THE SILVER STANDARD IN MEXICO. The editor of the North American Review asked me some time ago for an article about the industrial, agricultural, and commercial conditions of Mexico, as compared with the same conditions in the United States, in connection with the monetary systems existing in both countries. I was very reluctant to write on that subject, fearing that my remarks might be construed as showing a desire on my part to meddle in the important currency questions then pending in this country, or as an attempt to institute a comparison between Mexico and the United States, in which Mexico should appear in an advantageous position,' nothing being further from my mind than either of these purposes. Senator Morgan from Alabama subsequently made some inquiries of me on the same subject, and I could not refuse to give him the information he desired; after which I saw no objection to furnishing it to the North American Review, and I used in the preparation of this article. everything that I said to Senator Morgan in answer to his inquiry: No Possible Comparison Between Mexico and the United States.-I must begin, however, by saying that it would be neither desirable nor proper for me to enter into a comparison between Mexico and the United States. This country is so far in advance of Mexico in material progress, commerce, manufactures, improved methods of agriculture, high wages, public education, accumulation of wealth, banking and banking facilities, and so many other things, that such a comparison would be unfair, although in some respects Mexico has suffered less than this country during the present financial crisis. I shall, therefore, confine myself to stating the advantages and disadvantages produced in Mexico by the silver standard prevailing there, without drawing any conclusions from the facts presented, so that every reader can draw his own. 'This article was written and published at the time when the financial crisis of 1893 was producing its direst effects in the United States, that is, when prices had come down, factories were closed, operatives dismissed, wages reduced, strikes occurring everywhere, business depressed, many men were without employment, and in consequence of all that a very unsatisfactory condition of things prevailed all over the country. It is to that condition of things that the article refers in stating that Mexico had not suffered so much as the United States during that period. But in doing so, I must disclaim all purpose of commenting in any manner, even by implication, on the monetary question in the United States. My position here, both as an alien and more especially as the official representative of a friendly foreign country, precludes me from meddling in any way in a public question pending in the United States. Besides the conditions of the two countries are so widely different, that they can hardly be compared with each other, and what is advantageous to one might be inconvenient, or even hurtful, to the other. My statements have therefore reference to Mexico alone and in no way to the United States. Reasons why Mexico has the Silver Standard.-Mexico is legally a bimetallic country, because we have free coinage of both gold and silver at the ratio of 16 to 1; but practically we are a silver monometallic country, because under the operation of the Gresham Law all the gold bullion and the gold coin existing in Mexico is exported as merchandise, having a much greater market value than its legal value in Mexico, and silver is therefore the only metallic money used there in payment of debts or for any other purpose. The silver standard prevailing in Mexico was not adopted from choice. Mexico being the largest siiver-producing country, over two thirds of the whole silver stock of the world having come out of its mines, silver has been our only currency for nearly four hundred years. We have kept so far our monetary standard, because, as will be seen farther on, it has not been an unmitigated evil for Mexico, because we have hoped that the commercial nations of the world would find it to their interest to rehabilitate silver in some way, and also because we have been anxious to avoid the derangements and disadvantages consequent to a change of monetary standard which would be also felt, although not in such a degree, by the United States, should they attempt to change their present gold standard for a silver one. A change from the silver to the gold standard would cause in Mexico general ruin, as we do not yet produce gold enough to base our currency on that metal, and as our exports of commodities are not yet sufficiently large to allow us to buy all the gold we need for that purpose. The high price of gold is a great incentive to gold-mining, and if gold continues at the present high price for some time, I am sure Mexico will before long be a large producer of that metal. We never had any paper currency, either national, state, or issued by banks. Two or three banks, indeed, have now issued notes, but they are not legal tender. They are convertible into silver coin at the holder's pleasure, and while they circulate freely in the large cities and for convenience' sake are preferred to the hard dollar, they are almost unknown in the small towns and in the country. The bank issues special notes for each place, which are redeemable only in that place, thus keeping up in effect the old system of charging a high premium for the exchange of money from one place to another, the item of profit to the banks corresponding with what used to be the charge for transporting silver money. Advantages of the Silver Standard to Mexico.-The advantages to Mexico of the silver basis are the following, most of which could not be applicable to the United States on account of the different conditions prevailing in each country: ' 'The effects of the silver standard for all countries, and without taking into consideration the peculiar conditions of any one, are very clearly stated in the Report of the Committee appointed by the Japanese Government to study the question of standard, previous to their adoption of the gold standard, which was printed by order of the Senate of July 7, 1897, as Senate Document No. 176, 55th Congress, 1st Session. I take from that report the following heads on the subject of such advantages, without giving in detail the explanations and reasons of the report to sustain its views. The effects of the silver standard are: I. Increase of exports. 2. Rise in prices of commodities. 3. Light burden of debtors and taxpayers. 4. Good condition of agriculture. 5. Development of commerce and industry. 6. Increase in revenue from taxes and other sources. 7. Increase in demand for labor. 8. Increase of national expenditure. 9. Distress of those who receive fixed wages. 10. Disadvantages to creditors. 11. Growth of speculative enterprise. 12. Rise in prices of commodities imported from gold countries and decrease in imports. The effects of the gold standard as enumerated in that report are the following: 1. Profits to creditors. 2. Fall in prices of commodities imported from silver countries. 3. Decrease of national expenditure. 4. Depreciation of prices of commodities. 5. Loss to debtors and taxpayers. 6. Depression of commerce and industry. 7. Decline of rate of interest. 8. Distress of farmers. 9. Decrease in revenue. 10. Distress of employers. II. Decrease in demand of labor. 12. Increase of imports from silver countries. The report concludes by enumerating the effects in Japan of the recent change of ratio between gold and silver. 1. Radical change in the relative prices of gold and silver. 2. Gold appreciated more than silver depreciated. 3. The chief cause of change in the ratio of gold and silver is the increased demand for gold in several countries. 4. The change in the ratio of gold and silver gives advantages to the silver countries and disadvantages to the gold countries. Ist. The silver standard encourages very materially, so long as other leading commercial nations have the single gold standard, the increase of exports of domestic products, because the expenses of producing them, land, wages, rent, taxes, etc., are paid in silver, and therefore their cost, as compared with their market value, is considerably less than that of similar articles produced or raised in single gold standard countries. When sold in gold markets, therefore, they bring very profitable prices, as they are converted into silver, at a high rate of exchange. These conditions have caused a great development in the exportation of some of our agricultural products, because they yield very large profits; coffee, for instance, which costs on an average about ten cents a pound to produce it, all expenses included, has been sold at about twenty cents in gold in foreign markets. The export of other agricultural products which did not pay when gold and silver were at par, that is, at the ratio of one to sixteen, is now remunerative, because there is returned to us in exchange more than we lose in the gold price of the article. The same is the result of some agricultural products that we could not export before because their price in foreign markets was not remunerative. Such is the case, for instance, with beans, which at eight cents would not pay when silver and gold were at par, but now that eight cents in gold make about sixteen cents in silver, it is a profitable price. Our exports for several years preceding 1869 were about, a year... $20,000,000 00 The Statistical Bureau of the Mexican Government quotes the price of our exports in silver, and therefore to find them in gold they have to be reduced to the market price of silver, but, even reduced to one-half, the increase is very remarkable. Formerly we used to export only silver and gold; because of their 5. Japan has made great economic progress. 6. Increase of national expenditures. 7. Distress of those who receive fixed wages. 8. Loss of creditors. 9. Prevalence of speculative enterprise. 10. Rise in prices of goods imported from gold countries. II. Tendency to luxury. 12. The opening of the mint invites the import of silver. 13. Stagnation in commercial dealings with Japan and gold countries. 14. Decrease of capital investments from gold countries. 1 For the last two fiscal years our exports were: 1895-96, $105,016,902.00; 1896-97, $111,346,494.00. small weight and bulk relatively to their value, they were the only articles that paid for transportation. But the proportion of other commodities has been increased recently to fifteen, twenty, thirty, and forty per cent. of the export of our precious metals, and during the fiscal year ending June 30, 1896, the proportion was sixty-one per cent., as the exports of precious metals amounted to $64,838,596, and the exports of commodities to $40,178,306. 2d. The silver standard is a great stimulus to the development of home manufactures, because foreign commodities have to be paid for in gold, and, owing to the high rate of exchange, their prices are so high that it pays well to manufacture some of them at home, our low wages also contributing to this result.' For these reasons we are increasing considerably our manufacturing plants, especially our cotton mills, smelters, etc., and we begin now to manufacture several articles that formerly we used to buy from foreign countries, and all this, notwithstanding that the mountainous character of our country, the want of interior navigable watercourses, and the scarcity of fuel, make manufacturing very expensive in Mexico. But we are finding abundant coal deposits, and, when our railroads tap our coal-fields, that objection will be considerably diminished. One of our railroads, the International, built by Mr. C. P. Huntington and his associates, has already reached a very large coal-field at Salinas, near Piedras Negras, which is now supplying with coal a part of the country, and even some sections of the Southern Pacific system of this country, but of course it cannot supply the whole of Mexico. When that need is satisfied, we shall have to contend only with the increased expenses of transporting the raw material to the factories and the ' Mr. Ransom, United States Minister in the City of Mexico, confirms this statement in the following paragraph from his report on the Currency, Prices, and Condition of Labor in Mexico, dated at the City of Mexico, September 26, 1896, and published in Vol. XIII., Part I., of the Special Consular Reports: 44 " Manufacturing in Mexico has been developed to a considerable extent, especially in the manufacture of the coarser grades of cotton and woollen goods, ordinary bleachings, goods for shawls, prints, and calicoes, woollen cloth; also in the manufacture of the products of sugar-cane, alcohol, paper, cigars, and cigarettes. Many well-informed persons believe that the depreciation of the price of silver has been the main cause of the development of these industries. To some extent this is doubtless true; the large discount on silver has had its influence in depressing foreign importation and stimulating domestic production. But other powerful causes have had their effect in this direction—an able, wise, and just administration of the government during the presidency of General Diaz, the confidence of the Mexican people and foreigners in the stability of the government, the building of railroads (all but the one from Veracruz to the City of Mexico having been completed since 1883), the improvement of coast harbors, the enlargement of commerce, the liberal action of the government toward new industries; in fact, the general influences of law, liberty, peace, and commerce, have all contributed to this result." |