Paper Money of Chihuahua

.. by Simon Prendergast

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Home The History Banking in Chihuahua

Early legislation

During colonial times and the first years of independence the church was the most important single provider of credit in Mexico in part because of its vast holdings of property. Once divested of its lands by the Reforms of the 1850s, it was no longer able to carry out these operations on such a scale and other sources of credit were needed. However, providing such credit was made more difficult by the fact that Mexico did not have a banking law that defined the legal obligations of banks, their creditors and their debtors. Commercial houses (casas de comercio) made loans to hacendados and to the government at exorbitant rates at times, and some casas funded their operations by circulating liabilities called vales. Vales evolved into bearer notes that were redeemable for some type of commodity money (usually gold or silver coin) on demand. Bankruptcies among casas seem to have been a common phenomenon. Therefore if the public was to have any faith in banks, it was likely that they either would have to own considerable amount of land or would have to have connections with well-known foreign firms.

In May 1854 the Mexican Congress adopted a Code of Commerce as its first serious attempt to regulate financial institutions. However, the 1857 Constitution did not in fact mention banking and as Article 117 stated that those powers that were not expressly granted to the federal officers were reserved to the states this would have enabled state legislatures to pass their own laws. Chihuahua was the only state, outside of the Federal District, where the legislature took advantage of this constitutional right before the federal power decided to assume it because in Chihuahua the expansion in the economy had caused the need for, and provided the basis for, the establishment of such institutions and the issue of banknotes.

The powers conceded by the 1857 constitution placed the faction which controlled the state government in a favourable position, as it could grant lucrative concessions to its own favourites. In the concessions granted by the Chihuahuan legislature can be seen signs of the political infighting between the Terrazas and other families in the first decades of the Porfiriato.

In the absence of a strong regulatory system any issuer would need to inspire confidence, and it is noticeable that the first two concessionaires, Enrique Müller and Francisco Macmanus, had experience (having held the concession for the Chihuahuan mint and already offering banking facilities through their respective business houses), vast assets, and foreign nationality. Macmanus' notes were reported in 1883 as being the equivalent of America's silver certificates"the stability and unencumbered wealth of the Macmanus Scott estates of assets makes these bills absolutely par with silver and far more valuable as a financial agent for facilitating commercial transactions" El Paso Daily Times, 22 April 1883.

The earliest concessions were quite basic, merely permitting the issue of a certain amount of currency. The first, in 1875, for the Banco de Chihuahua, made no mention of any upper limit or guarantees, whilst the second, for the Banco de Santa Eulalia, only referred in passing to a guarantee. By 1882, however, the drafters had developed their skills and the concessions were demanding guarantees, the right to appoint supervisors and the obligation to provide credit facilities for the state government.

All these banknotes were of voluntary acceptance, and it was a constant problem that they were not readily accepted outside the state. The first notes were payable on sight in legal tender (en moneda corriente), i.e. copper coin, or in silver, either at a discount of 8% or at the daily exchange rate. The copper coinage was already debased and the discount on silver indicated the premium that this metal carried. Banknotes could be cashed in the branch of the bank that issued them or, at a discount, in another branch of the same bank, the discount representing the cost of shipping the notes back to the original branch and also an insurance premium against the fact that they might prove to be counterfeit. Because of this banknotes from out-of-state branches were overprinted with the name of the branch at which they were issued.

Within a few years of the original concessions notes issued in Chihuahua had to bear some indication that they had been registered by the Administrador de Rentashe Administracíon General de Rentas became the Tesorería General del Estado  in the constitutional changes of 24 September 1887. Some Banco Minero Chihuahuense notes carry the signature of the Administrador Ramón Cuellar over a bar overprint bearing his title: more common is a circular seal, in red or black, over either the year date or a five figure numeral. Since the year date 1881 is known the seal must have been in use by that year, though the requirement is first mentioned in the Banco Minero concession of 1882.

Later notes also carry revenue seals which were dated by fiscal year and so comprise two consecutive year datesThe Mexican fiscal year ended on 30 June. The designs changed for each fiscal year and there were denominations for ½c, 1c, 2c and 5c. Unissued notes invariably lack such seals, which must have been applied just before the notes were put into circulation.

Between 1875 and 1883 the Chihuahuan legislature granted concessions to six banks: the Banco de Santa Eulalia, Banco Mejicano, Banco de Hidalgo de Parral, Banco Minero Chihuahuense, Banco Minero de la Candemeña and Banco de Chihuahua though only the first four began operations.