CHAPTER XXXIII.

COMMERCE AND FINANCE.

1801-1887.

EARLY STATE OF TRADE—CONTINUED STAGNATION AFTER INDEPENDENCE—STEAM ON THE COASTS—ITS BENEFICIAL EFFECTS—VARIETY OF STAPLES—PORTS OF ENTRY AND TARIFFS—IMPORTS AND EXPORTS—FAIRS—ACCESSORY TRANSIT COMPANY—INTERNAL NAVIGATION—HIGHWAYS—MONEY—BANKING—POSTAL SERVICE—PANAMÁ RAILWAY TRAFFIC—LOCAL TRADE OF THE ISTHMUS—PEARL FISHERY—COLONIAL REVENUE IN FINANCES OF THE FEDERATION—SOURCES OF REVENUE OF EACH STATE—THEIR RECEIPTS AND EXPENDITURES—FOREIGN AND INTERNAL DEBTS.

During the first years of the present century, toward the end of the Spanish domination, after many restrictions to trade had been removed, and Central America had obtained leave to traffic direct with Mexico and other Spanish American colonies, there were only 30 or 35 mercantile houses throughout the country. Merchandise to the value of one million dollars was yearly imported from Spain through the bay of Honduras. The returns were chiefly in indigo, coin, and bullion. There was some trade also with Peru and Cuba.[XXXIII-1] Smuggling was carried on quite freely, even the officers of the revenue cutters taking a hand in it. The large amount of goods thus imported caused a drainage of specie.[XXXIII-2]

[Sidenote: FOREIGN TRADE DATA.]

[Sidenote: FAIRS AND IMMIGRATION.]

After the separation from Spain, there was little commerce for many years,[XXXIII-3] until the construction of the railway across the Isthmus, and the establishment of a line of steamers making periodical visits at the several Central American ports on the Pacific coast, afforded facilities for the development of both agriculture and foreign trade,[XXXIII-4] which under liberal legislation has since assumed large proportions, commerce being free with all friendly powers. In a note[XXXIII-5] are given copious data on the foreign trade of each of the five republics, showing an invariable balance in their favor, which steadily increased their wealth. As to internal trade, there is very little to say. The several republics have regularly established fairs, which are attended by those wishing to purchase national or foreign products or manufactures.[XXXIII-6]

The republics, having special facilities for internal navigation, endeavored to make them available. Guatemala granted privileges with the view of having a steam line established between the fluvial port of Panzós and Livingston, and also on Lake Amatitlan. In Nicaragua, under a contract entered into on the 22d of September, 1849, and amended April 11, 1850, between the government and an American company, transit was formally established between the two oceans, by way of Lake Nicaragua.[XXXIII-7] The American Accessory Transit Company, as it was called, went into active operation and carried thousands of passengers to and from California.[XXXIII-8] The first interoceanic trip was made in August 1852, and the service continued successfully until February 18, 1856, when it was suddenly closed, and the company's charter was revoked by the government of Rivas, at the dictation of William Walker.[XXXIII-9] The transit continued for a time under Walker's control, mainly to furnish his army with recruits, until the steamers fell into the hands of his enemies.[XXXIII-10] Navigation on San Juan River and Granada Lake was regulated in June 1861. In 1868 a convention was concluded between Nicaragua and Costa Rica for the navigation of the rivers San Juan and Colorado. In 1870 a contract was made with Hollenbeck and his associates for steam navigation on Lake Granada, and it was inaugurated in 1872.[XXXIII-11]

[Sidenote: ROADS AND CURRENCY.]

The national highways of Costa Rica are not all in the best condition, which is due to the destructive force of the winter rains. The government, however, endeavors to render them serviceable. In Nicaragua, the public roads, prior to the construction of railways, were only fit for mule travel, except at short distances from towns, which wagons could traverse. In the rainy season they were impassable, owing either to mud or swollen streams. The same is to be said respecting those of Honduras. Much has been successfully accomplished in late years in the improvement of roads and construction of bridges. Salvador appropriated in 1876 funds for macadamizing the public highways. Guatemala is well provided with roads and bridges, and derives a considerable revenue from tolls to keep them in repair, and to construct new ones.[XXXIII-12] Railways and telegraphs are treated of elsewhere.

The monetary unit of Costa Rica is the peso of one hundred centavos, with 25 grammes of silver of the standard of 0.900. The government mint coins gold, silver, and copper.[XXXIII-13]

Gold coin became very scarce in Nicaragua. There was no copper, and the smallest of silver was the half-real. Gold coins of the United States, Great Britain, and France, and the silver money of those countries, Switzerland, Belgium, Mexico, Peru, and Spain, were current for their full value.[XXXIII-14] In Salvador nearly all foreign coins were received for their face value. In Honduras the currency was much vitiated by the introduction of the moneda provisional—copper slightly alloyed with silver—of the denominations of quarter and half dollars, of which probably $1,500,000, nominal value, went into circulation since 1839.[XXXIII-15] Besides this coin there has been in circulation the cut money of the old kingdom, a portion of the Honduras government's own coinage, and that of the federal republic; all of which, together with English and American coins, make up the bulk of money in circulation.[XXXIII-16] In a decree of September 21, 1870, the government of Guatemala endeavored to introduce in its coinage the decimal system, recognizing the peso as the unit.[XXXIII-17] Another law of November 15, 1878, provided for the coinage of gold pieces of 1, 2, 5, 10, and 20 pesos, and silver pieces of 8, 4, and 2 reales, and half and quarter reales.[XXXIII-18] Foreign coins circulated at the rates fixed by the government.[XXXIII-19] There have been banks in most of the states of Central America for a number of years, several being now in successful operation.[XXXIII-20]

[Sidenote: BANKS AND MAILS]

The states of Central America, including the Isthmus of Panamá, maintain communications by mail, not only with one another, but likewise with other nations of Europe and America, and through them with the rest of the world.[XXXIII-21] The several republics use their best endeavors to perfect the internal mail service.[XXXIII-22] They pay subsidies to steamship companies for bringing and carrying their mails, and are members of the Universal Postal Union.

* * * * *

[Sidenote: ISTHMUS TRAFFIC.]

The discovery of gold in California, as is well known, restored life to the Isthmus of Panamá. In December 1849, the first emigrants went across, bound for the new El Dorado. In 1850 there was a large travel,[XXXIII-23] notwithstanding innumerable difficulties and discomforts. After the construction of the railway the traffic over it still increased; most of it was in transitu, but the local trade was not insignificant.[XXXIII-24] The note at foot contains data mainly procured from official sources on the amount of transportation from the earliest days of the opening of the road to a recent date.[XXXIII-25] It will be noticed that in the latter part of the sixth decade of this century the transit traffic through the Isthmus became greatly diminished. This was mainly due to the construction of the overland railway to the Pacific in the United States, and to the establishment of a British line of large and fleet steamers running from Europe to ports in the south Pacific through the straits of Magellan, affording advantages over the Panamá railroad transportation.

The transportation of passengers and merchandise to and from the Isthmus has been mainly effected by steamship lines—American and British during the first fourteen or fifteen years, to which were subsequently added those of a French company; and still later those of a German one.[XXXIII-26]

[Sidenote: GOLD AND THE ISTHMUS CANAL.]

The Isthmus traffic, from the earliest days of Spanish occupation of South America, was carried on by pack-mules at excessive rates.[XXXIII-27] In the early part of this century, the condition of trade being unsatisfactory, reforms were loudly called for by both Spaniards and Americans.[XXXIII-28] A brisk contraband trade was constantly going on.[XXXIII-29] After the war of independence, the traffic between Spain and South America ceased. In 1825-30 trade was at a low ebb.[XXXIII-30] With the view of fostering it, the New Granadan government, in 1847, decreed the suppression of custom-houses at Panamá, Portobello, and Chagres.[XXXIII-31] I refer elsewhere to the great improvement wrought by the influx of travellers consequent upon the discovery of gold in California. The amount of business done in providing conveyances, accommodations, and supplies of all kinds for passengers was very large, and money became quite abundant. The opening of the railway in 1855 paralyzed the local trade.[XXXIII-32]

The local trade of the Isthmus in 1865 is set down to have been $350,000 to $400,000 of imports, and between $500,000 and $600,000 of exports.[XXXIII-33] With a few exceptions, the chief trade in foreign goods is carried on by foreigners, most of whom deal in almost every kind of merchandise; the United States furnishing the greater part of the provisions, and other commodities. With the works on the canal, and the large increase of population, the local trade became greatly augmented. Weights and measures and money were based on the French decimal system.[XXXIII-34] All kinds of money were current. American coin generally commanded a high premium. Bank notes or paper currency of any kind could be easily passed.[XXXIII-35] Small silver coin was generally scarce, and there was no copper currency. There were no banks of issue, though some merchants did a banking business. Bills of exchange on England usually commanded a premium. Those on France were about par. The canal company sells exchange, receiving the existing currency in payment.

The Pearl Islands, comprising sixteen islands and numerous rocks, had a population of about 2,000 souls, about 700 of whom were engaged six months of the year in pearl fishing, which yielded about 1,000 tons of pearl shells valued at $70 per ton, and pearls enough to raise the value of both to $300,000 yearly. This industry had almost ceased to exist in 1873, owing to recklessness. Fishing for pearl oysters was forbidden by law on the 7th of May, 1872, for the term of five years, in order to allow the mollusk time to renew its vitality, which was in danger of destruction; but so far the measure has had no visibly good effects, and the fishery has not been revived. Pearl fishing was carried on with success by the Indians of Costa Rica on the coast of Nicoya, the shell being an established article of export.[XXXIII-36] Pearl oysters are also found near the south of Caroon Island, but yield so few pearls as to make it unprofitable to search for them.[XXXIII-37]

[Sidenote: REVENUE AND DEBT.]

As to finances prior to the separation from the mother country, and the disruption of the Central American confederacy, it can scarcely be said that the country had any.

A sketch of the revenue of the so-called reino de Guatemala, made in 1818 for the five years 1817-1821,[XXXIII-38] shows the various sources. The ordinary imposts yielded 462,944 pesos, and the special 256,975 pesos, making an aggregate of 719,919 pesos.[XXXIII-39] The scale of expenditure to the day of independence had been kept down; financial wants being few, the needed resources were easily collected, and did not weigh heavily on the people. The ruin of the treasury began in 1821, but was not felt till later, during the period Central America was harnessed to the Mexican empire.[XXXIII-40]

On the 2d of July, 1822, the congress of the Provincias Unidas de Centro América decreed the recognition of the public debt. In December 1824, the government, duly authorized by congress, contracted a loan with Barclay, Herring, Richardson, and Company, of London,[XXXIII-41] recognizing an indebtedness of $7,142,857, and the receipt of a net sum of about $5,000,000.[XXXIII-42] The banking house agreed to advance $200,000 at the end of two months, and $150,000 at the end of seven and nine respectively. To make the story short, the federal government received only $328,316, notwithstanding which its debt had risen in the early part of 1830 to one million dollars.[XXXIII-43] After the dissolution of the Central American union, the several states assumed a share of the foreign debt, and adopted measures to provide their governments with means to cover their expenses. Most of them depended chiefly on receipts from customs, and the monopoly of spirituous liquors and tobacco, stamped paper, excise, and a few other sources.[XXXIII-44]

The gross receipts for the fiscal year 1883, including a balance of $104,327 on hand from the preceding year, were $6,728,607.[XXXIII-45] The expenditures amounted to $6,613,607, of which $3,027,511 was the actual expenses of administration, and $3,586,096 went toward extinguishing the internal debt.[XXXIII-46]

[Sidenote: GUATEMALA INDEBTEDNESS.]

The indebtedness of Guatemala at the end of 1883 was as follows: Internal, including interest, $4,257,631. It is understood that on the 30th of September, 1885, it was estimated at $6,138,000.[XXXIII-47] The foreign debt resulted from the loan made in March 1869, in London, for the nominal sum of £500,000 at 6 per cent annually, and 3 per cent for a sinking fund.[XXXIII-48] The government remitted to London from 1870 to 1876, on account of that debt, for interest and sinking fund, $1,377,000, which was somewhat more than it had received. No further payments were made after October 1876. Consequently, at the end of 1885 the nation was owing, on account of that loan, £468,600 of principal, and £276,474 for interest, aggregating £745,074, which with exchange at 20 per cent make $4,470,444. Moreover, there is due by Guatemala, on account of her share of the federal indebtedness—she having assumed £100,000 of it—a very large sum. The debt had been reduced in 1873 to £70,600 to which must be added the dividends accrued to the present time.[XXXIII-49]

The national assembly voted on the 5th of July, 1886, for the fiscal year from July 1, 1886, to June 30, 1887, appropriations for expenditures of administration, aggregating $2,252,471, and afterward granted the extra sum of $326,800 for contingent expenses.[XXXIII-50] No provision was made as regards the foreign debt.

The revenue of Honduras in 1886 has been estimated at about two and a half million dollars, being considerably in excess of the expenditures.[XXXIII-51]

Honduras has a foreign and a home debt. The latter is partly consolidated and the rest floating. The consolidated, which was one million dollars, had been in 1883 reduced to $885,000. All treasury notes had been cancelled. The floating debt, amounting in 1880 to $578,609, had been reduced in 1883 to $244,694.[XXXIII-52] The indebtedness to British subjects, including the portion of the old federal debt which Honduras assumed, was finally extinguished by the payment of $50,000 in 1882, and the country was freed from the burden long weighing on the custom-house at Trujillo. The rest of the foreign debt, amounting in 1876 to $29,950,540, is held in London and Paris, having been issued at high rates of interest and at a low valuation. Since that time the accumulated interest has never been paid.[XXXIII-53] It is unknown what portion of the bonds issued has been negotiated. The actual indebtedness may fall short of the above amount after a thorough investigation of the financial affairs connected with the railroad.

[Sidenote: RECEIPTS AND EXPENDITURES.]

The revenue receipts of Salvador from all sources, according to President Zaldívar's messages of 1883 and 1884, were, for 1882, $4,549,209, and for 1883, $4,061,020. The expenditures as stated by the same authority were $4,416,454 in 1882, and $4,001,654 in 1883.[XXXIII-54] In 1866 the budget presented by the executive to congress estimated the receipts at $2,211,613, and the expenditures at $2,716,505, leaving a deficit of $501,869.

Salvador had in 1853 a foreign debt not far from $325,000.[XXXIII-55] Between 1861 and 1863 the government made an arrangement for the foreign debt, giving bonds to the amount of $405,260 to cover principal and interest. They were paid in due time, and since then the republic has kept itself free from foreign indebtedness. Her internal debt, consolidated at the end of 1882, was $1,589,861, and became slightly increased in 1883.[XXXIII-56] In June 1885 it was $7,147,359.

The financial condition of Nicaragua at the present time is quite easy. Her revenue has been steadily on the increase for several years past, except when interrupted by political disturbances, such as that of 1875, which caused a considerable diminution. The receipts from all sources in the biennial term of 1883-4 were $3,238,363, an excess of $359,426 over the two preceding years.[XXXIII-57] The expenditures in the biennial term of 1881-2 were $3,240,940, as itemized below.[XXXIII-58]

[Sidenote: NICARAGUA AND COSTA RICA.]

At the end of 1880 Nicaragua's share of the old federal indebtedness to British creditors—£31,510,[XXXIII-59] as per adjustment made in London on the 27th of March, 1874—had been reduced to £4,170 15_s._ 6_d._, which remained unpaid because the holders had failed to produce their claims. Since then the balance was further reduced to £4,011 15_s._ 6_d._, and the funds were on hand to pay it off on demand. This was the sum total of the republic's foreign liability. At the end of 1882 the internal debt was $920,258, of which $644,218 were subsequently paid, leaving a balance due of $328,667; adding thereto balances of special accounts, the whole debt of the republic at the end of 1884 was $908,707; but as the amount of consolidated bonds was being met, the whole indebtedness would really be $802,310.[XXXIII-60]

Costa Rica's financial condition is anything but an easy one. The receipts of the treasury for the fiscal year 1883-4 amounted to $1,586,561.[XXXIII-61] The receipts for the fiscal years 1884-5, and 1885-6, were estimated at about $2,559,866 and $2,936,756, respectively.[XXXIII-62] The expenditures for the fiscal years 1882-3, and 1883-4 were respectively $2,796,468 and $1,985,426; the former leaving a deficit of $1,246,448, and the latter of $398,865. Congress voted for expenses of the fiscal year 1885-6, $2,936,756, and for 1886-7, $2,607,613.[XXXIII-63]

[Sidenote: FOREIGN INDEBTEDNESS.]

The following statement exhibits the financial condition of the republic at the end of 1882, as represented by the secretary of the treasury. It will be well to state here that until 1871 Costa Rica was free from foreign debt, her proportion of the old federal indebtedness in London having been paid off at an early day of her independent life.[XXXIII-64] The government owed, on the 30th of April, 1871, $92,878; adding thereto the disbursements of eleven years—1871-82—$30,251,284, and $2,110,905 paid the railway, in bills of exchange on the national agent in London, and not included in the aforesaid outlay, we have an aggregate of $32,455,067; and deducting therefrom the revenue of the same eleven years, a deficit results of $6,524,516, which is made up of $1,454,086, excess of expenditure over receipts at the end of 1882, and $5,070,430, the equivalent in Costa Rican money of £895,221 3_s._ 11_d._, net proceeds of loans negotiated in London at 6 and 7 per cent.[XXXIII-65] However, the council of bondholders formed in 1883 the following statement of Costa Rica's foreign debt, namely: outstanding of six per cent loan of 1871, £941,200; overdue interest, £564,720, making £1,505,920. Outstanding of seven per cent loan of 1872, £1,460,200; overdue interest, £1,073,175 10_s._, making £2,553,273 10_s._ Grand total, £4,039,193 10_s._ The home debt was set down in 1885 at $519,000.[XXXIII-66]

In Panamá the receipts of the treasury from all sources in 1812, a few years previous to the separation from Spain, this nation being then at war with her American colonies, were $746,241.[XXXIII-67] In 1827, six years after the independence, the receipts were $241,683,[XXXIII-68] and the expenditures $238,929. Under the law suppressing custom-houses in the ports of the Isthmus, the revenue of the province in 1847 became reduced $77,880. The amount appropriated by the provincial legislature in October 1849, for expenses of the fiscal year 1840-59, was $51,220.[XXXIII-69]

After the organization of the Isthmus as a state of the Colombian confederation, there being no receipts from customs, the chief portion of the expenses has been met with a tax assessed on merchants and shop-keepers, estimated on the amount of business done by each, the legislative assembly fixing annually the sum required for the next year's expenditures, and the proportion of it to be covered by the commercial tax. The state received $50,000 out of the annual subvention of $250,000 paid by the railway company to the Colombian government. Other sources of revenue have been the taxes levied on steamship agencies, consumption, slaughter of cattle, ice, distilleries, and several others which in the aggregate are not insignificant.

[Sidenote: DEBT OF PANAMÁ]

The republic of Colombia being on the point of changing her organization, Panamá, consequent upon recent political events, was at the end of 1885 under a military government, the chief of which, exercising his extraordinary powers, ordered the continuance after January 1, 1886, of the appropriations that had been decreed for 1885, with a few modifications.[XXXIII-70] The financial condition of the state on the 30th of June, 1878, was an indebtedness of $214,317.[XXXIII-71]