The Economy of Colonial Mexico



16th Century Economy

            The 16th century was a time of conquest, consolidation, and growth for the Spanish empire.  Mexico, or New Spain, as it was referred to at the time, emerged as one of the world’s chief suppliers of silver.  This newfound colonial wealth was realized and capitalized upon during this era.

            During the 16th Century Spain and its colonies had great wealth from many different sources, but silver mining was the “cash crop” for the society.  Throughout the colonial period it was the primary export to Europe; however, the proportions varied from year to year.  Within the Viceroyalty, silver was a crucial stimulant of interprovencial trade, the settlement of northern Mexico, and the creation of markets for local goods in those regions (Hoberman).  Mining centers such as Zacatecas, Taxco, and Guanajuato flourished during this period.

            To keep a tight grip on the silver export only Vera Cruz, Cartagena, and Porto Bello were allowed to trade directly with Spain, at this time.  This was primarily to maintain strict control over silver export (Hoberman).  In Spain, Seville had a monopoly on trading and so an influential merchant class developed with connections to the trading ports in the colonies. 



17th Century Economy


            The 17th century was a period of fluctuation for the economy; however, it began and ended with acceptable levels of production.  This century’s silver industry and economy suffered a depression from 1640-1680, but still maintained its dominance in the silver market. Strict restrictions on the industry limited the success of the century and these policies and their consequences result in looming disaster at the turn of the century.

            The mines in Mexico were extremely productive, between 1590 and 1630, especially in comparison with silver mines in Peru, which experienced a mercury shortage (Stearns).  Among the most productive at the time were located in Zacatecas, Guanajuato, Pachuca, Taxco, and San Luis de Potosi.  In 1598, Viceroy Montesclaros wrote to the crown: “without silver, nothing happens in this kingdom (Hoberman).”  This was shortly after New Spain surpasses Peru in exporting silver, giving them the greatest trade volume in the world.  The importance of silver is again emphasized by Viceroy Cagereita in 1630 when he states, “without silver, which is the only thing that gives value to foodstuffs and merchandise, there is no trade (Hoberman).”   Perhaps this is an overstatement, but it is clear that the mining industry’s influenced towns and cities that were not tied directly to mining such as Queretaro and Yucatan (Hoberman).

            As the century progressed problems arose in the mining industry, and despite the rebound of the economy in the end of the century, this depression foreshadowed what was to come.  “In 1635, the value of silver registered at Zacatecas fell to 1,691,747 pesos and until 1716 did not exceed that level with regularity except between 1671 and 1682 (Emmer and Gaastra).”  The annual total during the 1630’s prior to this was about 3,731,200 pesos.  One reason, suggested by Emmer and Gaastra, for the reduction of these figures was the illegal trade of large amounts of silver with Manila by merchants.  In 1639 the diminishing silver output in Zacatecas, one of the chief sources of silver up until this time, forced Spanish merchants to look elsewhere for their silver supply, at least until more advanced mining techniques allow for deeper mining (Hoberman).  A contraction of growth in New Spain’s silver mining from 1640 to 1680, was the mostly the result of mercury shortages (Stearns), however, the decreasing Indian population was starting to limit production.  Problems extended beyond the mining industry; trade with Asia and interregional commerce lost vigor after 1640 (Stearns).

            The Economy was able to recover during the last decades of the 17th century due to changes in mining technique.  The return to smelting techniques, a process whereby silver is removed from the oar, was able to offset mercury shortages (Stearns).  This process used less mercury but was incapable of producing the same high yield of silver. 


18th Century Economy


            The 18th century began with a depression; however, as the century approached its midpoint economic conditions improved and reached and maintained unprecedented levels of production until the Mexican revolution in 1810.  The Burbon reforms, created by Charles III, restructured the silver industry and the entire colonial economy.

            The collapse of Spain’s economy during the early 18th century is due in part to the rapidly diminishing Indian population.  “Disease and over work combined to wipe out much of the Indian population.  By 1700, little over 1 million of an estimated 11 million Indians survived in New Spain (Mexico Connect).”  The Indian labor force was essential at this time, especially in mining, and “without Indian labor the mines could no longer function (Mexico Connect).”  Ironically, the Spanish assisted in the destruction of their economy by monopolizing irrigation water; without adequate amount of water for farming the Indians were incapable of sustaining their population.  The declining economy was also caused by the destruction of farmland by the vast cattle and sheep herds.  During this time people retreated into Haciendas, or rural estates.  Haciendas were “self sufficient centers of political and economic power.

            The second half of the 18th century was a time of unprecedented growth for New Spain’s economy and culture (Aceves and Chambers).  “This development was the product of a conjunction of circumstances, political, social, cultural and economic, which favored both material prosperity and the advancement of scientific activity (Aceves and Chambers).”  A series of reforms were initiated by the Spanish crown; of which, the basic principal was the termination of laws subordinating the entire economy to the overall good of the Spanish economy.  “Spanish diplomats dictated measures... to augment their monopolies and the collection of taxes as to facilitate free commerce between the ports of New Spain and the Spanish Peninsula (Aceves and Chambers).”  At this time Intercolonial trade with Peru, Guaremala and Nueva Granada was no longer restricted, however, this only lasted until 1782 (Stearns).  Charles III and authorized eight other Spanish ports, besides Seville and Cadiz, to trade with the Indies.  These restrictions were used in the past in an attempt to control the mining industry, provided new horizons for merchants, and this newfound freedom was representative of the changing times.   The system of fleets were abolished in 1763 in an effort to reinforce the idea of a more liaises fair government.


   Dual Roles of Silver    Merchants     Miners

Silver Industry of Mexico