Chapter 3

Financing Mexican Government

The difficulties of establishing an acceptable and effective system of taxation proved to be immense, if not unsurmountable in the decades between the 1820s and the 1870s. Much of this explains the political instability perceived by most historians looking at the centre of government at this time. At the provincial levels, however, late-colonial elites were usually able to retain and consolidate their positions as landowners and businessmen, often with a broad span of interests, and by accommodating members of the professions alongside them on the representative institutions. Matrimonial and professional contacts intertwined. Divisions over ideology, religion or the perennial issue of relations between State-level institutions and the central government, however, made elites vulnerable to lower-class pressures in town and country. The spilling over of national-level conflicts into the provincial milieu, and vice versa, further inhibited economic recovery and political consolidation.

The insoluble financial question explained, more than any other factor, the new Republic’s repeated difficulties. Failure to resolve the question of the distribution of fiscal resources and maintain a balance between State governments and the central government had broken the first Federal Republic by 1835–6. In 1833–4 federal revenue came to 13 million pesos: expenditure, however, totalled 16 million pesos. The deficit explained the pressures put on the State governments by the federal government. Under the federal system, the states were expected to pay a monthly contribution from their resources to the federal treasury. This was known as the ‘contingente’. It became one of the most controversial elements in the relations between federation and states. Neither federalism nor centralism managed to resolve or even put in order the Republic’s finances. Social conflict over direct taxation frustrated the attempt at reform from the centre in 1836–46. Mexico only had its first modern budget in 1861, due largely to the availability of up-to-date statistics published in 1856 and 1859. The Finance Ministry continued this practice after 1868–9, following the restoration of the Liberal-led Federal Republic in the previous year.¹

The bulk of national revenue came from indirect taxation. Much depended on the rhythm of external trade, which continued to be erratic. In 1825–6, customs revenues, chiefly from the port of Veracruz, accounted for 67.7 per cent of federal government income. By 1833–4, this proportion had risen to 76.31 per cent.² The external and internal debts became increasingly difficult to service. This issue immediately placed Mexico’s debt problem within an international context.³

The first federal system retained or restored a number of colonial taxes, generally regarded among the populace as irksome. These included the sales tax (alcabala). The federal government replaced the colonial-era Indian tribute with a contribución personal. All males between the ages of sixteen and sixty were eligible for the tax, without distinction of caste. A series of regulatory decrees followed from 1824 to 1830.⁴ This tax would become the forerunner of further experiments at direct taxation under the centralist system in 1836 and 1842.

Richer states, such as Zacatecas, a stronghold of federalism since 1823, aroused the envy of central level political figures who wished to rid the country of federalism. Zacatecas had experienced a revival of its silver-mining industry from the last years of the 1810s. In 1825–9, two-thirds of the total national coinage had originated from the State of Zacatecas. In 1830–2, the value of mining production there reached 14.4 million pesos. The State government had syphoned off some of the revenue to form a Civil Guard, which, by 1835, had a total of 4,000 men. Alamán held a low opinion of ‘the Zacatecas oligarchy’, which, in his view, consisted of evil-intentioned men who left the rest of the Republic in ‘anarchy’. Not even Zacatecas, however, could avoid financial imbalance: in 1830, expenditure exceeded revenue by 267,589 pesos. The State was in debt to the Tobacco Revenue and had not filled its contingente quota due to the national government. The State Congress’ solution was the imposition of a direct tax on capital, over 5,000 pesos, assessed by the municipal councils, with no exemptions.⁵

In 1830, the revenue of the State of Oaxaca totalled 387,778 pesos, out of which the State owed the Federal Treasury 243,215 pesos as its contribution to the federation. However, only the meagre sum of 131,474 pesos was available to cover the cost of internal administration. Given the indebtedness of many states, Senator Demetrio del Castillo managed to persuade the federal government to set the proportion at 30 per cent of states’ revenues. Vice President Anastasio Bustamente, then acting head of government, confirmed this on 11 February 1832.⁶

The Internal Debt

The internal debt rose to 92.4 million pesos by 1850, according to Finance Minister Riva Palacio’s calculation. Borrowing obviated the problem of further taxation, always politically fraught.⁷ The internal debt accumulated as a result of credits to government by private lenders, known as agiotistas, who rose to prominence during the centralist regime of 1835–46. This small network of powerful financiers dominated Mexico’s money market. Their capital had been acquired mainly through commerce. Most of them were Mexicans, with Escandón and Bringas in the lead, but some were of other nationalities, such as the British Montgomery, Nicod & Co., Geaves & Co. and the House of Ewen MacIntosh. The Montgomery, Nicod & Co. associates of the Martínez del Río House in public debt financing, were rivals of the Manning & Mackintosh during the 1840s. The Martínez del Río, originating from Panama, and the Guatemalan financier Felipe Neri del Barrio, also played a major role in credits to the Mexican government in the centralist period. The close inter-connection of business families is illustrated by the fact that Escandón was compadre of José Pablo Martínez del Río.⁸ Merchant-financiers, as in the colonial era, also extended their investment into the mining industry, as the career of Francisco Murphy illustrated.⁹

The outstanding debt question rendered the Mexican State vulnerable to pressure and manipulation by financiers. Yet, their fate could still hang in the balance. The Martínez del Río family business came near to bankruptcy in 1856, and in 1857 its total assets came to only 995,240 pesos, considerably lower than the spectacular fortunes of late colonial merchant-financiers and mine investors such as Regla or the Fagoaga family. Essentially, the family business acted as intermediary between European-based manufactures and consumers in the Spanish-American market. They had been engaging in the trade link from British-controlled Jamaica across the Isthmus of Panama to San Blas, one of dubious legitimacy, and onward to the rising city of Guadalajara, hoping to tap the wealth of the Zacatecas silver mines. The Guadalajara merchants, Pedro José de Olasagarre and José Prieto, owed them around 100,000 pesos in debt. The former’s Hacienda de Atequiza was mortgaged to Ventura Martínez del Río as collateral. When Manuel Olasagarre sold his father’s estate in 1838, he was able to pay back the debt to Martínez del Río. In 1844 this same Olasagarre became the first of Guadalajara’s mechanised factory operators. Escandón put up the finances and held a 70 per cent stake in the textile factory. The Martínez del Río had widespread marital and financial connections. In the previous decade, the family had been associates of the British firm Montgomery, Nicod & Co. in public debt financing.¹⁰

Direct Taxation

During the 1840s, a crucial decade for Mexican fiscal policy, debate focused on the issue of whether the imposition of direct taxation could provide the most effective instrument for the resolution of the financial problem. This issue cut across factional and party divides. Liberal administrations did not reverse the direct tax, known as the ‘contribución directa’ or the ‘capitación’, imposed in 1842, when they superseded the two Central Republics in 1846 and 1855 – nor again in 1867 after the collapse of the Second Empire. Facing a grave situation in the war with the United States, under the restored federal system, acting President Pedro Anaya pointed to the ‘extreme penury of the Federal Treasury without regular revenues’. A major federal revenue, he explained, was the contribución directa, formally established in 1842 on incomes, professional activities, luxury objects, ‘profitable exercises’ and ‘industrial establishments’. Anaya stressed that State governments did not have the right to appropriate such tax receipts and that arrears since 1 July 1845 were to be collected.¹¹

In the first serious attempt to restructure the tax system, the centralist governments established a series of new taxes on property, income and production. The process began on 5 July 1836 with a tax on the value of rural properties, including water supplies, livestock, offices and utensils. Tax evasion became widespread, not least due to inadequate statistics and insufficient agents. The tax was a failure from the beginning. From an anticipated 4 million pesos for 1838, only 731,106 pesos were collected. A further attempt was made on 11 March 1841 with a federal tax on rural and urban property, allegedly to finance a campaign for the reconquest of Texas. This was followed on 21 August 1844 by two taxes on rural properties and the estimated value of cloth and thread manufacture. The property taxes, we should note, remained in force after the transition to the second Federal Republic in August 1846.¹²

On 17 April 1837, the centralist regime, attempting to exclude provincial decision making over the distribution of finances, appointed senior finance officers (‘jefes superiores de Hacienda’), responsible only to the central government, for each of the departments. This measure aroused great opposition among the provincial power groups, since it crippled the new department authorities, which had replaced state institutions under federalism. The new juntas departamentales, replacing State Congresses, protested – Jalisco, Guanajuato, Zacatecas, Michoacán, Querétaro and Oaxaca – to the central government. Accordingly, Congress modified this decree on 23 December 1837 and permitted departmental governors to collect and supervise the application of finance in their own territories. As a result, the attempt to centralise the fiscal system lasted only nine months.¹³

By far the most important tax was the capitación (‘head tax’) established by the decree of 7 April 1842. This graded, national tax, to be paid monthly at rates between two reales and two pesos, fell on all males above sixteen years of age: labourers were to pay half a real and proprietors two pesos. Payment seems to have been successfully secured mainly in urban areas, despite opposition, since the total yield for the rest of 1842 came to 42.1 per cent of national revenue. The significance of this contribution could not be lost in a country in which indirect taxation traditionally yielded the greater part of revenue.¹⁴ In the State of Oaxaca, a total of 117,662 men were eligible for payment in 1843–4. The Department Assembly’s Regulation of October 1845 proposed to levy this tax on all males aged between eighteen and sixty years of age. After the collapse of centralism in 1846, the moderate liberal administration at national level retained this head tax and attempted to collect it as best it could at State level. Right through the period until 1852, repeated protests of incapacity to pay came from pueblos across the State of Oaxaca.¹⁵ Members of religious orders living in community and soldiers and militiamen on active service were exempt from payment. Parish priests and other members of the secular clergy were required to pay. Sub-prefects would collect the tax in each district, paying their salaries out of 12.5 per cent of the proceeds, as the late-colonial subdelegates similarly had done, with all the attendant irregularities. The Department Assembly’s Regulation of 28 October 1845 stipulated that all males between the ages of sixteen and sixty were eligible for the tax, at the rate of one real (one-eighth of a peso) per month, that is, one and a half pesos annually. Prefects had the responsibility to oversee the statistical records in each district. These records contained street names, house-block locations, addresses and the names of the persons living in each dwelling place, specifying who were the males, their age and their profession or job.¹⁶

Financial inconsistencies brought down the first Federal Republic. Centralism would be judged by the same yardstick.¹⁷ The centralist regime also sought to raise revenue through the restoration of the colonial Tobacco Monopoly, abolished by the federal government in 1833, but, in so doing, stirred up violent opposition in villages, where plantings had already taken place outside the colonial prescribed areas.¹⁸

The External Debt

In 1824 and 1825, the Mexican government had floated two loans on the London Stock Exchange, each for the sum of £3.2 million at 5 per cent and 6 per cent, respectively. The sale of interest-bearing bonds would raise the money. However, the financial situation in Mexico deteriorated to the extent that from October 1827 until April 1830 the government was unable to pay interest. The debt was recognised at 46,239,720 pesos in 1836. In 1842, British Minister Plenipotentiary Richard Pakenham negotiated the payment of 2 per cent of the Veracruz customs revenues and 1 per cent of those of Tampico to secure its servicing. Debt consolidated in 1846 fixed on £10,241,560, and the conversion in 1850 recognised this same total. A committee of Mexican bondholders had been set up in London in 1830 and continued until 1888, with the object of pressing the bondholders’ claims. Many of these bondholders were members of parliament, officers of the armed forces, financiers and other representatives of the upper echelons of British society. As such, they put constant pressure on the British government, which did not participate in such negotiations.¹⁹

Government revenue, estimated in 1849 at 9,838,240 pesos, fell far behind anticipated expenditure at 16,080,520 pesos, leaving a gaping deficit to be somehow covered. Various finance ministers sought to bring the external debt under control without much success. The moderate Liberal Manuel Payno (1810–94), acted as President Herrera’s Finance Minister from 4 July 1850 until 28 January 1851. Payno had been deputy for Puebla from May 1848 until December 1849 and a member of the Finance and Public Credit Committee, with particular attention to the British debt. The decree of 14 October 1850 established the bases for the regulation, conversion and liquidation of this debt. Payno left from Veracruz bound for London on 6 April 1851, arriving in Southampton on 7 May. He remained in Europe until October. Late in May, he attended a meeting of the committee of Mexican bondholders and handed over a certificate for the payment of 2.5 million pesos accruing on the interest. Payno estimated that the debt owing to the British bondholders was 51,208,250 pesos and that the overall external debt totalled 91 million pesos. Interest at 3 per cent on the British debt amounted to 2.5 million pesos, which he proposed should come from the last part of the indemnity payment by the United States to Mexico for the cession of the far-northern territories, due in May 1852. Mexican government income in 1851 reached only 8 million pesos, of which 6 million came from maritime customs revenues, 800,000 pesos from Tobacco Revenue, and 450,000 from direct taxation. With expenditure reaching nearly 12 million pesos, this left a deficit of almost 4 million pesos.²⁰

The Convention of 4 December 1851 between Percy Doyle, British chargé d’affaires in Mexico, and the Mexican government attempted a further regulation of interest payment. A convention was recognised by international law and was legally binding on Mexico. The Doyle Convention accepted the ‘London Debt’ of 1824 at £10,241,650, to be serviced by 25 per cent of Gulf import duties and 5 per cent of export duties, plus 75 per cent of Pacific export duties. It also established a consolidated fund of just under 5 million pesos to service the debt. Both the British and the Spanish debt (recognised by the Morán Convention of 6 December 1851 at 983,000 pesos) were to be serviced by the allocation of 12 per cent of Mexican customs revenues. The agent engaged in operating both the British and Spanish Conventions in Mexico was the Martínez del Río Company. Everything depended on the capacity of the Mexican government to service the overall debt. That meant paying regularly, at the agreed times, the interest accruing to the original creditors. Under Doyle’s Sub-Convention of 27 November 1852, the proportion of 12 per cent was increased to 15 per cent, since Mexico was already 124,622 pesos in arrears. Between 1852 and 1861, total capital and interest of 2,304,782 pesos was actually paid to the ‘British Convention Bondholders’ (as they had been described, since the 1846 debt conversion). However, sinking fund payments were behind to the total of 1,482,426 pesos by 1 January 1861. The question of foreign-debt service had become an international issue throughout the 1850s and into the 1860s.²¹

Prieto, Finance Minister in 1852–3 under Arista, inherited a Mexican debt to British bondholders of 51,208,250 pesos (£10,241,658).²² The essential problem for Mexican governments continued to be the fact that servicing the debt consumed an increasing proportion the customs revenues of the Republic, when at the same time these indirect taxes provided the principal revenues of the Federal Treasury.²³

Protectionism and Revenue-raising

The economic group most affected by the entry of foreign-produced textiles was the artisans. The tariff of 1824 attempted to address disruption of traditional Mexican labour patterns. Demands on Congress and government for protection from imported cottons became a major issue during the Guerrero Presidency of 1829 and the first Bustamante administration of 1830–2. Artisan industries, however, could be protected only by impossibly high tariffs. Governments could go only part of the way – or risk increases in the contraband trade and thereby loss of tax revenues.²⁴ The recession of 1837–9 placed protection (this time for factory producers) squarely on the political agenda, with Querétaro and Puebla business interests in the forefront. Tariff protection reached a culminating point in 1837, 1842 and 1843 with Mexican cottons as the objective. The 1837 tariff penalised the import of cottons and woollens, cotton yarn and thread, and ready-to-wear clothing. This 15 per cent import duty turned importers against the Bustamante administration, which had been initially supported by foreign merchants in Mexico for the purpose of enforcing law and order and protecting their financial interests. This and successive administrations found themselves caught between the need to raise revenue, the desire of Mexican manufacturers and artisans for protectionism, and the demands of foreign importers for lower tariffs.²⁵

In Mexico City in 1842, there appears to have been 11,229 male and female artisans out of a total urban population of some 120,000 inhabitants working in the textile industry and a range of other crafts and skills. That alone indicates the continuing scale of artisan activity, replicated not only in other urban areas but also throughout the smaller towns, villages and countryside. Such numbers gave the artisans – tailors, painters, metalworkers, ironmongers, sculptors, carpenters, carriage builders, potters, shoemakers and others – political potential. Ardent supporters of protectionism, the artisans saw their workshops ruined by foreign imports and themselves put out of work. Artisan textile production, for instance, continued alongside measures designed to promote the more technologically advanced factories. The Santa Anna administration set up the Junta de Fomento de Artesanos on 2 October 1843, which started work officially on 27 December 1843. It was designed to provide an institutional voice for the artisans occupied in the wide range of crafts, particularly in the urban areas. In many respects, this measure complemented the protectionist tariffs established in the previous September under pressure from the new industrial groups, especially the cotton manufacturers. In Mexico City, a total of 1,683 craftsmen registered with the Junta, which had its own regulations and membership fees. These latter were fixed well above the daily wage of an ordinary craftsman, who in 1845 would have earned between two and three reales. This meant that only owners of workshops would be able to afford the fees. The news sheet Semanario Artístico broadcast the views of members. On 7 May 1845, for example, the paper declared its opposition to the economic ideas of Adam Smith, who argued generally for a reduction of trade barriers and tariffs. After the fall of the centralist system, Liberal economic ideas began to prevail over protectionist tendencies after 1846. Artisan protests in 1849 and 1851 failed to reverse this trend.²⁶

US textile manufacturers, hoping for a natural market in Mexico where they would compete with British textiles, sedulously opposed Mexican protectionism. Governor Gómez Pedraza was complaining of the deleterious condition of industry in Puebla. Similar complaints came from the States of Mexico, Oaxaca and Jalisco.²⁷ Tariff policies had considerable success in reducing US imports by more than 80 per cent between 1840–1 to 1846–7, with considerable advantage to Mexican textile manufacturers.²⁸

Finance Minister Ignacio Trigueros soon clashed with the merchants over the tariff question and other outstanding issues, notably the allocation of sums from the Veracruz Customs House designed to pay funds owing to the British bondholders. The 1843 tariff, prepared by acting President Bravo (for which Santa Anna, absent at his Veracruz hacienda, could not be held responsible) included raw cotton and coarse woollens. The share of finished cottons in the scale of US exports fell from heights of 30 and 40 per cent to a low of 16 per cent between 1838 and 1846. Furthermore, the Mexican administration increased the export tax on gold and silver to 6 per cent on 10 March 1843. All the foreign representatives protested on 21 August, rejecting the Mexican government’s argument that this was to raise revenue. Worse still, the Mexican government increased the import tax to 20 per cent on 7 April in view of the secessionist intent in Yucatán and the apparent imminence of war over Texan secession. Then, on 14 August, a long list of prohibited articles appeared with the object of protecting national industries. By September 1843, import duties reached their highest level ever, at 30 per cent.²⁹

Foreign diplomatic representatives protested to the Mexican government against the imposition of duties by State governments on goods imported into their territories. Representatives of Great Britain, France, Spain, Prussia and the United States did so, individually and collectively, an indication of the prevalence of this practice across the Republic. Percy Doyle complained in December 1851 that the State government of Puebla had imposed a consumption tax of 6 per cent on 1 August on all foreign commodities entering the state. This naturally included textiles. Doyle regarded such a tax as illegal and contrary to the Constitution of 1824. Accordingly, he demanded a refund of the sums exacted from British subjects. The Mexican government agreed that State governments had no right to collect taxes on foreign imports but stated that only the federal congress could rescind them. State governments appeared to be disregarding federal government authority and acting as though they were independent entities, as Doyle pointed out to the Russell ministry in London. In short, the federal government, in his view, had failed to ensure the freedom and security of foreign trade in the country.³⁰

The call for tariffs to protect small producers extended into the Liberal camp as well. This, however, was combined with hostility to the factory producers. The situation of Oaxaca in the early period of the Liberal Reform gives us a clear illustration of the dilemma. On 24 October 1856, Treasurer General Luis Fernández del Campo discussed with the State Secretary the complaints made to President Comonfort against the State government by several owners of cotton factories. The latter objected to the 12 per cent sales tax placed by the Oaxaca Legislature on 4 February 1847 on cotton thread and cotton and woollen textiles entering the State from other states. The Minister of Finance had passed these complaints to the Oaxaca State government. That tax had been reduced on 6 February 1849 to 8 per cent and continued to be collected until June 1853, when it was interrupted by the change of regime in the country. When the state reverted to the status of department again, collection of the sales tax was resumed on 20 September. Fernández del Campo, evidently a supporter of the tax, explained that its original object had not been only to raise revenue for the State government, but to protect Oaxaca’s weakened textile industry. He reminded the State Secretary of Oaxaca’s history, before and after Independence, as a textile-producing province. There were also many looms in the provincial capital producing simple cotton clothing or weaving mantas. These industrial activities provided subsistence for many families. He estimated that some 100 families lived in this way in the city. The establishment of textile factories in Puebla and at Cocolapan threatened to reduce them to penury. Fernández del Campo argued that, although local products were of better quality, they could not compete in price with the factory products. He referred to the owners as ‘los grandes fabricantes’, whose aim was to monopolise textile manufacture. It was these men who were complaining about the surcharge. Removal of the sales tax, he warned, would put the artisans out of work. Even despite the tax, the factory products were increasing their sales in Oaxaca, rather than diminishing.³¹

We do not have the State government’s decision on this matter, if one was ever taken. Fernández del Campo’s warning concerning the future of the artisans revealed the seriousness of the threat to their livelihood by larger-scale production on water-powered looms. Even so, the level of tariff or tax protection for artisan industries might prove to be unsustainable.

Finance Ministers

The most striking phenomenon was the number of Finance Ministers in the period and how short, for the most part, was their term of office. Finance Ministers came from virtually all the different factions or interest groups in or around the Mexico City government or the leading provincial capitals – Puebla, Veracruz and Guadalajara. The brothers Francisco José and Pedro José Echeverría were Veracruz merchants, as were Manuel Eduardo de Gorostiza (13 October 1841–3 March 1843; 26 March–19 April 1846), Antonio de Garay and Ignacio de Mora y Villamil.³² Olasagarre, the Guadalajara factory owner, became one of Santa Anna’s Finance Ministers from May 1854 until 16 January 1855.³³ Haro y Tamariz, from the Haro family of Puebla, became Mexico’s fortieth Finance Minister on 29 October 1844, again from 25 September until 13 November 1846, and for a third period from 20 April until 5 August 1853 in Santa Anna’s last regime.³⁴

Finance Ministers, notably Payno, Prieto and Miguel Lerdo de Tejada, sought – albeit often in vain – to make their mark on the office and bring the government of their day to a more stable position. Most Finance Ministers reported to Congress the difficulties that they encountered when attempting reforms of taxation and the obstacles to revenue collection. Executive decisions often met with criticism or opposition in Congress and in its finance committee, where on-going struggles between executive and legislature or between rival political factions continued. Ministers complained of the inadequacy of their offices and staffing. Their overriding problem remained the organisation and servicing of the internal and external debt.³⁵

Payno and Prieto would both come to play a major role in the Liberal politics of the Reform era, building on the experience gained in the post-war period. Payno became Finance Secretary in the Comonfort administration from 13 December 1855 until 5 May 1856, again from 20 October until 11 December 1857, then finally, after Comonfort’s presidential coup d’état of Tacubaya, from 17 December 1857 until the Conservative coup and the removal of the remains of the Comonfort administration on 19 January 1858. Payno disliked the radical trend of the constituent and constitutional congresses of 1856 and 1857, but his identification with Comonfort’s actions led to his disgrace and cost him the support of most of the Liberal Party.³⁶

Prieto would hold the office of Finance Minister on five occasions. Internally exiled under the Santa Anna, Prieto, identified with the radicals, resumed office during the presidency of Álvarez, from 6 September until 7 December 1855. Out of power under Comonfort, Prieto was appointed Secretary of Finance by Juárez in his itinerant Liberal administration, first in Guanajuato, transferring to Guadalajara, and finally to the port of Veracruz in May 1858. Prieto held that office from 28 January until 5 August 1858, during the first stage of the Civil War of the Reform.³⁷

Payno and Prieto were close friends from their youth, despite later divisions on political issues. Payno was the son of an official in the Royal Customs Accounting Office, who happened to be a relative of Anastasio Bustamante, then an army officer operating with the Royalists in the Bajío. Payno Senior became Director General of Revenues in 1833 and a deputy in Congress in 1837, the year that Bustamante became President for the second time, and served on the Finance Committee. Elected again in 1842, he subsequently became Director General of the alcabala and the contribución directa. The younger Payno gained from his father’s experience an intimate knowledge of how the Republic’s finances were organised. Quintana Roo, then Minister of Justice, had taken the young Prieto under his wing in the early 1830s, furnishing him with a grant to study at the College of San Juan de Letrán, while at the same time earning a small wage in the Customs House. At the Mining College, Prieto studied mathematics and English language. Through his position at the Customs House, he came in contact with Payno Senior and made friends with the younger Payno. Together, they studied the writing of Adam Smith, Jean-Baptiste Say and the Spanish economists José Canga Argüelles and Álvaro Florez Estrada. In 1842, both Payno and Prieto secured appointments in the Tobacco Administration in Fresnillo, the mining town of Zacatecas and the city of Zacatecas, respectively. Back in Mexico City by 1844, Payno became the capital city’s tobacco factory accountant.³⁸

Prieto joined Otero’s tertulia, which included the veteran moderate, Gómez Pedraza, as well as Luis de la Rosa, and Comonfort. Both Prieto and Payno wrote for El Siglo XIX and El Monitor Republicano. Along with Payno and Ignacio Ramírez, Prieto wrote for the satirical magazine Don Simplicio: Periódico Burlesco, Crítico y Filosófico por unos simples, for which he was arrested in April 1846. Payno also wrote for El Museo Mexicano, which was edited by the Liberal publisher, Ignacio Cumplido, who also published El Eco del Comercio, founded by Payno early in 1848. Although both Prieto and Payno opposed the Gómez Farías administration’s attempt to raise war funds at the expense of the Church in January 1847, the two men divided over the question of continuing the war with the United States.³⁹

Setting the Mexican National State on a sound financial basis remained an outstanding problem for most of the nineteenth century. Debt-servicing problems accumulated over succeeding decades, despite attempts in the early 1850s to ensure regularity. The Doyle Convention of December 1851 remained the foundation for the financial relationship between the Mexican and British governments until the reconstituted agreement of 1884. Mexico’s debt question became an international issue involving the three European powers, Great Britain, France and Spain. Their joint intervention from December 1861 to April 1862 derived, as far as the British were concerned, from non-fulfilment of the terms of the Doyle Convention.

The internal debt question, which affected the balance of political forces inside the Republic, continued alongside the international debt problem. It explained how successive Mexican governments fell into the hands of powerful agiotistas. Liberal regimes sought to climb out of this bondage by using state power to appropriate what they believed to be the economically crippling wealth of the Church, testing to the limits the capacity of the Mexican State to enforce its measures.

These financial issues conditioned foreign states’ assessment of the Republic. Even so, Mexico possessed natural wealth, known and as yet unknown, which could lift the country from its seemingly abject condition. Had these resources been tapped, the country would have been able to sustain the debt acquired over the decades. Mexico’s problem was not the debt itself but the capacity to service it through regular interest payments and agreed negotiations for consolidation.⁴⁰