Weak Foundations.

The Economy of El Salvador in the Nineteenth

Century. 1821-1898

Héctor Lindo Fuentes

University of California Press
1991
Acknowledgments

I would not have been able to write this book without "a little help from my friends." Among
my helpful friends I must count, first of all, the members of my family. They have helped in
more ways than they imagine. I must single out my brother Arturo who provided timely
financial support at crucial junctures. Without him this book would have been substantially
undernourished. Many in the scholarly community have offered advice and constructive
criticism. John Coatsworth at the University of Chicago guided the first version of this material
and commented on later revisions. David Rock, S. L. Cline, E. Bradford Burns, Paul
Gootenberg, Donald Stevens, Christine Jones, and Knut Walter have commented on various
chapters of this work. All the remaining mistakes should be attributed to my stubborn resistance
to their generous advice. My students, with their demanding questions, have forced me to think
hard. Friendly institutions have offered financial support, leaves of absence, or both: the Ford
Foundation, the University of California, and the Universidad Centroamericana José Simeón
Cañas. I must also thank the staff of the various libraries and archives where I did my research:
Regenstein Library, Newberry Library, Center for Research Libraries, Research Library of the
University of Illinois at Urbana-Champaign, New York Public Library, New York Historical
Society, National Archives, Library of Congress, UCSB Library, UCLA Library, Biblioteca
Nacional de El Salvador, Biblioteca Miguel Angel Gallardo, Biblioteca de la Universidad
Centroamericana José Simeón Cañas, Biblioteca Luis Alfaro Durán, Registro de la propiedad de
la Sección de occidente, Registro de la propiedad de Ahuachapán,

― xii ―

Public Record Office, British Library, and London Search Room of Companies House. Thanks
to all.
Introduction

There are many routes to underdevelopment. This book is about the first steps in route taken by
El Salvador, a poor, small, and weak country. The question is, What happens when a small and
isolated territory devoted mostly to subsistence agriculture, with about 250,000 inhabitants and
a professional class of only four lawyers, four physicians, twelve surgeons, and seven druggists,
decides to organize itself as an independent country? Early in the process economic growth
became synonymous with the expansion of export agriculture, and sharing the benefits of
growth with the population at large was not a topic that deserved serious discussion at the
highest levels of government. By the end of the nineteenth century the implications of export-
led growth became apparent. The health of the Salvadoran economy was becoming highly
dependent on the fate of coffee exports. Changes in the international markets were beyond the
control of any Salvadoran but could have an effect on the life of most Salvadorans. At the same
time the economic and cultural gap between a small elite and the majority of the population had
widened tremendously.
 The country's position in the international market was the epitome of the "small-country
hypothesis." It could never bargain for the prices of the things that it bought or sold; it had to
accept whatever the international economy imposed. The wisdom of increasing exchange with
the outside world was seldom questioned. In fact, the quest for free trade was one of the
motivations for seeking independence from Spain. Protectionist sentiment in El Salvador was
never strong and, after the Gold Rush and the opening of the Panama Railroad, trade along the
Pacific

― 2 ―

coast rapidly expanded. Throughout history the country's geographical isolation had been the
strongest barrier against the expansion of the export sector, and most of El Salvador's
international trade had to be taken to the Atlantic coast through a long, rough, and convoluted
route. (Needless to say that geographical isolation did nothing to improve the lot of the average
inhabitant of the small colonial backwater.) That barrier rapidly crumbled during the second
half of the nineteenth century when the Pacific coast of the American continent became a busy
trade route. Aware of the opportunities, Salvadoran leaders moved to take advantage of the new
situation. There was a consensus that "progress" and exports went together. Little thought was
devoted to the dangers of having an economy too dependent on one export product, and little
attention was paid to the long-term implications of the changes brought to Salvadoran society
by this new phenomenon.

For the leaders of El Salvador the question was how to profit from the new opportunities.
Despite all its dangers, and they were many, it was the right question. The new state was not
organized enough to effectively police its porous borders or to force anyone to produce
anything. Even if someone had tried to impose protectionist legislation it would have been
almost impossible to limit the expansion of foreign trade. The temptation of making a fortune
from indigo or coffee exports was too great for people to ignore it. It was hard to imagine any
action or policy on the part of Salvadoran authorities which could have stopped the expansion of
the foreign sector. Any Salvadoran government trying to impose such policies could not stay in
power for more than a few months. The only possible question was how to profit from the
opportunity and Salvadoran leaders, given the limitations imposed by the sheer scarcity of
resources, were successful in this sense.

Not surprisingly, one of the main themes of this book is the way in which the Salvadoran
economy was shaped by the increasing importance of exports. In that sense this book describes
a story of modest economic growth. It is a discussion of how resources were organized to better
adapt to the opportunities offered by the international economy. Changing prices and access to
factors of production were important variables that needed to be analyzed in this context. From
this point of view nineteenth-century El Salvador was a success story. Salvadoran producers
adapted to changes in relative prices and were not timid in their pursuit of profits. Able and
hard-working people made fortunes. In contrast with other Latin American countries, it was
almost entirely a local effort; economic growth took place without large-scale imports of factors
of production. Local entrepreneurs using local resources built the economy, almost from
scratch. They made decisions on their own, taking their clues from foreign markets and not from
foreign companies or governments.

― 3 ―

A key theme in this context is the shift from traditional to modern agriculture. During the first
years of independent life the main agricultural products of El Salvador were indigo and food
crops, cultivated in exactly the same fashion for at least two hundred years. It was a situation
that, following Theodore Schultz, we can call "traditional agriculture." In this form of crop-
raising, long experience with the same techniques and endowment of resources make farmers
very efficient. "In allocating the resources at their disposal," says Schultz,
"in choosing a combination of crops, in deciding on how and when to cultivate, plant, water,
and harvest, and what combination of tools to use with draft animals and simple field equipment
—these choices and decisions all embody a fine regard for marginal costs and returns," and
therefore farmers "know from experience what their own effort can get out of the land and
equipment."[1]

When traditional agriculture is the main economic activity, children learn from their
parents all that is necessary to be efficient producers, and formal schooling has little economic
value. Moreover, there is no need to learn how to deal with economic changes other than
variations in prices and the weather; it is unnecessary to take into consideration the benefits or
the problems of technological change. This situation is upset, however, with the introduction of
modern agriculture in which techniques are always changing; and it is essential, therefore, to
learn how to rapidly adapt to new situations and constantly reallocate resources. This, together
with the economy's need to compete with other countries that were also rapidly improving
techniques, was what happened to El Salvador when coffee cultivation was introduced during
the second half of the nineteenth century. A new and highly profitable crop had arrived which
forced Salvadorans to learn not only a new agricultural technology but also new forms of
financing and marketing. Neither experience nor tradition had prepared Salvadorans to deal with
the complexities of the coffee business. Under the changed set of circumstances formal
education acquired a new economic importance; the ability to identify economic opportunities
in a changing world, to learn new techniques, and to constantly reallocate resources was
enhanced by formal education. "The presumption is that education," says Schultz,
enhances the ability of students to perceive new classes of problems, to clasify such problems,
and to learn ways of solving them. Although the problem solving abilities that students acquire
pertain to classroom work, the abilities that are developed by this work seem to have general
properties that contribute measurably to their performance as economic agents in perceiving and
solving the problems that arise as a consequence of economic changes. [2]

― 4 ―

Starting a coffee plantation was an adventure into the unknown that meant doing things in an
entirely new way. Obviously there was an element of risk involved. At the beginning, even
those who had some formal education needed an extra measure of courage and imagination to
engage in coffee cultivation. Entrepreneurship played an important role. In a clear restatement
of the problem of entrepreneurship, Nathaniel Leff provides a useful definition of the term:
Entrepreneurship clearly refers to the capacity for innovation, investment, and activist
expansion in new markets, products, and techniques. As such, entrepreneurship may reflect
superior information and, perhaps more importantly, imagination, which subjectively reduces
the risks and uncertainties of new opportunities that are ignored or rejected by other investors. [3]

Clearly, in El Salvador those with the capacity for innovation and investment, with access
to superior information (and the ability to decode it), or the capacity to imagine the possibilities
of a new crop, came from the very small group of people who had access to education. The pool
of people from which the entrepreneur could arise was already extremely limited. Thus, the fact
that the only rapidly growing sector of the economy was the production of coffee meant that the
benefits of growth would only reach a select few.

The expansion of the export sector did not take place in a vacuum. This book shows how
the emergence of a powerful oligarchy was the logical consequence of that expansion.
International trade transformed Salvadoran society. During the latter half of the century the
gates were opened to the outside world and powerful market forces were unleashed. The
economy became more productive at the same time that the society became unequal. In the
hurry to grow crops for the world market, food production suffered. The benefits of growth
were not equally distributed to all Salvadorans. In theory it is not necessarily a bad idea to
produce less food and more indigo or coffee if the latter are more profitable activities. But those
who previously benefited from food production did not get their share of the benefits of coffee
production. Concentrating on exports was not by itself a recipe for disaster. Despite the
fluctuations of international prices there was no other economic activity that on average could
have competed with coffee in terms of profitability. Moreover, it is very difficult to think of a
plausible scenario under which nineteenth-century El Salvador could have grown by expanding
production for its local markets. Given the agricultural tradition of the country and the lack of
technical skills, it would have been foolish to think about the expansion of industry before
exhausting the possibilities of agriculture.

― 5 ―

Coffee production became the most profitable economic activity at a time when the institutions
of the state were being created. All other things being equal, any movement away from
traditional agriculture was bound to increase inequality. All other things, however, did not
remain equal. The few educated people who could take advantage of international trade
opportunities were also the few educated people who could organize the institutions of the
emerging state. What would be the role of the state in the new country? The sheer scarcity of
human and material resources together with the ideas of liberalism suggested limited state
involvement in the economy, and that involvement was designed to promote exports. Very little
was done to enable the majority of the population to take advantage of the opportunities created
by international trade. By contrast, those who managed to engage in indigo and coffee
production were subsidized by everyone else. Import taxes ultimately paid by consumers
financed a transportation system designed to help exporters to take their products to the ports.
Most of the budget was used to finance an army that kept order for the benefit of exporters
while the educational system remained underfunded. Land policies were designed to favor
coffee production. The state was created by and for the emerging oligarchy.

This is a book on the beginnings of a poor country. The idea is to show how its economic
foundations were built. (Details of political history are mentioned only when necessary, but the
reader is referred to the standard literature when it is deemed appropriate.) As in any history
book it was difficult to set the limits for the period to be studied. The choice of a period is
always arbitrary, forcing one to establish breaking points where continuities abound. In the
nineteenth century, however, the starting point is easy to figure out. The independence from
Spain offers one of those rare occasions where the division is clear. From the economic point of
view, at least, the end of trade restrictions and the beginning of a period of political instability
introduce new themes into the discussion.

So, at least one knows where to start, but where is the end? History offers a seamless
fabric, but history writers have a limited lifetime; books have to end somewhere. The cutoff data
presents a problem with no clear-cut solution. Three events seem to offer a credible way out:
first, the legislation that privatized land (the liberal reforms, 1881–1882) helped to give a
permanent shape to the liberal state; second, General Regalado's coup d'etat (1898) started a
period of relative stability during which coffee planters ruled the country without surrogates;
and finally, the 1932 peasant uprising known as the Matanza represented a dramatic moment
when planters and soldiers began sharing power. Each of these events present difficulties as
endings of the narrative. Although the liberal reforms had a tremendous symbolic value, when

― 6 ―

they are set in the proper context they cease to be a breaking point and become an important
step in long process that began much earlier and continued much longer. Choosing the liberal
reforms as a cutoff date would be to recognize their status as a "breaking point" that needs to be
revised, and it would have been impossible to provide a good idea of how the Salvadoran elite
continued the process of consolidation in power. The Regalado coup d'etat, in turn, suffers from
lack of dramatism; it was a coup after the first important economic crisis brought about by
heavy reliance on coffee exports. Finally, the Matanza was enormously traumatic, but although
it was arguably linked to the liberal reforms, it had distinctly non-nineteenth-century elements
such as the role of the Great Depression, the influence of Marxist ideology, the political role of
radicalized university students, and the role of a rural proletariat. The least dramatic of the three
events, Regalado's coup d'etat, was chosen as the cutoff date for this book. In 1898, after a
painful economic crisis created by a drop in coffee prices, the planters did not make any attempt
to change the course. It was a recognition that, for better or for worse, they could not figure out
an alternative, and for the foreseeable future the economic destiny of the country would be
linked to the coffee industry and to the coffee elite.

― 7 ―
1
Before Independence

In the first decade of the nineteenth century the Intendente Antonio Gutiérrez y Ulloa prepared
his Estado General de la Provincia de San Salvador; Reyno de Guatemala (año de 1807) , a
comprehensive report on the population and resources of the territory that he ruled. [1] The data
in the report provide what may be the most complete picture of San Salvador in the years that
preceded independence. The act of writing the report was significant in itself. During the second
half of the eighteenth century the Bourbon reforms had brought a new and more systematic
attitude to government. Gutiérrez y Ulloa's work exemplifies that attitude. He estimated the total
value of the products of the country (1,796,234 pesos), the production of maize, beans, and
indigo, the number of inhabitants (classified by sex, race, and occupation), and the number of
bridges and boats. He counted priests and parishes, lawyers and physicians, mules and oxen,
and wrote down the names of landowners and their haciendas . His account was remarkable but
by no means exhaustive: the range of products included was limited, there was no allowance for
clothing or any other manufactured products, and investment, services, imports, and government
expenditures were not considered. (Incidentally, Gutiérrez y Ulloa's monetary figures are in
pesos. This monetary unit survived the colonial period and was used throughout the nineteenth
century. When trade regulations were lifted after independence, the monetary system became
quite promiscuous, and pesos from other parts of the continent were used alongside with the few
local coins minted during the period of the federation. It was an open economy with a silver
standard, in which the central government

― 8 ―

had no control of the money supply. Thus, whenever monetary units are mentioned in this work,
comparisons are limited to the same time period or, if distant years are compared, an effort is
made to provide a sense of the changes in purchasing power.)

One could not regard the intendente's report as an estimate of the national income but only
as an account of the most important products and activities. The report, however, provides a
snapshot of the changes that the last years of Spanish rule had brought to the intendancy of San
Salvador, then a part of the kingdom of Guatemala.
 Those changes helped to set the stage for the independence movement. Institutions created
by the Bourbon reforms gave a new sense of identity to the local leaders. The creation of the
intendancy of San Salvador in 1785, for example, permitted a tighter administration at the same
time that it helped to define the boundaries of the future Republic of El Salvador. [2] Thus, a new
sense of belonging was coupled with an increased feeling of the power of the colonial
authorities. The new intendancy, small in territory and in population (when independence came
in 1821 it had only 250,000 inhabitants),[3] received more attention than ever. To facilitate its
administration the territory was divided into four partidos , which in turn were divided into
fifteen subdelegaciones .[4] Tax collection was improved with the establishment of a
subadministration of hacienda in 1786.[5] The main towns were organized
around ayuntamientos that, together with the Montepío de Cosecheros de Añil , a credit
institution that served indigo growers, constituted an outlet for the political activities of the local
elite.

The promotion of trade, one of the main objectives of the Bourbon reforms, meant, in the
case of San Salvador, measures to encourage the production of indigo, the main economic
activity of the local elite. The basic idea was not very different from the supply-side economics
of the 1980s, although it made more sense. Neglect, high taxes and, more importantly, trade
restrictions had limited both output and tax collection capabilities. The reforms were more
successful in raising taxes than in encouraging production, but with more resources and a new
attitude toward government the state expanded its sphere of influence. The intendentes worked
hard to strengthen the administration of justice, organize militias, encourage trade, and carry out
public works, as well as bring education, provide health services, secure the food supply,
resettle the population, and assess the economic potential of the territory. These changes
involved hard work since intendentes had to overcome resistance from different quarters. Most
Salvadorans did not welcome the stronger presence of the government in their daily lives.
Moreover, the path to prosperity did not last long; the last years of Spanish rule were years of
economic depression and political turmoil. But however

― 9 ―

limited in their success, the changes that took place at the end of the eighteenth century were a
hint of the future.

Indigo, which had been produced in the region since the sixteenth century, became the
main export of the province and the economic foundation of its elite. This happened more as a
result of increased world demand for natural dyes than of the freer trade environment brought
about by the Bourbon reforms, whose role was merely to facilitate the economy's response to
external sitmuli. Yet, more flexible trade policies created new options for the indigo merchants.
The crown authorized legal commerce with Caribbean ports in 1765, and thirteen years later
Cádiz lost its monopoly when other Spanish ports were allowed to do business with the colonies
and trade on the Pacific coast was liberalized.

But changes were not limited to trade routes. The attitute toward trade changed in a way
that affected every aspect of the business world. There was a spirit of economic renewal, and
America was once again a land of economic opportunity. Ambitious young men were eager to
travel across the Atlantic to try their luck. Central America received its share, a new breed of
Spanish entrepreneurs with links to commercial houses in Cádiz arrived in Guatemala and
brought new energy to the economy. They reorganized the indigo market, then in high demand
by the expanding textile mills of the industrial revolution. Gaspar Juarros, Martín Barrundia,
Gregorio Urruela, José Piñol, and Juan Fermín Aycinena are some of the names associated with
this phenomenon. By the end of the century they had established the economically and
politically powerful "familias" that controlled most of the Central American trade. [6] Thanks to
their efforts, indigo production became the most dynamic sector of the economy. It was the
main link to the outside world. A report on the province of San Salvador written in 1765
describes how:
Many are the fruits produced by the territory of this government, but the one that sustains and
enriches its neighbors is indigo, in whose production engage the noble and the commoner, the
rich and the poor, some as owners of haciendas and some as their workers. [7]

By 1800 the director of the Montepío de Cosecheros de Añil was proclaiming proudly
that:
Indigo is the most valuable product of the land, it is an important branch of agriculture, industry,
and commerce. At harvest time it gives employment to many idle hands that otherwise would
have nothing to do. It contributes to the church more than any other product, for worship and
support of her ministers. It contributes to cover the expenses of the public treasury

― 10 ―

and is the backbone of commerce. After leaving a profit in circulation within this kingdom it is
exported ... and it serves as payment for European goods. [8]
 San Salvador produced most of the indigo exported by Central America. In fact, the
production figures for the Capitanía General were less than a quarter higher than the province's.
Gutiérrez y Ulloa says that in 1807 San Salvador produced 486,990 pounds of the dye with a
total value of 669,661 pesos.[9] This represented 77.71 percent of the total Central American
indigo exports for that year.[10] Indigo was the engine of the market. Its impact on the economy
went far beyond the stages of cultivation and processing. Imports were financed with its
proceeds, and trade in general was sustained by the income generated by it. The importance of
indigo was felt not only in the province of San Salvador but in the whole Capitancy-General of
Guatemala. The economic situation of San Salvador was crucial for the prosperity of the rest of
the colony. Fluctuations in indigo production or prices affected not only local landowners and
laborers but also the entire trade network that started with the local retailers and reached the
Guatemalan merchants who controlled the export and import markets. Thus, the profits gained
from indigo were essential to finance other sectors of the economy. [11]

This trend was consolidated throughout the century. There was a downside, however, to
excessive reliance on exports, and by the end of the colonial period Salvadorans knew by direct
experience its specifics. Interest in indigo diverted attention from the cultivation of food, and
the vagaries of international trade led to a serious economic crisis. Shortly before independence
Domingo Juarros noted that
[San Salvador's] trade is principally confined to the cultivation of indigo, to which indeed the
inhabitants devote their attention almost so exclusively as to neglect the growth of other articles
of the first necessity.[12]

Bourbon Administration

The Bourbon reforms went far beyond trade reform; they also had a direct impact on the
organization of government. Colonial authorities began to play a new role as promoters of the
economy and organizers of civil life. With the creation of the Intendancy of San Salvador as a
new subdivision of the Captaincy-General of Guatemala, the bureaucracy grew, tax collection
became more efficient, and more attention was paid to public order. By 1807 the crown
employed 212 civilians to administer San Salvador.[13] Having smaller administrative
subdivisions facilitated law-and-order activities.

― 11 ―

Public order was one of the key responsibilities of the intendentes. To perform their duties they
had an army at their disposal, but it was not a professional force and not very reliable. This
army, called the milicia , was formed by ladinos who during their service enjoyed the fuero
militar and the right to wear uniforms but who did not have access to positions of command.
These were reserved to Spanish officers of the regular army. [14] The size of the militia was quite
variable; by the end of the eighteenth century there were up to 2,916 ladinos in the militias of
the intendancy, but in 1807 the number had fallen to 588.[15] Since the main opposition to
Spanish policies came from the more articulate and organized groups, that is, from the ladinos,
the strength of the militias was not always reassuring. On an occasion when the intendente
Barón de Carondelet felt threatened by the ladino population, he wrote to the captain-general in
Guatemala complaining that he was "with only five good rifles, and cannot rely on the militia,
composed as it is entirely of ladinos. But, in an extreme situation, we can probably count on the
Indians."[16] In the case of external threats the militias were more useful. Outside enemies, after
all, were everybody's enemies, and the international situation at the end of the colonial period
hurt the interests of the indigo planters. British pirates, for instance, attacked the port of
Acajutla in 1799 and stole 79,000 pounds of indigo.[17] That kind of behavior affected everyone
and had to be deterred.

Concerns with law and order were not new to the colonial system, although the new
organization of the intendancies greatly improved them. Direct state involvement in education,
by contrast, was a novelty. When the Archbishop Cortás y Larraz visited the parish of San
Salvador in 1768 he found that there was "no school, neither in the capital nor in the
villages."[18] To learn how to read and write one had to go to a cleric with time to spare or to a
willing relative (assuming that one's relatives were literate). In some towns educational needs
would be satisfied by Indian teachers who taught "how to read and write, the method to assist in
mass, and church ceremonies to three or four [boys]." [19] Even the teaching of Catholic doctrine
was sorely lacking. Needless to say, there was no university. The only option to acquire higher
education was to attend Guatemala's Universidad de San Carlos, a most elitist institution that in
145 years of colonial existence graduated only 460 bachilleres from the entire Central American
isthmus.[20]

When in the 1770s the audiencia of Guatemala issued orders establishing primary schools
(escuelas de primeras letras) the first obstacle was to find qualified teachers. Few knew how to
read and write, and those who did were people in the higher levels of society who had little
inclination to become teachers. Moreover, who would want to go to school? The majority of the
population lived in a subsistence economy, and to them schooling had no clear economic
advantage. Indian com-
 ― 12 ―

munities actively resisted schools, which they saw as yet another Spanish burden. Alcaldes who
wanted to follow the order to introduce schools in their districts faced resistance. In the town of
Sonsonate a frustrated alcalde tried to coerce children into going to school, and the audiencia
had to advise him that his tactics were counterproductive. [21] The rural population, unmotivated
and sparsely distributed, could not be reached easily. It was best to concentrate efforts in the
cities. The Barón de Carondelet provided each barrio of the city of San Salvador with teachers
of elementary crafts and primary letters. In 1800 the "Escuela de la República," the first formal
school, opened its doors in the capital. Soon after, craft schools began operating in San
Salvador, San Vicente, and San Miguel. When in 1803 Archbishop Luis de Peñalver y Cárdenas
visited the province he found that only the "Escuela de la República" had a serious teacher, and
that the entire intendancy counted only 500 students. Surprisingly, ladinos and Indians did have
access to the few schools that existed at the time. Of the 164 students who attended the Escuela
de la República, by far the biggest in the country, 56 were Spanish, 91 ladinos, and 17 Indians.
[22]
 Four years later Gutiérrez y Ulloa found 1,793 students (less than 4 percent of all children)
and 88 teachers, but described the state of education as "extremely backward." [23] The number of
students had grown rapidly (if one is ready to trust the numbers), but the starting point was
abysmally low and the staying power of the educational effort in constant jeopardy.

Schools were financed, by and large, locally. In 1778 the audiencia had decreed that
Indian communities had to pay the salary of the schoolmaster. [24] (Judging from the results they
did not try very hard, but on occasion this new obligation could be used to defend the
community funds. In 1804, during the debate around the consolidation of debts, the alcaldes of
San Salvador argued that ladino and Indian comunidades needed their funds to maintain schools
and pay teachers' salaries.) Just before independence colonial authorities spent an average of
40,778 pesos per year, or 5.63 percent of the budget, on all Central American schools.
[25]
 Though commendable, the efforts to educate the Salvadoran people heaped a meager harvest.
Schools were unstable institutions and opened and closed unpredictably depending on the
availability of teachers and the willingness of parents to send their children. The lessons taught
in them were of the most elementary nature: reciting and writing prayers, rote memorization,
emphasis on penmanship, and little more.[26] Moreover, lessons were not always learned: in
1804 the school of Zacatecoluca had fifty-nine students and only six knew how to write. The
same year the Indian children of Dolores Izalco were reported to have "learned nothing"
because of the resistance of their parents to sending them to school. [27] By the end of the colonial
period, the educa-
 ― 13 ―

tional system, if it deserved that name, still languished in a most precarious state. The
Salvadoran elite was, in general, remarkably ignorant, and the general population had no use for
education. The concern among progressive rulers about education had, however, taken root.

The Spanish authorities proved more effective in their efforts to enforce laws regulating
commerce. They focused on small commercial activities as well as on big fairs. Indian
participation in the market economy was forced by a 1747 law ordering them to pay their
tributes in coin.[28] Intendentes saw to it that ladinos did not trick Indians by altering weights and
measures and that they did not take advantage of them by setting unfair prices. [29] That was the
easy part; the marketing of indigo was a more complicated problem. Indigo, the only crop that
could be sold in the world market in significant quantities, was the "soul that gave life to the
kingdom [of Guatemala]."[30] Its production was concentrated in San Salvador and, to a lesser
extent, in Guatemala, Nicaragua, and Honduras, but the greatest beneficiaries of the Indigo
business were the Guatemalan merchants. [31] During the second half of the eighteenth century
they had developed a system that permitted them to obtain an important share of the indigo
market. The merchants were led by a group of Spanish entrepreneurs who had family and
business connections with big commercial houses in Cádiz. Through their connections they had
access to capital for financing the planters in the provinces, to agents for purchasing European
goods that could be sold in the colony, and to ships that arrived at the Gulf of Honduras. It was
a package of services that was vastly superior to anything that Central America had ever seen.
As a result the Guatemalan merchants were in a privileged position, and they did not hesitate to
take advantage of it. By the beginning of the nineteenth century the system was firmly
established, together with the political social preeminence of the Guatemalan merchants. The
instructions to the Guatemalan delegate to the Cortes de Cádiz describe the system in part.
As to the merchants, there are up to thirty or thirty-five commercial houses in the kingdom
deserving that name, being the only ones that every year receive directly from Cádiz through the
gulf of Honduras European goods valued at a million pesos, a thousand more a thousand less,
which distributed among the merchants are sold retail at their stores. The greater number of the
former do their business in the houses that they have by the name of almacenes . The returns are
sent in an equal portion of indigo pounds, which is almost the only product that supports trade
with the metropolis. These calculations must be taken as an approximation, when the war with
the English does not place obstacles to navigation, and when locusts or other misfortunes do not
impair the harvest of the dye.[32]
 ― 14 ―

The system established by the merchants reached producers in the provinces. The latter obtained
credit from the former who provided them with the goods and cash necessary to survive until
the product was ready for the market. Crown officials in the provinces moonlighted as agents of
the merchants; the commercial network was also a network of influence. When indigo was
collected and processed, it was sold to the merchants at fairs in Guatemala or, after 1782, in San
Salvador, and then exported to Cádiz. By the time of the fairs the producers were so heavily in
debt that they had committed almost all their production to the merchants. [33]

The rapid rise of the Guatemalan merchants and their accumulation of power were early
indications of what can happen when the growth of the export sector demands a complex set of
skills. The business techniques employed to deal with both local producers and European buyers
of indigo were very clever and complex and required knowledge of both sides of the business
equation. That kind of knowledge was clearly beyond the majority of the population, and those
who had it could profit from it very handsomely. In fact, the Spanish entrepreneurs who arrived
in Guatemala during the second half of the eighteenth century had, as their main asset, their
skills. They arrived with little capital. Some of them started slowly familiarizing themselves
with Guatemala, which they visited first "as shipper-merchants," and "after many trips back and
forth between the [Iberian] peninsula and Guatemala they decided to settle for good in the
latter."[34] A change in technology, in this case business technology, created new opportunity for
those with special skills. In a region where the educational system was dismal, very few had
such skills, and they received enormous rewards for their knowledge.

Mule trains loaded with indigo were sent to Omoa or Trujillo on the Gulf of Honduras, to
Acajutla on the Pacific, or to Veracruz, via Oaxaca. The Gulf of Honduras route had definite
advantages over the other two. Trade along the Pacific coast developed very slowly, and very
few ships visited Acajutla. Before the discovery of gold in California and the construction of the
Panama railroad, coasting vessels had little business to do along the northern two-thirds of the
Pacific coast. The Veracruz route, long and slow, was a last resort. Its use made sense only if
other alternatives were closed due to the activities of privateers. [35]

The system was open to all sorts of external shocks. Trade routes had to be changed due to
the conflicts between England and Spain; credit was crushed by the 1804 credit consolidation
decrees and by disruptions in trade. When they were unable to pay their debts many Salvadoran
producers lost their land to Guatemalan merchants. [36] Honduran and
 ― 15 ―

Nicaraguan cattle breeders found themselves under similar circumstances. They supplied the
rest of Central America with meat and hides. Hides were an important part of their business
since they were used to make zurrones (bales; this word was translated as "seroon" in the
nineteenth century) to pack indigo and, therefore, their fate was tied to that of Salvadoran
producers. Honduran miners, in turn, had to send their silver to the Guatemalan mint. Although
the producers tried to weaken the control of the Guatemalans through contraband, the latter's
control of credit and their connection to the main trading houses in Cádiz made this difficult.
They provided a valuable service that no one else could offer. Not surprisingly, most of the
hostilities after independence were between Salvadorans and Guatemalans.

The growers considered themselves to be victims of the merchants. In 1781 they told the
government that the merchants wanted to keep them "in a state of Algerian slavery." [37] For the
Spanish authorities, who were not above "divide and conquer" theories of government, this
represented an opening. The colonial authorities tried to favor the Salvadoran producers in order
to weaken the powerful merchants. A credit institution was established to help indigo producers.
In 1782 Captain-General Matías de Gálvez signed the statutes of the Montepío de Cosecheros
de Añil (Indigo Growers Society).[38] To finance it, the Montepío was endowed with funds from
the Royal Tobacco Administration, and a tax on indigo was instituted to provide it with monies
on a continuous basis. The initial contribution was 100,000 pesos, and the income per year from
the indigo duty ranged between 10,000 and 25,000.[39] Despite the good intentions of the
captain-general, the Montepío never had enough funds to replace the merchants as the main
source of credit, and the credit problems of the growers persisted together with their dependence
on the Guatemalan merchants.

Prices were as much a problem as credit. The power of the Guatemalan merchants (a
highly organized group) to manipulate prices bordered on a monopsony situation and also
generated action from the colonial authorities. There were continuous disputes about prices and,
at the end of the eighteenth century, the captain-general periodically intervened to fix prices and
almost invariably sided with the interests of the Salvadoran producers. The 1772 fair provides a
good example of how this operated.
Growers' representatives from San Salvador and San Miguel came to the 1772 fair asking 10 1/2
reales for corte , 12 3/4 for sobresaliente and 15 for flor . San Vicente's delegates wanted higher
prices while the merchants proposed to pay 9 1/2, 11 1/2 and 13 1/2 reales, respectively. An
arbiter

― 16 ―

chosen to settle the conflict recommended the schedule proposed by San Salvador and San
Miguel. San Vicente and the merchants continued to protest; but prices of 10 reales, 12 1/2
reales and 15 reales were finally accepted by all parties. [40]

In 1780 and 1781 the merchants complained that Captain-General Gálvez was fixing
prices arbitrarily.[41] In 1803 the captain-general fixed prices following the recommendations of
the Montepío de Cosecheros de Añil. Between 1806 and 1810 the captain-general fixed all
prices.[42] But price-fixing policies did not always achieve their goal of protecting the producers.
In 1794 a grower complained that when loans were repaid in indigo he suffered losses of
between 10 and 15 percent, a figure similar to the difference between the prices paid by
merchants at the annual fair and open market prices. [43] This suggests that the merchants found
ways to circumvent the authorities and that the regulations were, at most, partially successful.
At the end, price fixing had to be abandoned.

The reasons why the colonial authorities exerted some control on the indigo market were
not necessarily altruistic. The Guatemalan merchants were the most powerful economic force in
the colony; they were well organized in Junstas de Comercio and, after 1794, in
the Consulado together with their presence in virtually every colonial institution. [44] It was in the
interest of the authorities to weaken them and keep them under control. The merchants
controlled import and export markets and had close ties with commercial houses in Cádiz. They
were the early beneficiaries of the Bourbon reforms but had become too powerful. Part of their
system involved the control of midlevel public officials by paying their sales taxes and tributes.
To weaken the power of the merchants, the Spanish authorities excluded them from the
deliberations that led to the creation of the Montepío de Cosecheros de Añil, and the indigo fair
was moved from Guatemala to San Vicente, in San Salvador province. Despite these attempts,
this power conflict was never resolved during the colonial period. The wholesale merchants
kept their control of the indigo market, circumvented and even ignored the prices fixed by the
authorities, and created new classifications of indigo that enabled them to set their own prices.
[45]
 The preceding discussion on the external sector of the colonial economy invites a
digression on the role of that sector as an obstacle to the development of Central America. Much
has been written about the impact of Spanish taxes and trade restrictions on the economies of
the colonies; some versions of dependency theory, for instance, argue that the empire extracted
surplus from the colonies and that this is the root of the underdevelopment of the Latin
American economies. In the view

― 17 ―

of liberal economists, taxes and trade restrictions distorted economic activity and introduced
inefficiencies that were an obstacle to growth. These arguments have been supported mainly
with evidence from the richest, most important, and more highly taxed colonies—Mexico, Peru,
Chile. Central America, being poor in gold and silver, did not have much to be deprived of.
Taxes and restrictions were costly, the burdens on labor were painful, but the colonial
experience did not bring underdevelopment through international trade mechanisms. Trade was
a very small part of the economy; most energies were devoted to subsistence activities. [46] Indigo
was the only viable export for the province of San Salvador, and it suffered more from locust
plagues, competition, high transportation costs, and the constant disruptions to trade created by
European rivalries than from taxes and regulations. At most, indigo production amounted to 15
percent of the national product of the province of San Salvador, probably much less. [47] The
overwhelming obstacles for the economy were in the acute scarcity of capital, human and
physical, and, being located on the Pacific coast when most trade was in the Atlantic, in a less
than privileged geographic location. The external sector did, however, play an important role in
contributing to the strength of powerful elites who, in turn, worked hard at protecting their
privileges.

Bourbon Spain did not profit much from owning Central America. During the late colonial
period trade had been revitalized, and it could be expected that revenues would increase. They
did, together with expenditures. The revenues of the Capitanía General came from four main
sources: the tributo , a head tax imposed on Indians; taxes on internal and foreign trade; its
share of the church tithe; and state monopolies of goods such as tobacco, liquor, gunpowder,
and playing cards. There were other minor sources of revenue such as the taxes on ice, cock
fights, stamped paper, rent of national houses, and the post office. [48] But that revenue was not
enough. The role of government had expanded and needed a larger bureaucracy. The costs of
maintaining the colony safe from the British further crushed the illusion of turning it into an
asset to the crown. In order to secure the safety of the northern ports the Viceroyalty of New
Spain had to subsidize Central America by sending situados . The amount of the situados was
between 100,000 and 200,000 pesos a year until they stopped in 1810. [49] Ordinary military
expenditures accounted for 44.20 percent of the budget. [50] The province of San Salvador did not
pay an excessive share of taxes. Between 1790 and 1814 her share of the funds sent to the royal
coffers was 12.16 percent, less than her share of the kingdom's population (about 16 percent).
[51]
 In turn, Central America as a whole had a lighter burden than other parts of the Spanish
Empire.[52]

― 18 ―

The last years of Spanish rule were also years of decreasing revenue for the crown. [53] The
capitation tax imposed on Indians was abolished in 1812, partially reinstated in 1814, and
abolished in 1820.[54] In order to promote trade the crown had given up potentially significant
sources of income. By the end of the colonial period goods traded to other regions of America
were free of duty. Foreign products coming via Panama, a puerto habilitado , did not pay taxes
either. Nor did Asian goods coming from Mexico. Many products were exempt from the
interior alcabala tax: cochineal and indigo when transported by the growers; cocoa, coffee,
indigo, and sugar when produced on newly cultivated land; meat and tobacco. That is, taxes did
not impose a heavy burden upon foreign trade; few articles paid duties. Alcabala taxes on other
products (presumably internal production) did make an important contribution to colonial
revenues. From 1812 to 1817 the average annual revenue collected from alcabala taxes was
157,681 pesos. Between 1815 and 1819 the alcabala accounted for 22.7 percent of the total
revenue. The tobacco monopoly was a better source of revenue; during the same period the
average contribution of tobacco to the colonial coffers was 54.3 percent. [55] Revenue was spent
inside the colony. Another form of taxation, forced labor in public works, was used in projects
that were meant to benefit the colony at large. Barón de Carondelet built new jails and the
waterworks of San Salvador by forcing the barrios of the city to provide the labor force. [56]

In emergencies the crown found ways to squeeze funds out of the colony. After declaring
war on England in 1804 Spain decreed the consolidation of church debts. In practical terms it
meant that the church had to call all outstanding loans and deposit the funds in especially
created Cajas de Consolidación . The decree was far reaching since the Catholic church and
institutions sponsored by her had become important lenders. The decree affected
private capellanías , convents, monasteries, hospitals, schools, and comunidades de ladinos e
indios . The comunidades contributed at least a quarter of a million pesos. [57] Central America
raised through these means at least 1,250,000 pesos, approximately the same as the value of one
year of indigo exports. The contribution of San Salvador was substantial. In 1807, one year
before the end of the consolidation, the local Junta de Consolidación had 590,376 pesos on its
books.[58] The economy was seriously disrupted. As currency was scarce barter became more
common. Indigo planters had to mortgage their properties, and the resources of the Montepío de
Cosecheros de Añil were diverted. In order to pay the principal of its debts, the Arce family,
prominent in the indigo business (and later in the independence movement), had to borrow
22,000 pesos from the Montepío and 10,900 pesos from a prominent Spanish merchant. [59]

― 19 ―

At the end of the colonial period the burdens of being a Spanish colony were not so much in the
high taxes or even in the trade restrictions but in the dangers of being linked to a metropolis that
was in a constant state of war. The 1804 consolidation, the excessive military expenditures, and
the constant disruptions to international trade made it very costly to be a colony. Indigo
producers were particularly hurt by this state of affairs.
Labor, Land, and Entrepreneurs

The economy was largely agricultural; most people lived and worked in the countryside. In
Gutiérrez y Ulloa's report only 5,891 people were counted as occupied in nonagricultural
activities. Most of them were either weavers (1,803), peddlers (1,738), or colonial employees
(785). Nonagricultural activities were few and demanded only the most basic skills. Gutiérrez y
Ulloa classified only twelve kinds of trades—weavers, hatmakers, bakers, blacksmiths,
musicians, carpenters, shoemakers, tailors, construction workers, silversmiths, dyers, and
painters—which provided for the simple necessities of colonial life. Moreover, it is quite
possible that even skilled laborers spent some of their time working in agricultural activities.
With such small numbers of artisans, most manufactures had to be imported, but foreign goods
were scarce and expensive. As Barón de Carondelet complained,
In all America there is probably no city as high-priced as San Salvador, for all items of general
consumption. Its long distance from the Atlantic makes it necessary to bring wine, oil, and other
European goods over here through Guatemala. [In that city] they change hands at a high profit
to the merchants. So when they are transshipped to San Salvador, there is an added expense of
sixty leagues' transport cost, in addition to the alcabala. Next, the local merchant takes his cut in
retail sales, so that the end results are excessive price levels. [60]
 It is worth mentioning that Barón de Carondelet expressed his dissatisfaction with
Salvadoran prices as an argument to ask for a pay raise. Yet, there is no question about the
isolation of the economy and the steep costs involved in transporting goods. The barón's
comments also shed light on the demand side of the market. Demand for manufactured goods
was so small that despite their high prices the stimulus was not enough for the creation of a
small local industry. In fact, very few people were in a position of consuming European goods.
The professional class was tiny, it included 4 lawyers, 4 physicians, 12 surgeons, and 7
druggists. The main city, San Salvador, had less than 15,000 inhabitants,

― 20 ―

614 of whom were Spanish.[61] The fact is that the economy was overwhelmingly rural and, by
and large, devoted to subsistence agriculture.

The main exception to the overwhelmingly agricultural character of the economy was
mining, iron in particular, which showed some dynamism, particularly in years when imports
were impossible.[62] Iron mining had started in Metapán, in the northwest, at the end of the
seventeenth century.[63] Although its existence was precarious and it faced the usual obstacles of
lack of capital and technology, and a tiny market, it was the most advanced sector of the
economy. Its importance should not be exaggerated, however. Mine owners, by and large
Spanish immigrants with limited knowledge of mining, had to engage in other business
activities in order to survive.[64] Production fluctuated widely; in a good year, like 1806,
production reached the mark of 1,000 quintales, whereas a bad year could mean no production
at all. There was some value added; the average production of steel between 1803 and 1820 was
3,335 pounds, and by 1807 there were 45 blacksmiths operating in Metapán and 219 in the city
of San Salvador.[65]

There are no explicit data on how many people were employed in mining. Gutiérrez y
Ulloa has no separate category for miners, which may suggest that it was not a full-time activity
and that people who worked in the mines were classified under their main occupation, that
is, jornaleros . The population of the district (4,203 inhabitants), however, had a completely
different composition than in the rest of the country. It had the highest percentage of Spaniards
(37.61 percent as opposed to the province average of 2.86) and the lowest of Indians (10.99
percent versus 43.06). Since Metapán's indigo production was not particularly prosperous, one
can infer that iron mining was mainly a white and mestizo activity and that it was attractive
enough to concentrate one-third of the Spanish population in a very small region. [66] Iron mining
was the most sophisticated economic activity, however low the level of technology employed.
Unfortunately, the skills that were developed in iron mining were completely irrelevant after
independence once the door was opened to foreign imports, and there was not a chance that the
local production could compete.

Silver mining was a relatively late and unsuccessful development. Silver was discovered
in the northeast of the province (near Gotera) in 1781. Excited with the prospects Captain-
General Gálvez lent money to Domingo Sánchez Espino, the miner who had made the
discovery, and granted him a repartimiento of 200 Indians. The inhabitants of the region
opposed the arrangement rather strenuously, and by 1793 the mine was shutting down for want
of labor.[67]

Agriculture was, by far, the main employer. But in the countryside, too, labor was
chronically scarce, although the peculiarities of indigo

― 21 ―
production made it possible to keep a certain balance. Harvest time was the main period when
indigo entered into open competition for labor. Only then were large groups of people mobilized
for indigo production. During the harvest in late September and October, and in November, the
month of the fairs, indigo was the main preoccupation of Salvadorans. All other activities came
to a halt in order to satisfy its needs. During the early 1800s Salvadorans are said to have
concentrated so much on the production of indigo "as to neglect the growth of other articles of
first necessity," presumably food.[68] The strain was felt at every level of Salvadoran society. For
the small elite it created a serious conflict. Since very few people had administrative skills, they
had to wear many hats: they were public officials, retail merchants, and indigo planters. At the
end of the rainy season they had to emphasize the latter role. All the officials of the Alcaldía de
San Salvador were involved in the harvest in some way or another and had to ask the authorities
in Guatemala for permission to abandon their posts. Priorities had to be established, and they
chose to perform their public duties from their estates since they had to be present to supervise
the harvest.[69] The result was that the local government was paralyzed during the months of the
harvest. This highlights another major bottleneck of the economy: the scarcity of entrepreneurial
talent. From the point of view of the labor force it was also necessary to bend the rules. People
engaged in the harvest could ask to be exempt from jail sentences. [70] Not only was production
of food and other articles of basic consumption neglected for the sake of indigo, but the
administration of justice and the normal performance of municipal duties suffered as well.

The peculiarities of the production of indigo and the small size of the nonagricultural
sector of the economy shaped the organization of agricultural labor. The agricultural techniques
used to produce indigo were very simple. Land was not even plowed. The ground (preferably
located in a warm area) had to be cleared and the brushwood burned sometime in February or
early March, before the beginning of the rainy season. Then, in March, the seed (which
resembled that of mustard) was broadcast over the ashes. Sometimes cattle were brought to the
fields to break the ground and mix the soil and the seeds with their feet. When the planter was
late in clearing the ground he had to plow lightly, broadcast the seed, and wait for the rain to
pack it. Weeding, when done, took place between April and June and again in August. By the
end of September or the beginning of October, when the rainy season was almost over, the buds
were about to open and the leaves were rich in indigo. The jiquilite leaves were cut four inches
above the ground, tied in bundles, and taken to the obraje for processing. Although the indigo
plant or jiquilite was a perennial, it was most productive in its second
 ― 22 ―

and third years after which the land was cleared and the process started all over again. The
cultivation of indigo falls clearly within the category of "traditional agriculture" as defined by
the economist Theodore Schultz. Agricultural methods had remained unchanged for such a long
time that they had reached the fixed state at which, given the level of technology, resources are
used most efficiently and people know how to adapt to changes in the market and in the climate.
This reasoning also applies to the processing of the dye, which saw little change over the
centuries.

Collecting the leaves and processing them required considerable amounts of manpower.
Two large brick tanks of about four square meters were used to process indigo for the market.
The leaves were left to ferment in the first tank until their color turned light green. This stage
took about ten or twelve hours. The fermented liquid was then transferred to the second tank. It
was most important to make the transfer when the fermentation had reached the optimum level.
The puntero , the person who made this crucial decision, checked the liquid often until he was
certain that the right level of fermentation had been reached. In the second tank the fermented
liquid was stirred by hand or by horse power while its color gradually changed to light blue and
then to a darker blue. Throughout the process the fermented leaves expelled an unpleasant odor
and attracted flies. After much stirring under the hot sun the hard labor of the workers was
rewarded when a purplish sediment sank to the bottom of the tank and the water became clear.
Then it was only a matter of draining the water and letting the sediment (a purple-colored mud)
dry under the sun. The final product, looking like a porous piece of purple-blue plaster, was
packed in leather "seroons." Once filled with indigo each seroon weighed 150 pounds. [71] The
seroons, simple leather bags lined with a straw mat, were perfectly suited to be carried by
mules. Each mule carried two seroons, one on each side.

Once the season was over most people (that is, those who were not merchants or owners of
haciendas) could forget about indigo. They went back to the tierras comunales, ejidos , and
small holdings to engage in subsistence agriculture and petty manufactures, and the haciendas
themselves again became sleepy places devoted to the production of foodstuffs and to raising
cattle. Competition for labor was high again during the planting season of corn in February and
March, which coincided with the planting season of jiquilite. [72] But the situation was not as bad
as in the last quarter of the year because not all jiquilite had to be replanted the same year and
planting did not demand as much labor as harvesting. In fact, indigo production did not call for
a social organization unrelated to the rest of the economic activities. It required only temporary
arrangements during three months of every year. The ten-
 ― 23 ―

sions between the market and nonmarket sectors of the economy were eased by this feature.
Labor was scarce indeed, but the export sector put pressure on it at most during one quarter of
the year. The strains on the social fabric did not have to be permanent.

Institutions like debt peonage, so important in other parts of the continent, did not flourish.
The repartimiento system was very well suited to satisfy the labor needs of the indigo producer
during the harvest season. During the hectic month of the harvest a variety of labor
arrangements were available. The producer of six pounds of indigo per year obviously did not
hire outside labor, whereas the large producer was forced to do so. Small growers could rely on
their families or on the cooperation of their neighbors to obtain the help needed to grow and
process indigo. Large producers needed more labor and, therefore, had to use different
arrangements. To satisfy their needs, they employed slaves, wage labor, repartimiento Indians,
tenants, share croppers, or a combination thereof. [73] Labor shortages had been a common
complaint throughout the eighteenth century. At the beginning of that century the crown
prohibited the employment of Indians in the production of indigo, but avoiding this prohibition
was not unusual.[74] However, the prohibition was lifted in 1737 and the use of repartimiento
Indians became widespread. A document signed by the Alcalde Mayor de San
Salvador provides an idea of the use of this institution. It shows the amounts of Indian labor
allocated in 1785 under the repartimiento system.[75] According to the document 3,284 Indians
were assigned to 78 indigo haciendas distributed all over the territory of the province. These
numbers suggest that the availability of labor through this system was not the same for all
producers. The alcaldes mayores, who were in charge of allocating Indian laborers to the
various producers, were involved in the business themselves. The consequence of this
arrangement was that those who held official appointments or were closely connected with the
bureaucracy had better access to Indian labor. In fact, only big hacienda owners received the
services of repartimiento Indians whereas the small producers had to find labor wherever they
could. Thus, the scarcity of labor went hand in hand with unequal access to it. The existence
of peones acasillados (resident workers) did not solve the labor shortage because these workers
were too few in number. The cultivation of indigo did not require constant attention and,
therefore, it was not necessary to secure a year-round labor force of any size. Incidentally, this
also explains why slavery was not an important institution. In a time when capital was scarce, it
was not a good idea to invest in slaves who would be fully employed only a few months every
year. Wage labor was the only other category of labor available in large numbers, but it was not
a dependable solution. Free laborers knew that they

― 24 ―

were in the best bargaining position and took advantage of it. It was a recurrent complaint that
they received wages in advance and then did not show up to work. [76]

The living conditions of agricultural labor are hard to assess. Working in

indigo obrajes was most unpleasant. The process involved the fermentation of jiquilite leaves
that turned fetid, released gases, and attracted clouds of flies. The rewards for agricultural work
were meager. There is no precise information on food intake. One can make educated guesses
by looking at the information available on food production, assessing its reliability, and
comparing it to other countries. Gutiérrez y Ulloa's figures for the province of San Salvador
give a per-capita consumption of maize of 80.82 kilograms, an amount that seems small when
compared to data available for Mexico during roughly the same period. Harry Cross estimated
the consumption of maize by peasants of a Mexican hacienda in the middle of the nineteenth
century, and using his data it is possible to estimate a yearly per-capita consumption of maize of
156.11 kilograms, almost twice as much as in the Salvadoran case. [77] It is also known that the
average consumption for all Mexico during the period 1800–1810 was 133 kilograms. There are
also data on consumption in Mexico City.[78] The lowest average consumption recorded is that of
1823, only 46.6 kilograms, a smaller figure than the intendente's, but the Mexican datum cannot
be taken at face value. The consumption in Mexico City in 1822 had been 102 kilograms, and in
1824 it was 96.2 kilograms. This suggests that the consumption of 1823 was extraordinarily low
and was probably complemented with maize stored from the previous year. Also, the
European/criollo population of Mexico City ate wheat. The above comparison does not make it
impossible to accept Gutiérrez y Ulloa's figure, but does suggest that it is a low estimate and
that there are reasons to believe that the Salvadoran peasant ate less maize than his or her
Mexican counterpart.

The fact that labor was ill rewarded even though it was scarce points out one of the main
characteristics of the economy of the province: its very low productivity. This is not surprising
given the lack of capital and the difficulties in trade that will be discussed later. Moreover, the
use of coercion further depressed salaries. The main features of the labor force at this time were
its scarcity, the seasonality of labor requirements, its low productivity, and the presence of
coercion. There were mechanisms that eased the problems. Indigo production imposed a rhythm
of life that alleviated tensions. During harvest time there was tension between town and country,
between subsistence and market agriculture. Individuals had to change their roles. Public
officials became producers, subsistence farmers became hired or forced laborers, producers of
food became producers of cash crops. At the end of the season, however,

― 25 ―

Table 1 Indigo Tithes in Four Partidos, 1804 (in Pounds)

Lbs. Tejutla Suchitoto San Vicente Zacatecoluca Total

0–10 83 33 4 — 120

11–20 5 22 2 — 29

21–30 2 4 3 — 9

31–40 2 3 2 — 7

50 — 3 — — 3

51–100 2 — 4 2 8
 101–150 — 1 6 2 8

151–200 — 1 1 — 2

201–300 — — 4 1 5

301–400 — — — — —

401–500 — — — 3 3

SOURCE: Manuel Rubio Sánchez, Historia del añil o xiquilite en Centro América (San Salvador: Ministerio de Educación, 1976), 1: 155–163.

everything went back to normal. The jiquilite plants were left in the fields to grow their
new leaves undisturbed. Labor, land, and landlord came together in the haciendas. There were
somewhere between four and five hundred haciendas in the territory of the province. [79] The
organization of indigo production was not uniform across the province. Haciendas had very
different sizes, and labor arrangements varied widely. Indigo was produced by both small and
large growers. The reports of the tithe collectors of the partidos of Tejutla, Suchitoto, and San
Vicente in 1804 give an idea of the differences in the relative importance of the producers.
Table 1 shows that there were many more small producers than large producers. According to
the tithe data 62 percent of the producers had an output of less than 100 pounds whereas only 10
percent had an output of more than 1,000 pounds. This result is consistent with the estimate
made in 1782 by exporters of indigo who figured that the planters whose output was between 6
and 100 pounds per year accounted for approximately two-thirds of the producers, and the rest
of the production was in the hands of the large landowners who produced thousands of pounds
every year.[80] The inequality was quite marked. Although indigo production was not necessarily
synonymous with wealth, wealth was almost always synonymous with indigo production. This
was true for a long period of time, and in the middle of the nineteenth century it was still the
case. From this fact it can be inferred that there were no economies of scale in indigo
production. The sheer size of the productive unit did not deter-

― 26 ―

Table 2 Regional Distribution of Indigo Production

(1) (2) (1)/(3)

Indigo Percentage (3) Production
Partido (lbs.) of Total Inhabitants Per Head

San Salvador 34,740 7.69 32,386 1.07

Olocuilta 3,168 0.65 8,774 0.36

Zacatecoluca 26,936 5.53 13,952 1.93

San Vicente 100,120 20.56 17,260 5.80

 Usulután 18,410 3.78 6,166 2.94

San Miguel 92,254 18.94 13,706 6.73

Gotera 20,962 4.30 9,662 2.17

San Alejo 2,820 0.58 5,239 0.54

Sensuntepeque 39,438 8.10 5,191 7.60

Opico 18,422 3.78 6,022 3.06

Tejutla 22,806 4.68 4,500 5.07

Chalatenango 40,430 8.30 13,131 3.08

Santa Ana 28,668 5.89 10,539 2.72

Metapán 17,912 3.68 4,203 4.26

Cojutepeque 19,884 4.08 14,519 1.37

SOURCE: Antonio Gutiérrez y Ulloa, Estado general , pp. 134 and 146.

mine its profitability; the persistence of small units indicates that they were profitable. The
geographic distribution of indigo production was more even than the interpersonal distribution.
All the partidos of the province produced indigo (see table 2). Furthermore, most of them
produced a significant amount of the dye. The two most productive partidos produced 27
percent of the indigo, and their population was 11.4 percent of the total of the province. The five
most productive partidos produced 55.96 percent, and their population was 48.9 percent. Even
though productivity was uneven, indigo production was distributed across the country following
the same pattern as the distribution of the population. Production per head ranged between 0.36
to 7.6 pounds while the average was 2.96 pounds. Indigo was important in every corner of the
country.

Salvadoran haciendas produced indigo for the world market and foodstuffs for the local
market and self-consumption. Since the nonagricultural sector was small the local markets for
food were limited. There was no industry to speak of, no major mines, no big cities. The towns
were closely connected to and highly dependent on agricultural production. The haciendas had
cattle and produced a little maize, beans, and

― 27 ―

indigo. Cattle raising was important not only for the meat but also because indigo was shipped
in leather seroons, thus the demand for hides was high. Cattle was both raised locally and
imported from Honduras.[81] People who lived in the hacienda all year round devoted most of
their time to food crops, both for their own subsistence and for the market, to feed the urban
population. The population figures given by Gutiérrez y Ulloa in his report throw some light on
the importance of the urban market. Gutiérrez y Ulloa classifies people according to their
occupations. As mentioned above, only 5,891 people worked in activities outside of agriculture.
This figure includes craftsmen who devoted part of their time to agricultural activities. Using
this figure it is possible to find a high estimate of the surplus that had to be extracted from the
agricultural sector. The average family size, according to the intendente's data, was 4.08, so, if
only the head of the family worked, the total number of people who lived outside agriculture
would have been 24,035. This means that, at most, only 15 percent of the population had to be
supported by the surplus of the agricultural sector. There are many reasons why this is a high
estimate. First, as has been noted, some craftsmen were also peasants. Second, Gutiérrez y Ulloa
probably undercounted the number of people who lived in the countryside. (The head tax gave
Indians an incentive to hide whenever heads were counted.) In any case, even if the haciendas
were the only suppliers of food to the cities, the demand for year-round labor in the haciendas
could not have been very high. Moreover, haciendas were not the only suppliers of food; Indian
comunidades were important competitors in that market. The majority of the population was
engaged in subsistence agriculture outside the haciendas. During the period of the indigo
harvest they had to be brought in.

Besides the haciendas the main productive units were the ejidos and the communal lands.
The ejidos were lands allocated to the municipalities so that each town had land for future
expansion, for cultivation of food crops, and for pasture. The communal lands were assigned to
the Indian communities for them to grow food. There was often confusion about the difference
between the status of both kinds of land, although it is clear that they were not private property
and were managed in a communal fashion. During the colonial period and well into the
nineteenth century there were terrenos baldíos , land owned by the state which was kept
uncultivated. It is not clear how much land can be included in each of the four categories
described above. Browning estimates that haciendas comprised about one-third of the territory
of the province, but he is less specific about the other forms of land tenure. [82] It is clear,
however, that land was abundant and that haciendas were only one among many different forms
of land tenure. In fact, much land

― 28 ―
remained unclaimed in the form of terrenos baldíos. This land was not claimed for production
until the second half of the nineteenth century when the national government offered it for sale
and even gave it away. By that time land was becoming scarce due to the entirely new set of
circumstances brought about by the increase in trade along the Pacific coast.

Capital, in contrast, was a relatively scarce resource. This situation, together with colonial
regulations, helped to determine the merchant-controlled system of financing described above.
The financing of indigo became the primary market activity around which gravitated all others.
Until 1782 the Guatemalan merchants were the main source of credit for the indigo producers.
The merchants supplied loans of an estimated 1 million pesos per year in clothing and other
merchandise and in cash.[83] These loans were meant to sustain the growers until the crop, which
was pledged as collateral, was ready, and they amouted to the value of almost the entire crop at
local fair prices. Captain-General Matías de Gálvez devoted his attention to the plight of the
indigo growers. He was concerned with the fact that "rare is the indigo grower who does not
have his growing crop mortgaged to the merchant, and for this advance it is common practice to
pay one real less [per pound] than the price at the fair." [84] The average price of the best quality
of indigo between 1779 and 1783, the years of Gálvez's tenure, was 13.6 reales per pound, and
the average price of the worst quality was 8.1 pesos. This suggests that the interest rates charged
by the merchants were, at least, between 7.4 percent and 12.3 percent. This was only part of the
effective rate because the goods advanced as part of the loan were "so exorbitantly priced that
all the growers of indigo are hombres perdidos !"[85] Financial capital was scarce, and the
growers had to pay dearly for it.

The response of the captain-general was to create the Montepío de Cosecheros de Añil.
One of the main problems of the Montepío was the high rate of default. What was meant to be
an institution for seasonal credit became a long-term lender. Borrowers repaid only one-fourth
of their loans plus interest every year. They defended the practice arguing that it allowed them
to make necessary investments.[86] The capacity of the Montepío to have an impact on seasonal
credit and free the growers from the merchants eroded rapidly. Notwithstanding this problem,
the Montepio did have a certain impact. The bitter opposition of the merchants and the strong
support of the growers for the survival of the Montepio prove this point. When in 1794 the
governor conducted an inquiry to determine the future of the Montepío he asked for the
opinions of the different groups affected, and the reactions of such groups were what could be
expected. For the merchants, who were not only lenders but also exporters of the dye, it was
impossible to see the benefits of the
 ― 29 ―

Montepío, and they recommended its abolition. For the growers and provincial merchants the
importance of the services rendered by the Montepío was very clear, and hence they
recommended its continuation, albeit with some organizational changes [87] . But from then on
the economic situation of the economy eroded rapidly. First trade with Spain was interrupted
and later, in 1804, Spain decreed the consolidation of church debts. With that decree one of the
main alternatives to merchant credit was practically eliminated. Moreover, the decree put
pressure on indigo planters who used their influence to obtain loans from the Montepío to pay
the principal of what they owed to the church. By the time of independence the average loan
was seven years' delinquent in payment of interest. [88] The church and the Montepío were
crippled as lenders, and after independence the conditions that had given an advantage to the
Guatemalan merchants dissipated. As a result, the colonial period left a weak legacy of credit
institutions.

The Marketing of Indigo

Getting indigo out to the market was not an easy task. Indigo cultivation took place on the coast
of the Pacific while most trade took place across the Atlantic. In the absence of decent roads it
had to be transported on mule trains all the way to the Gulf of Honduras. In normal times most
indigo would be exported via the Bodegas del Golfo Dulce although the ports of Omoa and
Trujillo were also used (for legal trade as well as for contraband). [89] If the British threat was
deemed too great indigo would be sent to Veracruz. The turn of the century was dismal in this
respect. For four years, between 1798 and 1801, indigo had to be sent to Veracruz where it was
stored until it could finally be exported in 1802.[90] Again in 1806 almost 93 percent of the crop
was exported via Veracruz.[91] Every year two or three ships visited the Pacific port of Acajutla
bringing wine, oil, olives, raisins, almonds, and silver bullion from Valparaíso, Callao, or
Guayaquil and returning to their ports loaded with indigo. Overall the Pacific trade never
amounted to more than 15 percent of the crop.[92]

Getting the indigo to the coast and through customs was not an easy task. The litany of
requirements, taxes, contributions, and transportation problems tried the patience of planters and
merchants even more than the patience of those who read about it. After the fairs indigo was
brought to Guatemala, taken out of the leather seroons, dried, weighed, marked with a hot iron,
wrapped in a straw mat, and packed in a new seroon. Taxes had to be paid: 4 pesos per seroon
as a contribution to the Montepío, 4 percent tithe, 4 percent alcabala, 1 percent avería , 1/2 real

― 30 ―
for every 25 pounds for entering customs, and 1 peso for storage. If shipped via Veracruz a 9-
percent alcabala and other minor taxes had to be added. Once in Cádiz it was necessary to pay
for customs, give a contribution to the Consulado, pay a fee for protection, and another fee to
cross the Guadalquivir canal. All in all, fees, taxes, and contributions added about 25 percent to
the initial price. On top of that one has to add transportation costs and interests. This last item
was significant since money was tied up for a long time before the merchant could see his
return. Mule trains were slow and expensive. Each mule carried two seroons and charged about
one real per day. It took at least forty days from San Salvador to Golfo Dulce and at least two
months from Golfo Dulce to Europe. If the mule train did not arrive at Golfo Dulce before the
end of June, it had to wait until October to be shipped since no ships were available in the
interim. In wartime indigo might be stored for years before it could be shipped.

Overall, the economy suffered more from the uncertainties of the world markets, the
generalized warfare in Europe, and the predatory activities of British pirates than from the
actions of the colonial authorities. The last years of Spanish rule magnified all these problems.
The decline of indigo production began at the end of the eighteenth century. When trade was
interrupted in 1798 and the crop had to be sent to Veracruz expenses began to rise. Four entire
crops had to be stored before shipments were resumed in 1802. There was no relief; at the same
time that indigo was finally leaving for Europe locusts were destroying the harvest and
competition from Venezuelan and Indian indigo was being felt.

The Napoleonic wars had a negative impact on the Spanish economy and disrupted trade
with the colonies. Demand for indigo fell to a fraction of what it had been in the past. José
Cecilio del Valle, a Central American statesman, mentions the activity of pirates and privateers
as one of the major reasons for the decrease in trade. [93] To make matters worse England raised
tariffs to protect her empire. Since 1819 non-Bengali indigo had to pay more than two times the
1798 tariff.[94] The average production between 1791 and 1800 for all Central America was
875,256 pounds, and between 1809 and 1818, 459,407 pounds.[95] After independence the new
authorities, worried about this situation, appointed a commission to study the economic
conditions of Central America. The commission found that
in the five years that preceded independence, our trade was the saddest.... The [indigo] crop
once was eight thousand and five hundred seroons; but in the five years that preceded
independence the estimate is quite different; it was reduced to only four thousand seroons; or
600,000 pounds.[96]
 ― 31 ―

Table 3 Indigo Production in Central America, 1809–1826

Year Pounds

1809 732,570

1810 740,820

1811 536,475

1812 450,425

1813 257,300

1814 422,507

1815 412,781

1816 376,800

1817 332,200

1818 332,200

— —

— —
 1826 1,200,000

SOURCES: From 1809 to 1818, Henry Dunn, Guatimala , p. 230; 1826, FO 15–3.

Although these figures do not coincide with those of table 3, the impression of a general
decay is common to both sets of data. Despite its decline, indigo was not abandoned, it was the
only product that the province could export in large amounts. The local elite had already
acquired a taste for foreign goods and was not about to forget them. The economy was
beginning to open to foreign markets, and the change was permanent. Although the province of
San Salvador had a largely subsistence economy and the majority of the population was not
directly affected by the indigo market, the elite did feel the full impact of the crisis. Their
livelihood was seriously threatened. Salvadoran farmers lost their mortgaged property to
Guatemalan merchants.[97] It is undeniable that indigo was important for the economy, but the
significance of this crop lay more in the fact that it was the main source of income of the ruling
class and its link to the world economy. The indigo market was their measuring rod for the
performance of the economy. Import merchants, bureaucrats, peasants who worked in the
production of the dye, muleteers, peddlers, craftsmen, builders, and all others whose economic
well-being was linked to the market economy had their future tied to indigo. The most articulate
groups in Salvadoran society, the better educated and organized, those who could influence
decisions, saw indigo as the main source of economic prosperity. Moreover, even though this
elite lived mainly in the larger towns, its influence spread all over the province.

― 32 ―

Indigo was produced everywhere and indigo producers ruled the municipalities throughout the
colony. The economic well-being of the kingdom was identified with the economic well-being
of its elite. Even if the food crops had an exceptional season and the lot of the impoverished
peasant improved dramatically, a bad harvest of indigo was enough to convince the elite that the
year had been bad for the colony as a whole. For the local authorities the fate of the elite was the
same as the fate of the province.

The market and subsistence economies were not isolated from each other. Theirs was not a
very close marriage, but they were not divorced. Indian communities that produced subsistence
goods on their communal lands also rented part of their holdings for commercial crops or
produced them by themselves. Peasants who tilled the fields of the ejidos and communal lands
were recruited by the indigo haciendas during harvest time. It is quite possible that depressions
in the indigo market benefited peasants since a smaller indigo harvest meant less demand for
their services and therefore more time to spend on their own crops. The smallness of the
province and the spread of indigo production made it virtually impossible for any community to
remain insulated from changes in the international markets. Indigo production shaped
perceptions and helped to define social groups and their motivations.

The trade crisis affected the functioning of government. During the last years of colonial
life the Captaincy-General's average annual deficit was 92,743 pesos and the Real Hacienda had
liabilities of over 2 million pesos.[98] (The average annual revenue for the period 1816–1820 was
251,855 pesos.) By 1821 the system of public finance "was labouring under a perfect state of
paralysis."[99] Marcial Zebadua, minister in the first federal cabinet, wrote that by the time of
independence public revenues were in a state of "absolute ruin." [100] Miles Wortman, in a careful
analysis of government revenue as an indicator of the Central American economy during the
colonial period, concludes that "the trend in declining revenue is fairly constant throughout the
region."[101]
Conclusion

The resources of the Salvadoran economy were few and unevenly distributed. A small elite
controlled the export sector, but even they had a hard time keeping their share. They saw
themselves as victims of the Guatemalan merchants whose control of the credit market provided
them with the key to control producers. Merchants with excellent contacts with commercial
houses in Cádiz, knowledge of international trading practices, entrepreneurial ability, and a
competitive attitude—a set

― 33 ―

of qualities unavailable to Salvadoran producers—mastered the system. Even with the open
support of colonial authorities producers did not find easy ways to circumvent their control.
Conflict between Salvadoran producers and Guatemalan merchants was bound to escalate.

A small number of Salvadoran producers, in turn, had the edge within the province thanks
to their better education and political influence. Having friends in high places (or being in a high
place) made it possible to obtain ever scarce laborers. Managing a large plantation required the
ability to discipline a large labor force, and the handling of credit operations required not only
administrative capacity but also good connections with the Montepío de Cosecheros de Añil and
the Guatemalan merchants. Only a handful of individuals shared these characteristics, and there
was no easy mechanism to expand the circle. Inequality begat inequality. No avenues for
advancement existed, schools served only the elite, only Spanish and criollos could belong to
the tiny officers corps in the army, and, beyond the indigo market, business opportunities were
nil.

The colonial period ended on a sour note. The attempts to introduce the Bourbon reforms
and the depression at the end of the period stirred up animosities between merchants and indigo
growers. The failure of the colonial government to deal with these tensions was apparent. Spain
itself, victim of the Napoleonic wars and of acute internal tensions, provided weak and erratic
leadership. Local authorities, facing a shortage of revenue, did not command the resources to
impose their authority. For the more conservative elements of the colony the virtual vacuum of
power in the center of the Spanish colonial system was a potential threat to their interests. For
the advocates of free trade the colonial government was an obstacle to their projects of
eliminating trade restrictions. The colonial period was coming to an end, and the dominant
groups of Central American society had to be ready to replace the Spanish authorities and to
advance their interests in whatever new political entity was to come. A divided Central America
and an ill-prepared province of San Salvador were about to become independent.

The smallness of the colonial bequest is key to understanding the limited choices available
to the future country. When the Spanish left, the province of San Salvador had land, a few tools,
a very small population devoted to subsistence agriculture, and a tiny elite devoted to indigo
production. The problem was not only a matter of having limited factors of production, or being
the victim of outdated trade regulations, it was, first of all, a problem of being unprepared to
deal with the abrupt changes that were about to come. The low levels of formal education that
existed during the colonial period were not a serious obstacle as long as the main business of the
land remained traditional agriculture.

― 34 ―

But technological change was taking place in the rest of the world, and it was impossible to
remain in relative isolation for much longer. With freer trade and wider contacts with the
international economy, Salvadorans had to compete by adopting new technologies (mainly
coffee cultivation and new business practices) and by constantly reallocating resources to adapt
to change. In that new world those with a measure of education would be the only ones with the
capacity to adapt and take full advantage of the new opportunities that were about to open.

― 35 ―

2
The Shattered Dreams of Independence
Independence came without war in 1821. Although the burdens of being a colony were removed (the trade
regulations, the high taxes, the problems of being part of an empire that was all too often at war), the burdens
of being independent remained to be discovered. The future of the former province of San Salvador remained
linked to that of the rest of Central America until 1839. In the first years the leaders of the independence
movement tried to organize the state with empty coffers and without a consensus. Under those less than
auspicious circumstances a Mexican invasion interrupted the process. In the end the Mexican adventure was
just an interruption, and, when Emperor Iturbide's troops left, Central American authorities started again to try
to do the things that independent countries were supposed to do. From the economic point of view the first task
was to implement a liberal program. Burdensome regulations were removed, part by design and part by
weakness; it was laissez-faire by default. Even when the authorities tried to enforce trade taxes they did not
have the organization or the power to get much accomplished. With foreign goods flooding the markets, there
was a feeling of change, even prosperity. But prosperity was not painless; inexpensive imports hurt many
craftsmen, and the elimination of colonial taxes made it impossible for the federal authorities to raise enough
revenue to organize their affairs. Many lessons had to be learned before a modicum of stability could be
achieved. Old and new conflicts within the newly created United Provinces of Central America led to a long
and costly period of civil war that ended with the partition of the region into five small independent states.

― 36 ―

The Hopes of Independence

No armed struggle was necessary to end colonial rule; the Spaniards were too busy trying to retain Mexico and
its wealth to pay much attention to the poor region of Central America. For the civic leaders of the colony the
outcome of the war in Mexico was crucial. The success of the Plan de Iguala helped to decide the fate of future
relations with Spain. In the words of Manuel Montúfar, a minister in the first federal government and an early
advocate of independence:
In 1821 the Kingdom of Guatemala was peacefully subjected under the Spanish government; the authorities and the people were preoccupied
only with the novelties introduced by the constitutional system. The freedom of the press and the exaltation of the parties, born from the
popular elections, spread opinions in favor of independence. Under these circumstances Guatemala learned about the Grito de Iguala, and
from April to September the opinion [in favor of independence] spread even more. Independent leaders held meetings in Guatemala, but they
did not have the resources or the courage necessary to revolt against the government; they expected everything from the progress of the Plan
de Iguala in Mexico.[1]
Montúfar may have exaggerated the peaceful subjection of the peoples of Central America, but the fact
is that independence came without bloodshed. After the news came that the Mexican independence was a fact,
a meeting was held on the fifteenth of September with all the authorities of the colony and, after deciding in
favor of independence, an act to that effect was written and signed. The fear that Iturbide's troops could come
to "liberate" Central America certainly helped to concentrate people's minds on the problem at hand. Central
America gained independence as a single country, and not until 1839 were the individual states going to
separate.[2] This seemingly effortless independence, however, was no indication of things to come.
A newly independent country had been signed into existence, but the new leaders did not quite agree on
what to do with it. The treasury was empty, and the Viceroyalty of New Spain was no longer there to
send situados , which once amounted to more than 25 percent of the budget.[3] The very first government, still
strongly influenced by the conservatives, allowed the Spanish nationals who worked for the colonial regime to
leave Guatemala with a two-month severance pay. The new authorities, by and large the same as the old,
showed great understanding for the emigrants and allowed them to take their fortunes. The result was a
significant capital flight. Mule trains loaded with gold and silver left Guatemala. After public outcry they were
charged a small tax

― 37 ―

that was often avoided.[4] The payment of severance pay, capital flight, and the emigration of capable public
servants had immediate consequences. No one was left to collect custom duties. When the government tried to
appoint judges in the provinces it realized that there were no resources to pay their salaries. [5] There were new
authorities ready to decide on the future but there were no resources to carry out the decisions.
Moreover, the end of Spanish rule left a power vacuum that horrified Guatemalan merchants. At the
same time, the possibility of a Mexican invasion was still present. The Marquis of Aycinena, the most
prominent merchant, had established contacts with Iturbide.[6] After all, if Central America became a part of
Mexico it would be possible to avoid the civil wars that were plaguing South America and, more importantly,
the Guatemalan elite would be able to keep its preeminence.[7] Others, like José Cecilio del Valle, one of the
foremost Central American intellectuals of the period and author of the Act of Independence, had questions
about the practical viability of the new state because of its "lack of population, lack of ports, distant and
insalubrious coasts, without a fleet, with little trade, so far backward in every aspect." [8] His misgivings were
very understandable. Central American leaders felt that they had no exact knowledge of the population or
resources of the region, the territory was not well known, there were no accurate maps, no one knew how much
food was produced or how rich the cities were.[9] To others the problem had a more direct political dimension.
In the discussions held by the Junta Consultiva Provisional , the first governing body of the independent
nation, Gabino Gaínza, the last jefe político and first president of the junta, supported the union with Mexico
arguing that it was important to preserve the union of the provinces. [10] In short, some of the same people who
had signed the Act of Independence were willing to give it up in the hope that Mexico would fill the void left
by Spain. Iturbide obliged; an invitation to join Mexico arrived.
Independence, however, brought into the open deep divisions that had existed since the late eighteenth
century. The bitter struggle between liberals and conservatives acquired new strength. [11] The resentments
created by the heavy-handed practices of the Guatemalan merchants were translated into resentments from the
provinces against Guatemala. The aquiescence of the provinces was not guaranteed. The Ayuntamiento of San
Salvador refused to unite with Mexico. In June 1822 the Guatemalans, who supported Iturbide's claims,
invaded San Salvador with an army of one thousand men and soon were joined by the Mexican general Vicente
Filisola, who arrived with six hundred more. This army could not defeat the Salvadorans and retreated.
Reactions followed, and Central American divisions became apparent. In

― 38 ―

Nicaragua, the cities of León and Granada had a war of their own provoked by the same issue, and Granada
ended up victim of pillage and robbery.[12] In 1821 Chiapas declared its independence from Spain and Central
America and its union with Mexico. It declared that it would never again belong to Guatemala even in the
eventuality that Guatemala united with Mexico.[13] Later that year the Honduran city of Comayagua declared
itself free from Spain and from Guatemala as well. [14] Mexican troops invaded San Salvador for a second time
and forced the state into submission. The Mexican episode lasted less than two years; it collapsed after
Iturbide's fall in Mexico. The number of people involved in the military operations, the pillage, and the other
means used to finance the armies were enough to deplete the almost empty coffers of the new nation.
Guatemalan, Mexican, and Salvadoran troops had been mobilized from March of 1822 until February of the
following year. The two invasions represented a serious disruption of the economic activities of the state of San
Salvador. In Guatemala the funds of the mint were looted to finance the military campaigns, and the federal
government had to pay for the return of Filisola and his army to Mexico. [15] Rather than filling the power
vacuum created by independence the Mexican invasion helped to expose the divisions that would plague
Central America for two decades and gave a hint of the costs of instability.
The first one and a half years may have been troubled, but independence was still expected to bring great
prosperity. One of the main burdens of being a Spanish colony was the restrictive trade policies imposed by
Spain. The economic potential of Central America had not been developed. Untapped resources were waiting,
many liberals thought, for a free market to operate and transform them into holders of tangible wealth. The
period immediately after the Mexican invasion was a period of hope, soon to be followed by frustration.
It is impossible to measure hope or to weigh the optimism that prevailed after independence, but there is
a curious document that illuminates this aspect of the early years of the federation. England had been engaged
in trade with Central America during the last years of the colonial period and was ready to take advantage of
the commercial possibilities opened up by the new political situation. [16] In order to be prepared to carry out its
policies and protect its interests, the Foreign Office asked George A. Thompson "to collect detailed intelligence
respecting the present state of that country."[17] Among the sources on which he based his report there is a
document written by Juan de Dios Mayorga dated in Mexico, January 12, 1824. Mayorga, an early leader of the
independence movement, was sent to Mexico in 1822 as a delegate to the Mexican congress to negotiate the
annexation of Central America to Iturbide's empire. His document is remarkable for being an exercise

― 39 ―

of imagination more than a statistical study. He wrote it after a two years' absence in Mexico, part spent in jail
and at a time when statistics on production had not been kept because of the political changes that were taking
place. Mayorga himself recognized the shortcomings of his report:
The produce of Guatemala and the quantities thereof are herein only expressed so as to give a general idea by way of approximation because,
for want of actual data, it is impossible to give the exact amounts, and the same are, therefore, stated as more or less. Our object has been to
form a calculation of the several articles of produce, both as articles of barter or of consumption, by the growers themselves, because
undoubtedly both contribute to augment the riches of the country. [18]
Adding up the value of all the products included in Mayorga's document, a figure of 52,529,450 pesos is
obtained, which suggests a production per capita for all of Central America of around 26 pesos. [19] This is
certainly a high figure if compared with estimates of the income per capita for El Salvador alone; and it would
have been higher if Mayorga had included investment and government expenditures. [20]
Despite the fact that Mayorga's estimates are high, the precariousness of the Central American economy
is still apparent in his account. It portrays a rural economy where most of the energies are devoted to produce
food. Agricultural production accounted for more than 80 percent of total production, maize and beans roughly
20 percent, and food in general 40 percent. Even with so much energy devoted to maize production the yearly
per capita consumption of maize implicit in the estimate was only 197.3 kilograms. It was a sad diet made more
depressing by the fact that the yearly consumption of country brandy was estimated at only two bottles per
head. Manufacturing, much of which was a product of Mayorga's fantasy, accounted for little more than 15
percent of the product, and it included things like "articles for the chase such as bows, arrows, lances." All
manufacturing, with no exception, was at the level of the most basic handicrafts: palm hats, baskets, country
earthenware, straw mats, and the like. Tool production was estimated at only 20,000 pesos (0.3 percent of the
total), a smaller figure than the estimate for musical instruments of all sorts (50,000 pesos) and certainly far
smaller than the value of articles of embroidery (1.5 million pesos). Together with somewhat realistic figures
on indigo production (3 million pesos, still an exaggeration), Mayorga provided data on the production of
exotic items such as pearls, coral, mother of pearl, chamomile, flowers, opium, and the like. Much of these data
on exotic items were apparently provided in the hope of stimulating British interest in Central American
products. The fact that we know that Mayorga's report

― 40 ―
has much of the optimism of a nineteenth-century public relations man only highlights the fact that the
economy he tried to embellish was very poor indeed. However high the hope for prosperity the point of
departure was extremely low.
The optimism of official and semiofficial reports on the economy can be explained in part by the desire
of the federation to issue bonds to sell in the English market, but the optimism was genuine nonetheless. The
expectations of an economic bonanza were so high that the rulers of the new nation felt free to borrow, because
they had little doubt about their ability to pay in the future. These hopes were based on the belief that by lifting
the restrictions imposed by Spain on trade and by lowering taxes, trade would be encouraged and economic
growth would follow. By opening all ports to international trade and thus putting an end to monopolistic
practices and restrictions on the mobility of factors of production the rulers of the new nation expected to bring
prosperity to its inhabitants. The first years of independence had not been free of problems. The depression of
the last colonial years had been severe and the Mexican invasion added uncertainty, caused destruction, and
disrupted economic activities. It was not a propitious environment for recovering from a long depression, but
after overcoming its first crisis the federation leaders felt certain that prosperity was just around the corner.

Interlude of Prosperity
During the period of relative calm between 1823 and 1826 the economy seemed to be on the road to recovery.
Free trade policies had some positive effects. José Cecilio del Valle summarized the situation as follows:
Before independence trade was very scarce, particularly in the later years, due to the Napoleonic disturbances and the pirates, but from 1821
to 1825 it practically doubled and the perspectives for the future in that direction were magnificent, in particular for the import trade, because
exports were restricted by the poverty of agriculture. Nonetheless, some articles in demand in the European markets were exported thanks to
the prosperity of the industrial revolution, prosperity that favored those countries that produced raw materials or articles used in the textile
industry such as cotton, cochineal or indigo. Lately, trade with Spain was limited almost exclusively to the export of indigo and cochineal.
Up to 8,500 bales of the former product, with an annual value of over two million pesos, were sent to the peninsula. In 1825 [indigo exports]
had reached again their original value of two million pesos and it was expected that, thanks to the new laws, their value could increase to five
million pesos.[21]
 ― 41 ―

Other sources confirm Valle's analysis. [22] Indigo production, which had declined steadily before independence,
was calculated to have reached about 1.2 million pounds by 1826, in sharp contrast to the low pre-
independence level of 332,000 pounds in 1818.[23] The average amount produced between 1809 and 1818 had
been only 459,407 pounds. The Consul of the Netherlands, Jacobo Haefkens, attributed the increase in
production to the better prices obtained in the free market as opposed to the prices received from the Cádiz
merchants.[24] The combination of peace and free market policies was a powerful stimulus to the economy.
Foreign trade was the main beneficiary of these policies. The positive effects of free trade were
reinforced by a marked improvement in the international price of indigo. During the first decade of the century
the average price of a pound of indigo in the English market had been 8s . 8d . By 1824 it had increased to 10s .
1d ., in 1825 to 13s ., and in 1826 to 11s .[25] For the local producer, however, the rise was not as high. Lower
export taxes plus freedom from Spanish monopolies do not seem to have had a great effect on the local prices
of indigo. Indeed, the difference between local and world prices increased.
There were no ambiguities in the market for imported manufactures; import prices declined across the
board. With lower prices and virtually no restrictions there was a trade boom. "It may be said in general," wrote
one of the leading merchants, "that the importation and exportation bear a progressive increase from one year
to another in the ports of the Atlantic as well as those of the Pacific." [26] Since imports increased faster than
exports there was a substantial outflow of specie. In 1830 it was estimated that 600,000 pesos in gold and
specie were exported to Belize. [27] It was the monetary equivalent of about half of a good indigo crop. Two
years later the American consul reported that more specie was leaving the country. [28] The increase in trade was
translated into a sharp decrease in the price of English goods. The tiny market was saturated in a very short
time. After all, it was only the few members of the elite who had a taste for European products or the silver to
pay for them. From 1824 to 1825 the price of English textiles dropped between 20 and 30 percent.
[29]
 Newspapers complained that despite the fact that the market was saturated the introduction of large
quantities of English cottons to San Salvador was not interrupted. [30] In the first years after independence legal
commerce had risen steadily and dramatically. Central American exports went up from 81,922 pesos in 1823 to
1,051,900 in 1826.[31] As these figures were estimated from tax collection data, they reflect not only the amount
of trade but also the capacity of the state to raise taxes. It is doubtful, however, that the figures exaggerate the
trade recovery. All the available evidence indicates that during the federal
 ― 42 ―

period the government's capacity to enforce tax collection was extremely limited.
As a matter of fact, contraband trade, which had been very much alive during the colonial period,
became even easier under the weak new authorities. The flight of Spanish bureaucrats had already hurt the
ability to collect customs taxes, and the internal divisions of the federation further crippled the system. In 1825
the contraband from Jamaica entering through Omoa was estimated at £100,000. [32] About half of the goods
imported by Guatemala in 1825 came from Great Britain, mainly "broad cloth, all kinds of cotton goods,
hardware and other dry goods."[33] Most of the contraband trade was carried from Jamaica via the British
settlement of Belize. Trade with Belize was simple; all that merchants had to do was to go to Belize with hard
dollars, indigo, or other produce, and then buy or barter to obatin British goods. [34] At the same time that the
authorities of Belize were reporting to London that trade with the "Guatemalan provinces" had increased
considerably, the collection of import and export taxes was decreasing. [35] In 1826 the authorities complained
bitterly about the seriousness of the problem of smuggling, but they were impotent. [36] In a moment of
frustration President Arce asked the British consul for help in controlling contraband, but the latter made no
commitments.[37] In his opinion smuggling was due to the inefficiency of the local authorities; he thought that
"there is no place in the world where the collection of revenue is so little understood, and, consequently, where
the frauds are so great."[38] The problem was persistent. There was a costly civil war from 1826 to 1829, and
after the war brought havoc to the administration there was no reason to expect an improvement in customs
collection. In 1832 Charles Savage, an American consul, estimated that smuggling amounted to about 28
percent of the total goods traded in the northern ports. In the southern ports, the consul observed, "the business
of the customs is even more fraudulently conducted."[39]
It was a two-way smuggling. Indigo and other goods brought to Belize paid no export taxes, and the
goods acquired there paid no import taxes. The question that arises with this evidence of smuggling is, Why did
it persist and probably increase at a time when trade barriers had been lowered? After all, during colonial times
taxes added around 25 percent to the cost of indigo delivered to Spain, whereas in the tariff act of 1822, indigo,
cocoa, and balsam had to pay a duty of only 2 percent.[40] On the side of imports, taxes were also low. Imports
that paid duty paid between 6 and 10 percent, a figure that in 1824 was increased by 4 percent. It was not until
the end of 1825 that protectionist measures were taken and raw materials and cotton goods were forced to pay
duties between 20 and 30 percent.[41] These duties were low, although not negligible. In comparison to colonial
times, when taxes were only one of

― 43 ―

many restrictions to trade, the postindependence effective tariff was relatively close to free trade. British goods
could be purchased at a price "thirty percent higher than they can be purchased at the respectable retail shops in
London" wrote Thompson. This was a different world than before independence. Foreign goods could "in most
cases be bought for less than one-tenth of the former price." [42]
The explanation for the extent of contraband trade can be found not only in the incentive to save taxes
but also in the low risk incurred by smugglers. The weakness of the new state made it very easy to smuggle
goods. In short, the relatively modest gains from engaging in contraband trade were not outweighed by the
costs of being caught. Moreover, the indigo fairs stopped offering the relative security of state-fixed prices. If
they had been limited to the legal trade, producers would have been, more than ever, at the mercy of the
Guatemalan merchants. But the opportunity to take their products directly to Belize and barter them for dry
goods was an excellent alternative, and they took it. As a result, trade was even freer than what the authorities
had legislated.
Free trade was not a blessing to everyone. The decrease in the prices of foreign goods meant
unemployment to producers of importables such as textiles. José Cecilio del Valle estimated that in 1795 there
were one thousand looms in Guatemala, whereas in 1830 only one hundred were left. [43] Manuel Montúfar in his
memoirs described the situation as follows:
Trade, which was open to all nations after independence and, in fact, even before, under the government of General Don Carlos Urrutia,
ruined, as was bound to happen, the factories of the country; so that the interior trade that existed in wool and cotton fabrics worn by the
poor, has been reduced to the consumption of the Indians of the State of Guatemala ... and it is impossible for [Central American]
manufactures to compete against foreign products.[44]
 To a certain extent, incipient industry was replaced by commerce. It was more profitable to devote time,
money, and energy, to commerce than to manufacturing. Merchants and weavers, however, belonged to
different social groups. Thompson was impressed by the way in which the "most respectable families" engaged
in trade. Indigo growers and cattle breeders exchanged their products for dry goods, mainly through the Belize
connection, and later became retailers of those products. [45] Weavers, by contrast, did not have the skills or
resources to take advantage of the new opportunities. It was impossible to compete with inexpensive European
manufactures; agriculture, cattle raising, and commerce were left as the only possibilities open to the investor.
In this environment of open trade, lax government, and, as we will discuss shortly, great political
instability, the economy of Central Amer-

― 44 ―

ica experienced important changes. The relative economic integration that had existed in the late colonial
period was weakened. The previous system had two basic features: the preeminence of indigo as the basic cash
crop, and the trade regulations imposed by Spain. The regulations disappeared with independence, and the
importance of indigo declined (this is valid for Central America as a whole, not for San Salvador, which
remained dependent on it). Moreover, Guatemala discovered the potential of cochineal, another natural dye.
Although indigo exports to Great Britain fluctuated widely (in a very good year like 1839, 700,522 pounds
were exported, but in a disastrous year like 1832 only 61,061 pounds were exported), cochineal exports to
England were growing at a very steady rate from 4,691 pounds in 1823 to 602,096 pounds in 1839. [46] This shift
in production had great repercussions. As cochineal production was exclusively a Guatemalan endeavor, the
previous division of labor, in which the Guatemalans were merchants and the other provinces were producers,
disappeared. Guatemalans, including some old merchant families and even Chief of State Mariano Gálvez,
were obtaining great profits from cochineal and depended less on the other states for their economic well-
being. Old colonial ties were weakened.
Changes in trade routes also contributed to break old ways of doing things. In the past, colonial
regulations and the monopoly of the Guatemalan merchant families had forced most trade to go to Guatemala
first, to be then exported to Europe via Veracruz or Izabal. After independence, exports via Veracruz made
little sense. Belize became the Atlantic port of choice. It had the best facilities and was regularly visited by
British ships. Every year between seventy and one hundred ships arrived at Belize with European merchandise
and left the port loaded with indigo, cochineal, and other minor exports such as sarsaparilla. [47] But this trade
was nobody's monopoly: Belize merchants consigned goods to Guatemala City; merchants from the different
states took their goods to Belize. Anyone with something to sell went to Belize. [48] Belize merchants prospered
rapidly and began playing an active role in the Central American economy. Marshall Bennett, their main
representative, exploited the "Tabanco" mine in the northeast of the state of San Salvador. [49]
Pacific ports were slow to develop, and their advantage over Belize was ambiguous. At the end of the
colonial period the importance of Acajutla, off the coast of El Salvador, was very limited; only two or three
ships visited it every year.[50] As a result of independence British merchants based in Chile and Peru began
doing business on the Pacific coast. As early as 1824 and 1825, more than ten British and American ships were
visiting Acajutla every year. They traded in gold, silver, "Asiatic goods," wine, flour, and European
manufactures.[51] From ten to fifteen British vessels were active in the Pacific trade in 1827.[52] When

― 45 ―

the Atlantic trade was disrupted by the civil wars that dominated the period, the Pacific trade expanded. That is
what happened during the civil war of 1826–1829 and again in 1833 when about one-third of the indigo exports
were taken to the Pacific ports rather than to Belize. But when calm returned, the latter port was still preferred.
Nonetheless, a general increase in commerce along the Pacific coast and new business contacts helped to
establish ports like Acajutla and La Unión.
An important development took place in 1833 when the agent to several Manchester manufacturers
received a shipment sent directly to the Pacific port of Iztapa (Guatemala) via the Horn. For the first time in
Central American history a Pacific port received a direct shipment from Great Britain. The event set a valuable
precedent, "the success which attended the experiment," reported the British consul, "caused a native house to
follow the example, and in consequence another ship arrived from England in the month of September [of
1834]."[53]
In a short while British manufacturers were doing direct business with Acajutla and La Unión. [54] The
federal authorities were as interested as the merchants since the Pacific trade could represent a healthy
competition to troublesome Belize. In his 1835 message to the congress an enthusiastic vice-president reported
that "This [Pacific] trade produces incalculable benefits to the agriculture of the country and it destroys the
settlement on the North Coast."[55] This was a most important development for Salvadorans who for the first
time could do direct business with Great Britain from their own territory. This complemented the business done
by British houses in Belize, Peru, and Chile who were already advancing merchandise on credit to Salvadoran
indigo producers. By 1839 almost 28 percent of the indigo production was regularly exported via Chile and
Peru. British merchants became regular customers at the indigo fairs in San Miguel and San Vicente in eastern
El Salvador, and they replaced the Guatemalan merchants and the Montepío de Cosecheros de Añil as the main
source of credit for the production of indigo. Independence and free trade had opened possibilities and created
problems, but the states of Central America were on a new track. For El Salvador this meant that the old
commercial dependence on Guatemala could be severed and that it could establish its own channels to obtain
credit and trade its products.

The Finances of the New Nation

The mixed blessings of free trade were particularly harsh on the finances of the federal government. The
federal authorities inherited a very bad financial situation that worsened immediately thanks to the Mexican in-

― 46 ―
vasion. When Manuel José Arce came to power as president of the Provincias Unidas in 1824 he found only six
hundred pesos in the federal treasury.[56] On top of that, taxes were cut, tax collection became more difficult,
and government expenditures increased rapidly to finance a new bureaucracy and army.
After the Mexicans left, the main authority was the Asamblea Nacional Constituyente , which was
elected to write the constitution of the federation and began at once to enact a liberal program. New Pacific
ports were authorized.[57] Taxes on gold, silver, tobacco, and iron were eliminated. Sales taxes were lowered
from 6 to 4 percent. Textile imports were charged between 4 and 10 percent according to their origin. [58] (The
legislation that set these taxes did not pass without opposition. Many had profited from the monopolistic
structure of the market that prevailed during the Spanish regime and, not surprisingly, wanted no changes.
"Still there are men," wrote José Cecilio del Valle with dismay, "who find the freedom of trade repugnant.")
[59]
 Weak attempts at protectionism failed. In October 1825 another measure was taken both to increase revenue
and to protect artisans. A new tax was imposed on raw materials, cotton goods, and other imports competitive
with domestic products. The tax rates were between 20 and 30 percent. [60] But smuggling was already out of
control.
Lower taxes and inefficient collection meant less revenue that, in turn, had to be distributed between the
federal authorities and the states. The federal government was supposed to receive all the revenue coming from
custom duties, the tobacco and the gunpowder monopolies, the post office, and public land. Revenue from
other taxes was left to the states. If there was a deficit, the states had to come to the help of the federal
government and share the burden.[61] The result for the finances of the federation was crippling: revenues fell,
expenditures rose, and the burden was not shared. The receipts of the tobacco monopoly (about half of the total
revenue) were to be administered by the states. [62] They did so but preferred to keep the funds to themselves.
Only Guatemala, interested in influencing the federal government, contributed to its support. As mentioned
above, the other main source of revenue, custom duties, did not fare very well. Smuggling flourished, while
taxes decreased.
Nonetheless, at the same time that the new country was encountering difficulties in raising taxes, it
increased its expenditures. A whole new beureaucracy was created. There was an executive, a congress, a
senate, and a supreme court at the federal level; and executive, legislative, and judicial branches at the state
level.[63] It was an untenable situation; the government could not even pay current expenditures. In 1826, the
situation deteriorating because of the civil war, the federal congress had to pass a law decreeing that
 ― 47 ―
since there is not enough to pay the full amount of the salaries of all the employees, a proportional distribution of the existing [revenue]
should be made.[64]
It was not a promising environment to build the institutions of the state.
Expenditure was greater since 1821 due to independence, the first war with San Salvador, the division of Mexican troops, and the creation of
a central independent government, based upon a system of double expenditure, paid by and large by the State of Guatemala. [65]
Political problems made it impossible to solve the financial riddle created by free trade policies. Every
effort to enhance revenue was checked by conflicting interests. To improve the finances of the federal
authorities the congress suggested that the Montepío de Cosecheros de Añil should be considered federal
property. President Arce, a Salvadoran and an indigo grower himself, considered the suggestion discriminatory
against Salvadorans. The non-Salvadoran members of the congress accused Arce of defending local interests.
[66]
 Endless political games turned the federal authorities into chronic complainers. Even the administration of
already-approved sources of revenue was a nightmare. The Salvadorans, for example, refused to allow federal
appointees to administer the tobacco revenue; it was a question of sovereignty. [67]
Not surprisingly deficits in the federal budget were the rule. In 1827, during the civil war, the budget
estimated a deficit of 690,791 pesos, almost equal to the estimated revenue of 690,000 pesos. [68] But it did not
make a difference whether the country was at war or at peace, the problem was never solved. A bold move to
raise foreign funds to get out of the problem failed miserably. At the end of 1825 the government contracted a
bond issue with the London banking house of Barclay, Herring, and Richardson. The English bankers were
supposed to sell £1,428,511 in bonds. By August 1826, they had sold only £111,300, and that very same year
the company went bankrupt.[69] Even worse, the little money that was raised was wasted in war activities. It took
half a century before this debt started being paid by the then individual countries of Central America. [70]
The authorities were caught between their liberal ideas and the economic needs of the new state. Their
lack of experience in such matters and the internal divisions of the federation did not help. In 1828 the
secretary-general of the state of San Salvador summarized his view of the puzzle:
Since our separation from Spain old contributions have been abolished in part, and in part they have considerably diminished, and as a
consequence

― 48 ―
there must be a deficit in the treasury. This deficit must be greater in proportion to the increase in our needs; and the local governments, who
rather than oppress the people with contributions want to make them lighter, face difficulties sustaining themselves without becoming odious
when the results of their efforts to increase public wealth are imperceptible and the beneficial influence of freedom cannot be perceived
either.[71]
Promises had to be balanced with realities and nobody found the formula to do it. The federal
government could never justify its existence since it could not supply any of the public goods that are expected
from a state. There was more to government than lowering taxes. Who would build roads and bridges? Who
would administer justice? Who would organize an educational system? When the federal congress closed its
1838 session, its president gave a bitter summary of the situation:
So far we have been unable to consolidate a stable government capable of making us shine with all our light and capacities.... Education
being the greatest goal to which every nation that aspires to be great and powerful should devote all its efforts, we, for well-known reasons,
have no more than six educational establishments in the Republic.... We have no navy.... We have no army.... There is no administration of
justice.... We have no external or internal credit.... Agriculture and trade are not as prosperous as they should be because there are no roads,
no bridges, no highways, no security.... We do not have more enlightened men to help us to promote our well-being and save our fatherland
because we have not known how to educate them.[72]
Central America had much to learn, and its rulers had to confront the consequences of their policies from
the very beginning. Free trade brought an increase in commercial activity, but revenue decreased when it was
most needed to consolidate the federation. Artisans were hurt, the previous beneficiaries of Spanish regulation
became uneasy, the old conflict between Guatemalan merchants and Salvadoran producers was exacerbated.
Although Central America was spared an independence war, it found in due time that the internal conflicts
within the new country were ripe for open confrontation. From 1826 until the breakup of the federation, war
became a way of life, and the gains that could have been made from the new economic policies were wiped out
by destruction, diversion of resources, and uncertainty. Very little was achieved in terms of building
institutions or providing services, but new economic trends did appear. El Salvador's economy began breaking
away from its dependence on Guatemalan credit and trade routes while, at the same time, sharp political
divisions were destroying the federation.

― 49 ―

The Costs of War

Together with free trade experiments, one of the main features of the Central American Federation was the
constant turmoil. The brief interlude of prosperity that lasted until 1826 was followed by almost twenty years
of civil war that caused the collapse of the Central American Federation. The potential benefits of a united
Central America—a more diversified economy, larger markets, a greater bargaining power when dealing with
the outside world—were difficult to comprehend when the main economic activity was, by far, subsistence
agriculture. It took a leap of the imagination to have a clear picture of the full benefits of unity. The perception
of what divided Central America was more clearly defined in people's minds. The provincial elites, in
particular, had old grievances against the capital. Indigo producers were concentrated in San Salvador whereas
the financing and marketing of that product were carried out by merchants living in the captial; tensions
between the two groups, apparent for a long time, were behind the main military and political confrontations
that followed independence. Far away, isolated Costa Rica had always felt neglected by the capital and did not
feel strongly attached to the federation. The Nicaraguans, also suspicious of the capital, were strongly divided
among themselves. Moreover, Central Americans had to decide on the organization and the orientation of their
new country in that environment. Regional animosities helped to stir up the ideological divisions that had taken
a sharp profile during the second half of the eighteenth century. As Ralph Lee Woodward Jr. puts it:
Central American conservatives retained serious scepticism about the ability of any but the educated and propertied to govern. A more
important institution in the liberal-conservative struggle was the Church. The liberals sought to disestablish it and remove it from political
and economic power, while the conservatives cherised it as a defender of their privileges and a vital element in both controlling and securing
the support of the masses. Liberals sought to destroy monopolistic control of the economy and to eliminate the fueros of the conservatives—
ecclesiastical, commercial, university, etc.[73]
 Although liberals and conservatives, Salvadorans and Guatemalans, producers and merchants found
reasons to despise and fight one another, the authorities of the federation, unable to raise revenue, did not find a
way to justify their existence. They provided no security and often seemed to threaten it, built no roads or ports,
and did not create a legal system that people would accept. The forces that divided Central America seemed
much stronger than the reasons to remain united.

― 50 ―

Table 4 War Statistics, 1824–1842

Men Wielding
Country Number of Battles Men Killed Executive Power

Guatemala 51 2,291 18

El Salvador 40 2,546 23

Honduras 27 682 20

Nicaragua 17 1,203 18

Costa Rica 5 144 11

SOURCE: Alejandro Marure, Efemérides de los hechos notables acaecidos en la República de Centro América (Guatemala: Tipografía Nacional, 1895), pp. 141
and 154.
 War and instability had profound economic consequences. Warfare blocked the possibilities of achieving
economic growth; it destroyed resources or diverted them to noneconomic activities. Although there is nothing
new about this notion, an idea of the specific ways in which wars were destructive is helpful to understand the
obstacles to growth during the first half of the nineteenth century. El Salvador was well suited to maximize the
damage done by wars; the country was small, underpopulated, and participated actively in most of the wars of
the period. Every district of the country, every economic activity, and every individual was touched by them.
Marure, the foremost historian of the region during the nineteenth century, compiled statistics on the Central
American wars during the period 1824–1842 (see table 4). According to his computations 23 different chiefs of
state led Salvadorans in 40 battles in which 2,546 people were killed. These figures yield an average of 2.1
battles and 134 killed per year.[74]
There are numerous accounts that provide a qualitative assessment of the economic impact of this
situation. The cumulative effect of the wars was apparent to the travelers who visited the region during the
1840s. Robert G. Dunlop, who traveled through El Salvador in 1846, noticed that "the state of San Salvador
appears to be in a most exhausted and ruined condition from the effects of the long continued civil war. All
sorts of industry are nearly at an end."[75] Whatever growth took place during the early national years was lost in
the turmoil. In the middle of the century, D'Arlach, a French traveler, found a stagnant economy. "After
independence," he wrote, "the progress has been nil."[76] Unable to produce indigo, its only export crop, at the
same levels as before, the country had no money left for imports.

― 51 ―
The imports from South America had also sadly fallen off; the importers have for the last two years done so badly, that only one vessel
arrived with a small quantity of merchandise, but even that is more than the people have cash to pay for. [77]
The trauma of the collapse of the federation left deep scars. After issuing its first constitution in 1842 El
Salvador remained prone to political instability and warfare. (There were wars with neighbors in 1844, 1845,
1851, 1863, 1871, 1872, 1873, 1876, 1885, and 1890.) Of course, not all wars had the same intensity or the
same impact on the economy. The war of 1863, for example, resulted in a prolonged occupation of the country
by Guatemalan troops and hurt the economy very directly. The wars of the 1870s, by contrast, had little impact
on exports.
The analysis that follows shows the specific ways in which warfare affected the factors of production.
Although the quality of the data makes it impossible to arrive at realistic global estimates, an effort has been
made to provide a sense of the proportions of the problem.

Capital
The availability of capital was affected in many ways, the most obvious of which was through direct
destruction. Facilities necessary for the production of indigo were destroyed, buildings were sacked, animals
were killed. At the same time, the incentives to increase the stock of capital were very badly hurt since
investment is very sensitive to the effects of uncertainty. In order to invest, people reduce present consumption
in the hope of increasing their future income. Before investing, the most sensible thing to do is to figure out the
expected return on the investment. The prudent investor wants to have a rough idea of the possible costs of the
investment, its potential benefits, and the alternatives at hand. All these calculations become much more
difficult in a situation of political turmoil. During the wars, the costs of investment went up because of the
problems of obtaining labor and working capital when needed, and because physical capital was often
destroyed. Once the final product was ready there were further problems in getting it to the market and then in
obtaining payment. Moreover, the very availability of funds for investment was limited by war. From the
lender's point of view it made very little sense to give money to an investor who could not guarantee repayment
or even that the collateral would be there in case of default. Even those who in better times had been able to
invest their own resources saw them reduced by the forced loans imposed on them by the contending armies.
Thus, everything conspired against invest-

― 52 ―
ment, and by limiting investment the wars affected not only current production but also future growth.
The climate of insecurity was present everywhere and for everybody. Evidence of this climate is clear
from accounts of the civil war of 1826–1829 when "businessmen and peasants were always exposed to the
barbarism of the soldiers; nobody had security, even letters were intercepted and prohibited." [78] Property
owners were always fearful of forced loans; the fear of "kidnappings, violent exactions and forced
conscriptions was felt even in the provinces most distant from the theater of war." [79] Forced loans drained the
country of funds for investment. Even when someone had funds it was most unwise to show any evidence of
their existence by doing foolish things like investing. The means of financing wars remained the same
throughout the century and created problems for future governments. War claims from nationals and foreigners
haunted the authorities for years. In 1859 the government was still paying loans and damages caused by the war
between the state and Francisco Morazán in 1833. Even when a certain degree of stability was established it
was extremely difficult to revive the primitive financial markets. The government had serious problems
borrowing money even for its current operations. As late as 1860 La Gaceta complained that after peace was
restored in 1846 "it would have been expected that credit would have improved, however, that happened very
slowly."[80] Dunlop, who traveled in El Salvador in the early 1840s, tells a story of how two well-to-do
acquaintances tried to turn their property over to him in order to avoid government exactions. They were so
anxious that they found it easier to trust their valuables to a complete stranger than to face a certain loss. And
they seem to have been prudent. The end of the story is that they had to give ten thousand pesos to the
government.[81] This story perfectly illustrates the difficult environment for the investor. It was hard enough to
keep one's money under the mattress, and it was sheer heroism to invest it.
The effects of instability on the credit market can be illustrated by comparing the case of El Salvador
with that of Costa Rica, which remained largely isolated from the Central American conflicts. Whereas in El
Salvador the public sector drained the credit market through forced loans to sustain destructive wars, in Costa
Rica it was an important source of funds to finance investment. Between 1824 and 1850 Costa Rican
municipalities, for example, played an important role as money lenders. During the same period public schools
and hospitals financed part of their activities by lending money. More than half of the funds in the credit
market came from public institutions of one sort or another." [82] Even more, public lenders gave longer terms
than private ones and played an important role in financing the beginnings of the coffee
 ― 53 ―

Table 5 Buildings Destroyed in 1828

Town Private Public Religious Total

Aculhuaca 136 3 2 141

San Sebastián 76 3 3 82

Cuscatancingo 252 2 1 255

San Martin 8 — — 8

Mejicanos 280 — — 280

Ayutuxtepeque 125 2 1 89

Nejapa 281 3 1 25

San Salvador 88 — 1 89

Total 1,246 13 9 1,286

SOURCE: Lorenzo Montúfar, Reseña histórica , 1: 97–98.

 industry. This early start in the credit market permitted Costa Rica to open its first successful commercial
bank in 1863, seventeen years earlier than the first Salvadoran bank. With a dramatically better credit
environment (and a somewhat better transportation situation) Costa Rica began profiting from coffee much
earlier than El Salvador. While the Costa Ricans were laying the foundations of their credit institutions and
adding to their capital stock, wars in El Salvador destroyed what capital stock existed. Again, this practice was
perfected in the early years of the federation. Part of the physical capital that was inherited from the colonial
period suffered early in the process. The destruction of property took very serious proportions. When the
Guatemalan army invaded El Salvador in 1828 for over seven months, its soldiers pillaged small towns
throughout the territory of the state. When they were forced to retreat, they engaged in destruction and looting
on their way back to Guatemala. Houses, schools, and other public buildings were demolished or torched in
eight different towns. A total of 1,268 buildings suffered at Guatemalan hands. The buildings ranged from
humble thatched huts to municipal buildings of more solid construction. In many cases this amounted to the
destruction of entire towns. In the small town of Nejapa (population 1,162 in 1807) 281 private houses were
torn down, together with part of the convent and two municipal buildings. In Aculhuaca, another small town,
the destruction included 136 private houses, the school, the customs house, part of the convent, and the
municipal building (see table 5).
Buildings in rural properties suffered great damage. The Aycinena family, which led the conservative
side during the civil war, suffered.

― 54 ―

considerable losses with the invasion—as the Marqués de Aycinena complained:

[T]he considerable fortune that we had was ruined by the revolution that book place the year of eight hundred twenty seven till eight hundred
twenty nine, because the government of Salvador took over sixteen haciendas that we had in that state, selling all their animals, the haciendas
in San Vicente, Zacatecoluca and San Miguel, more than four hundred seroons of indigo.... [A]nd even though in eight hundred thirty I
managed to make the legislature order the devolution of the haciendas, it was impossible to work them again since they were deserted and
their buildings were in ruins and it was only possible to rent one or another. [83]
 Examples of the destructiveness of war were not limited to 1828. Every one of the wars of the nineteenth
century offers examples of considerable destruction. In 1870 President Dueñas was charged by his enemies
with torching four hundred coffee plantations in Santa Ana province. [84] The charge was a clear exaggeration
since it implied that he torched more plantations than were in existence. However, it does highlight the fact that
allegations of destruction of property were all too credible.
Although not all wars destroyed capital in the same degree, all affected the investment climate and
delayed growth. Perhaps direct capital destruction was less important than the amount of capital that was not
created due to the enormous risks involved. In this respect small wars and coups d'etat could be as damaging as
big wars. Moreover, warfare also distracted the government from investment in overhead and in human capital.

Labor
The wars severely affected the availability of labor. An obvious way in which this happened was by permanent
removal of people from the labor force. A total of 2,546 Salvadorans died at war between 1824 and 1842 (see
table 4). This figure amounts to about 3 percent of the labor force. [85] A less permanent but equally significant
effect on labor was the conscription of able-bodied men to serve as soldiers. War took men in their prime away
from productive activities. The authorities were perfectly aware of the damage done to agriculture when big
armies were conscripted. When in 1823 the Salvadoran army invaded Guatemala for the first time, one of the
arguments used by the federal and Guatemalan officials against the invasion was that "it was not desirable to
withdraw so many arms from the agriculture of only one province" [86]
Table 6 gives an estimate of the labor demands of warfare. The table

― 55 ―

 
Table 6 Labor Demands of Warfare a

Year Months at War Duration in Months Size of the Army Months × Men

1822/23 July/Feb. 8 2,000 16,000

1823 October 1 2,000 2,000

1824 August 1 500 500

1825 January 1 500 500

1827 March/Dec. 10 1,900 19,000

1828 April 1 400 400

1828 Jan./Oct. 10 3,000 30,000

1829 Jan./April 4 2,000 8,000

1832 March 1 800 800

1833 Jan./March 3 600 1,800

1834 June 1 1,000 1,000

1838 March 1 1,300 1,300

1839 March/April 4 600 2,400

1840 March/May 3 900 2,700

 1842 Feb./Sept. 3 500 1,500

Total   52 18,000 87,900

SOURCES: From 1823 to 1824 the source is Alejandro Marure, Bosquejo histórico . For 1829, 1832, 1833, 1834, and 1839, Lorenzo Montúfar,
For 1838 and 1840, Italo López Vallecillos, Gerardo Barrios . For 1842, Alastair White, El Salvador .

a
 The duration of the wars is based on Alastair White, El Salvador , app. 3, p. 265. When the duration was considered to be uncertain, it was limited to one month in
order to minimize the figures that are known to be based upward.

was constructed with data from various sources. The number of wars and their duration was compiled by
Alastair White, and the size of the Salvadoran army engaged in each war was obtained from various sources.
[87]
 The number of months/men at war estimated in the table is probably an upper bound, because it is hard to
believe that the same number of men who started a war finished it. There were deaths and desertions that
cannot be taken into account in the calculations. Nonetheless, the table should give an idea of the effects of the
wars on the availability of the labor force.[88] Salvadoran armies with 500 to 3,000 men were at war for fifty-two
months. This figure is a gross understatement of the effects of wars on the labor force since conscriptions also
removed men from productive activities by forcing them into hiding. Government troops recruited new soldiers
wherever there was a concentration of men; young peasants found it necessary to avoid important economic
activities such as Sunday fairs and work gangs in haciendas.

― 56 ―

This arbitrary way of recruiting armies had unexpected effects on trade. The Indians who provided the cities
with vegetables and fruits stopped going to the markets because they were fearful of being conscripted.
  Soldiers were recruited in a most arbitrary fashion, without any consideration paid to their desires or to the
[89]

damage done to production. Marure described in detail the conscriptions for the 1826–1829 war:
The conscriptions were carried out in an extremely rigorous way; peasants were pulled out from their peaceful occupations and turned into
warriors; students abandoned their classrooms to take arms or to hide or become fugitives; it was not possible to freely attend to one's
religious duties, because groups of soldiers stood guard in the front yard of the churches to take men by surprise and take them to the
garrisons; there were no exceptions and even the people in the municipalities who did not send their quotas [of soldiers] on time were fined,
sent by force to the capital and made members of the army and condemned to forced labor in the active service. [90]
Although Marure refers mainly to the conscriptions of 1827 and 1828, the methods had not changed at
all in the 1840s when Dunlop visited the region. He describes how after declaring war against Guatemala,
the government was occupied in catching men for soldiers like wild cattle here and in all parts of the state and raising money by forced
contributions, so that the fair, which was about to take place, must prove an entire failure. Those who had anything to be robbed of were
taking themselves off as quickly as possible and the common people were hiding in the woods to avoid being taken for soldiers. [91]
Dunlop's account gives an idea of the environment of fear and insecurity that surrounded conscription. It
disrupted all activities and was the prelude to the even more disrupting consequences of war. The frustration of
the laborers accumulated after the long period of warfare. "What [the laborers] want," wrote the German
traveler Froebel in the 1850s, "is to be freed from military conscription, from revolution and civil war, to be set
to work in a sensible way."[92]
It would be inaccurate to concentrate only on the number of men removed from work; when they were
removed from work was also important. The effect of the lack of labor in an agricultural economy varies
seasonally. It is not the same to lack manpower during the harvest or the planting season as it is at some other
time of the year. Timing was particularly important in the production of indigo, which has to be cut at the right
time or it becomes worthless.[93] To assess the importance of the effects of the wars on the economy it is
necessary to have an idea of the distribution of wars in the calendar year. That information is pro-

― 57 ―

 
 Table 7 Month-To-Month Distribution of Battles

Month Battles

January 5

February 5

March 9

April 7

May 4

June 4

July 4

August 5

September 4

October 4

November 2

December 2

SOURCES: See table 6.

vided in table 7, which shows the number of times when there was war in each month between 1824 and
1842. As it can be seen, the variation was relatively small. During those twenty years there was war in March
nine times, the largest number in the table; and there was war in November two times, the smallest number.
Not surprisingly November was the month of the most important indigo fairs. The wages that prevailed at the
time are a measure of the productivity of labor and, therefore, the costs of removing labor from productive
activities. In 1834 an agricultural laborer received daily about three reales.[94] To give an idea of the value of
three reales in 1834 it would be necessary to have prices for that year. Unfortunately, the data are not available.
Nonetheless, it can be mentioned that in 1858 the price of twenty-five pounds of rice was four reales and in
1826 the price of the same amount of rice was between four and ten reales. [95] This suggests that wages were
very high due to the scarcity of labor. This impression is strengthened when the Salvadoran wage of 1834 is
compared to what prevailed in Costa Rica in 1846. That year the daily wage for an agricultural laborer was two
reales per day, at a time when Costa Rican laborers were "hardly sufficient for working all estates." [96]
Men killed, men fighting against one another instead of laboring in the fields—these seem to have been
the two main ways through which war reduced the amount of labor available for production. There was still
another way, out-migration. When times were tough and the amenities of life were absent from a particular
region, people moved away in

― 58 ―

search of better opportunities. There is no good information about the extent of out-migration in El Salvador
during the period covered by this chapter, but Lorenzo Montúfar, writing about problems in the eastern part of
the state in 1833, mentioned that in three months 557 Salvadorans had emigrated or been forced to leave the
country.[97] This suggests that the number of emigrants during more than twenty years of war was not negligible.
Moreover, after every internal conflict the leaders of the losing party had to go into exile. The numbers
involved in this particular form of out-migration are very small, but political leaders were among the very few
educated people in the country, and therefore the loss was significant in terms of human capital.
Trade
War threatened not only the different stages of production, but also the final product and the channels for
trading it. The logistical demands of warfare disrupted the transportation system. Communications were
difficult. In 1827 Guatemala prohibited all exchange of letters and all trade between Guatemala and San
Salvador, and the latter province reciprocated with a similar decree.[98] The limited number of horses, mules,
and oxen that existed in the country were constantly subject to requisition by the armies, thus putting a
hindrance on production and trade. As early as 1823, the Mexican general who led the invasion to San Salvador
had to ask the authorities of the towns occupied by his army about the number of mules confiscated by his
troops. His intention was to return them or pay for them, but there is no evidence that he fulfilled his promises.
[99]
 During the Guatemalan invasion of 1828 both sides tried to make cattle and horses unavailable to the other
side, thus limiting the number of animals that could be used for transporting goods. [100] When the conservative
Guatemalan leader Carrera invaded San Salvador ten years later he ordered his troops to take mules and horses
from many haciendas and left the country carrying a considerable booty. [101]
If it was possible to find a mule train and take the merchandise to its final destination, the safety of the
merchandise was not assured. Merchant's houses were a target for greedy soldiers and officers. In 1828
Francisco Morazán reported that he was able to stop part of the looting in a town, but a merchant's house had
already been robbed.[102] That year the government of the state of San Salvador expropriated 80 seroons (about
1,200 pounds) of indigo because it belonged to the Aycinena family, a powerful Guatemalan group that led the
conservatives who opposed San Salvador. The Aycinenas alleged that the indigo had already been sold to
Chilean merchants, and they were so influential that the Chilean government seized 30,000 pesos worth of
Salvador-

― 59 ―

an indigo stored in the port of Valparaiso. Earlier in the year Salvadoran troops had seized "about 200 seroons
of different products belonging to Guatemalan merchants and a considerable amount of specie that was in the
customs house at Gualam." This kind of behavior can be found in almost all the wars that took place during the
period. In 1837 the town of Zacatecoluca was robbed and some of its citizens were murdered by Indians led by
the conservatives. Dunlop thought that the people were "so accustomed to being robbed and plundered" that
they had "lost all desire of raising anything more than what may be required for their immediate wants." [103]
Trade was also affected by political decisions forced by the wars. Again, the civil war of 1826–1829
provides a good example. By 1828 the economic situation was worsening and trade was suffering so much that
protectionist sentiment was growing. Both the states of Guatemala and San Salvador restricted the activities of
foreign merchants. They could not travel freely or trade on their own. All their commercial activities had to be
carried out through local citizens.[104] The reasons for these trade barriers are not difficult to understand. During
the early years of the federation free trade policies had hit the artisan groups very badly. In the heat of the
political discussion many people blamed free trade for the economic crisis that was due mainly to the war.
Foreign competition was bad enough in times of relative prosperity, but when the wars disrupted the economy
and production decreased, there were more things to complain about. International trade, already limited by
war, was further limited by protectionism. The decrease in production, the difficulty in finding means of
transportation, and the insecurity of the roads also affected trade between the states. According to the British
consul interstate trade "decreased sensibly."[105] Transportation costs had always been high in the region. Rivers
were obstacles as opposed to being waterways. If there was no river there were always volcanoes and
mountains blocking the way. These problems limited the amount of trade between the states even during
normal times. War made matters worse even when it was not intense. Reverend Dunn summarized the problem
in 1828:
[A]lthough the war thus languished, its effects were perhaps more disastrous than would have followed a more profuse effusion of human
blood. Commerce was altogether suspended, and agriculture neglected; while contribution after contribution drained the city and ruined the
inhabitants.[106]
International trade did not fare any better. In this case the problem was worsened by changes in indigo
prices. From 1828 to 1832 they

― 60 ―
declined sharply and steadily. In 1828 the London price was 10s . 4d . per pound; by 1832 it had fallen almost
50 percent to 5s . 5d .[107] This contributed to the deterioration of the balance of payments. In 1833 the British
consul informed the foreign office that
the difference between the amount of these [exported] products and the total amount of importations is paid in specie or silver so that every
year the precious metals and money in circulation are drawn from the country. [108]
By 1834 the value of exports of gold and silver for all of Central America was 970,000 pesos, almost the
same as the value of indigo (638,000) and cochineal (275,000) put together. [109] The quantity exported went
down faster than prices. Exports of indigo in 1834 were 873,750 pounds, a sharp drop from the 1.2 million
pounds produced in 1826.[110] War affected production so much that it would be hard to argue that lower prices
played a significant role in production decisions. In fact, when indigo production began to recover in the 1840s
the average price was 4s . 3d ., even lower than in the 1830s.[111]
The trade situation was serious indeed. Local towns had difficulties obtaining vegetables because
conscription scared away Indian suppliers. When mule trains were used in the war effort and roads were
dangerous trade between states had to suffer. Trade with the outside world decreased because there was little to
trade. Declines in indigo prices made matters worse. Every aspect and every level of trade was affected by war.

Conclusion
The collapse of the Central American Federation was long in the making and very destructive. After the
federation Salvadorans did not see major improvements. The legacy of instability was long lasting and so were
its effects on the economy. An understanding of the effects of wars on the Salvadoran economy of this period
goes a long way to explain why growth was so slow in getting started. A country that began independent life
with only 250,000 inhabitants could not have armies without seriously affecting production. More importantly,
a very small country that had been a rather marginal part of the Spanish empire and had never had much
financial or physical capital had to face destruction and delay capital formation for more than twenty years.
Very few resources were available, and they were destroyed or left abandoned. Although at that time land was
relatively abundant and in those pre-napalm and pre-
 ― 61 ―

Agent Orange days there were no weapons that could destroy land, there were no men and no tools to cultivate
it. When production was possible marketing was difficult; the main means of transportation, the mule trains,
were as attractive to generals as able-bodied men. The long litany of destruction and diversion of resources was
only part of the negative impact of wars. The investment that did not take place carried the costs of war well
into the future. Moreover, although some production did take place, productive activities had to be carried out
while adapting to the war environment. That is, resources had to be allocated in inefficient ways in order to get
the work done.
It is impossible to estimate an exact figure for the costs of instability and war. The amount and quality of
data required for such a computation is not available, and I doubt that it ever will be. We do know, however,
that all the travelers who visited the region during the 1840s talk about sad landscapes of abandoned fields and
that indigo exports did not return to the prewar level of 1 million pounds until the late 1840s. When El Salvador
issued its own constitution and became a political entity separated from the rest of Central America it was a
barren country. Much time had been lost, and the country had to find peace to put its men to work and to find a
market for its products.

Salvador possesses within itself sufficient means to become flourishing and prosperous. Its condition, however, at the present time, is the
reverse of this, for few parts of Central America have suffered more from the devastating effects of civil discord. Broad tracks of land have
been thrown out of cultivation; some valuable estates have been almost ruined, many entirely so; the buildings, tanks for the manufacture of
indigo, and other appurtenances, have been dilapidated, or maliciously destroyed by the blind fury of party spirit, or suffered to decay, owing
to the insecurity consequent to contests so destructive, for at one period war was directed as much against property as against persons: many
proprietors have become unable to turn their estates to good account, from the want of capital for working them on so large and profitable a
scale as formerly. Notwithstanding these severe misfortunes, a few years of uninterrupted peace would enable the State to rise from its
depression; and with the exertions of a sensible and prudent Government on the one part, determined to respect and protect private property;
and, with the exertions of owners on the other part, it might again reach a high degree of prosperity. [112]

― 62 ―
3
Organization of the State 1840–1880
With the separation from the rest of Central America, El Salvador had to begin the process of organizing a state
and building a nation. Given the resources available it would be an enormously difficult task. In economic
terms the colonial period had left a meager heritage much of which was destroyed during the years of the
federation. Investment, too, suffered greatly and little new wealth was created during the period of turmoil.
Very few people had the capacity to organize the state or to engage in complex economic activities. At the
beginning of the century the intendancy had only four lawyers, and during the early years of independent life
education did not receive the highest priority; investment in human capital suffered as much as any other kind
of investment.
On the political side, the conflict between conservative and liberal ideas of the state became most
important. Moreover, the regional dimension of the conflict was not easily forgotten; Guatemala's rulers did not
give up their memories of the colonial period and tried to influence Salvadoran politics. Salvadoran politicians
had equally good memories and resisted the pressure. Both countries formed short-term alliances with
Honduras and Nicaragua to further their causes; all five countries of Central America provided refuge to their
neighbor's political enemies. As a result, between 1841 and 1890 El Salvador participated in five wars with
Guatemala, four with Honduras, and one with Nicaragua, while thirteen successful coups d'etat occurred. [1] It
took a long time before anyone could see a positive change in the economy, but change did come.
The generalized chaos of the federal period had offered no respite,

― 63 ―

whereas in the second half of the century peaceful intervals permitted the development of institutions, the
reorganization of the economy, and the formation of capital. As the economy began to grow again,
improvements in transportation and changes in the international markets led to the adoption of a new cash crop
—coffee—which replaced indigo as the main export crop. The overall effects of wars on the economy declined
and internal political life became more stable; over the years Salvadoran presidents had learned the tricks
of continuismo , and the growth of the export sector had increased the opportunity cost of warfare and had
generated a new consensus.[2] Change was apparent. The state took form in those years in a process that
culminated with the liberal reforms in the 1880s.
Outside forces partially shaped and stimulated the task of nation building. Central America attracted
colorful adventurers and the occasional attention of the world powers. On the whole, outside forces that were
not directly focused on El Salvador had the greatest impact. The ambitions of William Walker in Nicaragua
shook Central America and, in the end, helped to strengthen nationalistic sentiment. The desire of both the
United States and England to have a canal crossing the isthmus altered the balance of power in the region. The
Gold Rush in California bettered communications by stimulating trade along the coast of the Pacific, thus
improving El Salvador's access to the world market. Thanks to these developments it became easier for the
country to take advantage of changes in the international economy such as the opportunities created in the
cotton market by the Civil War in the United States.

Law and Order

Slowly but steadily the state began to make its presence felt in Salvadoran society. "The government," wrote
the editorialist of the official newspaper in 1859, had the "goal of improving everything.... Public buildings,
improvement of the army, judicial reform, administration of the exchequer, public education,
armaments."[3] The statement amounted to a definition of the scope of action of the government. The weak
efforts made by the authorities of San Salvador during the years of the federation took a new dimension. The
goal of "improving everything" gave a sense of direction and also represented a test of power.
Given the problems of the times, the police and the army received special priority. As early as 1825 the
federal authorities had issued regulations for a police force, but in 1843 the Salvadoran government found it
necessary to pass a law reminding authorities in the interior of the republic about their obligation "without
excuse or pretext, to walk their
 ― 64 ―

beat every Monday and Thursday."[4] In both the 1825 and the 1843 laws the police force was the responsibility
of authorities at the town level, a common practice during the colonial period. In 1848 police authority was
transferred to the central government when the legislative assembly issued a decree authorizing it to establish a
"rigorous" police force to control common criminals "who threatened the life and property of the citizens." [5] To
complement the 1848 law the assembly issued regulations for a general police and a rural police in 1854 and
1855.[6] Despite these efforts to centralize law enforcement activities, each community financed its own police.
In 1858 the town of Chalchuapa reported that its police force was financed by a combination of municipal
funds and a voluntary contribution from the town people. [7]
However, the central government defined the obligations of the police with criteria clearly beyond mere
local interests. Besides the normal activities of making life difficult for murderers, thieves, arsonists, and
drunkards, the obligations of the rural police included some with wider national implications. For example, the
rural police had environmental responsibilities such as to take care that lands were not set on fire, that
fishermen did not poison the waters of rivers and lakes, that the vegetation in the margin of the rivers was not
removed. They had to report on the condition of roads and bridges. They were also supposed to protect the
government's liquor and gunpowder monopolies by persecuting illegal production of those goods. Different
forms of the rural police existed since its creation in 1848, and all indications are that it remained active all
along. Its structure was modified in 1868 and 1889 until it became the Guardia Nacional in 1911. [8] As the
structure of the economy changed, the emphasis of the responsibilities of the rural police also changed. It
always had as one of its functions to enforce vagrancy laws but, as the pressures of the world market increased,
so did the importance of this function.
The efforts of the government to assert its authority also had to be backed by a stronger army. The
hurriedly conscripted barefoot soldiers of the early years of the republic had to be transformed into truarmies.
The efforts in this direction began immediately after the collapse of the federation. As a matter of fact, it was a
constant preoccupation that produced a great deal of legislation and limited results. Menéndez's 1858
compilation includes thirty laws and regulations that were meant to organize the army. However, it was not
until the first years of the 1860s, under the leadership of Gerardo Barrios, that the army was modernized in a
more credible way. Barrios provided it with modern war materiel, new facilities, foreign uniforms (including
flashy ones for the general), and foreign instructors. José María Melo, a Colombian general, was invited to
instruct the soldiers, and a French military mission including

― 65 ―

experts in infantry, artillery, and cavalry arrived in the country in 1862 to train the soldiers. It is not surprising
that Gerardo Barrios is still the most cherished hero of the Salvadoran military. His war minister thought that
his mission was "not limited to improve what existed but to create what did not exist." [9] Barrios's successor and
main enemy, Francisco Dueñas, shared his preoccupation with a strong army. He created a Civil Guard for the
city of San Salvador and issued new regulations for the rural police and the military school. [10] As positivism
made inroads, the officers' school became a more scientific military institute and was named "Escuela
Politécnica" in 1871.[11] That same year a new regulation established that every male between eighteen and fifty
years of age was considered part of the militia. Although this was meant to be an egalitarian measure taken by a
government that was consolidating its power, the army never was an egalitarian institution. The soldiers came
from the poorest social groups, and the generals earned thirteen times more than the soldiers. [12] By 1880 the
army had 20,000 men and had a brand-new garrison and a new military code. [13] At last the country had the
beginnings of a professional army. In fact, as we will see later, since the 1840s a major portion of the national
budget had been used to sustain the army.
Together with the organization of the repressive apparatus it was necessary to establish a set of rules for
the new country. After the federal constitution of 1824 the country had, counting only the nineteenth century,
eight more constitutions, four of them before 1880. Lawmakers kept themselves busy. After the breakup of the
federation, the country was left with a combination of laws inherited from the colonial days and from the
federation which responded more to immediate needs than to a well thought out idea of a new legal order.
When in 1855 Isidro Menéndez was asked to make a compilation of Salvadoran laws, he observed, "The
legislation of the state is very abundant, by and large refers to specific cases, and is incoherent, even
contradictory, and often does not conform to established principles." [14] If the state was to organize on a more
solid foundation the legal system had to make some sense. Menéndez's compilation was the first effort in that
direction. His work was not to legislate but to compile and bring a sense of order; he disregarded "useless" laws
and classified the rest in ten books. The next stage was a more creative one: new codes with coherent sets of
principles were promulgated. The Code of Commerce was printed in 1855. A code of civil and criminal
procedure, authored by Menéndez, was promulgated in 1857. A civil code, influenced by the Chilean code of
Andres Bello, and a penal code, based on an 1848 Spanish law, were promulgated in 1860. [15] As the body of
law was developing and becoming more complex, the government began to professionalize the judges, and
starting in 1859

― 66 ―

professional judges gradually replaced popularly elected ones. As in every initiative taken by the government,
the lack of qualified people got in the way. Qualified lawyers "adorned with the required qualities" were few
and did not want to abandon a well-paid private practice to join the judicial corps. [16]
Part of this effort to become a country of laws was the formalization of relations with the outside world.
Trade treaties and treaties of peace and amity were signed with the country's most important trading partners. A
particularly overbearing and obnoxious British consul, Frederick Chatfield, had given the country its first
lessons in dealing with big powers. Chatfield had tried to impose his views on bilateral issues by indiscriminate
use of blockades in 1842, 1843, 1844, 1849, and 1850. By 1850 the United States' interests in the region had
increased and the strategic potential of Central America was becoming increasingly clear. The young American
envoy E. G. Squier became Chatfield's main rival and, in his efforts to curb British encroachments on the
Atlantic coast of Nicaragua, sought friends elswhere in the region. [17] As a result, a treaty with the United States
was signed in 1850.[18] Between 1849 and 1865 El Salvador signed treaties with Belgium, Prussia, France,
Mexico, England, and Spain, plus numerous treaties with Central American neighbors. [19]
After the end of the federation the authorities of El Salvador had much to learn. The country had always
belonged to a larger administrative entity and had very little in the way of a central organization; many of the
laws and institutions of the colonial system had been rejected with independence, and the debacle of the
federation made it difficult to consolidate institutions. In a matter of twenty-five years the country had the
beginnings of a legal system and was being accepted as a bona fide member of the community of nations.

Education
The modernization of the repressive apparatus and a body of laws were not enough to create a modern state. It
was also necessary to create a citizenry, an awareness of belonging to a community, and to create, at least, an
educated minority capable of handling the increasingly complicated affairs of the nation. Wars with
neighboring countries and the adventures of William Walker in Nicaragua contributed to the creation the
beginnings of a national spirit; more positive efforts were carried out by the government in order to develop an
educational system.
The first steps toward the creation of an educational system were taken during the federal period. In July
of 1823, less than a month after the

― 67 ―

first Asamblea Nacional Constituyente declared absolute independence, one of the deputies of the Asamblea
proposed the adoption of the Lancasterian system in the schools of the new country. [20] Under this teaching
method, developed by Joseph Lancaster and Andrew Bell in England, advanced students, under the supervision
of a teacher, instructed beginners. Lancaster and Bell's ideas became popular all over the continent, and the
Lancaster Company had established a branch in Mexico City in 1822. [21] Lancaster was a skillful promoter of
his system, and when he approached the new leaders of Latin America he found a receptive audience. When in
1824 he sent a letter to Simón Bolívar explaining his educational techniques the letter was printed by
the Gaceta del Gobierno Supremo de Guatemala .[22] Earlier in the year federal diplomatic envoys had been
instructed to hire teachers able to apply the Lancasterian system. [23] (Henry Dunn, who later wrote his
impressions of Central America, went to Guatemala as a result of this initiative.) It is clear that the ideas of
Lancaster and Bell suited the Salvadoran situation where funds and teachers were scarce and standards did not
need to be high.[24] (Traditional agricultural activities did not require a very educated labor force, but the elite
did want to be able to keep the accounts right and to communicate with foreign business partners.) One teacher
paid by the government or by the local authorities was supposed to be in charge of each school. This ideal was
not always fulfilled, and the training of the teachers was often questionable. Despite the difficulties of the
period (one can only guess how forced conscriptions, economic decline, and generalized instability affected the
incipient school system left by the Spanish) institutions created during these early years were the foundation for
future growth. The first step to apply the Lancasterian system in El Salvador was taken in 1832 when José
Coelho, a Brazilian teacher who had organized a Lancasterian school in the state of Guatemala, was hired by
the state of El Salvador. Coehlo started in the next year the school "La Aurora de El Salvador," which was the
basis for a teacher's school founded in 1858.[25] Moreover, Coelho, who had knowledge of coffee cultivation,
helped to introduce that crop in the country.
The efforts to develop an educational system were renewed after the breakup of the federation. In 1841,
just after the breakup, the government ordered every town or valley with more than 150 souls to open a primary
school and promised to supply primers to the very poor. [26] This first law was more a statement of the
government's commitment to education than a realistic policy. Seven years' later the goal had not been
accomplished: in 1848 San Salvador province had 35 towns and only 22 grammar schools with a total of 996
students. Four of those schools were located in the capital and accounted for almost a third of the total number
of students.[27] There was only one girl's school, which

― 68 ―

had 30 students. Limited as it was, education had improved substantially since the early years of independent
life. Dr. Manuel Gallardo relates in his memoirs that when he was a child in the town of Suchitoto in the 1830s
there were no formal schools at which to study; his well-to-do family had to send him to San Salvador to Mr.
Coelho's school. Less fortunate parents who wanted their children to learn how to read and write had to beg
their few literate neighbors to tutor them. By 1849 things had improved, and Suchitoto and its district had 4
schools.[28] During the second half of the century the average school had between 30 and 50 students.
Schools were rather ephemeral institutions that opened and closed at whim. In January of 1849, La
Gaceta reported that Cuscatlán province had 34 schools, in June it listed 49, and one year later listed 38.
Similar changes can be observed in the number of schools of San Salvador province. [29] By 1850 the country
had 201 schools for boys and a total of 6,696 students. The quality of education was not very impressive, at
least it did not impress the German traveler von Scherzer who thought that "education is still at a very low
grade, although there is much goodwill on the Subject." [30] Scherzer may have been too quick to apply European
standards, but the little that is known about the educational system supports his observations. In 1858 the town
of Texistepeque had only one school and only 10 of its 47 students could write correctly. [31] Affluent families
preferred to send their children, particularly if they were women, to study with private tutors. Women studied
reading, writing, mathematics, and "all the other things that relate to the education of a lady," which normally
meant sewing, embroidery, music, and drawing.[32] Rich people from the provinces sent their children to study
in the capital or abroad. This last option was open to very few; in 1858 only 22 students from Santa Ana
province (population 57,844) were taking courses in schools of San Salvador and Guatemala or in Europe. [33]
The number of schools increased steadily and somewhat more rapidly in San Salvador province than in
other parts of the country: in 1848 San Salvador had twenty-two schools; in 1849, thirty; and in 1858, thirty-
five. Although the beginnings were rocky, by the end of the century the ratio of schools to total population had
increased visibly. Whereas in 1850 each school served 1,854 inhabitants, in 1892 it served 1,201 inhabitants
(see table 8).[34] This amounts to about 8 teachers per 10,000 inhabitants.
It must be taken into account that the mere increase in the number of schools underestimates the increase
in educational services. By the 1890s schools were stable institutions with a formal curriculum and better-
trained teachers. Government education spending increased throughout the second half of the century; 1892
expenditures were

― 69 ―
 

Table 8 Number of Schools for Selected Years

Year Schools Students Students Per School Total Population Inhabitants Per School

1850 201 6,696 33 372,815 1,854

1888 375 21,200 56 687,605 1,833

1892 585 29,427 50 703,000 1,201

SOURCES: La Gaceta . Rafael Reyes, Apuntamientos, p. 25. Bureau of American Republics, Handbook of Salvador, p. 30. Population figures are linear
interpolations from table 11.

forty-one times 1846 expenditures.[35] These figures do not mean that education expenditures were
particularly high. Instead, they indicate that in education as well as in everything else the point of departure
was close to zero. It was a difficult process; the government was creating a role for itself where there was none
and started with courage and optimism. As time passed the legislators realized the difficulties they were facing
and toned down their optimism. In 1841 they expected every town with 150 inhabitants to have a school, but
after twenty years of sobering experience they changed the standard to towns with at least 500 inhabitants and,
just in case, encouraged private efforts. [36] But even with somewhat more realistic assumptions the results fell
short of expectations. Priority given to education seems to have decreased as attention was turned to the
opportunities offered by international trade. As we will see later, since the 1850s international trade grew
dramatically, and producers engaged in a fierce competition for labor. Under those circumstances time spent in
school and away from the fields was time wasted. In 1872 Field Marshal González, the president of the
republic, warned the legislature about impractical legislation and the need to consider education in a wider
context "to reconcile the needs of the country with its pecuniary resources and other elements." [37] It may not
have been a conscious decision on the part of the elite (there is no contemporary statement indicating an open
disregard for education), but whenever the government had to make a choice between education and the army,
or education and roads, education lost. It is clear that education was not the highest priority of the Salvadoran
authorities.
An export-oriented economy or a sorry colonial bequest did not have to result in half-hearted educational
efforts. The success or failure of El Salvador in primary education can be measured against data for Costa Rica,
a country that had been more neglected during the colonial period

― 70 ―

and where coffee cultivation started earlier. By 1850 each Costa Rican school served 1,631 inhabitants, less
than the 1,854 served in El Salvador. This gap in educational services had been reduced somewhat by 1892
when Costa Rica had one school per 1,026 as opposed to one school per 1,201 inhabitants in El Salvador. [38] In
terms of sheer numbers of schools the advantage of Costa Rica was not overwhelming, although the cumulative
effects of the gap have to be regarded as significant. What may be more important is the seriousness and the
persistence of Costa Rican efforts. Judging from government expenditures on education, Costa Rica had a
steadier and stronger commitment to education. Whereas in El Salvador at most 5 percent of nineteenth-century
budgets was devoted to schools and teachers, the Costa Rican government would seldom spend less than 5
percent, and after 1877 it began spending more than 8.7 percent; a decade later it spent between 10 and 25
percent of its revenue on education.[39] Higher expenditures on teachers and schools were complemented by an
educational bureaucracy of inspectors, jueces and comisarios de escuelas, and educational boards at the town
level. It is clear that Costa Rica began establishing the foundations of a much stronger educational system in
the last quarter of the nineteenth century. The Costa Rican elite had a different sense of priorities that was
reflected in their achievements.
If achievements in primary education were only modest, secondary education lagged far behind. In 1872
there were only three official high-schools. The number was still the same in 1893 although by then there were
ten private high schools (the most important of which had only 125 students). [40] The pattern of elitism was
reinforced by the predominance of private schools in secondary education. Secondary and vocational education
was also provided by two teachers' schools, the "Escuela Politécnica" (which trained military officers), a fine
arts academy, and a telegraphy school. Altogether in 1887 El Salvador had 1,293 students in secondary
education. Again, a comparison is in order. In 1889, Costa Rica, a country with about a third of El Salvador's
population, had 912 students enrolled in high school.[41] That is, they reached a much higher percentage of
potential students.
Not surprisingly, university education did not progress very fast. The first president of El Salvador, Don
Juan Lindo, founded the university and an elite high school, Colegio de la Asunción, in 1841. [42] It took seven
years to write the university's bylaws and eight to build appropriate facilities. There was not much pressure
since the university could not start working properly until the colegio had graduated enough students eligible
for university education.[43] In 1847 there were only 61 young men attending the colegio, 19 studying Latin
grammar, 19 philosophy and mathematics, 15 law and theology, and 8 medicine. [44] The develop-

― 71 ―

ment of the university faced the same obstacles of virtually every other activity in the new nation—wars
interrupted classes, political change affected the availability of faculty, the 1854 earthquake destroyed its new
building.[45] But there was a clear sense of the need to promote higher education, even if (or maybe because) it
was meant to reach only a few. As it proved to be difficult to find qualified people willing to serve as faculty
for extended periods of time, in 1859 the government had to bring nine professors from Europe. [46] Despite these
efforts, the successes of the university remained rather limited. In 1879 the rector of the university lamented
that due to "wars, revolutions, changes, and constant problems, education barely progressed" between 1841 and
1859. As late as 1879 not one single Salvadoran had studied engineering. "It is very regretable," said the rector,
"that we do not have a son of the country who can plan a road or a bridge, or who can level a plot of land." [47] In
1888 only 528 Salvadorans had university degrees, 262 of whom were lawyers (14 of them had honorary
degrees). That year the university had 180 students; more than half of them wanted to become lawyers. [48]
The educational system had the structure of a very narrow and tall pyramid. In 1888, more than forty
years after the end of the federation, only 1 in 32 Salvadorans attended primary school, 1 in 530 secondary
school, and 1 in 3,820 the university. Even without considering the quality of the education, it is hard not to
conclude that the educational system failed to become an engine for growth, much less development. Instead, it
helped to perpetuate the inequality inherited from the colonial period. The enormous gap between the educated
and the uneducated, between the rich and the poor, was being cast in concrete. This was less of a problem when
the main economic activities were traditional ones that could be learned from one's parents and were not
subject to great market pressures. When the economy opened to the international markets and when the
increase of coffee production introducted new complications to the organization of production, those with an
education were in a better position to learn how to profit from the new possibilities. The number of people who
had the training to take advantage of the expansion of the export market remained extremely small throughout
the century.
Moreover, formal education seems to have been limited to the white and ladino population. In 1868 the
American envoy found that "the great mass of the rural population, and of the villages, have been living in
profound ignorance of books."[49] However, miscegenation, greater participation in market activities, and
informal education contributed to socialize the Indian population to the white man's world. The smallness of
the country made it impossible for any social or ethnic group to be

― 72 ―

isolated. "It can be said that among us the Indian race is disappearing," said La Gaceta in 1855. Indians
participated mainly in agricultural activities but were not limited to subsistence agriculture.
We have seen that practically each Indian who has converted, so to speak, to the Spanish race, has become a hard working agriculturalist or
an intelligent artisan. An example of this is precisely this capital city now of the state. Those who years back were called Indians, who had
occupations appropriate to beasts of burden and who only produced maize and beans, are now ladinos, and occupy themselves in the
cultivation of sugar cane, coffee, tobacco, and other things more important than maize and beans. [50]
These observations summarize the conviction prevalent among people in government that there was
something backward about the Indian's preoccupation with subsistence agriculture—something that could be
overcome by greater contact with the "Spanish race." A few years later that way of thinking would lead to the
privatization of Indian communal lands.
 The process of miscegenation and acculturation had started early in the colonial period. Even before
independence the Indian population comprised less than half of the total. In 1807 Gutiérrez y Ulloa estimated it
to be 43 percent. Only thirty years later John Galindo, an Irishman who worked for the federal government,
estimated that the percentage had been reduced to 22.5 percent (see table 9). These figures are not necessarily
an indication of the actual ethnic composition of the country, since neither author used strict scientific criteria
to arrive at his estimate. Rather, these figures indicate their perception of race. The idea of who was to be
considered white and who mulatto (or mestizo) had changed with independence. Indians who "had converted to
the Spanish race" were considered ladinos. Perceptions changed again when Indians ceased to be candidates for
adoption into the "Spanish race" and became competitors for land. After the liberal reforms, when Indian
communities were perceived as obstacles to growth and their communal lands were privatized, a semiofficial
publication broke down the population the following way: 55 percent Indian, 40 percent ladino, 4.5 percent
white, and 0.5 percent black.[51] It is hard to imagine how the stark differences with the figures for 1837 can be a
strictly demographic phenomenon. The country had undergone significant changes, but those changes were
more social, economic, and political than demographic. Ethnic distinctions, while still powerful, were giving
way to a more modern social differentiation: that between those who had access to power and resources and
those who did not. Nothing in the educational system contributed to change this situation.

― 73 ―

Table 9 Ethnic Composition of El Salvador, 1807 and 1837

  1807 1837
   Total Percentage Total Percentage

Indians 71,175 43.06 90,000 22.5

Ladinos 89,374 54.07 230,000 57.5

Whites 4,729 2.86 80,000 20.0

Total 165,278 100.00 400,000 100.0

SOURCE: Antonio Gutiérrez y Ulloa, Estado General, p. 146. Rodolfo Barón Castro, La Población , p. 453.

Transportation The rulers of the new country saw education as only one of their tasks, by no means the
most important. Foremost in their minds was the expansion of trade and the improvement of roads and harbors.
They were merchants and property owners themselves and had a clear perception of the need for better
communications. With the breakup of the federation and the weakening of the ties with the Guatemalan
merchants, trade routes began to change and roads had to lead to different places. The governor of San Miguel
province stated the idea clearly enough:
The continuation of roads in all the state is, in my judgment, the only way to aggrandize it, creating with the ease of transportation new
articles of extraction ...
The governor was convinced that "only facilitating the transportation of our products and merchandise is
possible to push forward our agonizing agriculture and commerce," and he devoted most of his efforts to
improve the road between San Miguel, site of the most important indigo fair, and the port of La Unión. [52] The
central government had projects of its own. Soon after the breakup of the federation authorities in the capital
decreed the opening of a new port in the Bay of Jiquilisco.[53] Despite the decree, the project never went very far
since the site was not economically viable. Government decrees, by themselves, could not accomplish much,
and the government, being in the first stages of organization, could not engage in a vast program of public
works. Private companies were hired to help with the larger projects. In 1849 the government signed a contract
with a private firm to improve the road to the port of La Libertad. At that time only a narrow trail linked the
capital city with its closest port. A wider road would have permitted the use of
 ― 74 ―

oxcarts.[54] Again, good intentions had to face difficult obstacles; it took ten years to start work on the road. [55]
The road to La Libertad marked the beginning of a new transportation plan. Given the shape of the
country, a mountainous and narrow strip of land along the Pacific coast, the central government decided to
carry out a very simple transportation scheme: to build and improve roads from production centers to the
Pacific ports and to secure shipping services. Since a mountainous geography and torrential rains made land
transportation difficult, three ports, Acajutla, La Libertad, and La Unión, were developed. Having three ports,
which may seem excessive for such a small and poor country, minimized the need for land transportation.
Although this plan had been well known since the early 1840s, it acquired a new meaning with the discovery of
gold in California.
From the transportation point of view the Gold Rush was a stroke of luck—the main obstacle of Central
American trade, the dismal road system, was considerably alleviated almost overnight. In the past the Pacific
ports had languished; few merchant ships visited them. Salvadoran trade did not justify the development of a
national merchant marine and did not attract foreign ships on a regular basis. Under these conditions
Salvadoran exports had to be sent to Belize or to Izabal through a difficult land route. The government had to
offer tax breaks to import merchants to encourage the use of the southern ports. [56] California's rapid growth
changed the picture by stimulating an unprecedented degree of commercial activity along the Pacific coast.
Salvadorans wanted to share in the bonanza. As early as December of 1848, after hearing about Aspinwall's
project to establish oceangoing service between Panama and California, the government offered Aspinwall's
boats free access to Salvadoran ports in order to encourage him to include them in the route. [57] Reports of
the fiebre dorada made the project more feasible. After 1849 Nicaragua and Panama became the favorite routes
for easterners eager to go to California, and the possibilities of a trade route through the Isthmus became
apparent. The effects on neighboring Nicaragua were visible in a matter of months. [58] Salvadoran businessmen
were delighted, and in 1851 La Gaceta editorialized with glee that
... with the events in California the southern ports have acquired an importance that can barely be estimated. We are beginning to see in small
scale a movement that later will surprise us.[59]
 The impact of the Gold Rush on maritime transportation was soon perceived as permanent. In 1853 the
governments of Central America

― 75 ―

signed contracts with the Central American Steam Navigation Company, an American concern, to establish a
monthly service of steamers between Iztapa, in Guatemala, and Panama. The service, which began early in
1854, touched the three ports of El Salvador and was run first by the Panama Railroad Company and later by
the Pacific Mail Steamship Company.[60] The contract established a regular and reliable connection with
European markets. With the inauguration of the Panama Railroad in 1855, European ships began to visit the
Isthmus on a regular basis. British entrepreneurs established a steamer service between Liverpool and the
Panamanian port of Colón and coordinated the arrivals with the steamers of the Panama Railroad Company
(PRRC).[61] Less than five years after the opening of the new route, seven different steamship lines connected
Panama with New York, California, South America, the West Indies, and England. [62] The Panama Railroad line
became the main link between the three Salvadoran ports and the rest of the world. In order to secure its
services the Salvadoran government paid the PRRC a subsidy of 8,000 pesos per year. By 1865 the subsidy had
increased to 12,000 pesos.[63] Starting in 1856 two steamers, the Columbus (460 tons) and the Guatemala (1,021
tons), touched Salvadoran ports twice a month each, on their way to Guatemala and on their way back to
Panama, and vessels from all over the world did business in the Pacific. Whereas before independence only two
or three unreliable ships visited Acajutla every year, in 1856, only one year after the opening of the Panama
Railroad, sixty-three different ships from England, Spain, the United States, France, Sardinia, Peru, Hamburg,
Denmark, Ecuador, Chile, Costa Rica, and New Granada visited Salvadoran ports. [64] The benefits of the new
trade were apparent, and it became necessary to appoint a full-time tax collector in La Libertad and to provide
the one in La Unión with extra help during the busy months of November, December, and January. [65] Trade
figures fluctuated widely but nobody doubted that the future would bring only more. A comparison between the
five-year averages of the total trade (imports plus exports) carried out during the periods 1854–1858 and 1859–
1863 shows an increase of 76.7 percent (see table 10).[66] In this kind of environment treasury officials
discovered that ports could be good business. Besides the increase in import revenues, the government could
make a handsome profit from handling the merchandise and storage fees. [67]
The PRRC steamers became essential to Salvadoran trade, but their service often left something to be
desired. They operated at full capacity, and the alternative services provided by other companies did not offer
the same advantages; the PRRC had monopoly power over the most convenient route. The company knew that
Salvadoran exporters were highly dependent on its services and felt no pressure to accommodate

― 76 ―

Table 10 Trade Growth Rates Five-Year Averages, 1854–1896 (in pesos)

Trade
Years (Imports + Exports) Growth Rate

1854–1858 1,968,934 —

1859–1863 3,479,266 76.7

1864–1868 4,230,793 21.6

1869–1873 6,406,725 51.4

1874–1878 6,097,092 -4.8

1879–1883 7,548,300 23.8

 1884–1888 8,623,037 14.2

1889–1893 9,516,145 10.3

1894–1896a 12,117,668 27.3

SOURCES: Appleton's Cyclopaedia; La Gaceta ; El Constitucional ; J. LaFérriere, De Paris à Guatémala ; Commercial Directory .

a
 There are no data available for the period 1896–1900.

their needs. There were constant complaints about the abuses of the company. The British consul
reported that there was "no end of the injuries and losses which are constantly suffered" by its users. [68] The
PRRC did increase the capacity of its steamers but not by much. After the Columbus sunk in December of
1861, a 1,200-ton steamer named Salvador was added to the line the next spring.[69] Sometimes the PRRC found
it convenient to add a third steamer, but not on a permanent basis. Despite the growth in Salvadoran trade with
the outside world, the dependence on foreign steamers established in the 1850s became a permanent fixture of
the economy.[70]
Port development became a priority as a result of the expansion of trade. When the government could not
carry out the necessary improvements by itself it gave concessions to private citizens or subsidized private
companies. In 1852 it gave a ten-year concession to run the wharf of the port of Acajutla to a gentleman who
promised to build a new wooden wharf and a warehouse that was supposed to be the only checking point for
merchandise.[71] Having a government-controlled warehouse was most important since import taxes were
becoming a major source of revenue. With the increase in revenue the government could be more aggressive in
improving port facilities. Eventually all three ports were endowed with new wharfs. A private company was
hired to build one at La Unión in 1868. The inauguration of the first iron wharf at La Libertad took place the
following year while workers put finishing touches to a similar structure in Acajutla in 1870. [72] Even with these
 ― 77 ―

improvements port facilities had serious shortcomings. To unload a ship, goods were hoisted and thrown into
big open launches (Indian canoes in the port of La Unión) in a rather careless fashion. Once loaded the
launches were rowed to the wharf, a distance ranging from a half a mile to two miles, where the packages were
hoisted again to the pier. Needless to say, the system damaged many goods. [73]
The other side of the transportation equation, the improvement of roads connecting productive areas to
the ports, also needed attention. Primitive mule trails had to be transformed into roads wide enough to permit
the passage of oxcarts. In the 1850s von Tempsky, a German traveler, described roads that were:
... labyrinthic in their connections, miry and rutty from travel of packmules and creaking carts dragged over them, with piles of merchandise,
from January till December ... perfectly impassable during the rainy season. Oxen and ox-drivers are the only animals that will then be able
to fathom, dive and rise in, the trembling mass of mud that is called the highway, even then. [74]
The situation improved slowly. By the end of the decade the road to Acajutla, the most important road
for the coffee business, received good reviews. Von Scherzer, who was seldom happy with Central American
roads, found it to be "tolerably convenient," and the government made continuous efforts to keep it that way.
[75]
 In 1859 it was already possible to bring oxcarts all the way from Santa Ana to Acajutla. [76] The roads from La
Unión to San Miguel and from San Salvador to La Libertad received due attention. Any assessment of
Salvadoran roads, however, was bound to be temporary, since before macadamization the quality of a road was
always at the mercy of the next torrential rains. High maintenance costs due mainly to the prevailing scarcity of
labor and occasional political unrest meant that some years roads did not receive any attention. One year of
heavy war activity like 1863 could make the road to Sonsonate "impassable even to the heaviest
oxcarts."[77] Moreover, the presence of road bandits further hindered road transportation. [78] But the heavier use
of certain roads made it politically wise to maintain them. In 1864 the road to La Libertad had enough traffic to
justify a weekly diligence service.[79]
Not much could be expected from the government. It barely had enough organization to concentrate on
the main roads to the ports. Public works in the interior had to be carried out by private individuals who often
got together to repair roads or build bridges. The road from Sonsonate to Ahuachapán, for example, had to be
financed by local businessmen.[80] By the late 1860s, when government revenue had already
 ― 78 ―

begun to increase, the authorities could turn to the improvement of internal roads linking the main towns.
[81]
 Soon there were plans to establish a diligence service between Santa Ana and Sonsonate and to expand the
service to Acajutla to coincide with the arrival of steamers. [82]
Public works were often (although not always) carried out by foreign nationals. In a country without
engineers no one else had the necessary know-how. Edward Hall, the British consul, in association with a
Guatemalan colonel and with the help of European workers, built the wharf at La Libertad. Likewise, a French
engineer, M. de Bresse, surveyed the road from La Unión to Acajutla. When the time came to engage in more
ambitious projects like building an iron bridge over the Lempa River, the government turned to an American
company in 1879.[83] As soon as economic growth began demanding more complex activities, foreigners had to
be brought in; nobody at home could do the job.
By the 1860s the government's responsibility for taking care of the transportation system was clearly
established and a sense of priorities had been defined. The most dramatic changes in transportation, however,
had come from an external source. Developments in California gave life to commercial activities on the Pacific
coast and brought, for the first time in history, regular and reliable shipping services to Salvadoran ports. The
significance of these changes did not escape the rulers of El Salvador who moved to take advantage of them.
The effort was less than smooth. It was interrupted by war activities in 1863 and 1871, constant scarcity of
labor, and occasional natural disasters. Nonetheless, through a combination of sheer luck and hard work the
mid-nineteenth century became the turning point in the history of transportation in El Salvador.

Revenue
As the state acquired the new responsibilities of building an army, developing educational and legal systems,
and improving transportation, it had to establish sources of revenue. To do this it kept old colonial taxes such as
import and sales taxes (alcabalas in the colonial terminology), and followed the tradition of state monopolies
(estancos) of liquor, tobacco, and gunpowder.[84] It also resorted to tolls to repair roads, sales of public lands,
and port fees. Occasionally, as an expedient means of financing wars, it issued bonds.
Bonds were exchanged in the market at a discount that fluctuated according to market conditions.
[85]
 Bonds could be used to buy public lands and to pay taxes, and most taxes could be paid with a combination

― 79 ―

of currency and bonds. On the one hand, this practice created a problem for the government, since it left it
without the ability to control the repayment of the internal debt. On the other hand, it kept the latter at relatively
low levels compared to the size of the budget. In fact, bonds were a rather costly way of raising revenue.
Market prices of bonds could be so low that when the time came to pay taxes, people preferred to use bonds
instead of cash, thus creating liquidity problems for the government. In 1858, for example, bonds sold at a 50-
percent discount, and demand for bonds increased because businessmen realized that they could cut their tax
liability in half. Bonds became such good business that unscrupulous government officials sometimes recycled
bonds that had already been canceled.[86] Unhappy with the practice, the government decided that if people
wanted to pay with bonds the sales tax would be 7 percent rather than 5 percent. [87] These difficulties with bond
financing were part of the larger problem of raising revenue. With the acute political instability that prevailed
after independence the destiny of tax money was never clear. With luck it could go to promote the public good;
it was more likely, however, to go to finance some hated political cause or, perhaps worse, into the pocket of a
petty caudillo. Not surprisingly, tax payments were avoided whenever possible. The federation had never been
able to address the issue properly, and it took a long time for the new country to secure a steady source of
income.
Government revenue fluctuated widely: in the early 1850s it could go from an annual decline of 15
percent, to a steady year, to an increase of 25 percent. The end result was, on the average, a slow if unreliable
growth in state resources. Although the Gold Rush brought a remarkable trade bonanza, the new state found it
difficult to benefit fully from the increase in trade. Between 1850 and 1855 the revenue grew at an average
annual rate of 3.56 percent, somewhat slower than the growth in imports, the main source of revenue. The
situation slowly improved: by 1860 El Salvador was able to reschedule payments on its share of the loans
arranged by the federation with the British house of Barclay in 1828, and in the late 1860s government revenue
was growing faster than imports with an average annual growth of 6.1 versus 4.9 percent for the 1866–1870
period.[88] The government's ability to raise taxes increased with better administration, a higher reliance on the
easily collected import taxes (the share of custom duties as a source of revenue increased from 27 percent in
1850 to 33 percent in 1855 and to 54 percent in 1868), a better record of accomplishments in public works, and
a greater military capacity.[89] It is no coincidence that tax collection improved in the second half of the 1860s
after a strong effort to professionalize the army.
Government expenditures provide a gauge to measure the way in which the government allocated
priorities. The army received the high-

― 80 ―

est priority. In "normal" years, like 1868, it received around 27 percent of total expenditures. In war years, like
1865 or 1871, it received between 40 and 50 percent, in addition to money borrowed from the public
(voluntarily or involuntarily). In the second place we find the service of the debt, around 13 percent in 1868
and almost twice as much twenty years later. It would not be unreasonable to count much of this as expenditure
on the army. Public works often received a smaller share than the service of the debt. Education received at
most 5 percent.[90] As we will see later, this pattern worsened at the end of the century when the elite
consolidated its power. This pattern of public expenditure exemplifies the disturbing picture that emerged
during the second half of the century. As the ruling elite defined the role of the state, starting practically from
zero, it discovered the advantages of a strong security apparatus and of public works designed to serve the
needs of the incipient export economy, but it neglected the development of people through education. This was
a result not necessarily dictated by market signals but, rather, by the elite's interpretation of its long-term
interests, by its own sense of priorities.
Conclusion
Much ground was covered between 1841, when the first constitution was written, and the 1880s. After having
been just an intendancy of the colonial system and then a state of a thoroughly disorganized federation, El
Salvador had to organize itself as a sovereign nation. The institutions of the state were organized after having
selectively rejected the institutions of the colonial regime and without having any experience in state building,
little knowledge of the law, and nothing resembling a civil service. It was the period when the state took form
along liberal lines; it defined its role in the economy and the society, and established the material and
institutional basis of government. Pretty much everything needed to be done, and was done, albeit on a small
scale. Public buildings were built, the army was professionalized, a legal system was established, treaties were
signed, schools were founded, ports were opened, taxes were collected. Although the list is lengthy, the fact of
the matter is that accomplishments were real but very limited. They were seen as great only because the point
of departure was so low. The small territory, exhausted by war and utterly disorganized in the early 1840s, was
becoming a nation, a poor nation.

― 81 ―

4
Labor, Land, and Investment 1840–1880
After the long years of warfare attention gradually turned to production. This first period of national
reconstruction and consolidation can be set between the promulgation of the first constitution in 1841 and the
liberal reforms in 1881. The spirit of the first part of the period is well summarized by the observations made
by Carl von Scherzer in 1857:
To heal the wounds inflicted on the country by party strife, to see the abandoned and desolate fields again under cultivation—the culture of
indigo, and the trade which had formerly prospered here more than anywhere else in Central America, once more reviving, and to restore the
almost annihilated credit of the republic—these were the objects to which all the cultivated or semicultivated inhabitants looked with their
most fervent wishes.[1]
It was difficult to get started. Rafael Carrera, the Guatemalan dictator, interfered in Salvadoran politics
causing great instability and making the task of organizing the state very difficult. It took a while before the
country could stand firmer and look at the recent past with contempt.
What was the revenue of the state from 1840 until 1844? A pittance, because of poor administration, waste, lack of attention given to this
important aspect of public administration, and, above all, the ruin and general poverty, which seem to have estranged commerce and led the
spirit of enterprise and agricultural industry into a state of depression; contributing to this malaise was the insecurity and lack of confidence
generated by the political situation.[2]

― 82 ―

Slowly the wonders of the industrial revolution came to the country in their more modest versions and opened
new windows to the world. In 1852 the elite of San Salvador could enjoy an optical show with still views of
Saint Peter's basilica, the battle of Austerlitz, and the canals of Venice. By 1859, young matrons could have
their portraits taken with a daguerreotype. The well educated had access to subscriptions to foreign magazines
such as El Correo de Europa and El Noticioso de Nueva York which arrived twice a month in the steamers
coming from Panama.[3]
Through foreign publications and occasional visits to Europe the spirit of positivism permeated the
ruling classes. Newspapers exalted the virtues of statistical studies of the population and the economy, and a
map of the country was commissioned.[4] The leader of this trend was Gerardo Barrios who in a trip to Europe
recognized the need for change. In a letter from Rome written in 1853 he stated:
I urgently needed this trip to correct my ideas and to be useful to my country.... I will return to preach to my fellow countrymen what we
Central Americans are and what we can become.[5]
The people who traveled to Europe were almost by definition members of the elite, and their narrow
point of view colored what they learned from their trips. They had little inclination to learn the lessons of the
1848 revolutions; positivist ideas of hierarchy, order, and progress had more appeal to them. The growth of the
economy consolidated a landed elite that, imbued with positivistic ideas, proved eager to erase whatever
remnants of egalitarian rhetoric were left from the early independent years. La Gaceta published editorials
reflecting this stronger class consciousness of the elite. Reflecting on the idea of citizenship the official paper
stated:
In the early years of independence the title of citizen was so extensively applied that there was no individual, no matter how notoriously
undeserving, who was not honored by that classification ... at that time there was a fanatic cult for democracy, there was a concerted effort to
please the mob and to erase all kinds of distinctions ... the title of citizen should be granted only to those with a certain degree of knowledge,
and who own such property, wages or earnings that could constitute guarantee of their honesty and their respect for peace and order. [6]
The "fanatic" cult for democracy was excised from the rhetoric of the elite until well into the twentieth
century.
Economic growth and the consolidation of the state had to face serious obstacles. Political instability
diminished but did not go away.

― 83 ―

The obstacles to growth did not all come from politics, nature took the blame more often than before. The
economy had setbacks due to locust plagues, epidemics, earthquakes, and droughts. But international trade
offered a strong stimulus and growth followed. The expansion of exports made it possible to break the old
vicious circle; in the past the central state's lack of authority led to chaos, wars destroyed the economy, and
with a weak economy the state could not raise enough revenue to consolidate. The situation changed with the
increase in trade brought about by the Gold Rush. Import taxes became a reliable and fast-growing source of
revenue; they were easy to police since they entered through only three ports rather than over porous and
poorly defined borders. With a dramatic increase in imports the state finally had enough revenue to finance a
strong army. By the end of the 1850s there were reasons for hope: "... the population improves and becomes
richer: production has doubled and the spirit of speculation is awakening everywhere," editorialized La
Gaceta .[7]
Labor
Chronic labor shortages characterized the nineteenth century. Even though the population grew steadily, there
were not enough people to satisfy the demands of the economy, and producers always complained about the
lack of manpower. Even before the opening of the Pacific routes the government had been enacting legislation
to force people to work. Vagrancy laws existed in different versions since 1825 when a legislative decree
imposed prison sentences on vagrants.[8] One of the first laws passed after the end of the federation imposed
fines on vagrants and forced everyone to carry a document, signed by a reputable employer, that served as
proof of employment.[9] Different police regulations issued in the 1850s insisted that one of the important
functions of the police was to enforce vagrancy laws.[10] The situation worsened later as the export sector
expanded faster than the labor force. Between 1821 and 1855 the annual growth rate of the population was
about 1.3 percent, and between 1855 and 1878 it was 1.5 percent (see table 11). At the same time total
international trade was growing at a much faster rate: its average annual growth rate for the same period was 7
percent. If one compares five-year averages to smooth out the wide fluctuations of the data, one observes an
increase of 76.7 percent from the period 1854–1858 to the period 1859–1863, and of 21.6 percent from 1859–
1863 to 1864–1868 (see table 10). Despite the obvious shortcomings of the trade data it seems safe to assert
that trade outpaced population

― 84 ―

Table 11 Population Growth, 1821–1892

Annual Growth Rate from Prior

Year Population Date

1821 250,000 —
 1855 394,000 1.3%

1878 554,785 1.5%

1882 664,513 4.6%

1892 703,000 0.6%

SOURCE: Rodolfo Barón Castro, La población de El Salvador , p. 467.

growth by a wide margin. This situation created tensions between export agriculture and other economic
activities such as subsistence agriculture and public works.[11]
High demand for labor during the peak of the agricultural season forced public works to come to a halt.
In 1855 the governor of Cuscatlán province explained that the lack of labor forced him to interrupt public
works during the rainy season (six months), at harvest time (two months), and at the time when indigo was
processed (one month). The town of Apaneca experienced a similar situation: "the lack of labor seems to stop
the development of public wealth," said the 1858 census.[12]La Gaceta complained in 1861 that agricultural
activities were always wanting for laborers.[13] The common practice of advancing money to laborers in order to
secure their services did not help much. Workers often accepted the advances and later failed to show up. The
problem was so widespread that the government felt compelled to send a letter to the governors asking them to
enforce the law because of,
... the generalized clamor of agriculturalists and landowners due to the lack of labor that they experience in their activities, because of the
frequency with which day laborers break their engagements and defraud the advance payment that they receive. [14]
As the problem persisted, in 1861 the government imposed sentences of three to eight days' labor on
public works on those laborers who did not fullfill their commitments. Those sentences replaced imprisonment,
which had proved to be ineffective.[15] The solution found by the legislators reflects their understanding of the
problem. Instead of removing laborers from the field by putting them in prison, they forced them to do work.
Not surprisingly vagrants were a rare sight. The wife of the British
 ― 85 ―

Table 12 Male Labor Force in Four Provinces, 1858

Province Total of Men Men Between 15 and 50 Percentage

La Paz 11,202 5,880 52.5

Sonsonate 10,583 4,516 42.7

Santa Ana 28,959 10,984 37.9

Cuscatlán 15,697 8,665 55.2

Total 66,441 30,045 45.2

SOURCE: Lorenzo López, Estadística , passim.

consul observed that "there are a few beggars certainly who come regularly every Saturday for their
weekly dole but they are as nothing in proportion to the population." [16]
The practice of weekly contracts and the fact that they were seldom renewed made on-the-job training
difficult. This became a greater problem after the introduction of agricultural machinery and complex
agricultural techniques.[17] Efforts to import labor failed. The government gave a concession to a Spanish citizen
who promised to bring 1,000 Chinese workers, but the project was never carried out. [18]
The relative scarcity of labor seems to have given freedom of movement to agricultural workers. The
mobility of the labor force equalized wages across the country. In 1858 an agricultural worker in the town of
Suchitoto earned two reales per day.[19] The same year Ilobasco wages were reported to have been "no different
than in other towns."[20] A decree issued in 1852 to help solve the problem of scarcity of workers for public
works ordered every male between fifteen and fifty years of age to work two days every year building roads.
Those who wanted to avoid the indignities of manual labor could do so, for a fee. They could pay another
person or pay a fine of four reales, equal to the wage rate observed in Suchitoto in 1858. [21]
Most workers labored in agricultural activities. In fact, agricultural employment increased over time. In
1807 Gutiérrez y Ulloa recorded the occupations of the entire male labor force, 76.5 percent of which was
engaged in strictly agricultural activities.[22] Fifty years later the proportion was even higher: the 1858 census of
Santa Ana province showed that 85.2 percent of the working men were engaged in agriculture. In Cuscatlán
province the equivalent figure was 88.9 percent. (See tables 12 and 13.) A later census made in San Vicente
province in 1878, shows

― 86 ―

Table 13 Male Occupation in Four Provinces, 1858

Province Agricultural Percent Non-agricultural Percent Total

La Paz 7,505 89.0 921 11.0 8,426

Sonsonate 5,469 82.5 1,164 17.5 6,663

Santa Ana 12,759 85.2 2,225 14.8 14,984

Cuscatlán 7,166 88.9 893 11.1 8,059

SOURCE: Lorenzo López, Estadística , passim.

 that of the 5,026 economically active men who lived in the city of San Vicente, 60 percent worked in the
countryside, a very high rate for city dwellers.[23]
Nonetheless, population growth was enough for cities to grow, for markets to develop, and for a greater
division of labor to take place. In 1807 Gutiérrez y Ulloa listed only twenty different occupations, whereas in
1858 the census of Santa Ana province alone registered twice as many. At that time Santa Ana province had
more masons, carpenters, tailors, and shoemakers than the whole country had in 1807. [24] In Sonsonate, the
municipal census of 1853 recorded forty different activities, ranging from lawyers to day laborers. The most
common occupations for men outside agriculture were domestic service, tailoring, shoemaking, retail trade, and
brickmaking. Women outside agriculture were more likely to be seamstresses or maids. The census seldom
acknowledged their contributions to agriculture, but it is hard to believe that they did not play an important role
working in the fields.[25] The larger cities became relatively more sophisticated places and provided a variety of
services. In 1858, Sonsonate, the closest commercial center to the growing port of Acajutla, had thirty-two
retail stores, four pharmacies, eighteen grocery stores, ten carpentry shops, twenty-two cobbler shops, twelve
looms, five brick ovens, and two flour mills. The relative prosperity of Sonsonate must be understood in the
proper context: in the whole country there were no more than five towns of the same size. It was located in a
prosperous region that produced indigo and coffee, and had the best conditions for raising cattle. However, it
exemplified the beginnings of urban life in the country.
Towns were growing and with them the number of artisans and construction workers. San Salvador,
which in 1839 had around 15,000 inhabitants, by 1865 had more than doubled its population. Belot reported
that in that year it had approximately 35,000 inhabitants. [26] In 1858 Santa Ana City had 20,845 inhabitants,
more than San Salvador

― 87 ―

had had twenty years earlier. It was a very tentative kind of urbanization; strong links to agriculture remained.
Cities provided the types of services necessary to sustain the growth of commercial agriculture, and
manufacturing activities were very basic. According to the 1858 census, 33 percent of the inhabitants of Santa
Ana province lived in the city of Santa Ana, but 85.2 percent of the working men of the province worked in the
countryside.
Wages in the cities and small towns were comparable to those in the fields. Domestic servants earned
wages similar to those of day laborers, and presumably the occupations were interchangeable. A male servant
in the town of Suchitoto in 1858 earned thirty-two reales a month plus food and shelter, not very different from
the two reales per day plus food that he would have earned working in the fields. Women earned less. A cook
earned between twelve and sixteen reales a month, and the maid in charge of running errands made between
eight and ten reales. Skilled workers had better wages and were more urban in the sense that they were less
likely to exchange their jobs for worse-paying agricultural jobs. A carpenter or a smith could expect to make
twice the wage of a day laborer and about the same as a tailor or a shoemaker. [27]
In the absence of good price series, it is impossible to make comparisons of the purchasing power of
1858 wages, but a comparison with data for the beginning of the century suggests that the diet of the
Salvadoran labor force had improved. In 1807 Gutiérrez y Ulloa reported a production of 116,157 fanegas of
maize to feed a population of 165,278.[28] This means that the annual consumption per head averaged 0.703
fanegas (80.82 kgs.). In 1858 the governor of La Paz figured that each individual in his province needed five
medios of maize per month and, comparing that estimate to the production of the province, he concluded that
there was a surplus. The governor's estimate is equivalent to an annual consumption of 2.5 fanegas of maize per
head, 3.5 times the amount of 1807. In the same year Santa Ana province produced 208,600 fanegas of maize
for a population of 57,844.[29] If all the maize was consumed in the province, the average annual consumption
would have been 3.61 fanegas per head. Another indication of the abundance of maize is the fact that its price
was down from 3 pesos/fanega in 1807 to an average of 1.86 pesos/fanega in 1858, a year when the expansion
of international trade had already been felt. Nonetheless, the equilibrium of food consumption was somewhat
precarious and consumption could vary widely year to year. In 1878 Castro estimated that in San Vincente
province annual consumption of maize was 1.21 fanegas per head, more than in 1807 but less than in 1858.
[30]
 Sometimes natural disaster struck causing widespread hunger. In 1854, for example, there was a big
earthquake and a locust plague which brought widespread famine. "This 1854
 ― 88 ―

was a melancholy year for Central America" wrote the wife of the British consul, "for after the earthquake
came a famine, the corn crops being destroyed by locusts that came in millions." The following year the
suffering was still vivid. La Gaceta commented on "the horrors of the hunger that we were unfortunate to
suffer last year."[31]
The equilibrium was precarious indeed, but, no matter how precarious, food seems to have been on the
average more available than before independence. Labor being scarce, rural workers had some leverage and
their living conditions could improve. Property owners were not necessarily happy with the arrangements. In
this instance the American consul was an articulate spokesman for employers when he reported that labor was
unreliable "owing to the indolent habits of the people, and the almost costless means of subsistence to the lower
classes."[32] Enforcement of vagrancy laws, however, reminded everyone of the alternatives to market
arrangements and wage bargaining: the power of the state could impose the rules of the game and even change
them. Part of the leverage of agricultural workers was their access to land and to inexpensive food. They could
always go back to their ejidos or communal lands. When the export sector gained in importance resources
moved from food production to coffee production, and a fierce competition for land began.

Land
The expansion of trade also affected land use and ownership. During the first half of the century the nature of
land ownership did not vary much from what prevailed during the colonial period. The land of the country was
divided into private haciendas, town land (ejidos), communal lands (which belonged to Indian communities),
and public lands (terrenos baldíos); by the end of the century most land was private. Since the 1850s the state
carried out an important effort to sell public lands and finally, after 1880, it eliminated ejidos and communal
lands as forms of property holdings. Haciendas and coffee fincas emerged triumphant at the end of the century.
[33]

The activities performed in haciendas changed little during the first half of the century. They followed
ancient patterns established during the colonial period. In 1847 La Gaceta described a big hacienda offered for
sale:
[It] has about 70 caballerías , most of it flat and very fertile and good for all types of agriculture with plenty of water of good quality and
unsurpassable for cattle raising. Its buildings are large and good for processing indigo as well as sugar. It has a chapel and a sacristy and
everything is in

― 89 ―
good shape, the same as the obrajes and tanks with a daily capacity of 300 cargas . Besides, there are two obrajes of 100 cargas capacity that
still need a little work to get them ready.
There are 40 mules and 100 oxen, 16 oxcarts, 80 boxes, wheels and other things necessary for processing indigo. For processing sugar there
are 2 sugar mills, 3 boilers, 150 foreign molds and everything else. In the current state it is estimated that it is possible to produce from 1,200
to 1,500 arrobas of sugar. The hacienda has 500 heads of cattle and 100 horses. There are various pasture lands, some of them fenced with
stone.[34]
This was a big and rich hacienda, wealthier than most, and it is quite possible that the advertisement
included a bit of creative marketing, but in its wealth it gives an idea of what could be expected of properties in
rural El Salvador. Indigo had to be mentioned first, but many other activities deserved mentioning. Sugar and
cattle raising were also important. All the implements necessary to process indigo and sugar and to take those
products to the market were present at the hacienda. Gradually they had accumulated a substantial amount of
capital: tanks to process indigo, sugar mills, buildings, and livestock. The abundance of cattle suggests plentiful
land. In fact, in the late 1840s prime land in El Salvador sold for lower prices than comparable land in Costa
Rica or Guatemala.[35] No mention is made of the labor force because it was in no way attached to the land. The
land produced many things: cash and export crops coexisted with basic foodstuffs. Staple foods, maize and
beans, were produced not only in haciendas but in ejidos and communal lands in every corner of the country.
Almost all the towns surveyed in the 1858 census mention cereal production. Half of the districts covered by
the census mention cattle raising.
Until the 1860s, when the increase in international trade began putting pressure on land, haciendas,
ejidos, and communal lands played equally important roles in production. Ejidos were considered to be an
essential component of a town. The authorities of the federation had restated the Spanish concept of the ejido
with an 1827 decree that endowed with land "towns that do not have enough for their agriculture." Moreover,
the law even considered the possibility of "taking the property of a private citizen" if necessary to create an
ejido, in which case the owner of the land would be compensated. [36] There is evidence that Salvadoran
authorities complied with the law. When after the earthquake of 1854 the town of Nueva San Salvador was
founded, the legislature endowed it with its corresponding lands "considering that its inhabitants will need land
in the ejidos for their plants and gardens."[37] In 1858 San Vicente received 30 caballerías of land for its ejidos
and in 1859 Jutiapa received nine caballerías for the same purpose. Ejido lands produced

― 90 ―

not only foodstuffs but also indigo and other commercial crops. The ejidos of Rosario de La Paz had very good
obrajes and in 1858, as they were underutilized, the mayor decided to open their use to newcomers. The
inhabitants of La Paz cultivated indigo and cereals, and raised cattle in their ejidos. When necessary, the
municipalities enlarged their ejidos by buying more land. In 1858 the municipality of Guayabal bought
communal lands from neighboring Indian towns in order to increase the size of its ejidos. [38]
Although there was no qestion that the ejidos played an important economic role, land was becoming
more valuable. By the 1860s the idea of endowing new towns with ejidos was losing support with liberals
under Barrios. (Earlier in their term, they had provided many towns with land.) First they began regulating the
creation of new towns. They thought that the "creation of new towns is pernicious when it is done by founders
who do not have the necessary elements to maintain their municipal existence." Therefore they decreed in 1862
that as a condition of creating a new town the population either had to prove that they had their own land or had
to buy it.[39] A few days later the legislation that regulated the allocation of new ejido land was abrogated. One
can only speculate that with land becoming more valuable, a clever way to acquire some was by creating a new
town and then asking the government for ejidos.
Communal lands were also a live and viable institution for most of the century. Indian communities were
sometimes accused of owning the most fertile lands in the country, and there was a constant friction between
municipal authorities and the communities, since communal and ejido lands were often side by side and limits
were not always clear.[40] In 1867 the government tried to mediate in these kinds of conflicts and the Senate
authorized the executive to grant municipalities the right to intervene in the administration of communal lands.
That provision was modified two years later when the president gave legal representation to Indian
communities that owned land "independent from municipal ejidos" and ordered them to appoint their own
representatives.[41]
Those conflicts were never fully resolved. When the liberals came back to power after Dueñas's defeat in
1871, the government was less sympathetic to the plight of the communities and less willing to mediate.
Conflict was more likely to become violent, as happened in 1875 when the Indians of Dolores Izalco rose in
arms and assaulted the garrison of the city of Izalco.[42] But while they existed, communal lands participated
acitively in the economic life of the country. Their activities were not limited to subsistence agriculture. The
Indians of Santa María Ostuma, for example, had bought their communal lands and used them to produce
tobacco for the market and cereals for themselves. In the communal lands of San Pedro Nonualco there were
one hundred sugar mills.[43]

― 91 ―

At the same time the government was very active selling terrenos baldíos. Ejido lands left unused by the
disappearance of the town that they were supposed to service were also sold. When the publication of La
Gaceta began in 1847, it carried periodic advertising of sales of terrenos baldíos. Land sales were not an
exercise in generosity or social policy but a revenue-raising operation. Public land was also used to redeem
government bonds.[44] In order to speed up sales the government passed legislation encouraging people to
identify and claim baldíos, offering as a reward a percentage of the land. The percentage varied from 25
percent for properties under 20 caballerías to 5 percent for properties over 1,000 caballerías. To discourage
abuses surveys were carried out by five government-appointed surveyors who were paid a fee established by
law.[45] Public land was sold at market value in public auction. A terreno baldío in a choice location between
San Salvador and Santa Tecla could be sold for five hundred pesos per caballería, whereas a baldío in faraway
Metapán could not be sold for more than thirty pesos per caballería. The former ejidos of Cuscatlán, which can
be reasonably assumed to have been cultivated, were offered at six hundred pesos per caballería. [46] Private land
was sold at similar prices. A private hacienda in Metapán was valued between thirty and sixty pesos per
caballería, a price similar to that of the baldío. A baldío in San Vicente was priced at three hundred pesos per
caballería and a hacienda in that same area was valued at 350 pesos. [47] There was an active land market, and the
government was more than willing to take advantage of it. In 1860, ten out of fifteen land cases handled by the
governor of Santa Ana were baldío claims.[48] Renting land was also common. In 1858 the powerful Guatemalan
family of the Aycinenas advertised in La Gaceta that it wanted to rent three haciendas in El Salvador.[49]
The constant entry in the market of terrenos baldíos kept land prices more or less constant and permitted
the expansion of haciendas and fincas to satisfy the expansion of exports. Without detailed information on land
quality or transportation costs to the nearest market, it is difficult to interpret the meaning of the land prices
advertised in La Gaceta ; however, one can observe that year to year land prices remained within the same
range until the late 1860s. Marginal land had a price around 20 pesos per caballería, whereas the best cultivated
land in a choice location had a price around 700 pesos per caballería (see table 14). However, warning signs
appeared on the horizon. The abrogation in 1862 of the law that ordered the creation of new ejidos was only the
first. By the late 1870s, when most terrenos baldíos had been sold, it became clear that further expansion would
not be painless. As we will discuss later, the local elite felt the need to claim ejidos and communal lands.
[50]
 Public land sales constituted the only escape valve in the system, but they reached their limit. The expansion
of international trade

― 92 ―

Table 14 Land Pricesa (1849–1865)

Year Location Price

1847 Sta. Tecla 500

  Metapán 30

  Cuscatlán 600

1848 Asunción Nonualco (baldío) 700

1849 San Vicente 300

  San Alejo 100

  San Pedro Nonualco (baldío) 250

  Tejutla 200

  Chiconhuezo 20

  Asunción Nonualco (baldío) 300

1850 Metapán 60

  Metapán 60
  Metapán 30

  Metapán 40

  Sonsonate 60

  Sensuntepeque 300

  San Vicente 350

1851 San Miguel (baldío) 350

1852 Chiconhuezo (baldío) 200

1855 San Vicente (baldío) 140

1856 San Vicente (baldío) 150

  Tejutla (baldío) 200

  Chinameca (baldío) 150

  Comasagua (baldío) 250

  Olocuilta 100

1857 La Paz (baldío) 200

  La Paz 170

  La Paz 800

1858 La Paz 100

  Tejutla 140

  Tejutla 75

  La Paz 175

  Sensuntepeque 100
   Ataco 100

  Jutiapa 100

1859 Santiago Nonualco 60

  Metapán 25

(table continued on next page)

― 93 ―

Table 14 (continued)

Year Location Price

  Chiconhuezo 40
  Tejutla 20

  Metapán 20

  Tejutla 40

  San Jacinto 250

  Jutiapa 100

  Pasaquina 90

  Pasaquina 80

1860 Gulf of Fonseca Islands 100

  Masahuat 27

1861 Chinameca 80

1864 Santa Tecla 646

   Guayabal 100

1865 La Paz (baldío) 150

SOURCE: La Gaceta .

a
 In pesos per caballería .

put heavy pressure on land and all the other factors of production. When the escape valve disappeared
the elite had already consolidated in power and, as we will discuss later, used the legislature to change the rules
of the game by privatizing all land.

Investment
The bottleneck in the credit market appeared much earlier than in the land market. There was plenty of reason
for this since the troubled years of the federation and beyond had retarded the development of credit practices
and institutions. As trade with the outside world increased, so did investment opportunities. But without a
banking system and with outmoded laws, obtaining credit was a cumbersome process with high transaction
costs. Credit operations were difficult and informal, although by no means negligible. In the absence of
institutions, human ingenuity played a major role. Importers used a complicated credit system
called habilitación based on discounts on the invoice price. An 1855 report of Great Britain's Board of Trade
describes the operation in detail:

― 94 ―
Business is carried on by the importers in the following manner, viz.: they sell to the resident merchants at about 80 percent, upon invoice
prices payable in 12 months, either in part cash, part indigo, or all in indigo, at the current price of that article at the time the payment
becomes due, or its market value at the time of the purchase. Those again dole out small invoices to the smaller shopkeepers, also upon long
credit, and so every business is done upon trust; a cash sale of 3,000 dollars pesos being seldom heard of. [51]
The 20-percent annual interest rate in real terms (in cash or in indigo) in the transaction described above
was consistent with the 18-percent interest offered to the charity board in 1849. [52] High interest rates persisted
during the period under consideration. In 1865 the French traveler Belot found monthly rates of 1.2 percent.
[53]
 These practices were still very much alive in 1878. In San Vicente province indigo growers sold their
product at the beginning of the year, before collecting the crop, and promised to deliver it ten months later, just
before the fairs. They used their haciendas as collateral in transactions that amounted to borrowing money at an
annual interest rate of up to 30 percent.[54] It was a system that permitted foreign credit to trickle down to small
producers but at considerable cost. Risks were high and, given the small amounts involved, transaction costs
were also significant.
High interest rates, coupled with the scarcity of labor, go a long way to explain the problems of investing
in permanent crops such as coffee. Nonetheless, informal arrangements eased the difficulties involved in the
process. Informal arrangements had to rely, almost perforce, on personal knowledge of the borrower, making
credit operations much easier for the members of the elite. The obstacles for a member of the lower classes to
start a business career can only be imagined. A person with connections and of recognized honesty could
obtain good deals, and knowing the right person could make the difference between obtaining credit or not.
Dr. Manuel Gallardo's credit history illustrates the advantages of being somebody. He was a young
doctor descended from indigo planters from Suchitoto. Able to save enough money to further his education, in
1855 he decided to go to Paris. As there were no banks that could make financial arrangements for him, he had
to search for a reliable friend who was willing to borrow his money and send the interest to Paris. The system
worked, and he returned from Paris with the enhanced reputation of a man educated in Europe. After a period
as rector of the university the young professional decided to start a coffee plantation, the latest thing in business
ventures. To select the land he could count on advice from his friend Juan Rafael Mora, a former Costa Rican
president cum coffee planter who was in El Salvador as an exile.
 ― 95 ―

But coffee production required a considerable investment, and the trees did not produce revenue until the fifth
year. Dr. Gallardo ran out of money. His credit needs were satisfied through his good connections; by that time
he had already been a minister and advisor to presidents, and he was a good risk. Commercial houses in San
Salvador gave him merchandise payable in twelve months. He resold it, and did so "at great profit." When that
was not enough he decided to borrow from a friend who charged him a rate below the market rate and gave him
enough time to pay. Dr. Gallardo's finca was a success story. As of 1990, his descendants, among them former
ambassadors and cabinet members, are still prospering. Obviously, someone like Doctor Gallardo, a prosperous
professional and able entrepreneur with a career in government, was a better risk than most borrowers. His
generous friends were doing good business by lending him money. [55]
Mortgage credit played a role in financing commercial activities. In 1860 there were 154 outstanding
mortgages in San Salvador province. Their average value was 1,301.47 pesos and their standard deviation
1,917.85. About a third of all mortgages (52) were secured by urban houses, and the rest by agricultural land
including, on one occasion, ejido land. They also included indigo obrajes and sugar mills. Credit obtained by
mortgaging property was used for various purposes. Some 28 percent of all mortgage loans were used to pay
for the security deposit needed to obtain a license to sell liquor, a lucrative state monopoly. Only 3 percent of
the total credit was specifically mentioned to have been used to finance indigo businesses and none for coffee,
a new kind of operation of unknown risk.[56]
There are similar data for San Miguel province. In that region there were thirty-one outstanding
mortgages with an average value of 1,265.55 pesos and a standard deviation of 2,184.91. Most of the
mortgaged properties (65 percent) were houses, and the rest rural property including, as in San Salvador,
ejidos, obrajes, and sugar mills. In this region, one of the main producers of indigo, only one mortgage was
used for an indigo business. Most of the credit was used to pay personal debts or security deposits. [57] These data
strongly suggest that mortgages were used mainly for urban businesses, a practice that is understandable at a
time when land deeds in rural areas were, to say the least, a very confusing matter. Thus, agricultural
production was largely financed by future sales in the manner described above.
The government participated in credit transactions by borrowing from the public. As mentioned before, it
sold bonds that circulated freely and even used them to pay for goods and services. They were attractive
because they could be used to pay taxes and public lands at a discount. Commercial houses bought and sold
bonds at a discount. Their use was so common that they had a great degree of liquidity and,

― 96 ―

since they could be endorsed to others, had some of the properties of money. [58] They helped to ease the scarcity
of currency. The country had no currency of its own; gold and silver coins from North and South America were
used for local transactions, and the scarcity of coins was such that cocoa beans and even eggs were often used
as a means of exchange for articles of small value.[59]
Credit difficulties slowed the process of capital formation but did not stop it. When Gutiérrez y Ulloa
prepared his report there were hardly any machines in the country and the amount of cattle was very limited. In
1858 sugar mills were spread throughout the country. Santa Ana province had 9 imported sugar mills and 166
made in the country. The typical hacienda had obrajes to process its own indigo. The number of construction
workers had increased substantially, which means that more houses were being built. Slow investment in
agricultural machinery was not only a matter of credit but also had to do with technological problems. Simple
sugar mills (trapiches) consisted of two vertical wood cylinders that rotated crushing the sugar cane. They were
inefficient but easy to operate and repair, whereas imported machinery needed maintenance and parts, two
extremely rare elements. It took a lot of courage to invest in a steam engine without knowing whether it could
operate long enough without interruption to be profitable. [60] The wife of the British consul noted that,
Machinery is beginning to be introduced into Salvador, and would be more so if there were more clever mechanics settled in the country; but
people are afraid of spending much in machines when there is no one capable of repairing them when out of order. [61]
Even more, brave investors sometimes spent a great deal of money on heavy machinery only to find out
that it could not be transported from the port to its site. As late as 1894 exporters were warned:
Machinery destined for this country should be made in as small pieces as practicable. The road from La Unión to San Miguel is strewn with
heavy pieces of mining machinery, big iron shafts, blocks of granite and marble for monuments, etc., which have never reached their
destination. At this date there is actually a boiler at the foot of the pier at Acajutla under 12 feet of water, which broke the chains with which
they were hoisting it from the lighter. It is sunk, probably never to be recovered. [62]
 There were modest local attempts to make up for the lack of foreign machinery. In 1859, La
Gaceta reported that a Costa Rican carpenter living in Nueva San Salvador had built and installed a water-
powered sugar mill that worked "perfectly."[63] But the use of water power could

― 97 ―

not be extensive in a country where rivers are small and vary greatly between dry and rainy seasons. Small
shops built simple agricultural machinery. In Santa Ana there was a shop that specialized in making wooden
sugar mills, molds for sugar, machines to process coffee, oxcart wheels, and the like. [64] In the late 1860s sugar
exports to California had increased enough to permit the importation of steam machinery for sugar mills. [65]
Capital formation did not take the form of complicated machines or the development of an incipient
industry; the country had a long way to go before reaching that stage. Instead, investment was directed to
bringing new land into cultivation, building facilities, installing modest sugar mills and indigo obrajes, starting
coffee plantations, and improving transportation, all of which made possible the expansion of foreign trade.

Conclusion
During the early years of the century, the context in which the state defined its role somewhat softened the
trend toward greater inequality. The constant need to finance wars and the use of forced loans tended to
equalize income. Labor scarcity, aggravated by the needs of the army, gave some leverage to workers, and
competition for land was checked by the availability of terrenos baldíos. The limited technological, monetary,
and organizational demands of traditional agriculture made it possible for all sectors of the population to
engage in it. However, the equilibrium was quite fragile; it was to be upset by the two key developments of the
second half of the century: the expansion of exports and the consolidation of the state. The combined action of
these developments meant that the ability of labor to obtain its share of the economic pie would be greatly
diminished. Labor's bargaining power depended on its relative scarcity, which, in turn, was determined by its
natural growth and its access to land. The expansion of coffee production put great pressure on land,
particularly land located in the western region where conditions were excellent for coffee production and ejidos
and Indian communities were strongest. Market forces and, later on in the 1880s, the new legislation of the
liberal reforms reallocated land and increased the numbers of landless laborers. [66] Moreover, the consolidation
of the state and its coercive apparatus made it easier to enforce vagrancy laws. With greater numbers of people
in the labor market and a stronger army, plantations would have a steady supply of cheap labor.
At the same time, the increasing importance of coffee production exposed the limits of existing credit
mechanisms. Since it took years for

― 98 ―

coffee trees to become productive, future planters depended on credit to get started in business. Given the
informal nature of the habilitación system, the members of the elite who had a good name, business contacts,
and the ability to make a good impression on foreign merchants, were in a privileged position to obtain funds.
Things were different for those who worked their ejidos or communal lands. They did not have friends or
relatives who could offer a helping hand, and strangers would find it difficult to lend them money. What
guarantee did they have to offer? How would a foreign merchant assess the risk of lending money to an
illiterate member of an Indian community?
The export sector eroded traditional forms of land tenure before it had any impact on the development of
a banking system. The authorities of the emerging state were better equipped and more inclined to enforce
vagrancy laws and to change the legislation that regulated land tenure than to provide credit to would-be
planters. When coffee production began in earnest, the situation of the labor, land, and credit markets was such
that a greater specialization in coffee exports would weaken labor, worsen the distribution of land, and allocate
credit only to a tiny minority.
 ― 99 ―

5
The Opening of the Economy 1840–1880
The expansion of the export economy financed and shaped the organization of the Salvadoran state. El
Salvador created itself as an independent nation in an environment of increasing openness to the outside world.
Key internal decisions were responses to developments taking place thousands of miles away: gold diggers in
California and railroad builders in Panama changed the direction of Salvadoran roads, a distant war in the
United States turned everybody's attention to cotton production, indigo planters became coffee planters. As
international trade changed the face of the nation, subsistence agriculture played an increasingly smaller
secondary role. Production was meant for the market, all land had to become a commodity, and all labor had to
be up for sale. El Salvador was a small country; it had no place to hide from the forces of the market.

Internal Trade
Internal trade expanded during this period. The distribution of goods was carried out through a network of large
annual fairs, smaller fairs, peddlers, Sunday markets, and city stores. Indian communities participated actively
in the trade network as suppliers of cereals, vegetables, salt, handicrafts, and much more. There is no substance
to the allegations that Indian communities were an obstacle to growth because their traditions encouraged
uneconomic behavior, or because they only wanted to produce food crops. The behavior of the prices of the
goods
 ― 100 ―

Table 15 Prices of Cereals in Western El Salvador, 1858

Product Number of Towns Average Price Standard Deivation

Maize 26 1.86 pesos fanega 0.68

Rice 17 0.60 reales almud 0.19

Beans 19 2.60 reales almud 0.82

SOURCE: Lorenzo López, Estadística , passim.

that they produced suggests a brisk participation in the market. As they bought and sold maize, rice, and
beans, the prices of these products reached the same levels across towns. Prices in 1858 showed little variation
in different western towns, which indicates an active market for goods produced mainly by Indian
communities. Table 15 shows the average and the standard deviation of the prices of maize, rice, and beans in
the towns of the western part of the country covered by the 1858 census. The census gives only one price for
each town, so that the number of towns is equal to the number of observations. As the table shows, the standard
deviation is more or less a third of the average price; prices did vary from town to town (they were not set by
custom), but the change was relatively small. Obiously, high prices of one product in one town would attract
more supplies, and prices would tend to level. The towns included in the census were all located in the western
part of El Salvador, a region that covers approximately a third of the territory of the country and, consequently,
distances between the towns were small. Nonetheless, it is possible to say that a substantial amount of the price
differentials in the data were due to transportation costs. (More information on transportation costs is given in
the next section of this chapter.) The existence of active food markets is hardly a surprise to anyone, but in the
case of El Salvador, where the territory is very small, the extensive use of exchange indicates that it was very
difficult for any group to be isolated from the market.
Communal lands and ejidos were not devoted exclusively to subsistence agriculture. Trade and cottage
industry were very much part of the rural economy. In the bigger towns there were fairs where many goods
were traded. San Juan Nonualco, a predominantly Indian town, bought its food from other towns and
concentrated in the production of hides, mustard, indigo seed, earthenware, and brown sugar. According to the
1858 census, the value of the nonsubsistence products was 48 percent of the value of the town's production.
The main economic activity of

― 101 ―

Guaymango was salt production; its inhabitants exchanged salt for foodstuffs and clothing. Other towns
combined subsistence production with cottage industries. In Tenancingo, for example, peasant families, after
tending their plots, manufactured straw hats to sell in the Sunday market and to export to Guatemala. San Pedro
Puxtla produced almost 300,000 straw hats every year, and La Paz produced rebozos (cotton shawls). Besides
producing maize and beans, the inhabitants of Ataco tanned hides, made leather chairs, baskets, and rope. If
these towns did not devote their labor and lands to subsistence agriculture, it was not because suitable land was
unavailable (with enough effort almost any land can produce maize) but because the existence of markets
offered them alternatives and allowed them to profit from their comparative advantages in other economic
activities.[1]
If Indians had an active participation in the market, the upper classes were not left behind. Apart from
agriculture, commerce was the most important economic activity. Mrs. Henry Grant Foote found that
"everyone from the President downwards keeps a shop, and no one objects to appear behind his counter and
sell you a reel of cotton, the wives and daughters often officiating in the same capacity." [2] Mrs. Foote's
amazement with that peculiarity of Salvadoran society led her to devise a curious classification of social
classes. In her view there were "only four classes besides soldiers in Salvador—great shopkeepers, little
shopkeepers, servants, and agriculturalists." [3] Another important outlet for trading goods were the annual fairs.
The main fairs traded primarily with indigo and imported goods. At these fairs merchants purchased a year's
supply of imported goods, a practice that was made necessary by the fact that vessels arrived annually. As fairs
gathered large amounts of people with abundant cash they were also an excellent place to exchange all other
kinds of goods. The main fairs, such as San Miguel's, attracted businessmen from all over Central America, and
several vessels from South America arrived with merchandise at the nearby port of La Unión. Goods sold at the
fair were "taken round Cape Horn by French, German, and English merchants, chiefly the latter, to the Bay of
Fonseca on the Pacific." Two-thirds of the trade of Honduras was supplied by this fair. [4] It was said that "At
these fairs more business is done than in all the rest of the state during the remainder of the year." [5] Indigo,
cattle, mules, horses, fruits, imported goods, books, everything was bought and sold. [6] As international trade
expanded, so did the volume of transactions and the number of fairs. Big fairs like San Miguel's made sense
because of the lack of regularity of shipping services; when the PRRC steamers began their bimonthly visits,
the practice of purchasing for the entire year became obsolete. [7]
Not all fairs were created equal, the annual fair of San Miguel

― 102 ―

attracted international businessmen while the fair of San Vicente, held every three months, attracted fewer
indigo dealers than peddlers or Indian peasants with food products. Lesser fairs dealt more with local than with
imported products and, despite the efforts of the government to coordinate their activities, competed against
each other. Established fairs were an opportunity for municipalities to make handsome profits by renting spaces
in the central square while new ones had to struggle in order to establish themselves and attract business. Local
authorities used aggressive marketing: when the fair of Suchitoto was authorized by the government in 1859 it
offered rent-free spaces for three years.[8] At the bottom of the scale were the small-town Sunday fairs that lured
"caravans of Indians arriving by foot, by horse, by mule, in gangs of five, ten, twenty, fifty," to peddle their
agricultural produce.[9] In 1857 the French consul counted nineteen annual fairs spread all over the country.
  The more remote parts of the territory were serviced by peddlers (buhoneros) whose activities were so
[10]

widespread that in 1856 the government was compelled to regulate them. [11]
The commercial importance of the fairs, the amounts of money that circulated there, and the quantities of
people that they attracted, made them tempting to unscrupulous people. Aware of the problem, local military
forces, very much in tune with the free market attitudes that were sweeping the economy, offered their much
needed protection for a fee. The practice became so abusive that it amounted to extortion. In 1851 the
Ministerio General had to issue an order stopping it and pledging that all expenses in security for the fairs
would come from the public treasury.[12] This event highlights not only the commercial importance of the fairs
but also the efforts of the state to become more institutionalized and provide security to economic activities.
Chatfield, the British consul, was perfectly aware of the fact that the fairs were crucial to the Salvadoran
economy. When he wanted to use gunboat diplomacy to promote the interests of his country, he made sure that
it hurt. He ordered blockades of La Unión in 1842, 1849, and 1850, timing them to coincide with San Miguel's
November fair.

External Trade
Before the Gold Rush opened new opportunities, exports per capita were relatively modest; they amounted to
less than two pesos in 1855. In less than four decades they had increased more than fourfold (see table 16).
[13]
 Undoubtedly the opening of the markets was significant. At the middle of the century the main export
product was indigo. In 1855 it

― 103 ―

 
 Table 16 Ratio of Exports to Population for Selected Years

Year Exports (in pesos) Population Exports Per Capita

1855 765,324 394,000 1.9424

1878 3,502,594 554,785 6.3134

1882 5,236,050 664,513 7.8795

1892 6,838,000 703,000 9.7268

SOURCES: Tables 11 and 20.

accounted for 86.30 percent of Salvadoran exports. Other exports tagged far behind; they were, in order
of importance: hides (4.14 percent), tobacco (3.64 percent), balsam (2.83 percent), and much smaller amounts
of silver, rebozos, sugar, coffee, and other minor items. The data available for this period only include products
exported by sea and do not take into account the considerable trade that took place over the borders, in
particular the trade through Belize, which was still important and included a substantial amount of indigo. [14] In
1856 the British consul reported that about 32 percent of the indigo crop was exported via Guatemala and
Honduras.[15] The position of indigo as the prime export was unquestionable. By the 1870s indigo exports were
being seriously challenged by a powerful newcomer: coffee. It was a gradual but steady process; in 1874 indigo
exports were, for the first time, less than half of total exports, even though the number of pounds exported was
higher than in 1855. Coffee exports, which had begun in 1855, reached 35 percent of total exports in 1874 and
80 percent in 1892. The development of trade with the rest of the world was possible thanks to the changes in
transportation described in chapter 3. Lower freights, shorter routes, and better shipping services opened new
possibilities. In the early 1850s indigo exports to England could follow two routes. They could either be
shipped from one of the Pacific ports and go around Cape Horn or be sent by land to Belize and then shipped to
England. In 1852 it took from 110 to 150 days for vessels following the Cape Horn route to reach England.
[16]
 The Belize route took, with good luck, somewhat less time (84 to 115 days). Goods had to be taken from El
Salvador to Lake Izabal by mule, and then they were shipped to Belize and transshipped to Liverpool. Table 17
shows the costs in time and money involved in this route. It was three times more expensive to take goods from
El Salvador to Belize than from Belize to Liverpool.
The situation started to change with the inauguration of the steam-

― 104 ―

Table 17 Costs of Transporting 150 Pounds of Indigo from El Salvador to England in 1853

  Pesos Days

El Salvador-Izabal 7 40

Izabal-Belize 1 5

Belize-England 2 4r . 60

Transshipment   9

Taxes and Commissions 1 6r .  

Total 12 2r . 114

 SOURCE: La Gaceta , January 21, 1853.

ship service between Central America and California in 1854 and the Panama railroad in 1855. Already
in 1858 a "considerable portion of the indigo crop" was exported by steamer via Panama. [17] The Panama
Railroad Company and later the Pacific Mail Steamship Company offered through-bills of lading from Central
American ports to Liverpool, including all the costs involved in crossing the Isthmus by railroad and
transshipping of goods. In 1859 the cost of shipping a 150-pound seroon of indigo by steamer to Liverpool via
Panama was six pesos, less than half of the cost of shipping via Belize seven years earlier. [18] Moreover, the
time of the trip was reduced to two months, or almost in half. Ships operating the Cape Horn route had to cut
prices to remain competitive. Given the high interest rates that prevailed at the time, the long duration of the
route (five months in 1860) was a serious problem for exporters who had to wait for months before selling their
products. By 1860 freights for the service around the Cape were a little less than half that for the Panama route.
A comparison between both routes taking into account interest rates and insurance costs shows that the Cape
Horn route managed to remain competitive with lower prices.[19] In less than ten years Salvadoran producers
saw freights and shipping time cut in half and much more regular shipping services. The reduction of time
between shipment and sale had economic advantages beyond the savings in interest. La Gaceta printed an
insightful analysis of the problem:
Against this [freight] difference it is necessary to keep in mind the loss of opportunities in the market, about three months during the best part
of the year, besides keeping funds idle and, as a result, loss of interests, difference in market prices when the goods arrive and other
considerations that have some importance.[20]

― 105 ―

Transportation costs did not fall as much as they could have, partly because of high demand for the services of
the Panama railroad and the monopolistic practices of the company that ran it. A former employee of the
company that built and operated the railroad explained the rate policies of his company with remarkable
candor:
These rates, said Colonel Center to me, long afterwards, were intended to be, to a certain extent prohibitory, until we could get things in
shape. As soon as we were on our own feet and ready for business we could, as I wrote the President, gracefully reduce our charges to within
reasonable limits. For it's always pleasing to the public to have prices come down rather than rise.
To his surprise, these provisional rates were adopted; and what is more they remained in force for more than twenty years. It was found as
easy to get large rates as small and thus, without looking very much to the future, this goose began to lay golden eggs with astonishing
extravagance.[21]
The contribution of changes in transportation costs to economic growth during the nineteenth century is
a well-established theme in the literature. In the case of El Salvador it is tempting to establish a parallel
between the effect of drastic freight changes experienced by Salvadoran producers in the 1850s and the benefits
derived from the construction of railroads in other countries. There are analytical differences that need to be
taken into account. Freight changes were not due to an investment project carried out within the country;
therefore the analysis is not really a project-evaluation problem. It is more a change in consumer surplus
derived from a change in an international price. A simple and inaccurate way of calculating it (see n. 22) would
be by calculating the cost of transporting the 1865 crop via Belize and comparing it to the cost of transporting
the same crop via Panama. The difference, that is, the social savings due to changes in freight rates, is an
amount of 70,635.53 pesos, 5.1 percent of the value of indigo and coffee exports in 1865. This figure is clearly
an upper bound since it does not take into account that the demand for shipping services would have been less
at higher rates.[22] Five percent of total exports could not have meant much in terms of the total national income.
Moreover, the government subsidized Panama Railroad steamers at a rate of 8,000 pesos per year. It is clear
that although the decrease in transportation costs was important, its overall significance should not be
overstated. El Salvador did benefit from lower freight rates and more regular shipping services, but the changes
took place at the margin. It seems that their most significant effect was not in expanding the national income
but in altering its structure. Lower

― 106 ―
transportation costs made export activities more attractive relative to other productive activities such as
handicrafts and food production. A trend that began timidly during the late colonial period, the expansion of the
export sector, was greatly reinforced. It was irreversible.
Moreover, the change in trade routes was not completed overnight. Since the Panama Railroad was a
monopoly with a very inelastic supply, it was able to operate at capacity charging very high rates. This means
that it left an unsatisfied demand and that the rates were high enough for the other routes to be able to operate.
The Izabal route, which had serious problems because of the long stretches of land transportation involved, was
still very much alive in 1864 when indigo was exported "in great amounts by the port of Izabal in the Republic
of Guatemala."[23] It is remarkable that the new Panama route did not displace an alternative that involved
traveling over roads that were unsafe, uncomfortable, expensive, and slow. The Cape Horn route was not
abandoned either. It was able to compete with lower prices until the opening of the Panama Canal.
The increase in trade opened up opportunities to commercial and financial intermediaries, and a few
British and American firms opened branches in El Salvador to take advantage of them. The extent of their
influence on the economy is not well known today. One of their roles was to provide information about
changes in the international market of the products exported by the country. The British firm Kerferd Sinclair
and Company published a column in La Gaceta in which it gave the London prices of the main commodities. It
also offered its services as credit intermediary in foreign operations and bought indigo, coffee, sugar, and
cotton.[24] The firm Guillermo A. Knoepfel of New York offered a great variety of services; an advertisement
said that the company,
will attend promptly and efficiently every order received, be it for stationery, printing, wallpaper ... buy or hire ships, collect dividends, wills,
debts ...[25]
The other side of international trade, imports, is harder to analyze. Official data on imports is less
reliable than the data on exports since the former paid taxes while export products paid rather minimal duties.
[26]
 Moreover, official trade figures give the impression that the balance of trade was always positive, something
that is contradicted by the presence of outflows of specie in certain years. Imports (as well as exports) were
valued at official prices that had nothing to do with market prices, and that remained the same over time. This
has the advantage that the series reflect only changes in quantities and not in prices, but it says nothing about
the balance of payments. It is important to keep in mind
 ― 107 ―

that since imports paid high taxes, there was a strong incentive to hide imports or to make "special
arrangements" with customs officials who were not always above corrupt practices.
Nonetheless, there are certain trends that are clear from the data.[27] The most important category of
imports was, by far, textiles. During the second half of the century they accounted for shares of total exports
between 53.17 percent in 1877 and 33 percent in 1889. The share of capital goods, by contrast, never reached 3
percent. Luxury goods, widely defined as nonessential consumer goods, varied between 12 and 31 percent, the
higher figures belonging to the end of the century. Although it would be hard to say that the members of the
Salvadoran elite indulged in extravagant displays of conspicuous consumption (their luxuries being rather
modest by the standards of the Porfirian elite in Mexico, for example), it is also hard to find anything in the
products imported that could contribute to the long-term development of the country. Even more, the high
imports of textiles made it impossible to develop a local textile industry even though the country had the
capacity to produce cotton.[28]
International trade had already become an economic activity linked to all aspects of the Salvadoran
economy. The dependence on the Guatemalan merchants that had prevailed at the beginning of the century
disappeared. Before the development of the new trade routes, the use of the Guatemalan ports of the Atlantic
was a necessity, but by the 1860s their use was a matter of choice. The indigo fairs became commercial events
where exporters and importers, important businessmen, and local producers and traders met. As the economy
began to grow, the links between the national and international economy became stronger. The new emphasis
on coffee production was to become the key link to the international economy.

Export Agriculture
When attention shifted from wars and politics to the routines of daily work, the economy showed a great degree
of adaptability in taking advantage of the opportunities of the world market, or in minimizing the adverse
effects of drops in the international prices of the main export commodities. This was possible due to the greater
access of information and improved transportation after the opening of the Panama railroad. Most importantly,
as the previous section emphasizes, the change in transportation costs made export production more attractive
relative to production for local consumption.
La Gaceta published articles describing the cultivation of different

― 108 ―

crops suitable to tropical climates. The virtues of vanilla and cotton were exalted, and coffee was hailed as the
crop of the future. Indigo prices had been bad during the 1840s, and the crop had suffered badly from civil
unrest and locust plagues. In the 1830s the average price of indigo in the London market was 6s . 8d ., and in
the 1840s it had fallen to 4s . 3d .[29] The situation improved in the following three decades, but the unreliability
of indigo had been proven; it was necessary to search for alternatives.

The Cotton Boom

Efforts to export agricultural products were bound to fail until the proper economic conditions were met; more
than a vision was necessary for exports to make sense. In 1874 a man named Wilson Jeffreys obtained an
exclusive concession to export sugar, maize, beans, rice, and cotton, all free of duty, but as the markets were
not there the venture never got off the ground.[30] Eventually, the concession was withdrawn. In 1849 William
Hoit was given a concession to process cotton, but the venture failed. [31] Without clear market incentives, tax
breaks and careful explanations of the cultivation of coffee and cotton were not enough to stimulate the
production of these crops on a large scale.
Nonetheless, when the economic stimulus was powerful enough, the economy was quick to respond, as
the cotton boom of the 1860s proved. Early experiments with cotton production did not lead anywhere. [32] In
1858, despite government efforts, the production of cotton was negligible; only Usulután province produced
some.[33] The British had also made efforts to encourage cotton production to supply their textile industry:
Manchester industrialists sent ten quintales of cotton seed to make them available to potential producers in El
Salvador, and the British consul distributed brochures describing the methods of cultivating the fiber. He also
set up machines to process cotton in San Miguel, San Salvador, and Sonsonate. [34] But that was not enough
incentive to abandon indigo and produce cotton on a large scale. E. G. Squier, the former American envoy
turned Central American expert, wondered why in a country "in which cotton is not only indigenous, but where
it may be produced in its highest perfection and at a minimum of cost, whether of labor or capital," cotton had
not become "one of the standard exports." He had a good answer:
[I]t has hitherto been impossible to reach the markets of Europe and the United States, except by the long and expensive route around Cape
Horn. And even now the exorbitant freight charges imposed by the Panama Railroad render it impossible to transport so bulky an article
across the Isthmus with profit.[35]

― 109 ―

Mr. Squier's interpretation was very sound but became irrelevant when, during the American Civil War, cotton
prices soared. Between 1851 and 1859 the average price of cotton in the London market was 58s . 6d. per cwt.;
in 1861 it increased to 72s. 5d. , the following year it almost doubled to 141s ., and in 1864 it reached a peak of
255s.[36] At the same time, the scarcity of cotton had depressed the demand for indigo; since there was less
cotton to weave there was less need for dyes, and indigo prices went down. This combination of factors was
enough to overcome all obstacles to cotton production, and Salvadoran producers were ready to adapt to the
new incentives. Suddenly cotton cultivation became the most attractive venture. Sharing the enthusiasm of the
natives, a French traveler thought that "among all the products of the soil cotton is the one that has the most
promising future."[37] Local newspapers were optimistic and carried articles on how to produce cotton, its
historical origins, and the relationship between its prices and the American Civil War. This time everybody was
paying attention to the message.
Some people abandoned their activities in San Salvador in order to produce the fiber. An advertisment
that appeared in El Constitucional illustrates the enthusiasm of the people:
The undersigned has left today to settle in the vicinity of San Silvestre Armenia in the locality known as "La Puerta," where he has a plot of
land of no less than 400 tareas to cultivate cotton; if anybody wants to join in the venture he can go to the place mentioned above. [38]
At the end of 1863 cotton was exported for the first time, and there were reports that 100,000 acres
would be sown in 1864. Initially, as the country lacked gins and presses, cotton had to be sent to Nicaragua for
processing.[39] Pretty soon all the necessary implements to process cotton for export were made available by
English companies who brought seed and gins.[40] The interest in cotton cultivation reached every corner of El
Salvador. The governor of La Paz province reported that all the farmers in that region were doing their best
within their means to produce cotton. Some, like the governor of Sonsonate, worried that the energies devoted
to cotton could affect negatively the plantations of coffee and sugar cane. The governor of Santa Ana was
cheerful about the prospects of the crop in his province. His colleagues in Chalatenango and San Vincente
shared his optimism. The governor of San Salvador worried that a plague of worms could damage the cotton
fields in his province.[41]El Faro published production estimates divided by region (see table 18). Even though
the figures are no more than educated guesses, they give an idea of the regional distribution of cotton
production. It is not sur-

― 110 ―

Table 18 Estimates of Cotton Production by Province, 1864

Province Cotton Production in Pesos

San Salvador 216,250

San Miguel 432,500

 Santa Ana and Sonsonate 108,125

Other Provinces 243,125

Total 1,000,000

SOURCE: El Faro , November 28, 1864,

prising to see that San Miguel province, a key indigo producer, was most interested in cotton. Optimism
was high. In October of 1864 El Constitucional estimated that the sales of cotton for that year would amount to
500,000 pesos. By November expectations had doubled, and El Faro estimated that the following year the crop
would be worth up to 1 million pesos, more than enough to compensate for the losses in indigo exports.
[42]
 Official figures, however, show a far more moderate picture. Exports in 1864 amounted to 123,672 pesos
and in 1865 were up to 183,719 pesos (5.36 and 7.96 percent of total exports). Cotton figures from different
sources, however, are so inconsistent that the only thing that can be said is that they were not insignificant and
that the authorities were very excited about the prospects.[43] The decline of the cotton crop began in 1866, and
there is no evidence that it was produced in 1868. When prices declined, El Salvador could not compete with
other countries due to "the great expense of cleaning, packing and exporting it." [44] Moreover, the ecological
conditions of Salvadoran coastal areas made cultivation difficult. When cotton was produced in large scale it
attracted numerous insects that damaged the crop.[45] It was necessary to wait until the development of effective
insecticides in the twentieth century to resume large-scale cotton production. The balance of the American
Civil War seems to have been negative; cotton exports compensated for some of the losses in the indigo
market, but total exports did not reach their prewar levels until 1867.
The cotton boom was neither thunderous nor lasting, but it highlighted the transformations that the
Salvadoran economy had suffered by the middle of the nineteenth century. Changes in transportation costs had
opened the economy to the rest of the world, and a distant war had affected the daily lives of many
Salvadorans. In a couple of years it was possible to reallocate resources significantly in response to changes in
 ― 111 ―

world prices. Given the right stimulus, such factors as the sluggishness of the capital market, the problems of
"know-how," and the scarcity of labor could be overcome in little time. This will be an important conclusion to
bear in mind when interpreting the second, and more lasting, change in the structure of agricultural production
that took place in the nineteenth century: the shift from indigo to coffee production.

Indigo
The years of instability of the federation and beyond had done great damage to the country's only significant
export product. Low prices in the London market, wars with Nicaragua and Honduras, four coups d'etat, one
Indian rebellion, and five British blockades did nothing to promote production during the 1840s. It was a bleak
situation. All foreign travelers mention the visible destruction; one of them thought that "improvements cannot
be expected till a new race of people inhabit Central America."[46] His analysis left something to be desired, but
it was clear that years of unrest had left great destruction. The timing of its labor requirements made indigo
production particularly vulnerable to wars and civil strife. The American envoy E. G. Squier had a clear
perception of the problem:
The manufacture of the indigo requires no very difficult or expensive processes; but it must be cut promptly at the proper period, or else it
becomes worthless. It is then necessary for the proprietors of estates to have a large and reliable source of labor. The difficulty of obtaining
these at such times during political disturbances when laborers seclude themselves as much as possible to escape conscription, has been one
of the principal causes of the falling off of the production of this commodity. [47]
Indigo had to be cut when buds were about to open, at which time the concentration of indigo in its
leaves was highest. The yield decreased sharply when wars interfered with the availability of labor and the crop
was collected late. Production increased somewhat at the beginning of the 1850s, but the recovery was
interrupted when in 1854 the crop was affected by a locust plague at the same time that an earthquake
destroyed the city of San Salvador (see tables 19 and 20).[48] The damage inflicted by both natural phenomena
was extensive. Labor was needed for the reconstruction effort, to fight the locusts, and to carry out the normal
economic activities. It was an impossible task, half of the crop was destroyed by locusts, and food production
also suffered; hunger was widespread.[49]
The recovery was difficult. After William Walker invaded Nicaragua in 1855 President Campo sent
Salvadoran troops to help in the effort
 ― 112 ―

 
Table 19 Indigo and Coffee Exports, 1849–1896 (in pesos)

Year Indigo Indigoa Price Coffee Coffeeb Price

1849 1,330,550 3 4      

1850 1,011,000 4 2      

1851 1,214,300 4 4      

1852 1,377,250 4 4      

1853 1,270,600 4 9      

1854 770,100 4 2      

1855 766,500 5 0 690 46 0

1856 1,235,250 5 6 10,848 46 9

1857 1,117,500 6 0 4,720 48 8

1858 1,280,400 6 5 n.a. 42 6

1859 1,605,450 5 8 18,000 50 9

1860 1,375,050 6 0 26,000 58 6

1861 1,980,600 6 8 36,000 55 6

1862 2,186,550 6 6 53,000 66 4

1863 n.a. 5 0 n.a. 69 2

1864 1,121,105 5 6 80,605 66 0

1865 1,237,400 5 7 138,263 63 6

1866 1,584,000 5 7 197,077 56 2

1867 1,979,850 6 0 275,220 71 0

1868 2,131,500 6 8 528,123 63 0

1869 2,477,550 6 6 507,793 63 0

1870 2,619,749 6 2 663,348 61 6

1871 2,308,317 5 0 662,421 63 0

1872 2,786,576 5 1 489,300 71 0

1873 1,802,037 5 0 1,056,330 88 0

1874 1,721,378 4 6 1,342,952 101 0

1875 1,160,700 4 10 1,073,158 95 0

1876 1,721,378 4 3 1,209,362 94 0

1877 n.a. 4 10 1,686,444 97 0

 1878 n.a. 4 4 1,179,334 93 0

1879 1,414,800 4 2 2,001,163 88 0

1880 1,173,673 5 3 1,723,465 89 0

1881 1,470,300 5 2 2,909,196 78 0

1882 1,295,550 5 0 2,700,804 76 0

1883 1,812,595 4 4 2,416,104 70 0

1884 2,073,752 4 3 2,200,106 66 0

1885 n.a. 4 0 2,010,436 64 0

1886 1,003,706 4 0 2,668,454 65 0

1887 1,421,789 3 10 2,780,234 81 0

1888 1,296,720 3 10 4,589,197 75 0

1889 1,347,108 3 6 3,545,764 83 0

1890 1,053,000 n.a. 4,268,743 n.a.

(table continued on next page)

― 113 ―

 
 Table 19 (continued)

Year Indigo Indigoa Price Coffee Coffeeb Price

1891 892,091 4 1 4,806,229 94 3

1892 1,150,170 3 9 5,526,757 93 0

1893 n.a. 4 1 5,405,222 96 4

1894 n.a. 3 9 5,035,363 96 4

1895 1,284,325 3 3 7,500,000 97 6

1896 979,990 3 5 7,568,399 99 8

SOURCES: The figures for the years 1849–1856 are estimates based on indigo export taxes published in La Gaceta , May 27, 1857. The rest of the data were
published in various issues of La Gaceta; Statesman's Yearbook; "Relaciones comerciales entre El Salvador y Estados Unidos de Norte América,"
América 7 (October, November, December, 1915): 4, 576; Italo López V.; Gerardo Barrios 2: 217; and Knut Walter. The price data come from Michael Mullhall,
The Dictionary of Statistics , pp. 475–479 and 792.

a
 In shillings and pence per lb.

b
 In shillings and pence per cwt.

Table 20 Total Imports and Exports (in pesos)

Year Imports % Change Exports % Change

1854 1,015,925 n.a 786,711 n.a.

1855 698,219 -31.27 765,324 -2.72

1856 1,046,720 49.91 1,285,485 67.97

1857 860,104 -17.83 1,304,102 1.45

1858 1,085,421 26.20 996,662 -23.57

1859 1,306,378 20.36 1,991,650 99.83

1860 n.a. n.a. n.a. n.a.

1861 1,319,727 n.a. 2,340,778 n.a.

1862 n.a. n.a. n.a. n.a.

1863 n.a. n.a. n.a. n.a.

1864 1,233,711 n.a. 1,675,496 n.a.

1865 1,688,636 36.87 2,288,136 36.56

1866 1,644,344 -2.62 2,434,801 6.41

1867 1,876,444 14.12 2,895,606 18.93

1868 1,948,587 3.84 3,468,208 19.77

1869 3,728,408 91.34 3,768,357 8.65

 1870 2,551,560 -31.56 3,180,910 -15.59

1871 2,551,539 0.00 3,810,916 19.81

1872 2,951,010 15.66 3,880,995 1.84

1873 2,103,218 -28.73 3,506,715 -9.64

1874 2,835,076 34.80 3,841,256 9.54

1875 2,689,968 -5.12 3,179,514 -17.23

(table continued on next page)

― 114 ―

Table 20 (Continued)

Year Imports % Change Exports % Change

1876 1,869,083 -30.52 3,605,023 13.38

1877 2,586,431 38.38 3,875,904 7.51

1878 2,500,614 -3.32 3,502,594 -9.63

1879 2,549,160 1.94 4,122,888 17.71

1880 2,294,542 9.99 4,273,088 3.64

1881 2,705,410 17.91 4,902,435 14.73

1882 3,170,056 17.17 5,461,408 11.40

1883 2,401,463 -24.25 5,861,053 7.32

1884 2,646,628 10.21 6,065,799 3.49

1885 2,134,095 -19.37 5,716,428 -5.76

1886 2,427,643 13.76 4,754,649 -16.82

1887 3,343,820 37.74 5,242,697 10.26

1888 4,076,404 21.91 6,707,024 27.93

1889 2,878,000 -29.40 5,489,000 -18.16

1890 2,401,304 -16.56 7,578,733 38.07

1891 3,200,094 33.26 7,072,578 -6.68

1892 2,757,693 -13.82 6,838,259 -3.31

1893 1,853,996 -32.77 7,511,068 9.84

 1894 2,170,633 17.08 6,610,902 -11.98

1895 2,890,739 33.17 13,847,625 109.47

1896 3,347,757 15.81 7,485,348 -45.94

SOURCES: Appleton's Cyclopaedia; La Gaceta; El Constitucional; LaFérriere, De Paris à Guatémala; Commercial Directory.

against the "filibuster." The war disrupted trade with Central America and with the rest of the world, and
the soldiers who returned from Nicaragua brought with them an epidemic of cholera morbus that weakened the
labor force.[50] By 1861, after a couple of years of relative stability under the strong leadership of General
Gerardo Barrios and with high prices in the London market, the recovery was complete. That year the crop was
50 percent higher than in 1849. In 1862 it was even better, surpassing the mark of 2 million pounds, a record
crop for the new country. The recovery had been slow and year-to-year fluctuations were great, but many felt
that the potential of indigo as an export crop had not been exhausted. It was a short recovery; old enemies had
not been forgotten, and in 1863 the country was again at war, this time with Guatemala. Production records
were not kept because of the war, but it was estimated that indigo exports decreased substantially. [51] In fact,
1864 exports were almost half of what they had been in 1862. Moreover, by that time the American Civil War
had already depressed prices. The

― 115 ―

recovery was slow because the cotton boom used up money, land, tools, and labor which otherwise would have
been employed in the production of indigo, and, because more importantly, prices were low. The Civil War
eventually ended, and in 1868 indigo production was back to its 1862 levels and grew steadily to an all-time
record in 1872. It was a trend too good to last, however: in 1873 a drought cut production in half while prices
in the London market dropped.[52] Another war with Guatemala in 1876 made matters worse.
 The international price of indigo had been rising slowly from the late 1840s until 1868, but from then on
the trend was negative.[53] The invention of the first artificial dyes in the 1850s condemned indigo to a slow
death. Salvadoran producers missed most of the good years due to wars and earthquakes, but whenever a
modicum of stability was achieved, production did increase. Although the high levels of 1872 were never seen
again, indigo production fluctuated between 1 and 2 million pounds. With the economic crisis of 1896 and the
invention of a close artificial substitute of indigo a rapid decline began. By the end of the century indigo had
ceased to be the engine of the economy since its prices had decreased much faster than the amount produced
and coffee exports were far more important.
Although political instability and natural disasters greatly affected indigo production, Salvadoran
producers were no fatalists. They were acutely aware of the fluctuations of the market and, when possible, were
eager to take advantage of them. La Gaceta published a monthly column with information on prices and the
general movement of the market in London. It also carried articles on the size of the crop in India and on the
prospects of production in the different regions of El Salvador. The governor of San Vicente province
described one of the fairs with comments worthy of a contemporary commodities analyst:
[T]here was as much indigo as we had announced and more than the majority of the interested parties believed, for that reason the first indigo
that arrived to the market sold at good prices, but when the rest arrived, the price diminished accordingly. [54]
Producers began worrying about finding ways of improving cultivation and the quality of the processing.
Gerardo Barrios, liberal leader, indigo producer, and later president of the Republic, published an article in
1856 giving advice on the best method to process indigo.[55] In 1858 Doroteo Vasconcelos, indigo producer and
former president, wrote to La Gaceta to announce a procedure that he had invented to process indigo more
efficiently.[56] Notwithstanding the advice that such prominent figures shared so selflessly with their
compatriots, in 1860 La Gaceta complained that:

― 116 ―
In the production of indigo, which up until now is the source of our wealth, we have not abandoned the routine dictated by tradition, we have
not taken any steps to improve it, not because it is unnecessary; indigo is made in India cheaper and cleaner, which should have encouraged
us to put ours at the same level.
Not knowing the means to substitute manpower nor doing anything about it, we are right to complain about the lack of labor, considering it
as an insurmountable obstacle for any enterprise of some magnitude. [57]
The writer argued that the lack of manpower was no excuse, because an increase in knowledge and the
use of machinery could solve the problem. But the optimism of the technology-oriented positivist thinkers of
the time was not enough to overcome a new reality: there was another crop that was more profitable. By 1860 it
was becoming clear that coffee was a better activity toward which to allocate one's scarce captial. Salvadoran
producers were not inherently resistant to innovation or to the use of machinery; they proved it when they
produced cotton on a large scale, and when they learned the complexities of coffee production. But they were
keenly aware of the constraints of the economy and of the alternatives available to them.

Coffee
El Salvador had produced coffee since colonial times, but never enough even for the local market. Antonio
Coelho, the Brazilian who was hired to demonstrate the Lancasterian teaching method in the 1830s, is credited
with introducing modern coffee cultivation techniques.[58] The possibility of exporting this product was not
considered until the late 1840s. In 1848 La Gaceta was optimistic about the prospects: "Soon we will be able to
export this fruit since there is already a surplus."[59] In the 1840s coffee production was becoming attractive
because indigo prices were at an all-time low. The average price of indigo for the decade was the lowest in the
century, and the price in 1848 was the worst of the decade.[60] Not surprisingly, local producers were anxious to
find crops that could replace indigo. There was an example to follow, Costa Rica, a country unsuited for the
production of indigo or cochineal, had started producing coffee at the beginning of the independent period, and
its accomplishments were already visible. The very first issues of La Gaceta devoted considerable space to
articles on the cultivation of coffee and its success in Costa Rica. [61]
But indigo prices improved during the following decades and, although interest in coffee remained very
much alive, indigo was still a viable export. Coffee production grew slowly; the hope of having
 ― 117 ―

enough coffee to export was expressed often by La Gaceta , and exports began at the end of 1855. The
government consistently encouraged coffee production. The first legislative decree to promote coffee
production, issued in 1847, addressed some of the basic problems raised by political instability: the labor
demands of warfare and public service. According to the decree all those who had more than 15,000 coffee
trees in production would enjoy a ten-year exemption from the duty of serving as concejales (members of the
town council), and their workers would be exempt from military service for the same period; the horses, mules,
oxen, and tools used in coffee cultivation would not be sequestered "for public service"; coffee would be tax
exempt for seven years; and imports financed with coffee revenues would have a 4-percent reduction in import
taxes.[62] The concessions were not negligible, but they did not address the equally serious problems of shortage
of capital, lack of agricultural knowledge, and high transportation costs. By 1857, when coffee exports were
already becoming a reality, incentives were increased. For the first time public lands became a policy
instrument to encourage production. When the city of Nueva San Salvador was founded after the 1854
earthquake, from six to twenty manzanas of public lands were granted to those who were willing to devote
two-thirds of them to coffee cultivation.[63]
Coffee production presented serious problems. In a country that had for years engaged in traditional
agriculture, the introduction of a new crop involving rather complex cultivation techniques was a great
challenge. Introducing a new agricultural technology was only part of the problem. Coffee was a perennial that
did not produce before three or four years, meaning that producers had also to learn new ways of financing
their crop. Engaging in coffee production meant a completely new way of doing things, a new way open only
to those who could master it.
First, we will discuss the difficulties involved in financing a plantation. Aspiring coffee planters had to
be ready to cover great expenses to plant the trees and then had to have other sources of income to sustain
themselves until the operation became profitable. In a country where capital was very scarce and, therefore,
interest rates high, where there were no credit institutions, and where memories of the effects of political
instability were still vivid, investment in long-term projects was difficult. "[Coffee's] general cultivation"
observed von Scherzer "has been prevented by want of confidence in the future." Given the prevailing political
uncertainty, no one wanted to have his scarce capital "locked up for three years." [64] Years of war had not only
shaken people's confidence but also used up their funds. The governor of San Vicente thought that his province
was not producing more coffee because of "the difficulty of exporting and the lack of funds on the part of the
land-

― 118 ―

owners who in the past, instead of being protected, were deprived of their property." [65] There were cries for the
creation of a bank for coffee planters along the lines of the Montepío de cosecheros de añil. [66] This is a good
place to remember the contrast with Costa Rica where a more stable environment permitted a much earlier
development of credit institutions and, therefore, where coffee cultivation began earlier.
Despite the numerous difficulties, the rewards for engaging in the adventure were considered to be high.
In 1857 Consul Foote figured that under adequate conditions, an initial investment of 500,000 pesos could
produce net profits of 835,000 pesos after five years.[67] The consul's estimates may have been optimistic; he
estimated interest rates at 5 percent when he himself had reported one year earlier that the real interest rate in
commercial transactions was at least 20 percent. [68] Moreover, his calculations did not take into account another
aspect of the cost of credit at the time: the possibility of yet another war with a neighboring country with its
destruction, forced loans, and demands for men, a very plausible consideration for Salvadoran producers. His
estimates merely show how coffee was beginning to look like a very promising crop. It was not a groundless
perception. Some coffee was already cultivated with success and market tests were encouraging. Samples of
Salvadoran coffee were sent to Europe where they obtained good prices. [69]
The growth of coffee production, however, was bound to be slow. Besides the problems of financing the
intial investment, coffee planters had to learn new and complex methods of cultivation and processing. [70] Seeds
were planted in May in a nursery, and the delicate seedlings could not be transplanted until the following May.
Then, an appropriate setting had to be found for the plantation: coffee grows between 2,500 and 5,000 feet
above sea level. Once in its permanent setting the trees had to be nurtured for at least three more years before
they yielded a good crop. Coffee trees needed protection from wind and sun, which meant planting large trees
to shelter them. After the plantation began to bear fruit it was necessary to clean the ground from five to six
times every year. Organic fertilizers were used to increase the yield. When the crop was ready, coffee berries
had to be picked by hand. Pickers had to be trained to work rapidly and thoroughly; inexperienced pickers
could damage the branches of the trees or drop the berries on the ground. At the end of the day the pickers took
the berries to a beneficio , a plant where the berries were processed. In the beneficio the pulp was separated
from the beans, which were then spread on a brick courtyard to dry under the sun (coffee is picked at the end of
the year during the dry season). The last stage was to clean the dry beans, classify them, and put them in bags.
In March and April the harvest was ready for export.
The complexity of the process required substantial financing, the

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organization of a large labor force, the coordination of different stages of production, and dealing with the
problems of transportation and marketing. Coffee production was a difficult and expensive skill to acquire, and
planters had to learn by trial and error. In the early years they made the mistake of not protecting the trees
against the sun. At the time it seemed the reasonable thing to do since unprotected trees bore larger crops, up to
four pounds per tree; but this practice so debilitated the trees that it took three to four years for them to
recuperate their strength. Trees under shade produced a smaller but steadier crop, an average of one pound per
year, and insured a longer life to the shrub. By 1885 the practice of cultivating the coffee under shade was
being adopted universally by the planters.[71] Undoubtedly, coffee cultivation required far more complicated
managerial skills than indigo. As the cultivation of coffee became more generalized, a division of labor
developed and the risks of production were spread among different economic units. By the end of the century
there were: nurseries that sold young trees ready for transplantation; large beneficios that processed berries
produced by smaller plantations; and coffee exporters with connections in Europe and the United States who
took care of marketing and shipment. It became a multidimensional business on which everybody's fate
depended.
From Indigo to Coffee
The transition from indigo to coffee was gradual: indigo production remained over a million pounds until the
end of the century, even though prices were falling. The introduction of artificial dyes was slow. Up until 1860
the textile industry had little use for artificial dyes. The first aniline, mauveine, was not discovered until 1856.
Other anilines were introduced throughout the century, but none of them was a close substitute for indigo;
synthetic indigo was not introduced until 1897.[72] By then coffee was already the main export product of El
Salvador. Total coffee exports were growing but not necessarily at the expense of indigo production; much of
its was net growth. Coffee production was growing faster than the population whereas indigo declined very
slowly. Part of the growth was possible thanks to the introduction of new land into cultivation. The
government's active sale of terrenos baldíos and the fact that land prices remained fairly stable support this
hypothesis. Moreover, change in transportation costs made production for exports more attractive; resources
previously used in food production and other activities were diverted. Still, if more resources were to be
devoted to exports, a choice had to be made between coffee and indigo, the only viable exports.
The incentives for shifting from one product to the other were varied.

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At the beginning of the process, prices were not the main incentive; between 1848 and 1869 the ratio of coffee
to indigo prices in the London market was decreasing. Transportation costs, by contrast, offer a more attractive
explanation since they experienced a sharp decline after the opening of the Panama Railroad in 1855.
Transportation costs had a greater impact on the profits of coffee since it had a smaller value per unit of
volume. A simple calculation can show how this worked. If coffee had been exported via Izabal in 1853,
transportation costs would have accounted for 24 percent of its price in London. In 1864, when the Panama
route was in full service, transportation costs accounted for 14 percent of its price. That 10-percent difference,
together with the savings in interest derived from a shorter trip, undoubtedly made the crop more attractive. A
similar calculation for indigo, however, shows that, with the new trade routes, transportation costs for that
product decreased from 6.9 to 3.2 percent of its London price.[73] In the margin, coffee benefited more from the
new transportation situation.
Another important consideration for producers had to do with the high risks involved in indigo
cultivation. They advanced this as one of the main arguments for cultivating coffee:
The main export crop of El Salvador [indigo] and the most important branch of its industry, has the inconvenience of being an unstable crop
and those who devote themselves to it would earn much more money cultivating coffee, sugar and cocoa. [74]
In 1878 the governor of San Vicente province made the same point saying that indigo was subject to
more variables than any other product. Among the culprits, he mentioned both the overabundance and the
scarcity of water, the lack of labor, "so frequent when a revolution takes place," and breakdowns in the obrajes
as some of the "eventualities."[75] Even more important was the constant threat of locusts, which had destroyed
many crops in the past. Coffee, in contrast, was less sensitive to those problems. In fact, a simple look at coffee
export figures shows a much steadier performance than indigo during the second half of the century.
Coffee did not become the main export overnight. Some of the reasons for this slow growth have been
suggested above: resources were scarce and there was a limit to what the economy could accomplish. The shift
to coffee production has to be viewed in the context of the alternatives available to the local producer. At
appropriately outrageous interest rates it would have been possible to find capital to cover the country with
coffee trees, but in order to do that all other activities would have had to come to a halt. Coffee was attractive
up to a point, but there were other economic activities, such as indigo, food production, and

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commerce, that were also profitable. The entrepreneur, then, had to decide between a range of possibilities.
When there was a product with a clear advantage, there were businessmen ready to seize the opportunity, as
was the case with cotton in the 1860s.
The shift from indigo to coffee brought important changes to the economy. First, the economic
geography of the country changed, the center of gravity moving from east to west. The eastern provinces of
San Miguel and San Vicente produced almost 60 percent of all the indigo exported in 1858. [76] The western and
central provinces, in comparison, were best suited for the cultivation of coffee. The Lorenzo López census of
1858, which includes only the western provinces, shows that the efforts to cultivate the new crop were general
throughout the region. In 1857 Santa Ana province had 439,980 trees in production and 1,400,630 planted but
not ready yet to produce.[77] Ahuachapán had 300,000 trees in production and 600,000 in nursery. Sonsonate had
67,865 trees already in production. Rich and poor, "both the landowner and the proletarian," were trying to
produce coffee.[78]
The increased importance of coffee over indigo was bound to affect the relative importance of ports.
Most of the activity moved from the eastern port of La Unión to La Libertad and Acajutla, which were closer to
the coffee plantations. About half of the indigo exports and very little coffee were exported from La Unión. In
1857, 52.6 percent of exports were shipped at that port; the percentage declined to 38.6 in 1871 and to 6.06 in
1893.[79] The shift was permanent. A related development took place in the last two decades of the century: the
privatization of ejidos and communal lands, in particular those located in the western provinces. Because this
phenomenon is quite complex, chapter 5 will be devoted entirely to a discussion of its implications.
The shift from indigo to coffee had far-reaching social implications. Coffee cultivation was a complex
task that demanded great skills, access to a considerable amount of credit, and willingness to take risks in an
environment where there were no legislation or market mechanisms to minimize risk. When coffee cultivation
began people from all walks of life tried their luck; at the end of the century a coffee elite had been formed. A
sort of economic Darwinism emerged. Given a situation where the scarcest factors of production were capital,
entrepreneurial talent, and land, every aspect of the coffee economy contributed to increase inequality. In a
very imperfect credit market access to credit was extremely difficult unless one was already rich, had excellent
connections, was very talented or, better, all of the above. Obtaining credit was just the first step. It was clear
that those who had the early advantage of access to credit were in a good position, but even they had to be very
able in order to survive for four years while the coffee tree matured, to

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learn the complexities of cultivation and processing, and to tackle the problems of marketing. After all, even
the rich had rather modest means and training. One of the very few ways of somewhat diminishing the risks
involved in coffee cultivation was by gathering as much information as possible on cultivation methods and the
markets; again, the ability to acquire and process information was open to very few. In short, true entrepreneurs
were needed, and the pool from which those entrepreneurs could conceivably emerge was exceedingly small.
Although entrepreneurial talent is rewarded in almost every economy, the new economic environment in
El Salvador had made it far more important than in the past, and the possible rewards were higher than ever.
There was little collective experience in dealings with the outside world. During the first half of the century
indigo exports had been quite limited, and only a few had developed the skills necessary to do business with
the outside. Exchanging indigo for foreign goods once a year at the San Miguel fair was not good enough. Most
planters had to learn the complexities of production and marketing through trial and error while a tight credit
situation made errors very costly. The accomplishments of the early coffee planters cannot be dismissed; they
were true pioneers. However, the economy rewarded lavishly the very able and punished all others. Eventually,
as few alternatives to coffee production were left, the early winners were able to keep their advantage well into
the twentieth century. As coffee exports gained in importance coffee planters became the coffee elite. An
interesting economic event gave way to a radical change in Salvadoran society.

Conclusion
None of the changes experienced by the Salvadoran economy during the second half of the century took place
overnight. Events of great significance, like the opening of the Panama Railroad, gave clues to the economy,
but the lack of resources slowed down growth. The importance of the opening of the Panama Railroad
epitomizes two changes in the world economy that greatly affected El Salvador, but which were completely
outside the sphere of influence of any Salvadoran individual or institution: (1) the transportation revolution and
(2) the explosion of trade activity along the coast of the Pacific ocean. Conceivably this is a metaphor for one
of the main characteristics of the modern Salvadoran economy, its helpless openness. When economists talk
about the small-country hypothesis, countries unable to achieve any impact on international prices, the example
of El Salvador comes to mind.
The incorporation of California to the territory of the United States
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(to use a neutral description of the events), the Gold Rush, the increased trade of Chile and Peru, the opening of
the Panama railroad, and the generalized use of steamboats in transcontinental navigation, all encouraged a
competitive environment in the shipping industry which gave new signals to the Salvadoran economy.
Although changes in transportation costs did not by themselves bring great growth, they made exports more
profitable and helped to reorient the economy toward export activities that favored only a few.
When the American Civil War disrupted the activities of the textile industry El Salvador received a
powerful lesson on the implications of a more open economy. Indigo prices went down, and it was necessary to
learn how to produce cotton to compensate for some of the losses. This was only a temporary adjustment,
however. A more permanent change in the Salvadoran economy was the shift from indigo to coffee. Again,
changes in the shipping industry played an important role since they benefited coffee profits more than indigo
profits. There was a strong incentive to increase exports, and within the exportables coffee received the
strongest incentive.
There is no question about the importance of changes in the international markets, but this does not mean
that the economic history of El Salvador is reduced to the study of those changes. The country had very
specific characteristics that shaped its responses. First of all, it was a country where traditional agriculture had
predominated for centuries and where few had the education necessary to function under the ever-changing
environment of a very open economy demanding the learning of new agricultural technologies. Second, a
government of indigo planters was delighted with the opportunity of expanding exports and did what it could to
reinforce the trends. It subsidized the steamers of the Panama Railroad Company and improved the ports and
the roads leading to them, encouraged coffee production, and rewarded it with land. Per-capita exports rose
throughout the period but never reached the levels observed in other countries of Latin America. In 1880
Argentina, Uruguay, and Cuba, the most export-oriented countries in the region, "matched or exceeded the
seventeen-dollar per-capita exports of the United States that year."[80] El Salvador's per-capita exports that same
year were around seven dollars. Even if the figure was relatively small, exports were the main source of income
for a ruling elite that was eager for new sources of income.
 Coffee cultivation had specific demands that rewarded capital (both human and physical) and
entreprenurial talent; its triumph was also the triumph of the elite, the only group in Salvadoran society with the
key to both factors of production. As long as other groups had access to land they could defend themselves;
they had more bargaining power in the

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labor market and could produce their own food. But the demands of the export crops soon put pressure on the
land market. The country was very small, and the government ran out of terrenos baldíos to distribute.
Moreover, coffee cultivation had very specific ecological needs that limited the amount of land that could be
devoted to it and determined its geographical location. In the past, capital and entreprenurial talent had been the
scarcest factors of production and they were duly remunerated; in the 1870s land, mainly land suited for coffee
production, was becoming scarce. The pressures of the international market had introduced a new element in
the economic picture and the country reacted accordingly: ejidos and communal lands were privatized. It was a
political reaction to an economic stimulus. The early expansion of coffee went together with a strengthening of
the coercive apparatus of the state, which gave the elite a greater flexibility to act. Instead of remunerating a
scarce factor of production, the ruling elite chose to change the rules of the game.

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6
The Privatization of Land
As suggested in the last chapter, the switch from indigo to coffee production was a response to changing
conditions in the international market. Indeed, artificial dyes began appearing on the market in 1856, and
uncertainty existed about the future of indigo; international markets expanded thanks to lower transportation
costs and to the rapid internal growth in the European economies, and the Salvadoran economy rapidly adapted
to the new situation. This explanation gives the impression that the decision to switch from indigo to coffee
was based exclusively on economic grounds, and that it was efficient to change the structure of agricultural
production. In the long run, this is a sensible interpretation. In the short run, however, the increase in coffee
production cannot be separated from a political and economic decision of great importance: the privatization of
ejidos and communal lands. This event is known in Salvadoran history as the liberal reforms.

Current Interpretations of the Problem

The understanding of this problem is central to every interpretation of the economic history of El Salvador.
Torres Rivas thinks that the liberal reforms facilitated "more than in any other region of Central America the
concentration of land ownership."[1] This remains the prevalent view, although it has been qualified by others.
For David Alejandro Luna, large properties were strengthened by the agrarian policies of the

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nineteenth century in general, but the specific consequence of the liberal reforms was the appearance of "anti-
economic small landholdings," a feature of the Salvadoran countryside ever since. [2] The main interpretation of
the liberal reforms has been articulated by David Browning in a pioneering book on changes in Salvadoran
landscape and society.[3]
 As Browning's interpretation is by far the most elaborate, it is convenient to analyze it in detail. He
discusses with great insight the enormous gap in the concepts of land use and land property used by the white
elite and by the Indian communities. According to Browning, the Salvadoran elite perceived two obstacles to
economic growth: excessive dependence on indigo production, and confusion with regards to land titles. [4] Their
solution to the problem illustrates their peculiar point of view—the problem of dependence on indigo was
solved with a new dependence on coffee; the problem of land titles was solved by depriving the Indian
communities of their land.
Browning suggests that the factor that moved the elite to desire changes in land tenure was the
introduction of coffee. The Indian and ladino concepts of land use were incompatible, and the expansion of
coffee made the confrontation unavoidable. "Above all else," says Browning, "it was the introduction of coffee
that persuaded those in control of the nation's affairs to reform the use and ownership of the land of El
Salvador."[5] Ejidos and communal lands were thought to be an obstacle to the development of coffee
production. Commercial agriculture was a difficult concept for Indians to understand: "In many [rural]
communities," says Browning, "explanations about the value of certain crops in international markets have
little meaning or importance." Thus, "it is not a matter of saying to a villager that he should be prepared to
grow export crops alongside maize and beans."[6] The problem became more complicated with the introduction
of coffee, which was
... an alien plant of which the individual cultivator had little knowledge and to which he attached no importance, either cultural or economic.
In addition a plant that required five years' growth before it gave fruit was not easy to accept into a cycle of cultivation that was attuned to the
annual change of the seasons, and where because of economic necessity and the cultural heritage it was assumed that each year brought rain,
growth and food.[7]
Indians thought that land had to be used to produce subsistence crops, whereas big landowners gave
priority to commercial crops that, it can be inferred, were more profitable. Following this line of reasoning, it
can be concluded that for the agricultural sector to grow it was necessary to eliminate traditional forms of
landholding. Those who cultivated
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ejidos and communal land had such a narrow concept of the role of land that they could not take advantage of
the better prices of cash crops.
This concept presents a problem since indigo, a commercial crop, had prospered since colonial times
when communal and ejido lands were of great importance. But indigo, according to Browning, was different
since
... the slow expansion of indigo production developed alongside indigenous subsistence farming and, though competition between the two for
land did exist, both systems were given time to adjust to the requirements of the other within a legislative framework that was designed to
preserve both new and indigenous structures.[8]
The pace of expansion permitted an adaptation without conflicts. That was not the case with coffee.
Moreover, Browning asserts that the elite changed its attitude toward land. This change was due to the different
production methods and economic organization involved in coffee cultivation. He found the following
differences:
- The crops were introduced in different ways. Indigo was introduced slowly whereas coffee expanded
rapidly.
- The methods of cultivation of both crops were different.
- Both crops had different labor requirements. Coffee needed more year-round labor.
- The geographical location of both crops was different because of the narrower ecological conditions
under which coffee can be cultivated with profit. [9]
Browning completes his interpretation by saying that the rapid development of transportation facilities
contributed to the rapid growth of coffee production. The main reason for the national elite to promote the
reform of land ownership was the desire to increase the production of coffee. There were substantial
differences in the cultivation of coffee and indigo that demanded a different attitude toward land.
Unfortunately, communal and ejido lands were in the hands of people who were interested only in subsistence
crops. The economic project of the national elite was incompatible with traditional forms of landholding.
In fact, there is much to learn from this interpretation, and the main lines of the story seem to confirm it.
As far back as the period between 1859 and 1863 Gerardo Barrios transferred public land to the private sector
with the sole condition that it should be used to produce coffee. As described above, the process culminated in
the abolition of commu-

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nal and ejido lands with decrees issued in 1881 and 1882. The prologue of the 1881 law stated that,
The land owned by communities impedes agricultural development, is an obstacle to the circulation of wealth, and weakens family ties and
the independence of the individual. Its existence is against the economic and social principles adopted by the Republic. [10]
A specific sector of Salvadoran society thus identified its group interests with those of the country.
The most recent interpretation of the liberal reform is Rafael Menjívar's. He also gives great importance
to the introduction of coffee, but he approaches the problem from a Marxist perspective. His main concern is
not why the reforms took place but what the role of the reforms was in the development of capitalism in El
Salvador. To him the liberal reforms played a key role in the process of capital accumulation. According to his
interpretation ejidos and communal lands "would be the lands that, under the process of originary
accumulation, would become the constant part of capital." [11] The beauty of the process was that at the same
time that the elite appropriated land, labor was freed to work in the coffee plantations. Key to his interpretation
is the amount of land involved. Undoubtedly the more land changed hands, the stronger the argument become.
He estimates that 40 percent of the territory of the country was directly affected by the reforms.
As this sketchy review of the literature suggests, there are four questions worth exploring in order to
understand the implications of the liberal reforms. First, what was the amount of land involved? Second, what
was the political climate that made them possible? Third, what was the role of the introduction of coffee? And
finally, how did the reforms alter the distribution of land?
The Importance of Ejidos and Communal Lands
As the authorities confirmed with a land-tenure survey carried out in 1879, what was at stake was a good
portion of the territory. Although the survey was incomplete (it provided no information for three rich
provinces, Ahuachapán, San Miguel, and La Paz, and its accuracy was affected by the great confusion over
land tenure that prevailed at the time), it had enough information to provide an idea of the order of magnitudes
involved. The governors' reports on which the survey was based originally appeared in the Diario Oficial , and
were summarized

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Table 21 Comparison Between Ejidos and Total Land (in hectares)

Province Enclosed Ejidos Unenclosed Ejidos Total Ejidos Surface of Prov Arable Land

Ahuachapán n.a. n.a. n.a. n.a. 91,796

Santa Ana 5,519.6 2,017.3 7,536.9 203,400 175,826

Sonsonate 24,856.2 10,180.4 35,036.6 128,800 102,473

Chalatenango 5,073.0 6,631.0 12,334.0 151,100 141,073

La Libertad 31,480.7 9,214.3 40,695.0 164,300 151,914

 S. Salvador 15,968.6 581.0 16,549.0 86,800 86,673

Cuscatlán 3,314.5 3,354.7 6,669.2 74,000 55,640

La Paz n.a. n.a. n.a. n.a. 89,428

Cabañas 3,972.0 1,740.0 5,712.0 102,800 59,749

S. Vicente 6,030.8 961.7 6,992.5 120,400 86,883

Usulután 13,087.9 14,027.2 27,115.1 212,300 139,216

S. Miguel n.a. n.a. n.a. n.a. 160,549

Morazán 16,156.3 18,483.3 34,629.6 138,000 76,491

La Unión 559.1 16,371.0 16,930.1. 347,800 116,612

SOURCE: Rafael Menjívar, Acumulación originaria , p. 95.

by Rafael Menjívar in his book Acumulación originaria (see table 21).[12] Menjívar's table compares the
area of the ejidos to the total land area and to the arable land of each province. The data on arable land included
in the table was taken from an agricultural census carried out in 1950; therefore, they are a high estimate of
what was considered to be arable land in the 1870s. According to the figures, 12.9 percent of the total territory
of the country and 17.7 percent of the arable land was ejido land (assuming that the three provinces that have
not been accounted for followed a similar pattern). Of course, the last percentage is a low estimate because of
the assumption made about arable land. Based on the same information, Browning asserts that "well over a
quarter of the country ... was considered by the villages to be their own domain." [13] Menjívar believes that this
estimate does not include communal lands and, after making some assumptions, reaches the conclusion that by
1879 "no less than 40 percent of the territory was covered by ejidos and communal land." [14] Both writers have
the same point of departure but arrive at substantially different estimates.
 Menjívar's figure is a very high estimate. He starts with Browning's estimate of 25 percent but, based on
the fact that there was great confusion as to what was an ejido and what was communal land, asserts that most
communal lands were not included in the survey. He tries to arrive

― 130 ―

at an estimate by assuming that the area covered by the communal lands can be obtained by subtracting ejido
land, haciendas, and nonagricultural lands from the total area of the country. It is a reasonable assumption,
much more reasonable than the actual selection of data to make the estimation. The area of the country's
territory is not in question, and the area covered by ejido lands, although known to be imprecise, at least is
based on a contemporary survey. The amount of land covered by haciendas presentes a trickier problem.
Menjívar, following Browning, asserts that the extensions of the haciendas can be estimated from the report
written in 1807 by the intendente Gutiérrez y Ulloa.[15] This approach has two problems: the intendente's report
does not have enough data to yield anything more than a general impression of the importance of haciendas,
and land tenure had experienced important changes in seventy years. The economy had experienced
transformations, the private land market had been very active, land transactions involving ejidos had taken
place, and the government had sold terrenos baldíos. Even if an accurate estimate of the land covered by
haciendas in 1807 was available it would be irrelevant to estimate hacienda land in the 1880s. By contrast, the
area of nonagricultural lands is taken from the 1950 agricultural census. This presents another serious problem:
new agricultural techniques and higher demographic pressure almost certainly made the area of 1950's
nonagricultural land significantly smaller than 1879's. Menjívar does not account for this. A sample of land
titles registered in the land registry of the western provinces suggests that by the 1880s common lands were a
small percentage of the total. Only 3.74 percent of the land in the sample was common land. (The evidence is
not conclusive since there were allegations that Indian communities were slow in privatizing their lands.
Nonetheless, the western provinces were the area where Indian communities were strongest and more
organized, and one would expect that they would have made a good effort to claim their lands.) [16] Menjívar's
estimate can be considered, at best, as a very high upper bound. Browning is more cautious because he believes
that, as the distinction between ejidos and communal lands was always blurred, it is not certain whether the
latter were included in the survey in any consistent fashion. His estimate of 25 percent of the territory is already
almost twice the estimate found in the 1879 survey, making a very generous allowance for the undercounting
of communal land.
It is not necessary to agree with Menjívar's exaggerated estimate to argue that the size of communal and
ejido lands was far from negligible. Not all ejido and communal land was cultivated, and private land was not
fully cultivated either, but there is ample evidence, both in the 1858 census and in the 1879 survey, of the
importance of ejidos and commu-

― 131 ―

nal lands in the production of foodstuffs and export crops. There is no question about the importance of these
forms of land tenure in terms of their size and of their contribution to the Salvadoran economy. Moreover,
ejidos and communal lands were closely identified with colonial institutions and with one significant group in
Salvadoran society: the Indian population.

Political Context
The substantial amount of land involved suggests that the move to privatize all land cannot be seen as an
exclusively economic decision. A large segment of the population was negatively affected by this decision,
which, therefore, could not be taken without considering political realities. Ejidos and communal lands were
not an obstacle to the expansion of coffee, and coffee, by itself, was not the main reason for the liberal reforms.
Foreign demand for Salvadoran agricultural products had made land relatively scarce and more desirable.
Under those circumstances a very small group that had been able to achieve control of the apparatus of the state
did not shy away from using its power, moving to change land legislation to its advantage.
 Changes in the balance of power between Indian communities and ladino landowners interested in
producing for the international markets are crucial to understand the liberal reforms. They were two groups
who had never seen eye to eye. Before independence, colonial institutions had mediated their conflicts, but,
with Spanish authorities gone, conflict broke out regularly. The old tradition of endowing towns with ejidos
and Indian villages with common land was threatened by the new and radical ideas of liberals inspired by
Adam Smith. Two factors helped to keep the landowners away from ejidos and communal lands: the existence
of abundant uncultivated land and the power of conservatives in neighboring Guatemala. Rafael Carrera, the
Guatemalan conservative caudillo, had come to power after a rebellion provoked by liberal excesses and with
the strong support of the Catholic church and the Indian communities. Moreover, he wanted like-minded
governments in Central America and used force to get his wishes. During the first three quarters of the century
the risks of confronting Indian communities were higher than the rewards. Indian rebellions were always
supported or used by conservatives to advance their political goals. As long as Indian groups could obtain
support in Guatemala, they represented a real threat. Indians had less to fear from conservatives, who wanted to
protect their power base, than from liberals, who wanted to free every market (including land) from colonial
restrictions. Moreover,

― 132 ―

there was great confusion about the difference between ejidos and common lands.
Liberals, in particular, identified all the supposed evils of communally owned land with the alleged
backwardness of the Indian population, even though many ladinos benefited from the ejidos. Interest in Indian
lands had been explicit since the early years of the national period. Juan Manuel Rodríguez, one of the leaders
of the independence movement in El Salvador, wrote in 1824:
Interior land is badly distributed, because Indians own most of it as common land and the so-called ladinos have none. The former do not
enjoy true ownership, therefore they do not value their land, and they only impede its cultivation by others. [17]
 Rodríguez's message may have been too blunt. Other liberal leaders couched the same concepts with an
appeal to loftier principles of equality:
In the old system class differences impeded the use of land, and in the so-called Indian towns, they [the Indians] decided how to use their
land, cultivating part for neighbors of the same towns who did not belong to their class. The law of equality established by our current system
must abolish every privilege since there is only one class of citizen, every one with the same options, it is very just to level all to the same
rights and obligations.[18]
There was a conflict, and it had clear ethnic connotations. In fact, both conservative and liberal leaders
were wary of the Indian population. Needless to say, all positions of leadership were held by criollos or ladinos.
When there was a danger of Indian revolt they put their differences aside. Anastasio Aquino's revolt in 1833
"had the salutary effect of causing all conflicting parties to unite against [the Indians]." [19] But liberal policies
were more likely than conservative ones to exacerbate Indian grievances.
In the unstable environment of the federal period, criollo and ladino landowners were far from being in
full control. The Indian population sometimes used the new political avenues created by independence. In 1835
Tomás Espinosa, a man of Indian extraction, was elected chief of the state of San Salvador. When ladinos and
criollos opposed his election, the Indian population fought to support him. Gral. Morazán, a liberal and
president of the federation, sided with the opponents of Espinosa, who was out of power in less than a year. [20] A
few months later, in May 1837, an Indian rebellion

― 133 ―
... rose upon the white and mulatto population murdering them and plundering their houses, under a supposition that the origin of the
devastating cholera was attributable to poison thrown into the rivers and that even the medicines supplied to them were impregnated with
deleterious substances.[21]
A cholera epidemic had helped to trigger resentments against landowners. It was a disorganized affair
that, unlike Carrera's similar rebellion in Guatemala, completely failed. However unsuccessful, these Indian
uprisings reminded liberals like Juan Manuel Rodríguez that there were limits to their programs.
 External pressures further helped to check the liberal program. After the breakup of the federation in
1839 the Guatemalan conservative leaders, first Carrera and then Cerna, were always available as allies to fight
against liberal excesses in El Salvador. Liberals were in power from 1845 to 1851, but they had to be tactful in
advancing their programs. Nonetheless, there were two Indian uprisings under their watch. [22] When
conservatives had a chance to rule, they, in turn, had to realize that the Salvadoran elite was, by and large,
liberal.[23] A good example of this was Francisco Dueñas, El Salvador's foremost conservative and the whipping
boy of liberal historians who, thanks to the help of Carrera, replaced liberal Gerardo Barrios in 1863. Unseating
Barrios took a fullfledged war between Guatemala and El Salvador, helped by Indian revolts against the liberal
leader.[24] Dueñnas's conservative instincts were reflected mainly in his respect for the Catholic church and for
Indian institutions. He never attempted to role back the clock. He passed legislation giving representation to
Indian communities but did not reinstate laws endowing towns with ejidos. He protected the church as a
spiritual force but upheld an 1832 law declaring the capellanías property of the state.[25] Many of his economic
policies were a continuation of those of his arch-enemy Barrios: improvement of roads and ports, pro-
fessionalization of the army, installation of telegraphs, sale of public lands, and the like. His main achievement
was to provide a measure of much needed stability. Exports grew faster under Dueñas than under Barrios, and
coffee took off during his period. Indians gave him their full support, and he did not touch their lands. When
liberals tried to stage a revolt in San Miguel, Dueñas defended himself with troops recruited in Indian towns. [26]
Things changed, however, and liberals came to power in Guatemala. One of Dueñas's main sources of
support was gone; his government was toppled in 1871. Without him Indian revolts returned; their institutions
were again under siege. The first revolt took place in 1872 when 400 Indians armed with machetes rose in
Cojutepeque under the battle cry

― 134 ―

"Dueñas and religion," but both Dueñas and the bishops were on the losing side. [27] Indian unrest returned three
years later. In March, 1875, in the predominantly Indian town of Izalco, people "believing that their rights were
being threatened by the sale of an ejido, instead of going to the courts were led into disobedience and
rebellion."[28] A few months later priests and Indians joined forces in San Miguel. A priest by the name of Juan
Manuel Palacios led a revolt that started with the opposition of street vendors to using the new market facilities
built by the government. Between "3 to 4,000 male and female fiends robbed, burnt, and devastated all that
they did not take away." As many as 300 principal families were threatened with death, and the military
governor of San Miguel province was castrated and killed. His body received so much abuse that it was
difficult to lift it from the ground to give it a decent burial.[29]
The conflict between old and new ways was clear. The idea of selling their produce in an enclosed
marketplace and having to pay rent for that privilege was completely alien to the Indians. Open markets in the
central square had been the custom since before the arrival of the Spanish. The only thing needed to sell a
product was to bring it to the central plaza, sit on the ground, and wait for customers. For the local authorities
the new marketplace represented an effort to modernize the city, making it more European—how could
anybody oppose it? In their view only culturally inferior Indians could not grasp the convenience of a clearner
and orderly marketplace.[30] The Indians lost that fight; their cause was hopeless. The San Miguel revolt was the
last real threat to the triumphant liberal republic. The civilian leaders of the revolt were executed, and the main
authorities of the Catholic church were sent into exile. [31] Neither the church nor the Indian communities could
gather resources to fight against an elite that was eager to expand its wealth and now enjoyed access to modern
communications to coordinate troop movements. More importantly, the end of strong conservative
governments in Guatemala removed the main obstacle to an attack against communal forms of land ownership.
The new liberal authorities had boundless faith in the free market. The example of the United States
inspired them. President Valle delivered a message in 1876 summarizing these feelings; in his view the
principle of laissez-faire, "observed with very few limitations in the United States of North America, has
transformed deserts which until recently had been inaccessible into very beautiful cities; has criss-crossed the
territory of the union with railroad tracks, and has taught and proven to the entire world the value and potential
of free institutions."[32] How could one apply those ideals in El Salvador? Certainly not by freeing the political
system. The Salvadoran elite was not
 ― 135 ―

ready to give up its privileges; before attempting to do anything so rash it was better to free the land market in
order to bring prosperity.
Talk about the "evils" of communal land (a code phrase for Indian property) became commonplace.
When in 1878 the governor of San Vicente tried to explain the stagnation of agriculture in his province, his
explanation amounted to a threat. According to him, the reason for the wasteful use of land was "the lack of
laws to regulate the cultivation of ejido lands, since it is not yet possible to turn them into private property." [33] It
was only a matter of patience; by the end of the year the mayor of the village of Mejicanos was proposing the
distribution of commercial plants such as cacao, rubber, agave, and, of course, coffee. Those who devoted at
least one-quarter of their ejidos to the cultivation of those crops were promised a title to that land. It was the
kind of measure that received lavish praise from the government. Moreover, it deserved emulation: the
municipalities of Soyapango, Ilopango, Tecolu-ca, and Villa Verapaz followed the progressive example of the
mayor of Mejicanos.[34] In his 1879 report to the legislature, the minister of government praised the action of
those forward-looking towns and stressed the damage done by ejidos and communal lands, which, in his
opinion, belonged to groups "removed from all progress and activity." "Let us cut, then, with a firm hand, the
chains that enslave agriculture," he concluded.[35] The day before, the president had signed legislation emulating
at a national scale the example of Mejicanos. The door was open to the privatization of land. Governors were
instructed to carry out a survey of land tenure to find out how much land was not privately owned. The process
culminated with laws passed in 1881 and 1882 abolishing communal lands and ejidos. The export sector
needed room to expand, and it was clear that communal lands and ejidos could be privatized without major
political consequences.
Yes, the Indian communities did have a different way of doing things, but they were not an obstacle to
the growth of the coffee industry or to economic growth in general. They participated in the market and were
quite capable of playing a constructive role in the economy. In fact, after the 1879 legislation they made
substantial efforts to cultivate coffee, and they had always engaged in the production of commercial crops.
[36]
 The liberal reforms were the culmination of a struggle for power. The local elite had strengthened its grip on
power to such a degree that it could reorganize land tenure without fear of the reaction. There was resistance,
but the social unrest that followed the reforms, although sometimes violent, was easily controlled. Indian
communities could not match the weapons, the numbers, the organization, or the mobility of the army.
Moreover, they had nobody to turn to for support. No other group in Salvadoran society had a community of
interests with

― 136 ―

them. By the end of the 1870s Salvadoran conservatives were not eager to defend traditional institutions; they
had become coffee planters. (The leader of the conservatives was Dr. Manuel Gallardo, the successful planter
mentioned earlier.)[37] Guatemala had ceased to be a conservative stronghold. Indian revolts were bound to fail.
There were revolts in 1884 in Izalco and Atiquizaya, in 1885 and in 1889 in Cojutepeque, and in 1898 in Santa
Ana province. In the last revolt the peasants cut off the hands of the Jueces Repartidores Ejidales .[38] Revolts
were "a delicate problem," but there was an army to deal with them, and it did. [39]

Statistical Analysis
Even though there was a political opportunity, it is still necessary to understand the economic incentives to take
advantage of that opportunity. If it was necessary to turn to coffee because it became more profitable than other
crops, then changes in coffee and indigo prices were important elements in the equation. To achieve growth,
decisions have to be made as to how to allocate resources between a wide range of economic activities. The
allocation of resources between coffee and indigo could not have been the same in 1830, when the price of a
cwt. of coffee was four times the price of a pound of indigo, as in 1889 when the price of a cwt. of coffee was
twenty-four times the price of a pound of indigo (see fig. 1). The behavior of relative prices across time is
therefore important in the discussion of the profitability of coffee production. [40]
But before starting, it will be convenient to describe the data used. Fortunately, coffee and indigo price
series for the English market are readily available. These series have been deflated with the English industrial
products price index. The industrial price index is preferred over the general price index because the value of
the pound sterling for the Salvadoran exporter was a function of the amount of industrial goods (mainly
textiles) that he could buy with the product of his exports. In other words, the deflated prices reflect monetary
units used to purchase industrial products at constant prices. This procedure assumes that the contribution of
indigo and coffee to the growth of the Salvadoran economy stemmed from their contribution to the country's
capacity to import industrial products, which seems a reasonable assumption.
The value of coffee and indigo exports was not deflated because the official value for these exports was
computed with the tarifa de aforos , which in the case of indigo remained at the same level during the entire
nineteenth century and in the case of coffee changed only sporadically. The basic data set includes the
following data series:[41]

― 137 ―
 [Full Size]

Figure 1. 
Relative Price

― 138 ―
— Coffee prices in England (1864–1889);
— Indigo prices in England (1864–1889);
— Coffee exports (1864–1889);
— Indigo exports (1864–1889); and
— English industrial price index (1869 = 100).
These series were used to compute the following:
— Deflated coffee prices (1869 = 100);
— Deflated indigo prices (1869 = 100); and
— Relative prices (coffee prices over indigo prices).
A look at the data gives an idea of the main changes that took place in the structure of agricultural
production. In 1864 the value of coffee exports was only 80,605 pesos; twenty years later it was above 2
million pesos. At the same time, the value of indigo exports declined slowly but steadily after a peak of
2,768,576 pesos reached in 1873 (see table 19). Part of the explanation of this phenomenon can be found in the
changes in international prices of these products. Coffee prices in the English market increased after the mid-
1870s.[42] The average price in the period 1865–1870 was 57.48 shillings per cwt. and in the period 1876–1880
had increased to 95.36 shillings (adjusted for inflation). The average indigo prices for the same periods were
5.47 shillings and 4.66 shillings per pound. But to have a better understanding of the role played by prices in
the change from indigo to coffee production it is necessary to analyze the data more closely.
A number of statistical manipulations were performed to understand this problem. These manipulations
include regressions of coffee exports (dependent variable) on coffee and indigo prices, relative prices (price of
coffee over price of indigo), and indigo exports. The results of the regressions are shown in table 22. The
determination coefficient of the regression on coffee prices was 0.82, and it improved marginally when prices
were entered with a lag of one year (in this case the determination coefficient was 0.85). This result
is consistent with the interpretation of the liberal reforms as necessary for the growth of the export sector
(which is not the same as saying that that was the case). Looking only at the figures one could say that coffee
production expanded because prices went up; planters took advantage of the opportunities offered by the world
market.
 This tentative conclusion is reinforced by the results of the regression on relative prices. Presumably
producers based their decisions not only on coffee prices but also on the alternatives available to them. Since
the main alternative was indigo they considered the ratio of coffee to indigo

― 139 ―

Table 22 Linear Regressions Coffee Exports (dependent variable) on Coffee and Indigo Prices

Independent Variable Slope Intercept r2

P coffee 65,671.65 -3,187,303 0.8254

P coffee (one year lag) 69,481.36 -3,337,667 0.8480

P coffee/P indigo 266,676.10 -2,529,479 0.7904

SOURCES: The price data are in Michael G. Mulhall, The Dictionary of Statistics, pp. 476–478. The English industrial price index is in B. R. Mitchell and Phyllis
Deane, Abstract of British Historical Statistics (Cambridge: Cambridge University Press, 1962). For the export data see table 19.

prices. Not surprisingly the regression in relative prices is significant: the determination coefficient is
0.79, and the slope of the regression line is quite steep. By contrast, coffee exports do not seem to be closely
correlated to the amount of indigo exports. If part of the resources that were originally employed in indigo
production were transferred to coffee, the correlation between coffee exports and indigo exports could be
expected to be negative and strong. However, the correlation is not significant. One explanation for this puzzle
is to be found in the strong fluctuations in the series of indigo exports. It has been discussed above how indigo
production was very sensitive to disruptions created by wars, locusts, and droughts. This accounts for strong
fluctuations that are not due to price variations or reallocation of resources but which affect the statistical
analysis.
Moreover, these results point to the distinct possibility that coffee expanded instead by using resources
previously used for food production rather than for indigo production. Although there are no direct data on
food production for the 1880s, it is clear that despite its fluctuations indigo production fell very slowly during
the second half of the century. This implies that most of the resources used for the expansion of coffee were
diverted from food production. Resources were very scarce, and the rapid growth of coffee could not possibly
come only from net growth. The liberal reforms, which affected Indian communities and ejidos traditionally
linked to the production of foodstuffs, insured that coffee could expand at the expense of food.
The fact that statistical manipulations were consistent with the interpretation that the liberal reforms were
necessary for the growth of the export sector can be substantially modified when one looks more closely at the
policy of incentives followed by the government. The incentives

― 140 ―

given by the government to stimulate coffee production greatly reinforced market signals. If the benefits to be
obtained from coffee production included not only the income from the sales of the beans but also the land
where they were produced, land had no opportunity cost for the producer. Instead, land was counted among the
benefits. Under such circumstances it would have been hard to find attractive any other productive alternative;
as a result, coffee production expanded more and faster than what would have been suggested by market
signals. Coffee planters took advantage of the opportunities opened up by changes in the international markets
and, also, by changes in the rules of the game dictated by governments run by planters. A policy of incentives
for one product led to a reallocation of resources that had a very direct impact on welfare. The liberal reforms
affected the allocation of resources between alternative products and also between different social groups. In
the 1850s changes in transportation costs had made production of export crops more attractive than food
staples; in the 1880s that trend was dramatically strengthened by adding land to the benefits. As a result Indian
communities lost their land and had to pay higher prices for food.
It is clear that government policies tipped the scale in favor of coffee production, but what kind of case
did the government have to justify its policies? When the legislation was passed in 1881 and 1882 the behavior
of prices did not offer an altogether clear message. Figure 1 shows a decrease of coffee prices relative to indigo
prices from 1848 to 1869, then an increase until 1874, a plateau lasting five years, a decline from 1879 to 1885
and, from then on, a rapid increase. The price situation faced by the producers at the time of the new land laws
was not clear. The effects of the invention of synthetic dyes on indigo prices were slow to appear. The most
important breakthrough in the production of artificial dyes took place in 1883 with the discovery of the
chemical structure of indigo, but it took over fifteen years to find an economically feasible substitute for indigo.
Despite the uncertainty about prices that was perceived in 1881, the liberal legislators imposed a
program of very radical reforms. In the final analysis their decision was correct in one sense—coffee prices
soared and, therefore, it made sense to specialize in its production. But it is difficult to argue that the data
available to the legislators at the time that they made their decision supported the need for such radical changes
in property holding. A posteriori, the decision made sense. A priori, it was a big risk for the country as a whole,
although it was a huge success from the point of view of the planters. The change had economic costs.
Government policies distorted market signals and encouraged the economy to move away from food
production. The social costs of the

― 141 ―

new legislation were far reaching: the privatization of land unleashed market forces that put Indian
communities and small peasants at a disadvantage, great numbers of peasants ended up dispossessed of their
land, and wealth distribution was radically changed. The possibilities of a more harmonious growth of the
economy and society were eliminated.
 It seems clear that changes in relative prices did call for a reallocation of the factors of production, but
the timing and the means used to carry out such goals are highly questionable. Such extraordinary government
measures were unnecessary to promote growth. Indeed, when the economic stimulus was powerful enough, as
in the case of the cotton boom earlier in the century, the different economic units could adapt rapidly to the new
conditions without having to change the structure of land tenure.
There was a political opportunity and an economic incentive, but even if it made sense to switch to
coffee production, land redistribution was not the only alternative open to the liberal leaders. There were three
markets that could respond to government intervention: land, labor, and credit. The liberal reforms affected the
first two and left the last one intact. It was an ironic choice since the main difficulty in the cultivation of coffee
was the high startup cost of coffee plantations.
Further insight into the problem can be gained by analyzing the alternatives available to the government.
The land market was a clear choice. The very importance and the geographical location of much of the ejidos
and communal lands made them tempting, but the evidence suggests that even without government intervention
the land market was changing rapidly and so was the balance between the different factors of production. Even
before the full implementation of the liberal reforms in the early 1880s the pressure of export agriculture on
land was becoming apparent. Land has always been a symbol of wealth and very desirable, but land is only one
of many forms of holding wealth. It is desirable as long as it can be put to productive use or can provide capital
gains. In the years after independence land had been abundant relative to capital and labor, and sales of terrenos
baldíos kept prices at roughly the same levels. There was no incentive to hold land for capital gains since its
price was not rising. The shortage of labor made it impossible to expand cultivation beyond certain limits, and
the pressure of demand was not felt in full force. By the 1880s the picture had changed. Demographic and
economic growth had altered the relative position of land and labor. The population had grown and, although it
cannot be said that labor was abundant, it was enough to satisfy the needs of the growing demand. At the same
time the growth of international trade made it possible to exploit more land.
(A fine point of interpretation is in order. In El Salvador coffee pro
 ― 142 ―

duction was the new element that made land more attractive and, thus, scarce in the economic sense. Hence, the
introduction of coffee is considered the key to understanding the liberal reforms. Although the demand for
coffee was instrumental in making land scarce, by stressing the concept of land scarcity the problem can be
related to similar events in other parts of the American continent, thus highlighting both the specific features of
the Salvadoran process and its participation in a broader phenomenon. The extension of railroad networks in
Mexico and Argentina and the Indian wars in the latter country were efforts to alleviate the pressure on land. In
El Salvador, demand for land increased but no more public land was available; the competition for it became
more urgent, and the methods to acquire it were ruthless.)
The impact of export agriculture on traditional forms of land tenure prior to the reforms can be
illuminated by an analysis of the wide variation in the percentage of ejido land between provinces (see table 23,
col. 7). Although data limitations make it difficult to draw definite conclusions, it is useful to compare the
degree of privatization in the different provinces with their share of the total of indigo production. There are
two possible hypotheses with regards to the relationship between concentration of indigo production and ejido
lands.[43] One is that land was more attractive in the areas where indigo was cultivated more intensively and,
therefore, haciendas expanded at the expense of ejidos and communal land. In those areas indigo planters took
advantage of every opportunity (legal or otherwise) to acquire new land and, after a while, the percentage of
private land increased. For this hypothesis to make sense land scarcity had to be felt well before 1880.
A different possibility is that the scarce resource was labor and not land. In that case indigo haciendas
would have had an incentive to be close to population centers where labor was available either for hire or, in
colonial times, in the form of repartimiento. Ejidos and communal lands were a reserve of low-cost labor, and
the haciendas wanted to profit from that reserve. If this was the case, it can be expected that the areas where
indigo was cultivated intensively also had the highest concentration of ejidos and communal lands.
Table 23 compares indigo production with the amount of ejido land in each province. The data on this
table were used to test the correlation between the percentage of ejido land and indigo production in each
province. As the provinces were of different sizes, the total amount of indigo production is not the relevant
measure. Instead, it seems that the ratio of indigo production to arable land gives a better idea of the importance
of indigo in each province.[44] The latter ratio was used to rank the provinces according to intensity of indigo
production and percentages of ejido land. A Spearman rank-order correlation was used to
 ― 143 ―

Table 23 Comparison Between Ejidos and Indigo Production

(1)
Indigo Production (2) (3) (4) (5)
Province (lbs.) Arable Surface (ha.) 1/2 Ranking of 3 Total of Ejidos

San Miguela 339,600 492,868 0.81 -- n.a.

San Vicente 199,200 86,883 2.29 3 6,992.5

Sensuntepequeb 150,000 59,749 2.51 2 5,712.0

Zacatecolucac 35,400 89,428 0.39 -- n.a.

Suchitotod 183,750 55,640 3.30 1 6,669.2

Chalatenengo 262,500 141,073 1.86 4 12,334

San Salvadore 24,000 234,587 0.10 5 57,244

Sonsonate 5,550 102,473 0.05 6 35,036

Metapánf 18,000 267,622 0.07 -- n.a.

 SOURCE: Adapted from Menjívar, Acumulación Originaria , p. 95, and La Gaceta , June 23, 1858.

a b
 lncludes San Miguel, Usulután, Morazán, and La Unión  The same as Cabañas

c d
 Same as La Paz  Includes Cojutepeque

e f
 Includes La Libertad  Includes Santa Ana and Ahuachaván

― 144 ―

compare these ranks. The value of Spearman correlation coefficient was-0.66, which indicates the ejido land
was less prevalent in provinces where indigo was important. This result favors the scarce-land hypothesis. The
rapid expansion of export agriculture made land more attractive, and planters found ways to acquire ejidos and
communal lands.
Since the data are incomplete, the test just performed, by itself, is not enough to be conclusive. Among
the provinces not included in the computation were some, like San Miguel, which were important producers of
indigo. Nonetheless, the same rank test was performed with the totals (as opposed to percentages) of ejido land
and indigo production, and with combinations of total values and percentages, and in all cases
Spearman's r was negative and had an absolute value above 0.50. This indicates, at least, that the pressures of
commercial agriculture were already eroding the institutions of ejido and communal land.
Changes in land tenure were directly linked to changes in the labor market. Authors such as Rafael
Menjívar give great importance to this link. In his book Acumulación originaria he argues that ejidos and
communal lands were eliminated due to "the need to integrate land to capital in coffee activities and the need
for free labor."[45] That is, one of the reasons for the liberal reforms was to increase the availability of labor by
denying access to land to an important sector of the population. This interpretation assumes that labor was
becoming scarce because of the increased demand created by the specific characteristics of coffee production.
It is difficult to be conclusive about his point. The results of the comparison between concentration of indigo
production and concentration of ejido land and most of the qualitative evidence suggest that labor was scarce
even for the production of indigo. If this is the case, the new element in the process is land scarcity, and labor
scarcity can be considered to be a constant. That is, the liberal reforms were triggered by the pressure on land
created by the new opportunities created by the opening of the economy. This stress on land scarcity does not
deny the fact that it was very convenient for plantation owners to have a greater pool of landless peasants to
recruit labor from. What is important to emphasize is that land scarcity was already eroding the ejidos and
communal lands without any change in legislation.
Despite the importance of land, the efforts to modernize the markets could have focused on the credit
market rather than on the land market. It can be argued that the backwardness of financial institutions was a
greater obstacle to the expansion of coffee than the scarcity of land. There were precedents. Credit
mechanisms, however rudimentary, had existed since colonial times. In the 1800s Guatemalan merchants
advanced money and goods to the big planters, who in turn gave credit to the smaller planters, and the
Montepío de cosecheros de añil had been

― 145 ―

an important credit institution. But the system was so informal and the legal system so inadequate that risks
were high and transaction costs onerous. The realities of coffee production demanded a more modern system.
New credit institutions could have solved the problem of investment costs. Even private credit with high
interest rates would have been a more efficient solution than the elimination of ejidos and communal lands.
There is no reason to believe that the Indian communities were an obstacle to growth. They were
perfectly efficient within the limits imposed by their agricultural knowledge, and ejidos and communal lands
had produced commercial crops for a long time before the reforms. The more "backward" elements of society
had a long tradition of successfully competing in the marketplace. They had the land and the willingness to
work, and faced the same obstacles as everyone else: difficult access to credit and to new agricultural
techniques. But under the new realities imposed by the expansion of coffee they would lose their lands, and no
effort was made to provide them with credit or education. Ejidos and communal lands had been used for
commercial crops for a long time before the reforms. The more "backward" elements of society had not shied
away from participation in the market economy. When the government pushed them to produce coffee they
were ready to try in order to avoid losing their lands; they understood the incentives perfectly well, even though
the fact that they had not had access to education put them at a disadvantage. Browning asserts that the weight
of evidence suggests that by the 1880s the villages had made positive efforts to increase coffee production and
had considerable success in doing so.[46] Maybe, but even if they had rapidly learned the new cultivation
techniques, the lack of credit would have placed an enormous obstacle to their efforts. Thus, the failure to
modernize the credit system was an important element to insure that only the elite would be able to profit from
the coffee business. They could have done it; other countries of Latin America, such as Colombia and Costa
Rica, with organizational problems similar to El Salvador's, but with different allocation of resources and
political options, did find ways to finance investment in coffee plantations. In those countries coffee plantations
prospered without abrupt changes in land tenure, and credit systems developed to satisfy the needs of the
planters. Mortgage credit, future sales, and direct credit from foreign houses solved the problem. [47] In fact, El
Salvador was developing the same mechanisms quite rapidly. There is no question that it was a difficult task.
The initial cost of updating financial laws and setting up a banking system would be followed by the
difficulties of managing complex operations. The transaction costs of lending to a great number of small
producers would have been high, and enforcing repayment

― 146 ―

would have been a major undertaking and a source of constant tensions. The lack of people with knowledge or
expertise in financial matters made the problem worse.
 The practical dimension tilted the scale against a sweeping credit reform. It was easier for a poorly
organized and underfunded central government with little expertise in financial matters to unleash the land
market than to organize the credit market. In the end the enforcement of the new arrangements was ultimately
left in the hands of the new landlords, and the state did not commit itself to a long-term involvement beyond its
capabilities.
If the state was to play any role in modernizing the economy, the land tenure system was the easiest
target, but by no means the only one. The goal of modernizing the credit market was within reach, and it was
quite possible to leave ejidos and communal lands alone and still produce coffee. Every choice, be it to
modernize the markets of land, credit, or labor, involved technical as well as political difficulties, but none was
impossible. The final result, the liberal reforms, provides a snapshot of the economic and political balance in
the 1880s. After all, not every country would have found it easy to change the rules of the game for an
important segment of the population without fearing a major social upheaval. Choices were made not only in
terms of growth but also in terms of allocation of resources between different social groups.

Extent and Timing of Land Transfer

The extent of the land transfer is not entirely clear. Some communal lands were successfully claimed by their
occupants. But changes in land tenure followed the pattern imposed by the profitability of land. Browning
makes this point when he states:
Villages away from the coffee areas were less affected by abolition: their more dispersed population meant that the many villagers who lived
and worked on isolated plots were able to claim these by right of possession, as poseedores actuales ; there was less competition for the
common lands and less intrusion into them by private estates; the character of the private estates, generally cattle haciendas with large areas
of uncultivated land, allowed continued unregulated settlement by squatters, unlike the coffee plantations. [48]
These variations in the transfer of land tenure strengthen the interpretation that the liberal reforms were
the product of competition for
 ― 147 ―

scarce land and the unequal distribution of power between the elite and the Indian communities and towns.
Where land was less attractive and, therefore, there were less incentives to compete, the villagers were allowed
to claim their land.
The transfer of land took more time than the liberal leaders had expected. The administration of the
process of issuing new titles for all the ejidos and communal lands proved to be difficult. The law of 1882 gave
six months to occupants to claim ejido land. They were supposed to go to the mayor of the municipality where
the land was located, prove that they were cultivating the land, pay a fee, and obtain a title to the land. If they
failed to claim the land, after the six-month period they would lose their rights and the land could be sold in
public auction. It was most unreasonable to assume that the process could take so little time. Before long it was
realized that six months was too short a period; the municipalities were inundated with claims and the period
was extended. Many mayors were illiterate, did not understand the law, or found it to their advantage not to
understand it. Indian communities, in turn, showed "little will to divide their property." [49] The problem was
complicated further when the government required that titles should be registered in the land registry. In March
1884 the executive branch was still extending the period for issuing titles for ejidos. The extensions were
always short, between three and six months, and seem to have been enacted to ease administrative problems
rather than to make it easier for the villagers to claim their lands.
It is not difficult to imagine the obstacles in granting land titles. The efforts of powerful individuals to
take undue advantage of the laws, the number of claims, and the limited ability of new institutions to handle the
problem contributed to lengthen and complicate the process. The legal system was slow, and issuing land titles
was a "delicate problem" that opened up opportunities to the unscrupulous. Skilled lawyers hired by rich
landowners with friends in high office had an edge over illiterate peasants. That natural advantage was
magnified by the lack of distinction between public and private interests. An illustration of this problem is
given by the ordeals of a British merchant who, frustrated with Salvadoran political and judicial systems, asked
his government to help him. Moses Levy, who had businesses in El Salvador, complained to the Foreign Office
in 1881 that El Salvador was a small country "where the natives are bound together by ties of consanguinity,
intermarriage or similarity of interests and where it often happens that men of unprincipled character are raised
to positions of influence, whence they can use their power to defeat the ends of justice; it is easy for persons to
arrange together to bring about this wholesale system of robbery." [50] Poor Mr. Levy was talking about his
personal battle to settle financial claims and

― 148 ―

not about the liberal reforms, but the situation of illiterate members of Indian communities could not have been
better.
Notices published in the Diario Oficial provide a glimpse of the problems encountered. In July 1882,
Higinio Calderón, administrator of the common lands of the town of San Ignacio, published a notice
announcing that he was dividing the property up and giving an ultimatum to prospective claimants to voice
their claims or lose them. Two weeks later Natividad Flores, the rightful administrator of the lands, challenged
Sr. Calderón's rights to carry out the partition. Sr. Flores, it turned out, was illiterate. He was lucky that
somebody warned him of the notice, but the trick was clever, and it is very likely that it was imitated by many.
Most of the land was owned by illiterate people who could easily miss a newspaper notice. Many of the
problems in registering lands had nothing to do with the complexity of the law but, as the governor of San
Vicente pointed out, they arose because "some councilmen oppose their private interests to the common
good."[51]
Even under ideal circumstances the practical aspects of giving land titles for one-quarter of the national
territory were overwhelming. A random sample of ejido lands that received title in the western provinces
between 1882 and 1885 helps to illustrate the problem. The average size of each ejido plot claimed was 30.38
hectares at an average price of two pesos per hectare.[52] The average size of the communal land plots claimed
was even smaller, 23.625 hectares. This means that if ejidos and communal lands accounted for about 25
percent of the territory of the western region it would have been necessary to register more than 3,500 titles.
During its first three years the Registro de la propiedad raiz de la sección de occidente registered 2,169 titles
and transactions, 20 percent of which did not involve claims of ejidos or communal lands.
 For those who wanted to take a more serious approach the practical problems were even greater. The
Indian community of the village of Coatepeque hired a surveyor to divide its land among its four hundred
members. It was a relatively rich community that owned 2,961 hectares of land. But imagine the problem if
every community tried to be scientific about distributing its land. El Salvador simply did not have enough
surveyors to do the job. As late as 1898 El Salvador had only nine individuals who called themselves civil
engineers and who were just a little more than surveyors. The National University began teaching civil
engineering in 1879. Conflicts about the partition of land were bound to arise.
The situation was further complicated by the different idea of land espoused by the Indian communities.
 Traditionally balsam growers owned balsam trees although the land on which they sat belonged to the
[53]

community. With the privatization of land the rights of the tree owners

― 149 ―

Table 24 Distribution of Private Land in the Western Provinces, 1882–1885 (in hectares)

Area # of Plots % of # of Plots Aggregated Area of Plots % of Total Area

0–5 34 54.83 84.647 2.64

5.01–100 19 30.64 500.550 15.48

>100 9 14.51 2,648.800 81.90

Total 62   3,233.997  
 SOURCE: Sample of entries in Registro de la propiedad raiz de la sección de occidente .

Table 25 Distribution of Ejido Land in the Western Provinces, 1882–1885

Area # of Plots % of # of Plots Aggregated Area of Plots % of Total Area

0–5 44 50.00 92.41 3.45

5.01–100 39 44.31 628.67 23.51

>100 5 5.68 1,952.30 73.02

Total 88   2,673.38  

SOURCE: Sample of entries in Registro de la propiedad raiz de la sección de occidente .

could not be ignored. When the land of Santa Isabel Ishuatán, a village located on the balsam coast, was
distributed, the titles indicated that "if the land included balsam trees belonging to third parties, [the title
holder] should allow the tree owners to cultivate and extract balsam from them. Both the title holder and the
tree owners would have to pay a fine of ten pesos per tree if trees are destroyed." [54] (The fine was substantial;
the average market price of land was about eighteen pesos per hectare.) Similar provisions were included in
titles issued by the village of Caluco, Sonsonate. Not surprisingly, it took more than six months to privatize all
the land in the country. In order to obtain final title it was necessary to publish three notices in the Diario
Oficial . In some instances the last notice was not published until 1899. [55] After ten years the problem still was,
in the words of the minister of government and war, "annoying in a thousand ways, of a serious character, and
delicate."[56] The last disputed lands became national property in 1891, and the last chapter of the "annoying"
story was written in March 1897, when the Ley de titulación

― 150 ―

Table 26 Distribution of Communal Land in the Western Provinces, 1882–1885

Area # of Plots % of # of Plots Aggregated Area of Plots % of Total Area

0–5 4 44.44 13.125 6.17

5.01–100 4 44.44 38.500 18.10

>100 1 11.11 161.000 75.72

Total 9   212.625  

SOURCE: Sample of entries in Registro de la propiedad raiz de la sección de occidente .

Table 27 Total Distribution of Land in the Western Provinces, 1882–1885

 Area # of Plots % of # of Plots Aggregated Area of Plots % of Total Area

0–5 82 51.57 190.182 3.11

5.01–100 62 38.99 1,167.720 19.08

>100 15 9.43 4,762.100 77.81

Total 159   6,120.002  

SOURCE: Sample of entries in Registro de la propiedad raiz de la sección de occidente .

de predios rústicos was passed. By that law the government gave away its rights on former ejidos and
communal lands to those who occupied them in good faith.[57]
Evidence from the land registry indicates that the privatized land was not equitably distributed. But this
was not by any means a new feature in the Salvadoran landscape. A study of the size of private plots and ejidos
in our sample shows a great degree of inequality in both categories. Most plots were under 5 hectares, but most
of the agricultural land of the country was in larger estates of more than 100 hectares (see tables 24–27). [58] In
the case of the ejidos 73 percent of the land was given to 5.68 of the new owners whereas the 50 percent less
fortunate scrambled for a share of 3.45 percent of the land. Private land was distributed in a similar fashion.
The larger estates, 14.51 percent of the total, accounted for 81.9 percent of the land, whereas plots under 5
hectares, 54.83 percent of the total, accounted for 2.64 percent of the land. Multiple ownership was more likely
to occur in the case of larger estates than in the case of smaller ones. This suggests that the reforms reinforced a
trend
 ― 151 ―

that was already very well established: they brought nonprivate land into line with the rest of the country.
Ejidos and communal lands were already on their way out; the pressure of export agriculture was already
eroding traditional forms of land tenure. The generalized inequality in land distribution may not have
originated with the liberal reforms, but the reforms certainly helped to make the phenomenon lasting. By 1950
the situation had not improved. According to that year's census only 1.17 percent of all the agricultural
properties in the country were greater than 100 hectares, but they accounted for 50 percent of the arable land.
By contrast, 42.56 percent of the properties were under 5 hectares and accounted for only 11.62 percent of the
arable land.[59] By an overwhelming majority, the people who claimed land described themselves as agricultores
or jornaleros (day laborers), but the reforms opened up opportunities for other people. Among those who
claimed to have rights to ejidos and common lands one finds construction workers, blacksmiths, teachers,
merchants, lawyers, physicians and, in the case of one of the largest claims, a field marshal.
The liberal reforms did not affect 40 percent of the Salvadoran territory, were not the beginning of land
concentration or of minifundios , and were not indispensable for the expansion of coffee production. But no
matter how much one may qualify the argument, they still stand out as a highly symbolic event in the economic
and social history of the country. They epitomized and accelerated the changes that took place in the nineteenth
century: the opening of the economy, the strengthening of an elite, the emergence of a numerous landless
peasantry, and the increasing importance of coffee production. The reforms were not imposed to achieve
economic efficiency, nor did radical redistribution of land achieve more growth than what a slower and more
equitable process would have accomplished. The reforms arose from the struggle between different social
groups to claim the benefits of the land, and not from the efforts of an enlightened minority to increase the
efficiency of the economy.

― 152 ―
7
A Land of Coffee Planters
In the last two decades of the nineteenth century, the structure of agricultural production in El Salvador
changed substantially. As coffee exports increased, the Salvadoran economy was opened to the rest of the
world. Not only coffee became the most important cash crop, but exports in general became a more important
part of the economy. By the 1880s land scarcity had become a serious problem, but by that time the scarcity of
credit and entrepreneurial talent had already helped to consolidate an elite; the liberal reforms followed.
Changes in international markets, together with the liberal reforms, had transformed the country. Coffee's share
to total exports increased from 59 percent in 1882 to 83 percent in 1900, and coffee became the main source of
income for members of the ruling class. In 1895 a majority of the members of the Salvadoran legislature were
coffee planters.[1] The elite was small and mostly white; whites of Spanish origin were estimated to be about 8
percent of the whole population, and they were "the exclusive office holding and law making class." [2] With the
profits generated by coffee exports they acquired a veneer of modernity. [3] The new face of the country was
presented to the world at the Exposition Universel in 1889. It was not a contradiction that to finance the exhibit
money had to be borrowed from Lazard, Frères & Co. [4] For its inhabitants the country seemed to have gone a
long way, but in order to display its prosperity to the rest of the world it had to ask for room in the Mexican
pavilion and to borrow money from a French banker.
Politics changed as a result of the expansion of export agriculture.

― 153 ―
Liberals reigned; the old conflict between conservatives and liberals was gone. Liberal ideas inspired the 1886
constitution, the most influential constitution in the history of the country. [5] The main political issue was to find
the best way to protect the coffee planters. President Ezeta (1890–1894) was overthrown when he mismanaged
a financial crisis and dared to double the export duty on coffee. His successor, Rafael Gutiérrez (1894–1898),
repealed the tax. Gutiérrez was overthrown when the drop in coffee prices in 1898 led to a financial crisis that
he could not handle. From 1898, when Tomás Regalado (founder of one of the legendary catorce familias )
overthrew Rafael Gutiérrez, to 1931, there were no coups d'etat and all the presidents were coffee planters.
Politicians still plotted to obtain power by staging a coup, but none could find enough support from an elite for
whom stability had acquired a new value. The only unsavory incident that affected the presidency during that
period was the assassination of President Manuel Enrique Araujo. The motives of the crime were never cleared
up, but insistent rumors linked it to business rivalries rather than to ideological differences. There was a sort
of pax coffeana . The reasons for this stability have been suggested above—the elite had a firm grip on power
and required stability to maximize profits. Undoubtedly there were tensions within the elite, but the interests of
most of its members were very similar.
All the elite families were committed to foreign markets; the organization of coffee production was more
homogeneous than the organization of indigo ever had been. As coffee was more valuable and more labor
intensive than indigo, the losses from taking labor away from productive activities could be very high. The
American vice-consul, reporting on the coup that brought Regalado to power, illustrated this point:
All business is at a standstill and as this is the time of picking coffee and no male coffee pickers can be had, and all horses, mules, carts, and
oxen are pressed in for military service, the loss to the coffee planters will be very great.
At the end of the coup he reported:
It is very fortunate that this revolution is ended as the coffee season is about to commence and if it would have lasted a month longer the
greater part of the coffee crop would have been lost.[6]
The incentives to maintain stability were higher than ever before and were shared by all those who had
the capacity to cause trouble to the government. The restless military found an outlet in conflicts with other
Central American countries, but all disruptions of peace in Central
 ― 154 ―

America were rapidly checked. Due to the new importance of foreign trade and to interest in a canal through
the Isthmus, the United States government regularly intervened to restore peace in the region and promoted
peace conferences that culminated in the Washington Treaties of 1907.
The new century was born under the sign of coffee. Every crisis seemed to reinforce the power of the
elite of coffee planters. After the crisis of 1898 there was no question, the planters were there to stay, their
interests became law. From then on they ruled the country uncontested until 1931 when they began sharing
power with the military.

Foreign Trade
Exports increased rapidly in the last three decades of the century (see tables 19 and 20). [7] Although indigo
production declined slowly, coffee production took off with zest. Indigo exports reached a level of 2,069,100
pounds in 1871, and in 1896 they had gone down to 1,277,293 pounds. In comparison to indigo's decline coffee
grew vigorously. Using the same years to compare, in 1871 a total of 4,471,300 pounds of coffee was exported,
while in 1896 that figure had increased more than fivefold to 25,266,134 pounds. [8] It is clear that the growth of
coffee was not all at the expense of indigo. Some of it was net growth and some was at the expense of other
economic activities. In fact, the average yearly growth of total exports between 1870 and 1895 was 3.5 percent,
a faster rate than would be reasonable to expect from the economy as a whole. [9] Although there were
significant ups and downs in imports and exports, the economy was becoming increasingly open.
The move from indigo to coffee and the service provided by the Panama Railroad permitted a
diversification of trading partners. During the first half of the century it had been necessary to rely mostly on
the British vessels that arrived at Belize or on the occasional ship that visited Acajutla. Not surprisingly Great
Britain had the virtual monopoly of the country's foreign trade. After 1855 there were more alternatives. At the
Colón terminus of the Panama Railroad there were British, French, German, and American steamships and
sailing vessels waiting to take goods to every corner of the world. Moreover, the rapid growth of California
provided a formidable market on the Pacific coast. By the end of the century Great Britain was just another
market for Salvadoran products, at the same level as Germany or France. The United States, by contrast, was
taking a clear lead. In 1892 it received more than 40 percent of Salvadoran exports, the greatest share of which
went to

― 155 ―

Table 28 Direction of Exports for Selected Years (in percentages)

Year U.S. G.B. Germany France

1883 25.32 37.75 16.86 8.73

1887 27.39 29.14 13.15 14.49

1892 42.13 11.67 11.52 13.96

1895 31.71 11.73 17.21 22.56

SOURCES: Great Britain, Parliament, Parliamentary Papers (Commons), 1886 , vol. 66, "Commercial Reports," p. 533 (of the report); Great Britain,
Parliament, Parliamentary Papers (Commons), 1889 , vol. 90, "Diplomatic and Consular Reports on Trade and Finance," p. 4 (of the report); Great Britain,
Parliament, Parliamentary Papers (Commons), 1893–94 , vol. 96, "Diplomatic and Consular Reports on Trade and Finance," p. 7 (of the report); Bureau of the
American Republics, Commercial Directory , p. 564.

California (see table 28).[10] California exports were reported separate from exports to the rest of the
United States from 1886 to 1889, and during those four years the share of California was never below 65
percent (1887) and could be as high as 84 percent (1889). Most of the revenue generated by the rapid
expansion of exports was used to buy manufactured goods, textiles in particular. During the last quarter of the
century textile imports accounted for one-half to one-third of yearly imports. No other category of imports even
approached them in importance. Machinery, for example, never reached 5 percent. All other items such as iron
tools, liquor, flour, drugs, earthenware, glassware, books, and furniture were imported in minor quantities. The
Salvadoran elite did not engage in lavish shopping; an analysis of imports leaves a distinct impression of
frugality, of a country buying basic things that it cannot produce. [11] In the case of imports, England lost ground
to other trading partners, but in a lesser amount than in the case of exports. Up until 1892 the English, the
leading producers of textiles, were still ahead of the Americans when it came to imports. That year 32 percent
of total imports came from England.[12]
The expansion of exports benefited from the liberal reforms and, at the same time, contributed to
reinforce their results. Coffee exports produced revenue to finance armies, public works, and even schools.
There was a sense of direction, and the direction was given by the coffee industry. After land was redistributed,
labor had to be organized differently, banks had to be created, trade had to be rechanneled. At the same time, it
did not take long before the country was reminded of the disadvantages of an open economy.

― 156 ―

Labor
As the economy was growing and becoming more open, labor became less and less able to reap the benefits of
the newly found abundance. Population growth and land redistribution greatly increased the amount of labor
available. This was in marked contrast with the first half of the century. "Labor is fairly plentiful," wrote an
anonymous planter, "it seldom being necessary to hunt up work people for an estate justly
managed."[13] Laborers kept moving from farm to farm, and few of them found permanent jobs. They were
"constantly on the move, working here one, two, or three weeks and then passing to another estate." [14] Years
earlier, peasants found temporary work in indigo haciendas and spent the rest of the year in their ejidos or
communal lands; by the end of the century that option was not available any more. Patterns of labor migration
that later became a hallmark of rural life in El Salvador were developed during this period.
The abundance of labor made life easy for the planters. Finding people to work on a plantation was very
simple. On Monday mornings the administrator rang the bell of the finca to call those interested in working.
Then, he allocated the different tasks according to the agricultural needs of the moment and selected a few as
day laborers to carry out miscellaneous jobs. Each finca had a few men employed by the month to take care of
regular administrative and housekeeping activities in addition to one or two foremen, a cattleman, a house
servant, a stableman or two, a cook, and the like.
Working days were long, from 6 A.M . to 5 P.M . Work was from Monday to Friday. On Saturday
mornings the foremen and the administrator received the completed tasks. Afterward, the workers returned
their tools to the store and, at three in the afternoon, they waited in line to receive payment. Food was part of
the compensation. The composition of the diet had not changed much during the century: "The food served to
the ordinary workman," wrote our anonymous planter, "consists solely of tortillas and frijoles." [15] There were
two meals a day, and the normal ration consisted of two tortillas and a handful of beans. Women received
smaller tortillas. If a worker had to work at night, he or she received double pay and an extra meal. The average
daily cost to the planter to feed each worker was between one-quarter and one-half real. The planters made sure
that nobody had a second ration; before going to the kitchen each worker received a token that could be
exchanged for a meal. The system was also useful to put a check on the cook. To supplement their diets
"laborers always look for a farm well supplied with fruit trees, the produce of which they eat in great quantities
and in

― 157 ―

a perfectly green state, which however seems to do them little or no harm." [16]
In 1886 wages were still two reales per day (one and a half reales in remote estates), the same as in 1858,
but maize prices were considerably higher.[17] In 1858 the average cost of the fanega of maize was 1.86 pesos
(see table 15), and by 1885 it had increased to five pesos. Permanent laborers were slightly better paid; monthly
wages were between eight and ten pesos. Cooks, servants, and cattlemen had similar wages. A second foreman
earned twelve pesos, and a first foreman between twenty and thirty pesos, while finca administrators earned
between eighty and one hundred pesos per month. This wage structure illustrates the peculiarities of the new
labor market that had developed after the liberal reforms and the introduction of coffee. Administrators gained
in importance in the bigger plantations; they were needed to organize more complicated tasks and a larger labor
force. The wage difference between administrators and common laborers shows the importance of the role of
the former; an administrator could earn ten times more than a simple peasant. It was difficult to find a person
with skill; the planters themselves were not always very able. In the view of an observer:
[T]he greater number of planters both of coffee and sugar, and I may include maize, beans, and tobacco, are equally and in many cases more
deplorably ignorant than their work people, who are for the most part an industrious, sober and peaceable set. [18]
Real wages were definitely lower in the 1890s than in the 1850s. The purchasing power of the nominal
wage of two reales had diminished considerably with the increase in the price of maize, the primary component
of a peasants diet. The fact that workers received meals as part of their remuneration did not offset the increase
in the price of maize because they still had to feed their families. It is clear that peasants, abundant in numbers
and dispossessed of their lands, had less bargaining power than before. The subordinate position of peasants
and the greater social control exerted by the elite contributed to depress wages. When it was necessary to
recruit large numbers of cheap labor to fight locust plagues, rich landowners induced the government to
literally conscript workers, "even at bayonet point." In those cases, "each of the involuntary toilers is paid a real
per diem, a sum supplying tortillas and frijoles enough to sustain life." [19] This was a wage clearly below the
market rate of two pesos plus food.
The system of advancing wages inherited from the colonial era was still alive.

― 158 ―
The system that has been and still is in vogue in these Republics of advancing money to work people on account of work to be done, in an
indiscriminate and careless manner, has done much harm to both workman and master. In nearly all cases the master loses both his money
and workman, while the money advanced is spent by the latter in some game of chance or in drink. [20]
Men who worked in the countryside dressed very simply—unbleached calico shirts and trousers, and no
shoes. Their complete wardrobe consisted of two such suits. They also had a rough cotton sheet to wrap
themselves in at night. A workman spent between ten and twelve pesos in clothing a year. Housing was as
frugal as clothing and food. The planter provided laborers with free housing, but the dwellings were of the most
elementary nature: a thatched roof and dirt floors were all that peasants were offered.
Direct hiring was not the only way to obtain labor services. There was also a lease arrangement that was,
in the final analysis, a form of recruiting labor. Large plantations had the custom of giving land to any
"respectable man" who wanted to cultivate it. Virgin land was loaned for one crop, and no monetary payment
was required; the only payment was clearing the land. This arrangement was convenient for the owner because
he did not have to worry about labor supervision and administration, and he did not have to be concerned with
the uncertainties of agricultural production. The only cost for the owner to have his land cleared was the
opportunity cost of not being able to use a plot of virgin land during one year. A few laborers were allowed to
live on the plantations all year round, and they (the so called colonos ) were given small plots of land to
cultivate maize or beans. In that way the planter had access to stable year-round labor.
Agricultural tasks were carried out with the simplest tools. A machete, a large hoe, and a bill hook were
the most used implements. Machetes, then as today, had various uses, from pruning to clearing the ground.
Ploughs were made with "a triangular piece of iron about four inches broad at the base fastened to a pole."
They were rudimentary and could not dig very deep into the soil. Larger plantations used American ploughs.
[21]
 Irrigation was unheard of. Consul Tunstall replied to an inquiry of the Department of State by reporting that
"... no system of irrigation is practiced in this consular district or in the Republic of El Salvador." [22] Fertilizers,
natural and artificial, were seldom used. The most common agricultural practice to recuperate the soil was to
"burn all the weeds and refuse on the fields and to spread the ashes from the furnaces, and the skimmings and
settlings from the [sugar cane] juice treated with lime."[23]
 ― 159 ―

Whatever the appearance of backwardness in the rural sector, Salvadorans had learned how to produce coffee
and did it well. Large labor gangs were organized to carry out complex tasks. As discussed above, one of many
possible ways was chosen to organize production in the countryside. The one chosen carried great social costs.
It was not only a productive activity that was taking shape, it was a society.

Credit and Money

Coffee cultivation changed the organization of agricultural units and the relationship between landlord and
laborer. It also influenced credit institutions. Partly because of economic growth and the overall modernization
of institutions, and partly because of the specific credit demands of coffee cultivation, banking developed
rapidly and in a disorderly fashion during the last twenty years of the century. Whereas in 1880 there was only
one bank, in 1898 there were six.
Capital was scarce relative to the other factors of production, but the situation improved with the
increase in foreign trade. Coffee planters obtained the credit necessary to invest from their European buyers,
and the local banks expanded their activities thanks to the deposits of the planters. Nonetheless, the country
was in great need of capital to increase the production of coffee. A good illustration of the scarcity of capital
relative to labor can be found in the advice given by the American consul to prospective immigrants.
There are at this present time very first-rate opportunities offering to men of industry and sobriety who will put a little intelligent work into
the land. Men of this description with a moderate capital of, say five to fifteen thousand dollars, are the men required here. At the same time
others with smaller capital have very great advantages of making money from the outset; but those who come merely seeking work will find
themselves hopelessly miserable.[24]
Foreigners were desirable as long as they came with capital and skills. Most often their skills were their
greatest asset. Human capital was the scarcest kind. In fact, the immigrants who found success in El Salvador
were those who followed the pattern suggested by Consul Duke, including Duke himself. At the end of the
century a few foreigners with skill, capital, and business connections in Europe and the United States resisted
the temptation to go to Argentina or other more promising places and settled in El Salvador. By and large they
had successful careers (more on this later). By contrast, those immigrants who had only their labor to offer had
a very difficult time. American consular reports were

― 160 ―

full of appeals to the Department of State for funds to protect destitute Americans. Many went to Central
America in the hope of finding jobs in railroad construction:
They all claim to have been induced to come here by reports of extensive railroad building and good wages, either in Salvador or some other
country, and when they discovered their mistake, they had no means to return. [25]
El Salvador was not an Argentina full of resources and empty of people. However, the people who lived
in the country had not had much of a chance to acquire an education and needed help to do many of the things
necessary to achieve their dream of progress.
The lack of educated people made it difficult to organize complex economic activities that required
specialized skills. One of those activities was banking. Before the first bank was founded in 1880 there were no
financial institutions to speak of. Money was lent by private individuals at high interest rates, and mortgages
were difficult because of the prevailing uncertainty over land ownership. [26] Many efforts to establish local
banks failed. Nobody in the country quite knew how to operate a bank and, anyhow, there was no capital to get
one started. It was necessary to find a foreigner courageous enough to take a high risk in a country where
political stability was not guaranteed, that had no well established export product, and where land rights (and
therefore the possibility of mortgages) were not always clear. The first brave man was William Kelly, an
English merchant who in 1867 signed a contract with the Salvadoran government to found a bank. [27] Despite all
the guarantees offered by the local authorities Kelly's effort failed. After the 1867 attempt every administration
tried to find foreign capitalists willing to establish a bank. Five years later, for example, the next administration
sent a special agent to England to negotiate the subscription of stock to finance the operation. Contracts were
signed with Don Francisco de Paula Suárez in 1874 and in 1877. Don Francisco tried to raise funds and
published a pamphlet publicizing the virtues of the young and promising Republic but, again, there were no
results.[28] At last, in 1880, the first successful bank, the Banco Internacional, was founded. Don Francisco's
pamphlet, after all, was not altogether baseless.
Before the end of the century six more banks had been authorized and, although not all of them were
successful, the survivors prospered rapidly. Thanks to the development of the coffee industry and to changes in
land tenure it was finally possible to make a good profit out of banking. Given the direct link of banking to the
growth of the coffee industry, it is not surprising that two of the banks had their headquarters

― 161 ―

in the western provinces.[29] The origin of the funds used to create the new financial institutions is not clear,
although in the last resort they were possible thanks to the revenues generated by coffee. Important planters did
not have the skill to run banks, but they participated in their organization and were their main stockholders.
Following the pattern set by other complex economic activities, all banks had at least one foreign partner or
manager.
If the Salvadoran financial system was found slow and imperfect, the option of borrowing money from
abroad was always open. The bad credit of the early years of the federation was, in every sense, a thing of the
past. As soon as exports began to grow, El Salvador improved its credit standing by settling its portion of the
federal debt. In 1861 the government made an arrangement with George B. Kerferd & Co., a Liverpool house
that did business in El Salvador, by which Kerferd & Co. agreed to pay the balance of the debt in exchange for
exemptions in customs taxes. The system worked quite well, and in two years the full debt of 405,360 pesos
had been covered.[30] This was an indication of the changing economic environment and of the extent of
business of Kerferd & Co. in El Salvador.
In order to finance their production costs, small planters sold their crop in advance to companies such as
Kerferd & Co. There was no guarantee other than the crop, and the price was fixed at the time of the purchase.
One of the advantages of this system was that the producer was insulated from the fluctuations of the
international price. The system, known as habilitación, could be quite profitable for the buyer. In some
instances he paid as little as 50 percent of the final value of the crop. [31] This figure of 50 percent was not strictly
the interest rate since it implied a portion of price speculation, but it gives an idea of the scarcity of credit.
After the liberal reforms the use of mortgage credit became more common. In 1860 there were 154
mortgages outstanding in the central region, guaranteeing an average loan of 1,292 pesos. Thirty-three years
later the same region registered 508 mortgages outstanding guaranteeing an average loan of 2,966 pesos.
[32]
 Undoubtedly, the creation of a land registry and the existence of more reliable land titles had made mortgage
lending more attractive. As Salvadoran businessmen became more sophisticated they began to approach
European investors at the source. A good example of this is the Salvador Coffee Estates Company, Limited; a
company registered in London in 1887 listing an address in the heart of the City of London. The company
raised a capital of £50,000 to buy a coffee plantation in Santa Ana province. One of the thirty-four shareholders
was José Francisco Medina, a pillar of the coffee establishment who seven years earlier had founded the Banco

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International.[33] Another instance of this practice was the Santa Ana Central Coffee Company registered in
London in 1900. In that case the company was formed by the owners of Alvarez Hermanos, a Salvadoran
company, as a device to mortgage their property in El Salvador, five plantations in the heart of the coffee
country, and borrow money in London. (Incidentally, the properties were mortgaged to two of the English
shareholders of Salvador Coffee Estates Company who were well acquainted with the value of the
plantations.) [34] Money advances to coffee planters remained common throughout the century. When in 1898
the crop was threatened by General Regalado's coup d'etat, British merchants with operations in El Salvador
became concerned. They asked the Foreign Office to safeguard their interests by sending a warship to the coast
of El Salvador. It was, they observed, "the season when the coffee crop is being prepared for shipment in which
British merchants are largely interested in consequence of their advances of money to the planters." [35]
Financial operations were carried out in an environment with few constraints beyond the naked market
forces. As the country lacked a monetary unit its money market was completely open. Before the creation of
local banks and the introduction of paper money, the country had to rely on money minted abroad. Thus, the
value of the peso, a remnant of the colonial period, was entirely determined by the market, and there was no
local monetary authority. A limited number of coins had been minted during the federal period, but they were
very rare.[36] Chilean, Peruvian, Bolivian, Guatemalan, Honduran, French, English, and American silver coins
were used for most transactions. Gold was scarce and was used to pay English and German balances. [37] More
primitive forms of currency were still in use. "Cut money" or moneda macuquina (roughly cut coins with a
stamped seal, a remnant of the colonial period) and even cacao beans and eggs were used until the 1880s. [38] The
result of this virtually unregulated system was a considerable amount of confusion. Money was debased,
abused, falsified, hoarded and, sometimes, used properly. (In 1874 the Juzgado de Hacienda reported that six
out of eighteen criminal cases tried in that court were for money falsification.) [39] Even cacao beans were
falsified with clay. Eggs, however, were not easily falsifiable, but they entered into circulation as soon as they
spoiled, thus giving a new twist to Gresham's Law.[40] Small change was so scarce that the one-quarter real coins
(cuartillos) were cut in half creating a tiny crescent-shaped coin that received the nickname of "finger nail." [41]
The public sought protection against fraud. Only round money (as opposed to "cut" money) was
accepted in important transactions.[42] Yet, the decrees trying to regulate currency that were issued regularly

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throughout the century are a constant reminder of the persistence of the problem. It was necessary to bring
order to the system. Efforts to establish a mint and a national currency went parallel to the efforts to establish a
bank. They faced similar problems: lack of knowledge and lack of capital. A decree was issued in 1869 (two
years after the first contract to set up a bank) authorizing the executive to establish a mint. The executive did
not follow through.[43] It may have been difficult to find the expertise and the capital necessary for the operation,
but it was always possible to legislate. In 1883 a monetary law was passed fixing standard weights for the
silver and gold coins to be minted in the future, but the law had to be shelved for nine years until a mint was
built and equipped. Things began moving faster in 1891 when the Syndicat Général de Monnaie, a French
company, was given a concession to build a mint. The concession was transferred to a British company, the
Central American Mint Limited, and a modern facility was inaugurated in August of 1892. The operation was
under a British manager and was hailed by the British consul as "most creditable." [44] Everything was ready to
coin gold and silver according to the regulations established by the 1883 law and to solve the vexatious
currency problems.
By 1892 the expansion of coffee exports, that is, the increased opening of the economy to world markets,
had permitted the creation of modern financial institutions and the beginning of a national money market. The
country was all set to pay for the consequences. At the same time that the mint began its operations the world
price of silver was sharply falling. Gresham's Law came into play, and gold went out of circulation. Since by
that time Europe and the United States had already adopted the gold standard, importers faced serious
difficulties. Having no experience in these matters the government of General Ezeta did not quite know how to
react. The legislature was called to an extraordinary session early in September of 1892. Before it met, a
committee of citizens gave a report on the problem and recommended prohibiting the importation of foreign
silver coins, reminting the coin in circulation, and accepting silver in circulation on a par with gold. [45] When the
legislature met a week later the executive proposed adopting the gold standard, but the committee that studied
the proposal, after consulting with prominent bankers and coffee planters, modified it to the point of making it
unrecognizable. The committee was dismissed and a new one was appointed to study the problem all over
again. In the meantime the full legislature decreed the creation of a new monetary unit, the "Colón," to
celebrate the four hundredth anniversary of the discovery of America. The new unit was a silver peso. It was
clear that the president was facing a strong opposition to his gold-standard project.
At the end of September the gold standard was forced through. The

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timing could not have been worse; silver prices were so low that people preferred to hoard their gold and use
silver as currency. To encourage the use of gold the law said that 70 percent of customs taxes had to be paid in
gold (with the exception of the coffee export taxes; political suicide had to be avoided). [46] The plan did not
work well at all. Merchants would rather stop imports than part with their gold; it was the beginning of a
confrontation. A new decree issued in April of the next year insisted on the gold standard and raised the
proportion of the customs tax to be paid in gold from 70 to 85 percent. In March the proportion was raised to
100 percent, but one week later, undoubtedly after strong political pressure, it went back to 85 percent. The
importation of foreign silver coins was prohibited, but the planters refused to put in circulation the gold that
they had received from the sale of coffee.
Imports plummeted together with government revenues. At a time when the trend of exports was very
positive, imports went from 3.2 million pesos in 1891 to 1.8 million in 1893.[47] The treasury had difficulties
meeting the payroll and was angry at the coffee planters. Nobody wanted to use gold and, since import taxes
were the main source of revenue, the government coffers were empty. In March of 1893 the Salvadoran
legislature, based on the "alleged fact that the rich do not pay taxes in the same proportion than the poor,"
raised the duty on coffee to two dollars per quintal payable in silver. [48] A new extraordinary session of the
legislature was called in May. A decree was issued according to which import taxes had to be paid 100 percent
in gold or (and this was the catch) its equivalent in silver. This was a concession, but at the depressed prices of
silver it resulted in outrageously high taxes. It was an untenable situation, and import taxes were lowered, still
payable in gold or its equivalent in silver. It was not enough; government coffers were empty. On June 27 a
new tax was created: a property tax at a rate of two per thousand. There were consequences; a military uprising
in the western provinces, the stronghold of the planters, had to be crushed July 3. Tension was mounting, but
the government was prepared: before the crisis it had spent 2 million pesos on weaponry. [49] The unavoidable
coup d'etat was delayed for one full year. In January 1894, a new tax of 25 cents gold per quintal imported was
decreed by the president. The proceeds from this last tax were to be applied to the building of the new railroad
from La Unión to San Miguel. A tax on urban property and two new taxes on coffee were too much for the elite
of coffee planters and, because "the people were tired of military rule and restive under the heavy taxes
imposed for railroads and other internal improvements," the government of General Ezeta was overthrown in
June 1894 by the legendary "forty-four."[50] (To date they are remembered fondly; General Ezeta's memory, by
comparison, is tainted by his efforts to impose
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taxes on the planters.) Once the old general was gone, the new president, General Gutiérrez, reduced the tax on
coffee exports from 2.25 dollars gold to less than 30 cents per quintal and repealed the property tax and the
gold-standard legislation.[51] The price of silver had already recovered, coffee exports doubled, imports went
back to their 1892 level, and three new banks were chartered in 1895. It was a swift recovery; obviously
productive capacity had not been damaged, and Salvadoran exports were producing a good profit. But the
financial uncertainty and the political struggle had created great distress.
It was a story of sheer ineptitude on the part of the government. It is not clear whether the conflict
between the planters and General Ezeta was the result of philosophical differences or of the chain of events.
[52]
 At any rate the crisis was misunderstood and mismanaged from beginning to end. No single actor in the
whole affair could be accused of economic insight or of political subtlety. The succession of decrees and
counter-decrees issued by the government and the adamant resistance of the planters created a situation of
uncertainty under which hoarding was the only adequate response. Wide currency fluctuations were a new
phenomenon brought about by the openness of the economy, and the country was not prepared to react to them.
Nobody understood the problem, and there were no institutions to deal with it. (If the country had adopted the
gold standard before the fall of silver prices there would have been no problem.) The main lesson was political
in nature. Coffee planters had proven that they could use their economic power to bring a government to its
knees. This strong political lesson had an economic implication: there was no easy way to carry out monetary
reform without affecting powerful interests. After a faint effort in 1897 El Salvador had to wait until 1919 to
carry out a monetary reform. Meanwhile the confusing monetary situation, with coins from all over Latin
America, mixed with bank notes and government bonds, persisted.
This laissez-faire environment had permeated every corner of the financial system. Banks operated with
minimum constraints and prospered as long as the coffee market was in good health. Their owners and main
customers were coffee planters. In years when coffee prices were good, deposits increased and banks were
eager to find borrowers. There was a boom mentality. "Money was plentiful, crisp new bills were accepted
everywhere, large dividends were paid, everybody was hungry for bank stock." [53] Even in 1893, in the midst of
the gold-standard crisis, business was very good.[54] After all, the gold-standard crisis had not affected the
productive capacity of the country or the value of its exports; people were betting on the future. A greater
problem was faced in 1897 when a drop in coffee prices brought the financial system to the brink of disaster.
Coffee prices had a positive trend between 1886 and

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1896 (see table 19, chap. 5), and production was also increasing. The shock came when prices in the
international markets dropped sharply in 1897. Prices at Le Havre were cut in half from 71 to 34 francs per 50
kilograms. In New York the price went from 6.65 to 4.6 cents per pound. Inside the country the price dropped
from 32 to 12 pesos per quintal. [55] The sharp fall was followed by a slow recovery: the trough of the
international price of coffee was reached in 1903, and it did not fully recover until the 1910s.
El Salvador's incipient financial institutions were ill prepared to face the new situation. Planters found
themselves short of money and were not able to pay their loans. By law, banks were supposed to keep 40
percent of deposits in their vaults, but they did not respect their charter. When it was apparent that they had a
cash crisis, there were runs on the banks. They could not sustain the pressure, and four out of six banks in
operation went bankrupt. The government was unable to obtain foreign loans. Planters who in the past "could
command any loans that they required" could not borrow money. [56] It was a new experience. The institutions
that had come to life thanks to the prosperity were put to the test. Foreigners were accused of keeping coffee
prices low, while merchants were accused of sending silver out of the country. [57] Currency went out of
circulation, and even eggs were scarce as currency. Small transactions were settled with candles. [58] There were
rumors of a coup d'etat; some planters expected that with a new and more responsible government, coffee
prices would go up.
The government was hesitant about the proper course of action. Its revenue had decreased, and it had no
financial means to support its current operations or to bail out the ailing banks. General Gutiérrez knew very
well the wrath of the planters; he had led the rebellion against General Ezeta after the gold-standard debacle.
Early in January of 1898 he issued a decree accepting bank bills in payments to the state and exempting banks
from payment of their obligations in silver. In one stroke he managed to worsen the government's financial
problems and to further weaken public confidence. Later in the month the decree was suspended for eight
months. In April the policy was reversed and a new decree forced the banks to redeem their notes in silver. The
crisis was averted when banks imported currency to meet their obligations. [59]
The financial crisis, external in its origins, was worsened by the extreme liberality that the banks had
shown in their operations during the years of prosperity. According to the American consul, they had "left aside
all usages and well-defined laws in banking so that they became mere speculative institutions, hunting
borrowers right and left and giving them unlimited credit."[60] Nonetheless, interest rates remained high

― 167 ―

even in the most competitive years. Banks charged up to 24 percent per annum, which also suggests the
possibility of inflation.[61]
In the midst of the crisis the presidents of El Salvador, Honduras, and Nicaragua signed the pact of
Amapala, which was supposed to be the first step to the reunion of Central America. The pact, rather than
distracting those who were actively planning to topple the government, provided them with political
ammunition. General Regalado, the main conspirator, argued that the financial burden of the union would fall
upon El Salvador at a moment when the country could ill afford it. Regalado overthrew General Gutiérrez in
November 1898. That was to be the last coup d'etat for thirty years. He came to power at a time of financial
crisis, but the strength of the ruling class proved to be unshakable.
As it had been proven during the gold-standard crisis, the government was extremely vulnerable to
external shocks since most of its revenue came from custom taxes. The boom mentality that had prevailed in
the banking industry was also present in government operations. In 1886 the total value of exports had been
4,754,649 pesos, and it more than doubled to 9,745,000 in 1896. Government revenue went up from 3,635,251
pesos in 1885 to 10,174,000 pesos in 1886. The rise had been rapid, and the fall was painful. The decline in
coffee prices was sudden, and the economy had a difficult time adjusting to the new realities. In 1898
government revenue was down to 4,609,630 pesos, less than half that of two years earlier. It was necessary to
cut expenditure in every possible way. In January the legislature suspended payment of interest on the national
debt.[62] Jails were emptied, police services were reduced, even the music bands were dismissed. The
government's printing office had to close because its employees had not been paid in five months. [63] No sector
of the population remained untouched: in the capital, university students insulted the government; in the
countryside, Indian groups, still sore after the liberal reforms deprived them of their lands, rebelled and cut off
the hands of judges.[64] Many of the consequences of the crisis went unrecorded since General Regalado, as a
money-saving measure, dismissed the employees of the statistics bureau (a fact that accounts for the lack of
economic data for El Salvador for the years 1898–1900).[65]
The nineteenth century was a period of almost absolute freedom in terms of fluctuations in exchange
rates and monetary arrangements. The intervention of the government in the money market had been limited to
issuing bonds to finance the budget and to occasional forced loans to finance military adventures. Not until the
last two decades, with a larger and more open economy, did money-market fluctuations become a

― 168 ―

serious problem, a problem that could topple governments. As the fate of Generals Ezeta and Gutiérrez prove,
by the last decade of the century the coffee Republic was a full-fledged reality. Coffee planters remained in
power until 1931 without having to face serious challenges from within the system. The economy recovered
slowly and the government, unable to raise enough revenue, operated with deficits until the end of the century.
Coffee exports remained high in terms of quantity, but the price was still depressed. Exports of indigo were
waning, and its price was falling steadily. But, after all, the basic trends of the Salvadoran economy remained
unchanged. The era of the coffee planters was here to stay, warts and all.

Communications and Transportation

The increase in exports that characterized the last quarter of the century demanded better communications and,
at the same time, provided the funds for it. The economic geography of the country had changed, and roads,
railroads, and ports reflected the new reality. During the indigo years the eastern part of the country had been
the economic center. The fairs of San Miguel and San Vicente were a must for buyers and sellers, and the port
of La Unión was the most active in the country. With the ascendance of coffee the western provinces gained in
importance; La Unión was replaced by Acajutla and La Libertad. At the end of the century new roads were
built to Santa Ana province and its environs, the heart of the coffee region.
Links with the outside world were most important. It was not only a matter of roads and ports;
information had to travel fast to take advantage of changing markets. A young American by the name of
Billings was hired to install the first telegraph linking San Salvador and the port of La Libertad. The line was
inaugurated in 1870. Soon the service was extended to the port of Acajutla via Santa Ana, Ahuachapán, and
Sonsonate. In a few months every port could use the telegraph to communicate with the capital. Four years
after the inauguration of the first line, the service became international when a new line establishing
communications between El Salvador and Guatemala was installed. By 1882 there were fifty-four stations in
the Republic and "no town of the least pretension" lacked telegraphic service. That year cable communication
with the rest of the world was established. No one missed the commercial significance of the improvement in
communications. When the cable service began, the official newspaper commented that "nowadays our
exporters of indigo and coffee can learn the prices of those products day

― 169 ―

by day and as a consequence they can place the proper orders," thus avoiding commercial losses. A new
dimension of the usefulness of these services was discovered when in 1885 El Salvador went to war with
Guatemala and a few weeks later when General Menéndez overthrew President Zaldívar. Thanks to the new
technology it was possible to mobilize troops more efficiently and to add a new twist to those ancient games.
But there was more to come. General Menéndez, presumably pleased with modern advances, introduced
telephone services in 1888.[66]
Despite changes in government, roads improved rapidly. In 1880 there were 128 cart-roads with a length
of 575 leagues. That same year a new road was being constructed between San Salvador and Santa Ana, the
most prosperous city in the coffee region (by 1887 about one-third of the production of coffee was marketed in
Santa Ana).[67] Every stage in the network had to be improved and there was plenty of room for progress. As the
country lacked local talent to carry out complex public works projects it was often necessary to hire foreign
companies. American companies such as the "Pacific Bridge Company" obtained contracts to build iron
bridges and piers.[68] By the end of the century the country had over 2,000 miles of good roadway, and its roads
were considered to be "far superior to those of most Latin American countries." [69] It is not necessary to
exaggerate the accomplishments of this period. The roads were not macadamized and had to be repaired after
every rainy season. With the improvements, however, the cost of internal transportation and the time involved
decreased.[70]
The basic structure of the railroad network was developed during the last two decades of the century. It
was relatively short and, following the pattern set by roads and telegraphs, developed first in the central and
western parts of the country. The beginnings were shaky and reflected lack of experience in these matters.
Early in 1872 the administration of Marshal González signed a contract with J. L. Bueron, an energetic
"practical engineer" who had arrived in the country the previous year. Although Bueron's qualifications were
less than ideal he was given exclusive concessions to build railways connecting the three ports of the Republic
to the closest cities: Acajutla to Sonsonate and Santa Ana, La Libertad to San Salvador and Santa Tecla, La
Unión to San Miguel.[71] The next year Bueron went to France to raise capital for his company. He formed a
society in Paris and found a French banker willing to serve as director. It should not have been too difficult to
raise the money since the government guaranteed an interest of 8 percent over capital of 11,500,000 francs, but
an earthquake destroyed San Salvador in March of 1873 and, at the same time, shook the confidence of
potential investors.[72] Bueron's only accomplishment was a line of about eight miles of railway between San
Salvador and Santa Tecla that he finished

― 170 ―

in 1876. A local merchant had to provide the money to finish the last few miles. The line was rather modest
from the engineering point of view; it had no bridges or tunnels and the cars were driven by horses, but it was
just the beginning. Never mind the technical aspects; the owners were pleased with it. It turned out to be the
most profitable Salvadoran railway.[73]
After ten years and only eight miles of railway the government revoked Bueron's contract in 1882. That
year the government engaged in feverish activity to address the railroad problem, at least at the level of contract
signing and paper shuffling. The Zaldívar administration signed contracts with Francisco Camacho to build the
line between the port of Acajutla and Sonsonate and Santa Ana, with Maurice Duke to build the line between
San Salvador and the port of La Libertad, and with General Butterfield (an associate of Cornelius Vanderbilt
and of General Grant) to build an ambitious line from the port of La Unión to the border with Guatemala. The
contracts amounted to a complete program of railroad construction connecting all the vital economic areas to
the ports and among themselves; they went a step beyond the Bueron contract in terms of ambition if not in
terms of realism. Neither Camacho nor Duke had any known experience in railroad building. Little is known
about Camacho and nothing that would lead us to believe that he was a railroad expert. Duke, in turn, was a
prosperous and versatile British merchant who had arrived in El Salvador as a young man in his twenties. He
had experience as a merchant, as American consul, and years later as a banker. [74] General Butterfield, by
contrast, had better qualifications since at least he had the backing of powerful railroad interests in the United
States. Not surprisingly the 1882 contracts accomplished little. Only the line between Acajutla and Sonsonate
was finished, rather quickly in June of 1882 when the first steam engine arrived at Sonsonate. [75] The rest of the
project faced countless obstacles.
Efforts were made to raise capital locally at the same time that companies were formed in London to
exploit the Camacho and Duke concessions, but the piles of paperwork on railroad construction advanced faster
than the trains themselves.[76] The section from Sonsonate to Armenia was inaugurated in 1884. Work on the
Sonsonate—Santa Ana road was interrupted by the 1885 war with Guatemala. Two years later a new
government renegotiated the contracts. As a result the country ended up owning three-fourths of the shares of
the Acajutla—Sonsonate road and the whole of the part constructed on the Santa Ana road. Despite the
nationalistic intentions of the new government, the Salvador Railway Construction Company, a British
concern, retained the administration of the Acajutla road.[77] After more contracts and more delays the Acajutla
line was extended to La Ceiba (about 20 miles from
 ― 171 ―

San Salvador) in 1891.[78] Almost ten years had passed since the line had reached Sonsonate and only 22 miles
had been added to the system. The railway connecting Santa Ana to the Acajutla line was progressing at a
slower pace; by 1892 only one-third of the projected 39 miles had been completed. [79] The modest 100-mile
network through the heart of the coffee region was completed, at last, in April of 1900.
While the Acajutla line was moving slowly, the Duke and the Butterfield contracts led nowhere. No
railway between La Libertad and San Salvador was ever built, while the construction of the La Unión—San
Miguel line had to wait until the next century to be completed. Given the problems in the construction of the
Acajutla network it would have been optimistic to expect a better performance in the La Unión—San Miguel
line. In fact, there were better uses for optimism. Eastern El Salvador had been losing economic ground to the
coffee-producing provinces of the west, and the slow pace of the La Unión railway only confirmed this fact.
After the contract signed with J. Bueron in 1872 the government signed contracts with nine different companies
(including Butterfield's) before the thirty-mile line was finished in 1911. [80]
During the first stage of railroad development the government tried a number of financial schemes,
always insisting on a certain measure of local control and never relying entirely on foreign capital. A turning
point took place in 1894 when the government gave a concession to an English firm, the Central American
Public Works Company, for the completion of the railroad between Santa Ana and Santa Tecla, the last stage
of the Acajutla network. The government guaranteed the CAPW an annual profit of 6 percent, and agreed to
the following:
During the life of the contract (50 or 99 years) no negotiations for the construction or operation of any railroad, by anyone in Europe, must be
entertained, nor can any railroad be established between Acajutla and the terminus of the Acajutla road, or from Santa Ana, except it be the
inter-continental line proposed by the United States. [81]
The British company, in turn, contracted to pay all the foreign debt of El Salvador. The years of failures
and the mounting debt had taken their toll. The CAPW agreement was a substantially different arrangement
from any made before. In the past, railroads had been financed stage by stage, internally or through bonds sold
in international markets, but the country had not given away the network to foreigners. The railroad from Ateos
to La Ceiba, for example, was built with funds obtained from a loan issued in London in 1889, but its operation
was in Salvadoran hands.[82] The portion of the Santa Ana railroad located between Ateos and Sitio del Niño,
inaugurated in 1893, was built by an

― 172 ―

American contractor and financed by a foreign loan in 1892 but, again, it was not given away. Even in 1894
there was a last effort to raise capital internally. In January of that year the government raised the import tax to
finance the La Unión—San Miguel line, and although the scheme failed it still represented an effort to finance
public works internally.[83]
It was the last such effort. The contract with the Central American Public Works Company represented a
permanent change in the form of financing and operating the system. Being in the midst of the financial crisis
created by the adoption of the gold-standard the government was facing a serious difficulty in paying its
obligations abroad. The change, however, had long-lasting effects. Crisis or no crisis, the difficulty of the
Salvadoran economy to generate the relatively large amounts of capital and expertise needed for railroad
construction and operation was becoming apparent. Although General Gutiérrez renegotiated the contract with
more favorable terms, it was within the same general principles. [84] After a revision of the contract in 1899 the
Salvador Railways Company, successor of the CAPW, was left operating the Acajutla network. [85] In 1908 the
government signed a contract with René Keilhauer to finish the project from La Unión to the border with
Guatemala. After a series of transactions the concession ended up in the hands of the International Railways of
Central America, a subsidiary of the United Fruit Company, which together with the Salvador Railways
Company controlled railroad traffic until the second half of the twentieth century. [86] It is fair to say that not
much was given away; Salvadoran railroads were only marginally profitable. [87] Unfortunately, there are not
enough data to calculate the social savings generated by the railroads, but, given the short distances involved, it
is doubtful that they were dramatic.
 After the railroads took the coffee to the ports, the next step in the transportation network was its
shipment to Europe and the United States. In terms of costs this was by far the most important side in the
transportation equation, but in this regard the country was unable to affect its destiny in any meaningful way
and had to accept whatever services foreign companies were willing to offer. Being very small and having little
to export El Salvador was not attractive to shipping companies. As mentioned in chapter 3, the Panama
Railroad Company and its subsidiary, the Pacific Mail Steamship Company, had a virtual monopoly of the
shortest shipping route to Europe across the Isthmus of Panama and took full advantage of the situation,
keeping the fares high and the service poor. Moreover, the Pacific Mail demanded an annual subsidy to carry
mail and to provide a regular service.
Efforts to change this situation were fruitless. One way to break the monopoly was to create competition.
In 1870 a private company formed

― 173 ―

by the main merchants of Central America bought the Prince Albert , a steamer operated by the Australian
Royal Mail Service, with the idea of establishing a line between the ports of Central America, Mexico, and San
Francisco, a route that was not well served by Pacific Mail steamers. The Central American governments were
delighted with the idea and gave all kinds of concessions to the new company. It was a good concept, but
Central American capitalists were not ready for such a venture and the company folded after the first trip,
reportedly due to lack of capital. [88] A similar scheme was tried seventeen years later when a new line between
San Francisco and Panama was established. The contract with Pacific Mail was about to expire and the
Marqués de Campos, a Spanish businessman, approached the government with the idea of a new shipping line
that was to be called Hispano—Centroamericana. He was to receive the Pacific Mail subsidy and to replace the
American line. Five second-hand steamers were to operate along the route. Optimism was high, and the arrival
of the Pioneer was hailed as "the commencement of a brilliant era for the owners and merchants." Feeling the
pinch the Pacific Mail lowered its rates until the new company went out of business later in the year. [89] A last
effort in this direction was made in 1894 when a company formed by American and Salvadoran investors was
authorized to run a line of steamers from the new port of El Triunfo. The new company planned to operate
along the Pacific coast, and its steamers were to visit ports of Colombia, Central America, Mexico, and
California. There is no indication that this company ever got its operation off the ground. [90]
Creating new companies was impossible, and attracting established ones was not easy. The latter
approach was tried a number of times with marginal success. In 1884 a contract was signed with a German
steamship company according to which the company, Kosmos, was to put in service eight steamers. One was to
transport goods to and from Hamburg. Of the remaining seven, four were to travel to South American ports and
three to Valparaíso to establish connection with steamers traveling to Europe. The contract had a provision to
the effect that Kosmos could not charge higher rates than Pacific Mail, and the Salvadoran government, in turn,
offered a subsidy of five hundred pesos per trip. The contract was renewed with some modifications in 1886
and 1891.[91] Kosmos, however, could not offer the same kind of service as Pacific Mail since its route went
around Cape Horn. Nonetheless, it was the kind of thing that made the Pacific Mail react, and it did so by
placing more tonnage on its line. The threat of competition was averted. Although a few German and Spanish
ships visited Salvadoran ports regularly, the Pacific Mail remained pretty much in control of the market.
[92]
 Replays of the same story took place in 1891 and in 1892. In 1891 the

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government signed a contract with another German company, the Hamburg-Pacific, which included a subsidy
of four hundred pesos for every steamship that visited a Salvadoran port, and in 1892 the government tried to
entice the "South American Steamship Company."[93] Neither company was able to make a substantial dent in
the business of the Pacific Mail because they had to operate along the Cape Horn route.
There was a third approach to disciplining the Pacific Mail: to withdraw the subsidy and the preferential
duty of 2 percent in favor of goods passing by the Isthmus of Panama. This approach was tried in 1874 when
one of the contracts of the Pacific Mail expired. The reasoning was that since the steamship company was
doing more than reasonable business in El Salvador it had an incentive to continue its service even without any
kind of protection. Things were more complicated, as the government found out in due time. By 1874 the
Pacific Mail was a huge company operating in the main ports of the Pacific Ocean (the company's steamers
went as far away as China), and without a contract it felt free to move its steamers around to operate in
whatever route was most profitable at the moment. As a result its service to El Salvador became highly
irregular to the point that the government had to reconsider its decision. A new contract was signed in
November of 1875 offering a subsidy of 12,600 dollars. In February of 1877 the subsidy was raised to 25,000
dollars, and the next year it was raised to 35,000 dollars.[94] The sad truth was that the service of the Pacific Mail
was far more important to El Salvador than El Salvador's business was to the Pacific Mail.
Despite the many efforts to reform it, the shipping network established in the 1850s around the Panama
Railroad remained unchanged. Pacific Mail steamers kept the greatest share of the market despite constant
complaints from the exporters of coffee. Whatever permanent improvements in service or lowering of fares
took place during this period were due to market considerations as seen by the Pacific Mail and not to
responses to actions of the Salvadoran government. Nonetheless, there were quantitative changes in the number
of ships that visited Salvadoran ports. In 1856 only 63 ships visited Salvadoran ports; by 1882 the number had
increased to 110, and by 1892 to 206. These figures tell only part of the story since the size of steamers and the
average tonnage increased over time.[95]
The development of a transportation and communications network faced the same difficulties as any
other complex economic activity: the leaders of the country understood the need for such a network, but they
were barely prepared to deal with it. Moreover, the economy was so small and the profits to be made so limited
that even foreign entrepreneurs showed little interest, and when they did the country had little

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power to negotiate advantageous contracts. Every contract, every step, was a mix of improvisation,
determination, and powerlessness. However, by the end of the century the primitive roads that had made life
difficult for travelers who came to the country in the 1850s were a thing of the past. The railroad line was only
99 kilometers long, but it was strategically located. The telegraph network had over 2,000 miles of wire and
180 offices. There were 500 miles of telephone lines and a cable service that provided communications with
most foreign countries. Ports had been improved and freight rates decreased. The country had acquired the first
taste of modernity. Export-related activities enjoyed privileged access to modest versions of new technologies.
But modernity was reserved for the capital city and the coffee-growing regions. The increased differentiation
between town and country and between the modern and traditional sectors which has prevailed during the
twentieth century was created during this period.

Revenues and Taxes

Although the newly found prosperity made it possible to carry out improvements in the transportation and
communications system, government revenue did not come directly from taxes on coffee or on the planters'
incomes. Until the end of the century two old taxes, import duties and the monopolies of gunpowder and
brandy, accounted for almost 70 percent of tax revenues (see table 29). It was harder to modernize the tax
structure as compared to other aspects of the economy. But even if the structure remained basically the same,
the tax base increased. The growth in imports and the overall economic activity were closely tied to the
prosperity of coffee exports.
 

Table 29 Government Revenues for Selected Years (in pesos)

Year Total Revenue Custom Duties 3/2 × 100 Gunpowder and Brandy 5/2 × 100

1869 830,371 461,395 55.6 155,560 18.7

1881 3,952,000 1,847,000 46.7 988,000 25.0

1885 3,635,251 2,547,615 70.1 605,523 16.6

1892 6,896,000 3,045,000 44.1 1,650,000 23.9

 1896 10,174,000 5,144,000 50.5 2,524,000 24.8

Source: Appleton's Cyclopaedia .

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Table 30 Average Import Duty Rate for Selected Years

Year Imports Custom Duties 3/2 X 100

1881 2,705,410 1,847,000 68.3

1883 2,401,463 1,455,300 60.6

1885 2,134,095 2,546,615 119.4

1889 2,878,000 2,252,000 78.2

1890 2,401,000 2,612,000 108.7

1892 2,756,000 3,045,000 110.5

1893 1,853,000 2,846,000 153.6

 1894 2,171,000 4,004,000 184.4

1896 3,000,000 5,144,000 171.5

Source: Appleton's Cyclopaedia .

Some of the main features of the tax system were remnants of the preindependence period. The liquor
monopoly, for example, had been a source of revenue since colonial times, but its importance had decreased. In
the 1850s revenues from this source were higher than custom duties. By 1887 custom duties generated twice as
much revenue as the liquor monopoly.[96] There were advantages to this monopoly since it did not impose an
administrative burden on the state; it was farmed out. The country was divided into nineteen distilling districts,
and the concession for distilling in each district was auctioned every four years. The government bought the
liquor from the distiller and then gave concessions to sell it to the public. A heavy tax on imported liquor
protected this monopoly.[97] It was a steady source of revenue since the demand for liquor was very inelastic.
Liquor concession auctions were not always carried out by the book since, as they were highly profitable, the
possibility of bribing public officials to secure a specific outcome was always a temptation. Presidents enriched
their friends and political allies by giving them concessions in the liquor monopoly. Import taxes also had a
venerable tradition going back to colonial times and became more important with the growth in exports. This
was only natural since custom taxes were easy to administer by governments with a very limited degree of
organization. They were relatively high and increased over time (see table 30). In the last two decades of the
century they fluctuated between 60.6 and 171.5 percent of the aforos value of imports. It was much easier to
raise taxes on imports than on exports. Coffee growers, whose power was increasing year by year, strenuously
opposed duties on coffee. As imported goods consisted mainly of textiles and tools, the average consumer was
badly hurt by high import

― 177 ―
taxes. Overall the tax sytem was highly regressive. Obeservers were impressed to see that
... land proprietors and land and houses and lots are untaxed, while the "natives," as the masses of these Indians and Aztecs and mestizos are
denominated, must pay a duty of 120 percent, besides freight charges, on their cotton shirts and "machetes." If trade with San Francisco, even
burdened with these obstructions, were conducted under terms of a liberal reciprocity treaty, there would be discovered here an invaluable
market especially for cotton goods, hardware and agricultural implements and machinery. [98]
Timid attempts to lower import duties were rapidly repealed. No revenue alternatives were found. In
1883 the government, in an effort to stimulate foreign trade, lowered the import duty by 20 percent. [99] In 1885,
after a fall in revenue, the duties were raised to 50 percent ad valorem: 25 percent payable in cash, 15 percent
in custom house certificates, and 10 percent in national bank notes. In March 1885 import duties were
increased 20 percent, payable in gold, and in June of the same year a small export duty on coffee that was
meant to fill the void left by the cut in import taxes was abolished. [100] These changes are another striking
example of the balance of power that predominated during the period.
There was no clear tax policy. Governments tried to raise revenue to finance their activities in whatever
way was politically viable. In general, this strategy did not include hurting coffee planters. Circumstances more
than policy seemed to impose new taxes. When the National Palace was burned to the ground in 1889 the
government imposed a tax on coffee exports of one peso per quintal to finance the new building. [101] Despite
opposition, this tax became part of the revenue, although the idea of a new palace was left for a better time.
However, this source of revenue was endangered when it became mixed with the gold-standard debacle of
1892–1894. President Ezeta, upset by the refusal of merchants to accept the gold standard and facing a serious
decrease in government revenues, tried to force the planters to pay higher taxes. After Ezeta was duly removed
from power (see earlier) the tax structure was restored to its previous balance favoring the coffee planters. But
even General Gutiérrez had to realize that the greatest source of wealth in the country could not go untaxed
and, six months after he had almost eliminated the export tax on coffee, he restored it to its former level of one
peso per quintal. Finally, after much struggle, the tax on coffee remained permanent. It amounted to less than 5
percent of the price of coffee FOB; a trifle when compared to import taxes of more than 100 percent, but
enough to topple governments.
 ― 178 ―

The Limits of Protectionism

This peculiar tax structure justifies a digression on the lack of industrialization in El Salvador. High import
taxes can, under certain circumstances, stimulate domestic production. That did not happen in El Salvador. The
only industrial activity of any importance was the textile industry. It was mainly in the hands of artisans using
handlooms. In 1893 there were around five hundred looms that were used mainly to produce rebozos (a kind of
shawl) for export, but they represented a negligible percentage of exports. [102] Moreover, the cotton thread used
to make them had to be imported, thus anticipating the pattern of industrialization in which the country
provided the labor force for processing foreign raw materials. Despite the high import duties it was cheaper to
import thread than to produce it domestically. Moreover, when an effort was made to protect the rebozo
industry more effectively, the limits of the system became evident. In 1893 taxes on imported rebozos (a
higher-quality product for well-to-do ladies) were increased to 40 pesos per kilo explicitly to protect the local
industry. The results of the new policy became apparent at once. Legal importation of rebozos through the ports
stopped immediately, only to be replaced by contraband through the borders. A source of revenue was drained
at the same time that the industry was left even less protected than before. [103]
A threshold on import taxes existed beyond which contraband became an option. Import duties from
goods coming from neighboring countries were negligible because they were impossible to administer. Ports
were good collecting points because transportation costs by land were so high that, within certain limits, it was
a better option for the merchant to pay taxes than to engage in contraband. Custom duties were more like
monopoly fees to use the ports. The problem was that when taxes were high enough to protect an industry they
were too high to be effective; they begat contraband. This was a direct result of the weak organization of the
state.
In fact, cotton production for the rebozo industry would have been possible in El Salvador, but at too
high a cost. It had existed but virtually disappeared after the boom of the 1860s. After the end of the American
Civil War cotton prices fell and Salvadoran producers could not compete in the international market anymore.
Cotton production fell "burying in its ruins a great many capitals, large and small." Even during the best days
of the cotton boom producers had to face pests that were beyond their control. Not until the twentieth century,
with the availability of insecticides and with a completely different international market, was it possible to
produce cotton on a large scale and at good prices. By the 1890s even lamp wicks and carded cotton for
surgical purposes had to be imported.[104]

― 179 ―

The leather industry was even less developed but, thanks to protectionism, it did cover domestic needs at a time
when most of the population did not wear shoes. A small tanning industry had developed; in 1885 the total
number of tanneries was over twenty. High import duties made local leather less expensive than the imported
kind. Whereas the price of German leather was twenty-five cents per pound, the price of the Salvadoran
product was eighteen cents. Yet, the quality was not the same since local hides were tanned using very crude
methods. The barks of locust, mangle, and oak were used for tanning, and the average tannery produced about
twenty hides a month. Bigger establishments were technically superior and were run by foreigners; a German
tannery turned out two hundred good quality hides every month. [105] By the end of the century soap and candle
manufacturing had developed; another instance in which government protection seems to have had some effect.
All the companies engaged in this activity enjoyed tax exemptions to import machinery and inputs. [106] And
although they produced exclusively for local consumption, one of them, "La Favorita," was the beginning of
Herbert De Sola's industrial complex, which now produces an impressive array of products, from margarine to
toothpaste, and exports to the rest of Central America. Other industries had very little importance. There was
some production of hats, baskets, rope, cigars, and other minor handicrafts. [107] Protectionism, then, was
successful only when import taxes did not go beyond the threshold where contraband became attractive, and
when the simplest technology was involved.
Mining fared better. It had a slow start but by the turn of the century was an extremely profitable venture
—for the British. Since the discovery of silver in the northeast in 1781 mining in that region had advanced
slowly. During the period of the federation Marshall Bennett, one of the top merchants of Belize, tried to set up
a modern operation in the "Tabanco" mine by bringing English technicians and steam engines to pump water.
  Even with access to British capital the venture faced the typical obstacles: lack of qualified labor and
[108]

management, bad roads, political instability. In 1830 Bennett tried to work "Tabanco" in earnest and brought
English miners; the results were discouraging, however:
[T]he machinery introduced was so heavy that, because of the bad roads, it was impossible to bring it to the place where the mineral was
located. This circumstance and others due to the political situation of the country made the project fall through. [109]
Even without the benefit of modern machinery the mines of the northeast were exploited profitably
throughout the century. A French

― 180 ―

company, the Société Française des Mines de San Salvador (which apparently was owned by the Société du
Crédit Mobilier) began operating "Tabanco" and "Encuentros" in 1855. In 1876 and 1877 the two mines
together produced 2,168 kilos of silver.[110] Smaller companies operated in the same region. In 1874 Señor
Miguel Macay discovered the "Divisadero" mine and for a while exploited it by himself. By 1882 the annual
extraction of silver ores had a value of 700,000 dollars, about 13 percent of the value of total exports.
Substantial British investment in mining began in 1888 with the organization of the Divisadero Gold and Silver
Mining Company and, the following year, Butters Salvador Mines, Ltd. The latter company was extraordinarily
profitable: from 1903 to 1913 it paid annual dividends of 52 percent on average. [111]
Iron mining remained marginal. Ever since the late colonial period small iron mines had operated in
Metapán, Santa Ana. Small foundries operated thoughout the century but never played an important role in the
economy. By the 1880s they had very little machinery, and the operations faced great difficulties due to lack of
coal. Oak charcoal was used as a substitute source of heat, one of the reasons for the poor quality of the final
product. The iron was used mainly to produce machetes. [112] Local needs were never satisfied by these
foundries; machetes and agricultural tools were imported in increasing amounts at the end of the century.
The sorry state of Salvadoran industry, despite heavy import duties and the even stronger protection
given by high transportation costs, shows the limitations of the Salvadoran economy. Industry was very slow to
develop due to the lack of technical knowledge, resources (lack of coal, for example), capital, raw materials
(e.g., cotton for the textile industry), and other inputs (e.g., chemical products to tan leather). The simplistic
notion that a certain isolation from world markets could have helped to develop a domestic industry does not
seem to have much relevance in the case of El Salvador. There were too many obstacles to overcome and,
perhaps a more important reason, from the point of view of the local elite coffee was still a better alternative. In
their experience, despite all the uncertainties, fortunes could be made (and were made) in the coffee business.
Industry was a more uncertain and more difficult investment option.

Elite Formation
As new economic activities became necessary, the burden of ignorance was much greater. Whenever a new
technology was brought or a new institution was created, it was necessary to use foreign expertise in order

― 181 ―

to solve the practical problems involved. This only highlights one of the leitmotivs of the economic hostory of
El Salvador: the great scarcity of human capital and the great rewards for those who had it. Salvadorans had
little access to education and a limited choice of activities to engage in. The educational system had started at
the very bottom, and it was not easy to lift it from there. Although the university was founded in 1841 it
remained small and offered courses in very few fields. The first subjects taught were law and medicine;
potential engineers or people interested in mathematics had nowhere to go. Agriculture was not considered a
subject proper for a university. Efforts to take a scientific approach to agriculture were unsteady. An
agricultural school destroyed by the 1873 earthquake was not rebuilt. In 1893 a model farm was established to
provide examples of modern agricultural techniques. Civil engineering did not fare much better. An effort was
made in 1864 to professionalize land surveyors, but the project fell victim of political instability. In 1879, just
one year before passing the legislation that eliminated the ejidos , the government realized that there were not
enough qualified people to survey the land. It was stimulus enough for the creation of the Facultad de
Ingeniería Civil, but it was difficult to raise the standards of the new facultad since teachers were ill prepared.
Science had to wait many years before it became a serious matter. As late as 1898 the Commercial
Directory listed only 11 engineers in El Salvador (5 of whom were foreigners). Lawyers, by contrast, were
relatively abundant (the law school provided the nearest thing to what we would now call a liberal arts
education); there were 189 lawyers and 144 physicians, the other profession of choice. [113] Such was the total of
the professional class in a country with more than 700,000 inhabitants.
Given the limited access to education it is natural that the children of the rich were more likely to obtain
a university degree than, say, an Indian child from Izalco. Children of the planters, however, seldom went very
far in their education. It was not rewarding to spend long years abroad studying complicated subjects when
they could learn the intricacies of coffee cultivation at home and be amply remunerated for their endeavors.
When the infrastructure became complicated and the time came to create banks or to build railroads, it was
always possible to import a foreign expert or semi-expert. Railroad construction was associated with names
like Bueron, Scherzer, Hinds, Glower, or Keilhauer. The agents of the shipping companies had names like
Mathe, Foote, or Courtade. Banks were administered by British and American citizens.
El Salvador experienced a selective immigration. There were no large national groups moving en masse
to El Salvador; immigrants were individuals (often male and single) with a specific expertise. They found out

― 182 ―

in a short time that their talents could be profitable and that they could receive rapid social recognition. The
Salvadoran elite, too ignorant and too small to do all the work necessary in a growing economy, was ready to
adopt the newcomers. Immigrants provided a good avenue to expand a suffocatingly small ruling class.
Second-generation immigrants could expect to marry into the elite. Eligible bachelors of good families were
few and difficult to catch, and it was more acceptable to marry a successful immigrant with white blood than a
local parvenu. Once rich and well married they adopted the cultural traits of their in-laws. Not having contact
with others of similar national background to keep the customs of the old country alive, immigrants did not
create cultural enclaves and were rapidly absorbed. They provided the blue eyes of their children and received
the prejudices of their new relatives in return.[114]
A study of the Salvadoran bourgeoisie written in 1977 presents a list of sixty-three of the richest families
in the country: people involved in agriculture, industry, and banking. This list, although incomplete, is a good
sample of the road to economic success.[115] It can be used to show the link between the changes that took place
at the end of the nineteenth century and the formation of an elite that had enormous power until 1979. Only
twenty-one (33.3 percent) of the families can be traced back to "old" nineteenth-century families; thirty-eight
(60 percent) are immigrant families, and four (6.3 percent) made their fortunes after the 1950s. [116] Among the
"old" families more than half started their fortune before the advent of coffee, and all of them prospered thanks
to agriculture, with or without the help of having a relative in the presidency. [117] Not surprisingly, some of the
old families sent their children to study abroad and by doing so enhanced their possibilities of success.
Immigrants and old families were direct beneficiaries of the economic environment of the turn of the century.
The growth in exports created new opportunities, and the few who had the education or ability to take
advantage of them were amply rewarded: they were given a country to rule.
In general, immigrants started in commerce and small industries and then bought land. Nationals
followed the opposite route. A rapid look at a list of landowners sheds light on this issue. Colindres's study
includes a list of people who in 1972 owned more than 100 hectares of land in seven western provinces (about
half of the territory of the country in the best part of the coffee region). [118] According to his information there
were 926 properties that satisfied that size criterion, 105 (11 percent) of which belonged to the descendants of
immigrants. If the criterion is narrowed to properties of more than 1,000 hectares, the share of the descendants
of immigrants rises to 21 percent.[119] These figures, together with the information on the "richest" families,
show a clear pattern. The

― 183 ―
more complex or the larger the size of a business activity the more likely it is that a descendant of an immigrant
will be involved.
Successful immigrants went to El Salvador for very diverse reasons, but they had one thing in common:
they knew a skill that Salvadorans did not. It could be anything, languages, car mechanics, or beer making. The
first known successful immigrant was Robert Parker, an English merchant who had fought with Cochrane in
South America; by 1826 he was already considered "one of the most influential persons, who was consulted by
the government of that state [of San Salvador] on all important occasions." [120] He knew languages, the art of
war, and the art of buying and selling under duress, a winning combination during the federal period. His
decendants are still prominent and linked to "old" families. Another successful early immigrant was Maurice
Duke, a British citizen born in Jamaica. He is a good example of how someone with an education had an edge.
His knowledge of English and of international business practices allowed him to engage in the most profitable
ventures of the time. He arrived at San Salvador in 1864 as a young man of twenty-four and, after only eight
years, he was considered to be a person "of character and position" and was appointed American consul. Later
in life he owned stock in the piers of La Libertad and Acajutla, was awarded a contract to build a railroad, and
was consulted by presidents. His son Rodolfo was one of the founders of the first Banco Agrícola Comercial,
and his daughter married into the Guirola family. His descendants are included in Colindres's list of the
"richest."
Even the simple skills of a specialized worker could be enough to start a career. An Italian chauffeur
brought to the country by a family of coffee planters used his skills to start a car dealership. It was even easier
if the skills brought by the immigrant were specifically suited for Salvadoran conditions. When the Alvarez
family came from Colombia it was already familiar with the coffee business; before the end of the century the
Alvarezes were founding banks.[121] Don Herbert De Sola can be included in this category. He was a Sefardic
Jew born in Curaçao to a business family. His first company was based in Panama and had opened a branch in
El Salvador in 1885. After the failure of Fernand de Lesseps's canal in Panama he decided to move his business
elsewhere. He made a long trip around the world to find a good place for business (he went as far as Transvaal)
and decided on El Salvador. By the time he arrived there and opened his first store in 1896 he was thirty-one
and already had some capital, experience, and excellent business connections in Panama and in Europe. It was
the right combination of skills and assets; before he died his companies employed 3,200 workers. [122]
People of Arab descent succeeded with a slightly different set of skills. They were not particularly well
educated when they arrived in El

― 184 ―

Salvador after the breakdown of the Ottoman empire. However, they came from a long tradition of merchants
and had a more aggressive business culture than the natives. As a result of their hard work and remarkable skill
their success was swift. Four families of Arab descent are among the thirty-one "richest" immigrant families on
our list. The right time to start a big fortune, it seems, were the last twenty years of the nineteenth century and
the first twenty years of the twentieth. Virtually all of the immigrants on Colindres's list and all but four of the
nonimmigrants started their business activities during or before that golden period. After that the door was
virtually closed. The timing of economic success was crucial. For those who arrived later it was much harder.
Although Colindres's sample included four "newcomers," it is highly questionable whether they were as
wealthy or as influential as the other fifty-nine. It seems a clear conclusion that the Salvadoran elite was
consolidated between 1880 and 1920 as a result of the expansion of exports. That was the gestation period of
the mythical "fourteen families."[123] After that period most applications to be a member of that exclusive club
were blackballed.

The Standard of Living of the Elite

The coffee elite developed a lifestyle that was in sharp contrast with the simple life of the rural worker
described above but that was modest by the standards of the rich in other parts of Latin America. There were
few amenities beyond the endless visits and the religious festivities. The capital was less than monumental; in
1887 it had only twenty-one two-story buildings and one theater. Electricity was not introduced until 1888. The
National Palace was one of the two "establishments deserving the name of monument" (the other being the
military school). It was a wooden building that occupied a full block and housed every single governmental
office, from the president's to the telegraph.[124] Unfortunately it was lost in a fire in 1889, leaving the city with
one less monument and historians without archival material. Up until 1885, when a spacious market was
opened to the public, groceries were sold at the central plaza, in exactly the same way as during the sixteenth
century. In contrast, there were plenty of small shops (64 bars, 58 stores selling imported merchandise, 55 shoe
stores, 14 millinery stores, 20 dressmakers, 18 bakeries, 3 bookstores, 5 flower shops, 2 public baths, etc.).
[125]
 Again, the accomplishments, however modest, seem remarkable when considering the point of departure.
Shortly before the breakup of the federation San Salvador was a city of about 15,000, "composed of a few short
streets branching off from a 'plaza' and of numerous Indian huts scattered over a large extent of broken
ground."[126]

― 185 ―

In 1891, Señor Aguilar, a rich planter, ordered an inventory of his goods. A look at this document gives an idea
of his way of life.[127] He owned two houses in San Salvador, in the center of the city. One of the houses was
next to the presidential palace. The living room of the house occupied by the family (one of only ten two-story
private houses in the whole city) was furnished with a German piano, velvet sofas and chairs, and damask
curtains, although there is no mention of silver or crystal. The planter's wife had jewelry worth more than half
the value of one of the houses. Following the Salvadoran tradition, the coffee planter also owned a hardware
store valued at 13,184 pesos. He also was a shareholder of the Banco Internacional and owned government
bonds.
His most valuable property was a coffee plantation with 150,000 coffee trees valued at 60,000 pesos.
The finca had two houses, watertanks, coffee nursery beds, and twenty-five manzanas of woods. There were
twelve oxcarts to transport coffee. The main plantation was complemented by a smaller one with 80,000 coffee
trees and by a beneficio (a plant to process the beans) that was purchased in 1886. The beneficio was as
valuable as the finca. It had a steam engine with its boiler, a pump, iron lifts, and other imported machinery.
The machinery was housed in a building with a tile roof.
The main plantation had been bought with a loan from the Banco Internacional, and the planter still
owed 10,000 pesos to the bank. He also had financial dealings with a firm in Birmingham and with two
German firms, one in Rainschail and one in Hamburg. Aguilar's total fortune was valued at 184,282.90 pesos,
and his debts amounted to 20,000 pesos. His fortune was relatively large for the period, equal to about 3
percent of the total revenue of the government. This fortune was not the largest at the time, but it had
peculiarities that made it an example of the evolution of the Salvadoran elite. The Aguilars were one of the
leading families of the province during colonial times and played a key role in the independence movement.
They were prominent in the indigo business, and when Eugenio Aguilar was president he signed the first piece
of legislation that gave incentives to coffee production. Later on they branched into banking and, as of 1990, a
large part of the fortune was still in the form of coffee plantations. It is a typical case of adaptation to changes
in the economy through many generations.
This glimpse into the standard of living of a member of the elite illustrates the contrasts of Salvadoran
society at the end of the century. The rich, although modest by European standards, had developed a way of life
totally removed from that of the campesinos . The differences could be seen in all aspects of life: access to
political power, to education, and so forth. That meant that those in power had a different perception of reality
than the majority of the people, and their power was great enough not to be accountable to them.

― 186 ―

Conclusion
By the end of the nineteenth century El Salvador had achieved both moderate growth and great inequality.
Whatever growth had taken place was closely asociated with the formation of a very small and powerful elite
that was able to use the apparatus of the state for its own purposes. This book has identified several elements
that led to this result:
1. The point of departure was very low. An understanding of this is essential to put the problem at hand
in proper perspective. A mere description of the availability of factors of production at the end of the colonial
period was enough to show that El Salvador began its existence with very little: a small and uneducated
population, a tiny elite, and scarcely any capital. Most resources were devoted to traditional agriculture and the
production of the most basic crafts. Indigo and food crops were cultivated following the same techniques that
had been used for at least two hundred years. The distribution of goods faced formidable obstacles. A very poor
communications system hampered trade; a rough geography and, being on the Pacific coast, a poor location,
forced the economy into isolation. The Salvadoran economy was, by and large, devoted to subsistence
activities and unprepared to do much else.
2. Economic growth was delayed for many years after independence. The tiny elite, unprepared to
organize a complex economy, was also unprepared to organize a stable political system. As a result, energies
were wasted in warfare, investment came to a halt, existing capital was destroyed, and credit and educational
institutions did not develop.

― 187 ―
Growth, even very slow growth, has a cumulative effect; so does destruction. A superficial comparison with
Costa Rica, which managed to remain insulated from the wars of the first half of the century, shows how the
latter country was developing credit practices and institutions while in El Salvador forced loans were used to
finance destructive wars. Not surprisingly, Costa Rica was able to begin learning how to cultivate and market a
new crop, coffee, and was able to finance it, much earlier than El Salvador.
3. The stimuli to engage in export agriculture on a large scale came from market signals, changes in
transportation costs and product prices, and not from government policies. After the Gold Rush and the rapid
increase in trade along the Pacific coast, transportation costs were lowered and export agriculture became more
profitable than ever. Government policies only reinforced market signals.
 4. The introduction of coffee meant a change from traditional to modern agriculture which, in turn,
created greater inequality. To take advantage of this change one needed a measure of education in order to be
able to learn new technologies and new forms of financing and marketing. In a country with a new and small
educational system, there were very few who were equipped to take advantage of the new opportunities. Many
in the indigo elite managed to switch to coffee production, but the link between the old elite and the new was
access to education and not to land. Indian communities had only the latter and ended up losing their ejidos and
communal lands.
5. The institutions of the state were designed to favor coffee planters. There were so few educated
individuals that coffee planters and politicians were bound to come from the same pool of people. The very
same individuals who organized the institutions of the new state and decided their role in the economy also
organized coffee production and decided its marketing. Despite the internal divisions that existed within the
elite, there was a consensus on the need to direct the activity of the state to facilitate export agriculture. The tax
system, the road network, legislation, the banking system—in fact, much of the legislative activity and virtually
all public works—were designed directly or indirectly to promote the coffee industry.
6. Outside influences can be traced to market signals and not to direct investment or, for that matter, to
any decision of foreign governments or individuals directed to take advantage of the economy of El Salvador.
While other countries of Latin America received a substantial influx of immigrant labor and capital (and had to
pay dearly for foreign investment), El Salvador, lacking in anything so appealing as Argentina's pampas,
Mexico's mines, or Peru's guano, was largely ignored by outsiders. The successes and failures of the nineteenth
century were

― 188 ―
achieved locally. At the same time that the country was deprived of foreign investment it had the freedom to
make its own decisions and its own mistakes.
7. The privatization of land, the so-called liberal reforms that ended up stripping Indian communities of
their lands, were not the origin of Salvadoran inequalities or the beginning of the liberal state. The liberal
reforms epitomize and dramatize a process that had began much earlier when the introduction of new
agricultural techniques and the development of the state had placed a tiny educated minority in a position of
great advantage. When the reform legislation was written, market forces were already rapidly eroding
traditional forms of land ownership, and inequality was well entrenched.
8. The elite that consolidated its power at the end of the nineteenth century and at the beginning of the
twentieth remained the arbiter of Salvadoran politics and society at least until the onset of the civil war of the
1980s.
The history of the economy of nineteenth-century El Salvador is, by and large, the history of the free
market playing in a small and unprepared country. With market forces operating openly and freely, the role of
the state was to take clues from them, to facilitate their action, and to reinforce them. Even without government
help the result would have been the same: a rapid growth of coffee production and greater inequality. After the
introduction of new cultivation, financing, and marketing techniques, market forces rewarded human capital
more than ever before and worsened the distribution of income and wealth. Without any other action,
inequality was bound to increase. Other actions were taken, however; the apparatus of the state was set in
motion to reinforce the trend. The first half of the century had not been a golden age; inequality was not an
invention of imaginative coffee planters. But greater prosperity widened the gap and sharpened the division
lines.
On the one hand, given the circumstances and the long litany of obstacles that the economy had to face,
one may be left with an impression of inevitability. Salvadoran leaders behaved in a perfectly rational fashion
and did exactly what could be expected from anyone in the same position: they took advantage of the few
opportunities available to them. What could have been done differently? Weren't they helpless instruments of
the enormous forces of international markets? Even during the worst of the crisis of 1898 they could not think
of a product more profitable than coffee. Given the price situation, the factors of production available to them,
and their own educational limitations, it would have been irrational to engage in any other productive activity.
Since internal markets were virtually stagnant, small manufactures had little room for expansion. Export
agriculture of products other than coffee
 ― 189 ―
faced serious constraints; cotton cultivation would not be a real possibility until modern insecticides were
available, while sugar was profitable only up to a point. Industry, in turn, had not even reached the gestation
period. It would be implausible to think of policies designed to offset the powerful economic incentives to
engage in coffee cultivation. After all, the state was financed by custom taxes and there was no hope of raising
them anywhere else.
On the other hand, even within the constraints imposed by the limited resources and the pressures of the
international markets, some things could have been done differently. Without entering into the realm of the
implausible (one could wish for a different international economic order, for a different price structure in
international markets, or for a different ideological outlook), there were two key obstacles that could have been
overcome: the one imposed by constant warfare, and the one imposed by lack of education. In fact, an
understanding of the advantages of peace and of the virtues of education were part of the mental furniture of
the typical liberal of the time. The only problem is that it was necessary to take both things seriously for the
country to become peaceful and educated. If the resources devoted to destruction had been devoted to
education, the population would have had many more choices, the economy would have had many more
alternatives, and inequality would have been less acute.
In the formation of human capital, as in any other form of investment, an early beginning and a steady
effort would have made a big difference. Again, the contrast with Costa Rica is telling. In the latter country all
forms of investment, including human capital, remained uninterrupted by warfare. There was a clear and steady
commitment to education that paid off in terms of less inequality and greater growth. Market forces, by
themselves, did not tell Salvadoran rulers that in the long run an educated population was an asset to everybody
or that a more stable and viable society was good for business. It had to be a determination based on a sense of
priorities, of a set of goals for the society at large. In this respect it is quite possible that the cultural and ethnic
divisions inherited from the colonial period played an important role. The politics around the issue of the
liberal reforms indicate that there was no sense of a common land.
A last important question remains. How much of today's problems can be blamed on nineteenth-century
developments? Some basic aspects of the present crisis do go back to the problems of a one-crop export
economy based on crippling inequalities. The main bequest of the nineteenth century was a small elite,
entrenched in power and virtually closed to newcomers, that was to shape the twentieth century. There is also
the problem of the political system. This book is not a

― 190 ―
treatise on political theory, but one cannot help but wonder if the absolute power of the planters has something
to do with their political inflexibility and narrow-mindedness. They were beyond credible challenges, they did
not have to learn the art of compromise, they could insulate themselves from the rest of the population. The
foundations left by the nineteenth century were very weak. But one should not leave twentieth-century leaders
free of blame. Upon those weak foundations they built a structure heavy with injustices, inconsistencies, and
political ineptitude.

― 191 ―

Notes

Introduction
1. Theodore W. Schultz, ''The Value of the Ability to Deal with Disequilibria," The Journal of Economic Literature 13 (September 1975):
831. Schultz first developed his pathbreaking ideas in Transforming Traditional Agriculture (New Haven: Yale University Press,
1964). [BACK]
2. Theodore W. Schultz, "The Value of the Ability to Deal with Disequilibria," p. 835.  [BACK]
3. Nathaniel H. Leff, "Entrepreneurship and Economic Development: The Problem Revisited," Journal of Economic Literature 17 (March
1979): 47. [BACK]
1 Before Independence
1. Antonio Gutiérrez y Ulloa, Estado general de la provincia de San Salvador; Reyno de Guatemala (año de 1870) (San Salvador: Dirección
de Publicaciones, 1962). [BACK]
2. The territory of the intendancy roughly corresponded to the current territory of El Salvador with the important exception of the Alcaldía de
Sonsonate, on the border with Guatemala, which became part of the country in 1823.  [BACK]
3. Rodolfo Barón Castro, La población de El Salvador (Madrid: Consejo Superior de Investigaciones Científicas, 1942), pp.235 and 446.
This figure includes the Alcaldía Mayor de Sonsonate, which was not part of the intendancy but after 1823 was incorporated to El Salvador.
In 1796 the population of Sonsonate was 24,684. [BACK]
4. Thomas Marc Fiehrer, "The Baron of Carondelet as Agent of Bourbon Reform: A Study of Spanish Colonial Administration in the Years
of the French
Revolution," 2 vols. (Ph.D. dissertation, Tulane University, 1977), 1: 105. This dissertation provides a detailed account of colonial
administration in San Salvador during the Bourbon reforms.  [BACK]
5. Miles Wortman, "Government Revenue and Economic Trends in Central America," HAHR 55 (February 1975): 256. [BACK]
6. For information on this phenomenon see Gustavo Palma Murga, "Núcleos de poder local y relaciones familiares en la Ciudad de
Guatemala a finales del siglo XVIII," Mesoamérica 7 (December 1986): 241-308; and the chapter on Central America in Diana Balmori,
Stuart F. Voss, and Miles Wortman, Notable Family Networks in Latin America (Chicago: The University of Chicago Press, 1984). [BACK]
7. Quoted by Manuel Rubio Sánchez, Historia del añil o xiquilite en Centro América , 2 vols. (San Salvador: Ministerio de Educación,
1976), 1: 282. [BACK]
8. Quoted by Manuel Rubio Sánchez, Historia del añil , 1: 234. [BACK]
9. Antonio Gutiérrez y Ulloa, Estado general , p. 134. [BACK]
10. The total was 626,600 lbs. Manuel Rubio Sánchez, Historia del añil , 1: 358. [BACK]
11. Miles Wortman, "Government Revenue and Economic Trends in Central America, 1787-1819," HAHR 55 (May 1975): 256. [BACK]
12. Domingo Juarros, A Statistical and Commercial History of the Kingdom of Guatemala , trans. John Baily (London: John Hearne, 1823),
p. 33. [BACK]
13. Antonio Gutiérrez y Ulloa, Estado general , p. 146. [BACK]
14. Gustavo Palma Murga, "Núcleos de poder," p. 282.  [BACK]
15. Antonio Gutiérrez y Ulloa, Estado general , p. 146; and Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 274.
16. Ibid., 1: 285.
17. Ibid., 1: 275. [BACK]
15. Antonio Gutiérrez y Ulloa, Estado general , p. 146; and Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 274.
16. Ibid., 1: 285.
 17. Ibid., 1: 275. [BACK]
15. Antonio Gutiérrez y Ulloa, Estado general , p. 146; and Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 274.
16. Ibid., 1: 285.
17. Ibid., 1: 275. [BACK]
18. Pedro Cortés y Larraz, "Descripción geográfico-moral de la Provincia de San Salvador en la diócesis de Gohatemala," in República de El
Salvador, Ministerio de Relaciones e Instrucción Pública, ed., Colección de documentos importantes relativos a la República de El
Salvador (San Salvador: Imprenta Nacional, 1921), p. 109.
19. Ibid., p. 219. [BACK]
18. Pedro Cortés y Larraz, "Descripción geográfico-moral de la Provincia de San Salvador en la diócesis de Gohatemala," in República de El
Salvador, Ministerio de Relaciones e Instrucción Pública, ed., Colección de documentos importantes relativos a la República de El
Salvador (San Salvador: Imprenta Nacional, 1921), p. 109.
19. Ibid., p. 219. [BACK]
20. Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 292. Gustavo Palma Murga, "Núcleos de poder," p. 276.
21. Ibid., 1: 300.
22. Ibid., 1: 298. [BACK]
20. Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 292. Gustavo Palma Murga, "Núcleos de poder," p. 276.
21. Ibid., 1: 300.
22. Ibid., 1: 298. [BACK]
20. Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 292. Gustavo Palma Murga, "Núcleos de poder," p. 276.
21. Ibid., 1: 300.
22. Ibid., 1: 298. [BACK]
23. Antonio Gutiérrez y Ulloa, Estado general , pp. 10 and 146. [BACK]
24. Adriaan C. Van Oss, Catholic Colonialism (Cambridge: Cambridge University Press, 1986), p. 144.  [BACK]
25. Geoffrey A. Cabat, "The Consolidation of 1804 in Guatemala," The Americas 28 (July 1971): 29. "Historical Detail of the Taxes and
Contributions Which Formed the Receipt of the Royal Hacienda," prepared by the Royal Tribunal of Accounts in 1818. A copy of this report
can be found in Foreign Office Series 15, vol. 3, fol. 25-46. Henceforth this series cited as FO 15 (volume number). This document was
given to George Thompson, the British envoy, by José del Valle.  [BACK]
26. Thomas Marc Fiehrer, "The Baron of Carondelet," 1: 298-299.  [BACK]
27. Adriaan C. Van Oss, Catholic Colonialism , p. 145. [BACK]
28. Miles Wortman, Government and Society in Central America, 1680-1840 (New York: Columbia University Press, 1982), p. 174. [BACK]
29. Thomas Marc Fiehrer, "The Baron de Carondelet," 1: 266. [BACK]
30. José María Peinado, "Apuntamientos sobre la agricultura y comercio del Reyno de Guatemala que el Señor Dr. Don Antonio Larrazábal
Diputado en las Cortes Extraordinarias de la nación por la misma ciudad pidió al Real Consulado en la Junta de Gobierno de 20 de Octubre
de 1810," in Carlos Meléndez, ed., Textos fundamentales de la independencia centroamericana (San José, Costa Rica: Editorial EDUCA,
1971), p. 75. [BACK]
31. Manuel José Arce, Memorias del General Manuel José Arce (San Salvador: Ministerio de Cultura, 1959), p. 271.  [BACK]
32. José María Peinado, "Apuntamientos sobre la agricultura," p. 76.  [BACK]
33. Troy S. Floyd describes the system in detail in his article, "The Indigo Merchant: Promoter of Central American Economic Development,
1750-1808," Business History Review 39 (Winter 1965): 466-487. The Costa Rican case is described in Thomas L. Karnes, "The Origins of
Costa Rican Federalism," The Americas 15. For a contemporary description see José María Peinado, "Apuntamientos sobre la agricultura," p.
76. Insights on the merchant community can be gained by reading the chapter on Central America in Diana Balmori. et al., Notable Family
Networks . [BACK]
34. Gustavo Palma Murga, "Núcleos de poder local," p. 289.  [BACK]
35. For information on trade routes see Julio C. Pinto Soria, "El valle central de Guatemala (1524-1821): Un análisis acerca del origen
histórico-económico del regionalismo en Centroamérica," Anuario de Estudios Centroamericanos 14 (1-2): 75-77. [BACK]
36. Miles Wortman, Government and Society , p. 192. [BACK]
37. Troy S. Floyd, "The Guatemalan Merchants, the Government and the Provincianos," HAHR 41 (February 1961): 102. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
 41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
38. Robert S. Smith, "Indigo Production and Trade in Colonial Guatemala," HAHR 39 (May 1959): 194.
39. Ibid., p. 196.
40. Ibid., p. 200.
41. Ibid., p. 202.
42. Ibid., p. 204.
43. Ibid., p. 204. [BACK]
44. Robert S. Smith, "Origins of the Consulado of Guatemala," HAHR 26 (May 1946): 156. Gustavo Palma Murga, "Núcleos de poder local,"
passim. [BACK]
45. Troy S. Floyd, "The Guatemalan Merchants," pp. 90-110.  [BACK]
46. See Adriaan C. Van Oss, "The Self-Sufficient Spanish Colonies in Central America," Mesoamérica 3 (June 1982): 67-89. [BACK]
47. Héctor Lindo-Fuentes, "Nineteenth-Century Economic History of El Salvador" (Ph. D. dissertation, University of Chicago, 1984), p.
19. [BACK]
48. Miles Wortman, "Government Revenue," p. 253.  [BACK]
49. Manuel Montúfar, Memorias para la historia de la revolución de Centro América (Jalapa, Mexico: Aburto y Blanco, 1832), p.
XXX. [BACK]
50. This figure is based on the average for the period 1814-1818. ''Historical Detail," FO 15-3, fol. 37-39.  [BACK]
51. Population estimates were always unreliable. I arrived at the 16-percent estimate by using Juarro's and Gutiérrez y Ulloa's figures. It
would be surprising if the population of El Salvador was significantly less than 12 percent. The tax data are in Miles Wortman, Government
and Society , p. 150. [BACK]
52. Between 1812 and 1817 the average revenue was only 776,274 pesos for all Central America (Thompson to Foreign Office, FO 15-1). A
simple calculation shows that this is a very low figure if compared to that for other regions during the same period. If we assume that the
income per capita for Central America was equal to a low estimate of 12.4 pesos, the GNP for the whole region would have been 24,800,000
(using Thompson's population estimate of 2,000,000 people). According to these data, revenue was around 3 percent of colonial income, and
this is an upper-bound estimate. John Coatsworth estimates that during the same period New Spain, which had a higher per-capita income,
collected from 10 to 12 percent of income in taxes, a figure similar to that of England. John Coatsworth, From Backwardness to
Underdevelopment: The Mexican Economy 1800-1910 (forthcoming). [BACK]
53. See Miles Wortman, "Government Revenue," passim.  [BACK]
54. Manuel Montúfar, Memorias , p. XXX. [BACK]
55. Thompson to Foreign Office, FO 15-3; and Miles Wortman, Government and Society , p. 153. [BACK]
56. Thomas Marc Fiehrer, "The Baron de Carondelet," 1: 290. [BACK]
57. Geoffrey A. Cabat, "The Consolidation of 1804," p. 28.  [BACK]
58. Antonio Gutiérrez y Ulloa, Estado general , p. 146. [BACK]
59. Roberto Molina y Morales, Los precursores de la independencia (San Salvador: Editorial Delgado, 1981), p. 273.  [BACK]
60. Thomas Marc Fiehrer, "The Baron de Carondelet," 1: 263. [BACK]
61. Domingo Juarros, A Statistical and Commercial History , p. 30. [BACK]
62. See José Antonio Fernández, "Al estilo de Vizcaya. La producción de hierro en el Reino de Guatemala" (unpublished mimeo, San José,
Costa Rica).
63. Ibid., p. 16.
64. Ibid., p. 46.
65. Ibid., p. 52. [BACK]
62. See José Antonio Fernández, "Al estilo de Vizcaya. La producción de hierro en el Reino de Guatemala" (unpublished mimeo, San José,
Costa Rica).
63. Ibid., p. 16.
64. Ibid., p. 46.
65. Ibid., p. 52. [BACK]
62. See José Antonio Fernández, "Al estilo de Vizcaya. La producción de hierro en el Reino de Guatemala" (unpublished mimeo, San José,
Costa Rica).
 63. Ibid., p. 16.
64. Ibid., p. 46.
65. Ibid., p. 52. [BACK]
62. See José Antonio Fernández, "Al estilo de Vizcaya. La producción de hierro en el Reino de Guatemala" (unpublished mimeo, San José,
Costa Rica).
63. Ibid., p. 16.
64. Ibid., p. 46.
65. Ibid., p. 52. [BACK]
66. The total population of Spaniards was 4,729, 1,581 of which lived in Metapán. Antonio Gutiérrez y Ulloa, Estado general , p.
146. [BACK]
67. See Troy S. Floyd, "Bourbon Palliatives and the Central American Mining Industry, 1765-1800," The Americas 18 (October 1961): 103-
125. [BACK]
68. Domingo Juarros, A Statistical and Commercial History , p. 33. [BACK]
69. Manuel Rubio Sánchez, Historia del añil , 2: 110.
70. Ibid., 2: 111. [BACK]
69. Manuel Rubio Sánchez, Historia del añil , 2: 110.
70. Ibid., 2: 111. [BACK]
71. The process changed very little with the passage of time. Robert Smith in "Indigo Production," p. 183, has a description based on a late
eighteenth-century document. That description is remarkably similar to the ones found in J. LaFerrière, De Paris à Guatémala, Notes De
Voyages au Centre Amérique, 1866-1875 (Paris: Garnier Frères, 1877), p. 314; and in a consular report sent by the American Consul in
1885: Duke, Despatch to Department of State, Novem-
ber 15, 1885, Despatches from United States Consuls in San Salvador, El Salvador, 1868-1906, National Archives, Washington,
D.C. (This collection hereafter cited as DUSC, SS.) [BACK]
72. Antonio Gutiérrez y Ulloa, Estado general , p. 137. [BACK]
73. Robert S. Smith, "Indigo Production," p. 186.  [BACK]
74. Manuel Rubio Sánchez, Historia del anl , 2: 82. [BACK]
75. The document is a statement by the Alcalde Mayor de San Salvador about the Indians who worked under the repartimiento system for
indigo haciendas. The document is reproduced by Manuel Rubio Sánchez, Historia del añil , 2: 139. [BACK]
76. Robert S. Smith, "Indigo Production," p. 189.  [BACK]
77. Harry E. Cross, "Living Standards in Rural Nineteenth-Century Mexico: Zacatecas 1820-80," Journal of Latin American Studies 10 (May
1978): 7. [BACK]
78. John H. Coatsworth, "Anotaciones sobre la producción de alimentos durante el Porfiriato," Historia Mexicana 26 (October-December
1976): 176. [BACK]
79. In 1770 Cortés y Larraz listed 442 haciendas, in 1807 Gutiérrez y Ulloa listed 442, and in 1820 Marticorena counted 400. David
Browning, El Salvador, Landscape and Society (Oxford: Clarendon Press, 1971), p. 83. None of them included the Alcaldía Mayor de
Sonsonate in their calculations since that territory was not added to what today is El Salvador until after independence.  [BACK]
80. Robert S. Smith, "Indigo Production," p. 186.  [BACK]
81. At the end of the colonial period the Central American economies had developed a certain degree of complementarity. See Ralph Lee
Woodward, Jr., "The Economy of Central America at the Close of the Colonial Period," in Estudios del Reino de Guatemala , Duncan
Kinkead, ed. (Sevilla: Escuela de Estudios Hispanoamericanos, 1985).  [BACK]
82. David Browning, El Salvador , p. 84. It is not clear whether Browning's estimate, which is derived from Gutiérrez y Ulloa's data, is an
upper or a lower bound. In fact, Gutiérrez y Ulloa's report gives information on hacienda size on very few occasions. Browning's estimate is
certainly the best that can be obtained from the source, but it should be kept in mind that it is based on very limited information.  [BACK]
83. Troy S. Floyd, "The Guatemalan Merchants," p. 99.  [BACK]
84. Robert S. Smith, "Indigo Production," p. 193.
85. Ibid., p. 193.
86. Ibid., p. 208.
87. Ibid., p. 207.
88. Ibid., p. 195. [BACK]
84. Robert S. Smith, "Indigo Production," p. 193.
85. Ibid., p. 193.
86. Ibid., p. 208.
87. Ibid., p. 207.
88. Ibid., p. 195. [BACK]
84. Robert S. Smith, "Indigo Production," p. 193.
85. Ibid., p. 193.
86. Ibid., p. 208.
87. Ibid., p. 207.
88. Ibid., p. 195. [BACK]
84. Robert S. Smith, "Indigo Production," p. 193.
85. Ibid., p. 193.
86. Ibid., p. 208.
 87. Ibid., p. 207.
88. Ibid., p. 195. [BACK]
84. Robert S. Smith, "Indigo Production," p. 193.
85. Ibid., p. 193.
86. Ibid., p. 208.
87. Ibid., p. 207.
88. Ibid., p. 195. [BACK]
89. In 1803 the Bodegas were moved to Izabal. [BACK]
90. Miles Wortman, Government and Society , p. 318. [BACK]
91. Manuel Rubio Sánchez, Historia del Añil , 1: 357.
92. Ibid., 1: 357-358. José María Peinado, "Apuntamientos sobre la agricultura," p. 77. Manuel Rubio Sánchez, Historia del puerto
de la Santísima Trinidad de Sonsonate o Acajutla (San Salvador: Editorial Universitaria, 1977), pp. 273-331.  [BACK]
91. Manuel Rubio Sánchez, Historia del Añil , 1: 357.
92. Ibid., 1: 357-358. José María Peinado, "Apuntamientos sobre la agricultura," p. 77. Manuel Rubio Sánchez, Historia del puerto
de la Santísima Trinidad de Sonsonate o Acajutla (San Salvador: Editorial Universitaria, 1977), pp. 273-331.  [BACK]
93. Quoted by Italo López Vallecillos, Gerardo Barrios y su tiempo , 2 vols. (San Salvador: Dirección General de Publicaciones, 1967), 1:
45. [BACK]
94. Miles Wortman, Government and Society , pp. 185-188. [BACK]
95. Henry Dunn, Guatimala or the United Provinces of Central America in 1827-28 (New York: G. & C. Carvill, 1828), p. 211;
and Redactor General , July 13, 1825. [BACK]
96. Quoted in Manuel Rubio Sánchez, Historia del Añil , 1: 371. [BACK]
97. Miles Wortman, Government and Society , p. 192. [BACK]
98. Manuel Vela, "Informe (inédito hasta ahora) del Ministro Tesorero de las Reales Cajas de Guatemala, acerca del estado deficiente del
Erario antes y después del 15 de septiembre de 1821—Madrid, 11 de marzo de 1824." ASGHG 12 (September 1935): 4. [BACK]
99. Thompson to FO, December 3, 1825, FO 15-1 fol. 187.  [BACK]
100. Marcial Zebadua, "Memoria presentada al Congreso General de los Estados Federados de Centro América," in Documentos y datos
históricos y estadísticos de la República de El Salvador (San Salvador: Imprenta Nacional, 1926), p. 150. [BACK]
101. Miles Wortman, "Government Revenue," p. 254.  [BACK]
2 The Shattered Dreams of Independence
1. Manuel Montúfar, Memorias , p. 45. For background on the independence movement see Mario Rodríguez, The Cádiz Experiment in
Central America, 1808 to 1826 (Berkeley, Los Angeles, London: University of California Press, 1978).  [BACK]
2. In May of 1838 the federal congress declared the states free to find their own form of government. The term of Francisco Morazán as
president of the Provincias Unidas expired in February of 1839 marking the end of the last symbol of the existence of the federation.  [BACK]
3. Average tax revenues between 1812 and 1817 amounted to 357,745 pesos, and the situados were between 100,000 and 200,000. George
A. Thompson, Narrative of an Official Visit to Guatemala from Mexico (London: John Murray, 1829), p. 476. Alejandro Marure, Bosquejo
histórico de las revoluciones de Centro América desde 1811 hasta 1834 , 2 vols. (Paris: Librería de la vda. de Ch. Bouret, 1837), 1: 95.
Manuel Montúfar, Memorias , p. XXX. [BACK]
4. "29 citizens to the Suprema Junta Nacional," Oct. 13, 1821, Boletín del Archivo General del Gobierno (Hereinafter cited as BAGG ), vol.
2, no. 1, p. 54; "Comision de Hacienda to 29 citizens," Oct. 25, 1821, BAGG vol. 2, no. 1, p. 55. Mario Rodríguez, The Cádiz Experiment , p.
153. [BACK]
5. Mario Rodríguez, The Cádiz Experiment , p. 154. [BACK]
6. Letter from Iturbide to Conde de la Cadena, Nov. 20, 1821, reproduced in Vicente Fillisola, La cooperación de México en la
independencia de Centro América , 2 vols. (Mexico: Librería da la vda. de Ch. Bouret, 1911), 2: 104.  [BACK]
7. Ayuntamiento de Matagalpa to Gabino Gaínza, Oct. 18, 1821, BAGG vol. 1, no. 1, p. 58. [BACK]
8. Quoted in Ramón López Jiménez, José Cecilio del Valle, Fouché de Centroamérica (Guatemala: Editorial José de Pineda Ibarra, 1968), p.
120. [BACK]
9. Acta de la Asamblea Nacional Constituyente, Sesión del 30 de junio de 1823, BAGG , vol. 1, no. 4, p. 444. These feelings were somewhat
exaggerated since Spanish intendentes had collected information on the territories under their supervision. A good example is Antonio.
Gutiérrez y Ulloa's, Estado General . [BACK]
10. Act of the Junta Consultiva Provisional, Jan. 5, 1822, reproduced in Ramón López Jiménez, José Cecilio del Valle , p. 163. [BACK]
11. On the origins of these divisions see Ralph Lee Woodward, Jr., "Economic and Social Origins of the Guatemalan Political Parties (1773-
1823)," HAHR 45 (November 1965): 556-566. [BACK]
12. Manuel Montúfar, Memorias , p. 12. [BACK]
13. Vicente Filisola, La cooperación 2: 31. [BACK]
14. Alejandro Marure, Efemérides de los hechos notables acaecidos en la República de Centro América (Guatemala: Tipografía Nacional,
1895), p. 2 [BACK]
15. George A. Thompson, Narrative , p. 470; and Dunn, Guatimala , p. 224. [BACK]
16. For a detailed account of commercial activities in Central America see Robert A. Naylor, "British Commercial Relations with Central
America, 1821-1851" (Ph.D. dissertation, Tulane University, 1958).  [BACK]
17. Foreign Office to Thompson, January 7, 1825, FO 15-1. Thompson was fluent in Spanish and had learned about Spanish America when
he translated and edited the English version of Antonio de Alcedo's Geographical and Historical Dictionary of America and the West Indies ,
5 vols. (London: James Carpenter, 1812-1815). [BACK]
18. Juan de Dios Mayorga, "Articles of Barter or Consumption in the Republic of Guatemala," January 12, 1824. Mayorga's report was
submitted as an appendix to George Thompson's report to the Foreign Office, FO 15-3, fol. 94.  [BACK]
19. Hubert H. Bancroft in his History of Central America (San Francisco: The History Company, 1887), 3: 650, uses Mayorga's total as the
value of the "yearly products of Central America" in 1826.  [BACK]
20. Thompson's rough estimate of the population of Central America at that time was 2 million people, FO 15-1, fol. 21. A very rough
estimate of the GNP per capita is estimated by Héctor Lindo-Fuentes in "Economic History." The upper-bound estimate was thirteen
pesos. [BACK]
21. Quoted by Italo López Vallecillos, Gerardo Barrios , 1: 45. [BACK]
22. In 1825 the minister of finance, José Beteta, gave George Thompson a financial report stating virtually the same. FO 15-3, fol. 23.  [BACK]
23. Manuel Rubio Sánchez, Historia del añil , quoting a federal commission, 1: 371-372. Also, Henry Dunn, Guatimala , p. 211, and FO 15-
3, fol. 81. [BACK]
24. Manuel Rubio Sánchez, Historia del añil , 1: 375. [BACK]
25. Michael Mulhall, The Dictionary of Statistics (London: George Routledge and Sons, 1899), p. 470.  [BACK]
26. Ayzinena to Consul O'Reilly, January 10, 1826, FO 15-5.  [BACK]
27. Dashwood to FO, January 27, 1830, FO 15-10. Dunn made the same point in 1828. Henry Dunn, Guatimala , p. 232. [BACK]
28. Robert S. Smith, "Financing the Central American Federation, 1821-1838," HAHR 43 (November 1963): 498. [BACK]
29. Ayzinena to O'Reilly, January 10, 1826, FO 15-5.  [BACK]
30. Semanario Político Mercantil de San Salvador , August 7, 1824. [BACK]
31. This is an estimation done by Miles Wortman based on tax data. See Government and Society , p. 241. [BACK]
32. FO 15-3, fol. 111. [BACK]
33. FO 15-3, fol. 124. [BACK]
34. O'Reilly to Foreign Office, February 22, 1826, FO 15-5.  [BACK]
35. Dashwood to Foreign Office, January 28, 1830, FO 15-10. [BACK]
36. Report of the minister of finance, appendix to O'Reilly's despatch to Foreign Office, April 2, 1827, FO 15-7.  [BACK]
37. O'Reilly to Foreign Office, February 22, 1826, FO 15-5.  [BACK]
38. O'Reilly to Foreign Office, November 10, 1826, FO 15-5. [BACK]
39. Quoted by Robert S. Smith, "Financing," p. 490.  [BACK]
40. "Arancel provisional para las aduanas de Guatemala," February 13, 1822, FO 15-3.  [BACK]
41. Robert S. Smith, "Financing," p. 490.  [BACK]
42. George A. Thompson, Narrative , p. 491. [BACK]
43. Quoted in Italo López Vallecillos, Gerardo Barrios , 1: 45. [BACK]
44. Manuel Montúfar, Memorias , p. XXVII. [BACK]
45. George A. Thompson, Narrative , p. 72. [BACK]
46. The data on exports to Great Britain have been computed from the tables in Robert A. Naylor, "British Commercial Relations," Tables of
Commercial Statistics 1821-1951. Trade with Great Britain amounted to about three-fourths of all of Central America's foreign trade.
47. Ibid., p. 201.
48. Ibid., p. 168. [BACK]
46. The data on exports to Great Britain have been computed from the tables in Robert A. Naylor, "British Commercial Relations," Tables of
Commercial Statistics 1821-1951. Trade with Great Britain amounted to about three-fourths of all of Central America's foreign trade.
47. Ibid., p. 201.
48. Ibid., p. 168. [BACK]
46. The data on exports to Great Britain have been computed from the tables in Robert A. Naylor, "British Commercial Relations," Tables of
Commercial Statistics 1821-1951. Trade with Great Britain amounted to about three-fourths of all of Central America's foreign trade.
47. Ibid., p. 201.
48. Ibid., p. 168. [BACK]
49. Henry Dunn, Guatimala , p. 228. [BACK]
50. Manuel Rubio Sánchez, Historia del puerto , p. 336. [BACK]
51. FO 15-5, fols. 108-110. [BACK]
52. Robert A. Naylor, "British Commercial Relations," p. 219.  [BACK]
53. Chatfield to Duke of Wellington, June 1, 1835, FO 15-16. [BACK]
54. La Unión is located on the Gulf of Fonseca at the easternmost end of El Salvador.  [BACK]
55. "Translated Extract of the Message of the Vice-President of Central America on the Opening of the Ordinary Sessions of Congress, 22nd
April 1835," FO 15-16, fol. 105. [BACK]
56. Manuel José Arce, Memoria , 29. [BACK]
57. Gaceta de Guatemala (Guatemala), Mar. 1, 1824. "Decretos de 6 de Febrero y de 13 de Junio de 1824 habilitando los puertos de La
Libertad y La Unión," in Isidro Menéndez, Recopilación de las leyes de El Salvador en Centro-América , 2 vols. (Guatemala, 1855-1856), 2:
229. [BACK]
58. Marcial Zebadua, "Memoria presentada al Congreso General," pp. 150-151, FO 15-1, fol. 187-188.  [BACK]
59. José Cecilio del Valle, Obras de D. José Cecilio del Valle , Ramón Rosa, ed. (Tegucigalpa: Tipograffía Nacional, 1906), p. 9. [BACK]
60. Robert S. Smith, "Financing," p. 490.  [BACK]
61. George A. Thompson, Narrative , p. 151. [BACK]
62. The 1825 budget can be found in Henry Dunn, Guatimala , p. 191. [BACK]
63. Pedro Joaquín Chamorro, Historia de la Federación de la América Central, 1823-1840 (Madrid: Ediciones Cultura Hispánica, 1951), p.
120, quoting Valle. Fulgencio Maiorga, "Memoria que el Secretario General Interino del Estado del Salvador D. Fulgencio Maiorga presentó
a la legislatura del año de 1828 sobre los diferentes ramos de la administración," in Biblioteca Nacional, ed., Documentos , p. 19. Manuel
Montúfar, Memorias , p. XXXI. [BACK]
64. Alejandro Marure, Bosquejo histórico , 1: 129. [BACK]
65. Manuel Montúfar, Memorias , p. XXXI.
66. Ibid., p. 46. [BACK]
65. Manuel Montúfar, Memorias , p. XXXI.
66. Ibid., p. 46. [BACK]
67. "Dictamen de la Comisión de Hacienda de la Asamblea Ordinaria del Estado de El Salvador, 28 de marzo de 1825," New York Public
Library, Miscellaneous Documents (Hereinafter cited as NYPL MD).  [BACK]
68. Report of the minister of finance, appendix to O'Reilly's despatch to Foreign Office, April 2, 1827, FO 15-7.  [BACK]
69. Robert S. Smith, "Financing," p. 486.  [BACK]
70. Fred J. Rippy, British Investment in Latin America, 1822-1949 (Minneapolis: University of Minnesota Press, 1959), p. 35.  [BACK]
71. Fulgencio Maiorga, "Memoria," p. 19. [BACK]
72. Quoted by Constantino Láscaris, Historia de las ideas en Centroamérica (San José, Costa Rica: EDUCA, 1970), p. 377. [BACK]
73. Ralph Lee Woodward Jr., "Central America," in Leslie Bethell, ed., Spanish America After Independence, c. 1820-c. 1870 (Cambridge:
Cambridge University Press, 1987), p. 180. For insights on the problems of the federation see Mario Rodríguez et al., Applied
Enlightenment: 19th Century Liberalism , Publication 23 (New Orleans: Middle American Research Institute, Tulane University,
1972). [BACK]
74. Alejandro Marure, Efemírides , pp. 141 and 154. [BACK]
75. Robert G. Dunlop, Travels in Central America (London: Longman, Brown, Green and Longmans, 1847), p. 148.  [BACK]
76. H. de T. D'Arlach, Souvenirs de L'Amerique Centrale (Paris: Charpentier, 1850), p. 103. [BACK]
77. Robert Dunlop, Travels , p. 149. [BACK]
78. Alejandro Marure, Bosquejo histórico , 2: 87.
79. Ibid. [BACK]
78. Alejandro Marure, Bosquejo histórico , 2: 87.
79. Ibid. [BACK]
80. Gaceta del Salvador , September 16, 1860. [BACK]
81. Robert G. Dunlop, Travels in Central America , p. 24. [BACK]
82. Iván Molina, La alborada del capitalismo agrario en Costa Rica (San Josá: Editorial de la Universidad de Costa Rica, 1988), pp. 20-
21. [BACK]
83. Manuel Rubio Sánchez, Historia del añil , 1: 184. [BACK]
84. Antonio Grimaldi, Opinión del Senador Lic. Don Antonio Grimaldi sostenida en el debate que tuvo lugar en la sesión del 13 de Abril y
la sentencia pronunciada por el Senado en la misma sesión contra el ex-presidente D. Francisco Dueñas (San Salvador: Imprenta de Palma,
1872), p. 3. A copy of this pamphlet was included as an appendix to Biddle despatch to the Department of
State, June 20, 1872, Diplomatic Despatches El Salvador, National Archives, vol. 3 (hereinafter cited as DDES).  [BACK]
85. This is a very rough estimate based on a simple extrapolation. The total population in 1821 was about 250,000 and, according to Antonio
Gutiérrez y Ulloa's Estado general , the labor force was about 35 percent of the total population.  [BACK]
86. Alejandro Marure, Bosquejo histórico , 1: 63. [BACK]
87. Alastair White, El Salvador (New York: Praeger, 1973), app. 3, p. 264. [BACK]
88. According to Gutiórrez y Ulloa's figures, in 1807 the male labor force was 34.7 percent of the total population. In 1829 the total
population was, according to Thompson, 330,000. Therefore, the size of the labor force was around 114,510 men.  [BACK]
89. Alejandro Marure, Bosquejo histórico , 2: 43.
90. Ibid., 2: 42, 43. [BACK]
89. Alejandro Marure, Bosquejo histórico , 2: 43.
90. Ibid., 2: 42, 43. [BACK]
91. Robert G. Dunlop, Travels in Central America , p. 24. [BACK]
92. Julius Froebel, Seven Years' Travel in Central America, Northern Mexico and the Far West of the United States (London: Richard
Bentley, 1859), p. 198. [BACK]
93. E. G. Squier, Notes on Central America: Particularly the States of Honduras and San Salvador (New York: Harper & Brothers, 1855), p.
305. [BACK]
94. Chatfield to Foreign Office, July 9, 1834, FO 15-14.  [BACK]
95. Lorenzo López, Estadística general de la República del Salvador (San Salvador: Imprenta del Gobierno, 1858), p. 52; Sosa to O'Reilly,
February 16, 1826, FO 15-5. [BACK]
96. Robert G. Dunlop, Travels in Central America , p. 50. [BACK]
97. Lorenzo Montúfar, Reseña histórica de Centro América (Guatemala: Tipograféa El Progreso, 1878), 2: 63.  [BACK]
98. Alejandro Marure, Bosquejo histórico , p. 78. [BACK]
99. Vicente Filisola, La cooperación , 2: 155. [BACK]
100. Alejandro Marure, Bosquejo histórico , 2: 106. [BACK]
101. Autobiografía del Dr. Manuel Gallardo in Miguel Angel Gallardo, ed., Papeles históricos , 5 vols. (n.p., 1954), 1: 45. [BACK]
102. Lorenzo Montúfar, Reseúa histórica , 1: 41. [BACK]
103. Robert G. Dunlop, Travels in Central America , p. 148. [BACK]
104. Alejandro Marure, Bosquejo histórico , 2: 78. [BACK]
105. Hall to Foreign Office, December 26, 1833, FO 15-13.  [BACK]
106. Henry Dunn, Guatimala , p. 198. [BACK]
107. Michael G. Mulhall, The Dictionary of Statistics , p. 473. [BACK]
108. Hall to Foreign Office, December 26, 1833; FO 15-13.  [BACK]
109. Chatfield to Foreign Office, September 10, 1834, FO 15-14.
110. Ibid.; Robert S. Smith, "Financing," p. 504.  [BACK]
109. Chatfield to Foreign Office, September 10, 1834, FO 15-14.
110. Ibid.; Robert S. Smith, "Financing," p. 504.  [BACK]
111. The figure for the 1840s is the average for the decade. The average for the decade of the 1830s was 6 s . 8 d . Michael G.
Mulhall, Dictionary of Statistics , pp. 473-474. [BACK]
112. John Baily, Central America; Describing Each of the States of Guatemala, Honduras, Salvador, Nicaragua, and Costa Rica; Their
Natural Features, Products, Population, and Remarkable Capacity for Colonization (London: Trelawney Saunders, 1850), p. 84. [BACK]
3 Organization of the State 1840–1880
1. Alastair White, El Salvador , pp. 265 and 266. Also, Glen W. Taplin, Middle America Governors (Metuchen, N.J.: Scarecrow Press,
1972), pp. 99 and 102. [BACK]
2. In the 1840s the presidential period was 2 years and the average time in power for a Salvadoran president was 18.34 months. By the next
decade the same average had increased to 30.48 months. After the 1864 constitution the presidential term was extended to 4 years, and for
the rest of the century the average administration remained in power for 62.11 months.  [BACK]
3. La Gaceta , July 30, 1859. [BACK]
4. ''Decreto legislativo de 29 de Abril de 1825," in Isidro Menéndez, Recopilación , 1: 181. "Reglamento de policía, decretado por el
Gobierno, en 12 de Mayo de 1843," Recopilación , 1: 182. [BACK]
5. "Decreto del Gobierno de 24 de Febrero de 1848," in Isidro Menéndez, Recopilación , 1: 185. [BACK]
6. "Reglamento de policía decretado por la Legislatura en 6 de Agosto de 1854," Recopilación , 1: 185. "Reglamento de policía rural,
decretado por el gobierno en 24 de Julio de 1855," Recopilación , 1: 190. [BACK]
7. Lorenzo López, Estadística general , p. 53. [BACK]
8. "Acuerdo del Ministerio del Interior de 28 de Julio de 1868," in Dionisio González, Instrucción que contiene las disposiciones económicas
municipales de un carácter general y la contabilidad para el manejo de sus fondos (San Salvador: Imprenta del Gobierno, 1867). Diario
oficial , March 12, 1889. [BACK]
9. "Informe del Ministro de Hacienda y Guerra Lic. Eugenio Aguilar, 31 de enero de 1862," in Italo López Vallecillos, Gerardo Barrios , 2:
240. [BACK]
10. Decrees of July 6, 1867, and July 22 and 28, 1868, in Dionisio González, Instrucción . Pedro Zamora Castellanos, Vida militar de Centro
América (Guatemala: Tipografía Nacional, 1924), p. 403. [BACK]
11. Carlos F. Urrutia, La ciudad de San Salvador (San Salvador, 1970), p. 86. [BACK]
12. Boletín oficial , 23 April 1873. Gaceta oficial , October 8, 1876. [BACK]
13. María Leistenschneider, ed., Dr. Rafael Zaldivar. Recopilación de documentos históricos relativos a su administración , 2 vols. (San
Salvador: Dirección de Publicaciones, 1977), 1: 221. Hubert Howe Bancroft, History of Central America , 3: 647. [BACK]
14. Isidro Menéndez, Recopilación , 1: 3. [BACK]
15. La Gaceta , July 5, 1855. República de El Salvador, Código civil de la República del Salvador, en Centro-América (Nueva York:
Imprenta de Eduardo O. Jenkins, 1860). [BACK]
16. "Informe del Ministro de Gobernación y Relaciones Exteriores Lic. Manuel Irungaray, leído el 24 de enero de 1860," in Italo López
Vallecillos, Gerardo Barrios , 2: 66. [BACK]
17. For documents on E. G. Squier's activities in El Salvador see U.S. Congress, Senate, Message from the President of the United States,
communicating, in compliance with a resolution of the Senate, information in relation to the difficulties between the British authorities and
San Salvador . Ex. Doc. 43, 31st
Cong., 2d sess., 1851. For a thorough account of Chatfield's activities see Mario Rodríguez, A Palmerstonian Diplomat in Central
America (Tucson: University of Arizona Press, 1964). [BACK]
18. "Tratado general de amistad, navegación y comercio entre El Salvador y los Estados Unidos, ajustado el 2 de enero de 1850," in Isidro
Menéndez Recopilación , 1: 86. [BACK]
19. Rafael Reyes, ed., Colección de tratados del Salvador (San Salvador: Imprenta del Doctor Francisco Sangrini, 1884), pp. 21, 66, 102,
237, 275, and 300; and Isidro Menéndez, Recopilación , 1: 86-93. [BACK]
20. Carlos González Orellana, Historia de la educación en Guatemala (Guatemala: Editorial "José de Pineda Ibarra," 1970), p. 239. [BACK]
21. Mary Kay Vaughn, "Primary Schooling in the City of Puebla, 1821-1860," HAHR 67 (February 1987): 46. [BACK]
22. Gaceta del Gobierno Supremo de Guatemala , July 30, 1824. A copy of this issue of the Gaceta was enclosed as an appendix to
Thompson's despatch to the Foreign Office, FO 15-1, Sept. 8, 1824.  [BACK]
23. Gaceta del Gobierno Supremo de Guatemala , April 10, 1824. [BACK]
24. We do not know for how long the Lancasterian system was applied in El Salvador. In Costa Rica, a country that was always ahead of El
Salvador in these matters, it predominated until 1886. See Astrid Fischel, Consenso y represión (San José: Editorial Costa Rica, 1987), p.
85. [BACK]
25. Carlos González Orellana, p. 247. [BACK]
26. "Decreto del Gobierno de 3 de Febrero de 1841," in Isidro Menéndez, Recopilación , 2: 6. [BACK]
27. La Gaceta , April 21, 1848. [BACK]
28. Manuel Gallardo, "Autobiografía, " p. 29; and La Gaceta , January 12, 1849. [BACK]
29. La Gaceta . J. LaFerriére, De Paris à Guatémala , p. 206. Rafael Reyes, Apuntamientos estadísticos sobre la República del Salvador;
trabajo destinado a dar una idea del país en la Exposición Universal de París en 1889 (San Salvador: Imprenta Nacional, 1888), p. 25.
Bureau of American Republics, Handbook of Salvador (Washington, D.C.: Government Printing Office, 1894), p. 30.  [BACK]
30. Carl von Scherzer, Travels in the Free States of Central America: Nicaragua, Honduras and San Salvador (London: Longman, Brown,
Green, Longsmans & Roberts, 1857), p. 128. [BACK]
31. Lorenzo López, Estadística general , p. 49. [BACK]
32. La Gaceta , May 25, 1859. [BACK]
33. Lorenzo López, Estadística general , pp. 43 and 90. [BACK]
34. The population data employed in the computation comes from Rodolfo Barón Castro, La población de El Salvador , p. 467; and the
number of schools from La Gaceta and Bureau of American Republics, Handbook of Salvador , p. 30. [BACK]
35. Total expenditure in education was 7,505 pesos in 1847 and 308,382 pesos in 1892, about 4.5 percent of the total budget. La Gaceta ,
December 24, 1847, and Bureau of American Republics, Handbook of Salvador , p. 30. [BACK]
36. La Gaceta , November 6, 1861. [BACK]
37. Biddle, Despatch to Department of State, Feburary 1, 1872. DDES, vol. 2.  [BACK]
38. For the Salvadoran data see table 8. For Costa Rica see Astrid Fischel, Consenso y represión , Cuadro No. 32. The population data for
Costa Rica used for the computations was extrapolated from Ciro F. S. Cardoso y Héctor Pérez Brignoli, Centro América y la economía
occidental (San José: Editorial de la Universidad de Costa Rica, 1977), p. 225.  [BACK]
39. See Astrid Fischel, Consenso y represión , Cuadro No. 2 and Cuadro No. 25. [BACK]
40. Biddle Despatch to Department of State, January 8, 1872. DDES, Vol. 2. Bureau of American Republics, Handbook , p. 30. [BACK]
41. Astrid Fischel, Consenso y represión , Cuadro No. 48. [BACK]
42. Manuel Gallardo, "Autobiografía," 1: 45. [BACK]
43. Miguel Angel Durán, Historia de la Universidad, 1841-1930 (San Salvador: Editorial Universitaria, 1975), p. 31.  [BACK]
44. La Gaceta , January 21, 1848. [BACK]
45. Isidro Menéndez, Recopilación , 2: 9. Pedro I. Fonseca, Monografía de San Salvador (San Salvador: Imprenta Nacional, 1914), p. 24;
and La Gaceta , January 29, 1848. [BACK]
46. "Informe del Ministro de Gobernación y Relaciones Exteriores, Lic. Manuel Irungaray, leído el 24 de enero de 1860," in Italo López
Vallecillos, Gerardo Barrios , 2: 76. [BACK]
47. Diario oficial , January 15, 1879. [BACK]
48. Rafael Reyes, Apuntamientos , pp. 26-27. [BACK]
49. Williams, Despatch to Department of State, February 6, 1868, DDES, Vol. 1.  [BACK]
50. La Gaceta , August 23, 1855. [BACK]
51. Rafael Reyes, Apuntamientos , p. 13. [BACK]
52. La Gaceta , January 7, 1848. [BACK]
53. "Decreto de 2 de abril de 1841," in Isidro Menéndez, Recopilación , 2: 230. [BACK]
54. Miguel Angel García, Diccionario histórico-enciclopédico de la República de El Salvador (San Salvador: Imprenta Nacional, various
dates), 11: 185. [BACK]
55. "Informe del Ministro de Gobernación y Relaciones Exteriores Lic. Manuel Irungaray, leído el 24 de enero de 1860," in Italo López
Vallecillos, Gerardo Barrios , 2: 79. [BACK]
56. "Decreto de 9 de Marzo de 1847, concediendo cierta esención de derechos a los hilos de los colores que espresa, que se introduzcan por
los puertos del sur," in Isidro Menéndez, Recopilación , 2: 164. [BACK]
57. La Gaceta , December 8, 1848. [BACK]
58. Norberto Ramírez to E. G. Squier, 16 December 1850, the papers of E. G. Squier 1841-1888, series 1, Vol. 1, pt. 2, Library of
Congress. [BACK]
59. La Gaceta , May 16, 1851. [BACK]
60. Hubert H. Bancroft, History of Central America , 3: 664. [BACK]
61. La Gaceta , January 18, 1860. [BACK]
62. Fesenden Nott Otis, Illustrated History of the Panama Railroad (New York: Harper and Brothers, 1861), p. 145. [BACK]
63. El Constitucional (San Salvador), March 6, 1865. [BACK]
64. Foote to Foreign Office, FO 66-2. [BACK]
65. "Informe del Ministro de Hacienda y Guerra Lic. José Félix Quiroz a la
Cámara de Diputados leído el 24 de enero de 1860,'' in Italo López Vallecillos, Gerardo Barrios , 2: 86; and La Gaceta , March 28,
1860. [BACK]
66. Year-to-year fluctuations were so wide that it seemed advisable to compare five-year averages. Complete import and export figures are in
table 20. [BACK]
67. Francisco Solano Astaburuaga, Repúblicas de Centro América o idea de su historia i de su estado actual (Santiago de Chile, Imprenta del
Ferrocarril, 1857), p. 76; La Gaceta , January 5, 1859. [BACK]
68. Great Britain, Parliament, Parliamentary Papers (Commons), 1865 , vol. 13, "Commercial Reports Received at the Foreign Office from
Her Majesty's Consuls Between July 1st and December 31st, 1864," p. 142 (of the report).  [BACK]
69. Fesenden Nott Otis, Illustrated History , p. 149. Livingstone to D. of S. December 20, 1861, DUSC, La Unión.  [BACK]
70. The evolution of shipping services after the switch to coffee production is discussed in chap. 6.  [BACK]
71. Lorenzo López, Estadística general , p. 189. "Decreto legislativo del 2 de abril de 1853," in Isidro Menéndez, Recopilación , 2:
168. [BACK]
72. Antonio Cardona Lazo, Diccionario geográfico de la República de El Salvador (San Salvador: Publicaciones del Ministerio de
Economía, 1945), p. 112. "Contrata con Don Pedro Dárdano y Don Manuel Trigueros para construir muelle en La Unión, 18 de mayo de
1868," in Dionisio González, Instrucción ; and Bureau of American Republics, Handbook of Salvador , p. 14. [BACK]
73. Bureau of American Republics, Handbook of Salvador , p. 57. [BACK]
74. G. F. von Tempsky, Mitla: A Narrative of Incidents and Personal Adventures on a Journey in Mexico, Guatemala, and Salvador in the
Years 1853 to 1855 (London: Longman, Brown, Green, Longmans and Roberts, 1858), p. 424.  [BACK]
75. Carl von Scherzer, Travels , p. 193. [BACK]
76. "Informe del Ministro de Gobierno y Relaciones Exteriores Lic. Manuel Irungaray, leído el 24 de enero de 1860," in Italo López
Vallecillos, Gerardo Barrios , 2: 79. [BACK]
77. El Faro , August 22, 1864. [BACK]
78. La Gaceta , October 31, 1857. [BACK]
79. El Constitucional , July 20, 1865. [BACK]
80. La Gaceta , January 15, 1857. La Ferriére, De Paris à Guatámala , p. 229. [BACK]
81. El Constitucional , July 22, 1864. [BACK]
82. "Acuerdo del Ministerio del Interior de 26 de septiembre de 1867," in Dionisio González, Instrucción . [BACK]
83. Pedro I. Fonseca, Monografía de La Libertad (San Salvador: Imprenta Nacional, 1913), p. 21. Williams, Despatch to Department of
State, January 21, 1869, DDES, vol. 1. Maria Leistenschneider, ed., Dr. Rafael Zaldívar , 1: 279. La Férriére, De Paris à Guatemala , p.
124. [BACK]
84. The gunpowder monopoly, which had been abolished by the federation in 1830, was restored in 1852. Isidro Menéndez, Recopilación , 2:
106. [BACK]
85. La Gaceta , September 16, 1852, and September 7, 1859.
86. Ibid., September 12, 1860.
87. Ibid., January 9, 1858, and September 3, 7, and 10, 1859.
88. Ibid., December 12, 1860. [BACK]
85. La Gaceta , September 16, 1852, and September 7, 1859.
86. Ibid., September 12, 1860.
87. Ibid., January 9, 1858, and September 3, 7, and 10, 1859.
88. Ibid., December 12, 1860. [BACK]
85. La Gaceta , September 16, 1852, and September 7, 1859.
 86. Ibid., September 12, 1860.
87. Ibid., January 9, 1858, and September 3, 7, and 10, 1859.
88. Ibid., December 12, 1860. [BACK]
85. La Gaceta , September 16, 1852, and September 7, 1859.
86. Ibid., September 12, 1860.
87. Ibid., January 9, 1858, and September 3, 7, and 10, 1859.
88. Ibid., December 12, 1860. [BACK]
89. The custom tax data was compiled by Knut Walter, "Trade and
Development in an Export Economy: The Case of El Salvador, 1870-1914" (M.A. thesis, University of North Carolina, 1977), table
1, p. 21. [BACK]
90. Knut Walter, "Trade and Development," table 19, p. 82; El Constitucional , March 6, 1865. [BACK]
4 Labor, Land, and Investment 1840–1880
1. Carl von Scherzer, Travels in the Free States , p. 201. [BACK]
2. La Gaceta (San Salvador), May 27, 1857.
3. Ibid., June 18, 1852, and February 9, 1859.
4. Ibid., August 11, 1858. The product of this effort was the "Mapa de la República de San Salvador," by Maximilian V. Sonnenstern
(New York: Lith. of J. Bien, 1858). [BACK]
2. La Gaceta (San Salvador), May 27, 1857.
3. Ibid., June 18, 1852, and February 9, 1859.
4. Ibid., August 11, 1858. The product of this effort was the "Mapa de la República de San Salvador," by Maximilian V. Sonnenstern
(New York: Lith. of J. Bien, 1858). [BACK]
2. La Gaceta (San Salvador), May 27, 1857.
3. Ibid., June 18, 1852, and February 9, 1859.
4. Ibid., August 11, 1858. The product of this effort was the "Mapa de la República de San Salvador," by Maximilian V. Sonnenstern
(New York: Lith. of J. Bien, 1858). [BACK]
5. Quoted in E. Bradford Burns, "The Modernization of Underdevelopment: El Salvador, 1858-1931," The Journal of Developing Areas 18
(April 1984): 297. [BACK]
6. La Gaceta , December 24, 1859.
7. Ibid., May 27, 1857. [BACK]
6. La Gaceta , December 24, 1859.
 7. Ibid., May 27, 1857. [BACK]
8. "Decreto legislativo de 19 de Abril de 1825 sobre vagos, coimes y mal entretenidos," in Isidro Menéndez, Recopilación , 1: 181. [BACK]
9. "Decreto legislativo del 14 de abril de 1841," in Isidro Menéndez, Recopilación , 1: 199.
10. The regulations of 1843, 1854, and 1855 are found in ibid., 1: 182, 185, 190.  [BACK]
9. "Decreto legislativo del 14 de abril de 1841," in Isidro Menéndez, Recopilación , 1: 199.
10. The regulations of 1843, 1854, and 1855 are found in ibid., 1: 182, 185, 190.  [BACK]
11. Trade data have to be approached with great caution. Official figures did not value export products at market prices. Instead, an artificial
price was set by the tarifa de aforos . Although this feature makes it possible to compare figures over time (it is the equivalent of using
deflated data) recordkeepers were not always consistent, and some artificial prices changed from time to time. The tarifa price of indigo
remained constant at one peso per pound since the 1850s. The tarifa price of coffee was about twelve pesos per quintal, but occasional
variations could be as large as 100 percent. As neither the volume of exports or the complete set of tarifas is available for each year, it is
impossible to correct the data to make allowance for changes in the artificial prices. Thus, the total export data are a combination of figures at
constant prices and figures with prices subject to changes. Moreover, data collection in the nineteenth century was not the most accurate
exercise. Hence, the trade figures discussed in this book ought to be considered as only a rough approximation. An effort was made
throughout the text to provide qualitative evidence to confirm the trends observed in the data.  [BACK]
12. La Gaceta , September 13, 1855. Lorenzo López, Estadístical general , p. 99.
13. Ibid., March 9, 1861.
14. Ibid., May 9, 1857.
15. Ibid., March 9, 1961. [BACK]
12. La Gaceta , September 13, 1855. Lorenzo López, Estadístical general , p. 99.
13. Ibid., March 9, 1861.
14. Ibid., May 9, 1857.
15. Ibid., March 9, 1961. [BACK]
12. La Gaceta , September 13, 1855. Lorenzo López, Estadístical general , p. 99.
13. Ibid., March 9, 1861.
14. Ibid., May 9, 1857.
15. Ibid., March 9, 1961. [BACK]
12. La Gaceta , September 13, 1855. Lorenzo López, Estadístical general , p. 99.
13. Ibid., March 9, 1861.
14. Ibid., May 9, 1857.
15. Ibid., March 9, 1961. [BACK]
16. Mrs. Henry G. Foote, Recollections of Central America and the West Coast of Africa (London: T. C. Newby, 1869), p. 101. [BACK]
17. Williams, despatch to Department of State, September 22, 1868. DDES, Vol. 1.  [BACK]
18. "Acuerdo del Ministerio de Fomento de 8 de agosto de 1868," in Dionisio González, Instrucción , n.p. [BACK]
19. Lorenzo López, Estadística general , p. 130.
20. Ibid., p. 167. [BACK]
19. Lorenzo López, Estadística general , p. 130.
20. Ibid., p. 167. [BACK]
21. La Gaceta , June 8, 1859. [BACK]
22. Antonio Gutiérrez y Ulloa, Estado general , p. 146. [BACK]
23. Esteban Castro, "Estadística de la jurisdicción municipal de San Vicente escrita por el bachiller pasante don Esteban Castro por comisión
de la Municipalidad de San Vicente, 1878," in Biblioteca Nacional, Documentos y datos históricos , p. 116. [BACK]
24. Lorenzo López, Estadística general , p. 43; Antonio Gutiérrez y Ulloa, Estado general , p. 146. [BACK]
25. Carl von Scherzer, Travels , p. 185. [BACK]
26. G. W. Montgomery, Narrative of a Journey to Guatemala, in Central America, in 1838 (New York: Wiley & Putnam, 1839), p. 101.
Gustave de Belot, La République du Salvador (Paris: Chez Dentu, 1865), p. 35. [BACK]
27. All the wages are for the town of Suchitoto. Lorenzo López, Estadistica , p. 131. [BACK]
28. Antonio Gutiérrez y Ulloa, Estado general , pp. 133 and 146. [BACK]
29. Lorenzo López, Estadistica , pp. 40, 43, 85. [BACK]
30. Esteban Castro, "Estadística," p. 94. [BACK]
31. Mrs. Henry Foote, Recollections , p. 68; La Gaceta , July 19, 1855. [BACK]
32. Williams, despatch to Department of State, January 26, 1867, DDES, Vol. 1.  [BACK]
33. Chap. 6 will be entirely devoted to the liberal reforms that privatized all land. Liberal and conservative attitudes toward ejidos and
communal lands will be discussed in that context. [BACK]
34. La Gaceta , December 17, 1847. [BACK]
35. Derek Noel Kerr, "The Role of the Coffee Industry in the History of El Salvador, 1840-1906" (M.A. thesis, University of Calgary, 1977),
pp. 30-31. [BACK]
36. Isidro Menéndez, Recopilación , 1: 141. [BACK]
37. La Gaceta , January 4, 1855. The granting of ejido land was regulated by legislation issued by the state of El Salvador in 1827. Isidro
Menéndez, Recopilación , 1: 140.
38. Ibid., January 20, March 13, 1858; Lorenzo López, Estadistica , pp. 10, 11, and 140. [BACK]
37. La Gaceta , January 4, 1855. The granting of ejido land was regulated by legislation issued by the state of El Salvador in 1827. Isidro
Menéndez, Recopilación , 1: 140.
38. Ibid., January 20, March 13, 1858; Lorenzo López, Estadistica , pp. 10, 11, and 140. [BACK]
39. Gaceta oficial , February 19, 1862. [BACK]
40. Mrs. Henry Foote, Recollections , p. 84. El Constitucional , March 9, 1865. [BACK]
41. "Acuerdo Legislativo de 3 de Febrero de 1867," and "Decreto presidencial de 1 de Junio de 1869," in Dionisio González, Instrucción ,
n.p. El Faro Salvadoreño , March 1, 1869. [BACK]
42. Hubert H. Bancroft, History of Central America , 3: 400. [BACK]
43. Lorenzo López, Estadística , p. 126. [BACK]
44. "Decreto Legislativo de 1 de Marzo de 1847," in Isidro Menéndez, Recopilación , 2: 221. [BACK]
45. "Decreto gubernativo de 1 de Octubre de 1855," in Isidro Menéndez, Recopilación , 1: 145. This decree superseded another from June
17, 1835, that charged government officials with the identification of baldíos. Recopilación , 1: 141. [BACK]
46. La Gaceta , October 1, October 29, November 19, November 26, 1847.
47. Ibid., June 28, 1850; July 13, 1849; and December 27, 1850.
48. Ibid., March 23, 1861.
49. Ibid., February 6, 1858. [BACK]
46. La Gaceta , October 1, October 29, November 19, November 26, 1847.
47. Ibid., June 28, 1850; July 13, 1849; and December 27, 1850.
48. Ibid., March 23, 1861.
49. Ibid., February 6, 1858. [BACK]
46. La Gaceta , October 1, October 29, November 19, November 26, 1847.
47. Ibid., June 28, 1850; July 13, 1849; and December 27, 1850.
48. Ibid., March 23, 1861.
49. Ibid., February 6, 1858. [BACK]
46. La Gaceta , October 1, October 29, November 19, November 26, 1847.
47. Ibid., June 28, 1850; July 13, 1849; and December 27, 1850.
48. Ibid., March 23, 1861.
49. Ibid., February 6, 1858. [BACK]
50. As late as 1874, nine baldíos were claimed although only five were recognized as such. República de El Salvador, Ministerio de
Hacienda y Guerra, Memoria de Hacienda, 1875 (San Salvador: Tipografía Nacional, 1875), p. 49.  [BACK]
51. Great Britain, Abstracts of Reports of Various Countries and Places for the Year 1855 , pp. 167 and 168. [BACK]
52. La Gaceta , May 25, 1849. [BACK]
53. Gustave de Belot, La République , p. 49. [BACK]
54. Esteban Castro, "Estadística," p. 92. [BACK]
55. Manuel Gallardo, "Autobiografía," pp. 56-75. [BACK]
56. La Gaceta , January 23, 30; February 6, 13, 16, 1861.
57. Ibid., February 20, 23, 27, 1861. [BACK]
56. La Gaceta , January 23, 30; February 6, 13, 16, 1861.
57. Ibid., February 20, 23, 27, 1861. [BACK]
58. Gustave de Belot, La République , p. 50. [BACK]
59. Carl von Scherzer, Travels , p. 195. [BACK]
60. In 1875 LaFerriére reported that a French citizen had a steam-operated sugar mill in the environs of San Salvador and praised him for his
courage. LaFerriére, De Paris à Guatémala , p. 239. [BACK]
61. Mrs. Henry Grant Foote, Recollections , p. 92. [BACK]
62. Bureau of American Republics, Handbook of Salvador , p. 60. [BACK]
63. La Gaceta , March 19, 1859.
64. Ibid., November 6, 1862. [BACK]
63. La Gaceta , March 19, 1859.
64. Ibid., November 6, 1862. [BACK]
65. Williams, despatch to Department of State, January 26 and September 22, 1867, DDES, vol. 1.  [BACK]
66. The liberal reforms will be discussed in detail in chap. 6.  [BACK]
5 The Opening of the Economy 1840–1880
1. Lorenzo López, Estadística , passim 13-165. [BACK]
2. Mrs. Henry Foote, Recollections , p. 60. Something similar happened in Costa Rica; see Lowell Gudmunson, Costa Rica Before
Coffee (Baton Rouge: Louisiana State University Press, 1986), p. 68.  [BACK]
3. Mrs. Henry Foote, Recollections , p. 61. [BACK]
4. "Adventures in the Gold Fields of Central America," Harper's Magazine 12 (December-May 1855-1856): 315. [BACK]
5. Robert Dunlop, Travels in Central America , p. 19. G. F. von Tempsky, Mitla , p. 424. [BACK]
6. La Gaceta , November 5, December 3, 1859. [BACK]
7. Williams, despatch to Department of State, December 21, 1868, DDES, vol. 1.  [BACK]
8. Isidro Menéndez, Recopilación , 1: 202. La Gaceta , September 7, 1859. [BACK]
9. LaFerriére, De Paris à Guatémala , p. 153. [BACK]
10. Knut Walter, "Trade and Development," p. 23. [BACK]
11. La Gaceta , February 21, 1856.
12. Ibid., October 17, 1851. [BACK]
11. La Gaceta , February 21, 1856.
12. Ibid., October 17, 1851. [BACK]
13. See n. 11, chap. 4. [BACK]
14. La Gaceta , December 27, 1855. [BACK]
15. Foote to Foreign Office, March 31, 1857, FO 66-2. [BACK]
16. La Gaceta , November 12, 1852; January 2, 1853. [BACK]
17. Foote to Foreign Office, March 18, 1858, FO 66-3. [BACK]
18. La Gaceta , March 26, 1859.
19. Ibid., April 28, 1860.
20. Ibid., April 28, 1860. [BACK]
18. La Gaceta , March 26, 1859.
19. Ibid., April 28, 1860.
20. Ibid., April 28, 1860. [BACK]
18. La Gaceta , March 26, 1859.
19. Ibid., April 28, 1860.
20. Ibid., April 28, 1860. [BACK]
21. Tracy Robinson, Panama 1861-1907 (New York: The Star and Herald Co., 1907), p. 24. [BACK]
22. A number of caveats are in order. Since I have not been able to find information on 1865 freight rates for the Izabal route, I used 1853
rates without even adjusting for inflation (there is no price index for that period and little hope of ever having one). Moreover, the
calculations involve only coffee and indigo exports, about 60 percent of total exports in 1865. Official export figures for this period ignore
exports by land, and we know that a significant amount of indigo was exported via Belize. Notwithstanding all these caveats, I feel that the
social savings are so small that the availability of better data would not change the conclusion that changes in transportation costs could not
have been a very important source of growth. [BACK]
23. El Constitucional , May 12, 1864.
 24. Ibid., October 13, 1864. [BACK]
23. El Constitucional , May 12, 1864.
24. Ibid., October 13, 1864. [BACK]
25. La Gaceta , July 8, 1863. [BACK]
26. After 1855 indigo taxes never financed more than 5 percent of the government revenue while by the end of the 1850s import duties
financed more than 50 percent. [BACK]
27. This analysis of imports is based on data tabulated by Knut Walter for his M.A. thesis and generously shared with the author. Walter's
sources are the standard ones: La Gaceta , and British and American consular reports. [BACK]
28. William P. McGreevey, in his book An Economic History of Colombia, 1845-1930 (Cambridge: Cambridge University Press, 1971), pp.
170-171, estimates the effects of imports on the local production of importables. An effort to replicate McGreevey's methodology for the
Salvadoran case indicates that imports of textiles (the main importable that could be produced locally) grew at a slower rate than the
population and that, following McGreevey's methodology, local production of texiles would have increased faster than the population. This
result is not confirmed by qualitative evidence and may indicate that official
import figures are grossly understated. The way around this problem would be to use data collected from the official documents of El
Salvador's trading partners. Unfortunately, for most of the century American and British export data merge El Salvador with the rest of
Central America. [BACK]
29. Michael G. Mulhall, Dictionary of Statistics , pp. 473-474. [BACK]
30. La Gaceta , March 23, 1847. [BACK]
31. Francisco J. Monterey, Historia de El Salvador, anotaciones cronológicas (San Salvador: Talleres Gráficos Cisneros, 1943), p.
232. [BACK]
32. E. G. Squier, Notes on Central America , p. 304. [BACK]
33. La Gaceta , July 28, 1858. [BACK]
34. E. G. Squier, Is Cotton King? (New York: n.p., 1861.), p. 2.
35. Ibid. [BACK]
34. E. G. Squier, Is Cotton King? (New York: n.p., 1861.), p. 2.
35. Ibid. [BACK]
36. Michael G. Mulhall, Dictionary of Statistics , pp. 475-476. [BACK]
37. Gustave de Belot, La République , p. 41. [BACK]
38. El Constitucional , April 29, 1864. [BACK]
39. Great Britain, Parliament, Parliamentary Papers (Commons), 1865 , vol. 13, "Commercial Reports Received at the Foreign Office from
Her Majesty's Consuls Between July 1st and December 31st, 1864," p. 142 (of the report).  [BACK]
40. El Constitucional , May 19, 1864.
 41. Ibid., August 19, August 26, September 9, October 20, November 3, 1864.
42. Ibid., October 13, 1864; El Faro , November 28, 1864. [BACK]
40. El Constitucional , May 19, 1864.
41. Ibid., August 19, August 26, September 9, October 20, November 3, 1864.
42. Ibid., October 13, 1864; El Faro , November 28, 1864. [BACK]
40. El Constitucional , May 19, 1864.
41. Ibid., August 19, August 26, September 9, October 20, November 3, 1864.
42. Ibid., October 13, 1864; El Faro , November 28, 1864. [BACK]
43. Official figures are inconsistent, a report by the British consul indicates that cotton exports in 1865 were 70,024 pesos, while adding up
partial reports published in the official newspaper gives a figure of 183,719 pesos for the same year. The American minister, by contrast,
reported that production was 533,225 pesos in 1865, 157,577 pesos in 1866, and 80,394 pesos in 1867. There is no agreement either on the
figures for total exports, although in this case the discrepancies are quite modest. El Constitucional , April 13, July 20, July 27, 1865. Great
Britain, Parliament, Parliamentary Papers (Commons), 1866, vol. 69 ( Accounts and Papers , vol. 31), "Commercial Reports Received at
the Foreign Office from Her Majesty's Consuls During the Year 1865," p. 742 (of the report). Great Britain, Parliament, Parliamentary
Papers (Commons), 1867 ( Accounts and Papers , vol. 29), "Commercial Reports Received at the Foreign Office from Her Majesty's
Consuls During the Year 1866," p. 173 (of the report). Williams, despatch to Department of State, January 26 and November 6, 1867, DDES,
vol. 1. [BACK]
44. Great Britain, Parliament, Parliamentary Papers (Commons), 1867 ( Accounts and Papers , vol. 29), "Commercial Reports Received at
the Foreign Office from Her Majesty's Consuls During the Year 1866," p. 173 (of the report).  [BACK]
45. Williams, despatch to Department of State, January 26, 1867, DDES, vol. 1.  [BACK]
46. Robert Dunlop, Travels in Central America , p. 22. [BACK]
47. E. G. Squier, Notes on Central America , p. 305. [BACK]
48. Thanks to the practice of assigning indigo the artificial price of one peso per pound, data in pesos is equivalent to data in pounds.  [BACK]
49. La Gaceta , May 27, 1857.
50. Ibid. [BACK]
49. La Gaceta , May 27, 1857.
50. Ibid. [BACK]
51. El Constitucional , May 12 and October 13, 1864. [BACK]
52. Flint, despatch to Department of State, January 16, 1874, DUSC, La Unión.  [BACK]
53. Michael G. Mulhall, Dictionary of Statistics , pp. 476-477. [BACK]
54. La Gaceta , November 11, 1857.
 55. Ibid., July 3, 1856.
56. Ibid., February 13, 1858.
57. Ibid., March 10, 1860. [BACK]
54. La Gaceta , November 11, 1857.
55. Ibid., July 3, 1856.
56. Ibid., February 13, 1858.
57. Ibid., March 10, 1860. [BACK]
54. La Gaceta , November 11, 1857.
55. Ibid., July 3, 1856.
56. Ibid., February 13, 1858.
57. Ibid., March 10, 1860. [BACK]
54. La Gaceta , November 11, 1857.
55. Ibid., July 3, 1856.
56. Ibid., February 13, 1858.
57. Ibid., March 10, 1860. [BACK]
58. Alberto de Mestas, El Salvador, país de lagos y volcanes (Madrid: Ediciones Cultura Hispánica, 1950), pp. 103-104.  [BACK]
59. La Gaceta , December 1, 1848. [BACK]
60. Michael G. Mulhall, Dictionary of Statistics , p. 474. [BACK]
61. The first of four consecutive articles was published in the fourth issue of La Gaceta , April 16, 1847. Interest in the Costa Rican
experiment was shared by Guatemala. See "Memoria sobre el cultivo del café arreglada a la práctica que se observa en Costa Rica, escrita
por el Licdo. Dr. Manuel Aguilar y mandada a imprimir por el Consulado de Comercio de Guatemala," reprinted in Revista de Historia , no.
14: 203-214. The original was printed in Guatemala in 1845.  [BACK]
62. "Decreto legislativo de 9 de Marzo de 1847," in Isidro Menéndez, Recopilación , 1: 143. This decree modified an executive decree issued
May 28, 1846. [BACK]
63. La Gaceta , December 4, 1856. [BACK]
64. Carl von Scherzer, Travels , pp. 168 and 204. [BACK]
65. La Gaceta , December 16, 1857.
66. Ibid., December 19, 1857. [BACK]
65. La Gaceta , December 16, 1857.
66. Ibid., December 19, 1857. [BACK]
67. Foote to Foreign Office, March 31, 1857, FO 66-2. [BACK]
68. Great Britain, Board of Trade, Abstracts of Reports , p. 167. [BACK]
69. Foote to Foreign Office, March 31, 1857, FO 66-2. [BACK]
70. The following description is based on a report by an American consul in Costa Rica written in 1887; therefore it represents state-of-the-
art knowledge of coffee cultivation in the late nineteenth century. U.S. Congress, House, "Reports from the consuls of the United States upon
the production of and trade in coffee among the Central and South American states." H.R. 401, 50th Congress, 1st sess., pp. 54-58 (of the
document). [BACK]
71. Duke despatch to Department of State, November 15, 1885, DUSC, San Salvador.  [BACK]
72. The New Cambridge Modern History (Cambridge: Cambridge University Press, 1962), 11: 92.  [BACK]
73. The choice of dates corresponds to the most reliable freight data available. In 1853 no coffee was exported, therefore there are no specific
freight rates for that product. But, as in 1864, coffee rates per ton were about half of indigo rates; the same ratio was kept for 1853. La
Gaceta , January 2, 1853. El Constitucional , September 9, 1864. Neither indigo nor coffee prices for 1853 or 1864 deviated significantly
from the decade's average. [BACK]
74. La Gaceta , December 6, 1862. [BACK]
75. Esteban Castro, ''Estadística," p. 92. [BACK]
76. La Gaceta , June 23, 1858.
77. Ibid., December 12, 1857. [BACK]
76. La Gaceta , June 23, 1858.
77. Ibid., December 12, 1857. [BACK]
78. Lorenzo López, Estadística , p. 57. [BACK]
79. La Gaceta , November 14, 1851. U.S. Congress, House, Commercial Relations of the United States with Foreign Countries , H.R. 160,
42nd Cong., 3rd sess., p. 766 (of the document); and U.S. Congress, House, Commercial Relations of the United States with Foreign
Countries , H.R. 186, 54th Cong., 1st sess., p. 348 (of the document).  [BACK]
80. David Bushnell and Neill Macaulay, The Emergence of Latin America in the Nineteenth Century (New York: Oxford University Press,
1988), p. 290. [BACK]
6 The Privatization of Land
1. Edelberto Torres Rivas, Interpretación del desarrollo social centroamericano (San José, Costa Rica: EDUCA, 1971), p. 66. [BACK]
2. He uses the word minifundio . David Alejandro Luna, Manual de historia económica de El Salvador (San Salvador: Editorial
Universitaria, 1971), pp. 209-210. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
 5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
 6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
3. David Browning, El Salvador , chap. 5. Browning's book is, by far, the best on any aspect of the economic history of El Salvador.
4. Ibid., El Salvador , p. 172.
5. Ibid.
6. Ibid., p. 182.
7. Ibid., p. 183.
8. Ibid., p. 166.
9. Ibid., pp. 166-171. [BACK]
10. Diario oficial , February 26, 1881. [BACK]
11. Rafael Menjívar, Acumulación originaria y el desarrollo del capitalismo en El Salvador (San José, Costa Rica: EDUCA, 1980), p. 99.
12. Ibid., p.95. [BACK]
11. Rafael Menjívar, Acumulación originaria y el desarrollo del capitalismo en El Salvador (San José, Costa Rica: EDUCA, 1980), p. 99.
12. Ibid., p.95. [BACK]
13. David Browning, El Salvador , p. 190. [BACK]
14. Rafael Menjívar, Acumulación originaria , p. 99. [BACK]
15. Browning's estimate, based on an educated guess of the average size of haciendas multiplied by the total number of properties, is useful
to his purposes, but it seems to me that it cannot be used for more precise calculations.  [BACK]
16. The sample is discussed at length at the end of this chapter.  [BACK]
17. Semanario politico mercantil de San Salvador , September 18, 1824.
 18. Ibid., October 16, 1824. "En el sistema antiguo impedía la diferencia de clases hacer útiles los terrenos, y en los pueblos que
llamaban de indios, estos eran los que disponían de los suyos cultivando porciones a los vecinos de los mismos pueblos que no eran de su
clase. La ley de igualdad establecida por nuestro actual sistema debe abolir todo derecho particular porque no habiendo ya mas que una clase
de ciudadanos, todos con las mismas opciones, es muy justo que se nibelen [ sic ] todos a unos mismos goces y a unas mismas
cargas." [BACK]
17. Semanario politico mercantil de San Salvador , September 18, 1824.
18. Ibid., October 16, 1824. "En el sistema antiguo impedía la diferencia de clases hacer útiles los terrenos, y en los pueblos que
llamaban de indios, estos eran los que disponían de los suyos cultivando porciones a los vecinos de los mismos pueblos que no eran de su
clase. La ley de igualdad establecida por nuestro actual sistema debe abolir todo derecho particular porque no habiendo ya mas que una clase
de ciudadanos, todos con las mismas opciones, es muy justo que se nibelen [ sic ] todos a unos mismos goces y a unas mismas
cargas." [BACK]
19. Hall, despatch to Foreign Office, April 30, 1833, FO 15-13.  [BACK]
20. Chatfield, despatch to Foreign Office, February 26, 1836, FO 15-18.  [BACK]
21. Chatfield, despatch to Foreign Office, June 26, 1837, FO 15-19.  [BACK]
22. One in 1845 and one in 1848. None of them seems to have been very serious.  [BACK]
23. Conservatives were in power from 1851 to 1859 and then, for the last time, from 1863 to 1871.  [BACK]
24. Partridge, despatch to Department of State, June 26, 1863; November 8, 1863, DUSC. Dueñas ordered the execution of Barrios. This
action (not uncommon in nineteenth-century political life), together with the fact that the Dueñas family became the epitome of the all-
powerful "fourteen families," turned President Dueñas into a very unpopular character in Salvadoran history.  [BACK]
25. Decreto Presidencial of March 18, 1868, in Dionisio González, Instrucción , n.p. The Salvadoran church never was a big landowner or an
important economic force. According to Menjívar, Acumulación originaria , p. 120, before the liberal reforms the church controlled about 27
caballerías (1,207 hectares) of land. Land registry records start after the liberal reforms and have little evidence of church wealth in the form
of land tenure. Father Rodolfo Cardenal, the person most familiar with church archives in El Salvador, says that those archives show no
evidence of significant church economic power. (Personal communication, February 1988).  [BACK]
26. Fearon, despatch to Department of State, May 31, 1865, DUSC, La Unión.  [BACK]
27. Biddle, despatch to Department of State, July 11, 1872, DUSC.  [BACK]
28. Quoted in Rafael Menjívar, Acumulación originaria , p. 89. [BACK]
29. Duke, despatch to Department of State, July 9, 1875, DUSC. Ramón López Jiménez, Mitras Salvadoreñas (San Salvador: Departamento
Editorial, 1960), p. 107. [BACK]
30. The idea of open markets is still ingrained in Salvadoran culture and has been reinforced by widespread urban poverty. One of the main
headaches of the municipal authorities in San Salvador is the problem of street vendors.  [BACK]
31. The bishop returned the following year; he was a humbler man. When in 1879 the government started the civil registry of births, deaths,
and marriages (up until then a church prerogative), the church could only complain helplessly about the "secularizing persecution." Ramón
López Jiménez, Mitras salvadoreñas , p. 108. For the relations between church and state in the nineteenth century see Ramón López
Jiménez, Mitras salvadoreñas , and Rodolfo Cardenal, El poder eclesiástico en El Salvador (1871-1931) (San Salvador: UCA Editores,
1980). [BACK]
32. Andrés Valle, "Manifiesto del Presidente de la República del Salvador," 1876.  [BACK]
33. Esteban Castro, "Estadística," p. 95. [BACK]
34. Derek N. Kerr, "The Role of the Coffee Industry," p. 77. Diario oficial , February 25, 1879.
35. Ibid., February 25, 1879. [BACK]
34. Derek N. Kerr, "The Role of the Coffee Industry," p. 77. Diario oficial , February 25, 1879.
35. Ibid., February 25, 1879. [BACK]
36. For a discussion of the role of Indian communities in the market sector of the economy see chap. 5.  [BACK]
37. Duke, despatch to Department of State, Oct. 3, 1885, DUSC, San Salvador.  [BACK]
38. Mensaje del Presidente Zaldívar , January 1885. Duke, despatch to Department of State, May 28, 1885, DUSC. Great Britain,
Parliament, Parliamentary Papers (Commons), 1890, vol. 77, "Commercial Report No. 749," p. 6 (of the report). Abelardo Torres, Tierras y
colonización (El Salvador: mimeo, n.d.), p. 37. Information on the 1898 revolt is scanty, but it seems to have taken place on the margins of
Regalado's movement and was certainly linked to the economic crisis of that year. It may have been only a way of taking advantage of the
prevailing instability to settle scores. [BACK]
39. A more threatening uprising linked to the reforms, the Matanza , occurred in 1932, but the interpretation of this event includes a score of
considerations beyond the liberal reforms.  [BACK]
40. The availability of more complete data has modified my view on these issues.  [BACK]
41. The price data are in Michael G. Mulhall, The Dictionary of Statistics , pp. 476-478. Coffee prices are in shillings per cwt., and indigo
prices are in shillings per pound. The English industrial price index is in B.R. Mitchell and Phyllis Deane, Abstract of British Historical
Statistics (Cambridge: Cambridge University Press, 1962). For the export data see table 19. As mentioned in n. 11, chap. 4, artificial prices
were used to value exports, and artificial prices of coffee could and did vary. It is very important to keep this in mind in order to interpret the
results of the statistical computations with due caution. It is remarkable, however, that despite the obvious limitations of the data the results
of the regression analysis are quite strong. [BACK]
42. In the following discussion all prices mentioned will be deflated prices.  [BACK]
43. Given the confusion between ejidos and communal lands that exist in the survey, the term ejido in this calculation really stands for some
undefined combination of both forms of property holding.  [BACK]
44. The data on indigo production used for the test are from 1858, when the administrative division of the country was different than in 1878.
This made it necessary to adjust the figures. [BACK]
45. Rafael Menjívar, Acumulación originaria , p. 101. [BACK]
46. David Browning, El Salvador , p. 185. [BACK]
47. Marco Palacios, El café en Colombia (1850-1970) (Bogotá: Editorial Presencia Ltda., 1979), chap. 3.  [BACK]
48. David Browning, El Salvador , p. 213. [BACK]
49. Diario oficial , March 7, 1882. [BACK]
50. Moses Levy, despatch to Foreign Office, January 18, 1881, FO 66-26.  [BACK]
51. Diario oficial , August 12, 1882. [BACK]
52. Land registry offices opened in 1882 as a result of the liberal reforms. The Santa Ana office covered the three western provinces: Santa
Ana, Sonsonate, and Ahuachapán, the richest coffee producers in the country and where ejidos and Indian communities were strongest. Land
titles and changes in ownership were recorded in volumes of the Registro de la propiedad raiz de la sección de occidente . I took a random
sample of 10 percent of all land titles and transactions registered during the first three years of the registry. Vol. 3 and 6 of
the Registro are missing. [BACK]
53. As mentioned before, David Browning analyzes this topic with great insight in El Salvador , passim. [BACK]
54. Registro de la propiedad raiz de la sección de occidente , 7: 497. [BACK]
55. Registro de la propiedad de Ahuachapán , item 181, 2: 213. [BACK]
56. Diario oficial , March 4, 1893.
57. Ibid., March 12, 1892. Abelardo Torres, Tierras y colonización , p. 8. [BACK]
56. Diario oficial , March 4, 1893.
57. Ibid., March 12, 1892. Abelardo Torres, Tierras y colonización , p. 8. [BACK]
58. Not having a complete survey of land tenure, conclusions on this matter are bound to be tentative. The assumption here is that the land
titles in the land registry are representative of land tenure across the country. It is an assumption that seems reasonable. The results are
consistent with what we know about indigo production at the beginning of the century and with the 1950 census.  [BACK]
59. República de El Salvador, Ministerio de Economía, Primer censo agropecuario (San Salvador: Dirección General de Estadística y
Censos, 1954), p. 37. [BACK]
7 A Land of Coffee Planters
1. Dawson, despatch to Department of State, March 10, 1895. Despatches from United States Consuls in San Salvador, El Salvador, 1868-
1906, National Archives, Washington, D.C. (this collection hereinafter cited as DUSC).  [BACK]
2. DuPre, despatch to Department of State, March 17, 1887, DUSC.  [BACK]
3. For insights into the intellectual atmosphere that prevailed in El Salvador during this period see E. Bradford Burns, ''The Intellectual
Infrastructure of Modernization in El Salvador, 1870-1900," The Americas 41 (January 1985): 57-82. [BACK]
4. Diario oficial , February 10, 1892. [BACK]
5. See Julio Alberto Domínguez Sosa, Génesis y significado de la constitución de 1886 (San Salvador: Departamento Editorial,
1958). [BACK]
6. Baruch, despatch to Department of State, November 21 and December 26, 1898, DUSC.  [BACK]
7. See n. 11, chap. 4. [BACK]
8. Biddle, despatch to Department of State, February 21, 1872, DDES, vol. 2. Bureau of the American Republics, Commercial Directory of
the American Republics , 2 vols. (Washington, D.C.: Government Printing Office, 1898), 2: 564-565. The years were selected because of the
availability of volume of exports for both commodities and not for being particularly representative. However, the trends are unmistakable
(see table 19). [BACK]
9. There are no GNP figures for this period, but population growth was less than 2 percent per year. There is nothing in the evidence that
would lead us to expect that other factors of production or technological change (in areas other than coffee) grew any faster than the
population. [BACK]
10. Diario oficial , September 7, 1887. Great Britain, Parliament, Parliamentary Papers (Commons), 1889, vol. 80, "Diplomatic and
Consular Reports on Trade and Finance: Report for the Year 1888 on the Trade of Salvador," p. 4 (of
the report). Great Britain, Parliament, Parliamentary Papers (Commons), 1890 , vol. 77, "Diplomatic and Consular Reports on Trade
and Finance: Report for the Year 1889 on the Trade of Salvador," p. 6 (of the report).  [BACK]
11. Imports are detailed in English and American consular reports. They are well analyzed by Knut Walter in "Trade and
Development." [BACK]
12. Great Britain, Parliament, Parliamentary Papers (Commons), 1893-1894 , vol. 96, "Diplomatic and Consular Reports on Trade and
Finance: Report for the Year 1892 on the Trade of Salvador," p. 7 (of the report).  [BACK]
13. Consul's Duke despatch of November 15, 1885 is a commercial report that includes, as an appendix, a long description of a coffee
plantation that he requested from a planter who remained anonymous. The discussion that follows is based on both Duke's despatch and the
planter's description.
14. Ibid.
15. Ibid.
16. Ibid. [BACK]
13. Consul's Duke despatch of November 15, 1885 is a commercial report that includes, as an appendix, a long description of a coffee
plantation that he requested from a planter who remained anonymous. The discussion that follows is based on both Duke's despatch and the
planter's description.
14. Ibid.
15. Ibid.
16. Ibid. [BACK]
13. Consul's Duke despatch of November 15, 1885 is a commercial report that includes, as an appendix, a long description of a coffee
plantation that he requested from a planter who remained anonymous. The discussion that follows is based on both Duke's despatch and the
planter's description.
14. Ibid.
15. Ibid.
 16. Ibid. [BACK]
13. Consul's Duke despatch of November 15, 1885 is a commercial report that includes, as an appendix, a long description of a coffee
plantation that he requested from a planter who remained anonymous. The discussion that follows is based on both Duke's despatch and the
planter's description.
14. Ibid.
15. Ibid.
16. Ibid. [BACK]
17. Consul Duke, despatch to Department of State, June 10, 1886; Lorenzo López, Estadística , p. 130. [BACK]
18. Consul Duke, despatch to Department of State, June 10, 1886, DUSC.  [BACK]
19. DuPre, despatch to Department of State, August 11, 1887, DUSC.  [BACK]
20. Duke, despatch to Department fo State, November 15, 1885, DUSC.
21. Ibid., June 10, 1886, DUSC. [BACK]
20. Duke, despatch to Department fo State, November 15, 1885, DUSC.
21. Ibid., June 10, 1886, DUSC. [BACK]
22. Turnstall, despatch to Department of State, June 10, 1886, DUSC.  [BACK]
23. Duke, despatch to Department of State, June 10, 1886, DUSC.
24. Ibid., July 10, 1885, DUSC. [BACK]
23. Duke, despatch to Department of State, June 10, 1886, DUSC.
24. Ibid., July 10, 1885, DUSC. [BACK]
25. Pollock, despatch to Department of State, April 15, 1894, DUSC.  [BACK]
26. One of the private companies involved in the money-lending business, Blanco y Trigueros, is said to go back to 1835 and survived until
the twentieth century. Bureau of the American Republics, Handbook of Salvador , p. 68. [BACK]
27. Dionisio González, n.p. Williams, despatch to Department of State, Sept. 23, 1867, DDES, vol. 1.  [BACK]
28. Jan. 1875, Mensaje del Mariscal González. Diario oficial , March 8, 1878. Enrique Franke, The Banknotes of the Republic of El
Salvador (San Salvador: Banco de Fomento Agropecuario, 1974), p. 21. Francisco de Paula Suárez, Noticias generales sobre la República
del Salvador reunidas y publicadas por F. de P. S. (Lima: Tipografía de "La Patria," 1874). It is not clear whether the Suárez contract was a
direct result of the 1873 mission. The reason why there were two contracts is that Marshal González was overthrown by Rafael Zaldívar in
1876. [BACK]
29. The Banco Occidental, founded in 1889, had headquarters in Santa Ana; and the Banco Ahuachapaneco (1895), which never got off the
ground, was based in Ahuachapán. [BACK]
30. A small amount remained outstanding due to claims against Kerferd & Co. by a few bondholders. The final settlement took place early in
1879. An account of the transactions was published in The Pacific Mail , London, June 6, 1875. See also Hyde Clarke, secretary of the
Council of Foreign Bondholders, to Foreign Office, February 10, 1879, FO 66-24. There is evidence that George B. Kerferd & Co. operated
in El Salvador until the 1880s, and one of Kerferd's
nephews was in charge of the business in El Salvador. Unfortunately, it has been impossible to find the papers of the company;
apparently it was not registered. There is no record of its existence at the Public Record Office or at the London Search Room of Companies
House. [BACK]
31. J. LaFerriére, De Paris à Guatémala , p. 51. [BACK]
32. La Gaceta , January 23 and 30, February 6, 13, and 16, 1861. Diario oficial , March 9, 1894. [BACK]
33. Public Record Office, Board of Trade Files of Dissolved Companies, group BT, class 31, no. 3574/21914. The company was dissolved in
1913. [BACK]
34. Public Record Office, Board of Trade Files of Dissolved Companies, group BT, class 31, no. 9217/68395.  [BACK]
35. British merchants to Foreign Office, November 23, 1898, FO 66-45.  [BACK]
36. The federal government minted limited amounts of silver coins. The state of San Salvador also minted provisional coins between 1828
and 1835. See Rafael González Sol, "Principios generales de numismática y bosquejo histórico de la circulación monetaria en El
Salvador," Anales de la Sociedad de Geografía e Historia de Guatemala , vol. 15, no. 1 (September 1938): 79. [BACK]
37. Duke, despatch to Department of State, June 10, 1885, DUSC. DuPre, despatch to Department of State, September 14, 1886,
DUSC. [BACK]
38. J. LaFerriére, De Paris à Guatémala , p. 419. Carl von Scherzer, Travels in the Free States , p. 195. José María Peralta Lagos (T. P.
Mechín), Burla burlando , 2d ed. (San Salvador: Departamento Editorial, 1955), p. 166. [BACK]
39. El Salvador, Ministerio de Hacienda y Guerra, Memoria (1875), p. 50. [BACK]
40. T. P. Mechín, Burla burlando , p. 166. [BACK]
41. Rafael González Sol, "Principios generales," p. 83. [BACK]
42. J. LaFerriére, De Paris à Guatémala , p. 420. [BACK]
43. El Faro Salvadoreño , March 1, 1869. [BACK]
44. Great Britain, Parliament, Parliamentary Papers (Commons), 1893-1894 , vol. 96, "Diplomatic and Consular Reports on Trade and
Finance: Report for the Year 1892 on the Trade of Salvador," p. 4 (of the report). Diario oficial , August 27 and September 3, 1892. [BACK]
45. Diario oficial , September 7, 1892.
46. Ibid., September and October 1892, passim.  [BACK]
45. Diario oficial , September 7, 1892.
46. Ibid., September and October 1892, passim.  [BACK]
47. Bureau of the American Republics, Commercial Directory , p. 564. [BACK]
48. Dawson, despatch to Department of State, July 26, 1893, DUSC.  [BACK]
49. Diario oficial , July 17, 1893. [BACK]
50. The American Annual Cyclopaedia , 1894, p. 709. [BACK]
51. Dawson, despatch to Department of State, October 3, 1894, DUSC. Diario oficial , June 19, 1894. [BACK]
52. General Ezeta's fondness for currency reform was attributed to the great profits that could be made by minting new coins. However,
every single event in the nineteenth century is full of allegations of corruption.  [BACK]
53. Jenkins, despatch to Department of State, April 15, 1898, DUSC.  [BACK]
54. Great Britain, Parliament, Parliamentary Papers (Commons), 1893-1894 , vol. 96, "Diplomatic and Consular Reports on Trade and
Finance: Report for the Year 1892 on the Trade of Salvador," p. 3 (of the report).  [BACK]
55. Charles Rufenacht, Le café et les principaux marchés de matières pre -
mières; la monnaie, les changes, les marchés à terme; statistiques s'étendent de 1845 à 1955 (Le Havre: Société commerciale
interocéanique, 1955), p. 280. Jenkins, despatch to Department of State, June 16, 1898, DUSC.  [BACK]
56. Jenkins, despatch to Department of State, December 8, 1897, DUSC.
57. Ibid., December 23, 1897, DUSC. [BACK]
56. Jenkins, despatch to Department of State, December 8, 1897, DUSC.
57. Ibid., December 23, 1897, DUSC. [BACK]
58. T. P. Mechín, Burla burlando , pp. 169-170. [BACK]
59. U.S. Congress, House, Commercial Relations of the U.S. with Foreign Countries , H.R. 483, 55th Cong., 2nd sess., p. 615 (of the
document). The Monthly Bulletin of the Bureau of the American Republics , July 1898, p. 57. Maurice de Perigny, in Rafael Menjívar et
al., El Salvador de 1840 a 1935 (San Salvador: UCA Editores, 1978), p. 104. [BACK]
60. Jenkins, despatch to Department of State, April 15, 1898, DUSC.
61. Ibid. [BACK]
60. Jenkins, despatch to Department of State, April 15, 1898, DUSC.
61. Ibid. [BACK]
62. Diario oficial , January 3, 1898. [BACK]
63. Manuel Vidal, Nociones de historia de Centro América , 2 vols. (San Salvador: Dirección de Publicaciones, 1969), 1: 340.  [BACK]
64. Diario oficial , January 3, 1898. Abelardo Torres, Tierras y colonización , p. 37. [BACK]
65. Historians resent General Regalado's decision. [BACK]
66. Torbert, despatch to Department of State, Aug. 6, 1870. Manuel Vidal, Nociones , 2: 248. Great Britain, Parliament, Parliamentary
Papers (Commons), 1883 , vol. 74, "Reports from Her Majesty's Consuls on the Manufacture, Commerce etc. of Their Consular Districts," p.
2205 (of the report). Diario oficial , July 21, 1882. [BACK]
67. The American Annual Cyclopaedia , 1881, p. 805. DuPre, despatch to Department of State, October 28, 1887, DUSC.  [BACK]
68. Maria Leistenschneider, ed., Dr. Rafael Zaldívar , 1: 279, 1: 283. [BACK]
69. New International Year Book , 1899, p. 716. [BACK]
70. DuPre, despatch to Department of State, September 10, 1887, DUSC.  [BACK]
71. Biddle, despatch to Department of State, April 3, 1872, DDES, vol. 3. Bueron was a native of Prussia, a naturalized American who had
resided in Mexico and Cuba before going to El Salvador in 1871. [BACK]
72. J. LaFerriére, De Paris à Guatémala , p. 207. "Mensaje dirigido por el Presidente de la República del Salvador Mariscal Don Santiago
González a la Asamblea General" (San Salvador: Tipografía Nacional, 1875), p. 5.  [BACK]
73. Gaceta oficial , July 27, 1876. [BACK]
74. Duke, despatch to Department of State, Jan. 31, 1872, DUSC, SS.  [BACK]
75. Diario oficial , June 7, 1882.
76. Ibid., August 23, 1882. Ross, pp. 308, 317.  [BACK]
75. Diario oficial , June 7, 1882.
76. Ibid., August 23, 1882. Ross, pp. 308, 317.  [BACK]
77. Great Britain, Parliament, Parliamentary Papers (Commons), 1886 , vol. 66, "Commercial Reports" no. 10, p. 531 (of the report). Great
Britain, Parliament, Parliamentary Papers (Commons), 1888 , vol. 103, "Diplomatic and Consular Reports on Trade and Finance: Salvador,
Report for the Year 1887 on Trade of San Salvador," p. 7 (of the report). President Zaldívar was overthrown in 1885 amidst allegations of
corruption and of mishandling the railroad contracts. As a result of these allegations the Constitutional Assembly of 1886 ordered the
executive to renegotiate the contracts. According to the terms of the
contract with Camacho the Salvador Railway Construction Company could retain the vote of its 3,000 shares until it was paid in full
the 200,000 pounds that it had advanced. [BACK]
78. "Los ferrocarriles de Guatemala y El Salvador" Centro-América 4: 1 (January, February, March, 1912), p. 93. [BACK]
79. Great Britain, Parliament, Parliamentary Papers (Commons), 1893-1894 , vol. 96, "Diplomatic and Consular Reports on Trade and
Finance: Report for the Year 1892 on the Trade of Salvador," p. (4 of the report).  [BACK]
80. "Ferrocarriles de El Salvador," Centro-América 5: 2 (April, May, June, 1913), p. 286. [BACK]
81. Pollock, despatch to Department of State, April 12, 1894, DUSC.  [BACK]
82. Percy F. Martin, Salvador of the Twentieth Century (London: Edward Arnold, 1911), p. 51.
83. Ibid. Pollock, despatch to Department of State, January 31, 1894, DUSC.  [BACK]
82. Percy F. Martin, Salvador of the Twentieth Century (London: Edward Arnold, 1911), p. 51.
83. Ibid. Pollock, despatch to Department of State, January 31, 1894, DUSC.  [BACK]
84. Council of Foreign Bondholders to Foreign Office, June 17, 1898, FO 66-45, fol. 47-53.  [BACK]
85. Diario oficial , March 1, 1899. [BACK]
86. The La Unión line reached San Salvador in 1922 and was connected to the Guatemalan network in 1929 already under the ownership of
IRCA. Fred Rippy in British Investment in Latin America and Rafael Menjívar in Acumulación originaria give detailed accounts of the
transactions involved in the financing of railroads. [BACK]
87. Fred Rippy, British Investment , p. 38. [BACK]
88. Torbert, despatch to Department of State, Jan. 17 and Aug. 6, 1870, DDES, vol. 2.  [BACK]
89. Great Britain, Parliament, Parliamentary Papers (Commons), 1888 , vol. 103, "Diplomatic and Consular Reports on Trade and Finance:
Salvador, Report for the Year 1887 on the Trade of Salvador," p. 3 (of the report). Diario oficial , July 13, 1887. [BACK]
90. Dawson, despatch to Department of State, October 23, 1894, DUSC.  [BACK]
91. Diario oficial , March 12, 1892. The American Annual Cyclopaedia , 1884, pp. 715 and 716; 1887, p. 728. [BACK]
92. U.S. Congress, House, Commercial Relations of the U.S. with Foreign Countries , H.R., 50th Cong., 1st sess., p. 924 (of the
document). [BACK]
93. Dawson, despatch to Department of State, July 18, 1893, DUSC. Guatemala, Gosling, despatch to Foreign Office, April 15, 1892, FO 15-
271. [BACK]
94. U.S. Congress, House, Commercial Relations of the U.S. with Foreign Countries , H.R. 157, 43rd Cong., 2nd sess., p. 203 (of the
document). Gaceta Official , February 27, 1877; June 27, 1878. El Salvador, Ministerio de Hacienda y Guerra, Memoria (1875), p. 102. It is
necessary to make two caveats: first, El Salvador was less than punctual in paying the subsidies; before the contract expired in 1874 El
Salvador owed 56,598 pesos in overdue subsidies. Second, there is speculation that the contracts with the Pacific Mail had something to do
with corruption at the highest levels of government. The basic argument, however, still stands. El Salvador was too small to break the
company's monopoly power. [BACK]
95. FO 66-2. Great Britain, Parliament, Parliamentary Papers (Commons), 1883 , vol. 74, "Reports from Her Majesty's Consuls on the
Manufacture, Commerce etc. of their Consular Districts," p. 2204 (of the report); Great Britain, Parliament, Parliamentary
Papers (Commons), 1893-1894 , vol. 96, "Diplomatic and Consular Reports on Trade and Finance: Report for the Year 1892 on the Trade of
Salvador," p. 7 (of the report). The figures are approximate since the statistics for 1882 and 1892 count every time that a foreign ship touched
a Salvadoran port but the figure for 1856 is for only one port. To solve the problem the figures for 1882 and 1892 were divided over
three. [BACK]
96. Francisco Solano Astaburuaga, Repúblicas de Centro América , p. 76. Rafael Reyes, Apuntamientos , p. 22. [BACK]
97. Duke, despatch to Department of State, September 22, 1885, DUSC.
98. Ibid., March 17, 1882, DUSC. [BACK]
97. Duke, despatch to Department of State, September 22, 1885, DUSC.
98. Ibid., March 17, 1882, DUSC. [BACK]
99. The American Annual Cyclopaedia , 1883, p. 710.
100. Ibid., 1884, p. 715; 1885, pp. 722-723.  [BACK]
99. The American Annual Cyclopaedia , 1883, p. 710.
100. Ibid., 1884, p. 715; 1885, pp. 722-723.  [BACK]
101. Dawson, despatch to Department of State, October 7, 1893, DUSC. There were short-lived precedents for this tax. In the mid-1860s
there was a tax of fifty cents per quintal. Twenty years later President Zaldívar imposed a 2 percent ad-valorem tax on coffee exports which
was rapidly repealed by the legislature.
102. Ibid., May 17, 1893, DUSC. [BACK]
101. Dawson, despatch to Department of State, October 7, 1893, DUSC. There were short-lived precedents for this tax. In the mid-1860s
there was a tax of fifty cents per quintal. Twenty years later President Zaldívar imposed a 2 percent ad-valorem tax on coffee exports which
was rapidly repealed by the legislature.
102. Ibid., May 17, 1893, DUSC. [BACK]
103. Diario oficial , May 20 and June 27, 1893. This event was related to the gold-standard crisis.  [BACK]
104. Dawson, despatch to Department of State, May 17, 1893, DUSC.  [BACK]
105. Duke, despatch to Department of State, June 9, 1885, DUSC.  [BACK]
106. República de El Salvador, Dirección e Inspección General de Hacienda, Tarifa de aforos para el cobro de los impuestos fiscales sobre
la importación de mercaderías (San Salvador: Imprenta Nacional, 1895). [BACK]
107. Diccionario Enciclopédico , s.v. "Salvador, El." [BACK]
108. Henry Dunn, Guatimala , p. 228. [BACK]
109. W. Goodyear, "Distritos Mineros de El Salvador" Anales de la Sociedad de Geografía e Historia de Guatemala 31 (January-December
1958): 138-139. Goodyear was hired in 1879 by the Zaldívar government to explore the mineral wealth of the country. The report published
by the Anales seems to be the final report of his exploration. [BACK]
110. W. Goodyear, "Distritos mineros," pp. 131 and 140. LaFerriére, De Paris à Guatémala , p. 142. [BACK]
111. E. Bradford Burns, "Modernization," p. 303. Rippy, p. 39.  [BACK]
112. Domingo Juarros, A Statistical and Commercial History , p. 32; Henry Dunn, Guatimala , p. 221; Duke, despatch to Department of
State, November 15, 1885, DUSC; José Antonio Fernández, "Al estilo de Vizcaya," passim.  [BACK]
113. Miguel Angel Durán, Historia de la Universidad , pp. 31 and 76. Bureau of American Republics, Commercial Directory ,
passim. [BACK]
114. Needless to say, not every single immigrant bequeathed a fortune. The descendants of some had to earn their livelihood by teaching
history. [BACK]
115. Eduardo Colindres, Fundamentos económicos de la burguesía salvadoreña (San Salvador: UCA Editores, 1977). Colindres's list was
hotly discussed
when it came out. Even if it is not satisfactory to everyone it provides a good sample of the "movers and shakers" of the Salvadoran
economy before the current civil war. [BACK]
116. This classification is based on documentary evidence and interviews with members of the elite. Oral traditions on this subject are very
strong. Most of this information is fairly recent, and knowledge on these matters is considered essential to function in certain circles of
Salvadoran society. For documentary evidence see: Bureau of the American Republics, Commercial Directory ; Braulio Pérez
Marchant, Diccionario biográfico de El Salvador (Santa Tecla, El Salvador: Escuela Tipográfica Salesiana, 1937); L. A. Ward, ed., "Libro
Azul" de El Salvador (San Salvador: Bureau de Publicidad de la America Latina, 1916).  [BACK]
117. Corruption in politics was one of the trademarks of the nineteenth century. At least six of the twenty-one old families had a relative or
two in the presidency, and all of them had relatives in high places at some time or another. (This is not to say that the only way to succeed
was to steal money; the skills to succeed in politics were similar to the skills to succeed in business. Besides, it also took some talent to keep
the money for more than a century. There were quite a few casualties.)  [BACK]
118. These data precede the land reform. [BACK]
119. It is impossible to know the exact proportion of non-Spanish immigrants relative to the rest of the population; the Salvadoran census
does not ask people about their national origin. A look at the telephone directory suggests that it is exceedingly small. I would be very
surprised if it was anywhere close to 5 percent. [BACK]
120. O'Reilly, despatch to Foreign Office, December 3, 1826, FO 15-5.  [BACK]
121. This is the same family that registered the Santa Ana Central Coffee Co. in London in 1900. See n. 34.  [BACK]
122. E. Alvin Fidanque et al., Kol Shearith Israel: A Hundred Years of Jewish Life in Panama (Panama: Congregation Kol Shearith Israel,
1977), p. 139. [BACK]
123. The number has no meaning based on an objective criterion. Some social scientists advocate a higher number. An aristocratic
Salvadoran lady has remarked that the number is totally inaccurate: "We are only three families," she stated. She has no credentials as a
social scientist. [BACK]
124. J. LaFerriére, De Paris à Guatémala , p. 163. [BACK]
125. Rafael Reyes, Apuntamientos , p. 85. [BACK]
126. Chatfield, despatch to Foreign Office, June 26, 1837, FO 15-19.  [BACK]
127. This document is owned by Juan Francisco Aguilar Bustamante, a direct descendant of the planter.  [BACK]

References
Note on Sources
Historians have had a difficult time finding information on the early years of El Salvador since the documents
of the national archive burned during the 1889 National Palace fire. In the absence of a national archive it was
necessary to squeeze information out of the limited sources that have survived. Hence, this book draws from a
varied mix of government publications, travel books, diplomatic correspondence, magazine articles, and the
like. The best guides to the sources are Thomas Schoonover's article "Central American Commerce and
Maritime Activity in the Nineteenth Century: Sources for a Quantitative Approach," Latin American Research
Review , vol. 13, no. 2; and Kenneth J. Grieb, Central America in the Nineteenth and the Twentieth Centuries:
An Annotated Bibliography (Boston: G. K. Hall, 1988). A brief description of the sources found most useful for
this book follows.
Some of the early official documents were reprinted in Miguel Angel García's multivolume Diccionario
histórico and as appendixes to the work of nineteenth-century historians like Marure and Cevallos. American
libraries, such as the New York Public Library, have small collections of documents that go back to the
decades that followed independence, but there is no single repository of documents from which one can obtain
a fairly complete view of the period.
An important source for the second half of the century is La Gaceta , the official newspaper, which begin
publication in 1847 and printed a variety of information on prices, production, imports, exports, and legislation.
The Library of the Universidad Centroamericana José Simeón Cañas in San Salvador has a nearly complete
collection of this newspaper.
British and American consuls and ministers, interested in promoting trade with the new country, were
often careful reporters of economic conditions; their

― 222 ―

reports contain valuable appendixes with statistical data. The British data are available at the Public Records
Office, Foreign Office series 15 (General Correspondence, Central America and Guatemala 1824–1905) and
series 66 (General Correspondence, El Salvador 1856–1905). The commercial reports printed in the
Parliamentary Papers also proved to be a source of valuable information. American consular and diplomatic
despatches are available at the National Archives in the General Records of the Department of State, Record
Group 59. This information can be complemented with the reports printed under the general title
of Commercial Relations of the United States with Foreign Countries which are found in the Serial Set of U.S.
congressional papers. Specific references to all these documents are found throughout the text.
Travel accounts also proved useful. The Ayer Collection of the Newberry Library, Chicago, and the
British Library have good collections. Franklin D. Parker's Travels in Central America is an excellent
introduction to this literature.

Academia de Geografía e Historia de Costa Rica, ed. Centro América en las vísperas de la

independencia . San José: Imprenta Trejos Hnos., 1971.

Academia Salvadoreña de la Historia. San Salvador y sus hombres . San Salvador: Dirección General de
Publicaciones, 1967.

Aguilar, Manuel. "Memoria sobre el cultivo del café arreglada a la práctica que se observa en Costa Rica,
escrita por el Licdo. Dr. Manuel Aguilar y man-dada a imprimir por el Consulado de Comercio de Guatemala."
Reprinted in Revista de Historia , no. 14: 203–214.

Appleton, D. and Co. The American Annual Cyclopaedia . New York: D. Appleton and Co., 1861–1900.

Arce, Manuel José. Breves indicaciones sobre la reorganización de Centro-América, escritas por

Manuel José Arce en la ciudad de San Salvador en 1846 . San Salvador: Tipografía "La Unión," 1905.

———. Memorias del General Manuel José Arce . San Salvador: Ministerio de Cultura, 1959.
 Baily, John. Central America; Describing Each of the States of Guatemala, Honduras, Salvador,
Nicaragua, and Costa Rica; Their Natural Features, Products, Population, and Remarkable Capacity for
Colonization . London: Trelawney Saunders, 1850.

Balmori, Diana, Stuart F. Voss, and Miles Wortman. Notable Family Networks in Latin America .
Chicago: The University of Chicago Press, 1984.

Bancroft, Hubert H. History of Central America . 3 vols. San Francisco: The History Company, 1887.

Barberena, Santiago I. Descripción geográfica y estadística de la República de El Salvador . San

Salvador: Imprenta Nacional, 1892.

Barón Castro, Rodolfo. La población de El Salvador . Madrid: Consejo Superior de Investigaciones

Científicas, 1942.

Baumgartner, Louis E. "The Myth of Central American Independence." Bucknell Review 15 (March

1966).

Belly, Felix. A travers L'Amérique Centrale . 2 vols. Paris, 1867.

Belot, Gustave de. La République du Salvador . Paris: Chez Dentu, 1865.

― 223 ―
 Biblioteca Nacional, ed. Documentos y datos históricos y estadísticos de la República de El Salvador .
San Salvador: Imprenta Nacional, 1926.

Boddam-Whethan, John Whethan. Across Central America . London: Hurst and Blackett, 1877.

Bristow, Joseph L. Report of Joseph L. Bristow, Special Panama Railroad Commissioner to the
Secretary of War. June 24, 1905 . Washington, D.C.: Press of B. S. Adams, 1905.

Browning, David. El Salvador, Landscape and Society . Oxford: Clarendon Press, 1971.

Bureau of the American Republics. Commercial Directory of the American Republics . 2 vols.

Washington, D.C.: Government Printing Office, 1898.

———. Handbook of Salvador . Washington, D.C.: Government Printing Office, 1894.

———. "Railway from La Libertad to Santa Tecla." Monthly Bulletin of the International Bureau of the
American Republics 24 (June 1903).

———. "Salvador: The Salvador Railway and the Coffee Crop." Monthly Bulletin of the International
Bureau of the American Republics 23 (September 1906).

Burns, E. Bradford. "The Intellectual Infrastructure of Modernization in El Salvador, 1870–1900." The

Americas 41 (January 1985).

———. "The Modernization of Underdevelopment: El Salvador, 1858–1931." The Journal of

Developing Areas 18 (April 1984).
 Bushnell, David, and Neill Macaulay. The Emergence of Latin America in the Nineteenth Century . New
York: Oxford University Press, 1988.

Bustamante Maceo, Gregorio. Historia Militar de El Salvador . San Salvador: n.p., 1951.

Cabat, Geoffrey A. "The Consolidation of 1804 in Guatemala." The Americas 28 (July 1971).

Calderón, José Tomás. Prontuario geográfico, comerical, estadístico y servicios administrativos de El

Salvador . San Salvador: La Salvadoreña, 1927.

Cardenal, Rodolfo. El poder eclesiástico en El Salvador, 1871–1931 . San Salvador: UCA Editores,
1980.

Cardona Lazo, Antonio. Diccionario geográfico de la República de El Salvador . San Salvador:

Publicaciones del Ministerio de Economía, 1945.

Cardoso, Ciro F. S. "Historia económica del café en Centroamérica (siglo XIX): Estudio comparativo ."
Estudios Centroamericanos 4 (January–April 1975).

Cardoso, Ciro F. S., and Héctor Pérez Brignoli. Centro América y la economía occidental (1520–1930) .
San José: Editorial de la Universidad de Costa Rica, 1977.

Castañeda, Francisco. El General Menéndez y sus victimarios . San Salvador: Dirección General de
Publicaciones, 1966.

Castro, Esteban. "Estadística de la jurisdicción municipal de San Vicente escrita por el bachiller pasante
don Esteban Castro por comisión de la Municipali-dad de San Vicente, 1878." In Biblioteca
Nacional, Documentos y datos históricos .
 Cevallos, José Antonio. Recuerdos Salvadoreños . 3 vols. San Salvador: Direc-

― 224 ―

ción General de Publicaciones, 1965.

Chacón, Enrique. El Presidente Dr. Francisco Dueñas y su época . San Salvador: Tipografía La Unión,
n.d.

Chamorro, Pedro Joaquín. Historia de la Federación de la América Central, 1823–1840 . Madrid:

Ediciones Cultura Hispánica, 1951.

Clegern, Wayne M. "Change and Development in Central America." Caribbean Studies 5 (January

1966).

Clyde, William Pancoast. The National Advantages of Government Aid to American Commerce . New
York: D. Taylor, printer, 1877.

Coatsworth, John H. "Anotaciones sobre la producción de alimentos durante el Porfiriato." Historia

Mexicana 26 (October–December 1976).

Colindres, Eduardo. Fundamentos económicos de la burguesía salvadoreña . San Salvador: UCA

Editores, 1977.
 Comité Ejecutivo de las Fiestas del VI Centenario. San Salvador, biografía de una ciudad cuatro veces
centenaria . San Salvador: Imprenta Nacional, 1946.

Cortés y Larraz, Pedro. "Descripción geográfico-moral de la Provincia de San Salvador en la diócesis de

Gohatemala." In República de El Salvador, Ministerio de Relaciones e Instrucción Pública, ed., Colección de
documentos importantes relativos a la República de El Salvador . San Salvador: Imprenta Nacional, 1921.

Cross, Harry E. "Living Standards in Rural Nineteenth-Century Mexico: Zacatecas 1820–80." Journal of

Latin American Studies 10 (May 1978).

Crowe, Frederick. The Gospel in Central America . London: Charles Gilpin, 1850.

Curtis, William E. Trade and Transportation Between the United States and Latin America .
Washington, D.C.: Government Printing Office, 1890.

D'Arlach, H. de T. Souvenirs de L'Amérique Centrale . Paris: Charpentier, 1850.

Deane, Phyllis. Abstract of British Historical Statistics . Cambridge: Cambridge University Press, 1962.

Dodd, Mead & Co. The International Year Book . New York: Dodd, Mead & Co., 1898–1900.

Domínguez Sosa, Julio Alberto. Génesis y significado de la constitución de 1886 . San Salvador:

Departamento Editorial, 1958.

Dunlop, Robert G. Travels in Central America . London: Longman, Brown, Green and Longmans, 1847.

Dunn, Henry. Guatimala or the United Provinces of Central America in 1827–28 . New York: G. & C.
Carvill, 1828.
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———. Dirección General de Estadísticas. The Republic of El Salvador . New York: C. J. O'Brien,

1924.

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 ———. Tarifa de aforos para el cobro de los derechos de importación en las aduanas de la República
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Fischel, Astrid. Consenso y represión . San José: Editorial Costa Rica, 1987.

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Fonseca, Pedro I. Monografía de La Libertad . San Salvador: Imprenta Nacional, 1913.

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Foote, Mrs. Henry G. Recollections of Central America and the West Coast of Africa . London: T. C.
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Fortín Magaña, Romeo. Constitución de 1886 y su proceso histórico . San Salvador: Talleres Gráficos
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Gámez, José D. Gerardo Barrios ante la posteridad . San Salvador: Dirección General de Publicaciones,
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Periodicals

The American Annual Cyclopaedia (New York, 1861–1900).

El Bien Común (San Salvador, 1838).

 Centro America (Guatemala, 1909–1920).

El Faro (San Salvador, 1865–1870).

Gaceta del Gobierno (República de Centro América, 1827).

Gaceta del Gobierno Supremo de Guatemala (Guatemala, 1824–1825).

Gaceta Oficial (San Salvador, 1847–1900; at times called La Gaceta, El Constitucional or Diario

Oficial).

Gazeta del Gobierno (San Salvador, 1831).

El Indicador (Guatemala, 1824–1825).

Monthly Bulletin of the Bureau of the American Republics (Washington, D.C.).

La Oposición (Guatemala, 1837)

The Pacific Mail and Central American Journal (London, 1873–1876).

Redactor General (Guatemala, 1825).

Semanario Político Mercantil de San Salvador (San Salvador, 1824).

La Verdad (Guatemala, 1837).
 ― 233 ―

Index

Acajutla: impact of coffee on, 121 , 168 ;

pier, 76 , 183 ;

pirate attacks to, 11 ;

railroad, 170 -72;

and road network, 74 , 77 , 78 , 169 ;

telegraph, 168 ;

trade through, 14 , 29 , 44 , 45 , 154

Aculhuaca, 53
Agriculture: machinery, 96 ;

school of, 181 ;

subsistence, 27 , 148 ;

tools, 158 , 180 ;

traditional, 3 , 5 , 22 , 33 , 123 , 186

Aguilar, Eugenio, 185

Aguilar family, 185

Ahuachapán, 77 , 121 , 168 , 213 n.52, 215 n.29

Alvarez family, 183

Alvarez Hermanos, 162

American Civil War, 109 -10, 114 -15, 123 , 178

Aniline. See Artificial dyes

Apaneca, 84

Aquino, Anastasio, 132
Arab immigration, 183 -84

Araujo, Manuel Enrique, 153

Arce, Manuel José, 42 , 46 -47

Argentina, 123 , 142 , 160 , 187

Armenia, Sonsonate, 109 , 170

Army, 11 , 79 -80, 133 , 155

Artificial dyes, 115 , 119 , 140

Artisans, 19 , 48 , 86

Asamblea Nacional Constituyente, 46 , 67

Aspinwall, William, 74

Ataco, 101

Ateos, 171

Atiquizaya, 136

Australian Royal Mail Service, 173

 Aycinena family, 58 , 91

Aycinena, Juan Fermin, 9 , 37 , 53

Ayuntamientos, 8

Balance of trade, 106 . See also Exports;

Imports;

Trade

Baldíos: claims, 207 n.50;

and ejidos, 130 ;

prices, 119 ;

sale of, 91 , 124 , 133 . See also Land;

Liberal reforms

Balsam, 148

Banco Agricola Comercial, 183

Banco Ahuachapaneco, 215 n.29

Banco Internacional, 160 , 161 , 162 , 185

Banco Occidental, 215 n.29

Banks, 159 , 160 -61, 165 -67, 187

Barclay, Herring, and Richardson, 47 , 79

Barrios, Gerardo: army modernization and, 64 , 65 ;

on indigo processing, 115 ;

land policies, 90 , 127 ;

ouster, 133 ;

political stability under, 114 ;

views, 82

Barrundia, Martín, 9

Belgium, 66

Belize: contraband through, 42 , 43 ;

 merchants, 44 , 45 ;

route, 74 , 105 ;

specie exports to, 41 ;

trade through, 43 -45, 103 , 154

Bell, Andrew, 67

Bello, Andrés, 65

Belot, Gustave de, 94

Bengal, 30

Bennett, Marshall, 44 , 179

Billings, 168

― 234 ―

Birmingham, 185
Blanco y Trigueros, 215 n.26

Blockades, 66 , 102 , 111

Bolívar, Simón, 67

Bolivia, 162

Bonds, 78 -79, 95 , 167

Bourbon reforms, 7 -9, 10 -19, 33

Brandy monopoly, 175 -76

Bresse, M. de, 78

Bridges, 78 , 169

Browning, David, 27 , 125 -30, 145 , 211 n.15

Bueron, Juan Luis, 169 , 170 , 171 , 181

Butterfield, General, 170 , 171

Butters Salvador Mines, Ltd., 180

C

Cable communications, 168

Cádiz, commercial houses, 13 , 15 , 16 , 32 ;

end of monopoly, 9 ;

exports to, 14 ;

and indigo prices, 41 ;

and indigo taxes, 30

Cajas de consolidación, 18

Calderón, Higinio, 148

California, exports to, 97 , 155 , 173 ;

and trade expansion, 74 , 104 , 122

Callao, 29

Caluco, 149

Camacho, Francisco, 170 , 218 n.77
Campo, Rafael, 111

Candles, 166 , 179

Cape Horn route: competitiveness of, 104 , 106 , 173 , 174 ;

and trade, 45 , 101 , 103 , 108

Capellanías, 18

Capital, 128 , 159 , 181 , 186 , 188 -89

Captain-General, 11 . See also Gálvez, Matías de

Captaincy-General, 10 , 17 , 32

Carondelet, Barón de, 11 , 12 , 19

Carrera, Rafael, 58 , 81 , 131 , 133

Castro, Esteban, 87

Catholic Church, 131 , 133 , 134 , 212

Cattle raising, 27 , 43 , 96

Central American Mint Limited, 163

Central American Public Works Company, 171 , 172

Central American Steam Navigation Company, 75

Cerna, Vicente, 133

Chalatenango, 109

Chalchuapa, 64

Chatfield, Frederick, 66

Chiapas, 38

Chile, 44 , 45 , 58 , 123 , 162

China, 174

Cholera morbus, 114 , 133

Civil code, 65

Coatepeque, 148

Cochineal, 40 , 44 , 60

Cochrane, Lord, 183
Code of commerce, 65

Coelho, José Antonio, 67 , 68 , 116

Coffee, 116 -22;

cultivation and processing, 118 ;

exports, 103 , 112 , 188 ;

incentives to, 117 , 187 ;

prices, 112 , 138 , 165 , 167

Cojutepeque, 133 , 136

Colegio de la Asunción, 70

Colombia, 145 , 173 , 183

Colón, currency, 163

Colón, Panama, 75 , 154

Colonos, 158

Colindres, Eduardo, 182 , 183 , 184
Columbus , 75 , 76

Comayagua, 38

Commercial regulations, 13

Communal lands: defined, 27 ;

and ejidos, 132 ;

geographical location, 141 ;

importance, 88 -90;

labor in, 142 , 156 ;

as obstacle to coffee, 126 -27, 131 ;

production in, 22 , 100 , 101 , 145 ;

size of holdings, 148 . See also Land;

Liberal reforms

Conscriptions, 56

Conservatives, 37 , 131 , 136 , 153
Consolidación de deudas, 14 , 18

Consulado, 16 , 30

Contraband, 42 , 43 , 46 , 178

Convents, 18

Cortés y Larraz, Pedro, 11

Costa Rica: coffee cultivation in, 116 , 187 ;

credit and investment, 52 -53, 118 , 145 , 187 , 189 ;

education in, 69 -70, 189

Cotton, 108 -111, 141 , 178 , 209 n.43

Courtade, 181

Credit: and coffee, 121 ;

and indigo, 28 ;

institutions, 159 -162; 215 n.26;

market, 93 -95, 144 ;
 reform, 146 ;

and wars, 186 . See also Habilitación;

Montepío de Cosecheros de Añil;

Mortgages

Cuartillo, 162

Cuba, 123

Curagao, 183

Currency, 7 , 162 , 166 , 216 n.36

Cuscatlán, 68 , 84 , 85 , 91

Custom duties. See Import duties

D'Arlach, H. de T., 50

De Sola, Herbert, 179 , 183

Debt, federal, 161 . See also Barclay, Herring, and Richardson

Debt peonage. See Labor, colonial

Dependency theory, 16

Divisadero, 180

Divisadero Gold and Silver Mining Company, 180

Dolores Izalco. See Izalco

― 235 ―

Dueñas, Francisco, 54 , 65 , 90 , 133 , 212 n.24

Duke, Maurice, 159 , 170 , 171 , 183

Duke, Rodolfo, 183

Dunlop, Robert G., 50 , 52 , 56 , 59

Dunn, Henry, 59 , 67
E

Earthquakes, 89 , 169

Education: after independence, 66 -72;

before independence, 11 -12;

expenditure in, 80 , 202 n.35;

and inequality, 187 ;

and war, 186

Ejidos: and communal lands, 132 ;

defined, 27 ;

geographical location, 141 ;

importance, 88 -90;

labor in, 142 , 156 ;

and liberal reforms, 125 , 128 , 135 , 147 , 150 ;

as obstacle to coffee, 126 , 127 , 131 ;
 production in, 22 , 100 , 101 , 145 ;

size of holdings, 129 , 130 , 148 ;

and surveyors, 181 . See also Land;

Liberal reforms

El Triunfo, 173

Electricity, 184

Encuentros, 180

Engineering, 148 , 181

England. See Great Britain

Entrepreneurship, 4 , 122

Escuela Politécnica, 65 , 70

Escuela de la República, 12

Espinosa, Tomás, 132

Exports: coffee and indigo, 60 , 152 , 154 , 155 ;

 per capita, 102 , 123 ;

total, 41 , 60 , 113 , 167 . See also Coffee;

Indigo

Exposition Universel, 152

Ezeta, Carlos: and gold standard, 153 , 163 -166, 177 , 216 n.52;

ouster, 164 , 168

Facultad de Ingeniería Civil, 181

Fairs, 15 , 29 , 43 , 99 , 107 . See also Guatemala;

San Miguel;

San Vicente

Federation, 47 , 196 n.2

Fertilizers, 158

Filisola, Vicente, 37 , 38
Financial intermediaries, 106

Fincas, 156 . See also Coffee;

Land

Flores, Natividad, 148

Food, 21 , 24 , 87 , 119

Foote, Henry Grant, 118 , 181

Foote, Mrs. Henry, Grant, 101

Forced loans, 52

Foreign Office, 147 , 162

France, 66 , 162 , 169

Freights. See Transportation costs

Froebel, Julius, 56

Fuero militar, 11
G

Gaínza, Gabino, 37

Gallardo, Manuel, 68 , 94 -95, 136

Gálvez, Mariano, 44

Gálvez, Matías de, 15 , 20 , 28

George B. Kerferd and Company, 161 , 215 n.30. See also Kerferd Sinclair and Company

Germany, 162

Glower, 181

Gold Rush: impact on revenue, 79 ;

and trade, 1 , 74 , 83 , 123 ;

and trade routes, 187

Gold standard, 163 -165, 167 , 177

Golfo Dulce, Bodegas, 29 , 30

González, Santiago, 69 , 169
Goodyear, W., 219 n.109

Granada, Nicaragua, 38

Grant, Ulises, 170

Great Britain: currency, 162 ;

exports to, 44 ;

imports from, 41 , 43 , 155 ;

and Nicaragua, 66 ;

obstructions to trade, 14 , 29 , 30 , 60 , 102 , 111 ;

tariffs, 30 ;

trade with, 45 , 154 ;

treaty with, 66

Gresham's Law, 162 , 163

Guadalquivir Canal, 30

Guardia Nacional, 64
Guatemala: audiencia of, 11 ;

conservatives and, 136 ;

currency, 162 ;

exports via, 103 ;

fairs, 14 , 16 ;

and indigo, 9 , 13 ;

invasion of, 54 ;

Kingdom of, 8 , 36 ;

railroad to, 170 , 218 n.86;

shipping to, 75 ;

telegraph service with, 168 ;

trade with, 58 ;

wars with, 51 , 53 , 62 , 114 , 115 , 133 , 169

Guatemala , 75
Guayaquil, 29

Guayabal, 90

Guaymango, 10

Guillermo A. Knoepfel, 106

Guirola family, 183

Gulf of Honduras, 13 , 14 , 29

Gunpowder monopoly, 175 . See also Taxes

Gutiérrez, Rafael: and gold standard, 166 ;

and railroad contracts, 172 ;

tax policies, 153 , 165 , 177 ;

ouster, 167 , 168

Gutiérrez y Ulloa, Antonio: on education, 12 ;

on food production, 87 ;

on haciendas, 130 ;
 on labor, 19 , 20 ;

report, 7

Habilitación, 93 , 161 . See also Credit

Haciendas: description, 88 -89;

expansion, 142 ;

importance, 27 ;

number of, 195 n.79;

size, 25 , 130 , 195 n.82, 211 n.15

Haefkens, Jacobo, 41

Hall, Edward, 78

Hamburg, 173 , 185

Hamburg-Pacific, 174

Hinds, 181
Hispano-Centroamericana, 173

― 236 ―

Hoil, William, 108

Honduras: cattle breeding in, 14 , 27 ;

currency, 162 ;

indigo production in, 13 ;

mining, 15 ;

and Pact of Amapala, 167 ;

trade with, 101 , 103 ;

wars with, 62

Hospitals, 18
I

Ilobasco, 85

Ilopango, 135

Immigration, 181 -184, 187

Import duties, 176 , 178 . See also Revenue;

Taxes

Imports: and gold standard, 164 ;

impact on importables, 208 n.28;

machinery, 155 ;

and revenues, 79 ;

textile, 107 , 155 ;

total, 41 , 42 , 113 , 106

Income per capita, 194 n.52

Independence, 35
India, 30

Indian(s): conscription of, 56 ;

and debt consolidation decree, 18 ;

education, 12 , 71 -72;

land, 18 , 126 , 129 , 148 , 187 ;

legal system and, 148 ;

liberal reforms and, 130 , 131 , 147 ;

market participation, 27 , 99 ;

as obstacle to growth, 145 ;

population, 72 ;

revolts, 111 , 132 , 133 , 134 , 136 , 167 , 213 n.37

Indigo, 111 -16;

cultivation method, 21 ;

exports, 40 , 44 , 110 , 112 ;
 financing, 28 ;

foreign competition, 30 ;

geographic distribution, 26 ;

in Honduras, 13 ;

importance, 9 -10;

labor, 21 ;

marketing, 13 -16, 29 ;

prices, 15 -16, 28 , 41 , 60 , 108 , 138 ;

processing, 22 , 115 , 194 n.71;

production, 8 , 10 , 31 , 41 , 111 -16, 186 ;

taxes, 15 , 29 ;

tithes, 25 , 29 ;

yield, 111 . See also Montepío de Cosecheros de Añil

Indigo Grower's Society. See Montepío de Cosecheros de Añil

Industrial revolution, 9 , 82

Industry, 43 , 178 -79, 189

Inequality, 186

Intendentes, 8 . See also Carondelet, Barón de

Interest rates: before banks, 28 , 161 ;

and coffee, 118 ;

and 1898 crisis, 166 ;

and habilitaciones, 94 , 160 ;

and transportation, 104

International Railways of Central America, 172 , 218 n.86

Investment, 51 , 186

Iron. See Mining

Irrigation, 158

Iturbide, Agustín de, 35 , 36 , 37 , 38

 Izabal, 44 , 74 , 103 , 106 , 120

Izalco, 12 , 134 , 136

Iztapa, 45

Jamaica, 42

Jeffreys, Wilson, 108

Jiquilisco Bay, 73

Jiquilite. See Indigo

Juarros, Domingo, 10

Juarros, Gaspar, 9

Judges, 65 -66

Junta de Consolidación, 18

Junta Consultiva Provisional, 37

Juntas de Comercio, 16
 Jutiapa, 89

Juzgado de Hacienda, 162

Keilahuer, René, 172 , 181

Kelly, William, 160

Kerferd Sinclair and Company, 106 . See also George B. Kerferd and Company

Knoepfel. See Guillermo A. Knoepfel

Kosmos, 173

La Ceiba, 170 , 171

La Favorita, 179

La Libertad: pier, 76 , 78 , 183 ;

railroad, 169 , 170 ;
 road, 73 , 77 , 169 ;

telegraph, 168 ;

trade through, 121 , 168 ;

transportation network and, 74

La Paz, 90 , 101 , 109

La Unión: pier, 76 ;

railroad, 164 , 169 , 170 , 171 , 172 , 218 n.86;

roads, 77 , 78 , 169 ;

San Miguel fair and, 101 ;

trade through, 45 , 121 , 168 ;

transportation network and, 74

Labor: after 1850, 156 -159;

in the colonial period, 19 , 23 , 142 , 200 n.88;

division of, 86 ;
 and liberal reforms, 142 -43;

relative to land, 141 ;

scarcity of, 83 , 85 ;

and wars, 54 -58

Lancaster, Joseph, 67

Lancasterian teaching method, 67 , 116 , 202 n.24

Land: distribution, 149 , 150 ;

leases, 158 ;

market, 141 ;

prices, 89 , 91 , 119 ;

private, 150 ;

registry, 213 n.52, 214 n.58;

scarcity, 141 -43;

tenure changes, 142 ;
 titles, 147 . See also Baldíos;

Communal lands;

Ejidos;

Liberal reforms

Lazard, Frères & Co., 152

Le Havre, 166

Leather industry, 179

Leff, Nathaniel, 4

Legal system, 65 -66

Lempa river, 78

León, Nicaragua, 38

― 237 ―
 Lesseps, Fernand de, 183

Levy, Moses, 147

Ley de Titulación de Predios Rústicos, 149

Liberal reforms, 5 , 6 , 140 , 147 -48, 188

Liberals, 37 , 131 , 132 , 153

Lindo, Juan, 70

Liverpool, 75 , 103 , 104

Locusts, 30 , 108 , 111 , 139

London, 161 , 170

Looms. See Textile industry

López, Lorenzo, 121

Luna, David Alejandro, 125

Macay, Miguel, 180
Manchester, 108

Marqués de Campos, 173

Marure, Alejandro, 50 , 56

Matanza, 5 , 6 , 213 n.39

Mathe, 181

Mayorga, Juan de Dios, 38 , 39

Medina, José Francisco, 161

Mejicanos, 135

Melo, José María, 64

Menéndez, Francisco, 169

Menéndez, Isidro, 64 , 65

Menjívar, Rafael, 128 , 129 , 130 , 144

Merchants: Belize, 44 , 45 ;

British, 45 , 101 , 162 ;
 French, 101 ;

German, 101 ;

Guatemalan, after independence, 28 , 29 , 43 , 48 , 107 ;

Guatemalan, credit, 45 , 144 ;

Guatemalan, rise, 9 , 14 ;

Guatemalan, and trade, 10 , 13 , 16

Metapán, 20 , 91 , 180 , 194 n.66

Mexico: colonial taxes, 18 ;

food consumption in, 24 ;

immigration to, 187 ;

invasion, 35 -38;

Lancaster schools in, 67 ;

luxury imports in, 107 ;

railroad, 142 ;
 trade, 18 , 173 ;

treaty with, 66

Migration, 156

Military school, 65 , 184 . See also Escuela Politécnica

Mining, 20 , 179 -180

Mint, 163

Monasteries, 18

Montepío de Cosecheros de Añil: creation of, 15 ;

and credit market, 33 , 45 , 118 , 144 ;

and politics, 8 , 47 ;

problems, 28 . See also Credit;

Indigo

Montúfar, Lorenzo, 58

Montúfar, Manuel, 36 , 43
 Morazán, Francisco, 52 , 132 , 196 n.2

Mortgages, 95 , 145 , 160 , 161 . See also Credit

Napoleonic Wars, 30 , 33 , 40

National Palace, 177 , 184

Nejapa, 53

New Spain, 17 , 36 , 194 n.52

New York, 166

Nicaragua: and Mexican invasion, 38 ;

and Pact of Amapala, 167 ;

products, 13 , 15 , 109 ;

trade route, 74 ;

wars with, 62 , 111 , 114

Nueva San Salvador. See Santa Tecla

O

Obrajes, 24

Omoa, 14 , 29 , 42

Ottoman empire, 184

Pacific Bridge Company, 169

Pacific Mail Steamship Company, 75 , 104 , 172 -174, 218 n.94

Pact of Amapala, 167

Palacios, Juan Manuel, 134

Panama: and colonial taxes, 18 ;

and De Sola's business, 183 ;

route, transportation costs, 105 , 120 ;

route, trade, 74 , 75 , 173
Panama Canal, 106

Panama railroad: freights, 105 ;

impact on trade, 1 , 104 , 107 , 122 -23, 154 ;

and introduction of coffee, 120 ;

service, 76 ;

and shipping routes, 174

Panama Railroad Company: routes, 75 , 172 ;

subsidy, 105 , 123 ;

and trade, 101 , 104 -06

Parker, Robert, 183

Partidos, 8

Peddlers, 19 , 102

Penal code, 65

Peñalver y Cárdenas, Luis de, 12

Peru, 44 , 45 , 123 , 162 , 187

Peso. See Currency

Piers, 169

Piñol, José, 9

Pioneer , 173

Plan de Iguala, 36

Police, 63 -64, 83

Population, 8 , 19 , 84 , 186 , 194 n.66

Ports. See Acajutla;

El Triunfo;

La Libertad;

La Unión

Positivism, 82

Prices: bonds, 79 ;
 food, 100 ;

and introduction of coffee, 120 ;

silver, 165 . See also specific product

Prince Albert , 173

Professionals, 19

Protectionism, 1 , 42 , 178

Prussia, 66

Public works, 80 , 155 . See also specific activity

Puntero, 22

― 238 ―

Railroads, 168 -172, 175 . See also Panama Railroad;

 specific destination

Rainschail, 185

Rebozos, 101 , 103 , 178

Regalado, Tomás, 5 , 6 , 153 , 162 , 167

Registro de la propiedad raíz de la sección de occidente, 148

Regression analysis, 138

Relative prices, 137 , 141

Repartimiento, 20 , 23 , 142 . See also Labor

Revenue: after 1850, 175 -177;

in colonial period, 32 , 194 n.52, 196 n.3;

and gold standard crisis, 164 , 167 . See also Taxes

Roads, 77 -78, 168 , 169 , 175 , 187 . See also specific destination

Rodríguez, Juan Manuel, 132 , 133

Rosario de La Pax. See La Paz

 Royal Tobacco Administration, 15

Salvador

Salvador Coffee Estates Company, Limited, 161 , 162

Salvador Railway Construction Company, 170 , 218 n.77

Salvador Railways Company, 172

San Francisco, California, 173

San Ignacio, 148

San Miguel: agriculture, 108 , 110 , 121 ;

education in, 12 ;

fair, 45 , 101 , 102 , 122 , 168 ;

haciendas, 54 ;

mortgages in, 95 ;

railroad, 171 , 172 ;
 roads, 77 , 169

San Pedro Nonualco, 90

San Pedro Puxtla, 101

San Salvador: city, cost of living, 19 ;

city, communications, 77 , 168 , 169 , 170 -171;

city, education, 12 ;

city, population, 86 , 184 ;

intendancy, administration, 8 , 10 ;

intendancy, and debt consolidation decree, 18 ;

intendancy, fair, 16 ;

intendancy, independence, 35 ;

intendancy, production, 17 , 31 ;

province (after independence), 68 , 95 , 108 , 109

San Vicente: agriculture, 87 , 109 , 117 , 121 ;

 credit, 94 ;

education, 12 ;

and ejidos, 89 , 135 ;

fair, 16 , 45 , 102 , 115 , 168 ;

haciendas, 54 ;

labor in, 85 ;

land prices in, 91 ;

tithes, 25

Sánchez Espino, Domingo, 20

Santa Ana: city, population, 86 , 87 ;

city, railroad, 170 , 171 ;

city, roads, 77 , 78 , 168 , 169 ;

city, telegraph, 168 ;

province, agriculture, 109 , 121 ;
 province, education, 68 ;

province, Indian revolt, 136 ;

province, labor force, 85 , 86 ;

province, land registry, 213 n.52;

province, sugar mills, 96 , 97

Santa Ana Central Coffee Company, 162

Santa Isabel Ishuantán, 149

Santa María Ostuma, 90

Santa Tecla, 91 , 117 , 169 , 171

Savage, Charles, 42

Scherzer, Carl von, 68 , 81 , 117 , 181

Schools, 18 , 67 -70, 155 . See also Education

Schultz, Theodore, 3 , 22

Seroon. See Zurrón
Shipping, 103 , 154 , 172 -174

Silver, 20 , 60 , 103 , 164 . See also Mining

Sitio del Niño, 171

Situados, 17 , 36 , 196 n.3

Smith, Adam, 131

Soap manufacturing, 179

Société du Crédit Mobilier, 180

Société Francaise des Mines de San Salvador, 180

Sonsonate: Alcaldía Mayor, 191 n.2;

province, agriculture, 108 , 109 , 121 ;

town, description, 86 ;

town, education, 12 ;

town, land registry, 213 n.52;

town, rail-road, 171 , 172 ;
 town, roads, 77 , 78 , 169 ;

town, telegraph, 168

South American Steamship Company, 174

Soyapango, 135

Spain, 14 , 17 -18, 29 , 30 , 66

Spearman's rank-order correlation, 142 -43

Squier, Ephraim George, 108 , 109 , 111

Statistics bureau, 167

Suárez, Francisco de Paula, 160

Subdelegaciones, 8

Suchitoto, 25 , 68 , 85 , 87 , 102

Sugar, 96 , 97 , 103 , 207 n.60

Syndicat Général de Monnaie, 163

T

Tabanco, 44 , 179 , 180

Tanneries. See Leather industry

Tarifa de aforos, 136 , 176 , 205 n.11

Taxes: and coffee, 117 , 153 , 177 , 187 , 219 n.101;

colonial, 15 -18, 78 ;

custom, 42 , 167 , 174 , 176 , 177 ;

during federation, 46 ;

and gold standard crisis, 164 -165

Tecoluca, 135

Tejutla, 25

Telegraph, 133 , 168 , 175

Telephone, 169

Tempsky, G. F. von, 77
Tenancingo, 101

Terrenos baldíos. See Baldíos

Texistepeque, 68

Textile industry, 43 , 178

Thompson, George A., 38 , 43 , 197 n.17

Torres Rivas, Edelberto, 125

Trade, 16 -17, 58 -60, 75 , 205 n.11. See also Exports;

Imports

― 239 ―

Traditional agriculture. See Agriculture

Transportation costs, 104 -105, 119 , 120 , 208 n.22

Transvaal, 183
 Treaties, 66

Tributos. See Taxes, colonial

Trujillo, 14 , 29

United Fruit Company, 172

United States of America: economic example of, 134 ;

and exports, 123 , 154 ;

and monetary system, 162 ;

railroad contractors, 170 ;

strategic interests, 66

Universidad de El Salvador, 70 , 148 , 181

Universidad de San Carlos, 11

Urruela, Gregorio, 9

Urrutia, Carlos, 43
 Uruguay, 123

Usulután, 108

Vagrancy laws, 83 , 88

Valle, Andrés, 134

Valle, José Cecilio del: on economic conditions, 40 , 41 , 43 ;

on trade, 30 , 46 ;

on politics, 37

Valparaíso, 29 , 173

Vanderbilt, Cornelius, 170

Vasconcelos, Doroteo, 115

Venezuela, 30

Veracruz, 14 , 29 , 30 , 44

Villa Verapaz, 135
W

Wages, 57 , 85 , 87 , 157

Walker, William, 63 , 66 , 111

Wars, 49 -61, 80. See also specific country

Washington Treaties, 154

White, Alastair, 55

Woodward, Ralph Lee Jr., 49

Wortman, Miles, 32

Zacatecoluca, 12 , 54 , 59

Zaldívar, Rafael, 169 , 170 , 217 n.77, 219 n.109

Zebadua, Marcial, 32

Zurrón, 15