Bourbon Administration

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

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

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

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

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

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

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

The Spanish authorities proved more effective in their efforts to enforce laws regulating commerce. They focused on small commercial activities as well as on big fairs. Indian participation in the market economy was forced by a 1747 law ordering them to pay their tributes in coin.^[28] Intendentes saw to it that ladinos did not trick Indians by altering weights and measures and that they did not take advantage of them by setting unfair prices.^[29] That was the easy part; the marketing of indigo was a more complicated problem. Indigo, the only crop that could be sold in the world market in significant quantities, was the "soul that gave life to the kingdom [of Guatemala]."^[30] Its production was concentrated in San Salvador and, to a lesser extent, in Guatemala, Nicaragua, and Honduras, but the greatest beneficiaries of the Indigo business were the Guatemalan merchants.^[31] During the second half of the eighteenth century they had developed a system that permitted them to obtain an important share of the indigo market. The merchants were led by a group of Spanish entrepreneurs who had family and business connections with big commercial houses in Cádiz. Through their connections they had access to capital for financing the planters in the provinces, to agents for purchasing European goods that could be sold in the colony, and to ships that arrived at the Gulf of Honduras. It was a package of services that was vastly superior to anything that Central America had ever seen. As a result the Guatemalan merchants were in a privileged position, and they did not hesitate to take advantage of it. By the beginning of the nineteenth century the system was firmly established, together with the political social preeminence of the Guatemalan merchants. The instructions to the Guatemalan delegate to the Cortes de Cádiz describe the system in part.

As to the merchants, there are up to thirty or thirty-five commercial houses in the kingdom deserving that name, being the only ones that every year receive directly from Cádiz through the gulf of Honduras European goods valued at a million pesos, a thousand more a thousand less, which distributed among the merchants are sold retail at their stores. The greater number of the former do their business in the houses that they have by the name of almacenes . The returns are sent in an equal portion of indigo pounds, which is almost the only product that supports trade with the metropolis. These calculations must be taken as an approximation, when the war with the English does not place obstacles to navigation, and when locusts or other misfortunes do not impair the harvest of the dye.^[32]

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

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

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

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

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

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

Prices were as much a problem as credit. The power of the Guatemalan merchants (a highly organized group) to manipulate prices bordered on a monopsony situation and also generated action from the colonial authorities. There were continuous disputes about prices and, at the end of the eighteenth century, the captain-general periodically intervened to fix prices and almost invariably sided with the interests of the Salvadoran producers. The 1772 fair provides a good example of how this operated.

Growers' representatives from San Salvador and San Miguel came to the 1772 fair asking 10 1/2 reales for corte , 12 3/4 for sobresaliente and 15 for flor . San Vicente's delegates wanted higher prices while the merchants proposed to pay 9 1/2, 11 1/2 and 13 1/2 reales, respectively. An arbiter

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

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

The reasons why the colonial authorities exerted some control on the indigo market were not necessarily altruistic. The Guatemalan merchants were the most powerful economic force in the colony; they were well organized in Junstas de Comercio and, after 1794, in the Consulado together with their presence in virtually every colonial institution.^[44] It was in the interest of the authorities to weaken them and keep them under control. The merchants controlled import and export markets and had close ties with commercial houses in Cádiz. They were the early beneficiaries of the Bourbon reforms but had become too powerful. Part of their system involved the control of midlevel public officials by paying their sales taxes and tributes. To weaken the power of the merchants, the Spanish authorities excluded them from the deliberations that led to the creation of the Montepío de Cosecheros de Añil, and the indigo fair was moved from Guatemala to San Vicente, in San Salvador province. Despite these attempts, this power conflict was never resolved during the colonial period. The wholesale merchants kept their control of the indigo market, circumvented and even ignored the prices fixed by the authorities, and created new classifications of indigo that enabled them to set their own prices.^[45]

The preceding discussion on the external sector of the colonial economy invites a digression on the role of that sector as an obstacle to the development of Central America. Much has been written about the impact of Spanish taxes and trade restrictions on the economies of the colonies; some versions of dependency theory, for instance, argue that the empire extracted surplus from the colonies and that this is the root of the underdevelopment of the Latin American economies. In the view

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

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

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

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

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