Abstract

"Sovereign Debt and Foreign Trade through the Mexican ‘Era of Chaos,’ 1827-1861"

Hadar Hoter-ishay, University of Vienna (hhi5112@gmail.com)

The proposed paper will explore how prominent British merchant bankers have used the young Mexican Republic’s sovereign debt crisis to favor their mercantile affairs throughout the mid-nineteenth century. Due to political instabilities, Mexico suffered from a decades-long “era of chaos,” including rapidly changing governments and long-lasting insolvency. As a result, Mexico’s British creditors, known by the name agiotistas, the moneylenders, had to reinvent their affairs in Mexico. Thus, they turned Mexico’s foreign debt from a financial means to accumulate profits from dividend payments into a negotiation tool and pressure leverage to increase imports into the country and lower trade costs.
In the mid-nineteenth century, British merchant bankers were specialized governmental financiers and importers of various goods. When Mexico deteriorated into a sovereign debt crisis, the difficulties of one business field supported the other. Thus, instead of collecting interest and loan repayments, the creditors used their access to Mexican policymakers to band over the protectionist policies aimed at nourishing the local industry. The creditors thus pressured governments to significantly lower tariffs, gain personal tax rebates, and lift specified import bans, thus penetrating the Mexican market through negotiations.
Based on archival materials, including the creditors’ house correspondences and private communications, the paper will explore merchant bankers’ flexibility while doing business in Mexico. The paper will thus shed new light on the role sovereign debt has played in the nineteenth-century Mexican economy, not only as a burden upon the public budget but as a tool to tackle protectionist policies in the hands of private entrepreneurs. Moreover, it will present the dynamic nature and strategies of British merchant bankers through their conduct as importers and creditors of the rapidly changing Mexican governments, thus portraying the entrepreneurs as active agents of globalization.