Mexico and its reconstruction/Chapter 14

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CHAPTER XIV

INDUSTRY AND INTERNAL COMMERCE

Internal industrial development was practically non-existent in Mexico before the Spanish conquest and remained negligible throughout the colonial period. Indian industry for the supply of local wants continued throughout the country districts. The civilization was static both socially and geographically. In the towns, it is true, some articles of European manufacture were introduced but they were only those that could bear high carrying costs. They did not displace native manufactures because they reached only those of European blood, nor did their high price, as a rule, give rise to local manufacture.

The typical Mexican manufactured products that found their way into European trade, if the simple process by which they were produced can be dignified by the name of manufacture, were the precious metals, cochineal, indigo, and sugar. Because of the exclusion of foreigners, the commercial and industrial development, so far as it was not in the hands of the native races, was monopolized by Spaniards.

One of the first industries established—a reflection of the development the Spaniards emphasized in the country—was the coining of silver, which was begun at the Mexico mint, established in 1537. Toward the end of the colonial period a beginning of textile manufacture did occur, the chief centers of which were Querétaro, San Miguel el Grande, Puebla, and the Intendanz Guadalajara. The latter two were credited with a production of cotton goods valued at over 3,000,000 pesos^[1] in 1802. The industry was in the hands of small spinners and weavers. Querétaro produced both cotton and woolen goods. There were a few silk weaving establishments, this industry having been introduced by a Frenchman.^[2] A few printing establishments and glass and fayence factories built up a small trade.

The developments in industry in the outside world during the nineteenth century had a greater effect on Mexico than in the preceding period. Some Mexican industries were killed. Cochineal and indigo lost their place in trade. New lines appeared, lines that had a more direct connection with the modern conditions, which, little by little, were coming to affect the life of the republic. The first quarter-century following independence was so disturbed that no important development of industry occurred and no statistics are available giving a survey of the efforts made in small establishments.

Some factors of Mexican life favored industrial development in the last half of the nineteenth century. In the industries in which native labor could be used to advantage the low labor cost encouraged investment. The low exchange rate of silver raised the price of imported articles and thus favored local enterprise. Further, the government sought to help industry as it did agriculture by creating artificial advantages for local enterprise, not only in a protective tariff but, after 1893, by special exemptions. In that year the executive was empowered to give special privileges to those setting up new industries in the country if their investment amounted to 250,000 pesos. These privileges might include freedom from direct federal taxes and freedom from customs taxes on the machinery and other materials of construction necessary for setting up the establishment.^[3] The states adopted a similar policy to attract industry to their own territories.

The textile industry is the best known of Mexican manufacturing developments and the one in which the Mexican population has had its best opportunity to display its abilities. Cotton weaving is naturally its most important branch. The first cotton mill is said to have been set up as early as 1829. The credit for giving the industry its first genuine impulse, however, appears to belong to Esteban Antuñano, who set up his first establishment in Puebla in 1833.

Advance sufficient to justify extensive export has not been made, in fact, there is still, in normal times, an important import trade in textiles. The grades of goods chiefly produced are medium priced cottons, such as meet a wide demand among the common people. Fine cotton goods, however, are woven and in their making the native has shown himself of decided capacity.

In this industry, as in all others established in Mexico, the period of rapid development began with the early '90s. At the outbreak of the revolution there were 324 factories reported as manufacturing cotton and wool textiles. The most important of the cotton mills were those of the Compañía Industrial de Orizaba, operating the famous Rio Blanco mill, founded in 1892, and others at Cocolapan, San Lorenzo, and Cerritos; that of the Compañía Industrial Veracruzana, founded in 1898, known as the Santa Rosa mill, at Orizaba; that of the Compañía Industrial de Atlixco, near Atlixco, and those of the Compañía Industrial de San Antonio Abad, in San Antonio Abad, Miraflores, and Colemena. The capital in these companies is predominantly French.

The most important woolen mill was the Fabrica de Tejidos de Lana de San Idelfonso in Tlalnepantla. The most important jute factories are the British owned Santa Gertrudis in Orizaba, and the Aurora in Cuatitlan in the State of Mexico.^[4]

Factories producing sugar, candy, and chocolate numbered over 2,196 in 1912. Most of them were small. Hidalgo led the list in number of establishments with over a fifth of the total. The other states that ranked high were in order Jalisco, Nuevo Leon, Vera Cruz, Oaxaca, and Puebla.'^[5]

Though Mexico has a comparatively high production of sugar, export has not yet come to be important. A very important by-product of the sugar factories of Mexico is rum, which is also chiefly manufactured for the local market. After the sugar industry the production of brandy is the most widespread industry of Mexico. There were 1,417 factories reported before the revolution, depending chiefly upon sugar cane and corn as raw materials. About 40 breweries were in operation and they were, with few exceptions, in German hands.^[6]

Tobacco manufacture has become one of the widespread industries of Mexico. There were 482 factories in operation at the outbreak of the revolution. The greatest number were found in the cities of the central plateau and in the Gulf coast states of Vera Cruz and Tamaulipas. The states of the southeast and most of those of the northern belt were poorly represented.^[7]

Electrical power development is limited in Mexico because of the torrential character of most of the rivers, the uneven flow of which makes the power actually available very irregular. Nevertheless, there are a number of power plants of importance, among which are that on the Rio Blanco owned by S. Pearson and Son, a British interest controlling also an electric light and power company in Vera Cruz, which operates water rights on the Rio Antiguo and the Rio Octopan. The Atoyac Irrigation Company is a hydraulic electric company with rights on the Atoyac River, which uses the spent waters for irrigation. At the outbreak of the revolution it was controlled by a Puebla company, which also had concessions on the Portezuelo and the Rio Blanco. The power rights at Nexaca Falls are owned by the Mexican Light and Power Company, a British interest.^[8]

The development of industry has been hindered in Mexico, as it is in many other countries, by lack of a good supply of coal. What industrial development has occurred has had to depend largely on the great forests of the country for fuel. As those lying within easy reach of the railroads have been exhausted, the price of wood has naturally risen and efforts to obtain substitutes have been increased. Imported coal continues to be expensive. Some advance has been made in the utilization of water power, especially in the textile industries but the country's rivers are not of sufficiently steady flow to make reliance on that resource satisfactory. Fortunately, the development of the oil regions along the Gulf coast has now placed Mexico in a favorable position, so far as the fuel requirements of her industries are concerned, a factor in which the republic is now as favored as it was formerly unfortunate.

Indirectly, the progress of the local industrial development is reflected in the foreign trade returns of the two decades preceding the revolution. Imports of manufactures ready for consumption increased but little. The total value, for example, of such articles as cloth, chemicals, liquors, paper, vehicles, arms, and explosives was $17,157,000 in 1896. In 1906 it had risen to $25,982,000, but, while the first figure was 40 per cent of the total, the latter was but 24 per cent. In the same period, machinery imports doubled, animal products increased 170 per cent, vegetable products 133 per cent, and mineral products—including fuel and metals—more than fourfold. Apparently the growing industry of Mexico was already enabling it to supply itself with the cheaper articles of local consumption and at the same time increasing the demands for food, machinery, and raw materials.^[9]

Turning from manufacture to internal trade, we find that in the country at large during the colonial period commerce went on in much the same channels as before the coming of the white man. The Indians manufactured their simple home-industry wares for local consumption and, to a lesser degree, for the trade of the city, where they were sold for the articles that each community did not produce for itself. The white population in the cities gradually came to act as middlemen for the local, as well as for the foreign trade.^[10] Supplementing the regular local markets there were occasional fairs, notably at Jalapa, held chiefly for the goods coming from Europe and, at various times, at Acapulco, San Blas, and Mexico for the goods brought back from the Far East in the irregular trade of the Manila galleons.

Foreign merchants made their way but slowly into Mexico, even after the winning of the independence of the republic. By 1850 there were a number of French retail houses established in the larger towns of Mexico, especially in the dry goods business. The rest of the jobbing and retail business in that line was still controlled by Spaniards and Mexicans. There were three French banking and commercial houses, and two wholesale houses. Eight German, and three English wholesale houses also had established themselves.^[11]

In the interior towns, even after the middle of the century, there were still few foreign houses. Strangers were suspected, especially if they had money and the insecurity of the country made even capital that was venturous enough to go to the larger centers unwilling to take the risks of carrying stocks elsewhere.

It was not until after 1870 that marked increase of activity in internal trade began to be shown. At that time the British and Germans had in their hands all the wholesale trade and the manufacture of wool and cotton in which the French were later to play a prominent part. A curious development has occurred in this line in Mexico. After the opening of the country, at the end of the Spanish régime, the British came to control it, but were forced to share it with the Germans. The latter practically replaced the British but were in turn themselves displaced by the French. The Germans and British also controlled the sale of silks, iron and steel, and jewelry. The Spaniards had the wholesale and retail trade in liquors and groceries, lines in which they have continued to figure prominently.^[12] Foreigners have continued to be a prominent factor in the commercial life of the republic and each group has shown a tendency to control certain lines of business. At the end of the Diaz régime the French continued to be prominent in the dry goods and clothing trade and had "practically monopolized" the sale of notions. Better class bakeries, fine jewelry stores, tailoring establishments and a part of the grocery stores were owned by them. The employees of these establishments were also largely French.^[13] Americans came to control the trade in machinery and machinery supplies. Germans were prominent in the hardware business—much more prominent in disposing of the goods than the proportion of German manufactured hardware imported indicates. British commerce showed less tendency to confine itself to special lines.

It is easy to overemphasize the degree to which industry and modern commercial methods have found their way into Mexico and this is often done by those who know only the Mexico of the large towns and of the strips of territory that are within range of the whistle of the railway locomotive. Outside of these areas the Mexico of to-day retains, to a degree hard for the American or European to realize, the conditions of a generation ago and in many districts almost the conditions of the time of the conquest.^[14]

A prominent characteristic of Mexican commerce . continues to be the degree to which the capital is its center, in spite of the facilities introduced by the railroads for its decentralization. Mexico City, the metropolis of the country, by a wide margin is the center of Mexican commerce to an even greater degree than Paris is the center of French trade. The railroads that converge at the capital have helped to continue the habit of the provincial commercial interests to look upon it as the source of supply. In it are the chief banks and from it much of the industrial activity is directed.^[15]

The harm done to industry in Mexico during the years of the revolution is much smaller than it would have been had the country had greater development of local manufactures. Agriculture, the chief industry of the republic, suffered severely. In some states, like Vera Cruz, the farming population flocked into the towns. As a result the sugar crop of the state fell from 170,000 tons in 1911 to 40,000 tons in 1917-18. The Cordoba coffee crop dropped off in the same period from 50,000,000 pounds to 20,000,000. In other areas the people, though they stayed on the land, did not plant crops which they felt no assurance they would be allowed to harvest and market. The cattle industry of the northern states steadily declined. That in Chihuahua was reported in 1918 to be only about five per cent as important as before the revolution. In other states legislation for dividing up the large estates threatened to make stock raising impossible.

The effect of the revolution on some of the manufacturing industries is hard to estimate. Tobacco manufacture appears to have flourished. The textile mills, though they were hampered by the secondary results of the revolution: sabotage, strikes, high taxes, and impractical labor legislation, continued to operate at a satisfactory rate during at least a portion of the revolutionary period.

Mining, taken as a whole, did not prosper. The northern states were one of the favorite battlegrounds of the revolutionists and only properties near the railroads or large towns could be operated with any degree of security. The Chihuahua smelters were closed down for the two years ending April, 1918, and other mining operations were at a low ebb.

The worst industrial conditions seem to have been passed by 1918. From that time on the agricultural population has been less disturbed by bandits and the farmers were reported in 1920 to have gone back to work except in remote districts and certain sections of Puebla, Chihuahua, and Durango.

The rapid rise in the value of silver in the latter part of 1919 encouraged extending that branch of mining and the output of other metal and mineral products was increased under the stimulus of the business boom following the declaration of peace in Europe.^[16]

The effect of the revolution on mercantile operations was to induce the sacrifice of stocks in regions threatened by disturbance. Those supplies that were left when the roving military forces came were often confiscated outright or paid for by warrants issued by the commanding officers. Once the stocks were gone their former owners replaced them, if at all, only by buying for minimum current requirements. The paper money issues also demoralized mercantile accounts and the stories of the experiences of some of those who found themselves forced to accept worthless paper for goods they had purchased on a gold basis are among the most extraordinary which the revolution produced.

In mercantile as in industrial activities a gradual improvement from 1918 on has occurred with the re-adoption of the gold standard and establishment of comparative order by governments whose control is accepted or acquiesced in by the war-weary population.

1. Karl Sapper. Wirtschaftsgeographie von Mexico, 1908, p. 25.
2. Maurice de Perigny, Les Etats Unis du Mexique, Paris, 1912, p. 101, and Sapper, op. cit., pp. 25-30.
3. Maurice de Perigny, op. cit., p. 100.
4. Erich Gunther, Handbuch von Mexico, Leipzig, 1912, p. 181
5. Statistics in Erich Gunther, op cit., p. 184.
6. Ibid., p. 185.
7. Statistics of the location of factories are published in ibid., p. 183.
8. Ibid., p. 179.
9. Commercial America in 1907, Washington, 1909, p. 43.
10. Karl Sapper, op cit., 1908, p. 30.
11. M. P. Arnaud, L'Emigration et le commerce francais au Mexique, Paris, 1902, p. 54. This work and Maurice de Perigny, op. cit., give excellent accounts of the French influence on the economic development of Mexico.
12. Arnaud, op. cit., p. 65, and House of Representatives, Document 145, part 5, 58th Congress, 3d Session, "International Bureau of American Republics," Mexico, p. 68.
13. M. P. Arnaud, op cit.
14. Karl Sapper, op. Cit., p. 37.
15. House of Representatives, op, cit., p.
16. Supplement to Commerce Reports, June 21, 1921.