The Origins and Progress of The Us Mexican Trade

The Origins and Progress of U.S.
-Mexican Trade, 1825-1884: "Hoc opus, hic labor est"

Author(s): Richard J. Salvucci
Source: The Hispanic American Historical Review, Vol. 71, No. 4 (Nov., 1991), pp. 697-735
Published by: Duke University Press
Stable URL: http://www.jstor.org/stable/2515761
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Hispanic American Historical Review 71:4
Copyright ? 1991 by Duke University Press
CCC ool8-2168/91/$1.50
The Origins and Progress of

U.S. -Mexican Trade, 1825-1884:
"Hoc opus, hic labor est"
RICHARD J. SALVUCCI
"Where is the republican that does not sigh for the emancipation of
Mexico? Who is there in the United States, merchant or manufac-
turer, planter or artisan, that would not be benefitted by the liberation
of this great empire from Spain . . . a source of trade to us more
important than any we have with the old world."
Niles Weekly Register, September 30, 1815
"Of the New America, Mexico is probably fated to be the most im-
portant state."
National Gazette, April 9, i825
H E economic and commercial history of early national

Mexico remains very much a mystery, the contributions
of John Coatsworth, Donald Stevens, Barbara Tenen-
baum, Guy Thomson, David Walker, and numerous Mexican scholars
notwithstanding.' In part, the problem is one of finding, collating, and
Woodrow Borah, John Coatsworth, Albert Fishlow, Pedro Fraile, Stephen Haber, John Hus-
ton, Linda Salvucci, Donald Stevens, Barbara Tenenbaum, and two anonymous referees
offered suggestions and criticism of this paper. Seminar participants at the University of
California, Berkeley, and at the University of Texas, Austin, were helpful as well. An earlier
version was presented at the annual meeting of the American Historical Association. The
National Endowment for the Humanities and the Social Science Research Council provided
financial support.
1. John H. Coatsworth, "Obstacles to Economic Growth in Nineteenth-Century
Mexico," American Historical Review, 83:1 (Feb. 1978), 8o-1oo; Donald F. Stevens, "Eco-
nomic Fluctuations and Political Instability in Early Republican Mexico," Journal of Inter-
disciplinary History, 16:4 (Spring 1986), 645-665, and his Origins of Political Instability
in Mexico (forthcoming); Barbara Tenenbaum, The Politics of Penury. Debts and Taxes in
Mexico, 1821-1856 (Albuquerque, 1986); Guy P. C. Thomson, Puebla de los Angeles. Indus-
try and Society in a Mexican City, 1700-1850 (Boulder, 1989); David W. Walker, Kinship,
698 | HAHR I NOVEMBER I RICHARD J. SALVUCCI
interpreting statistics that are frequently difficult, conjectural, or contra-

dictory. But it is also a question of knowing where to start; of deciding
what is important; and of creating a framework within which statistics and
other economic data assume coherence, consistency, and meaning, even
in the presence of incomplete information.
A likely point of departure is foreign trade. It is clear from the work of
Stevens, Tenenbaum, and Thomson that foreign trade is central to discus-
sions of political change, capital movements, indebtedness, and commer-
cial policy. Foreign trade was nearly at the heart of early national political
economy. But the composition, evolution, and effects of foreign trade are
by no means well known, much less undisputed. Tenenbaum links the
fragility of the fiscal system, and indirectly of federalism itself, almost en-
tirely to the cyclical variability of trade and tariffs. Stevens, on the other
hand, discerns a politicized economic cycle and reverses cause and effect,
concluding that "politicians [in Mexico] did not merely respond to eco-
nomic cycles, but caused them."2 Clearly then, examining foreign trade is
a means of understanding issues that largely defined the existence, char-
acter, and viability of the Mexican state in the early national period. "Sin
hacienda, no hay estado," as a publication of the day remarked.3
Yet a study of Mexico's foreign trade in the early nineteenth century
is also necessarily an analysis of its commercial policy. And commercial
policy was, and is, a weapon. It was, perhaps, uniquely effective against
the pressures that both Great Britain and the United States exerted on
Mexico, for the Mexican market was an object of competition between
them, and competition brings leverage. Mexico employed the weapon,
sometimes successfully and sometimes less so, but always in reaction to
enormous pressures on its sovereignty. In Mexican eyes, the flag fol-
lowed trade.
From a historical standpoint, then, studying early national trade pat-
terns and commercial policy allows us to draw large lessons about the
behavior of small polities and to discuss a neglected aspect of Mexican
history as well. But where to begin? The Anglo-Mexican trade was of
paramount importance, but before 1858 Great Britain ostensibly kept
no systematic account of its bullion imports.4 Pending further research,
Business, and Politics. The Martinez del Rio Family in Mexico, 1823-1867 (Austin, 1986);
Ciro Cardoso, ed., Formaci6n y desarrollo de la burguesia en M6xico. Siglo xix, zd ed.
(Mexico City, 1981); and Cardoso, ed., M6xico en el siglo xix. Historia econ6mica y de la
estructura social (1821-1 91o), 4th ed. (Mexico City, 1983).
2. Tenenbaum, Politics of Penury; 168-169; Stevens, "Economic Fluctuations and Politi-
cal Instability," 665.
3. Gaceta del Gobierno Supremo de Mexico, Nov. 8, 1823.
4. See [John Pender & Company] Statistics of the Trade of the United Kingdom with
Foreign Countriesfrom 1840 (Manchester, 1869), 85-86.
ORIGINS AND PROGRESS OF U.S.-MEXICAN TRADE, 1825-1884 699
Britain's early balance of trade with Mexico is mostly a matter of conjec-

ture. The Franco-Mexican trade was not unimportant, but before 1847 its
statistics reflect "official values."5 So we begin with the record of United
States-Mexican trade.
While the record of the United States-Mexican trade is far from per-
fect, it is nevertheless voluminous and can be adjusted for the errors and
omissions characteristic of all trade data. Moreover, the trade cycle with
the United States is at once typical and peculiar, and the tension itself
is revealing. Trade deficits, one may say, are trade deficits. They vary in
size but differ in degree rather than in kind. In this sense, trade with the
United States was no less representative than any other. Yet this trade
also carried unique implications for both nations and was subject to social,
political, and diplomatic pressures that the Anglo- and Franco-Mexican
trades never faced. In other words, "ordinary" exchange between the
United States and Mexico sometimes reflected unusual circumstances and
at times produced untoward results.
Finally, the size of trade between Mexico and the United States may
well have been "small" in a conventional sense, but its impact depends
less on its absolute size than on the scale of measurement chosen.6 In the
Mexican view, any trade with the United States could be potentially haz-
ardous, whatever its volume. From the standpoint of the United States,
the silver that Mexico used to finance its purchases had direct effects on
the U.S. money supply into the 1830s, and indirectly thereafter. Mexican
silver fueled the inflation of the middle 1830s in the United States and was
a major cause of the Panic of 1837.7 Moreover, the trade to Mexico had im-
portant regional consequences within the United States. As late as 1830,
Philadelphia merchants believed that they handled about 50 percent of
the U.S. trade to Mexico, and Mexico was the city's fifth largest trading
partner overall.8 How much the trade counted is a matter of perspective.
5. But see Bernard Kapp, "Les relations 6conomiques ext6rieures du Mexique (1821-
1911) d'apres les sources frangaises," in Ville et commerce (Deux essais d'histoire hispano-
americaine) (Paris, 1974), 9-93. The official value series is, in essence, a constant franc series
in prices of 1826. The larger study from which this essay is drawn uses 1840-44 as a base
period. I have yet to express the 1826 series in French prices of 1840-44.
6. For example, from the 1830s through the 188os, Cuba and Brazil were the principal
sources of exports from Latin America to the United States. If silver is excluded, Mexico
does not figure in the top three sources until the 188os. But if silver is included, Mexico
was never out of the top three. Moreover, the monetary effects of Mexican silver were vastly
more important than the availability of sugar and coffee when the United States was on a
de facto silver standard. See Roy W. Jastram, Silver. The Restless Metal (New York, 1981),
65-69.
7. Peter Temin, The Jacksonian Economy (New York, 1969), esp. 68-91. For silver
and the early U. S. monetary standard, see Jerome Officer, "Dollar-Sterling Mint Parity and
Exchange Rates, 1791-1834," Journal of Economic History, 43:3 (Sept. 1983), 579-616.
8. The figure of 50 percent appears in Henry Toland to President of the United States,
700 1 HAHR I NOVEMBER I RICHARD J. SALVUCCI
Exports, Imports, and the Balance of Trade
To tell a coherent story, we need to know the U. S. balance of visible

trade with Mexico, that is, the relative size of merchandise exports and
imports. But the numbers do not come easily. The existing trade statistics
are usually misleading and often incorrect. And the United States con-
trolled its own carrying trade to Mexico, which means that its earnings
from these services need to be taken into account, even though they are
generally ignored.9 The ostensible balance of Mexico's visible trade with
the United States is probably wrong. The current account balance, that is,
net income from trade, investment, and services, is a mystery.
The reliability of trade statistics is an enduring problem for historians,
analysts, and policy makers; no discussion based on quantitative evidence
can ignore these issues.'0 Since trade is fundamentally a quantitative mat-
ter, getting the numbers right is a necessary first step. Thus, the discussion
of sources and methods that follows is a central aspect of this essay, but
it is a difficult one as well. "Hoc opus, hic labor est," as a U.S. consul of
the time complained when asked to provide similar commercial data." For
the sake of readability, I have relegated purely technical matters to four
appendixes. Anyone wishing to replicate or appraise my results should
find the data in the appendixes helpful.
The standard U.S. sources for imports from and exports to Mexico are
Series U321 (exports) and U339 (imports) of the Historical Statistics of the
United States.'2 Series U321 gives the current value of exports, noting only
that "reexports" (total imports less retained imports) are included. This
is an enormous understatement. Before 1841, in no year did reexports to
Mexico comprise less than half of all U. S. exports by value. Even after
1841, reexports were hardly insignificant. In both 1852 and i86o and even
as late as 1872 when they were swelled by English materials for Mexican
railroad construction reexports were again 40 percent of all exports by
Philadelphia, Nov. 27, 1830. Letters regarding the appointment of James James as Vera-
cruz consul. Record Group 59, National Archives [hereafter RG 59, NARS]. For Philadel-
phia's trade with Mexico, see Linda K. Salvucci, "Development and Decline: The Port of
Philadelphia and Spanish Imperial Markets: 1783-1823" (Ph.D. diss., Princeton University,
1985), 221.
9. See Appendix C and Table C-1.
io. For instance, see Warren T. Brookes, "Hiding a Boom in a Statistical Bust," Wall
Street Journal, Aug. 6, 1987, or "Le 'trou noir' des statistiques internationales," Le Monde,
June 16, 1987.
11. Literally, "This is hard, this is work," from Virgil's Aeneid.
12. U. S. Department of Commerce, Bureau of the Census, Historical Statistics of the
United States, Colonial Times to 1970. Bicentennial Edition, 2 vols. (Washington, 1975), II,
903-904. Also see I, xii-xiii, "The Problem of Historical Statistics."
TABLE 1: Share of Reexports in All U.S. Exports to Mexico
Years Share Standard deviation
1820-29 .814 .027

1830-39 .724 .087
1840-49 .404 .129
1850-59 .271 .o8o
1860-69 .2o6 .078
1870-79 .296 .o6i
Source: Computed from American Commerce: Commerce of South America, Central Amer-
ica, Mexico, and West Indies, 3283-3284.
value.'3 Total and domestic exports to Mexico were by no means identical,

as shown in Table i.
The importance of reexports from the United States was well known.
As late as 1852, the U.S. consul in Veracruz could remark that "the car-
goes of our New York packets [consist] almost wholly of bonded goods
from Europe and China."' 4 Mexican geography and the early concentra-
tion of foreign commercial houses in Veracruz enhanced the original sig-
nificance of the reexports trade. For example, the British commercial
houses of Marshall & Manning [later Manning & Mackintosh]; Bates Bar-
ton & Co.; and Exter, Greaves & Co. [McCalmont, Greaves & Co.] were
established in Mexico City and Veracruz.15 But the U.S. consul at Vera-
cruz noted that "English goods going into Mexico through Texas ... will
injure the English trade [through Veracruz] exceedingly for the United
States . . . can get them into the interior much cheaper than they can
13. United Kingdom, Parliament, Report by Mr. Lionel E. G. Carden on the Trade and
Commerce of Mexico, C. 3785 (1883), 3. The national composition of reexports changed dur-
ing the 1870s as well. After 1869, the French classified exports by intended market rather
than by port of destination. Goods sent to the United States for reexport to Mexico were
now classified as exports to Mexico rather than as exports to the United States. See Tableau
d6cennal du commerce de la France avec ses colonies et les puissances 6trangeres 1877 a
i886, 2 vols. (Paris, 1888), I, xiv.
14. J. T. Pickett to Secretary of State, Veracruz, Feb. 21, 1852, U.S. Dept. of State,
Consular Despatches from Veracruz, RG 59, NARS. Before 1846, merchandise for reexport
entered U.S. ports free of duty but subject to forfeiture of a customs bond while remaining
on board ship. The system produced considerable evasion and was scrapped in favor of a
bonded warehouse system in 1846. Goods were bonded on deposit and again on withdrawal
for subsequent export. Evidence of sale discharged the bonds. See Thomas F. Gordon)
comp., A Collection of the Laws of the United States Relating to Revenue, Navigation, and
Commerce (Philadelphia, 1844), 83-84, and Robert Mayo, A Synopsis of the Commercial
and Revenue System of the United States, "Extra Edition" (Washington, 1847), 328-340.
15. [Katherine de la Fosse] The First Hundred Years. British Industry and Commerce
in Mexico: 1821-1Z921 (Mexico City, 1978), not paginated.
be transported from [Veracruz] up these everlasting hills."' 6 Overland

reexports through the United States also reflected the continuing produc-
tivity of Mexico's northern silver mines in the wake of insurgent damage
to the Guanajuato district in the i8ios. Before 1846, northern silver also
drove the Santa Fe trade and financed substantial U.S. reexports to Chi-
huahua and Durango. To the extent that overland reexports through the
United States reduced transportation costs, or to the extent that mari-
time reexports bypassed Veracruz for Alvarado or Tampico, the trade that
had customarily linked Veracruz to Mexico City was diminished. As the
English diplomat H. G. Ward observed, the British were committing the
very error that the Spaniards had made in concentrating their energies on
Veracruz and Mexico City. The immediate beneficiaries of this strategy
were the U.S. merchants who acted as commercial intermediaries. Geog-
raphy was thus the unspoken ally of the Yankee trader.'7
For simplicity, we define "U.S. exports" as domestic exports (i.e., pro-
duced in the United States). We assume that reexports from the United
States remained foreign property, but that U.S. merchants and shippers
profited from carrying them to Mexico. In other words, U.S. reexports
were largely British and French exports transported by U.S. carriers.
They produced "invisible earnings" for the U. S. current account '8 but did
not affect the balance of its visible (merchandise) trade with Mexico.
In Table 2, column A, I give domestic exports to Mexico from 1824/.
25 to 1883/84. Two figures are given for 1862/63 through 1864/65. The
first figure is "official" and recorded in American Commerce. Commerce of
South America, Central America, Mexico, and West Indies, With Share of
the United States and Other Leading Nations Therein, 1821-1898 (Wash-
ington, 1899), a source for Series U321 (exports to Mexico) and U339
(imports from Mexico) in the Historical Statistics of the United States.
The bracketed second figure is corrected for contraband war materiel that
flowed from Union ports to the Confederate States through Matamoros,
Mexico during the U.S. Civil War. (See Appendix A for details.) Exports
were valued on a "free along side" (FAS) basis (before adding insurance,
freight, and merchants' commissions). Nevertheless, all these numbers
(and those that follow) are approximations and cannot be considered exact.
i6. F. M. Dimond to Secretary of State, Veracruz, Sept. i, 1845, RG 59, NARS.

17. Answers of Augustus Storrs of Missouri to Certain Queries Upon the Trade and
Intercourse . . . of the Internal Provinces of Mexico, i8th Cong., 2d sess., Senate, Jan. 3,
1825, pp. 6, 8-9, 12; Angela Moyano Pahissa, El comercio de Santa Fe y la guerra del 47
(Mexico City, 1976); Petition of Sundry Inhabitants of the State of Missouri Upon ... the
Internal Provinces of Mexico, i8th Cong., 2d sess., Feb. 14, 1825, pp. 4-5; Henry George
Ward, Mexico en 1827, trans. Ricardo Haas (Mexico City, 1981), 281.
i8. The current account balance measures net income from trade, services, and invest-
ment.
ORIGINS AND PROGRESS OF U.S. -MEXICAN TRADE, 1825-1884 703
The U.S. Constitution (section 9, clause 5) prohibits federal imposition of

an export tax, so the government had no vested interest in consistently
and correctly recording the value of exports. And well into the 1850s, the
U. S. consul at Veracruz downplayed the precision of the statistics of the
trade.'9 But as we will see, this concern need not be exaggerated. Internal
evidence suggests that the export totals are broadly correct. However we
revise, transform, or manipulate the historical statistics, we uncover no
substantial discrepancy between trends discussed in the consular reports
and those indicated by the historical statistics. This strongly suggests that
the U. S. consuls, whatever their personal financial interests, were reason-
ably unbiased reporters of economic information, or that their biases and
interests did not significantly affect the reliability of the information they
reported.20
In column A (Table 2) I give exports in current prices, and their move-
ments include changes in both volume and value. But we must distinguish
between changes in export prices and export quantities. The usual way of
doing so is by "deflating" a series in current prices, thus converting "nomi-
nal" into "real" values. For this conversion, we require an index of prices
of U. S. exports to Mexico, or a good approximation of such an index. The
Warren-Pearson index of U. S. wholesale prices spans the nineteenth cen-
tury, but there is no guarantee that it accurately reflects the composition
of exports to Mexico. The safest course is to construct our own export
price index.
As I show in Table 3, the value share of the top five domestic goods
exported to Mexico from the i820S through the i88os was always high-
with the exception of the 1870s, it was never less than 50 percent-and
in the 183os and 1840s it was well over 6o percent. These goods included
finished cottons, wheat flour, raw cotton, and after 1868/69 steel rails as
a proxy for manufactures of iron and steel. Concentration makes the con-
struction of the index much easier. I provide details of how the index was
constructed in Appendix B. Here we need only say that the deflator is a
Laspeyres index with a base period of 1840/41-1844/45. Its weights were
adjusted (and linked) in 1840/41, 1844/45, 1859/60, and 1868/69 to re-
flect the changing composition of exports. The index covers roughly 40 to
70 percent of all U.S. exports to Mexico by value, which is adequate. In
19. J. T. Pickett to Secretary of State, Veracruz, July 4, 1854, RG 59, NARS.

20. Richard Werking concludes that "after three or four years at their posts some of the
[U.S.] consuls managed to acquire a modicum of efficiency and suitability for their jobs."
The general reliability of their commercial reporting on Mexico supports the conclusion. See
Richard Hume Werking, The Master Architects. Building the United States Foreign Service,
1890-1913 (Lexington, KY, 1977), 9. On the same theme, see also Henry E. Mattox, The
Twilight of Amateur Diplomacy. The American Foreign Service and Its Senior Officers in
the 189oS (Kent, OH, 1989), ix-xiii.
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706 I HAHR I NOVEMBER I RICHARD J. SALVUCCI
TABLE 3: Five-Commodity Concentration Ratios, U.S. Domestic Expo
to Mexico
Years Ratio Standard deviation
1824-29 .51 .20

1830-39 .65 .09
1840-49 .69 .10
1850-59 .72 .12

1860-69 .51 .14
1870-79 .40 .o8
1880-84 .59 .13
Source: The five-commodity concentration ratios were computed on a yearly basis and then
averaged by decades. From 1824/25 through 1883/84, the sources of raw data are the annual
"Statements of [Foreign] Commerce and Navigation of the United States," nearly all of which
appear as both House and Senate documents in the U. S. serial set. After i859/6o, the source
of data is U.S. Treasury Department, Commerce of the United States and Other Foreign
Countries with Mexico, Central America, the West Indies, and South America (Washington,
1889), data on Mexico. Some categories were consolidated after i86o. See Appendix B for
the commodity composition of exports.
Table 2, the index appears in column B. Real exports in constant 1840/

41-1844/45 prices are given in column C and are nothing more than (A/
B X ioo).
U. S . imports from Mexico are easier to measure. By and large, Mexico
shipped precious metals-mostly silver-to the United States. Most came
in specie, but there was some bullion as well. As I show in Table 4, specie
and bullion (including some gold) were never less than half of all imports
by value. Until its world price fell in the later 1870s and early i88os, silver
was often 6o to 70 percent of the value of all U.S. imports from Mexico.
Without much error, then, we can deflate these imports (silver plus all
others) by an index of silver prices constructed on an 1840/41-1844/45
base.21 Imports in current prices appear in column D, Table 2, and the
silver price index in column E. Real imports in prices of 1840/41-1844/45
appear in column F and are nothing more than (D/E x iloo).
Mexico's export figures for precious metals are highly suspect, since
substantial Mexican taxes on the coinage and export of specie during much
of the nineteenth century made smuggling silver out of the country big
business.22 But the U. S. import totals are probably accurate, even though
21. Economic historians conventionally distinguish between merchandise and specie

balances. Since there are no prices with which to deflate the (import) merchandise balance,
I ignored the usual distinction.
22. See Barry M. Gough, "Specie Conveyance from the West Coast of Mexico in British
Warships c. 1820-1870: An Aspect of Pax Britannica," Mariner's Mirror, 69:4 (1983), 419-
433; and John Mayo, "Consuls and Silver Contraband on Mexico's West Coast in the Era of
Santa Anna," Journal of Latin American Studies, 19:2 (Nov. 1987), 389-411.
TABLE 4: Share of Specie and Bulliona in All U.S. Imports from Mexico,
1824/25-1883/84
Years Share Standard deviation
1824-29 .77 .09

1830-39 .77 .18
1840-49 .6i .18
1850-59 .72 .07

1860-69 .57 .24
1870-79 .65 .10
1880-84 .52 .o8
aIncludes gold.
Source: Silver data computed from American Commerce: Commerce of South America,
Central America, Mexico, and West Indies, 3323.
silver and gold were admitted duty free; the absence of taxation made con-
cealing them or evading customs pointless. While U.S. import accounts
had to be reformed in the 1840s because of inaccuracies, their precious
metal totals were considered basically sound.23
With new series for United States imports from and exports to Mexico,
we can now compute a more accurate balance of visible trade (merchan-
dise exports less imports). In Table 2, column G, the balance appears in
current dollars. It is simply net income from merchandise trade.
Not all international transactions are "visible." Conventional balance-
of-payments accounting distinguishes "visible trade" from "invisibles"
such as trade in business services.24 In general, the "balance on visible
trade" differs from the "balance on current account" by the movement
of "invisibles." Practically speaking, the only computation of invisibles
possible here is income from insurance, shipping, and commissions. I de-
scribe the procedure for calculating these in Appendix C and credit to
the United States the amounts computed as "invisible exports" to Mexico.
The annual earnings from invisibles appear in Table 2, column H, and the
balance on current account in column I, the sum of G plus H. The current
account is simply net income from trade, services, and investment.
From Numbers to Notions: Silver, Cycles, and Tariffs
Numbers, of course, are not the whole story, but without them there
would be no story. And the story they tell is one of both persistence and
23. [Alex del Mar] Report of the Director of the Bureau of Statistics on the Imports of
the United States (Washington, i868), 1-2, 14, 21-22.
24. For example, see Albert H. Imlah, Economic Elements in the Pax Britannica.
Studies in British Foreign Trade in the Nineteenth Century (1958; reprint, New York, 1969),
42-81.
change. Mexico continued to trade silver for cloth, much as the Indies had
under the Bourbon monarchs but with new wrinkles. As wheat fields in the
United States began to appear west of the Alleghenies, New Orleans could
supply Mexico with wheat flour shipped cheaply down the Mississippi.
And then there was raw cotton. In the early 1840s, Mexico's new cotton
industry drew heavily on raw cotton imported from the United States. As
Lucas Alamain observed in 1846, "Without [it], the factories could hardly
have made half of what they did during the past two years." The available
evidence suggests that Alamain's calculations were very nearly correct.25
Yet there is a sense in which what did not change was as impressive as
what did. The Mexican cotton industry in the 1830s and 1840s was based
less on comparative advantage than on restrictions on international trade,
a nostrum peddled by Mexican industrialists who found domestic mar-
kets difficult to control. From the standpoint of international trade cycles,
moreover, the Mexican staple remained silver, and the impact of its pro-
duction and export during the early and middle decades of the nineteenth
century was substantial. There are two ways of seeing this.
First, and most obviously, silver was a medium of international ex-
change and figured prominently in Mexico's capacity to import. The value
of Mexican imports from the United States conformed closely to the value
of the silver exported to the United States. Indeed, the correspondence is
nearly exact.26
Second, Mexico was a nation with small, fragmented capital markets
that rationed credit through kinship networks rather than through banks
or other formal intermediaries. Under these circumstances, development
economists suggest, activities that raise investible wealth will have an eco-
nomic impact disproportionate to their size.27 In Mexico, silver mining
25. See "Memoria sobre el estado de la agriculture e industria de la repiiblica en el

afio de 1845" (1846), in Documentos para el estudio de la industrializaci6n en Mkxico, ed.
Horacio Labastida (Mexico City, 1977), esp. 202-203. The U. S. consul at Veracruz concurred
in a letter to Secretary of State, Veracruz, Dec. 17, 1842, RG 59, NARS. The Tariff of 1843
prohibited raw cotton and provided the Santanista regime (and Santa Anna himself) with a
pretext for selling lucrative import licenses (permisos) between 1843 and 1845. A license of
May 3, 1844, authorized imports of ioo,ooo quintales, or io million pounds. By the out-
break of the war, the United States had exported over 12 million pounds, or an average of
4 million per year. If Alamdn's figures were correct, U.S. cotton supplied at least a third of
Mexican requirements in the early 1840S. Shipments of raw cotton are documented in the
"Statements of [Foreign] Commerce and Navigation of the United States" for 1843/44, 44/
45, and 45/46. Also F. M. Dimond to Secretary of State, Veracruz, July 11, 1843, and May 5,
1845, RG 59, NARS.
26. I ranked cumulative Mexican silver exports to the United States and cumulative
domestic U.S. exports to Mexico by decade (1820S through i88os). The rank-order correla-
tion between the series was .93, or nearly perfect.
27. For the theory, see Ronald I. McKinnon, Money and Capital in Economic Devel-
opment (Washington, 1973), 5-21. On capital markets in Mexico in the early nineteenth
century, see Stephen H. Haber, "Industrial Concentration and the Capital Markets: A Com-
was one such activity. Compared to agriculture, mining's share in national

income was not large, but it proved a concentrated and unrivaled source
of liquid, mobile savings to investors. As a result, and in the long run,
variations in silver production were tied to variations in the supply of loan-
able funds. Thus Guy Thomson's calculations of the volume of loans in
Puebla between i8oo and 1830 show a decline whose severity could only
be explained by an equally sharp fall in the production of silver.28
As loans rise and fall, the volume of "real" economic activity financed
by credit must also grow and contract, and so too will imports and exports.
Thus, in an open economy, the balance of trade must reflect changes in
the business cycle, and in Mexico the business cycle was necessarily tied
to the credit that silver mining supplied. In early national Mexico, trade
cycles, business cycles, and the production of silver had to be related.29
The evidence from Mexico's trade with the United States is consistent
with these hypotheses. In logarithms, real U.S. imports from and exports
to Mexico (see Figure i) conform closely to each other, indicating compa-
rable rates of change. Indeed, on the face of things, U. S. imports of silver,
hides, dyewood, and indigo from Mexico move somewhat in advance of
U. S. exports to Mexico, especially before the late i86os. This pattern may
suggest an "export-led" model of Mexican growth that persisted until the
onset of the depreciation of silver after 1867 and until the beginnings of
industrialization under Porfirio Diaz somewhat later.30
Figure i reflects roughly three similar cycles in imports and exports.
Measured from trough to trough, the first spans 1825/26-1847/48, with a
parative Study of Brazil, Mexico, and the United States, 1830-1930," journal of Economic
History, 51 (forthcoming, 1991).
28. The standard estimate of sectoral shares in Mexican income around i8oo is Fer-
nando Rosenzweig Hernandez, "La economia novohispana al comenzar el siglo XIX," in
El desarrollo econ6mico de Mexico, i8oo-igio (Toluca, 1989), 23-85. On loan volume in
Puebla, see Thomson, Puebla de los Angeles, 50. For mining output, I follow In6s Herrera
Canales, "Empresa minera y region en M6xico. La Companiia de Minas de Real del Monte
y Pachuca (1824-1906)," in Siglo XLX, 4:8 (Jul.-Dec. 1989), 122-123.
29. This statement refers directly to the commercialized sector. But cyclical changes in
money income indirectly determine the opportunity cost of resources remaining at subsis-
tence. In this sense, the statement may refer to both the commercialized and subsistence
sectors.
30. The characterization of Mexico as an "export-led" economy until the latter third of
the nineteenth century merits consideration. According to criteria outlined by Irving Kravis,
"Trade as a Handmaiden of Growth: Similarities Between the Nineteenth and Twentieth
Centuries," Economic Journal, 80:320 (Dec. 1970), 850-872, esp. 853-854, Mexico before
Diaz was, in some respects, not unlike other export economies. For one thing, silver min-
ing had indirect "real" economic effects through the supply of loanable funds as well as
directly through localized linkages. Movements in income followed the production of the
export staple. For another, foreign capital was drawn to mining, a sector whose productivity
exceeded that of agriculture or industry. But the share of all exports (including silver) in
Mexican national income is still unclear.
Log Constant Dollars
100,000,000
10,000,000
Exports
1,000,000 _ r ........................................ Exports~~~~~~~~~~~~~~~~~........

1 000 000
1 0 0 ,0 0 0 I l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l I
1824/25 1834/35 1844/45 1854/55 1864/65 1874/75 1884/85
FIGURE 1: U.S. Imports from and Exports to Mexico, 1825/26-1883/84

(prices of 1840/41-1844/45)
peak in 1835/36. The second covers 1847/48-1867/68, with a peak around

i86o/6i. The last begins in 1867/68, peaks around 1872/73, and closes in
1883/84. The dangers of teleology notwithstanding, the chronology con-
forms to not a few significant points of Mexican history between Iturbide
and Diaz: the Texas rebellion; the War of 1847; the French invasion (and
U. S. Civil War); the Restored Republic; the death of Juarez and the acces-
sion of Lerdo de Tejada; and the completion of rail links with the United
States. Of course, any year might well be invested with significance in
those turbulent times. Yet more than coincidence is at work, for Mexican
trade cycles were thoroughly politicized as well. Over the long run, cycli-
cal changes in the production and export of silver clearly mattered. But in
the shorter run, the impress of political factors is obvious.
Politics, Edward Nell observes, is economics pursued by other
means.31 Since political factors were deeply embedded in the short-run
movements of Mexican trade and commerce, who could disagree? But in
this context "politics" meant two things: tariff policy, and the uncertainty
that coups, blockades, pronunciamientos, wars, and repeated changes of
regime engendered.
The level of tariff protection was clearly a political outcome. The pri-
vate demand for industrial protection, the public demand for revenue, and
the diplomatic aspects of trade and territorial expansion all played a role
in setting the tariff Moreover, the enforcement of tariffs was a free-for-
all. If several tariffs were in force, which was to be honored? Did national,
state, or local tariffs take precedence? Who, if anyone, knew the code or
31. Edward J. Nell, "Value and Capital in Marxian Economics," in The Crisis in Eco-
nomic Theory, ed. Daniel Bell and Irving Kristol (New York, 1981), 196.
could even find a copy of it on demand? It was a nightmare for merchants

and consuls, but chaos has its reasons, and uncertainty could be a potent
ally for unstable regimes.
Economic uncertainty is an amorphous idea, akin, perhaps, to risk of
indeterminate probability. But risk and uncertainty were key elements
in the economic calculus of early national Mexico. Barracks revolts, pro-
nouncing generals, extreme factionalism, blockades, and the risk of war
paralyzed trade and commerce as effectively as did garbled regulations
and unenforceable property rights. Merchandise no longer moved, debts
went uncollected, and silver shipments slowed.
The First Cycle (1825/26-1847/48)
Texas dominated the political economy of the first cycle. Its trauma di-
verted Mexican trade toward Great Britain, whose role as a potential
counterweight to U.S. territorial designs on Mexico ended only with an-
nexation and the Mexican War. The theme appears in modern Mexi-
can scholarship and pervades the writings of men as different as Alamain
and Carlos Maria de Bustamante. The message is clear: the flag follows
trade. Trading with the United States brings their merchants, and their
merchants bring trouble. "They are the true sons of Englishmen," wrote
Bustamante, "whose example in India they remember and emulate. Mer-
chants financed the invading expedition. Once their company had gotten
hold of the land, they turned it over to the crown, which installed a gov-
ernment and set millions of Indians groaning under a slavery enforced
by bayonets."32 To judge the dramatic effect that the Texas rebellion had
on the pattern of trade between Mexico, the United States, and Great
Britain, see Appendix D.
Alamain's point was much the same. "Instead of armies, battles, and in-
vasions, which raise such uproar and generally prove abortive, [the United
States] use means which, considered separately, seem slow, ineffectual,
and sometimes palpably absurd, but which united, and in the course of
time, are certain and irresistible." And what were these means? The list
was a long one, but the first Alamain mentioned was "commercial negotia-
tions." 33
To be sure, Mexico had never trusted U.S. commercial ambitions. In
1829, Secretary of State Martin van Buren termed Mexico's dilatory con-
32. Carlos Maria de Bustamante, Apuntes para la historia del gobierno del general don
Antonio L6pez de Santa Anna (1845; reprint, Mexico City, 1986), 209.
33. "Report of the Secretary of State to the Congress of Mexico," in Message from the
President of the United States . . . Upon the Existing Relations Between the United States
and Mexico, 25th Cong., 2d sess., July 4, 1838, 343.
sideration of a treaty of reciprocity a "mistaken policy . . . unfriendly

to the commercial prospect of the United States." Mexico regarded the
United States "with a degree of indifference and suspicion as extraordinary
as it was to be regretted." Negotiation over the treaty, which had begun
in i826, dragged on until 1832. And even then, "the first attempts of
our adventurous citizens [were] burdened by the imposition of prohibitive
duties . . . [in] Mexican ports."34
The tariff, then, was Mexico's weapon of choice. Before the War of
1847, Mexico repeatedly adjusted its coverage and level, most notably in
1829, 1837, and 1842-43. In theory, the tariffs covered a variety of articles,
but in practice their target was finished cottons, the industry that Mexi-
can industrialists sought most strongly to protect. Things started badly
in 1825, with allegations of discriminatory duties on U.S. cottons, and by
1827 rising duties had driven U.S. exports sharply down.35 Matters wors-
ened in 1829, and U. S. merchants in Veracruz warned that the new duty's
"pernicious influence . .. has annihilated the reviving spirit of commercial
enterprise." The U.S. consul concurred. When pressed, Lucas Alamain,
then secretary of home and foreign relations, promised relief. But his
suggesting that repeal of the duty on coarse cottons would pass the Mexi-
can Senate "without the slightest opposition" was simply bad faith on
Alamain's part.36
Much worse was in store. In the continuing wake of the Texas crisis,
the tariff was again revised. Although some duties were reduced in 1837,
the new schedule prohibited (effective March 1838) ordinary cottons and
woolens, cotton yarn and thread, and ready-to-wear clothing. In late 1842,
duties on goods otherwise permitted rose 30 to 50 percent. The Tariff of
1843 reiterated the prohibitions of 1837 but added raw cotton and coarse
woolens to a list that included at least sixty articles "embracing most of
the necessaries of life and far the greater portion of [U.S.] products and
fabrics."37 As the U. S. consul in Veracruz remarked, "no cotton goods
can be imported less than 25 and 30 threads [per quarter square inch]
34. Van Buren to Charg6 d'Affaires in Mexico, Washington, Oct. i6, 1829, in Message
from the President, 44.
35. See J. R. Poinsett's instructions, Washington, Mar. 26, 1825, and Poinsett to Secre-
tario de Relaciones Exteriores, Mexico, Dec. 28, 1826, both in Carlos Bosch Garcia, Docu-
mentos de la relaci6n de Mexico con los Estados Unidos, 4 vols. (Mexico City, 1983-85), I,
78, 210-211.
36. "The memorial of the subscribers comprising all the American merchants residing
in the city of Vera Cruz," in Message from the President, 218; William Taylor to Secretary
of State, Veracruz, July 5, 1829, RG 59, NARS; and Anthony Butler to Secretary of State,
Mexico, Mar. 9, 1830, in Bosch Garcia, Docurmentos de la relaci6n de M6xico con los Estados
Unidos, II, 192.
37. R. J. Walker to President of the United States, Washington, Mar. 30, 1847, in Mayo,
Commercial and Revenue System of the U. S., 413.
TABLE 5: Share of Finished Cottons in U.S. Domestic Exports to Mexico
Years Sharea Standard deviation
1825/26-1829/30 .338 .125

1830/31-1837/38 .414 .094
1838/39-1846/47 .162 .084
1847/48-1852/53 .235 .133
1853/54-1855/56 eo67 .021
1856/57-1859/60 .108 .071
1868/69-1871/72 .058 .005
1872/73-1879/80 .131 .o8o
a Defined as the sum of plain and colo

are figured in current prices.
Source: Computed from the annual "Statements of [Foreign] Commerce and Navigation of
the United States," 1825/26-1883/84.
which comprises that very kind of good suited and worn by the poor and
middling classes of the community." Here was a recipe for reviving the
moribund obrajes of the colonial regime.38
The prohibitions were murderously effective. Before 1838, finished
cottons were 30 to 40 percent of domestic U.S. exports. Once the Tariffs
of 1837 and 1842 had taken hold, the share of cottons fell to only i6 per-
cent (see Table 5). A small market for cotton twist, yarn, and thread was
annihilated as well. "[Mexico's] commerce would be infinitely important
to us," said the U.S. minister in 1842, "but for this unfortunate Texan war,
which has caused much injury to the United States."39
In late 1845, a bill pending in the Chamber of Deputies would have
admitted cotton and cotton manufactures on better terms. Seven percent
of customs duties would indemnify cotton growers and manufacturers for
their losses to foreign competition.40 The bill failed; the tariff scheduled to
go into effect in February 1846 was as restrictive as its predecessors. But
the war intervened, and Mexican ports were placed under blockade.
The U.S. consul in Veracruz was no doubt correct when he observed
in late 1845 that "Mexico never since she has been a Nation has been in so
38. A copy of the schedule of 1837 is reproduced in Diario del Gobierno de la Repfiblica
Mexicana, Mar. 22, 1837. The 1843 schedule was the Arancel general de aduanas maritimas
yfronterizas (Mexico City, 1843). U.S. consular reports (various officials) discuss the tariffs.
See Mar. 28, 1837, Dec. 17, 1842, Dec. 27, 1842, among others. For the quoted observation,
see F. M. Dimond to Secretary of State, Veracruz, Nov. 1, 1845. All are in RG 59, NARS.
39. Waddy Thompson to Secretary of State, Mexico City, July 30, 1842, in Bosch
Garcia, Documentos de la relaci6n de Mexico con los Estados Unidos, III, 511. The disposi-
tion of foreign trade after 1837 was in part responsible for the political turmoil of the early
1840s. See Cecilia Noriega Elio, El constituyente de 1842 (Mexico City, 1986), 17-31.
40. F. M. Dimond to Secretary of State, Veracruz, Oct. 16, Nov. 1, and Nov. 4, 1845,
RG 59, NARS.
wretched a State." 4' But wretched is not powerless. Although an amalgam
of economic nationalism and opportunism, Mexican policy nevertheless
rested on the law of demand. This was the nation's best weapon.
In the long run, Mexico's strategy did not and probably could not have
prevented the loss of Texas, New Mexico, and California to the United
States. But in the short run it was hardly irrational. High tariffs satisfied
the demand for protection that manufacturers pressed so insistently on
the Mexican Congress and mollified other vital (and volatile) constituen-
cies as well.42 And, indeed, trade with the United States remained small,
much to the chagrin of those who had expected great things of the Mexi-
can market. In the early days of the First Republic, newspapers in the
United States hailed Guadalupe Victoria as another George Washington.43
By 1845, the comparisons drawn were altogether less flattering.
A final observation. In the very short run, large fluctuations in trade
occurred from year to year. Some were simply random, and not all are
easily or equally explicable. Yet contemporaries understood the link be-
tween political stability and sustained growth. As one anonymous essayist
put it: "The mere rumor of a revolution is pernicious. . . . Agriculture falls
off, commerce is all but paralyzed, and silver shipments cease because the
roads are probably not safe. In short, the citizens are in arms, and all is in
disorder. These are the necessary and immediate consequences of the very
rumor, more or less substantiated, of the next revolution."44 Uncertainty
dominated yearly, and daily, affairs.
The Second Cycle (1847/48-1867/68)
Historians of the United States once called their Civil War the "irrepres-
sible conflict." No one familiar with relations between the United States
and Mexico in the 1840s could conclude that the Mexican War was any less
"irrepressible." U.S. ambitions and Mexican nationalism were mutually
exclusive. Indeed, the drive to commercial and territorial expansion char-
acteristic of U.S. foreign policy in the 1840s has been termed "manifest
design" by a historian who argues that this expansion was neither acciden-
41. F. M. Dimond to Secretary of State, Veracruz, Dec. 11, 1845. His characterization
of the United States appears in a dispatch of Nov. 1, 1845. Both are in RG 59, NARS.
42. See Richard J. Salvucci, Linda K. Salvucci, and AshIn Cohen, "Interpeting Com-
mercial Policy in Mexico: Protection and Free Trade, 1750-1840" in The Political Economy
of Spanish America in the Age of Revolution, ed. Kenneth Andrien and Lyman Johnson
(forthcoming, 1992); F. M. Dimond to Secretary of State, Veracruz, July 30, 1845, RG
59, NARS.
43. "[Guadalupe Victoria's] soul is made of the same stuff as Washington's." National
Gazette, Feb. 2, 1825.
44. "Mexico, Sept. 1, 1845," in Diario del Gobierno de la Repfiblica Mexicana, Sept. 1,
1845.
Log Constant Dollars
10,000,000 }
1,000,000
1847/48
100,000
FIGURE 2: Real Domestic U. S. Exports to Mexico, 1825/26-1883/84

(prices of 1840/41-1844/45; log scale, axis shifted). Heavy line is post-
Mexican War period.
tal nor providential.45 In the long run, Mexico's defeat (and the annexation
of Texas) implied a permanent increase in the U. S. market and a sweeping
reorientation of Mexico's trade. I highlight this increase in Figure 2 by
shifting the X-axis (years beginning in 1825/26) upward to intersect the
log of real exports in 1847/48. Exports naturally rose and fell thereafter,
but they rarely returned to antebellum levels. Commercial expansion may
or may not have "caused" the Mexican War, but commercial expansion
was one result. A manifest design had manifest results.
Still, none of this happened overnight. Mexico's defeat by no means
meant that the United States could appropriate a larger share of the Mexi-
can market at will. In the short run, the spike in finished cottons sent to
Mexico in 1847/48 did not and could not last (see Figure 3 and Table 5). It
reflected the administration of a war tariff by U. S. troops in the occupied
ports of Tampico and Veracruz.46
Mexico still had commercial weapons, and the demand for protection
remained strong. Thus, by the early 1850s, the old complaint was again
heard. The United States could expect little from Mexico "whilst the sys-
tem of prohibitions is observed."47 Meanwhile, the United States brought
45. Thomas R. Hietala, Manifest Design. Anxious Aggrandizement in Late Jacksonian

America (Ithaca, 1985), esp. 55-94.
46. David Pletcher, The Diplomacy of Annexation: Texas, Oregon, and the Mexican
War (Columbia, MO, 1973), 499. The text of the tariff and addenda to it appear in Mayo,
Commercial and Revenue System of the U. S., 418-426.
47. Lionel Motes to Secretary of State, Veracruz, July 1, 1850, RG 59, NARS.
Constant Dollars
1 ,600,000
Texas Rebellion
1,200,000 1853* Tuxtepec Revolt
End of
Mexican War
800,000
1837* 1856*
1829* /1880*
400,000
1842* ~ ~ I1872*
0
1825/26 1845/46 11865/66
FIGURE 3: Real U.S. Cotton M

1882/83 (prices of 1840/41-1844/45). An asterisk indicates a major tariff
change.
new territorial pressures to bear during negotiations over the Treaty of

the Mesilla in 1853. James Gadsden, the U.S. minister, wanted Sonora
and Chihuahua as well but did not get them.48 Nor did he get commercial
concessions, whatever his original interest in them may have been.
Indeed, after the Treaty of the Mesilla, the Mexican government once
again restricted U. S. exports, much as it had done after the Texas rebellion
in 1835, and a booming postwar market for U.S. finished cottons all but
collapsed (see Table 5). By late 1854, the consul in Veracruz could write,
"Santa Anna's policy destroys commerce, particularly that of the United
States." In a later dispatch he quotes Gadsden, who minced no words. "I
had contemplated . . . [directing] the Secretary of State's attention to the
entire Santa Anna Commercial Code-so embarrassing, destructing [sic]
and offensive to all trade and intercourse with Mexico-in the hope of
convincing him of the necessity of getting rid of the Brigand [Santa Anna]."
"Nothing," concluded U.S. Consul Pickett, "can be more corrupt, false,
unequal, and generally pernicious than the entire Mexican commercial
system."49
The sources of this vitriol were two: "the" Tariff of 1853 and the Com-
mercial Code of 1854. In practice, four "national" tariffs were in force in
48. Oscar J. Martinez, Troublesome Border (Tucson, 1988), 18-21.

49. J. T. Pickett to Secretary of State, Veracruz, Dec. 8, 1854; Gadsden is quoted in
Pickett's dispatch of Oct. lo, 1855. Both in RG 59, NARS.
1853, plus state and regional levies in Guadalajara and Monterrey. "How
many more there may be in different sections of the country I shall not
attempt to record," wrote the consul in Veracruz. Nor was the Commer-
cial Code much better (or worse). "[O]ne might as well attempt a digest of
the laws of the Meades [sic] and Persians or an abridgment of the Chinese
Encyclopaedia as a codification of all the imperious arbitrary dicta of the
absconded Mexican solon [Santa Anna]."50
To the United States, all was chaos. Which tariff applied or to whom
duties should be paid was not clear. "Merchants are even now continu-
ally imposed on and openly robbed under one or the other of them."
This view was not unique to foreign observers. Mexican historians, too,
shudder at the "fiscal disorder" that the declining Santanista dictatorship
encouraged.51
But why should Mexicans educated in the legacies of Guadalupe
Hidalgo and the Mesilla assume that open trade with the United States
was beneficial? Had it ever been? Its desirability was an axiom only in the
minds of U. S. officials, who since the days of Poinsett had repeatedly com-
plained that Mexico impeded trade. James Gadsden was no worse when
he concluded, "Let us labor to kill [these barriers to trade] outright and
to secure guarantees against their resurrection."52 Mexico's desire for au-
tonomy (or, indeed, its definition of sovereign interests) figures nowhere
in his thoughts.
Santa Anna, on the other hand, had long played cat and mouse with
the United States. He understood its interest in enlarging trade and held it
at bay as he picked U.S. pockets. "[The] Tariff is not a rigid law in the Re-
public.... His Most Serene Highness [Santa Anna] violates it constantly
by selling exclusive privileges," observed the U.S. consul in Veracruz.53
By misdirecting, stalling, and confounding, Santa Anna's "chaos" forced
merchants to disclose how much they were willing to pay to do business.
This may have been dishonest and even inefficient in a broader economic
sense, but it was an effective means of extracting rents from U.S. mer-
chants and of restraining their enthusiasm for Mexico. True enough, Santa
50. J. T. Pickett to Secretary of State, Veracruz, Oct. 10, 1855, RG 59, NARS. In 1870,
Matias Romero judged the tariffs of 1845 and 1853 "the highest that have ever prevailed in
the republic." See the Diario Oficial, Oct. 31, 1870, cited in Foreign Relations of the United
States [FRUS], 1870, 488.
51. J. T. Pickett to Secretary of State, Veracruz, Oct. 10, 1855, RG 59, NARS; Carlos J.
Sierra and Rogelio Martinez Vera, Historia y legislaci6n aduanera de Mexico (Mexico City,
1973), 125.
52. Gadsden is quoted in Pickett's dispatch of Oct. lo, 1855, RG 59, NARS. His words
were reminiscent of U.S. wartime thinking eight years earlier. The secretary of the trea-
sury advised President Polk in 1847 that "[Mexico's commercial prohibitions] should not be
permitted to continue." See R. J. Walker to President of the United States, Washington,
Mar. 30, 1847, in Mayo, Commercial and Revenue System of the U. S., 414.
53. J. T. Pickett to Secretary of State, Veracruz, Oct. 23, 1854, RG 59, NARS.
Anna plundered the state. But his odd ethic was shared by principled
idealists whose instincts for personal, political, and national survival were
equally indistinguishable. Moreover, Santa Anna displayed a studied am-
bivalence toward foreign trade. Waddy Thompson, the U.S. minister to
Mexico from early 1842 through early 1844, portrayed him as leaning
toward autarchy: "[Mexico] had no need of foreign commerce. . .. [It
produced] all the necessaries of life."54
The Ayutla movement of 1855 represented, in this context, a shift of
substantial proportions. The Tariff of 1856, which permitted the volume
of exports to Mexico to grow, was its proximate result. Finished cottons,
always a sensitive indicator of the strength of protection, gained ground,
and in time their share in exports recovered from the sickening collapse
of 1853/54 (see Table 5). Broadcloth, timbers, ready-made clothing, and
raw cotton all disappeared from the index of prohibitions. Nominal duties
on finished cottons fell by an astounding 70 percent and were lower in
1856 than at any time since 1845. By one estimate, the implicit index
of protection on goods from the United States was about 30 percent, an
extraordinarily low figure by historical standards.55
As a harbinger of Liberal (and liberal) capitalism, the Ayutla move-
ment embraced the national ambitions and possibilities of a bourgeoisie
long frustrated by civil unrest. Their notions of growth stressed the expan-
sion of demand rather than the control of supply, a modernizing attitude
altogether different from the vague neomercantilism of the later Bourbons
and their successors. Witness the words of Guillermo Prieto, who assumed
the treasury portfolio in 1855: "The faith I have in free trade is the faith I
have in all sublime manifestations of liberty."56
Different, too, was their notion of the political economy of trade. The
upswing in exports from the United States that would characterize the
third cycle (1867/68-1883/84) marks the end of repeated cycles of annexa-
tion and commercial resistance. Better to yield markets than territory, dol-
54. Waddy Thompson to Secretary of State, Mexico City, Oct. 3, 1843, in Bosch Garcia,
Documentos de la relaci6n de Mexico con los Estados Unidos, III, 614.
55. Report on the Commercial Relations of the United States with All Foreign Nations,
2 vols. (Washington, 1857), II, 353-362, for changes in the Mexican tariff. The computa-
tions are mine. Average duties on U.S. imports (i.e., the implicit tariff index) are quoted in
Charles Rieken to Secretary of State, Veracruz, Dec. 31, 1857, RG 59, NARS. For compara-
tive data on the implicit index of protection, which measures the ratio of duties collected to
the total value of dutiable goods imported, see Salvucci, Salvucci, and Cohen, "Interpreting
Commercial Policy in Mexico," Figure 1.
56. For "demand versus supply" as a core of the capitalist ethos, see the discussion
in David Eltis, Economic Growth and the Ending of the Transatlantic Slave Trade (New
York, 1987), 19-23. Prieto is quoted in Sierra and Martinez Vera, Historia y legislaci6n
aduanera, 128.
lars than dominion. Matias Romero put it succinctly: "The best means of
impeding annexation is to open the country to the United States . .. with
the objective of making annexation unnecessary and even undesirable."
Figures 1 through 3 offer proof that Romero's observation was historically
accurate, even if the United States had no further interest in annexation
after the Treaty of the Mesilla.57
The "Decade of Civil Wars" (1857-67) was an anomalous one. Contra-
band distorted normal patterns of trade between Mexico and the United
States, and the analysis of corrected statistics is merely somewhat less
misleading. Clearly, these years form a bridge (or gap) between the sec-
ond and third cycles. I shall resume sustained analysis with the Restored
Republic (1867-76).
There is, however, a final point. Repeated civil disturbances were dis-
ruptive and costly. Foreign conflict may bring prosperity, but enduring
domestic crises do not. During the final days of Santa Anna, the U. S. con-
sul in Veracruz noted that "the Pronunciados (Revolutionists) [have] cut
off all communication with [Mexico City and] . . . the telegraph has long
since been destroyed.... The Rebels are determined to seize the public
moneys." So, too, in 1858 with the outbreak of the War of the Reform:
"commerce and business [were] completely prostrate, and silver could not
be shipped out through Veracruz."58
The costs of remaining on a nearly permanent war footing were severe.
Peasants pressed into armed service could not plant or harvest, a major
source of disruption to an agrarian economy. Moving armies around the
countryside required huge numbers of horses, mules, and oxen to drag
artillery and to carry supplies.59 Obtaining them from farms, silver mines,
and transportation was very costly, and the sample of U.S. import trans-
actions through Laredo, Texas, in Table 6 documents this only too well.
Military demands for draft animals during the War of the Reform (i858-
6o) exhausted the supply of live animals and drove their ordinarily large
share of the border trade to zero. This was one of the ways in which persis-
57. Romero is quoted in Thomas David Schoonover, Dollars over Dominion. The Tri-
umph of Liberalism in Mexico-United States Relations, 1861-1867 (Baton Rouge, 1978), 19,
and, in general, 251-276. Donathon C. Olliff, Reforma Mexico and the United States: A
Search for Alternatives to Annexation, 1854-1861 (University, AL, 1981) also underscores
the counterpoint of trade and annexation. Mexican historians concur. See Sergio Ortega
Noriega, "Intercambios econ6micos entre el Noroeste Mexicano y los Estados Unidos a
fines del siglo XIX. El caso de Topolobampo," in Hist6ricas [Instituto de Investigaciones
Hist6ricas, UNAM], 1 (1979), 13-23, esp. 15.
58. J. T. Pickett to Secretary of State, Veracruz, Aug. 7, i855, and Feb. 25, i858, RG
59, NARS.
59. John S. D. Eisenhower, So Far From God. The U.S. War with Mexico, 1846-1848
(New York, 1989), xxii and iii n., for enlightening examples.
TABLE 6: Sample Percentage of Live Animalsa in U.S. Imports Through
Laredo, Texas, 1853-1860
Year Percent Nb
1853 31 20
1854 32 30
1855 50 24
i856 13 25
1857 50 23
i858 0 14
1859 0 14
i86o o i8
aHorses, m
b N = sample size. The sample is a i6 percent random-start, fixed-interval sample (i.e., every
sixth import transaction is tallied).
Source: Laredo, Texas impost books, in the records of the Bureau of Customs, NARS. See
Major Sources in Customs Bureau Records for Statistical Data on Exports and Imports of
the United States to 1goo (Washington, 1973).
tent instability reduced productivity in nineteenth-century Mexico, and

its effects are especially clear from examining patterns of trade with the
United States.
The Third Cycle (1867/68-1883/84)
During the third cycle, Mexico's international position changed signifi-

cantly. By 1883/84, Mexico had become an important Latin American
market for U.S. exports. Real imports (merchandise plus silver) from
Mexico grew as well. In 1867/68, they stood at 6.1 million dollars (prices
of 1840/41-1844/45). By 1876/77, imports had more than doubled. In-
deed, one account suggests that the United States had surpassed Great
Britain as Mexico's principal trade partner by the late 1870s.60
The composition of trade changed as well. Mexico began to import
capital goods from the United States, and the share of steam engines, sew-
ing machines, machinery, and builders' hardware grew. Moreover, the
6o. See Abdiel Ofiate, "El surgimiento de la supremacia estadounidense en los merca-
dos latinoamericanos: el caso de Mexico, 1870-1914," in El dilemma de dos naciones. Rela-
ciones econ6micas entre Mexico y Estados Unidos, ed. T. Noel Osborn B. et al. (Mexico
City, 1981), 391-404. Jorge Espinosa de los Reyes, Relaciones econ6micas entre Mexico y
los Estados Unidos, 1870-1910 (Mexico City, 1951), 54, puts the date around 1884. This in-
crease did not represent a simple diversion of British trade. Preliminary calculations indicate
that British real exports to Mexico per capita (prices of 1840-44) increased by over 8o per-
cent between 1869-71 and 1879-81. U.S. real domestic exports per capita (prices of 1840/
41-1844/45) more than doubled over the same period. Total Mexican demand was obviously
growing.
share of specie and bullion in imports from Mexico fell to just over 50 per-
cent, while the volume of jute, sisal, and hemp quadrupled between 1871
and i88o. In other words, investment grew, while exports swelled and
diversified.61 Arnaldo Cordova argues that modern capitalist development
first appeared during the Restored Republic. Evidence from the trade
cycle is consistent with Cordova's argument. It also suggests that Mexico
capitalized on the favorable international economic conditions after i856
as soon as it had attained a reasonable level of governmental stability.62
Yet the beginnings of this expansion were obscure. The Liberals
entered Mexico City in the summer of 1867, but for another two years
merchants complained that business languished.63 Or was the slump lim-
ited to Veracruz? The Free Zone (Zona Libre) along the northern border
was a smuggler's delight, and Matamoros felt no discomfort.64 Large ship-
ments of silver to China via San Francisco linked the mines of Zacatecas
with the port of Mazatlan.65 The old axis of colonial trade and commerce-
Mexico City to Veracruz-was neither dying nor dead but saw intimations
of mortality. One port's prostration was another's prosperity.
Nevertheless, by 1871 some perceived a slow rise in agricultural pro-
duction, foreign investment, and exports brought by the prospects of
peace. In 1872, a new tariff reduced the list of prohibitions and consoli-
dated a number of miscellaneous duties. The proximate result of the re-
vision heartened U.S. cotton manufacturers. Between 1872/73 and 1879/
8o, when the tariff was again revised, the share of finished cottons in U. S.
exports rose to more than 13 percent, the highest it had been in twenty-
five years (see Table 5), an increase that must have seemed encouraging.
But like all good campaigners, U.S. officials wanted complete victory
6i. U.S. Department of the Treasury, Bureau of Statistics, American Commerce, Co0m-
merce of South America, Central America, Mexico, and West Indies with Share of the United
States and Other Leading Nations Therein, 1821-1898 (Washington, 1899), 3370-3376.
62. Arnaldo C6rdova, La ideologia de la revoluci6n mexicana. La formaci6n del nuevo
regimen, 13th ed. (Mexico City, 1985), 15; and Charles Hale, The Transformation of Liber-
alism in Nineteenth-Century Mexico (Princeton, 1989), 16-ig. For patterns of international
growth, see Solomos Solomou, "Non-Balanced Growth and Kondratieff Waves in the World
Economy, 1850-1913," Journal of Economic History, 46:1 (Mar. 1986), 165-169.
63. E. H. Saulnier to Secretary of State, Veracruz, May 2, i868, and May 24, 1869, RG
59, NARS.
64. Oscar Martinez, Border Boom Town: CiudadJuarez Since 1848 (Austin, 1978), 14-
17. On contraband, see Matias Romero quoted in FRUS, 1870, 491-492. The Matamoros
trade is documented in the annual reports of the consular district of Mexico City, written by
Julius Skelton and dated Sept. 30, 1871 (1869/70), Sept. 30, 1872 (1870/71), and Dec. 5, i874
(1871/72), RG 59, NARS. Also see Mario Cerutti, Burguesta y capitalismo en Monterrey,
1850-1910 (Mexico City, 1983), 36-39.
65. Robert C. West and James J. Parsons, "The Topia Road: A Trans-Sierran Trail of
Colonial Mexico," in Hispanic Lands and Peoples. Selected Writings ofJamesJ. Parsons, ed.
William M. Denevan (Boulder, 1989), 143-149; Daniel Cosio Villegas, Historia moderna de
M6xico. La repfiblica restaurada. La vida econ6rnica (Mexico City, 1955), 176.
TABLE 7: Mexican Silver and the Terms of Trade

(1840/41-1844/45 = 100)
Years Production (Kg) A% Mexico TOT A%
1866-70 2,604,500 57.6

1871-75 2,747,591 5.5 74.6 29.5
1876-80 3,083,518 12.2 73.6 -1.3
Source: Production of silver in kilograms from In6s Herrera Canales, "Empresa minera
y region en M6xico. La Compafiia de Minas de Real del Monte y Pachuca (1824-1906),"
Siglo XIX, 4:8 (1989), 122-123. An estimate of the Mexican terms of trade (TOT) is com-
puted from Table 2. The yearly silver price index is divided by the U. S. export price index,
and five-year averages are computed. The delta percent (A%) is the percent change between
five-year periods.
(or unconditional surrender). For a variety of reasons, they did not get it,
at least before 1884. One explanation was the changing terms of trade.
From 1866/70 to 1871/75, the terms of trade with the United States
improved by nearly 30 percent as the inflation of the U. S. Civil War sub-
sided (see Table 7). Real silver output grew slowly, but its purchasing
power surged. By contrast, from 1871/75 to 1876/8o silver production
grew more rapidly, but the terms of trade actually fell. The growth in
Mexico's capacity to import diminished, and the market tightened, as the
inflection in the U.S. real export curve in Figure i shows. U.S. consular
officials blamed shoddy merchandise, inappropriate products, and incor-
rect packing-all the usual suspects. Nor could the United States finance
its exports as the Europeans did, for the United States was still a net im-
porter of capital. But the depreciation of the peso undermined the case
for free trade.66
Nor did it end there. By i88o, a new tariff and a new regime committed
to industrialization were in place. And in view of the rapidly falling freight
rates that the railroads brought, the demand for protection necessarily
rose, if only to compensate for the fall in the "tariff" of transportation costs.
So the Tariff of i88o became the first in a series of upward revisions that
reputedly made Mexico's nominal rates, particularly on finished cottons,
the highest in the world. Since raw cotton was now admitted duty-free,
the effective rate of protection, the margin between the cost of imported
cotton and the sale price of the finished cloth, must have been substan-
66. For a litany of complaints, see the annual reports of the consular district of Veracruz
written by L. T. Trowbridge and dated Sept. 30, 1872 (1871/72), Sept. 30, 1873 (1872/73),
Sept. 30, 1875 (1874/75), Oct. 1, 1877 (1876/77), Sept. 30, 1879 (1878/79), Oct. 31, i88o
(1879/80), in RG 59, NARS.
tial.67 The industrialists and financiers who had assumed control of the
Mexican state knew precisely what they were doing.
These developments-the depreciation of the peso, Mexican industri-
alization, and renewed demands for protection-signalled a retreat from
the Liberal position of the late 1850s and called for new thinking in the
United States. It was not long in coming and found expression in the com-
mercial treaty of 1883. As Abram S. Hewitt, a congressman from New
York, put it, the treaty, which was ratified but never fully implemented,
"proceeds from a totally different idea [and] . . . regards Mexico and
the United States as integral parts of one commercial system. It is an at-
tempt to establish between the two countries the same condition of affairs
that exists between the several States of the Union."68 Indeed, the treaty,
which created lists of duty-free goods, was part of a larger congressional
movement to establish what a supporter called an "American Zollverein"
or customs union embracing all the Americas. But with Mexico the advan-
tages of propinquity were greater, and as Hewitt said, "So long as we get
an entering-wedge we ought to be satisfied." What Poinsett had so long
ago essayed, Hewitt and his allies now in part accomplished.69
The "entering wedge" came in 1884 with the completion of the rail link
between Mexico and the United States. The railroad brought the third
cycle to a close and permanently altered economic relations between the
two nations. Like Santa Anna, whose death in 1876 coincided with Diaz's
accession to power, Porfirio Diaz would play various foreigners against
each other. And like Santa Anna, he would have his victories. But unlike
Santa Anna, Diaz no longer had a northern "desert" to mediate between
weakness and strength. In fact, during Grover Cleveland's second term
alone (1893-97), the United States sent as much to Mexico as it had during
the combined presidencies of Andrew Jackson through Abraham Lincoln.
The world had indeed changed.
67. Stephen H. Haber, Industry and Underdevelopment: The Industrialization of

Mexico, 1890-1940 (Stanford, 1989), 38. For "effective" protection, see Feb. 27, 1885, Con-
gressional Record [Cong. Rec. ], 48th Cong., 2d sess., Appendix, 173. The concept of effec-
tive protection is discussed at length in Malcolm Gillis et al., Economics of Development,
2d ed. (New York, 1987), 436-439.
68. Feb. 27, i885, Cong. Rec., 48th Cong., 2d sess., Appendix, 172. On the treaty,
see Josefina Zoraida Vdzquez and Lorenzo Meyer, The United States and Mexico (Chicago,
1985), 89-go, and Espinosa de los Reyes, Relaciones econ6micas, 76-105.
69. June 30, i886, Cong. Rec., 49th Cong., ist sess., Appendix, 380-393; and April i8,
i888, Cong. Rec., 5oth Cong., ist sess., Appendix, 303-318. For the roots of this movement,
see William Appleman Williams, The Tragedy of American Diplomacy, 2d ed. (New York,
1972), 24-27.
Reflections on the Balance of Payments
The U.S. balance of payments with Mexico, represented by columns G

through I in Table 2, is well worth considering.70 The United States con-
sistently ran a visible deficit (column G) that its estimated earnings from
shipping services (column H) did not offset. Since the merchandise bal-
ance consistently favored the United States, its visible trade deficit was
the result of large deficits on the specie balance. By and large, Mexico
sent more silver to the United States than required to pay for the goods
and services it imported.
Was this unusual, and why did it occur?
A developing country typically runs a deficit on its current account
and a surplus on its long-term capital account. Such a country typically
consumes more than it produces, especially during economic expansions.
To do so, it borrows abroad to finance additional imports. Nevertheless,
what is true of the balance of payments in general is not necessarily true
of specific cases. Surpluses from one partner may finance deficits with
another, for a country's trade need not be balanced with each of its part-
ners, just balanced overall. Perhaps Mexico achieved its balances partly
through trade with the United States. But the evidence is still incomplete.
Reexports yield a more promising clue. If we add them to domestic
exports, the cumulative current account balance of the United States with
Mexico before the U. S. Civil War (thirty-five years) was approximately 3.8
million dollars or nearly balanced on an annual basis (these calculations
are omitted from Table 2). In other words, Mexico did some of its business
with Britain, France, and the Hanseatic cities of Hamburg and Bremen
through New York. Within reasonable limits for shipping and brokerage,
the figures come out about right. Of course, this interpretation is consis-
tent with the commercial rather than industrial character of antebellum
U.S. capitalism.
After the U. S. Civil War, Mexican current account surpluses increased,
even when reexports are considered. No one factor accounts for them, but
several plausible explanations exist.
The first is the export of silver coin to California for reexport to China.
Between 1866/67 and 1871/72, the United States reexported io.6 million
dollars of silver specie to China. Over the same period, unexplained ex-
ports of Mexican silver to the United States (that is, silver beyond that
needed to pay for U. S. exports, reexports, and shipping services) totalled
about 14 million. In a crude sense, U.S. reexports of silver to China "ex-
plain" about 75 percent of Mexico's current account surplus, although they
70. I omit the years of the U.S. Civil War in Table 2 because of problems associated
with measuring and accounting for contraband.
abruptly ceased in 1871/72 (there were sizable reexports to Hong Kong in

i873/74) 71
The timing of the surge is no coincidence. In the spring of 1856, the
Chinese authorities in the treaty port of Shanghai made the Mexican "dol-
lar" legal tender, and the ports of Canton and Foochow soon followed.
By early i858, the demand for Mexican coin in Shanghai was substantial.
Once the civil wars in Mexico and the United States were over, there was
no obstacle to the remission of Mexican silver to China through Califor-
nia.72
Contraband is another part of the puzzle. By 1878, one U.S. observer
wrote that "smuggling [into Mexico] had so largely increased that hon-
est commerce was ruined."73 Smuggled goods exported by water posed
no problem. The items were recorded as conventional exports from the
United States's standpoint. Overland exports to Mexico or Canada, legal
or no, were another matter. They went unrecorded until 1893. If signifi-
cant overland smuggling existed, the exports would go unrecorded on the
U. S. side of the ledger.
Yet the specie that paid for smuggled goods necessarily figured as a
U. S. import. If overland smuggling were substantial, Mexico would send
far more silver than required to pay for recorded exports from the United
States. And that is precisely what happened. Overland smuggling from
Texas into the northern Free Zone was rampant in the middle and later
1870s. Indeed, it was in the 1870s that smuggling first grew large enough
to create noticeable discrepancies in the balance of payments. It thus be-
came a major irritant to bilateral relations, and the existence of the Free
Zone itself hung in the balance until 1878.74 Mexico's surpluses of the
time-and they were substantial-thus record the unrecorded, if not the
unrecordable.
Finally, Porfirio Diaz's seizure of power was a very near thing, and
hardly uncontested. The country was in turmoil, and a sudden fall in
the price of silver in late 1878 compounded the atmosphere of "great
national calamity." With reserves apparently short, Treasury Minister
Matias Romero was forced to cast about for new sources of revenue, and
71. This paragraph draws on the annual "Statements of [Foreign] Commerce and Navi-
gation of the United States" for 1865/66-1875/76 for data. The computations are mine.
72. United Kingdom, Parliament, Silver, &c (China) (i858), esp. 50-52, 55, 58, 61-62,
71-72.
73. See John W. Foster to Secretary of State, Mexico, Sept. 7, 1878, in FRUS, 1878,
588-589.
74. See John W. Foster to Secretario de Relaciones Exteriores, Mexico, Sept. 26, 1878,
in FRUS, 1878, 657. The Free Zone existed between i858 and 1905. It was controversial in
both Mexico and the United States. A useful account of it appears in Espinosa de los Reyes,
Relaciones econ6micas, 105-113.
the U. S. legation reported that he "alarmed all the property and business
interests of the country lest [these measures] fall too heavily upon their
branches." Perhaps the nation's alarmed financial interests took steps to
secure their assets abroad. If so, part of the unexplained surge of Mexican
silver exports in the late 1870s was capital flight-some silver recorded on
current account belongs to the capital account instead.75
Conclusions and Implications
Paul Gootenberg and Frank Safford have observed that neither Peru nor
Colombia adopted an unrestricted free trade regime much before the
185os.76 To that list we may now add Mexico, at least by evidence of its
trade with the United States. Indeed, it was not until midcentury that
Mexico adopted an even vaguely liberal commercial policy. But viewed
from the perspective of Porfirian Mexico, that opening too was an inter-
lude. With periodic exceptions, Mexico has historically been a high-tariff
country.77
I have elsewhere suggested a number of factors that made protection
an attractive stance in the years before 1840. My purpose here has been to
suggest political sources of greater subtlety, generality, and chronological
scope. From the Mexican perspective, relations with the United States in
the years before 1853 frequently turned on the balance between annexa-
tionist pressures and commercial exclusion. In the early national period,
the Mexican response to annexationist pressures and losses entailed a con-
sidered and defensive effort to restrict trade with the United States. The
rise of liberalism in its pure (Juarez) or even manque (Diaz) forms thus co-
incided with a commercial settlement of sorts with the United States. And
while Santa Anna is no star in the official firmament of Mexican Liberal-
ism, the inchoate form of later tactics to which Sebastian Lerdo de Tejada
or Diaz would subscribe is plainly evident in his actions. Diaz, we are
told, largely reaped what Juarez sowed. But both learned something from
"Su Alteza Serenisima" as well. Even in the "chaotic" years of the early
75. For the quote, see John W. Foster to Secretary of State, Mexico, Sept. 7, 1878, in
FRUS, 1878, 588-589. See Mohsin S. Kahn and Nadeem Ul Haque, "Capital Flight from
Developing Countries," Finance & Development, 24:1 (Mar. 1987), 2-5, for ways of esti-
mating capital flight from balance of payments data. For a useful survey of the literature,
see Sunil Gulati, "Capital Flight: Causes, Consequences, Cures," Journal of International
Affairs, 42:1 (Fall 1988), i65-i85.
76. See their essays in Joseph L. Love and Nils Jacobsen, eds., Guiding the Invisible
Hand. Economic Liberalism and the State in Latin American History (New York, 1989),
35-98. Also see Gootenberg's Tejidos y harinas, corazones y mentes. El imperialismo norte-
americano del libre comercio en el Peril, 1825-1840 (Lima, 1989) for a comparative study.
77. I am indebted to Steve Haber for this observation.
and middle nineteenth century, there were continuities of political style

and culture that provide an intelligible intellectual framework.
But Mexican commercial policy ultimately affected economic vari-
ables, and it must be judged mainly in those terms. In this context, its
efficacy was unquestionable. Despite all that has been said about Mexi-
can smuggling, evasion, and corruption-a litany chanted in the United
States with only brief respite since the i840s-none of these repealed the
law of demand.78 When Mexican tariffs drove up the relative price of U. S.
finished cottons, their consumption within Mexico fell. When prohibitions
were laid on U. S. goods, their quantities exported dropped. The evidence
is too persuasive to argue otherwise. Even under the most disorganized
circumstances, policies that relied on supply and demand for their imple-
mentation worked. The spectrum of interpretive possibilities thus offers
two alternatives. Either the law of demand is surprisingly robust, or the
disorder that reigned in Mexico from the 1830s through the 1870s was
institutional rather than administrative. As in most matters, the truth lies
between these extremes.
Finally, we must realize that early Mexican regimes were not free to
choose. Policies that were politically expedient could also be economically
disastrous. No sensible economist could find much to recommend in the
whirligig of early national tariff policy. But even a mildly nationalistic (or
realistic) one might understand why there was little choice. Tariffs and
prohibitions were consistently used to enhance the economic and politi-
cal stability of the Mexican state, even though these same measures im-
plied a corresponding reduction in national income. Indeed, before 1867,
Mexico's choice may have been between existing poorly and not existing
at all. If a condition for long-term growth is the evolution of unfettered,
politically autonomous trade, Mexico was, by force of circumstances, un-
able to meet it.79 Mexico's loss of territory was a burden of U.S. imperi-
alism, but its defensive commercial policy necessarily reduced efficiency
and retarded growth as well. Over the course of a century, even small
annual losses compound to large disparities in international income levels.
Sometimes, little things mean a lot.
78. For the litany, see Robert Johannsen, To the Halls of the Montezumas: The Mexican
War in the American Imagination (New York, 1985), 293-296.
79. For example, Nathan Rosenberg and L. E. Birdzell, Jr., How the West Grew Rich.
The Economic Transformation of the Industrial World (New York, 1986), 71-112, esp. go.
In a similar vein, see also E. L. Jones, The European Miracle. Environments, Economies,
and Geopolitics in the History of Europe and Asia, 2d ed. (Cambridge, 1987), 85-103.
Appendix A: Correcting Series U321 and U339 for
Errors and Omissions
Until 1893, goods carried overland for export were not included in U.S.
export totals. This omission affected all overland trade to Mexico. For
example, the value of the Santa Fe trade between Missouri and the Pro-
vincias Internas is not included in Series U321. According to data supplied
by Josiah Gregg in Commerce of the Prairies (1849), the Santa Fe trade
averaged nearly $134,000 per year from i822 through 1844, but yearly
swings of up to $ioo,ooo were not unknown.' In general, U.S. merchants
exchanged dry goods for silver specie and bullion-as much as $i8o,ooo
in 1824. This was no small sum. It amounted to more than 7 percent of
Mexico's net exports of silver to the United States in 1824/25.2
Nevertheless, the significance of the trade to the United States is not
completely clear. In the 182os, petitioners from Missouri claimed that the
profits of the trade were "an amount considerable in the commerce of an
infant state." Moreover, "the principal article carried to the Internal Prov-
inces is cotton goods, the growth and manufacture of the United States."3
Yet U. S. cottons were no more than about a third of domestic exports to
Mexico in 1825/26, and domestic exports were then only i6 percent of all
exports to Mexico. U.S. cottons could not have been more than 5 percent
of all U.S. exports (that is, domestic exports plus reexports) to Mexico in
the mid-i82os. Unless the Santa Fe trade was unusual, U.S. cottons had
little place in it.
Moreover, the marked controversy over granting a "drawback" or re-
bate on tariffs levied on foreign goods for reexport to Santa Fe suggests
that cottons and calicoes from England and France, linens from Germany,
and handkerchiefs and stockings from India were staples of the trade.
Consequently, we assume that Josiah Gregg's estimates of the size of the
trade should be added to reexports rather than to domestic exports.
The years from 1862 through 1865 also present problems, for both
Mexico and the United States were embroiled in civil wars. Conventional
political boundaries were blurred, contraband flourished, and there was
an unprecedented increase in the value of trade. Why?
From 1851 through i86o, United States imports from Mexico aver-
aged roughly 1 million dollars a year in current prices. By i865, the figure
1. John MacGregor, Commercial Statistics: A Digest . . ., 5 vols., 2d ed. (London,

1850), III, 734.
2. Answers of Augustus Storrs of Missouri to Certain Queries Upon . . . Trade and
Intercourse Between Missouri and the Internal Provinces of Mexico, 18th Cong., 2d sess.,
Jan. 3, 1825, p. 6. My calculation.
3. Petition of Sundry Inhabitants of the State of Missouri Upon ... the Internal Prov-
inces of Mexico, 18th Cong., 2d sess., Feb. 14, 1825, pp. 4-5. My calculations follow.
had swollen to $6 million. Raw cotton alone accounted for $5 million. But
Mexico had not suddenly become a major cotton producer. It had become
an entrepot (at Matamoros, Tamps., across the Rio Grande from Browns-
ville, Texas) for raw cotton that could not be shipped from Confederate
ports because of the Union blockade. The cotton was then lightered down-
river and transferred to ocean-going vessels for shipment to the United
Kingdom and to the Union states. To correct the U.S. import figures, we
simply deduct the value of cotton imported from Mexico from the import
totals and supply the correction in brackets to the right of the "official"
figure in Table 2.4
U.S. exports to Mexico, Series U339, also increased during the Civil
War. Union merchants used Matamoros as an entrepot through which to
smuggle supplies to the Confederate states, often under the guise of sup-
plying Judrez and the Liberals in their struggle with the French. As a
result, United States (i.e., Union) exports to Mexico between i862 and
1865 are too large. Annual domestic exports to Mexico in the 1850s aver-
aged $2.3 million. By 1865 they had reached nearly $14 million. For the
years 1863 to 1865, I adjusted exports of wheat and wheat flour, cotton
manufactures, manufactures of iron and steel, and exports of boots and
shoes to Mexico to account for this smuggling. The corrections appear in
Table 2 in brackets to the right of the official figures and are based on the
same sources used to correct U.S. imports from Mexico.
4. James W. Daddysman, The Matamoros Trade: Confederate Commerce, Diplomacy,

and Intrigue (Newark, DE, 1984); Ronnie C. Tyler, "Cotton on the Border, 1861-65," South-
western Historical Quarterly, 73:4 (Apr. 1970), 455-477; Robert W. Delaney, "Matamoros,
Port for Texas during the Civil War," Southwestern Historical Quarterly, 58:4 (Apr. 1955),
473-487; and Cerutti, Burguesia y capitalismo en Monterrey, 32-34. Statistics from Ameri-
can Commerce: Commerce of South America, Central America, Mexico, and West Indies,
3,284, and from Commerce of the United States and Other Foreign Countries with Mexico,
Central America, the West Indies, and South America, data for Mexico.
Not everyone would accept this analysis. Thomas Schoonover's "Mexican Cotton and
the American Civil War," The Americas, 30:4 (Apr. 1974), 429-447, argues (1) that Mexico
grew its own cotton for export during the U. S. Civil War and (2) that the needs of the French
army under Maximilian accounted for greatly increased imports from the United States. The
second proposition could be true, but Schoonover makes no attempt to document it. And it
is odd that a French army would use materiel from the United States to carve out a captive
market for French goods in Mexico. The first proposition is also possible, but, curiously
enough, Schoonover finds no evidence of the production, collection, preparation, and trans-
portation of nearly 16 million pounds of raw cotton for export to the United States in 1864.
Of course, the British also imported raw cotton from Mexican planters, and there were the
requirements of the domestic Mexican market as well. I suspect that most "Mexican" plant-
ers were in Louisiana and Texas. For a corroborative view, see Stanley Lebergott, "Through
the Blockade: The Profitability and Extent of Cotton Smuggling, 1861-65," Journal of Eco-
nomic History, 41:4 (Dec. 1981), 867-888. Lebergott finds no evidence that Mexico supplied
the Union states with cotton. Also see Mario Cerutti and Miguel Gonzalez Quiroga, "Guerra
y comercio en torno al rio Bravo (1855-1867). Linea fronteriza, espacio econ6mico comun,"
Historia Mexicana 40:2 (Oct.-Dec. 1990), 242-245.
To verify my adjustments, I estimated a time trend for imports and
exports between 1850 and 1870 but omitted i862 through 1865 as anoma-
lous. I then used the fitted line to predict what imports and exports should
have been had the U.S. Civil War not intervened. The "counterfactual"
values were not substantially different from the intuitive corrections I
provide.
Appendix B: Constructing a Domestic Export

Price Index
Readers interested in the nuts and bolts of constructing a base-weighted

(Laspeyres) price index should consult Paul Gootenberg, "Carneros y
Chufio: Price Levels in Nineteenth-Century Peru," HAHR, 70:1 (Feb.
1990), 1-56, for a model.
This index is simpler than Gootenberg's. Four or five goods always
dominated domestic exports to Mexico, even though their relative posi-
tions changed from year to year. In 1842/43, for instance, finished cottons,
raw cotton, and flour accounted for 35 percent of the value of domestic
exports. Finished cottons and raw cotton accounted for most exports, and
their shares were roughly equal. In 1845/46 they accounted for 55 percent
of exports, but raw cotton outweighed finished cottons. In 1852/53 they
comprised nearly 8o percent of exports, but finished cottons were most
important. How do we handle this?
All price indexes are idealizations, and this one is too. To construct it,
I researched the annual "Statements of [Foreign] Commerce and Naviga-
tion of the United States" for 1825/26-1858/59; from 1859/60 through
1883/84, I used Commerce of the United States and Other Foreign Coun-
tries with Mexico, Central America, the West Indies, and South America.
For each year, I determined the five leading exports by value. The weight
assigned each was its annual export value divided by the annual value of
all domestic exports. After figuring these values for each year, I examined
the results to see if any patterns or groupings emerged.
A number of consistencies were evident. For example, in 1825/26-
1840/41, finished cottons and wheat flour generally appeared in the top
five export goods, although their annual weights varied. To avoid the re-
petitive calculation of an index whose changing weights required annual
"links," I averaged the annual weights and used the resulting averages as
the weights for finished cottons and wheat flour during the subperiod.
For prices, I used the Historical Statistics of the United States (Wash-
ington, 1975), Series E 123-134, "Wholesale Prices of Selected Commodi-
ties: 1800-1970." For each year, I multiplied a good's average weight by
its price. To keep other prices constant, I also multiplied everything else
TABLE B-i: Assigned Weights of Leading Exports
Finished Wheat Raw Steel Everything

Subperiod cottons flour cotton rails else
1825/26-1840/41 (.34) (.09) (.57)

1840/41-1844/45 (.13) (.09) (.29) (49)
1844/45-1859/6? (.23) (.07) (.34) (.36)
1859/60-1868/69 (.14) (.lo) (.17) (59)
1868/69-1883/84 (.13) (.14) (.22) (.51)
(i minus the sum of the weights of the goods included) by i. This gives a
conservative measure of price change and avoids an implicit exaggeration
of the weights that occurs when no other goods are included. The result-
ing sums (the sum of the weight of each good times its price, plus the
"everything else" term) were then divided by the average sum for 1840/
41-1844/45. This base period roughly corresponds to the 1839-45 (peak-
to-peak) business cycle in the United States and was as normal a time in
Mexico's foreign economic relations as any other. No other period seemed
more suitable, or less unsuitable.
Because the composition of trade changed over sixty years, I some-
times adjusted weights, dropped goods that were no longer important,
or added new goods. To maintain historical and interpretive continuity, I
linked or chained the subperiods by overlapping them and recalculating
forward.
The periods and weights used are shown in Table B-i. The weights
are rounded to two decimal places and differ a little from the weights I
actually used because of rounding.
Some adjustments reflected changes in Mexican policy, e.g., large
licensed imports of raw cotton beginning around 1840. Others were
needed because of the inflation caused by the Crimean War (1854-56) or
the U.S. Civil War (i86o-65). Railroad building in Mexico provided the
rationale for the construction of the last subperiod.
An important point is that the index of U. S. export prices to Mexico is
not the same thing as the index of Mexican import prices from the United
States. Distribution and supply in Mexico were always subject to severe
interruption, and the operation of international markets was bound to be
affected. As a result, the Mexican terms of trade with the United States
are not really the reciprocal of the U.S. terms of trade with Mexico. We
need four prices, rather than two.
But we do not have Mexican prices, at least not yet. We are forced to
use the U.S. export price index as the Mexican import price index. For
now, this is an unavoidable simplification.
Appendix C: Estimating the U.S. Current Account
Balance with Mexico
The current account balance is the difference between exports and im-
ports of goods and services. The visible trade balance is the difference be-
tween exports and imports of merchandise, or net income from merchan-
dise trade. The current account and trade balances differ by the extent
of trade in services or "invisibles." These items include business services
(brokerage, shipping, insurance), tourism and emigrant funds, and inter-
est and dividends on foreign investments. The current account measures
net income from trade, services, and investment.
Looking at net balances from the U.S. side of the ledger, for our pur-
poses only business services in trade matter. Tourism in either direction
did not matter. Mexican migration to the United States before 1897 was
small, and even fewer U. S. citizens migrated to Mexico. Interest and divi-
dends on U. S. investment in Mexico could not have been large before the
189os, or, at the earliest, before the mid-i88os. Wealthy Mexicans had
purchased U.S. bonds and equities since the 1830s, but the size of their
holdings is unknown. Little specie that Mexico sent north represented a
credit to the U.S. current account before the mid-1870s.
But brokerage and the carrying trade were another matter. The United
States garnered important earnings from the carrying trade in the early
nineteenth century.' Data from the annual "Statements of [Foreign] Com-
merce and Navigation of the United States" in Table C-i suggest that U. S.
vessels controlled the great bulk of the carrying trade between Mexico
and the United States. Yet how well can we measure these earnings?
We have several estimates of the cost of importing Mexican silver. In
1842, F. M. Dimond, the U.S. consul at Veracruz, wrote that "all remit-
tances are made in hard dollars the export duty on which is 3.5 percent
and freight generally i percent. Commission for purchases 2.5 percent
and on sale 5 percent and sometimes 8 percent." He added that insurance
on shipments was made in the United States or Europe, "there being no
institution of that kind in the Republic."2
The consul in the mid-185os, J. T. Pickett, also put total costs in the
neighborhood of io percent.3 But the meaning and apportionment of these
1. Douglass C. North, The Economic Growth of the United States, 1790-1860 (New
York, 1966), 25.
2. Dimond to Secretary of State, Veracruz, Dec. 27, 1842, RG 59, NARS.
3. See 34th Cong., 2d sess., Report on the Commercial Relations of the United States
With All Foreign Nations, 3 vols. (Washington, 1856), III, 410. In 1878, John W. Foster
noted, "I find that it costs, to place the silver produced at the Real del Monte mines in the
Bank of England or in New York, 13.5 percent, and from Guanajuato or other points in the
TABLE C- 1: U.S. Share of the Carrying Trade by Percent of Value,

1824/25-1855/56
Decade Domestic Reexports Weighted average
1824-29 91 96 95
1830-39 85 78 79
1840-49 89 96 92
1850-56 87 52 57
All 88 8o 8i
Source: Data c
in the "Statements of [Foreign] Commerce and Navigation of the United States" through
1855/56. Shares are weighted by their respective share of all exports to determine the
weighted average.
costs depends on the definition (and nationality) of the buyer, the seller,
and the broker. To avoid interminable complications (and calculations),
I assume that citizens of the United States buying silver produced a net
charge against the United States of 1.5 percent (1 percent freight pay-
able to U.S. shipping less 2.5 percent commission on purchase payable
to a Mexican broker). There are obviously other ways of looking at the
matter, but this procedure is a conservative reading of limited evidence.
The nature of the silver market, of course, goes well beyond the scope of
this essay.
Mexico also exported logwood, cochineal, dyestuffs, hides, and other
commodities to the United States. But we have no basis for estimating
U. S. earnings on them and must omit them from our calculations. Specie
mattered most anyway.
U.S. earnings on exports to Mexico were composed of earnings on
domestic exports and earnings on reexports. A report of 1885 concluded
that commissions, insurance, and freight from the United States to Mexico
added 20 percent of the value of goods.4 In short, we multiply the value
of exports plus reexports by 20 percent and credit the result to the United
States. We could refine the estimate by adjusting the yearly totals by the
proportion of cargo carried by U.S. vessels, but that gives too great an
interior from 14 to 15 percent. Of this sum from 10.5 to 12 per cent are local and government
taxes and charges." The statement implies that 1.5 to 3 percent was divided between brokers
and shippers, or about what we use. See 45th Cong., 3d sess., House, Commercial Relations
with Mexico, 15.
4. U.S. Congress, Senate, Message from the President of the United States . .. in rela-
tion to the Foreign Trade of Mexico, Central America and South America, the Spanish West
Indies, Hayti and San Domingo, 48th Cong., 2d sess., Jan. 20, i885, 8. Also see Commercial
Relations with Mexico, 12, for similar illustrations.
impression of precision. These are orders of magnitude and should be

understood as such.5
Appendix D: Texas and Changing Patterns of Trade
I suggested that the Texas rebellion produced a dramatic change in the

pattern of trade between Mexico, the United States, and Great Britain.
Here I wish to demonstrate precisely how pronounced that shift was.
In order to measure the shift in trade patterns "caused" by affairs in
Texas and by the Mexican reaction to them, I converted U.S. domestic ex-
ports and all British exports to Mexico to index numbers whose base year
is 1835 (i.e., 1835 = oo). I then examined the behavior of both series to
see if the pattern of export behavior changed in any significant way after
1835. In analyzing time series, it is customary to remove the underlying
trend by differencing (i.e., subtracting successive observations from each
other). In this case, I examined both first differences (the rate of change
of the index numbers) and second differences (how much the change itself
varied). While a distinct pattern was evident in both the first and second
differences of the index numbers, the series of second differences shows
the pattern most clearly.
Figure D-i demonstrates this graphically. Before 1835, U. S. and
British exports to Mexico move in more or less parallel fashion, although
the swings in U.S. exports (the short dashed line) are less pronounced
than those in British exports (the solid line). But around 1835/36 (where
the vertical axis serves as a kind of before-and-after signpost), a new pat-
tern emerges. Growth in British exports is now accompanied by a slow-
down in U. S. exports, and vice versa. Graphically, the pattern of trade no
longer appears as parallel fluctuations driven uniformly by demand, but
as reversed peaks and troughs. The altered trade flows continue until the
outbreak of the Mexican War.
There can be no clearer demonstration that around 1835 there was
a dramatic change in trade relations between Great Britain, the United
5. It is important that U.S. exports were valued at cost "in the ports . . . from which
they [were] exported." Imports were valued at cost "in the foreign ports from which they
[were] exported." See "Act of February io, 1820: An act to provide for obtaining accurate
statements of the foreign commerce of the United States." Gordon, comp., Collection of the
Laws of the United States Relating to Revenue, Navigation, and Commerce . . . , 249-251.
Export values are essentially free alongside ship (FAS) values. Import totals exclude freight
and insurance, the "invisibles" whose magnitude we estimate. See U.S. Dept. of Commerce,
Handbook of Cyclical Indicators (Washington, 1984), 56-57. These conventions imply that
U.S. exports to Mexico are, at best, only estimates of Mexican imports from the United
States. Similarly, U.S. imports from Mexico are, at best, estimates of Mexican exports to the
United States.
400 -
200 -
Time line centered id number

on Texas-- -U.K.
-A 290
- 400
- 600-
U.S. U.K. ~~Second difference of index numbers
FIGURE D-1: U.S.-Mexico and U.K.-Mexico Trade, Second Differences of

Index Numbers of Nominal Exports (1835 = loo)
States, and Mexico. Mexico's markets were thereafter "opened" to one

party mostly at the expense of the other, something not much in evidence
before. In other words, Mexico now pitted one partner against the other
in the contest for markets.

The Origins and Progress of The Us Mexican Trade

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The Origins and Progress of U.S.

-Mexican Trade, 1825-1884: "Hoc opus, hic labor est"

The Origins and Progress of

Niles Weekly Register, September 30, 1815

National Gazette, April 9, i825

H E economic and commercial history of early national

interpreting statistics that are frequently difficult, conjectural, or contra-

Britain's early balance of trade with Mexico is mostly a matter of conjec-

To tell a coherent story, we need to know the U. S. balance of visible

TABLE 1: Share of Reexports in All U.S. Exports to Mexico

Years Share Standard deviation

1820-29 .814 .027

value.'3 Total and domestic exports to Mexico were by no means identical,

be transported from [Veracruz] up these everlasting hills."' 6 Overland

i6. F. M. Dimond to Secretary of State, Veracruz, Sept. i, 1845, RG 59, NARS.

The U.S. Constitution (section 9, clause 5) prohibits federal imposition of

19. J. T. Pickett to Secretary of State, Veracruz, July 4, 1854, RG 59, NARS.

5 N wc I c ~o tos c t, 0 m moo ci u: Mo uc t N.ct mo OA t- . N t-

~L4~~Q 01- 5'00CON I 0? 0c) )Ci0 t f 0c ) N t0 co 00 t^ M '

_ X _ r o t ~ I o o CD O CD | I C5) 0 0 0 0 0 0 0 0 (MO MCF) CD O O O

m - 011 C,, 'o o1 r-0 1 o . Mo M 1 o00 o l o o 'o o mfo

C l Cl Cl Cl COCOC cO co COcocoO co ' - - - O - t - 'ft )

I- 0 oo I- c )so a) C, ooCsst )osH

~~~~c~ o >c oo u) u0 c o0 AI - ~c o0 0c oc -I -Nm0 cc

0 ) o um 0 m OA I- 1- 'I u) o. m u) m 1- I- c o oo o0 0 0 o s. 0) 00 I- u) . I moo c o 00I

co I m t . 1u) 0 Noo 0 co I- m n c t- u) 0 N co I- m H. 1- 00 0) u) co I -Oo

00 0 0000 0 0000 0 0000 0 0000 00 00 00 00 00 00 00 co co co co co co co co co co0 0 00

Years Ratio Standard deviation

1824-29 .51 .20

1850-59 .72 .12

Table 2, the index appears in column B. Real exports in constant 1840/

21. Economic historians conventionally distinguish between merchandise and specie

Years Share Standard deviation

1824-29 .77 .09

1850-59 .72 .07

From Numbers to Notions: Silver, Cycles, and Tariffs

25. See "Memoria sobre el estado de la agriculture e industria de la repiiblica en el

was one such activity. Compared to agriculture, mining's share in national

1,000,000 _ r ........................................ Exports~~~~~~~~~~~~~~~~~........

1824/25 1834/35 1844/45 1854/55 1864/65 1874/75 1884/85

FIGURE 1: U.S. Imports from and Exports to Mexico, 1825/26-1883/84

peak in 1835/36. The second covers 1847/48-1867/68, with a peak around

could even find a copy of it on demand? It was a nightmare for merchants

The First Cycle (1825/26-1847/48)

sideration of a treaty of reciprocity a "mistaken policy . . . unfriendly

TABLE 5: Share of Finished Cottons in U.S. Domestic Exports to Mexico

Years Sharea Standard deviation

1825/26-1829/30 .338 .125

a Defined as the sum of plain and colo

The Second Cycle (1847/48-1867/68)

Log Constant Dollars

FIGURE 2: Real Domestic U. S. Exports to Mexico, 1825/26-1883/84

45. Thomas R. Hietala, Manifest Design. Anxious Aggrandizement in Late Jacksonian

1,200,000 1853* Tuxtepec Revolt

FIGURE 3: Real U.S. Cotton M

new territorial pressures to bear during negotiations over the Treaty of

48. Oscar J. Martinez, Troublesome Border (Tucson, 1988), 18-21.

tent instability reduced productivity in nineteenth-century Mexico, and

The Third Cycle (1867/68-1883/84)

During the third cycle, Mexico's international position changed signifi-

TABLE 7: Mexican Silver and the Terms of Trade

Years Production (Kg) A% Mexico TOT A%

1866-70 2,604,500 57.6