that there would be no market for Veracruz
tobacco if the public continued to be exposed to the seductive appeal of
the foreign product, the planters sought to prohibit absolutely its intro-
duction; but they were poVerless to act while the Empresa remained in
business. 24
The Empresa's method of purchasing tobacco in the villas cosecheras
deliberately exploited the increasing poverty there and, consequently,
generated much ill will. Unlike the royal monopoly, the private company
provided no financial assistance to growers before the annual harvests.
Upon delivery of their crops, the cultivators received from the company,
not cash, but certificates (promissory notes) payable in ten installments
spread over the next twelve months. For the Empresa the system offered
two advantages. First, it eased the company's chronic problems with
liquidity, shifting the burden of financing its purchases on to the planters.
Second, it reduced the real cost of procuring tobacco. The company re-
purchased with cash its certificates from needy planters, but with an i8 to
2o percent discount over face value.25
23. For examples of charges of wrongdoing, see Tornel, Manifestaci6n (1841), p. 8; and
El Conciliador (Jalapa, Veracruz), Jul. 7, 1840.
24. Empresa, Memoria, pp. 14-17, 37, 46-48.
25. Reflecciones, pp. 9-lo; Pedro Ansoategui to Gregorio Jose Martfnez del Rfo,
22, 1839, Mexico City, CMRF.
The Empresarios
Proposals to rescind the Empresa's contract and to force the monop-

oly's return to government administration were debated in Congress
every year between 1838 and 1841. Inside and outside government circles,
planters and bureaucrats schemed incessantly. They forged an unlikely al-
liance with jealous businessmen,26 spokesmen for regional interests, and
liberal ideologues-allies who sought to liquidate the Empresa as a prac-
tical first step in their separate (and contradictory) campaigns to capture a
share of the monopoly, to return it to local jurisdiction, or to extinguish it
and establish a free trade in tobacco. How did the empresarios neutralize
the not insubstantial influence of their enemies? A partial explanation of
their political success lay in their eminence in high government councils.
On more than one occasion, the company's shareholders succeeded in
designating the minister of the Treasury and through him they effectively
influenced government fiscal policy. In Congress, the company counted
on the services of Jose Basilio Arrillaga and Luis Varela, respective heads
of the finance committees in the Senate and in the Chamber of Deputies.
These same individuals, as employees of the Banco de Amortizacion and
the Ministry of the Treasury in 1837, had worked with Francisco Fagoaga
to prevent Rafael Argfielles and the planters from overturning the auction
of the four departments to the Compafifa Empresaria.
Larger and more impersonal forces were also at work. After all, the
Congress of early republican Mexico was politically insignificant; real
power resided arbitrarily in the person of the president; all politicians and
functionaries were notoriously unprincipled. In the last analysis, the
Empresa weathered the political storms because the national government
could not afford to permit its dissolution. The company constituted a
unique reserve of money and influence upon which the Bustamante ad-
ministration became dependent. Thus, more often than not, it was the
Executive Branch that frustrated congressional attacks on the Empresa.
26. The Empresa's takeover of the monopoly in Guanajuato resulted in controversy and
litigation with a group of investors led by Miguel Bringas. Joining in the general campaign of
defamation against the company, Bringas probably wrote the anonymous pamphlets, La
renta no debe ser administrada por empresas particulares (1840); and Qiga toda la repfiblica
los atentados de Rubio y los excesos de unjuez (Mexico City, 1841). Oiga toda la republican,
published after the Empresa won the first round against Bringas in a Guanajuato courtroom,
alleged that Cayetano Rubio possessed "the most depraved heart that could be found in the
human breast"; for the company's reply, see Empresa del Tabaco, Informe de la empresa al
publico (Mexico City, 1841). Notary references for appeals and arbitration proceedings con-
tinuing through 1844 include AN-36i- 1841:56-57 (Apr. 14); AN-529- 1842:28-30
(Jan. 17); AN- i69- i844: 158- 159 (Feb. 26).
In 1838 Bustamante's ministers pledged to oppose "by whatever means" a
project being debated in the Chamber of Deputies that would return the
monopoly to government administration. The ministers labelled this
legislation "premature and noxious" to the government's interests be-
cause the terms of a $0.5 million loan obtained from Juan Rondero guar-
anteed the lender a mortgage against tobacco revenues and forbade re-
turn of the monopoly to government administration before this loan had
been repaid.27
Like other lenders, the Empresa's shareholders used their financial
resources to dictate terms commensurate with the perils of lending to
such a poor credit risk as the national government. A $o.5 million lo
that accompanied the 1839 contract had assured acceptance of the em-
presarios' terms. A second loan of $o.8 million in December 1839 further
reduced the likelihood of involuntary, premature cancellation of the con-
tract. Aside from obvious political dividends, these loans reduced the real
cost of renting the monopoly. Under the terms of the 1839 contract, rent
was payable half in copper and half in silver. The first loan, made mostly
in copper, required repayment as a credit of $30,000 monthly in rent due
to the Banco de Amortizacion. The second loan, made as $500,000 in cash
(two-thirds in copper) and $300,000 in government debt issues, was re-
payable with an additional bank credit of $40,000 monthly. These com-
bined credits exceeded the less than $50,000 monthly rent ordinarily due
the bank. In offering the loans, the shareholders achieved considerable
savings, given the real differences in the value of silver, copper, and
paper. Incidentally, the loans also gave the Empresa extraordinary lever-
age in its dealings with the bank, since the government used for its pur-
poses all the income formally assigned to the bank. Without monthly rent
receipts, the bank would be insolvent. But in a private agreement, con-
cluded in December 1839, the Empresa promised to deposit $3,000 to
$4,000 monthly to enable the bank to satisfy its obligations (mostly sala-
ries to its administrators). Thereafter, any act that threatened the 1839
contract or the Empresa's role in the monopoly also jeopardized the bank,
and the empresarios could trust that agency to be an ardent defender of
the status quo. 8
Drawing upon its special relationship with the Bustaman-te govern-
ment and exploiting its unique national network of subordinate agencies,
27. AN-286 (Banco)-1838:91-97 (Jul. 6); AN-286 (Banco)-1840:221i-226 (Apr. ii),

AN-286 (Banco)- 1841:307-317 (Feb. 25); similar conditions were imposed l)y church loans
granted in 1840 and 1841.
28. AN-286 (Bainco)-i839:22i-226 (Dec. i6); contract of Dec. 14, 1839, in Empresa
del Tabaco, Docuomentos que justifican el desistimiento de la eopr-esa de tabacos respect de
los t-ees negocios que trata dle la ley dle 28 de abr-il de 1841 (Mexico City, 1841), p. 9.
the Empresa and its shareholders engaged in a bewildering variety of

speculations only marginally related to the sale of monopoly tobacco.
The company functioned as a general clearinghouse for credits against
government agencies. These credits included various types of current ob-
ligations such as claims for import duties, orders on customs houses, li-
censing fees, and drafts drawn on departmental treasuries. To transfer
funds to and from Mexico City, the departments, and military units across
the republic, the national government relied heavily upon the company's
facilities. The Empresa also purchased large quantities of internal public
debt bonds and other debt issues that could be acquired for only a fraction
of their face value. It bought these not only for speculative purposes, but
also as a favored device to convert cash revenues into capital reserves.
Over the long term, mutual benefits and shared interests tended to
ensure that the practices and policies of the politicians harmonized with
those of the empresarios. From one day to the next, however, the atti-
tudes of the functionaries and their treatment of the Empresa's share-
holders were volatile and wildly unpredictable. For example, in January
1839, even as the empresarios were lending $500,000 to his government,
Bustamante jailed Cayetano Rubio on suspicion of sedition. The partners
in the company had to post a sizable bond to secure his release. " When
faced with more pressing political or fiscal pressures, the national govern-
ment often failed to adhere to either the spirit or the letter of its con-
tracted obligations. In a notorious case, in July 1841, it required the com-
pany to provide a $30,000 loan as a condition for obtaining a license to
import cigars from Campeche, not because the Empresa lacked the legal
right to import foreign tobacco, but because the Bustamante government
desperately needed cash and because it wanted compensation for the po-
litical trouble that licensing those imports would bring.3l
If the Empresa's association with the national government was am-
biguous, relations with local authorities were well defined. The share-
holders aptly categorized that relationship as a state of undeclared war. 32
The interests of a national monopoly administered by private investors
and the needs of local governments and regional economies remained an-
tagonistic and irreconcilable. Since Bustamante was reluctant to sacrifice
29. For examples, see the statement of fees collected by the corredor Juan N. Pereda
for various transactions totaling nearly $700,000 between May and October 1841 aOld testi-
mony that the Empresa paid Juan Rondero a .5 percent commission onl $652, 174 ill 12 per-
cent ftlld bonds redeemed by the government oll July 7, 1841 anld Feb. 14 1843, Pereda v.
Empresa, AJ.
30. AN- 164-1839:49-50 (Jan. 24).
31. Statement of fees, Feb. 14, 1843, Pereda v. Empresa, Aj.
32. For the company's problems with local officials., see Empresa, Memoria.
fragile understandings with local officials in order to achieve vigorous en-
forcement of the monopoly, the company assumed the initiative and at-
tempted to circumvent hostile local governments by contracting the per-
sonal services of department heads, governors, high military officers, and
important public employees at all levels. Those services did not come
cheaply. The Empresa paid out more than $1.5 million in "extraordinar
expenses" between 1839 and 1841. Even with their pecuniary largesse,
the shareholders faced nearly insurmountable obstacles in doing business
outside the limits of Mexico City. As early as March 1838, the governing
junta in the department of Mexico forwarded to Congress its resolution
that all private contracts be voided and that "the tobacco monopoly and
its administration be established in the same terms as in the time of the
Spanish government."33 By April 1841, another fourteen departments
had asked Congress to take similar action. This opposition to the Empresa
reflected two distinct concerns. On the one hand, the abolition of locally
administered monopolies after 1837 robbed the departments of what for
some had been a principal source of income. Thus attacks from Guana-
juato or Zacatecas were pragmatic attempts to recapture lost revenues.
On the other hand, in departments such as Jalisco and Michoacan, popu-
lar movements emerged to resist any institution that denied an oppor-
tunity to develop the bountiful resources available for producing and mar-
keting locally grown tobaccos. Just as the Veracruz planters were likely to
condemn the abuses of a monopoly as a tactical part of their assault on the
Empresa, so, too, authentic enemies of monopoly attacked the Empresa
as the more tangible target.
Demands for special favors, recalcitrant officials, and nearly continu-
ous political turmoil greatly increased the costs of doing business in the
departments. Good business sense dictated that the company should con-
centrate its manufacturing operations in a few centrally located factories.
Nevertheless, to keep the peace, the shareholders attempted to placate
the many municipal and departmental officials who lobbied strenuously
for the establishment of tobacco factories in their districts and, conse-
quently, made uneven, expensive investments for manufacturing facili-
ties in Querktaro, Guanajuato, Morelia, Mexico City, Puebla, Orizaba,
Saltillo, and San Luis Potosi. Even when it accepted the inevitability
of high overhead costs, the Empresa sometimes found its attempts to
market monopoly tobacco obstructed by local authorities, who refused
to obey the instructions of the central government. In Chihuahua, of-
ficials imposed an illegal tax on each package of cigarettes and cigars sold
33. Mexico (state), Iniciativa que la exma. junta departamental ha dirigido al congress
general de la repriblica inexicana sore el estanco del tabaco (Mexico City, 1838), p. i6.
there. The political prefect in Matamoros would not publish decrees that
reestablished the monopoly in 1837, and until 1840 the customs house in
this port city continued to issue licenses for the import of tobacco from
the United States despite the protests of the company's agents. For friends
and foes of the Bustamante regime alike, the Empresa's local agencies
were a source of quick cash to finance their military operations. Rebels
in Jalisco and Michoacdn routinely inflicted heavy losses. From Texas in
1840, the filibuster Juan Molano invaded Tamaulipas and seized and sold
the Empresa's store of tobacco in northeastern Mexico. Declaring monop-
oly tobacco to be spoils of war, the commander of the Army of the North,
General Mariano Arista, used the proceeds of its sale, first, to defeat
Molano, and, soon afterward, to make war against Bustamante. To pay his
followers and to "protect" the company's property from rebels, Santa
Anna, who rallied to the government's support in July 1840, confiscated
the Empresa's funds and inventories in Veracruz.
Contraband
If the rental of a monopoly by a government to private persons is con-

sidered equivalent to the leasing of a portion of a state's coercive powers,
then the Bustamante regime did strike a reasonable bargain with the Em-
presa despite the considerable informal discounts exacted by its share-
holders. In response to unfair comparisons of their company's sales with
those of the colonial monopoly, the impresarios reminded the critics that
the Spanish government had been "mas que fuerte" and, consequently,
could impo e a "real monopoly." Without the backing of a strong state,
the Empresa was, they confessed, only "a simple vendor in competition
with an infinite number of traficantes clandestinos. " 34 Illicit cultivation in
the departments of Michoacdn, San Luis Potosi, Jalisco, Oaxaca, Mexico,
and Veracruz kept the black market in tobacco well supplied.3 The Em-
presa attempted periodically to suppress the contraband trade by destroy-
ing its sources of supply, but with little lasting success. More often than
not, such ventures only touched off local rebellions against the national
government. For example, in December 1840 the company launched a
carefully planned incursion into the Sierra de Huasteca to search out and
destroy the tobacco planted by Indian peasants in the area. In a pincerlike
movement, the Empresa linked its resguardo with regular army troops
marching out of San Luis Potosi and Queretaro. The intrusion provoked a
34. Empresa del Tabaco, Observacioties al dictamnen de la segunda conmisi6n de ha-

cienda de la cdmara de diputados del congress general de 4 de abril del corriente aho sore
que no se celebren contrato con la empresa de tabacos (Mexico City, 1840), p. 19.
35. For the company's war against contraband, see Empresa, MAemoria, pp. 31-42.
fierce reaction in the Huasteca and the operation soon took on the charac-
teristics of a "mountain war." The imperative to restore order claimed
precedence over any plan to destroy illegal plantings. Similar results
came with sorties into Jalisco, Zacatecas, Michoacdn, and Veracruz-the
company's effort to destroy contraband cultivation was repeatedly subor-
dinated to more immediate problems-and the Empresa, which paid for
the use of government troops, was stuck with the bill. In the wake of some
revolts, such as those in 1839 and 1840 at San Andres Tuxtla, Tlapacoydn,
and Coyousquihui in the department of Veracruz, national and local au-
thorities intervened to prohibit the Empresa from burning tobacco fields
there because of the obvious menace to public tranquility. Consumers in
Acapulco, accustomed to tobacco grown on the Pacific Coast, stubbornly
refused to purchase the monopoly products; and because of "local and po-
litical peculiarities," the Empresa could not force compliance with the
law. Contraband planters in Michoacdn mixed business with politics and
enlisted the support of rebels to protect their interests. With a pecuniary
incentive from the Empresa, the revolutionaries were induced to aban-
don their protection of the contrabandistas. Though effective, such tac-
tics imposed additional costs.
The company's principal weapon against the contraband trade was its
large force of private guards, the resguardo. The purpose of the primary
corps of the resguardo, dispersed strategically across the department
of Veracruz, was to cut off contraband at its principal source the villas
cosecheras. Though costly, private police were needed because there the
military commanders, mayors, and judges were tobacco planters or their
kin and would not assist the Empresa in enforcing the monopoly. The
company's subordinate agencies down to the lowest levels maintained
separate resguardos and local guards to enforce the monopoly. Critics
charged that the company police force constituted a private army that
preyed on the powerless, and that its "inexcusable licentiousness" was
abetted by the "indolence of certain authorities" corrupted by the em-
presarios.36 While not denying that excesses sometimes occurred, the
shareholders defended the resguardos as a necessary evil, noting that co-
lonial administrators likewise had employed force to overcome resistance
to the monopoly in the countryside.
On the rare occasions when the resguardos encountered well-armed
and combative contrabandistas, their confrontations might well explode
into bloody battles as at Ixhuacdn, Veracruz, in 1838 and at Apan, Quer6-
taro, and Tlalnepantla, Mexico, in 1839. The great majority of smugglers,
36. Organization of the resguardo is outlined in Empresa, Memoria, pp. 19-23; for a
critique of the resgnardo and an analysis of popular resistance to the monopoly, see Reflec-
ciones (1849), p. 6.
however, were less bellicose, more ordinary folk who were marginally
employed in menial occupations and willing to take risks.37 The Ernpresa
marketed tabaco en rama at 6.5 r. per pound (equivalent to 20.3 r. per
arroba). Contraband tobacco of the same quality sold in the villas cose-
cheras for $3 to $4 per arroba, so the margin for profit was considerable.
Punishment for those caught trafficking, though harsh, was not so draco-
nian as that formerly imposed by the royal monopoly. In most cases, the
contraband was confiscated by the Empresa and the offender was obliged
to pay a fine equivalent to twice the legal price of the quantity of tobacco
seized. Those unable to pay their fines might be sentenced to prison or to
labor on public works.
Perils and Profits
Through most of 1840 the Empresa continued to thwart attempts by

its foes to revoke the 1839 contract and to force liquidation of the com-
pany. Ironically, by December 1840, the emnpresarios had lost their en-
thusiasm for the costly venture and sought to renegotiate their contract
with the Bustamante regime. After nearly three years, the company had
failed to produce any sustained profits, its demands on the shareholders'
personal resources were insatiable, and the investors faced possible finan-
cial ruin. Why were the empresarios unable to use their monopoly rights
to squeeze out the lucrative profits that their enemies always assumed the
Empresa must produce? Monopoly tobacco sold at prices of up to six
times that of contraband tobacco and many more times what free market
tobacco might have cost. Yet, as the shareholders painfully discovered,
those prices were not sufficient to cover unexpectedly high overhead
costs. The same politicized economy that initially seemed so attractive to
investors now constrained the entrepreneurs' ability to shift productive
and marketing factors for optimum profitability.
To their dismay, the Empresa's partners learned that their enterprise
was much less profitable than the more cumbersome colonial monopoly.38
From data reported by the Empresa, a reasonable estimate can be con-
structed of the comparative costs associated with a hypothetical $i.oo of
tobacco sales. For the Empresa, the cost of manufacturing, including
37. For the case of eight individuals caught carrying contraband tobacco into Mexico
City, see Comiso de 8 tercios de tabaco, 1837, AJ, Tabaco; for the planters' attitudes toward
smuggling, see Tornel, Manifestaci6n (1841), p. 8; and Empresa, Memoria, p. 15.
38. Estimated costs for the Empresa are computed from data reported in Empresa del
Tabaco, Observaciones sobre el andlisis que han formado los seniores Lebrija y Barrera
del proyecto relative a la amortizaci6n del cobre, renta del tabaco y drbitros para la guerra
de Tejas (Mexico City, 1841); estimated costs for the real renta are computed from data re-
ported in Estados Generales, 1765- 1809, AGN, Tabaco.
wages, would be $0.25; tobacco, paper, and related supplies, $0.215; ad-
ministrative salaries and commissions, $0.145; rent, $0.125; extraordinary
expenditures, $o.075; resguardo, $o.05; and transportation, $o.03. With
costs totaling $o.89, every $i.oo of sales should have produced $o. ii in
net revenues. In contrast, the costs for $i.oo of sales by the colonial mo-
nopoly were only about $0.32 for administrative items, including salaries,
wages, and commissions; $o. i8 for tobacco and paper; and $0.02 for
miscellaneous expenses. For the colonial monopoly, each $i.oo of sales
yielded $0.48 in net revenues.39
Because of unanticipated problems with currency and credit, even the
small ii percent margin for the Empresa's profits on sales proved to be
largely illusory. The Banco de Amortizacion failed to amortize copper cur-
rency, and so copper coins suffered a constant decline in value even after
an official 50 percent devaluation in 1837. The unofficial discount imposed
by most merchants on copper reached io percent in early 1840. By No-
vember 1841, it was close to 35 percent. Tardily, the shareholders were
shocked with the realization that "if copper is not amortized, the Empresa
will lose more than other businesses.. All the monopoly's receipts
for tobacco sales were in copper, but the company was obliged to receive
those monies at their statutory value. Retail prices for tobacco were fixed
by law, and attempts to raise them entailed unacceptable political costs.
Since the shareholders' capital investments and most company expenses
were payable in silver, the imagined ii percent net revenues were con-
sumed by the glut of copper. A second crucial hindrance to profit-making
was that, unlike the colonial monopoly, which was self-financing, the Em-
presa seemingly needed endless infusions of capital. To stay solvent, the
Empresa borrowed heavily in the Mexico City markets. By July 1839 the
company's indebtedness exceeded $300,000. Interest rates for these loans,
provided by commercial houses such as Martinez del Rio Hermanos and
Manning and Marshall, averaged about 15 percent annually. In July 1841,
two prominent Mexico City financiers, Gregorio Mier y Terdn and Joaquin
Obreg6n, offered the company new loans totaling $55o,ooo, but with
higher interest rates (i8 percent annually) and collateral that included not
only all the Empresa's assets, but certain private properties belonging to
its shareholders. If one assumes that the presumed $o.89 in costs were
financed at 15 percent annually, then the total costs per $i.oo of sales
39. Empresa, MeinoNia, pp. 17, 37, 46; Pedro Ansoditegui to Gregorio jose Martinez del
Rio, Mexico City, Nov. 30, 1840; Mav 19, Nov. 6, 1841. CMRF; Mexico, Banco Nacional de
Amortizaci6n, Informwe de la junta dii-ectivo del banco de amoiotizaci6n sobre los dive-sos
proyectos que se han presentado para ellos (Mexico City, 1841), p. 6.
40. Empresa, DocuImentos, p. 29; similar sentiments are expressed in Empresa to
Basilio Arillaga, Apr. 12, 1841, Pereda v. Empresa, Aj.
would have been $i.02, and profits would have been nonexistent even
without the added aggravation of copper. 4
While the Empresa's annual report in December 1840 showed that its
assets exceeded liabilities by a margin of $1.7 million, those assets con-
sisted mostly of an excessively large tobacco inventory that was not easily
convertible to cash. The company did have nearly $0.5 million in cash on
hand, but that was insufficient to cover future obligations for salaries and
debt service. Although the shareholders took care to isolate their invest-
ments in the Empresa from other interests, going so far as to specify in
the company's charter that each was liable only for the amount of capital
introduced into the company, the Empresa's inability to generate liquid-
ity eventually jeopardized their personal finances. For most of 1838 and
1839 the partners paid irregular monthly assessments of $2o,ooo on each
of the company's eight shares. By August 1841, their investments in the
enterprise totaled $1.47 million in silver.'2 Compounding the hardship
felt by some investors, the Empresa, unlike most of its contemporaries,
did not provide an annual division of profits or living allowances. To keep
themselves solvent, the partners borrowed heavily or began selling off
other properties to raise cash. Flores was the first to be affected by the
constant drain on resources and personal liquidity. After bankruptcy pro-
ceedings in 1839, his share in the Empresa, already mortgaged to Barrio,
was sold to Cayetano Rubio's son-in-law, Joaquin Erraz6. Unhappy with
the prospects in 1840, Agtiero, Gonzalez y Cia. gave up its share in the
Empresa after granting it a new loan for $325,321. Muriel Hermanos, a
Mexico City commercial house that assumed ownership of the vacant
share the following year, was also asked to provide additional financial
support for the company. Barrio was the next to drop out. With $324,000
tied up in two unproductive shares in the Empresa, he was obliged to
convene a meeting of his creditors in July 1841. Although his assets of
$1.9 million compared favorably with debts of less than $o.9 million, the
entrepreneur had no cash to meet his current obligations. Only the timely
intervention of family and friends saved Barrio from a disastrous bank-
ruptcy and the loss of all his properties. -3
41. AN-426-1838:647-648 (June 16); AN-426-1840:325-333 (Apr. 4); AN-429-

1841:326-328 (July lo); AN-426-1841:759-766 (july lo); Pedro Ansodtegui to Gregorio
Jos6 Martfnez del Rio, Mexico City, July 22, 1839, CMRF.
42. AN-286-1841:342-349 (Aug. 30); Emnpresa, Memoria, pp. 28-29; a summary of
the Empresa's report to its shareholders for Dec. 31, 1840, including a detailed breakdown
of its inventory, is in Mexico, Suprenmio Gobierno, Comntuticaciones sobre ammrtizaci6n de lh
noneda de cobre (Mexico City, 1841), doc. 1.
43. For Barrio's financial problems, see Pedro Ansodtegui to Gregorio Jose Martinez del
Rio, Mexico City, May 5, 1838; Feb. 20, Aug. 29, Oct. 1, 1840; July 6, Aug. 13, 1841; Felipe
Neri del Barrio to Jose Pablo Martinez del Rio, Mexico City, Aug. 13, 1841, CMRF.
It was under such portents that a commission of the Empresa's share-

holders and financial advisors initiated discussions with the Bustamante
government in December 1840. They proposed to cancel the 1839 con-
tract and to liquidate the Empresa in order to form a new company in
partnership with the government. The purpose of this enterprise was to
be threefold: to provide an immediate $0.5 million loan so that the gov-
ernment might continue the war to recover Texas; to amortize copper cur-
rency; and to administer the tobacco monopoly.14 If accepted and imple-
mented on terms offered by the empresarios, the proposal eliminated
serious problems that menaced their investments in the Empresa. First,
it provided an escape from the provisions of the 1839 contract, which
specified that when the contract expired in 1844 the government would
accept an inventory valued at not more than $2 million. In December
1840, the Empresa's inventory totaled twice that amount. Although sales
were steadily, if slowly, improving, they showed signs of stabilizing at a
level where the inventory could not be reduced by routine sales. Political
considerations made it impossible for the company to interrupt already
contracted purchases of tobacco from the Veracruz planters. Second, un-
der the new arrangement, the Empresa would pay no rent for the monop-
oly. Under the old contract, rent was soon to increase from $6oo,ooo to
$700,000 annually after 1841. Third, while the shareholders privately had
covered the rising costs of financing their enterprise, now the state would
issue $8 million in public debt bonds for the new company. Fourth, the
new plan converted the Empresa from a nominally private enterprise to a
nominally statist enterprise, eliminating in theory continued resistance to
a private company's administration of the monopoly. The same manage-
ment would continue, but in a disguised form less susceptible to political
attack. Moreover, as a para-state enterprise, the company could pass all
enforcement costs back to the national government since it would have
free use of the military and other coercive agencies of the state. Under
the old contract, the Bustamante government had little incentive to make
a strict effort at enforcement because it received a fixed rent paid largely
in advance. Now dependent upon one-half of actual profits, the govern-
ment would be obliged to police the monopoly effectively. Finally, if this
proposal were approved, the disadvantages of copper currency would now
rebound to the empresarios' benefit. Given the monopoly's huge receipts
of copper, it was a natural medium from which to implement amortiza-
tion, and the shareholders would be strategically placed to reap the maxi-
mum benefits.
44. M. Barrieros to Empresa, May 13, 1843; A. Ycaza to C. Rubio, May 16, 1843;
T. Pimentel to Empresa, May 16, 1843, Pereda -v. Eimpresa, AJ.
Committees in the Chamber of Deputies and in the Senate, headed

by persons who previously had shown favor to the empresarios, reported
the proposal to Congress, and it was subsequently enacted as the law of
April 28, 1841. Owing, however, to a tremendous storm of protest, the
measure never took effect, and the emipresarios were forced to abandon
their grand scheme.45 Their legislative initiative had touched off a bois-
terous public debate and had united all of their enemies at the same time
over the single issue. While the opposition of their traditional foes was
significant, the shareholders blamed their defeat on "support altogether
more respectable and of more decisive influence" the community of
public debt speculators (agiotistas) in the capital. This group feared that
with the new enterprise the erpresarios might corner a disproportionate
share of the government's dwindling resources, leaving other lenders out
in the cold. As the dimensions of the broad-based coalition that opposed
them became apparent, the shareholders had begun, even before passage
of the law of April 28, to explore alternatives that might be politically
more feasible. They let it be known that they would support any action to
cancel the 1839 contract if the government committed itself to the pur-
chase of the entire tobacco inventory at the price levels stipulated in that
contract. To facilitate the transfer, they offered to accept in lieu of
cash-an appropriate quantity of public debt bonds for their tobacco.
While they claimed that the gesture was motivated by a noble and dis-
45. The text of the law of Apr. 26, 1841, is reproduced in Pereda v. Emnpresa, AJ; the
polemical literature generated by the company's amortization plan was voluminous. It can
be broken down into several categories: first, sympathetic tracts; second, opposition associ-
ated with the planters; third, complaints from the agiotistas; and fourth, criticism fiom the
Banco de Amnortizaci6n. The first group includes the following: Empresa, Observcciones
(1841); Mexico, Senate, Dictamen de la comision de hacienda del senado sobre las diferentes
comunicaciones del banco de amortizacidn, relativas al acuierdo de la cdmara de diputados,
en que se establece una compania para proporcionar al gobierno prontos auxilios, admin-
istrar la renta del tabaco, y amortizar la snoneda de cobre (Mexico City, 1841); Luis Varela,
Esposicin11. de los resultados qne la hacienda putblica reportarci del proyecto pro puesto al
congreso sobre la ainortizacidn de la inoneda de cobre i estaoc() del tabaco (Mexico City,
1841); La verdadera a la falsa opinion puiblica, sobre el proyecto pendienlte el. el senado,
relative a la amnortizacidn, del core, administraciocl de la renta del tabaco y drbitros para la
gterra de Tejas, por un patriota (Mexico City, 1841); El negocio del dia: Cobre, tabaco i
prestamo; conducta de las comisiones reutnidas para este niegocio (Mexico City, 1841). Typi-
cal of the second type are Tornel, Manifestaciin (1841) and Tomnis L6pez Pimentel, Cuatro
palab1ras que el ciudano diputado Toands Ldpez Pimnentel dirige a los individ-oos de las
comisiones de hacienda y Tejas (Mexico City, 1841). Exemplary of the third kind is Joaquin
Lebrija and Ignacio de la Barrera, Replica de Librija y Barrera a los seiiares de la coanpahia
enipresaria de la renta national de tabaco (Mexico City, 1841). In the final category are
Banco de Amortizaci6n, Contestacion del banco nacional de amnortizacidn a las observa-
ciones que hace la comisidn de hacienda del senado en so dictaoen. publicado el 24 de abril
prdcsima pasado (Mexico City, 1841). For the empresarios' feelings about the debacle, see
Empresa, Documentos (1841), pp. 27-28; and Felipe Neri del Barrio to Jos6 Pablo Martinez
del Rio, Mexico City, Mar. 25, May 1, 1841, CMRF.
interested desire to provide the government with "a lucrative means" to
remedy its fiscal problems, in fact the empresarios hoped to bring about a
political solution to the stalemate by appeasing the planters and the bu-
reaucrats. But now the shareholders found their way blocked by an old
ally. Once aware of the ramifications of the Empresa's projects, the Banco
de Amortizaci6n had become an implacable critic, fearing that implemen-
tation would usurp the agency's functions and resources.46 When all at-
tempts at compromise failed to win approval, the emnpresarios withdrew
support from the Bustamante government and, ominously, began to look
for their economic salvation in a reordering of the Mexican polity.
Liquidation
With the treasury empty, with few assets left to provide security for
lenders, and with a political crisis looming, Bustamante and his support-
ers failed in the spring and summer of 1841 to persuade the agiotistas to
come forward with the large sums needed to keep his government afloat.
The few loans negotiated under ruinous terms were of little use now as
speculators scrambled wildly to loot the few valuables still owned by the
failing regime. Using Manuel Canseco, installed as minister of the Trea-
sury through the Empresa's influence, the shareholders managed to ex-
tract $514,000 from the national treasury in July 1841. Observers re-
ported that "before casting aside the corpse," the emnpresarios tried
vainly to retrieve another $300,000 owed by the treasury on several ac-
counts. At the same time, Tomds Morphy, a prominent merchant and
agiotista, began shuttling back and forth between the capital, cities in the
interior, and Manga del Clavo, Santa Anna's estate in Veracruz. Rumors
abounded that Morphy's mission was to plan and to coordinate a revolt
against Bustamante. As the planters and most of the government em-
ployees and military personnel were already solidly behind Santa Anna,
the defection of a substantial portion of the monied classes might tip the
tenuous balance of power decisively away from Bustamante. Neither
Santa Anna nor Morphy had access to the large sums of money useful for
assuring a successful revolution. The shareholders did.47 The empresarios
46. To defend itself, the Banco de Amortizaci6n drafted its own plan to amortize copper.
Banco de Amortizaci6n, Informe (1841), pp. 17-34; for its intrigues to thwart the Empresa's
plans, see Bank to Senate finance committee, Apr. 15, 1841, in Empresa, Documentos
(1841), pp. 14-15; Bank to Empresa, Apr. 26, 1841; Bank to Minister of the Treasurv,
May 17, 27, 1841; Minister of the Treasury to Bank, May 31, 1841, Pereda v. Empresa, AJ.
47. For other proposals to liquidate the Empresa, see Empresa to Minister of the Trea-
sury, May 27, 31, 1841, Pereda v. Empresa, AJ; other references to the outcome are in Min-
ister of the Treasury to Bank, May 31, 1841; Minister of the Treasury to Joint Finance Com-
mittee, June 9, 1841; text of presidential decree, July 1, 1841, Pereda v. Empresa, AJ.
also had a plan for ridding themselves of the Empresa, but it could only
be implemented if the strongman from Veracruz occupied the presi-
dential chair.48
The caudillo formally pronounced against Bustamante in September
1841, and, after token resistance was squashed, Santa Anna formally as-
sumed the presidency on October 4. The turnover brought immediate
economic readjustments within the financial community. On the verge of
personal bankruptcy and unable to pay his creditors before the revolt,
Morphy became wealthy overnight as an intermediary between His Ex-
cellency and businessmen promoting their sundry projects. In that capac-
ity, employed as a corredor, Morphy negotiated a settlement between
the Empresa and the new government. As was customary, he received a
fixed percentage of the value of the deal as compensation for his ser-
vices.49 Even without Morphy, the shareholders figured prominently
among those making fiscal policy for the Santa Anna regime. As members
of a commission created by Santa Anna to restructure the Ministry of the
Treasury, Barrio and Escandon helped formulate a new plan to finance
the bankrupt national treasury.50 Out of their labors and those of the
influence-peddlers came the discovery that the needs of the nation were
identical to the needs of those who had invested so heavily in the Empresa.
The decree of November 12, 1841, cancelled the 1839 contract, returned
the monopoly to government administration, and authorized the pur-
chase of the company's entire inventory under terms previously rejected
by the Bustamante regime. Santa Anna defended the action as a response
to public opinion, citing the Empresa's troubled relations in the country-
side and the bureaucrats' argument that continued mismanagement would
reduce the monopoly to a state of total disorganization "with significant
damage to the permanent interests of the treasury."3' Of course, the real
beneficiaries were neither the public at large nor the treasury, but the
planters, the bureaucrats, and the empresarios who had realigned a por-
tion of the politicized public sector to further their own special interests.
Now the planters could rely on the government to purchase more to-
bacco (even if it lacked a market) and to legislate on their behalf. Santa
Anna pleased them enormously when he decreed on December 20, 1841,
a prohibition on the import of all classes of foreign tobacco. Anxious to
re-create the colonial order, the new regime extended official recognition
and gave new rights and privileges to the planters' corporate bodies. On
48. Pedro Ansodtegui to Gregorio Jose Martinez del Rio, Mexico City, July 6, 1841,
CMRF.
49. Ibid., Nov. 6, 1841.
50. Diario del gobierno, Nov. 9, 1841.
51. Dubldn, Legislacidn, IV, 49-50.
May 22, 1842, His Excellency formally approved "the project of regula-
tions presented by the . . . cormin de cosecheros de Orizaba." This legis-
lation defined and described the internal organization of the planters'
body and established a formal relationship with the state.52
Speaking for the bureaucrats, Campos and Prieto were again anxious
to share with Santa Anna their ideas for managing the state-run monop-
oly. Their proposed regulations, mostly plagiarized from the ordenanzas
of the real rental, incorporated several novel provisions to govern the con-
ditions of employment and personnel procurement. Managerial positions
and their salaries were to be increased. The Empresa's managers, espe-
cially high-level officials, would be summarily fired and their places taken
by experienced civil servants (like Campos and Prieto). Positions in the
resguardo and in the offices of the monopoly in the countryside were re-
served for their colleagues in the military. Widows eligible for government
pensions would get the small retail outlets in the cities, the estanquillos.
While these proposals were officially ignored, Santa Anna did order the
commission charged with drawing up new regulations for the monopoly
to grant employment preference to veterans. Soon after the government's
takeover of the monopoly in January 1842, the company's principal ad-
ministrators were replaced by political appointees. In May 184z the gov-
ernment agency created to administer the monopoly, the Direccion Gen-
eral de Tabaco, revoked all licenses for estanquillos granted between 1837
and 1841 and reassigned the privilege to sell tobacco to persons it deemed
more worthy. Between 1842 and 1844 personnel files for all the monop-
oly's thousands of employees at all levels were reviewed, and those who
originally had not been appointed to their position by the government
were liable to arbitrary dismissal. By 1844 the monopoly had been en-
tirely restructured along the colonial pattern. Although sales increased
with the return to governmental administration, higher overhead costs
weighed heavily on the monopoly and it produced little revenue for Santa
Anna's government.53
Political intrigues transformed a costly economic misadventure the
Empresa del Tabaco-into a profitable undertaking. Santa Anna's govern-
ment purchased the company's complete inventory of fixtures and tobacco
52. Ibid., IV, 87, 189-198.

53. Jose Mariano Campos and Manuel Prieto, Reglamento que Jose Mariano Camp
Manuel Prieto han. presentado al exmo. sr. general president de la reptiblica, benemerito de
la patria d. Antonio Lopez de Santa-Anna (Mexico City, 1841); Diario del Gobiernlo, Nov.
19, 1841; directive, Direcci6n General del Tabaco, May 18, 1842, AGN, Tabaco, vol. 237;
Jos6 M. Sarabia to Direcci6n General de rentas estancadas, Guadalajara, May 15, 1845,
AGN, Tabaco, vol. 14; Mexico, Direcci6n General de Tabaco y demas rentas estancadas,
Dernonstraci6n de los terininos en que ha obtenido la renta del tabaco una planta general de
empleados (Mexico City, 1846), p. 5.
stocks valued at $3,982, 128. Added to that sum was $644,881 in govern-
ment credits, including some which had originated before independence.54
To pay for the inventory and the aggregated claims, Santa Anna's Ministry
of the Treasury issued special bonds payable from a share of import duties
collected in the ports. Since the shareholders accepted these bonds with a
41 percent discount over face value, the nominal quantity of bonds issued
to cover a $4.5 million debt totaled $6.3 million. Separately, the Empresa
received $35,000 monthly in tobacco revenues from Zacatecas and Jalisco
and all of the government's share of profits in the Fresnillo silver mines.
These monies were assigned to repay the company's accounts with the
Banco de Amortizacion and the treasury. Also reserved for the Empresa's
debt service were all duties assessed on unminted silver exported from
the Pacific ports of San Blas and Mazatlan. Between January 1842 and
May 1843, the tobacco bonds received $256,699 from a ilo percent quota
on the Veracruz customs houses, $127,845 from the Pacific ports, and
$42,544 from other customs sources. The share from the Fresnillo mines
amounted to $193,850. Silver export duties added another $202,534. Pay-
ments from the tobacco monopoly and from treasury sources were also
significant, totaling $472,542 in the same period.55
Return of the monopoly in exchange for the government's commit-
ment to purchase the inventory did not, of course, bring an immediate
end to the impresarios' anxiety about the large sums they had tied up in
the company. Rafaela Rengel, Barrio's wife, described the uncertainties
that lay ahead:
Many are the dangers that it [the Empresa] faces in the long time
that comes between . . . the delivery of the inventory [and the time
when] the government finishes paying for it; and besides the revo-
lutions that may occur, none of our present rulers has a reputation
for being a slave to his word.56
In the beginning, at least, Santa Anna was scrupulous in honoring his gov-
ernment's contractual obligations with the Empresa. Although he or-
dered payments on the public debt suspended in March 1842, the to-
bacco bonds were exempted and continued to receive their fixed quota of
customs duties. Eventually, however, he reneged on his promises, took
back the quota, and used those revenues for his own purposes. The law of
54. Contract, Ministry of the Treasury and Empresa del Tabaco, Jan. 13, 1842, AN,
Protocolo de Hacienda, Ram6n Villalobos, 1842; for the inclusion of credits belonging to
Fagoaga, see AN-215-i841:51-57 (Aug. i8).
55. Manuel Payno, "Memoria sobre la convenci6n inglesa: Creditos de Martinez del
Rio Hermanos," in La Patria (Mexico City), Nov. ii, 1844.
56. Rafaela Rengel de Barrio to Jose Pablo Martinez del Rio, Mexico City, Feb. i6,
i842, CMRF.
702 HAHR I NOVEMBER I DAVID W. NVALKER
May iil, 1843, consolidated the tobacco bonds along with many other
public debt issues into a general fund known initially as the 25 percent
Fund. The measure reduced the likelihood of a complete and speedy re-
demption of the tobacco bonds, and their value declined proportionately.
Yet, relative to other creditors, the tobacco bondholders received prefer-
ential treatment. While the owners of other debt issues were obliged to
pay the government a 6 percent surcharge on the value of bonds intro-
duced into the 25 percent Fund or else risk an indefinite suspension of
payments, the tobacco bondholders were permitted to add their $5 mil-
lion to the fund without the surcharge. This courtesy, and other favors,
helped the empresarios make up for the loss of their private quota. For
the arrangement of the 25 percent Fund and for the sale of the govern-
ment's 50 percent interest in the Fresnillo mines to the Empresa, Santa
Anna reportedly charged a personal fee of $8o,ooo. Even so, it was a
worthwhile investment for the shareholders because for $120,000 in cash
and $480,ooo in bonds, the company acquired a 50 percent share of
the most profitable mining operation of the decade. The negotiation
yielded an immediate profit since the shareholders immediately (and in-
voluntarily) sold a 25 percent interest in the Fresnillo mines to other pri-
vate investors for $224,000 in silver. The Empresa liquidated other ac-
counts with the treasury and with the Banco de Amortizacion in a manner
equally remunerative (and irregular). It purchased for $3,000 in cash and
$425,000 in credits two extensive rural estates, San Agustin de los Amoles
and Cienaga del Pastor, owned by a pious fund administered by the
government
Acquisition of public properties, however lucrative in the long term,

did little immediately to solve the Empresa's liquidity problem. It had rid
itself of the monopoly, but it still needed large quantities of cash to cover
enormous debts due for repayment in 1842 and 1843. The sale of its re-
serve of Mexican public debt issues produced temporary relief in the
summer of 1842, but for the most part the shareholders waited anxiously
for news that their attempts to find new credit sources had been successful.
In a notable endeavor, they authorized Escandon's voyage to Europe to
acquaint overseas investors with the Empresa's potential. This mission
failed to yield positive results, but in Mexico City the shareholder's frantic
search paid off. A British firm there, Manning and Marshall (later Manning
57. Pedro Ansodtegui to Gregorio Jose Martinez del Rio, Mexico City, Mar. 21; July 8,
Nov. 27, 1843; Jose Pablo Martinez del Rio to Gregorio Jose Martinez del Rio, Kingston,
Jamaica, Oct. 18, 1843, CMRF; contract, Ministry of the Treasury and Empresa del Tabaco,
June 9, 1843, AN, Protocolo de Hacienda, Manuel Orihuela, 1843: AN- 169-1843:426-439
(July 5); contract, Ministry of the Treasury and Empresa del Tabaco, Nov. 29, 1842, AN,
Protocolo de Hacienda, Rarn6n Villalobos, 1842.
and MacKintosh), agreed to pay dr

Empresa while acting as its agent to collect payments from the govern-
ment and to distribute dividends proportionately among the tobacco
bondholders. Meanwhile, the private sale of tobacco bonds helped the
empresarios stay solvent pending final liquidation of their company. When
first issued early in 1842, these bonds sold in Mexico City for about 35
percent of face value.58
How much shareholders won or lost by investing in the Empresa de-
pended upon the timing of their entry and withdrawal. Flores and Agiiero
Gonzalez y Cia. probably absorbed slight losses. Barrio, forced by his
narrow scrape with bankruptcy to leave the company prematurely in
March 1843, lost a chance to maximize his profits. The other shareholders
acquired his two shares by paying off his accounts and drafts totaling
$164,952 and by assigning to him the titles to San Agustin and Cienaga
del Pastor.9 Assuming that Barrio netted no more than half the fair mar-
ket value of those haciendas ($200,000) in a hardship sale to Escandon,
then Barrio earned about $364,952 on $344,000 invested in the Empresa.
For all his labors, for all the capital he risked, the entrepreneur earned a
profit of 6 percent over six years, an effective annual return of less than
1 percent. If the cost of financing $344,000 is included, then he actually
lost nearly $237,048, an annual negative return of 14 percent. For the
shareholders who stayed with the Empresa until the end, the results
were more positive. In November 1843 Barrio's friends reported that
while he suffered great misery, his former associates in the monopoly "are
today very buoyant."60 His exit left them as principal owners of the $5.8
million in tobacco bonds that remained after the Fresnillo transaction.
A portion of these bonds, perhaps as many as $8oo,ooo's worth, and all
the Empresa's cash reserves were applied to the company's debts with
private lenders. By May 1844, when the shareholders announced formal
dissolution of the Empresa, only $50,643 in such debts remained to be
paid.6' Assuming that at this time the shareholders could have imme-
58. Pedro Ansodtegui to Gregorio Jose Martinez del Rfo, Mexico City, Apr. 6, July 20,
Aug. i8, 1842; Nov. 27, 1843; June 25, 1845; Jose Pablo Martinez del Rio to Gregorio Jose
Martinez del Rfo, Paris, Aug. 31, Oct. 20, 1842; Jose Pablo Martinez del Rfo to Gregorio
Jose Martinez del Rio, Mexico City, June 26, 1845, CMRF; AN-169-1842: i88-igi;
AN-426-1844:486-488 (May 6); Manuel Escand6n to Manuel Lizardi, London, Oct. 27,
1842; F. Lizardi to Tomds Morphy, London, Oct. 29, 1842, SRE, Tabacos, 1842, leg.
14-3-8; B. Maqua, J. A. Beistegui, Muriel Hermanos to J. A. Zayas, Mexico City, SRE,
Martfnez del Rfo Hermanos, i851, leg. 1557-12.
59. AN-426-1843:344-375 (Mar. 30).
6o. Jose Pablo Martinez del Rio to Gregorio Jose Martfnez del Rio, Puebla, Nov. 25,
1843, CMRF.
6i. Termination of the company is registered in AN-426-1844:486-488 (May 6);
bonds were also used apparently to pay off political debts. For example, a list of tobacco
diately realized 35 percent of the nominal value of the $5.o m

bacco bonds ($1.75 million in cash) and assigning as the residual value of
the Fresnillo shares and their dividends, $o.8 million, the return was
about $2.55 million on $i.o million invested, a profit of about 25 percent
per year over six years (or ilo percent annually, if finance charges are in-
cluded). Since the empresarios continued to speculate with the bonds
after 1844, the net returns for some were higher, for some, lower.62
Conclusion
Whether administered by the Empresa for private profit or by the

state for the benefit of planters and bureaucrats, the monopoly remained
a costly and cumbersome means to cultivate, manufacture, and market
tobacco. Economic productivity was misplaced as inefficient producers
were protected with artificial comparative advantages and as more of
Mexico's scarce and expensive resources were employed to produce less
tobacco. While the oppression of this institution weighed heavily on
working-class consumers and unorganized small-scale producers, its ef-
fects on Mexican society were generalized. For ordinary folk, it meant the
imposition of inferior merchandise at inflated prices and unfair exclusion
from potentially remunerative work in the tobacco trade. The monopoly
purposely redistributed income and opportunity away from the periphery
and toward the political center in Mexico City and Veracruz. Even with
high retail prices, however, the Empresa's affluent capitalists were nearly
ruined when overhead costs exceeded income from the sale of monopoly
tobacco. Proponents defended the institution as a fiscal imperative, but in
practice it produced few revenues for postindependence governments
in Mexico. Instead, it sapped the state's fiscal resources. Governments
were obliged to sacrifice potential revenue in order to accommodate the
demands of planters, bureaucrats, and emipresarios. As an analysis of the
Empresa's liquidation reveals, the shareholders' "profits" in the ven-
ture were derived primarily from the misappropriation of government
properties.
Starved for income, governments in early national Mexico succumbed
easily to the endemic political chaos that characterized this era. The day-
bondholders prepared in 1851 included the names of Francisco Fagoaga for $74,627 (vice-
president of the Banco de Aniortizaci6n, 1837-38); Rafael Beraza for $18,622 (minister in
Santa Anna's cabinet, 1842-44); and Juan Rodriguez de San Miguel for $8,6oi (congres-
sional finance committees, 1840-41) in Martfnez del Rfo Hernmlanos to Percival Doyle, June
20, i85i, BFO, vol. 290, no. 240.
62. For the post-1844 speculations in tobacco debt bonds, see Walker, "Kinship, Busi-
ness, and Politics," chap. 7.
to-day workings of the tobacco monopoly also directly jeopardized the

tenuous political peace. This was the case for the years 1837 to 1841 as
rival interest groups resorted to political intrigue and agitation to improve
their relative standings. Principled and unprincipled resistance to the
monopoly aggravated already troubled relations between local and na-
tional governments, making political consolidation of the new nation even
more difficult. The planters' campaign to disrupt the rental of the four
departments to the empresarios almost resulted in a confrontation be-
tween the Veracruz and Mexico City governments. In parts of the country-
side anarchy reigned as the Empresa's search-and-destroy operation in-
cited peasants to revolt. In Mexico City a bureaucrat's dismissal was
followed by a workers' riot in a tobacco factory. The empresarios' schemes
to profit from their troubled enterprise encouraged Santa Anna's armed
overthrow of Bustamante.
The great tragedy for Mexico was that the tobacco monopoly was not
an isolated, irrelevant institution. On the contrary, it was but a fraction of
a larger, expansive politicized public sector. Would-be monopolists rou-
tinely used the coercive powers of the state to structure commerce not
only in tobacco, but also in textiles and armaments, in staples such as beef
and salt, and in enterprises for roads, mints, public finance, and a host of
other endeavors. The cost of the ensuing confusion was staggering. Poli-
tics became increasingly disarticulated as literally every movement of the
economy set off divisive conflicts governments in Mexico collapsed an
average of once every thirteen months between 1821 and 1867. Economic
growth was also absent. For entrepreneurs, short-term political conquests
produced profits, not economic efficiency, not productivity, and not the
introduction of real savings. Even as empresarios energetically launched
grand ventures such as the Empresa del Tabaco, Mexico's national income
continued to decline precipitously.

Walker, Bussines As Usual

Uploaded by

Copyright:

Available Formats

You might also like

Walker, Bussines As Usual

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Walker, Bussines As Usual

Uploaded by

Copyright:

Available Formats

Business As Usual: The Empresa del Tabaco in Mexico, 1837-44

Author(s): David W. Walker

Business As Usual: The Empresa del

HE royal tobacco monopoly in New Spain was created by

Three groups with distinct and largely incompatible interests battled

5. Vicente Prieto, Manifiesto que el general Vicente Prieto hace de la importancia iy

Although the Compania Empresaria lost money throughout 1838, its

The partners selected Manuel Montifar, an experienced adminis-

Colonial Administration Private Company

Year Sales Year Sales

1766 $2,027,958 1838 $ 600,000'

aColonial sales in silver; 1838-41 sales in copper.

For its middle-level management, the Compafifa Empresaria (and

Campos failed, however, to obstruct implementation of new work regula-

The arbitration accord of January 1838 brought only a brief respite in

Proposals to rescind the Empresa's contract and to force the monop-

27. AN-286 (Banco)-1838:91-97 (Jul. 6); AN-286 (Banco)-1840:221i-226 (Apr. ii),

the Empresa and its shareholders engaged in a bewildering variety of

If the rental of a monopoly by a government to private persons is con-

34. Empresa del Tabaco, Observacioties al dictamnen de la segunda conmisi6n de ha-

Perils and Profits

Through most of 1840 the Empresa continued to thwart attempts by

41. AN-426-1838:647-648 (June 16); AN-426-1840:325-333 (Apr. 4); AN-429-

It was under such portents that a commission of the Empresa's share-

Committees in the Chamber of Deputies and in the Senate, headed

52. Ibid., IV, 87, 189-198.

Acquisition of public properties, however lucrative in the long term,

and MacKintosh), agreed to pay dr

diately realized 35 percent of the nominal value of the $5.o m

Whether administered by the Empresa for private profit or by the

to-day workings of the tobacco monopoly also directly jeopardized the

You might also like