"The Economy of Mexico in the Post-Independence Era"

The History of the Americas in the 19th Century, By Carlos Vera, Published in Mexico City, Mexico.

"... On April 4th of 1825, exactly two months after America's own Independence Day, the people of Mexico elected Vincent Guerrero as the Republic of Mexico's first president. One month later, he took his Oath of Office and entered the National Palace, formerly known as the Viceroy Palace, as the executive of the new republic (at this time the Yellow House, the future residence of the Mexican presidents, was under construction and was only finished after Gurrero left office). In his victory speech, the president declared that he would 'construct Mexico into a powerful, modern nation' and 'completely overtake our former colonial masters and prove that we will succeed as an independent republic.' This speech, which was recited in front of nearly tens of thousands of citizens, drew many cheers from the crowd. Due to his charismatic personality and substantial promises, the public had high expectations for President Gurrero and the newly established government (complete with the Chamber of Deputies, the Cabinet, and a hastily appointed Judiciary). Almost immediately after taking office, President Gurrero worked tirelessly to stabilize and improve Mexico's economic situation. Thankfully, right as he took office, aid from Samuel Kim began to arrive in Vera Cruz to help restore the damaged port city, and the American government was well underway to support its new republican neighbor. Even so, the challenges facing President Guerrero and his cabinet were daunting, and Mexico's future remained uncertain for the first five years after the declaration of the Mexican Constitution...

During the colonial era, the biggest contributors to the Mexican economy were the agricultural sector and the silver mining sector. Agricultural products were exported in significant numbers, but silver was the true 'driver' of New Spain's economy. The Spanish Crown held a monopoly on the silver supply in New Spain and enacted various reforms before the 19th century to not only increase the production of silver but also to increase the standings of miners (to make mining a more respectable profession). Several successful strikes were carried out by miners in New Spain's history, demonstrating that miners were some of the most respected and well-paid free workers within New Spain. However, mercury was an absolute necessity to extract silver from ores through the patio process. Mexico lacked the trees to use as fuel to extract silver with high heat; thus, the patio process was critical to the silver production in the Spanish colony. During the colonial era, nearly all of New Spain's mercury was from Spain, or more specifically, the mercury mines in Almaden. Unfortunately, due to the Mexican War of Independence, the supply of mercury halted completely, bringing silver production (and a significant part of the economy) to a halt. Even worse, the silver mines themselves (in the New Spain provinces of Zacatecas, Guanajuato, and Puebla) were damaged during the war due to the fierce fighting between Mexican revolutionaries and Spanish soldiers, especially in the more sparsely populated north. Combined with the devastation to a significant amount of farmland and the various amounts of damage to Mexico's biggest towns and cities, the Mexican economy in the post-independence era was on teetering on a cliff's edge.

Yet Mexico held two distinct advantages that allowed them to survive: American aid and a central government. The first batch of aid from Samuel Kim consisted of machinery and steam engines for the silver mines (to repair the damaged mines and increase their efficiency), food aid (for areas heavily affected by the war, such as Vera Cruz and Puebla), gold bullions (for the Mexican government to use for finance while the economy entered its recovery stages), farming tools, and various seeds and plants (that were already double-checked by Kim personally to ensure that none of them were invasive to the local wildlife). Additionally, hundreds of American engineers, doctors, merchants, bankers, and professors were sent to help modernize the Mexican economy. These professionals all worked under American Enterprises, Kim's personal company, and they were prepared to help Mexico establish its own domestic corporation to begin industrialization and overseas trade. All in all, it was an impressive amount of aid, and many members of the government let out a sigh of relief upon its arrival. Moving with urgency and care, the Mexican officials immediately began revitalizing the economy and uplifting the ailing populace with the aid it received from abroad, wasting no time to begin its various projects to revive the economy. With a strong, central government that was able to direct the provinces under the Republic of Mexico, the nation started to show some signs of recovery within a year. However, it was only the beginning of a long journey to modernization...

The first sector that was 'revived' was the silver mining industry. President Gurrero, his Cabinet, and the Chamber of Deputies were fully aware that silver would stabilize the economic situation until other economic sectors were developed. Additionally, with America and European nations heavily relying on silver for the China Trade, silver was in high demand across the Western World. As such, much of the Mexican government's concentration was on repairing the mines, improving their efficiency, building infrastructure to improve transport to and from mines, and establishing a steady source of mercury for silver extraction. The first two were resolved quickly due to Kim's aid, as he provided the necessary equipment and tools to both repair and improve the mines. As the mines started to pump out silver ores, steam engines were also introduced to improve productivity. The steam engines were critical because they allowed miners to travel to their working levels faster, winch out heavy materials, and pump out water. Like in American and Great Britain during the early days of the Industrial Revolution, Mexico enjoyed the fruits of steam power and saw increased production after implementing the steam engines in the mines...

The latter two goals were glaring problems that the Mexican government placed more focus on. While New Spain's silver production was high even with poor local infrastructure, an improved road (and potentially, a rail) network was seen as a necessity for reducing the cost of transport, increasing the safety of merchants and travelers (as banditry was common due to the poor and rural nature of the existing roads), and connecting the nation's interior to the coastal areas. The Mexican government sought to construct railroads as soon as possible, as they believed that it would help unify the nation (both politically and economically) and put thousands of Mexicans to work. However, Kim (who arrived in Mexico in May of 1825 to help assist the Mexican government) remarked that placing a significant amount of resources to construct the railroads would be counterproductive, as other areas of the Mexican economy needed immediate attention. He proposed that the government spend money and resources to create more paved roads and improve the farmlands (from irrigation canals to better tools).

Despite his suggestion, the Mexican government was insistent on building railroads but was willing to compromise on the scope of the project. Thus, the Atlantic Union Company, America's biggest rail company, was given a contract to build a rail line that ran from Vera Cruz to Mexico City to Leon to Zacatecas. An additional two divergent rail lines were planned to be built after the Vera Cruz-Zacatecas line was finished (from Vera Cruz to Oaxaca to Salina Cruz, and from Mexico City to New Santander to Monterrey). The first mentioned rail line connected the silver mines in the northern parts of Mexico to Vera Cruz. Similarly, the latter two were planned to connect the Pacific to the Atlantic by land and Mexico City to the United States. Before the construction of the rail lines from Vera Cruz to Mexico City began, the Mexican government started major construction projects to improve the quality of existing roads and pave new ones. While these various projects took over a decade to complete, they employed thousands of Mexican workers, created a growing middle class, and built the public's trust in the new government. Especially since the new republican government was doing more for the former colony's sake than the Spanish administration before them...

For the last issue, Mexico turned towards Peru-Bolivia to acquire mercury. Peru-Bolivia maintained one of the few mercury mines needed for silver extraction in Huancavelica, which was necessary since Spain was hostile to its former colonies in the Americas. Once negotiations began, the Peruvian-Bolivian government knew the significance of the mine within their borders. Due to its recent independence from Spain and economic uncertainty, the South American nation negotiated deals that heavily favored itself. Unfortunately, there was little Mexico could do to negotiate better terms, as they needed the mercury from Peru-Bolivia urgently. And while there were a few other nations that produced mercury, Peru-Bolivia was close to Mexico and held large mercury reserves. As such, President Gurrero and the Chamber of Deputies approved a treaty that declared Mexico would purchase mercury from Peru-Bolivia in large quantities while paying marked-up prices for the mercury. This quickly angered many in the Mexican government, as they saw the Peruvian-Bolivian government as 'greedy and backstabbing towards their fellow republican revolutionaries.' While America started to export mercury to Mexico after discovering several mercury mines in California in 1836, Mexico and Peru-Bolivia's relations went cold after the deal was signed. And later on, it would play a critical role in Mexico's willingness to intervene in the 1837 Ecuadorian Crisis against Peru-Bolivia...

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Meanwhile, the agricultural sector of the Mexican economy improved as well. With Kim exporting various American manufactured farm tools to Mexico and introducing better farming techniques to improve crop yields, the farms around Vera Cruz (where most of the exports were coming from) began to see rapid improvements within three years. And as the tools and techniques spread across the nation, the stagnant agricultural sector began to grow from its long hibernation. However, it was not just Kim's efforts that brought about improvements to Mexican farmers in the post-independence era. Indeed, the Mexican government played a vital role in the development of agriculture. President Gurrero, delivering on his election promises, passed various land reforms to slowly cede more lands to peasant communities and combat the monopolies held by various wealthy criollo and peninsulare families across the nation. Knowing that taking aggressive actions might provoke an armed response (as seen in the Valladolid Rebellion, which saw the death of thousands of rebels and Mexican soldiers), the president decided to take things slowly but surely.

Using the gold he had at hand and borrowing more from American banks, he bought millions of acres of land directly from wealthy landowning families and sold them to subsistence farmers with a critical condition. The condition was that the subsistence farmers were not to make any down payments for the land they acquired, but they were obligated to pay a yearly tax according to their yield and profits for a period of twenty years. This was done through many government officials that collected information from those that 'bought' land from the government and reported their findings to the Chamber of Deputies and the President in Mexico City. Depending on the farmer's yields, the Mexican Ministry of Agriculture decided whether to seize parts of the land, allow the farmer to maintain his current holdings, or even grant more land to productive farmers. While President Gurrero expected to take losses in the short term, he believed that the nation would benefit in the long term. In addition to this 'buyback,' the Mexican government also implemented an inheritance tax across the nation. Once a landowner died, his children would only inherit three-quarters of the land, with the remaining going to the Mexican government for future sales or ownership. This slowly allowed the Mexican government to roll back the monopoly held by several powerful families and redistribute the land to lower-class farmers. On top of these reforms were irrigation projects to open up farmland that was unavailable before and the establishment of an Emergency Grain Stockpile (like the one in the United States) to allow farmers to sell their produce at a steady rate and provide relief to starving citizens. By the time Gurrero left office, Mexico was well on its way to 'modernizing' the farming industry, with land reforms bringing the total of land owned by wealthy landowning families from 90% to 75%. Additionally, the people finally felt secure and well-fed, allowing the next administration (led by former Foreign Minister Victoria) to smoothly take power through the 1831 Elections...

An important aspect of Mexico's economic growth during the post-independence era also relied on a healthy mix of grains, ranching, and cash crops. For grains, the staple trio of maize, wheat, and vegetables remained the most important crops within Mexico and was crucial to the Mexican nation's stability. Some of the discontent that stemmed from the Mexican Independence War was from food shortages (especially maize, which was probably the most important grain in Mexico). The wide availability and increased production of these staple crops helped boost population growth and prevented food shortages that would inevitably lead to riots and even outright revolution. As for ranching, it provided a steady source of meat and other dairy products that the nation needed and offered an alternative to areas with relatively poor soil quality. This was especially true in northern Mexico, where the weather and land were dry. Ranching also helped develop Texas and other southwestern states in the United States, as Mexican ranchers often dealt with newly established American communities on the frontier by offering them steady supplies of meat, dairy, and leather (which we will cover later on). For cash crops, Mexico invested heavily in its coffee and sugar cane industry, especially since the nation faced heavy competition from other American nations from other cash crops. Colombia produced most of the Americas' cocoa, while the United States produced a significant amount of oranges and even more cotton. While Haiti and the French Empire were competitors in the sugar industry, Mexico had an ideal climate suitable for the cash crop. With lowered prices, there were willing buyers in Europe, and even in the United States. Meanwhile, coffee production was big across the Caribbean, but the same reasoning for developing the sugar industry applied to the coffee industry. Coffe was in high demand across the United States (especially as the emergence of cafes took the United States by storm), and most of southern Mexico was ideal for coffee growing. As such, sugar and coffee production exploded as many big landowners sought to increase profits with the new advancements they had at hand.

But one of the biggest and surprising developments in Mexico's agricultural sector was the introduction of jute, a natural fiber derived from plants. Due to its appealing color, strength, and cost-effectiveness, jute was one of the most profitable crops in existence. However, jute was only local to certain eastern regions in India and nowhere else in the world. In fact, there were many historical records of British merchants and businessmen enriching themselves off the sale of jute, which could be woven into clothing, ropes, sacks, and other items made of fabric. Yet, Samuel Kim managed to acquire a handful of jute plants, taught himself how to grow the plant properly, and introduced jute to Mexican farmers in the province of Vera Cruz in 1826, promising them that the plant had great potential for growth and profitability in the humid, tropical climate of Mexico (which often saw a large amount of rain as well). The problem with growing a jute plant was that it required a perfect climate to accommodate it. India's eastern regions contained soils with fine particles of clay and silt, along with heavy monsoon seasons, to help the plant grow and spread. While Mexico's southern provinces were not exact replicas of the Indian regions that grew jute successfully, they were very close in terms of the soil type (fluvial sediments that were ideal for jute plant growing), heavy rain seasons (approximately 2000 mm to 3000 mm of rain in the area per year), and climate (tropical). The first few yields of jute in 1827 offered promising results, and the jute plant continued to spread across southern Mexico (and in Yucatan as well). With virtually no competition from the rest of the Americas, Mexico exported jute in greater numbers year after year, and the plant became one of Mexico's biggest cash crops. This plant, combined with sisal (a plant native to Mexico and also a plant cultivated for fiber production), led to the textile boom that supplemented the industrial growth in Mexico. In fact, many historians claim that jute and sisal led to the economic boom in Mexico from 1830-1835, as it provided America with an alternative to cotton as the Anglo-American War tore through the southern states...

As for the industrial sector, the Republic of Mexico had virtually no industry to speak of for the first several years. While Kim's American Enterprises helped establish several textile factories (which became critical after jute became more and more prevalent), steel mills (especially after iron mines were discovered in western and northern Mexico), and a few manufacturies for farming tools, Mexico's industrial production remained low due to the United States. With America already having a strong industrial presence and exporting manufactured goods for cheap, Mexico's industrial sector struggled to compete against America's industrial might. This was after tariffs were applied by the Mexican government to help stimulate the local industry's growth. However, the Mexican government expanded its industry into smaller but less competitive sectors to help Mexico industrialize. Vera Cruz was expanded into a major port city with a large port to handle imports and exports for trade, and a shipyard was built within the city for building both commercial and military ships. With the assistance of American technical advisors, Mexico built small but cheap steamships to sell to local powers (which was especially important in the post-independence Americas era, as many new nations sought to build up their merchant marine and navy). Additionally, Mexico also directed its steel to be exported to the southwestern United States, especially as California became a commercial hub. Steel was critical in constructing railroads, machines, and other goods, which territories like California lacked due to the sheer distance between the eastern United States and the western United States. As such, Mexico produced steel for its own railroad industry and for 'stricken' American territories out in the west, which helped develop a friendly relationship with American settlers and Mexicans.

Of course, the industrial sector in Mexico changed during the Anglo-American War, which forced Mexico to invest more in its industrial sector and produce weapons, helmets, and other military necessities to support the United States. During the Anglo-American War, Mexico truly 'roared into existence,' as it was one of the few LAN members untouched by the war. After the invasion of the southern United States during the height of the war, northern Mexico (and other cities such as Veracruz and Mexico City) shaped into an industrial hub to arm and supply tens of thousands of LAN soldiers. Monterrey grew rapidly as lower-class Mexican citizens, and poor subsistence farmers flocked to the city to obtain a well-paying job in a factory. And after the war, the expanded industrial sector remained and grew. This was especially true after American Enterprises' holdings in Mexico were ceded to the Mexican government after the public reading of Kim's will. The Mexican branch of American Enterprises was rebranded as 'Mexican Industries and Enterprises' (in Spanish, 'Industrias y Empresas de Mexico') and owned by the Mexican government until its privatization in the late 19th century (and to this day, IEM remains one of the biggest corporations in Mexico). By 1835, Mexico was a valuable economic, military, and political ally of the United States and one of the biggest economies in the Americas (after the United States)...

Now, while these reforms and growth helped propel Mexico to greater heights, the effects of these changes were not evident until the year 1835, a decade after the Republic of Mexico's founding. During the first five years of uncertainty around the Mexican Republic, thousands of Mexicans immigrated to the United States on promises of free land and citizenship. From the year 1825 to 1835, it was estimated that around 100,000 Mexicans went through a perilous journey through the vast deserts of the Mexican North and the American Southwest to reach 'freedom.' Many of them settled in (the current states of) Texas, Shandin, Taho, and California, along with a few in Kiowa, Louisiana, and Baja California. These immigrants would help establish ranches and farms across the southwestern United States and help tired American settlers settle into the rough conditions of the 'Wild West,' becoming an indispensable part of the United States for centuries to come...