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6 1 S T CONGRESS 1

2d Session

SENATE

DOCUMENT

N o . 493

NATIONAL M O N E T A R Y COMMISSION

The Banking System
of Mexico

CHARLES A. CONANT
Author of "A History of Modern Banks of Issue," " T h e Principles
of Money and Banking," etc.

Washington : Government Printing Office : 1910

NATIONAL MONETARY COMMISSION.

NELSON W. ALDRICH, Rhode Island, Chairman.
EDWARD B. VREELAND, New York, Vice-Chairman.
J U L I U S C. BURROWS, Michigan.

J E S S E OVERSTREET, Indiana.

E U G E N E H A L E , Maine.

J O H N W. W E E K S , Massachusetts.

PHILANDER C. K N O X , Pennsylvania.

ROBERT W. BONYNGE, Colorado.

THEODORE E. BURTON, Ohio.

SYLVESTER C. SMITH, California.

J O H N W. DANIEL, Virginia.

LEMUEL P . PADGETT, Tennessee.

H E N R Y M. TELLER, Colorado.

GEORGE F . BURGESS, Texas.

HERNANDO D. MONEY, Mississippi.

A R S ^ N E P . P U J O , Louisiana.

JOSEPH W . BAILEY, Texas.

ARTHUR B . SHELTON,

Secretary.

A. PIATT ANDREW, Special Assistant to Commission.

CONTENTS.
Page.
CHAPTER I.—General scope of the system
5
II.—Banking development before 1897
6
III.—The banking law of 1897
10
IV.—Motives of the new legislation
18
V.—Conditions governing note issue
26
VI.—The position of the National Bank
33
VII.—Functions of the Banco Central
41
VIII.—Character of Mexican banking business
46
IX.—Movement of the circulation
54
X.—Adoption of the gold exchange standard
62
XI.—The banks and the monetary reform
73
XII.—Organization of the state banks
76
XIII.—Publicity and official supervision__.
78
XIV.—Growth of the banks of issue
84
XV.—The banks in the crisis of 1907
87
XVI.—Development of Mexican banking under the law of
1897
99
APPENDIX A.—Report on the banking system by the secretary of
finance to Congress, November 15, 1897
109
B.—The banking laws of Mexico:
The preliminary law of 1896
169
The general law on institutions of credit:
CHAPTER I.—Of institutions of credit and their
organization
172
II.—Of banks of issue
175
III.—Of mortgage banks
183
IV.—Of banks of promotion
195
V.—Enactments common to all b a n k s . _
199
VI.—Franchises and taxes
210
Transient articles
212
C.—Report of the Exchange and Currency Commission __
215
D.—Statistical Tables
Folders.
TABLE N O . I.—Reports of condition of Mexican institutions of credit, June 30, 1909.
No. 2.—Balance sheet of banks of promotion,
1898-1909.
No. 3.—Balance sheet of mortgage banks, 18981909.
No. 4.—Balance sheet of banks of issue, 18981909.

THE BANKING SYSTEM OF MEXICO.
CHAPTER

I.—General scope of the system.

The banking system of Mexico is based upon a plurality
of banks of issue, with a single institution at the center
without numerous branches, but maintaining a large
metallic reserve and supporting the local banks by rediscount. The system thus combines some of the features
of the central bank system, which is all but universal in
Europe, with the system of isolated independent banks of
issue which prevails in the United States.
While there are several banking institutions of importance which date back more than a generation, the Mexican
system as now constituted is the result of a complete
reorganization by Mr. Limantour, the Minister of Finance,
in 1897. It was then that a sharp line was drawn between
banks of issue, dealing with commercial credits, and banks
for mortgage loans and for promotion, authorized to deal
with their respective classes of business. In the reorganization the National Bank of Mexico, which had for a time
a practical monopoly of note issue, was left in a position of
influence at the center of the new system, but banks of
issue were permitted in the different states under conditions which, without establishing an absolute monopoly,
tended to encourage the creation of one strong bank in each
state. An auxiliary organ of the state banks, not contemplated by the law, has arisen in the form of the Banco

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Central, or central bank, which acts as clearing agent in
the City of Mexico for the state banks and affords a bond
of union among them which permits cooperation in critical
situations.
When the lav/ of 1897 w a s enacted, it was supposed to
restrict banks of issue to commercial business. Some
abuses of the privileges of these banks, however, led to still
further restrictions upon their field of operations by a law
of 1908. The tendencies which developed in Mexico,
as well as in the United States, to participate in syndicate
operations and to loan too large a proportion of the assets
of the bank to a single institution were checked by new
prohibitions, which carried out in greater detail the purpose of the original law. To remove assets which were
valuable, but not readily convertible, from the banks of
issue, a new institution was created for loans to irrigation
works and for the encouragement of agriculture.
CHAPTER

II.—Banking development prior to i8gj.

The history of banking in Mexico prior to the steps taken
in 1896 to bring about unity of system was that of a few
banks, largely financed from abroad, having special concessions and acting according to no uniform requirements
as to circulation, reserves, and other obligations of sound
banking. Up to 1864 the banking business was done by
large mercantile houses having foreign relations. Advances were made in connection with commercial operations, such as are still made by sugar refiners to growers
and by distillers to producers of the materials for alcohol.
These houses in some cases issued certificates of deposit in
the form of bills, but they were filled in for the uneven

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a m o u n t s deposited, as with the notes issued in England b y
t h e goldsmiths in t h e seventeenth century, instead of
being issued for fixed sums.
The first real banking office established in Mexico was a
branch of the London Bank of Mexico and South America,
which became later t h e Bank of London and Mexico
(Banco de Londres y Mexico). This branch was established in 1864, without any special concession or authority,
a n d was subjected to violent opposition by the old commercial houses, which gained support from the fact t h a t it
did not make public its accounts. I t nevertheless attained
a considerable degree of success, thanks to its skillful management, scrupulous fulfillment of its obligations, a n d
absence of speculative loans to the Government, and introduced t o some extent t h e use of b a n k notes. a
This b a n k was for some time without a serious competitor except among t h e commercial houses. About
1875 two or three small banks were founded in the state of
Chihuahua under authority of the local government,
which issued notes to bearer, payable in copper or silver.
A t about t h e same time (in 1879) the oldest institution of
credit in Mexico, the Monte de Piedad, whose foundation
extended back to t h e eighteenth century, obtained authority to carry on banking operations and to issue certificates
of deposit payable to bearer on demand. The use which
was made of this authority did not, however, prove profitable, and it was ultimately allowed to fall into disuse.
I t was about t h e time of the first administration of
President Diaz t h a t t h e serious economic development of

« Favre, Les Banques au Mexique, p. 9.
7

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Mexico began and foreign capital poured into the country
for the construction of railways. An important banking
foundation naturally followed. A special concession was
granted by Congress in 1881 to the Franco-Egyptian Bank,
which afterwards became the International Bank of Paris,
to establish a bank of issue in Mexico. The conditions of
the concession were that the circulation should always be
covered by readily negotiable securities, and should not
exceed in amount three times the cash reserve. No monopoly was granted by this concession, but the charter was
in the nature of an official indorsement, in order to produce
a favorable impression upon the public. The bank was,
however, given the functions of cashier for the State.
The new institution was named the National Bank of
Mexico. The capital was fixed at $8,000,000, divided into
8,000 shares of $100 each, and was paid up in the proportion of 40 per cent. a Another institution, the Mexican
Mercantile Bank, sprang into existence without any
special concessions, and continued in business until 1884,
when it was absorbed by the National Bank. Deficient as
was the banking equipment of. Mexico, the creation of
such banking facilities brought down the current rate of
interest from above 12 per cent to 9 and 8, and ultimately
in some cases to 6 per cent.
The first attempt to introduce uniform legislation in
r e g a r d t o b a n k s w a s m a d e i n t h e C o d e of C o m m e r c e p r e fix The dollar sign is used in this paper for the peso, which has continued
for several centuries to be the name of the Mexican monetary unit. The
value of the peso, or dollar, was $1,012 in the present standard of the
United States, while gold and silver remained at 16 to 1. As the value of
silver bullion declined, the gold value of the peso declined, approximately
pari passu, until the monetary reform of 1905.

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pared in 1884. In the spring of that year Mexico was
taught the lesson which Belgium had learned thirty years
earlier and which other countries have learned at various
times which have sought to base the issue of demand
liabilities upon long-term loans. The Monte de Piedad,
although it held a cash reserve of $2,480,000 against a
circulation of $4,327,000, found its position threatened.
The fact was suddenly realized that the reserve constituted
the only available resource for the redemption of the
notes, because the remainder of the assets were locked up
in mortgages for long terms. Political disorders completed the distrust which was produced by these conditions, a run was made for the redemption of notes, and the
institution was compelled to suspend. Outside aid was
obtained, and the bank was kept upon its feet, but its
experience brought home in a striking manner to the
legislators as well as to the financial wTorld the inadequacy
of long-term investments for meeting liabilities payable
on demand.
It was undertaken in the Code of Commerce to lay down
general rules for the incorporation of banks. Existing
concessions were recognized, but the right to grant new
concessions was taken from the local authorities and vested
exclusively in the Federal Government. The issue of
notes without a concession was prohibited, and the limit
of circulation was fixed at three times the metallic reserve.
One-third of the circulation might be secured by a deposit
of money or securities of the public debt. The amount of
notes outstanding was subject to a tax of 5 per cent, and
banks were required to make monthly publication of

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the state of their reserve. No attempt was made to prescribe the character of paper to be discounted or even to
forbid mortgage loans, such as had wrecked the Monte
de Piedad.
Under this general law many local banks were projected
and some were established, but many projects proved
abortive, and the thorough organization of the banking
system awaited the installation of Mr. Limantour as
Minister of Finance in 1893. He saw at once the danger
of a situation in which there was no real uniformity of
system or effectiveness of regulation and decided to grant
no further concessions until these conditions had been
modified. After laying down a few fundamental principles in the law of June 3, 1896, he appointed a special
committee to prepare a new project to work out these
principles in detail, constituting the committee of representatives of the National Bank of Mexico, the Bank of
London and Mexico, the Mortgage Bank, and several
prominent financiers, including Senor Joaquin D. Casasus,
afterwards ambassador to the United States. A careful
and exhaustive report on the principles of sound banking
and the system best adapted to conditions in Mexico was
prepared by this committee, approving the fundamental
principles which the minister laid down and authorizing
him to prepare the definitive project, which became the
law of March 19, 1897.
CHAPTER

III.—The banking law of 1897.

The essential feature of the law of March 19, 1897, so
far as it related to banks of issue, was the abandonment
of the system of monopoly of note issue, but the extension
of regulations conforming to the rules of sound banking

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over all banks to be in future established. The federal
banking system was in future to recognize three classes
of institutions—banks of issue, issuing notes payable to
bearer on demand; mortgage banks, issuing mortgage bonds
to cover loans on real estate; and banks of finance or promotion, issuing treasury bonds to cover loans to industry
and agriculture for short terms, b u t longer t h a n t h e term
of t h e usual commercial loan.
The mortgage banks of Mexico are of the usual type
existing in Europe—issuing bonds for even amounts and
for long terms, capable of easy transfer in t h e open market.
The object of t h e so-called banks of promotion, or finance
banks, was to extend credit to agricultural and to mining
enterprises. The essential difference between t h e m and
t h e mortgage banks was the term of their obligations,
which was limited in 1897 to a m a x i m u m of two years,
extended in 1908 t o three years. The funds t h u s obtained
are loaned to mining and agricultural enterprises for a
corresponding period, not exceeding three years. This
t e r m was adopted in order to afford sufficient time for the
completion of the transactions for which the money was
advanced, and in case of a bad year to permit the enterprise to recoup in the year following. The security for
such loans is the tools, machinery, etc., employed and the
fruits of the enterprise. The instability of mining operations made it necessary for the banks to require reports
from experts t h a t the proceeds of operation would be
sufficient to repay the loan. I n cases where advances
were made, the bank was invested with the right of supervising closely the management of the enterprise and

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especially to note if the funds advanced found the employment for which they were destined. Moreover, the
products of the enterprise were remitted to the bank as
they were realized.0
These restrictions were so severe that the finance banks
were availed of only to a very limited extent. Apart
from the unwillingness of the borrower to make a loan
under such restrictions, the demand from the investor
for short-term bonds proved very limited, since they constituted neither a permanent investment nor a resource
immediately realizable. 6 The new form of banking
charter did not, however, prove entirely futile. It
afforded an opportunity for the creation of at least one
important institution of a special character which contributed much to the banking development of the
country. This was the Banco Central, which became
a sort of clearing agent for the state banks, and did.
much in binding them together in effective cooperation. c
The abandonment of the system of monopoly of note
issue required negotiations with the National Bank, with
a view to modifying its existing privileges, the regulation
of other existing banks, and provisions which should
attract capital into the proposed new banks. The new
a Banking law of 1897, art. 90.
b Favre, pp. 51-54.
c As this monograph is concerned chiefly with commercial banking, it
has not been deemed necessary to go into great detail in the text regarding
the mortgage and finance banks, but their scope and purpose will be found
set forth in the report of the Finance Minister, given in full as Appendix
A, and in the text of the law, given as Appendix B.

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fabric did not involve restrictions upon private banks,
several of which were well established in Mexico. In
order to avoid confusion, however, the use of the term
" b a n k " by institutions organized outside the statute
was ultimately limited by a presidential decree of May
28, 1903. It was then provided that the word could not
be used except by corporations legally constituted or by
branches of foreign banks which satisfied the Minister of
Finance of their standing and conformed to Mexican law.
Existing corporations already using the name in Mexico
might continue to do so by appending to their title the
words, "sin concesion" (without franchise).0 The fact
was appreciated, however, that the forms of banking
organization proposed by the law might not meet all the
requirements of banking operations in the Republic. It
was accordingly provided that an individual or a corporation might continue to receive concessions, but that
in the case of joint-stock companies claiming limited
liability, they should be organized according to the laws
of the country. Institutions not falling within the scope
of the three classes of banks recognized by the new law
were to continue to be governed by the general laws of the
Republic until such time as special laws might be enacted. 6
Foreign institutions issuing notes payable to bearer were
forbidden to open agencies or branches in the Republic
for the circulation or redemption of such notes. c
o Decree of May 28, 1903.
Relativas, pp. 41-42.
& Banking law, art. 1.
c Banking law, art. 13.

Instituciones

de Credito: Leyes y Circulares

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The arrangements made with the National Bank of
Mexico involved concessions satisfactory to both sides,
which did not impair essentially the power of the bank
or its position toward the Government, but required the
abandonment of the pledge previously given by the
Government, that it would not permit the creation of
additional banks of issued It was the aim of Mr. Limantour to extend the advantages of credit institutions to
all the productive parts of the Republic by the creation
of a system of local banks, meeting the varied requirements of each state. It was not his desire, however, to
throw the field open to promiscuous competition, like
that invited by the national banking law of the United
States. It was necessary, in order to carry out this programme and to afford a powerful attraction to the investment of capital, to offer special inducements to the first
comers. With this object was adopted the system of a
single bank of issue in each state, which should have a
qualified monopoly in the local field. The new7 law did
not prohibit the foundation of more than one bank in
each state, but it accomplished this limitation practically
by extending special privileges for a term of years to the
first bank of issue to which a charter might be granted.
The granting of new charters, however, was not automatic, and was hedged about with careful restrictions.
A bank of issue could not be founded with a less capital
than $500,000, which was raised by the law of June 19,
1908, to $1,000,000 for banks which might thereafter be
established. The express authorization of the Department of Finance was made necessary for the increase
a

The terms of this arrangement are set forth elsewhere.

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Mexico

or diminution of banking capital, and no bank could be
organized until the capital had been fully subscribed and
at least 50 per cent in cash paid in. Those seeking a
concession for any institution of credit organized under
the law were required to deposit in the treasury or in the
National Bank of Mexico government bonds of a nominal
value equivalent to at least 20 per cent of the sum which
the bank was required to have in hand in order to be
incorporated. The preliminary concession might be
granted to private individuals, not less than three in
number, but they must show within four months that
they had organized a joint stock company to operate
the concession and had transferred the concession to such
company. a
The duration of new bank charters was not in any case
to exceed thirty years from the date of the enactment
of the law for banks of issue and fifty years for the other
classes of banks. By this provision the privilege was
reserved to the Government of revising the general banking law at stated periods and making the new requirements applicable at once to all the banks.
The special privileges conferred upon the banks authorized by the law of 1897 consisted chiefly of exemptions
from taxation. These exemptions were generous enough
to afford to the bank, for a time at least, sufficient advantage to discourage competition under the federal law.
They were in brief as follows: b
Capital, dividends, and issues of securities were exempted from all forms of taxation, federal, state, or
« Banking law, arts. 8 - n .

& Banking law, arts. 121-128.

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municipal, except the usual tax on buildings and certain
stamp taxes.
Stamp duties were remitted on documents used by
institutions of credit in their internal management or on
documents passing between the head institution and its
agencies or branches, provided such documents did not
create rights in favor of the bank or of third parties foreign to the institution.
Stamp duties were not required on contracts entered
into by institutions of credit with the Federal Government or with the governments of states and municipal
corporations.
Stamp duties were not required on summaries of
accounts, advices of payment for receipt, drafts, bills of
exchange, promissory notes, telegraphic or other forms
of transfer of money, in cases relating to business done
with the federal, state, or municipal governments of
Mexico.
In the case of bank notes, mortgage bonds, certificates of deposit, and treasury bonds put in circulation,
checks drawn by or upon a bank, the amount of the stamp
required, whatever the amount mentioned in the contract,
was limited to 5 cents.
%
Notarial contracts and loans, sureties, pledges, or
mortgages in favor of or against institutions of credit were
limited to a stamp duty of two tenths per cent, except where
the general laws imposed a lower rate. The same contracts when drawn up in private form were limited to a
stamp rate of one tenth per cent.

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Fees of experts, notaries, and other persons whose
remuneration was fixed b y schedule by local laws were
required t o be reduced in t h e case of institutions of credit
t o two-thirds of t h e schedule rate. I n no case was it permitted t h a t local enactments should be observed which
authorized higher charges because one of t h e contracting
parties was a corporation.
I t was provided t h a t the States of t h e Federation should
not impose any t a x on banking business, properly so
called, when transacted by institutions of credit, except
on mortgage loans, where t h e rate should not exceed onequarter of i per cent on t h e a m o u n t of t h e transaction.
All these exemptions and special privileges were t o run for
twenty-five years from the date of t h e law. These provisions applied equally to mortgage banks as well as t o
banks of issue. The provision which protected t h e comparative monopoly of t h e first b a n k of issue in each State
was t h a t these regulations should benefit only t h e first
b a n k established in each of t h e States or federal territories,
and t h a t concessions for other banks of issue could be
granted only with t h e understanding t h a t t h e new b a n k
should be subject t o all the taxes imposed by general law
a n d t o a special t a x of 2 per cent per a n n u m on paid-up
capital. This t a x was to be paid t o the Federal Governm e n t a t t h e end of each quarter. 0
So rapidly did banks multiply under t h e provisions of
t h e law of 1897 t h a t it was deemed prudent as early as
1905 t o check their further extension. I t was accordingly
provided t h a t no further charter for a b a n k of issue should
a

8648—10

Banking law of 1897, art. 129.
17

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be granted until after December 31, 1909, and that those
granted after that date should not carry the exemptions
from taxation accorded to the first banks. a After the
disturbances of 1907 and 1908, it was deemed best to extend the limit of time, within which new charters would be
refused, until March 19, 1922.b As this date was exactly
coincident with the period for which the first banks were
to enjoy their exemptions from taxation, it was tantamount
to a decision by the Government that the latter should
enjoy, without further competition, their qualified monopoly of the note circulation until the time arrived for a
general revision of the privileges conferred by the banking
law.
CHAPTER

IV.—Motives of the new legislation.

The motives actuating the Government in introducing
the banking law of 1897, and the manner in which the new
system was put in operation, were discussed at length by
the Minister of Finance in a report to Congress on November 15, 1897. In recommending a radical revision of the
banking system of Mexico, Mr. Limantour pointed out
the need of introducing uniformity into the complex
conditions which had arisen from the granting of special
charters. It was necessary, he declared, to fix a common
term for the charters, to reduce privileges to an equality,
and to establish uniform regulations in regard to the
issue of notes. The conditions existing when the minister
began the reform were described by him as follows:0
a
Law of May 13, 1905, art. 5. Instituciones de Credito: Leyes y Circulates Relativas, p. 47.
& Law of June 19, 1908, art. 3.
c Instituciones de Credito: Leyes y Circulates Relativas\ p. 117.

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Seven banks were operating in t h e States when t h e
decree of J u n e 3, 1896, was promulgated, and no two of
them had identical charters, b u t all differed in various
points, more or less essential. Thus, for example, one
charter terminated in 1904, the others at later dates up
t o 1939; t h e issue was regulated, in t h e case of some
banks, by t h e a m o u n t of capital, in the case of others, by
three times t h e capital; t o guarantee the circulation,
sureties were required of some banks, deposits of others,
and of yet others neither sureties nor deposits, b u t a different kind of guaranty. The reserve funds differed
greatly in amount with the different establishments; the
right t o establish branch banks was unlimited for some
banks, wThile for others it was subject to various restrictions. The value of the notes which they were allowed to
issue was, in some cases, 25 centavos as a minimum, while
in others 1 peso was the smallest value authorized. There
was one b a n k which was authorized to make loans subject
t o extension up t o twelve months, while the operations
of the others were not to exceed six months. Similar
differences existed in the guaranties for loans and discounts, as well as in privileges and exemptions from t a x ation, and in other fundamental requirements of t h e
charter."
W i t h a view t o putting an end to this diversity in legislation, a term was fixed within which the banks established
in the States were to submit to t h e provisions of t h e new
law, in exchange for t h e character of first b a n k in each of
t h e respective States, wTith the full rights and privileges
granted t o such first banks. This inducement proved

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insufficient to secure the desired object. Most of the
institutions of credit that were in operation in the country
when the law of March 19 was brought in agreed to subject their charters to the provisions of the law; but since
the new charters bore the character only of a mere authorization, and the banks were obliged to accept the modifications which the law might undergo in future, some of
them decided not to surrender the rights and obligations
of their original charters, which could not be altered
during the life of the franchise, except by the consent of
both parties. Ultimately, however, agreements were
reached by which the existing banks accepted the provisions of the new law, with the reservation that they
should not be bound by subsequent modifications, during
the life of their original charters, unless such modifications
were acceptable to them.
According to this limitation any future legal enactments in the matter of banks will affect these establishments only in those matters which are not opposed to the
provisions of the law of 1897 and to the express stipulations of the agreements; but it was also agreed that, if
provisions of a general character or stipulations contained
in subsequent charters should grant greater privileges to
the banks as a whole, the older banks could claim the
benefit of them, provided they made express application
for the purpose to the Department of Finance, and that,
if said privileges were associated with certain obligations
or legal requirements, the benefit of the privileges should
accrue to the banks only in case they accepted at the
same time these obligations or legal requirements.

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I n adopting t h e system of local banks having t h e power
of issuing notes upon their assets Mr. Limantour assigned
three principal reasons for rejecting the system of centering in one institution complete monopoly of note issue.
H e declared t h a t it would be contrary, in t h e first place,
to t h e rights acquired b y t h e banks which had previously
obtained concessions. I n the second place, an establishment which should be invested with the exclusive privilege of note issue throughout Mexico would be fatally
under t h e domination of t h e Government. The financial
distress of t h e state wTas still too recent t o be forgotten.
If similar periods should occur in t h e future, the first idea
of an embarrassed government would obviously be t o
appeal t o t h e b a n k and its power of note issue t o obtain
t h e resources of which it had need. Clearly it would not
require a long time under such conditions not merely to
deteriorate the condition of t h e public finances b u t to
bring t h e country under the regime of forced legal-tender
paper.
The principal reason assigned, however, for the new
system was t h a t t h e system of monopoly would not meet
t h e needs of t h e country. The economic organization of
Mexico, it was declared, is still too simple for the need of
a single b a n k playing the role of regulator of t h e money
market, of rediscount, and of t h e ultimate banking reserve.
On t h e contrary, the true role of a bank of issue should
be t o mingle intimately in t h e life of the country and to
provide for the daily needs of commerce and of industry.
These, it was argued, were not t h e same throughout t h e
extent of Mexican territory. Physically and politically,

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Mexico is a country decentralized. Its variety of altitudes divides it into three climatic zones, having each its
own character, resources, and different products. In the
warm belt {tierra caliente), a low, humid, and hot country,
flourish all forms of tropical vegetation, cacao, vanilla,
pepper, coffee, sugar cane, and the hard woods utilized for
ebony and ornament. The temperate zone (tierra templada), between 1,000 and 2,000 meters above the sea, and
the cold zone (tierra fria), land high and cold, produce,
according to elevation, rice, cotton, and all varieties of
European plants—cereals, vegetables, the vine, fruits, and,
on the summit, forests of firs. Mineral riches are not less
varied. Apart from silver, which is found in all the
States of the Confederation, the Mexican subsoil contains
gold, copper, iron, lead, sulphur, mercury, and even petroleum and precious stones. This variety of resources, agricultural and mineral, is still further complicated by a great
diversity in their distribution throughout the country.
Certain States are almost exclusively mineral and others
almost exclusively agricultural."
Upon the economic merits of the conflict between
monopoly and local banking, Mr. Limantour expressed
himself as follows:b
" If we examine the subject from the standpoint of the
development of public wealth, is it likely that the privilege
granted to a single bank of issuing notes for the entire
Republic would yield the best results? The examples of
monopoly which might be cited in support of an affirma* Favre, pp. 23-25.
* Institutiones de Credito: Leyes y Circulates Relativas, p. 91.

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tive reply are confined t o nations of small territory, with
climates and natural resources of no great variety, and
whose population, generally dense, shows great homogeneity; or to countries with strong centralizing tendencies, for t h e most p a r t absolute monarchies, a system
which readily and naturally admits of t h e union of t h e two
supreme powers—the civil power and the power which
regulates credit.
" I n t h e Republic of Mexico, with its vast territory, its
sparse population, its imperfect means of communication,
and its immense variety of products, each locality has as it
were local interests, t h e development of which, so far as
the use of credit is concerned, can not be confided to a
single banking institution, which, no m a t t e r how m a n y
branches and dependencies it m a y establish, could never
supply the needs nor remedy t h e ills of each part of t h e
national territory.
" And it is not unreasonable t o declare t h a t branches of a
central bank are incapable of exercising satisfactorily, in
every corner of the country, t h e beneficent influence of
establishments of this kind, because a branch bank can
have neither the initiative nor t h e authority to provide for
the exigencies of every economic situation; and, on t h e
other hand, the general and permanent regulations t o
which every administration must be subject, especially one
vSO complicated as t h a t of a central bank, lack t h a t flexibility which is necessary to meet the innumerable and
unforeseen emergencies arising from interests so divergent
as those of t h e various localities of t h e Republic

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"From this point of view, the creation of local banks
evidently presents undeniable advantages. Managed by
persons whose interests are centered in the same locality,
who are acquainted with the people and the affairs of the
community, and who are so situated as to be able to give
personal attention to the business and to understand the
peculiar needs of a given district, its resources and their
chances of development, such banks will undoubtedly be
better able to realize the objects of the credit circulation
confided to banking establishments.
" Furthermore, the adoption of the system of a plurality
of banks will, in the course of time, permit the development
of specialization, the sphere of action of local banks being
marked off from that of the great banks located in the
Federal District, with their ramifications in the States.
There can be no doubt that, through the very nature of
both kinds of institutions, the general banks, which operate
at many points in the Republic with large capital and
extensive connections, will develop into banks of rediscount, and, by that very fact, become true protectors of
the local banks, with which they neither should nor can
come into conflict, because they complement each other
and constitute, in brief, distinct organs of a homogeneous
and well-balanced system."
In order to obtain an accurate view of all the aspects of
the problem, Mr. Iyimantour deemed it necessary, on the
other hand, to examine carefully the consequences that
might arise from liberty of banking, in order not to run
the risk of incpnveniences as grave, or even graver, than
those that would have ensued from the system of entire

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monopoly of note issue. Upon this point he referred to t h e
general banking law of t h e United States, b u t concluded
t h a t it was not entirely adapted to conditions in a country
which h a d not h a d an extended banking experience. On
this subject he declared: 0
" O n comparing t h e political and economic conditions
of t h e nations whose legislation does not require banks
t o apply for a concession to issue notes, it appears a t once
t h a t their citizens are familiar with the practice of individual liberty and by t h a t very fact know how t o guard
against t h e grave consequences t h a t might arise from the
abuse, and sometimes even from t h e normal exercise, of
t h a t liberty. The degree of intellectual development
which t h e masses have attained and their experience in
business constitute t h e most effective counterweight possible to t h e reckless or even tortuous and mischievous
tendencies of an ill-administered establishment. Finally,
the well-understood interest of t h e banks themselves
prompts t h e m to enter into close relations of m u t u a l
support, whereby they are almost always shielded against
economic crises and adverse incidents.
" Can it reasonably be maintained t h a t Mexico is in this
condition? The very recent intrpduction of banks properly so called; t h e lack of experience in the use of credit;
t h e distrust still prevailing, especially in districts outside
t h e great centers of population, of instruments of credit;
and t h e pronounced spirit of imitation, which would
assuredly lead t o a multiplication of banks out of all proportion to the needs of t h e country, are some of the
a

Instituciones de Credito: Leyes y Circulares Relativas, p. 93.

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reasons that speak in favor of certain restrictions until the
country shall have become accustomed to those ideas
and practices without which absolute liberty of banking
involves extreme dangers.
" If to these considerations we add the fear of a powerful
reaction against bank notes, in case of the failure of any
establishment, no matter of how little importance, there
will be no disagreement with the conclusion that the
Government has acted wisely in deciding that the number
of local banks to be established must not exceed certain
limits.
" I n following this plan the new law will no doubt give
birth, at least in the early years of its operation, to a sort
of banking oligarchy, causing the distribution of institutions of credit at all convenient points throughout the
Republic, while their number, nevertheless, will not be so
small as to give color to the statement that the issuing
power constitutes a privilege in favor of a few. In any
case, in a matter so delicate as that of credit, it is more
prudent that the nation shall be in a position later on to
extend the scope of its legislation, in order to favor the
multiplication of banks on a larger scale, than to be
driven by the bad result^of a first effort to the restriction
of their number and powers."
CHAPTER

V.—Conditions governing note issue.

The conditions laid down by the Mexican law for the
issue of circulating notes are somewhat more liberal than
those in the United States, but are nevertheless clear and
definite. It is provided that the amount of such issues

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Mexico

shall not exceed three times the paid-up capital of the
bank and that a reserve of 50 per cent shall be held not
against notes only, but also against deposits payable on
demand or subject to withdrawal at not more than three
days' notice. This requirement is not so exacting, however, as might appear, because the Mexican law~ does not
count as deposits the privilege given to borrowers to draw
upon the bank. Indeed, all such " current accounts/' as
they are called in Mexico as well as in Europe, even
though the depositors have the privilege of checking
against them, are specifically exempted from classification
as deposits.
How considerably these qualifications reduce the proportion of liabilities against which a cash reserve must be
held is disclosed by a glance at the balance sheets. Thus,
on December 31, 1908, deposits payable at sight or in not
more than three days stood at $64,162,230; deposits payable in more than three days, at $48,097,893; and creditor
current accounts, at $334,754,206. Only the first item
was subject to the reserve requirements of 50 per cent,
which, with outstanding notes of $87,504,630, was amply
covered by cash holdings of $77,753,503.
In requiring a reserve of 50 per cent against demand
liabilities, Mr. Limantour departed from the previous
requirement of the law, which called for a metallic reserve
of only one-third of the note issue. He admitted, in his
report of 1897, that this provision might err from excess
of caution, but declared that it was preferable to sin in
this direction, since the requirement could ultimately be
relaxed, rather than to expose the bank note, which had

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only begun with difficulty to penetrate among the mass
of the people, to a disaster which would throw the country
back a long way in the road which had led other nations
to prosperity. a
The assets of the banks are left in their own custody,
subject to certain requirements as to their character. In
the revision of 1897 Mr. Limantour definitely rejected the
principle which had been adopted from the Amercian law
in the Code of Commerce of 1884, that the primary
reserve of one-third held against circulation might consist
in whole or in part of bonds. He placed his advocacy of
basing note issues upon assets partly upon political conditions in Mexico, but partly also upon the fundamental
theory of a banking currency. He said on this subject: b
"So strong was the desire to guard the banks against
all outside influences, and especially against political
influence, that notwithstanding the precedents created by
earlier charters, requiring that the circulation be guaranteed in part by a deposit of government bonds, it was
deemed inadvisable to retain this requirement and to
provide for a deposit, more or less substantial in amount,
of evidences of the public debt as a guaranty for the redemption of the notes. What would be the influence of
such a deposit upon the credit of a bank in case that, in
consequence of the vicissitudes of foreign or domestic
politics, the securities of the State should precipitately
decline? Would not rather the intensity of the evil be
enhanced by the decline in the value of the guaranty at
a

Instituciones de Credito: Leyes y Circulates Relativas, p. 104.
& Instituciones de Credito: Leyes y Circulates Relativas, p. 102.

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the very moment when business was paralyzed by the
general crisis, cash was hoarded, and payments were
delayed?"
Whenever the circulation exceeds the limits fixed by
law, the bank is required to communicate the fact in
writing to the government inspector and to abstain from
making new loans until the circulation has been reduced
within the legal limits. If the reduction has not been
effected within five days, the Department of Finance is
required to set a period not exceeding one month, within
which the bank must bring its circulation within the legal
limits or be subject to the forfeiture of its charter or to
enforced liquidation.
Bank notes are not legal tender, but circulate only by
voluntary acceptance on the part of the public. They are
required to bear on their face the promise to pay the
bearer in cash the amount of the face value of the note.
Notes must be redeemed at the head office of the bank or
its branches, but the branches are under legal obligations
only to redeem the notes which they have issued. The
failure of a bank to redeem one of its notes gives to the
bearer the right of summary action against the institution,
after summons to pay has been formulated by a notary.
Bank notes are a first lien on the assets of the bank with
the exception of claims to property pledged to the bank,
under the terms of the Civil Code and the Code of Commerce; mortgage debts, when such mortgage has been
registered previous to the transaction, whereby the bank
acquires the mortgage to the property; and debts to the

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Commission

federal, state, or municipal governments for taxes. Other
claims of the public treasury take a different rank.
The denominations of Mexican bank notes are limited to
$5, $10, $20, $50, $100, $500, and $1,000. The smallest
of these denominations, equivalent to $2.50 in American
gold, leaves a vacuum in the circulation for the use of the
silver peso, which for many years was almost the only
money of the Republic except the subsidiary coins.
The notes of Mexican banks are not printed exclusively
at a government agency, but overissue is checked by a
provision that no note shall be put in circulation without a
proper stamp, engraved on the note by the stamp-printing
department. Permission to engrave this stamp must be
obtained from the Finance Department and is granted
only upon catisfactory evidence that the proposed issue
does not exceed the legal limit of the circulation. The
banks are allowed to keep their own notes, which are not
in use, in vaults with two keys, one in the custody of the
government inspector. Such notes are not counted as a
part of the legal issue outstanding, and reserve is not
required against them until they are withdrawn from the
vaults and put in circulation. a
Banks are not prohibited from reissuing the notes of
other banks, but by an amendment of the law adopted in
1908 they are required to arrange for a periodical exchange
of such notes and, in the absence of express agreement to
the contrary, to pay balances in such exchanges in cash. 6
The purpose of this provision was explained by the Mina
Circular of February 25, 1898, Instituciones de Cridito: Leyes y Circu>lares Relativas, p. 62.
b Instituciones de Credito: Leyes y Circulares Relativas, p. 12.

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ister of Finance to be not only to protect the public
against any circulation which might be forced or artificial,
but also to safeguard the banks against the pressure
which might be brought to bear by rivals by the accumulation of a great quantity of notes for presentation at a
given momenta The Government was given authority to
prescribe regulations for the interchange of notes.
The requirements made by the Government in regard to
the metallic reserve have grown more exacting with the
progress of time. The first circular issued under the law
of 1897 simply required a statement of the metallic money
at the close of business on the last day of the month, the
amount of notes issued, the amount which had come into
the bank during the month, and the average stock of
notes in the bank and branches. 6 The exact manner of
calculating the value of gold and silver bullion and foreign
moneys was prescribed four months later by a circular of
October 16, 1897. Details as to the denominations of
outstanding notes were required in 1904.° The adoption
of the monetary reform in 1905 called for several temporary regulations, and after the influx of gold, caused by
the rise in the value of silver bullion, statements of cash
holdings were required to give separately the amount held
in gold, in silver pesos, and in fractional money.** Banks
of issue were forbidden to count the old coinage as part of
a
Circular of July 8, 1908, Instituciones de Cridito: Leyes y Circulares
Relativas, p. 81.
b Circular of June 23, 1897, Instituciones de Cridito: Leyes y Circulares
Relativas, p. 59.
c
Circular of October 24, 1904, Instituciones de Cridiio: Leyes y Circulares
Relativas, p. jo.
d Circular of March 1, 1906, ibid., p. 78.

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their reserve after August 28, 1906, and by a circular of
June 10, 1907, were required to restrict the amount of
fractional silver admitted as reserve to 5 per cent of the
total reserve required. It was pointed out by the Minister
of Finance that the amounts of fractional silver reported
by the banks had been steadily increasing until they generally exceeded 10 per cent and in some cases attained 40
per cent of cash holdings.a
These requirements show that the security of the notes
depends upon the solvency of the individual bank, and
acceptance of the notes by the public depends upon belief
in that solvency. The banks are under no obligation to
contribute to a common fund for the redemption of the
notes of failed banks, as in Canada, nor are they under
any obligation to support each other, except such as they
have assumed voluntarily through the mechanism of the
Banco Central, to be hereafter described. Their notes,
without forced legal-tender quality, hypothecated security,
provision for a safety fund, or any form of government
guaranty, circulate upon the merits of the issuing banks.
In seeking to introduce them into circulation, moreover,
the banks have not had the benefit of marked deficiency
in the stock of metallic tools of exchange. Mexico, as one
of the largest producers of silver, kept her mints open
until 1905 to its free coinage, which enabled its producer
to convert his product into money and turn it at once
into the channels of circulation.
a Instituciones

de CrSdito: Leyes y Circulares Relativas, p. 79.

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CHAPTER

System

Mexico

VI.—The position of the National Bank.

The National Bank of Mexico occupied a peculiar position at the time of the adoption of the general banking
law of 1897. It was conducted under a charter which
granted privileges in regard to note issue about which
there was some difference of opinion between the bank
and the Government. It was the contention of the bank
that the Government was pledged to grant no charters,
beyond those already in force, authorizing the issue of
notes. Notwithstanding this contention such charters
had been granted by the Federal Government or the States
until the number of banks of issue stood, in January, 1897,
at seven, exclusive of the National Bank and the Bank of
London and Mexico, whose title to issue circulation was
not disputed. Notwithstanding this competition, however, the National Bank and the Bank of London and
Mexico possessed $30,000,000 of the capital stock of banks
of issue out of a total capital of $35,550,000, and had in
circulation $33,256,145 of the total note circulation of
$38,497,367."
It was obviously desirable if a new banking system was
to be inaugurated that it should be with the consent and
cooperation of the National Bank and not under conditions which might lead to litigation over the rights of the
new banks. As expressed in the report made by Mr.
Limantour to Congress on this branch of the subject: 6
"The anomalous condition arising from the fact that
provisions of a general character affecting outsiders,
o Casasus, Las Rejormas a la Ley de Instituciones de Credito, p. 309,
& Instituciones de Cridito: Leyes y Circulates Relativast p. 90.
8648—10

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Commission

which are properly a matter of common law, had been
embodied in a charter which, even though sanctioned by
Congress, still retains the character of a contract entered
into between two parties; the fact that, despite the stipulations of said contract, and the protests founded on that
contract, which were made by the National Bank, charters were granted for the establishment of banks of issue
in various places in the Republic; lastly, the suppression
in the new Commercial Code of 1889 of the provisions
which the earlier code contained on'the subject of banks—
all these circumstances created a state of affairs replete
with difficulties, which compelled the Government to
adopt a definite attitude, based on a system which, while
respecting all legitimate rights, should at the same time
be adapted to the needs of the country/'
In order to meet these difficulties Mr. Limantour entered upon negotiations with the National Bank with a
view to modifying its charter in such terms as to remove
all doubt concerning the legality of the privileges of the
local banks already in operation and those which it was
proposed to establish. The National Bank was disposed
to take a friendly and receptive attitude, which was not
unnatural in view of the powers which might be invoked
by the Government against an .institution which should
resolutely antagonize public policy. An arrangement was
accordingly reached in the early months of 1896 which
took the form of several agreements signed and sealed
between the Executive, acting under authority of Congress, and the administrative council of the bank, acting
under authority of the general assembly of the share-

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Mexico

holders. The concessions made by the National Bank
were summed up by Mr. Limantour as follows:a
"i. It declared its willingness to relinquish the rights
granted in its charter relative to the creation of other
banks, and it announced its unreserved assent to the
principles of the law of June 3, 1896, which authorizes
the establishment of banks of issue in the States and
Territories of the Republic.
"2. It agreed that the maximum of the standing credit
of the Government in current account which the bank
is obliged to maintain in favor of the General Treasury
of the Republic shall hereafter be 4,000,000 pesos instead
of 2,000,000, which was the limit fixed by earlier agreements.
" 3. It also agreed that the service of collection and distribution of government funds, which it has to perform
in accordance with its charter, shall continue to be performed for the coming ten years at a commission of 1 ^
per cent, instead of the 2 per cent which it had been
receiving, this commission including not only all expenses,
but also the risks of said operations.
"4. It agreed that the commission of 2 per cent which
the Government, in accordance with contract, was paying it for the service of the consolidated debt, should be
reduced to 1 per cent.
" 5 . It assumed the obligation to open a credit, not to
exceed 500,000 pesos in current account, in favor of the
National Loan Office (Monte de Piedad), without special
guaranty and with interest of only 3 per cent per annum.
0 Instituciones de Cre'dito: Leyes y Circulares Relativas, p. 94.

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" I n return for these concessions the National Bank
obtained two advantages—an addition of fifteen years to
the term of its charter, and a guaranty that during ten
years the National Loan Office shall not avail itself of
nor grant to third parties the authority which it received
from the Government to put in circulation certificates of
deposit or notes payable at sight and to bearer."
While it might appear from this enumeration of concessions that the bank yielded much more than it obtained, the concessions in regard to the loan to the treasury and the charge for the fiscal service of the Government were in harmony with the general tendency in
recent years to increase such loans and reduce such
charges among the banking institutions of other countries
where a central bank exists. The cardinal privilege obtained by the bank was the extension of the charter,
which would have expired in 1934 if the bank had taken
an attitude hostile to the policy of the Government.
The increase in the credit accorded to the treasury—
from $2,000,000 to $4,000,000—was a natural sequence of
the growth in the volume of public receipts and expenditures. The result of such a growth was to require a larger
working balance, and already, from 1892 to 1895, the
balance of this current account in favor of the treasury
had been allowed to exceed, sometimes by considerable
amounts, the original limit of $2,000,000. In view of the
willingness of the bank to extend such credits in the past
it was not, therefore, a great concession merely to give
legal sanction to this extension. 0
a

Instituciones

de Cr6dito: Leyes y Circulates Relativas, p. 95.
36

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System

Mexico

Whatever might have been the apprehensions of the
officers of the National Bank of Mexico in regard to t h e
results of t h e competition to be expected from t h e new
state banks of issue, events did not prove such competition t o be seriously injurious. I t was the obvious intention of the Government, indicated b y continuing t h e fiscal
functions of t h e National Bank on behalf of t h e treasury,
t h a t the National Bank should continue to occupy a
distinctive position in the banking system. I t was declared in the report submitted to Congress t h a t under the
new law there would be two great banks of issue (including the Bank of London and Mexico) in t h e Federal
District, with authority to create branches throughout
the country and a number of banks in the States and Territories, with special privileges for the first b a n k established in any dne of t h e m and with authority t o establish
branches, under fixed conditions, in any p a r t of the Republic, except for t h e exchange of notes in t h e Federal
District.
The history of t h e growth of t h e banking system under
the law of 1897 indicated at first, as was naturally to be
expected, considerable development of t h e state banks,
as banks of circulation and of discount. The National
Bank of Mexico h a d a circulation at t h e close of J a n u a r y ,
1897, amounting t o $21,772,100, and the Bank of London
and Mexico a circulation of $11,529,045, leaving t o the
other banks only about $5,000,000 of the total circulation
of $38,497,367. The next few years witnessed the creation of m a n y new state banks and a corresponding expansion in t h e note circulation. The condition of all t h e

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banks on June 30, 1901, showed a total volume of notes
outstanding of $63,505,969, to which the National Bank
contributed $23,325,827. At this time the circulation of
banks other than the National Bank was $40,180,142,
but this included the circulation of the Bank of London
and Mexico, which was $16,492,043.
This upward movement of the circulation of the state
banks, while that of the National Bank remained comparatively stationary, continued until the summer of 1905.
From that date different tendencies developed, and the
National Bank became more than previously the reserve
bank of the country and the source of note issues which
were acceptable in all parts of Mexico. The aid given by
the National Bank in the adoption of the monetary reform, by contributing the entire fund turned over to the
exchange and currency commission and by substituting
its notes for silver withdrawn from use, was undoubtedly
a factor in this change in the proportion of notes in circulation. The panic of 1907 in the United States, with
its reaction upon Mexico in the form of restricted credit,
also tended to improve the position of the National Bank.
So far as there was a demand for the support of the
market by the issue of additional notes, it seems to have
been met by the expansion of the note issues of the
National Bank of Mexico, while the circulation of the
state banks was undergoing contraction. The table given
below, showing the ratio of the circulation of the National
Bank of Mexico and that of the state banks to the total
circulation, throws an interesting light on this phase of the
subject. It discloses the fact that while the National

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System

Mexico

Bank issued only about 29 per cent of the total circulation
at the close of 1905, its proportion had risen at the close of
1908 to more than 41 per cent. The details for the end of
each quarter for several years appear in the table.
Circulation of the National Bank and other banks.
National Bank.

Other banks.

Total.

$23,595,281

$59,935,595

$83,525,876

Mar. 31

23,689, 739

62, 134,629

85,824,568

June 30

26, 439> 982
25,572,486
27, 749, 275

63, 014,273

8 9 , 4 5 4 , 255

64, 803,817

90,376,303

66, 392, 132

94, I 4 L 4 0 7

30, 188,347
31,608,695
33,633,490
35,472,833

66, 724,404
65, 526,281
61, 964,003
62, 315,045

37,894, 286
37,566,398
35,040,817
34,682, 544

63, 070,454
60, 904,130
60, 633,073
56, 793,438

39, 283,609
39.479,934
34, 173,359
36,225,518

55, 126,868
52, 773.359
50, 365, 763
51, 279,112

Month ending-

1904.
Dec. 31
1905.

Sept. 30
Dec. 31
1906.
Mar. 31
June 30
Sept. 30
Dec. 31

96,912, 751
97, 134,976
94,597,493
97,787,878

1907.
Mar. 31
June 30
Sept. 30
Dec. 31

100,964,740
98,470,528
95.673,890
91,475,982

1908.
Mar. 31
June 30
Sept. 30
Dec. 31

94,4io,477
92, 253,293
84,539, 122
87, 504, 630

In so far as this relative movement of the circulation of
the state banks and the National Bank can be considered
as permanent, it would seem to indicate a tendency toward the evolution of a bank of rediscount, supporting
the minor banking institutions of the country by the issue
of notes to meet emergencies, even in the absence of any
legal obligation to fulfill such a function. It was declared
by Mr. Limantour, in his budget report in December,
1908, that " under the present trying conditions the bank

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Commission

in question has rendered vital service to the commercial
and industrial interests and private individuals, thus giving
another proof of its great usefulness to the community—
a usefulness which time assuredly will only enhance." 0
Further evidence of this primacy of the National Bank
is afforded by the movement of specie holdings and note
issues during the interval of business contraction, between
July 31, 1907, and June 30, 1908. During .this period
the total note circulation of the country diminished by
nearly $4,000,000, but the circulation of the National Bank
increased by about $3,750,000. The specie holdings of
the National Bank, on the other hand, while declining in
September, 1907, by about $500,000 from the high point
of July, recovered rapidly during the period of business
relaxation in the spring of 1908, until they reached the
unusual total of $40,176,282, or considerably more than
half of the total specie holdings of all the banks. The
different manner in which note issues and specie holdings
fluctuated during this period of stress, as between the
National Bank and other institutions, appears in the table
below:
Movements

of notes and specie,

1907—8.

Notes in circulation.

National Bank
Bank of London
Central Bank
Other banks
Total

Specie held.

July 31, 1907.

June 30, 1908.

July 31, 1907.

$35.766,709
15.587.928

$39,479,934
12, 977, 776

44.792,790

39,795.583

$30, 197.977
11,135,265
1,140,348
27, 219,311

$40,176,283
io,597.532
1,160,994
24,762,084

96,147.427

92, 253,293

69,692,901

76,696,893

a Financial Documents, 1908, p. 21.

June 30, 1908.

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CHAPTER

System

Mexico

VII.—Functions of the Banco Central.

The Banco Central Mexicafio was an organ which grew
logically out of the new order of things established in
Mexico under the law of 1897, but was the conception of
individual initiative rather than of the law. The Banco
Central is not a bank of issue. It was organized nominally
under that division of the law relating to banks of promotion {Bancos Refaccionarios), but its function differs in
many respects from that contemplated for those institutions. Instead of devoting its energies primarily to loans
for agriculture and industry for terms of two or three
years, it has acted as a sort of clearing agent for the state
banks. The obvious weakness of the system laid down
by the law of 1897 was the lack of common support among
the state banks. As the situation was stated by Favre:°
"The principle of local banks, excellent in itself for assuring to the entire country a distribution of credit appropriate to the varied needs of different regions, had one
defect. The isolation of the banks was to a certain extent
the price of their independence. Very flexible, but abandoned to their own resources, they were far from having
the solidity of the branches of a great establishment which,
supported by the central office, form a compact aggregate,
capable of resisting attacks and crises. On the other hand,
in spite of the close relations which they could not fail to
establish among themselves, the need made itself felt of
a common center, in the nature of a clearing house, which
should facilitate the settlement of their operations and
the exchange of their notes."

Les Banques au Mexique, p. 62.
41

National

Monetary

Commission

It was to meet this need that the Banco Central came
into being. The bank opened on February 15, 1899, with
a capital of $6,000,000, of which one-half was paid up.
Originally 50 per cent of the stock belonged to a syndicate represented by the Deutschebank, Messrs. Bleichroeder & Co., and J. P. Morgan & Co. This syndicate
had a majority of the board, but this arrangement was
found to be a hindrance to the progress of the bank and
a plan was devised by which the various state banks of
the Mexican Republic took over these foreign shares and
placed the control in Mexican hands. a
The new plan, which went into effect in 1902, provided
that each of the state banks should possess a number of
shares in the Banco Central which should be equal to at
least 10 per cent of the nominal capital of the state bank
on December 31, 1901. The shares of the Banco Central
were divided into two series, one representing those subscribed by the shareholders and the other those belonging
to the banks. The latter were registered in the names
of the banks and can not be transferred. When a new
establishment was founded, if the number of available
shares set aside for the banks was insufficient, the new
bank was compelled to go into the market and buy the
general shares, which were deposited in the vaults of the
Banco Central with a certificate setting forth that they were
subject to the same conditions as the other shares owned
by the banks. This method of pooling the stock was subject, however, to the condition that ten years after the
a

New York Bankers' Magazine, (October, 1908), L X X V I I , p. 527.

Banking

System

Mexico

agreement, with the consent of the majority of the banking shareholders, the banks might convert their banking
shares into general shares.a
The relations between the Banco Central and the state
banks are regulated by a contract which is made for a year
with each of them. The Banco Central grants to each local
bank a current account, of which the debtor balance may
reach 10 per cent of its paid-up capital. This current account is at a differential rate of interest—5 per cent in favor
of the local bank when there is a balance in its favor, 7^2 per
cent in favor of the Banco Central when the balance is
against the local bank. The account is balanced and the
allotment of interest made every six months. When the
balance in favor of the local bank rises above 10 per cent
of its capital, the rate of interest allotted is increased by
3 per cent; on the contrary, when the balance against the
bank exceeds 10 per cent, the interest paid is increased by
2 per cent.
The Banco Central buys the notes of the local banks to
the amount of the credit which it has extended. These
notes must be reimbursed at par. The Banco Central,
however, in order to guard against emergencies, reserves
the right to refuse notes which are presented in abnormal
quantities or with suspicious intent. The Banco Central
discounts the obligations remitted to it by the local banks,
buys and sells exchange for their account at a commission
of 4 per cent of the net profits, and undertakes to represent
them in relations with the Government. Both parties

a Favre, p. 64.

National

Monetary

Commission

agree mutually and gratuitously to make collections for
each other.
Thus is established a community of interests and mutual
support among the local banks which would otherwise be
lacking. Still further strength is given to the system by
the careful regulations which have been framed to secure
prompt support for any bank which may be involved in
difficulties. As soon as a bank considers itself threatened,
it is authorized to notify the Banco Central. The latter
telegraphs immediately to the other associated banks, who
are under agreement to establish at once at the Banco
Central a fund equal to 50 per cent of the capital of the
threatened bank. Contributions to this fund are limited,
however, to not more than 2 per cent of the capital of any
contributing bank. The amount thus placed in the hands
of the Banco Central is employed in redeeming at par the
notes of the establishment which is threatened. If the
bank itself is intrusted with the funds for redeeming the
notes, it is required to remit them promptly to the central
bank, where they are held in trust on account of the banks
in the proportion in which they have contributed to the
fund. For this service the bank receiving aid is required
to pay 12 per cent on the sums paid and the costs of the
operation.
The importance of the Banco Central as a part of the
banking system was promptly recognized by the Minister
of Finance and received his cordial support. He saw
in it not only a means of cooperation, but a more efficient
means than government inspection of keeping the operations of the state banks within sound limits.

Banking

System

Mexico

The operation of the Banco Central was so successful
that its capital was several times increased after 1901.
The later issues were taken by foreign syndicates, which
did not, however, undertake to interfere with the local
management of the bank. It was on the initiative of
the Banco Central that a clearing house was established
in the City of Mexico in 1905 for the banks of the capital.
The extent to which the Banco Central is availed of
by the state banks is shown by the rapid growth of its
transactions. The balance sheet of December 31, 1908,
showed assets of $84,141,461, of which the largest item
was loans upon pledges, $21,176,893. Discounts, however, stood at $10,201,991; the balance of current
accounts to the banks, $12,633,153; and accounts of
various classes, $18,365,673. Several items of the balance
sheet indicated the investment of the assets in securities
and industrial loans. Among them were securities
immediately realizable, $3,593,862; investments in bonds
and shares, $5,656,399; and industrial loans, $3,410,197.
On the side of liabilities, the large capital of the bank,
$30,000,000, affords a guaranty which permits certain
classes of operations which would be less secure with a
small capital and a large deposit liability. The reserve
fund and the profit and loss account add, respectively,
$6,186,605 and $3,945,307 to this amount, making up
with the capital not far from half of the liabilities of the
bank. The deposits payable on demand with interest
stood on December 31, 1908, at $6,758,900; those payable
after more than three days at $5,917,893; and various

National

Monetary

Commission

liabilities at $9,047,800.® The item of accounts of various
classes, $18,365,673, balances the corresponding item of
the assets and is made up to a considerable extent of
accounts in process of collection between the banks.
The benefits of the Banco Central to the state banks are
disclosed, as much by the volume of operations as by the
state of the balance sheet. The entry and outgo of cash,
check accounts, and other items, a usual feature in
European bank reports, although rarely kept by banks of
the United States, show a very rapid inflow and outgo
under nearly every head. The following figures show
these movements under some of the principal items:
Movement of accounts of Banco Central.
Year.

1899
1900
1901
1902
1903
1904
1905
1906
1907
1908

State banks.

$84,029, 913
159.165,489
220,469,437
317,728,928
406,489,928
467, 741,465
670,585,461
483,460,118
527,629,120
441,915,280

Current
accounts.
$47, 510,675
64,970,181
9 3 , 8 1 1 , 717
2 0 1 , 3 2 1 , 669
199,778,557
1 7 4 , 4 4 8 , 963
315,463,093
441,931,928
348, 298,843

Cash turnover.

$232,596,011
4i7,3ii,344
710,311,344
955,149,526
133. 2 7 3 , 2 4 0
3 7 5 , 9 3 0 , 244
588,754,858
740,912,750
891. 485,979
556, 4 1 6 , 9 1 4

VIII.—Character of Mexican banking business.
The method of extending accommodation to commerce
by the banks of Mexico differs in several respects from
the methods pursued in other countries. The comparatively small proportion of commercial operations of the
type which afford suitable paper for discount compels
CHAPTER

These figures are from the official report of the bank, made to the
shareholders April 14, 1909.

Banking

System

Mexico

the banks, with due regard to the encouragement of
Mexican industry, to make loans for longer terms and in
a different manner than the banks in Europe and the
United States. The law regarding discounts requires
that paper discounted shall bear at least two signatures
and shall be payable in not more than six months. It is
not through discounts, however, that the bulk of Mexican
banking business is done.a The bulk of the assets of a
commercial bank in Mexico consists of notes deposited as
a pledge for advances made by the bank, but these notes
are not indorsed over to the bank in the same manner as
in Europe and America.
The client who has received an advance upon the
deposit of a note as collateral is debtor to the bank to
the amount of the advance if the paper is not paid at
maturity. Banks in nearly all cases hold the paper until
maturity, and the advances are usually for a period of
not less than nine months, and sometimes for a year.
This detracts from the convertibility of the assets, but
the position of the local banks has been materially
strengthened by the arrangement made with the Banco
Central for discounting their own paper in case of need.
The advances made upon commercial paper in this manner afford returns often running to 8 and 9 per cent.
The paper is selected with considerable care, and Mexican
debtors are usually punctilious in keeping their engagements. 5 The character of the paper carried is verified
« I t is declared by Favre that discount, as employed in Europe, is so
little in use in Mexico that it is regarded as almost a disgrace to have a
note discounted.—Les Banques au Mexique, p. 44.
b Favre, p. 73.

National

Monetary

Commission

by the commissioners of the Government, who are not
tolerant toward obligations with signatures of doubtful
value. In order to make loans under the conditions
which exist in Mexico, a minute knowledge is required
of the men to whom credit is granted and of the character
of the business which they carry on.
Among the items which are required by law to appear
in the monthly balance sheets of the banks are the
amount of paper discounted, the amount of loans on collateral, and the amount of creditor current accounts.
The creditor current accounts involve a certain amount
of duplication between the banks, as in the case of the
reserve deposits of banks in the United States. Thus,
the creditor current accounts of the Banco Central represent credits opened in favor of the local banks. Such
accounts at the local banks themselves represent the
credits extended among themselves for the purpose of
covering their exchanges. They also represent the credits extended to commercial and industrial houses against
guaranties of a character approved by the representative
of the Government. As these credits are not necessarily
for any fixed term, they afford such means as the banks
have at their command for extending aid to industrial
and commercial enterprises. In this respect they play to
a certain degree the part played by the cash credits of
the Scotch banks in the eighteenth and nineteenth
centuries.
Variations in the manner of classifying assets led to
some reforms in 1908, which caused a considerable change
in the amounts appearing under different items of the

Banking

System

Mexico

balance sheets. These changes were explained by t h e
Minister of Finance in his report for 1908, as follows: 0
" T h e considerable oscillation observable in t h e items
of 'notes discounted' and 'loans on collateral' is due
largely to the new classification of t h e constituent elements of the assets, for t h e increase in the item of ' a c counts current, d e b t o r s ' in the balance sheet of the
banks of issue is undoubtedly due to the transfer thereto
of accounts t h a t had been improperly included under
'notes discounted' and 'loans on collateral.' The large
reduction of the two last-named items is also partly due
to the volume of accounts collected during t h e year.
" T h e magnitude of the items 'accounts current, debto r s ' and 'accounts current, creditors' is also due t o t h e
practice of including under t h e m t h e balances of bookkeeping accounts, which do not represent credits or debits,
properly so called, and which should balance exactly.
These bookkeeping accounts a m o u n t on the side both of
assets and liabilities t o more t h a n $220,000,000. Impersonal accounts, such as 'profit and loss,' 'dividends
distributable,' etc., are also included under t h e items of
'accounts current, d e b t o r s ' and 'accounts current,*
creditors.'"
The item of the assets designated as "securities and
obligations immediately realizable or negotiable" is required b y t h e Government to represent only w h a t its title
implies. Securities thus held are required to be government bonds or industrial securities enjoying a market
sufficiently wide to permit their sale or negotiation within
a

Financial Documents, December, 1908, p. 21.

8648—10

National

Monetary

Commission

a short time. The banks are not permitted under this
head to carry shares in participations nor securities which
are not quoted. As the situation is defined by M. Favre: °
"The banks are strangers to the issue of company
securities. Mexico does not yet know the pompous
flotations and guaranteeing syndicates, nor any of the
necessary but dangerous methods of our modern banks.
It is by new companies themselves that their securities
are usually issued, with the support of private bankers
or of banks without concessions which make a specialty
of dealing in securities. But the establishments of credit
are not permitted to participate, and there is no danger of
finding among their assets certificates arising from issues
which have failed or only partially succeeded."
As required by the fundamental conditions of the law,
the chief business of the banks of issue is limited to commercial loans and discounts of the character above set
forth. A certain amount is permitted, however, to be
advanced upon stocks and bonds. The law requires that
such advances shall not exceed 90 per cent of market
value and that in case of depreciation the deficiency shall
A>e made good within three days or the securities immediately sold.
The lurking element of danger in loans of the last two
types, .by banks having large demand liabilities, which
caused so much embarrassment to the trust companies of
the United States in 1907, was revealed in Mexico at about
the same time. Loans upon securities increased very
rapidly after the impetus given to Mexican industry by

Les Banques au Mexique, p. 74.
50

Banking

System

Mexico

t h e monetary reform. The increase had, indeed, begun
before t h e reform was p u t in execution and had already
carried the amount of such loans from $49,513,193 on
December 31, 1902, to $62,818,661 for 1903; whence,
after the monetary reform, they rose to $86,098,254
for 1905; $102,240,713 for 1906; and to $110,244,160 on
J u n e 30, 1907. The halt called in all speculative movements and the pressure in the money market caused a
sharp contraction of such loans to $64,609,118 on J u n e
30, 1908, and a still further reduction at the close of the
year 1908 to $56,012,818.
Mortgage loans occupy only a subordinate place among
the assets of the banks of issue. They represent ordinarily only the pledge of real estate as a supplementary
guarantee where t h e value of the original pledge has
declined and t h e borrower has not been able to substitute
any other form of security. The tendency to the overextension of credit immediately before the pressure of
1907 is indicated by t h e fact t h a t these loans secured b y
mortgage multiplied several times during the period of
liquidation which followed the pressure. They stood on
J u n e 30, 1906, at only $1,680,224, to rise on J u n e 30, 1907,
to $2,910,744. Then came the sudden shrinkage in the
value of securities, t h e curtailment of loans, and demands
by the banks for supplementary security, which carried
the amount of loans on mortgage on December 31, 1907,
to $6,240,828; on J u n e 30, 1908, to $7,773,865; and on
December 31, 1908, to $10,504,677. I t is to be expected
t h a t these amounts will be gradually reduced with t h e
restoration of sound conditions, since they are contrary

National

Mon etary

Commission

to the policy of the law which governs banks of issue and
contrary to the condition of the banks themselves prior
to the last few years, when loans on mortgage for all the
banks were kept below $1,000,000.
The original banking law of 1897 imposed four restrictions upon banks of issue in regard to classes of business
allowed. Two of these restrictions were directed to limiting the character of paper discounted—that it should not
run for more than six months and that it should be guaranteed by at least two responsible signatures, unless collateral security was given. It is under the latter exemption, as stated above, that a large share of Mexican banking
business is done. The other two prohibitions were against
loans secured by mortgage (with the usual exemptions for
property taken in case of default) and the pledging of circulating notes or creating any lien upon them.
In spite of these restrictions, the rapid influx of capital
into Mexico for investment in fixed forms after 1905
encouraged the employment of banking methods which
did not meet the approval of the Minister of Finance.
This became apparent after Mexico had felt the reaction
of the crisis of 1907 in the United States. Hence resulted a circular letter, issued by Mr. Iyimantour to the
banks under date of February 10, 1908, pointing out
that certain reforms seemed to be called for in banking
practice and proposing a conference of bankers in April
for the discussion of the subject. One of the results of
these conferences was that further restrictions were imposed upon the character of business permitted to the
banks, much more minute and specific than those con-

Banking

System

Mexico

tained in the original act. It was deemed advisable to
directly prohibit participation in industrial enterprises
and to limit to 10 per cent of capital and reserve the
amount invested in corporation securities. A leaf was
taken also from the national banking law of the United
States, by prohibiting loans to any one person or corporation exceeding 10 per cent of paid-up capital. The text
of these restrictions was embodied in a new draft of article
29 of the law of 1897, which was made to read as follows:0
"ARTICLE XXIX.

' i It is prohibited to banks of issue:
" 1 . To make loans or discount notes or other paper
running for more than six months.
" 2 . To discount notes or other commercial paper
without at least two signatures of well-known solvency,
unless collateral security is given.
" 3 . To make loans secured by mortgage except in
the cases set forth in the following article.
" 4. To make loans without sufficient collateral to persons or associations not domiciled nor having business of
importance in the States or Territories wherein the home
office, branches, or agencies expressly authorized by the
Treasury Department may be located. From this provision are excepted operations between banks.
" 5 . To mortgage their real property or borrow on their
credits.
" 6 . To pledge or pawn their bank notes or to contract
obligations respecting them.
a

Instituciones de Cr6dito: Leyes y Circtilares Relativas, p. 13.

National

Monetary

Commission

7. To accept uncovered bills of exchange or drafts, or
to open credits not revocable at discretion by the bank.
" 8 . To hold corporation stocks or bonds exceeding 10
per cent of the amount of paid-up capital and reserve at the
time. Securities representing the federal debt and others
where the capital or revenues are guaranteed by the
Government are not included in this limitation.
" 9 . To operate on their own account mines, metallurgical offices, mercantile establishments, industrial or
agricultural enterprises, or to take part, either by general
or silent partnership, in associations, except under circumstances analogous to those set out in article 100, in which
case the provisions of article 101 shall be complied with.
" 10. To engage in insurance operations.
" 1 1 . To accept responsibilities, whether direct, indirect,
or associate, from any single person or association, which
in the aggregate exceed 10 per cent of the paid-up capital
of the establishment. Rediscounts between banks are
excepted.''
CHAPTER

IX.—Movement of the circulation.

The Mexican bank-note system has not been long
enough in operation to justify final conclusions in regard
to the character of its movements. Any tendency which
might exist toward automatic expansion or contraction to
meet seasonal requirements has been more or less obscured
by a number of special circumstances, the most conspicuous of which have been the natural expansion of a
new system to meet the requirements of a country going
through a rapid process of development and the issues

Banking

System

Mexico

made to meet the changes which took place in the volume
of metallic money during the initiation of the monetary
reform. A further circumstance which tended to obscure
any purely rythmical movement which might occur under
stable conditions was the sharp contraction in the volume
of business caused by the panic of 1907 in the United
States and its after effects in Mexico.
It was almost inevitable that the creation of new banks
of issue in a large number of the Mexican States should
cause an increase in the note circulation. This tendency
may be explained as the provision of an adequate medium
of exchange where it did not before exist. This has been a
common phenomenon in banking history, and also in the
history of the distribution of the precious metals, that the
new supply has gone largely to those localities where the
means of circulation were scanty, instead of being superimposed upon the circulation in that part of the community where it was already adequate, or nearly adequate,
for commercial operations. a
The net increase in circulation in Mexico has not been
large, however, in proportion to the growth in banking
facilities. The issue of notes has been accompanied by a
more than corresponding increase in the metallic reserves
of the banks, which has left the amount of notes only
slightly in excess of reserves. The reason for the growth
of the reserve is found in the requirement of the banking
law that mfetallic money shall be held to the amount of 50
per cent of certain classes of demand liabilities in addition
a This subject is discussed more fully in the author's "Principles of
Money and Banking," Book I I , Chap. VI, on "TheDistribution of Money."

National

Monetary

Commission

to circulating notes. The relative increase in circulation
and in metallic reserve for representative years since the
enactment of the new banking law has been as follows:
Increase of note issue and metallic reserve.

December 3 1 -

Metallic
reserve.

Circulation.

$54,375,769
64,012,464
84,202,709
94, 141,407
97,787,878
91,475,982
87,504,630
92, 2 2 1 , 477

1900
1903
1905
1906
1907
1908
1909 ( J u n e 30).

$39.197,024
49,394, 76i
61, 564, 982
68, 312, 005
64,909.345
69,818,349
77,753.503
84.352, 54i

The increase in note issues within ten years shown by
the above figures is about 65 per cent, while the increase
in reserves is 98 per cent. This increase in circulation is
not in itself insignificant, but it is small compared with
the increase in total banking assets, which was more than
300 per cent between 1898 and 1908. The rapidity of
this growth over five-year periods is graphically shown by
these figures:
Growth in banking assets.
Dec. 31, 1898
Dec. 31, 1903
Dec. 31, 1908

$170,650,776
360, 144, 145
704,522,244

The comparatively moderate increase in bank-note circulation is susceptible of several explanations having
special reference to conditions in Mexico. In countries
where the check system has been highly perfected, as in
Great Britain and in the United States, it would be possible to attribute such a condition to the preference for

Banking

System

Mexico

checks over bank notes. To a limited extent, b u t to a
limited extent only, this explanation would probably fit
conditions in Mexico. The extensive operations carried
on b y American smelting and mining companies and b y
other large corporations, b o t h domestic and foreign, have
been facilitated b y the extension of the banking system
and are consummated largely by checks, drafts, and bills
of exchange rather t h a n by the employment of notes. A
part of t h e reason for t h e slow increase in note circulation
is to be found, however, in the preference of t h e mass of
the community for " h a r d m o n e y , " or for the physical
possession of silver coin, which was for so long a time
almost the only medium of exchange. The use of silver
was a part of national economic policy for m a n y years, in
order to afford a m a r k e t for the metal, and was promoted
by limiting the minimum issue of bank notes to five pesos.
For all transactions in smaller amounts a void was left
for the use of the peso duro (or hard dollar), which so long
enjoyed the monetary empire not only of Mexico, b u t of
China, the Philippines, and other countries of the Orient.
This and another cause for the limited circulation of notes
are thus set forth b y F a v r e : a
" F o r this state of things may be assigned two reasons,
which, however, mutually supplement each other. I t
should not be forgotten, in the first place, t h a t the Mexican b a n k note is not legal tender. Although it is received
everywhere, even in the public offices, no one is compelled
to accept it. I n the second place, thanks to the large
production of silver and to its free coinage, Mexico was

Les Banques an Mexique, p. 78.
57

National

Monetary

Commission

always abundantly supplied with metallic money, and as
no one was compelled to receive notes, the employment
of silver money, which had already entered so deeply into
popular habits, was continued. It is probable that with
the adoption of the gold standard and the suspension of
the free coinage of silver this situation will be modified
and the credit circulation will acquire a wider extension. "
So far as it is possible to draw inferences in a guarded
way from the fluctuations in the Mexican bank circulation, it would seem that the end of the quarter—in
March, June, September, and December—is usually a
period of expansion. Examination of the table given
below, showing the changes in note circulation at the
end of each month for the four years ending with 1908,
shows that, with the single exception of December, 1907,
the circulation at the close of these months was larger
than that for the month preceding. In the spring the
increase often extended over to the close of April, but in
the summer showed usually a considerable contraction in
July. The record of October is less uniform. The month
of December, with the exception of the crisis period of
1907, shows the expansion at the end of the quarter in a
rather more marked degree than in other cases. So far
as any inference can be drawn from so limited a set of
data, the spring months appear as those of active demand
for notes, while the summer shows a considerable contraction.
The events attending the consummation of the monetary reform in 1905 and 1906 and those attending the
business reaction at the close of 1907, disclose at least a

Banking

System

Mexico

considerable degree of responsiveness on the p a r t of the
note circulation to the demand for currency. The details
regarding t h e action of the banks in supplying notes to
cover t h e withdrawal of silver coin in carrying out t h e
monetary reform are set forth elsewhere. I t is sufficient
t o say in this connection t h a t the banks met the requirement for currency by increasing their note issues to take
u p the coin withdrawn.
The movement of the note issue at the time of t h e
crisis of 1907 was quite different from t h a t of the note issue
b y the national banks of the United States. The note
issue of Mexico showed a fall from a m a x i m u m of
$100,964,740 at t h e close of March, 1907, to $95,673,890
a t the close of September and to $91,475,982 a t the close
of December. A still lower figure was reached in J a n u ary, 1908, to be followed b y an expansion in March of
a b o u t $4,750,000. Contraction then set in again in
earnest, until the close of August, 1908, showed a circulation of only $83,741,316, or more t h a n 16 per cent below
t h e m a x i m u m of t h e period of expansion. Some recovery
took place during the a u t u m n of 1908, b u t the circulation
still remained at the close of December, in spite of t h e
end-of-the-quarter demand, at $87,504,630, or fully 1 2 X
per cent below t h e m a x i m u m of 1907. The details of
these movements of the circulation at the end of each
m o n t h appear below.

National

Monetary
Changes in note circulation

Commission
at end of each month.

1906.

End of—
$82,995,576
84.246,461
85,824,568
87,213,076
87,054,131
89,454,255
92,002,194
89,461,960
90,376,303
92,933.798
91,918,180
94,141,407

January._
February _
March
April
May
June
July
August
September
October
November.
December _

$93,597,868
96,181,246
96,912, 751
98, 143,032
95,985,238
97,134,976
95.487,247
93, 2 7 5 , H 3
94,597,493
95.108,751
96,017,095
97,787,878

$98, 184, 395
99, 674. 882
1 0 0 964, 740
99 072, 829
98 297 088
98 47o 528
96 147 427
95 52i 153
95 673 890
94 577 098
92 699 333
9i 475 982

$89,659, 571
91, 689,723
94.4IO 477
93,584 097
9i,77o 812
92,253 293
85,930 980
83,741 3i6
84,539 122
84,662 267
84,544 942
87,504 630

Whether these figures indicate a healthy movement of
the circulation or not, they at least indicate susceptibility
to change in conformity with changes in commercial conditions. How widely this movement differs from that of
the circulation in the United States, based upon United
States bonds, may be judged by the brief summary of the
movement of the American circulation contained in the
following table:
Movement

of circulation

in the United

States.

Secured b y —
Total.

Date.
Bonds.

Lawful
money.

July 1, 1907
January 1, 1908
July i , 1908

$555.57o,88i

$48,217,809
46,670,997

January 1, 1909
July 1, 1909
August 1, 1909-

628,786,205

643,459,898
623,250,517
659,673,408
667,508, 731

75,083,400
48,281,960
30,246,666
27,845,433

$603,788, 690
690,130 895
698,333 917
677,068 165
689,920 074
695,354 164

Banking

System

Mexico

The significance of these figures is found chiefly in the
movement of the circulation secured by bonds. It appears
that while there was an increase of about $88,000,000,
or less than 8 per cent, at the time of the panic, to meet
the demand for currency, there was a subsequent contraction of only about $20,250,000, or less than 3 ^ per
cent, after money had become redundant, and rates for
call loans in New York were for a long time continuously
below 2 per cent. This trifling contraction, moreover,
was offset more than twice over within about another year
by the issue of notes upon bonds which had previously
been used to protect deposits of public money with the
banks. a
The criticism might perhaps be made against the movement of the Mexican circulation that it did not meet the
requirements of an elastic currency by prompt expansion
for tiding over the temporary demand for a medium of
exchange at the height of the panic. It does not appear,
however, that such a demand was acutely felt, and it is
certain that there was no suspension of currency payments
nor any abnormal increase in the discount rate for sound
loans. There was considerable disturbance in the market
for credit due to large investments in securities which
could not be quickly realized, but the effect was felt upon
the credit situation rather than upon the demand for currency. Such demand as arose for the support of the market by the issue of additional notes was met chiefly by
the National Bank rather than by the state banks, as
a

Cf. Wall Street Journal, August 10, 1909, from which the above figures
are taken.

National

Monetary

Commission

has been set forth in the chapter devoted to that institution.
CHAPTER

X.—Adoption of the gold exchange standards

The work of putting the banking system upon a modern
basis had hardly been achieved when Mr. Limantour
turned his attention to the subject of the metallic standard. Mexico had been a large producer of silver from
the times of the Spanish conquest, and her standard coins
had found their way through the gateways of Europe
and the Philippines—which was at one time an appanage
of Mexico—into China, Japan, and most of the countries
of the China Sea. But the gradual fall in the gold price
of silver, accentuated in 1902 by the lowest level ever
touched by the metal, convinced Mr. Limantour and his
advisers that Mexico must follow other advanced nations
onto the gold basis. The public finances were deranged
by the fall of silver, because much of the foreign debt of
the country had been contracted in gold, and the import
trade had been reduced almost to gambling because exchange with gold countries had become subject to such
wide fluctuations. More important still was the effect of
the fall of silver and its incessant fluctuations upon the
earnings of the railways and the refusal of foreign capital
from gold countries to embark in the extension of the
railway network or in other Mexican enterprises. While
many local enterprises profited after a fashion from the
rise in exchange, the railways were governed by official
a The account here given of the adoption of the exchange standard follows in the main the narrative of the author's " History of Modern Banks
of Issue," fourth edition, New York, G. P. Putnam's Sons, 1909.

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System

Mexico

rates, which t h e Government only tardily, in 1902, authorized t h e m to change.
Confronted b y these conditions, Minister Limantour
obtained t h e approval of President Diaz for the appointment of a monetary commission to investigate all phases
of the subject of t h e metallic standard. While this commission was at work in Mexico, beginning in t h e spring
of 1903, another step was taken by the Mexican Government, designed to secure a certain degree of international
cooperation in establishing more stable exchange between
other silver-using countries and gold-standard countries.
Notes substantially identical in language were addressed
in J a n u a r y , 1903, by t h e representatives of China and
Mexico to t h e Government of the United States, asking
the aid of t h e latter in presenting the subject to those
Governments having commercial and territorial interests
in t h e Orient. I t was pointed out t h a t the imports
of certain silver-using countries reached a total of
$574,627,323 (in United States gold coin), and t h a t the
problem of securing relative stability of exchange between
the gold and silver countries is one whose importance is
not limited to silver countries, b u t comes home with
force to all those gold-standard countries which are seeking markets for their products in silver countries and are
seeking t h e extension of their trade in t h e Orient.
The Government of the United States responded favorably t o this appeal, and President Roosevelt, under
authority of Congress, appointed a commission of three
members to cooperate with a commission appointed by
°> Commission on International Exchange, 1903, p. 39.

National

Monetary

Commission

Mexico to present the subject to other Governments. 0
These commissions visited successively London, Paris,
The Hague, Berlin, and St. Petersburg, where they conferred with commissions appointed for the purpose. The
result of their mission was an agreement between representatives of all the Governments visited—those of Great
Britain, France, the Netherlands, Germany, and Russia—
which was well expressed by the first resolution adopted
at London: 6
"That the adoption in silver-using countries of the gold
standard on the basis of a silver coin of unlimited legal
tender, but with a fixed gold value, would greatly promote the development of those countries and stimulate
the trade between those countries and countries already
possessing the gold standard, besides enlarging the investment opportunities of the world."
There was not absolute agreement among the various
powers in regard to the best means of reaching this
result, but in most cases it was agreed that the ratio of
32 to i should be adopted as the relation between the
gold standard and the new silver coins. This fundamental resolution was an indorsement of the principle of
the gold-exchange standard.
Not much more than a moral effect was anticipated by
the Government of Mexico from the efforts made abroad.
a The members of the American commission were Hugh H. Hanna, of
Indiana; Charles A. Conant, of New York; and Prof. Jeremiah W. Jenks,
of New York. The members of the Mexican commission were Enrique C.
Creel, president of the Banco Central; Luis Camacho, financial representative of Mexico in London; and Eduardo Meade, of San Luis Potosi.
& Report of the Commission on International Exchange, 1903, p. 141.

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Mexico

Public opinion was still sensitive in the United States,
and to some extent in Europe, against international bimetallism, for which the United States had made their
last effort in 1897.a It was expressly declared, therefore,
in both the Mexican and Chinese memoranda to the
United States, that it was not the expectation or the
wish "that the gold-standard countries should take any
action tending to impair their monetary standard or to
make material changes in their monetary systems. b One
of the objects sought, however, was to bring about
greater regularity in the purchase of silver bullion by
different powers, when required for coinage purposes, in
order to diminish fluctuations in exchange with silver
countries. The soundness of this policy was so far recognized by the British Government that it was afterwards
adopted on a large scale in purchases of silver for India.
While the commission on international exchange was
pursuing its mission in Europe the commission appointed
to study the subject at home continued its inquiries through
several subcommittees. The fourth subcommittee, which
was charged with analyzing the effects of the fall of silver,
reported in favor of a system of stable exchange for
Mexico at a ratio of 33 to 1. The full commission held its
a

Vide "Statement respecting the Work of the Recent International
Bimetallic Commission," by Senator Wolcott, of Colorado, in United States
Senate, January 17, 1898. I t was then proposed to the government of
British India that it should retrace the steps of 1893 by again opening its
mints to free coinage of silver, but this was met by a "unanimous and
decided opinion'' on the part of the government against such action.—
Commission on International Exchange, 1903, p. 303.
& Commission on International Exchange, 1903, p. 45.

8648—10

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Monetary

Commission

final sitting on February 10, 1904, and in its report recommended the adoption of a stysem based on the gold standard. They did not advise the adoption of a gold currency,
but of a system which would keep silver in circulation in
quantities as large as possible without impairing the maintenance of the legal ratio with gold. To these ends it
was recommended:
1. That the mints be closed to the free coinage of silver,
and that the reimportation of Mexican pesos be prohibited
after proper delay.
2. That a ratio be established between gold and silver
based upon the average gold price of silver for the preceding ten years, which should not be raised more than
10 per cent.
3. That gold should not at first be coined for either the
Government or individuals, but that such coinage should
be deferred until the new coin should have attained parity
with gold and when in the opinion of the Government the
circulation of gold would not impair the maintenance of
this parity. a
A plan for carrying out these ideas was presented to
Congress by Minister Limantour on November 16, 1904,
which reviewed all sides of the discussion which had been
taking place in Mexico, frankly discussed the merits and
defects of the old system, and pointed out the means of
establishing the new. In this report the argument that
the export trade profited by a depreciating currency was
examined and found to have little foundation in the commercial history of Mexico. It was the conclusion of the
o Commission on International

Exchange, 1904, p. 419.

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System

Mexico

minister t h a t t h e expansion of t h e mining industry,
though facilitated b y t h e depreciation of t h e local currency, could not be ascribed to t h a t as t h e chief cause,
b u t to other causes, foremost among which were t h e construction of railways into new regions, the cheapening of
transportation rates, and modern methods of treating t h e
ores. Turning to t h e figures of gross export trade, it was
pointed out t h a t during t h e ten years ending with 1891,
when t h e fluctuations in the gold value of silver were
slight, total exports rose from $26,000,000 to $53,000,000
in American gold, or more t h a n 100 per cent, while for
the ten years ending with 1901, during which t h e value
of the Mexican peso fell from 84 to 48 cents in gold, t h e
increase in t h e value of exports, reduced to gold, was only
from $63,000,000 t o $77,000,000, or about 22 per cent. a
The minister did not adopt, in terms, the conclusion of
members of t h e American commission in 1903, t h a t ,
under t h e system of a falling monetary unit, " Mexico
had in recent years given up a growing proportion of t h e
products of her own labor and intellectual efficiency in
return for foreign p r o d u c t s ; " b u t in his report in t h e
a u t u m n of 1905 he brought out the corollary of this
proposition, t h a t t h e rise in the unit in 1905 enabled
Mexico " t o purchase a much larger quantity of foreign
merchandise without any very material increase in our
a
Monetary Reform in Mexico, p. 4. This subject was discussed and
similar conclusions reached in a paper submitted to the Mexican commission by the present writer, Professor Jenks, and Mr. Edward Brush, April
18, 1903. (See Commission on International Exchange, 1903, pp. 431-439.)
It was also discussed exhaustively by Senor Casasus, Currency Reform
in Mexico, pp. 193-239. On the same subject in other countries, vide
the author's Principles of Money and Banking, I., pp. 347-351.

National

Monetary

Commission

remittances abroad." a An important factor in the progress of recent years was the abolition of the alcabalas,
or interior customs taxes at state lines. It was not
until the middle of the year 1896 that this reform was
effected, with the result of relieving commerce from a
galling exaction and greatly stimulating the public revenue from other sources.
A measure to carry out the reforms proposed by Minister
Limantour was submitted with his report and became law
on December 9, 1904. This law declared that the existing
silver coin, containing 24.4391 grams of pure silver and
2.6342 grams of copper, should continue to possess full legaltender powers, but that it should have a value equal to
75 centigrams of pure gold. The issue of money of all kinds
was reserved to the executive, who was also clothed with
authority to forbid or tax the importation of Mexican pesos
into the Republic; to continue coinage of old pesos for export; to modify the form of the peso; to authorize the
circulation for a limited time of the gold money of other
nations; to modify the mining laws by reducing the charge
of 2 per cent upon coinage, the stamp tax of 3 per cent,
and the charges for assaying, smelting, and refining; to
modify the taxes on mine titles and various local taxes; to
exempt mining machinery from import duties; to arrange
for advances upon silver bullion and for its sale under favorable conditions at home and abroad; and to create a coma
Financial Documents, December, 1905, p. 4. The minister calculated
t h a t exports valued in silver, amounting for the fiscal years 1903, 1904, and
1905 to $207,377,793, $210,312,374, and $208,520,451, respectively, worked
out in gold value, at the average rate of exchange, a t $82,950,000,
$91,440,000, and $101,710,000, respectively.

Banking

System

Mexico

mission for the purpose of maintaining stability of exchange, to which should be confided a special fund to be
created by the executive and such powers as the executive
thought proper. a
Sweeping as these measures were, there was some division of opinion as to the effective steps required for maintaining parity. Mr. Creel, chairman of the Commission on
International Exchange, had urged that exchange funds
should be established in New York and Europe, and had
upon this point been vigorously supported by members of
the American commission, but he was overruled by the
majority of his associates. Minister Limantour accepted
in a tentative way the view of the majority, that the appreciation of the silver peso to gold parity could be brought
about by scarcity, but by the institution of the commission
on money and exchange he recognized the view that something more than scarcity must be relied on, under all the
conditions of international trade and the money market, to
maintain permanently a parity once attained.
The event which contributed most to allay doubts and
to permit the Government to advance from the ground of
experiment to that of accomplishment was the rise in the
price of silver bullion. The hiatus in the demand for the
metal which had carried its price down in the London
market to 21 \{d. in December, 1902, and January, 1903,
was at length passed, and during the period from April,
1903, to the beginning of 1905 silver moved slowly, but
almost uninterruptedly, upward. 5 In January, 1905, the
a The text of this bill (in English) is given in the Report of the Commission
on International Exchange, 1904, pp. 449-50.
b Commission on International Exchange, 1004, P- 2&.

National

Monetary

Commission

London price was 28^d.—an advance of nearly one-third
over the low point of 1903. On March 25, 1905, therefore,
although silver had then receded to about 26d., the new
gold standard was put into effective operation. A step
toward the policy of India was introduced by one of the
laws now promulgated by the provision that henceforth,
except for recoinage, new silver money should be issued
only in exchange for gold coin or bars at the legal parity.
It was provided that this exchange of silver for gold should
cease to be obligatory when silver rose above the legal
parity.
A fund was constituted by section 27 of one of the new
laws, called " Fund for the regulation of the monetary circulation," with the avowed object of facilitating the adaptation of the monetary circulation to the requirements of
stability in foreign exchange. At the same time (April 3,
1905), a commission on money and exchange was created
and a fund of 10,000,000 pesos was placed under its control, deposited in part at the National Bank of Mexico
and in part at the other principal foreign banks. These
funds were destined to support exchange by enabling the
commission to buy or sell gold drafts according to the
state of the market. a
The work of the commission was given an entirely different direction from what was expected by the continued
rise in the price of silver bullion. By the close of 1905
Mexico was not only firmly established upon the gold
a
Viollet declares t h a t this "completed in a happy way the reform, which
could not have been accomplished if it had been founded exclusively on
the scarcity of money."—Le Probleme de VArgent et VEtalon d'Or au
Mexique, p. 202.

Banking

System

Mexico

standard, b u t was beginning to import gold in p a y m e n t
for her exports of silver. U p to the year 1904 exchange
on New York had fluctuated in harmony, more or less
exact, with the market for silver bullion. During t h e
latter half of 1904, however, this exchange became practically fixed a t $2.16 in Mexican money for $1 in United
States gold. 0 The reason was in p a r t the rise in silver,
b u t was also in p a r t the known purpose of Mexico t o
establish soon the relation of two to one. W i t h the further rise in silver in 1905, which carried the average London quotation for t h e metal to 27} fd. for t h e year, and
to a m a x i m u m of 33>^d. early in 1906, it became no longer
a question of maintaining the value of the silver coins,
b u t of keeping t h e m down to the gold value fixed by law.
The first importations of gold were encouraged b y the
Government in order to enable the banks to diversify
their reserves, b u t before the close of 1906 t h e golden
stream had become a torrent and silver coins were freely
exported because the market price of their bullion contents was above their legal value in Mexico. Exports of
silver from Mexico for the sixteen months ending with
October, 1906, were $55,608,823, and the coinage of gold
was $51,606,500. b The fear spread t h a t the country
would be denuded of the stock of subsidiary silver necessary to do business, and in the a u t u m n of 1906 an export
t a x of 10 per cent was imposed upon the a m o u n t of silver
coins sent abroad without the importation of an equivalent a m o u n t of gold. c
a

Commission on International Exchange, 1004, p. 29.
& Financial Documents, December 1906, p. 7.
c Bulletin de Statistique, January, 1907, LXI, p. 120.

Najional

Monetary

Commission

Fortunately the new monetary law, while leaving the
old silver peso unchanged at 27.03 grams, provided for
subsidiary silver coins lighter in weight in proportion to
their legal value (25 grams to the peso) and with a fineness
of eight-tenths in pure silver instead of 0.902.° This precluded the profit which was found with the old pesos in
exporting them for sale in the London silver market. The
policy pursued by the Government, therefore, was to refrain entirely from the coinage of pesos and to endeavor
to fill the channels of circulation with gold, bank paper,
and subsidiary silver. To this end, in December, 1905,
the issue of gold certificates was authorized against
deposits of bar gold and foreign gold coin. Every effort
was made also to increase the coinage of subsidiary silver,
until at the end of November, 1907, the amount coined
in about two years and a half in pieces of 50 centavos was
$26,186,619, and in smaller pieces $5,499,923. h
By the close of the fiscal year 1908 the amount of
gold coinage which had been executed since the inauguration of the monetary reform in 1905 had reached
$81,626,500; silver pesos, $3,700,000; pieces of 50 centavos, $26,830,619.50; pieces of 20 centavos, $3,846,923.80;
and pieces of 10 centavos, $1,823,000, making a total
silver coinage of $36,200,543.c The coinage of the fiscal
year 1908 was $16,600,000 gold and $7,403,619.50 silver.
Within that time, or as early as October, 1907, silver had
dropped below the Mexican legal parity in the bullion
a Decree of March 25, 1905, Bulletin de Statistique,
p. 560.
b Financial Documents, December, 1907, p. 17.
c
Financial Documents, December, 1908, p. 25.

May, 1905, LVII,

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System

Mexico

market and the danger of undue exports of the coin was
over. a The result of the fluctuations in the value of the
metal had been to equip the banks with an ample stock
of gold and leave the stock of silver coin adequate for
national needs. On June 30, 1908, the exchange and currency commission had a net fund of $17,100,340, of which
$6,100,000 was in Mexican gold coin, $6,104,169 on deposit
with banks and banking firms at home and abroad, and
$3,000,000 in silver pesos. 5
CHAPTER

XI.—The banks and the monetary reform.

The banks under federal jurisdiction naturally played
an important part in carrying out the monetary reform.
They turned over the old silver pesos to the Government
as rapidly as conditions permitted for conversion into the
new. The National Bank furnished the $10,000,000 with
which the exchange and currency commission were provided by the law of March 25, 1905. The problem which
confronted the administration during the transition from
the old system to the new was to adjust the volume of
coinage to the requirements of business in such a way as
to bring about parity of exchange, without producing
unnecessary stringency in the money market. The curtailment of the amount of silver pesos in the hands of the
public was estimated by Mr. Limantour, the Minister of
Finance, at $3,000,000 between May and October, 1905,
apart from exportations of silver from the exchange fund.
a

The average London price of silver bullion for the year ending June 30,
1908, was 27.3313d., but the highest price in August, 1907, was 32%&. and
in May, 1908, only 24}|d.—Report of the Director of the Mint 1908, p. 24.
b Financial Documents, December, 1908, p. 26.

National

Monetary

Commission

The contraction was much more considerable during
November, 1905, when, as the result of the rise in the value
of silver bullion, pesos were shipped abroad to an amount
estimated at $10,000,000, of which $5,500,000 was withdrawn from the exchange fund and $1,000,000 to
$2,000,000 directly from the banks. a
While these changes were taking place in the cash holdings of the banks, the void in the circulation was being
filled by increased issues of bank notes. Thus, the total
note circulation advanced from $82,995,576 at the close
of January, 1905, to $92,002,194 at the close of July, 1905.
The increase was principally in the issues of the National
Bank, which increased between the dates named from
$22,513,994 to $28,502,230. As a result of these movements it was declared by the Minister of Finance that the
curtailment of specie was, up to the end of October, more
than compensated by increased issues of notes and that
the heavy shipments of pesos in November only brought
about a reduction of $2,000,000 approximately in the
total stock of monetary units (cash and notes) between
May and the beginning of December, 1905.
The banks were enabled, by the unexpected rise in the
price of silver bullion above the legal parity in 1905 and
at the beginning of 1906, to strengthen their reserves in an
unexpected measure. Up to near the close of 1905 the
metallic resources of the banks consisted chiefly of silver,
and reliance was placed upon the funds of the exchange
and currency commission to keep this silver at its legal
gold value. With the rise in the price of silver bullion in

a Financial Documents, 1905, p. 13.
74

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System

Mexico

the London market, it became possible to sell t h e coins for
gold a t more t h a n their legal gold value. The margin at
first was so slight as to encourage this movement only
through the exchange and currency commission and the
banks. During this period the commission was easily able
to persuade t h e banks of issue to realize their silver pesos
abroad through its instrumentality for an equivalent
amount in gold. As t h e price of silver rose, however, so
as to m a k e t h e margin of profit upon t h e sale of coins considerable, large shipments were made by private individuals as well as by the banks and it was deemed necessary
to pass a law, imposing an export t a x on Mexican silver
coin sent abroad without t h e importation of an equivalent
amount in gold. a
So rapidly were t h e reserves of the banks converted from
silver into gold t h a t t h e Government for t h e first time, in
J a n u a r y , 1906, decreed t h a t t h e character of t h e money
held in b a n k reserves should be classified as t o whether it
was gold or silver. In the first statement made under this
requirement, for J a n u a r y 31, 1906, t h e gold held was as
yet only $15,832,840 and t h e silver was $49,781,155, in a
total of $65,613,995. By the end of J u n e t h e gold
h a d increased to $42,381,837 and t h e silver had fallen t o
$29,849,675, in an increased total of $72,231,513. For
the next few months t h e increase in gold held by t h e
banks was not rapid, b u t there was a gradual advance until
the a u t u m n of 1907, when the amount of gold held on September 30 was $54,262,427 and of silver $14,531,420 in
total cash holdings of $68,793,847.
a

Financial

Documents, December, 1906, p. 6.

National

Monetary

Commission

The experience of the depression of 1908 was to reduce
somewhat the proportion of gold and to increase the proportion of silver. This was the natural result of the diminished demand for currency caused by the relaxation of
business activity, and the reflex movement of money back
to the banks, because the money actually in use consisted
chiefly of silver and not of gold. Between December 31,
1907, and February 29, 1908, the gold holdings of the banks
fell from $53,854,896 to $48,974,648, while silver holdings
increased from $15,963,452 to $16,156,988 and subsequently, on June 30, 1908, to $23,908,748.a The decline
in specie from December 31, 1907, to February 29, 1908,
was from $69,818,349 to $65,131,636. Of these sums the
National Bank of Mexico held on December 31, 1907,
$32,015,845 and on February 29, 1908, $29,931,696.
Thus, partly by the operation of normal causes and partly
by their own foresight, the banks of Mexico were supplied
with metallic reserves in actual gold, which not only added
to their capacity to maintain the parity of their own notes,
but greatly strengthened the monetary position of the
country.
CHAPTER

XII.—Organization of the State Banks.

The form of organization of the state banks of issue is
not definitely set forth in the law of 1897, but it is implied
that the bank shall be under the direction of a board of
directors, or council of administration (Consejos de
Administracidn), who shall exercise their executive
authority through a majority. The members of the

Financial Documents, 1908, p. 20.

Banking

System

Mexico

board are declared to be responsible at the civil law for
any infringement of the provisions of the banking law
which has their sanction. The manager carrying out
such infringements is also made liable, unless he has
acted under express orders from the directors. The
severe liability of the board and of the manager, however,
does not impair the criminal liability which they may
have incurred under either federal or local laws. a No
member of the board of directors can enter on the discharge of his duties without giving bond, for which purpose he must make a deposit in the bank in cash or in
shares of the bank, according to the amount fixed by its
by-laws.
Members of the board are not permitted during the
first year of the existence of the bank to take part in any
transactions by which they render themselves liable to
become debtors to the bank. After the expiration of
the first year, they are permitted to enter into such transactions when they are associated in the liability with
another guarantor of undoubted solvency or when they
furnish collateral security for double the amount of such
debt or liability. This provision was extended in 1908
to partnerships of which members of the board might be
members. It was also strengthened by the requirement
that there should be unanimous agreement, in cases of
loans of this character, among the directors present in
regard to accepting the guaranteeing firm or the collateral
offered, unless the latter fell under the classes of securities

a Law of 1897, art. n o .

National

Monetary

Commission

described b y t h e law as immediately realizable or negotiable. I t was also prohibited to officers and managers t o
transact personal business a t t h e bank. a
CHAPTER XIII.—Publicity and official

supervision.

Minister Limantour in t h e law of 1897 took several leaves
from t h e banking history of American as well as European
countries in requirements regarding publicity and official
supervision. I t was provided, even in t h e preliminary
outline of t h e new system embodied in t h e law of J u n e 3,
1896, t h a t t h e banks should publish monthly a cash s t a t e
m e n t which, besides showing balances of accounts as
required b y law, should also set forth t h e a m o u n t of coin
on hand, t h e a m o u n t of notes in circulation, a n d . t h e
a m o u n t of deposits payable on demand or on notice of
three days or less. The purpose of this enactment
seemed to be to disclose merely t h e relation of t h e cash
reserve t o liabilities. T h e complete law went further b y
setting forth in detail t h e items which m u s t be included
in these monthly statements. These were, on t h e side
of assets, t h e uncalled capital; cash holdings; a m o u n t of
discounts; a m o u n t of loans on collateral; a m o u n t of loans
on mortgage; holdings of public funds, other bonds, a n d
shares capable of being immediately converted into cash;
t h e balance of debtor current accounts; and t h e value of
real estate held b y t h e bank. On t h e side of liability
only five items were required-—capital; notes or other
obligations in circulation; deposits subject t o call a t
a

L a w of June 19, 1908.
Relativas, p. 175.

Instituciones

de Cr6dito: Leyes y

Circulares

Banking

System

Mexico

short notice; t h e balance of debtor current accounts;
and t h e reserve fund.
Early in 1906 a subdivision was required of cash holdings into gold coin, silver pesos, and subsidiary silver.
The law of 1908 added some further specifications, designed
to bring to light the investment of assets in questionable
forms and to show t h e amount of surplus funds and t h e
character of deposit liabilities.
Aside from these published monthly statements, t h e
banks are subject to t h e supervision of t h e federal Department of Finance. The power of this department m a y b e
exercised either through inspectors permanently appointed
for each b a n k or through special inspectors appointed for
particular reasons. 0 The functions of these inspectors
go beyond those of b a n k examiners under the national
banking law of t h e United States and assimilate somewhat
closely to those of the board of censors of the Bank of
France and the Bank of Belgium. They are authorized
to t a k e p a r t in t h e preparation of t h e monthly balance
sheets and to verify, when they see fit, the cash holdings
and the outstanding issues of the bank. Their signature
is required to notes or securities which are p u t in circulation, after they have been stamped b y t h e Government
and been subjected to other official requirements for their
validity. W i t h these powers, it becomes their d u t y t o
see t h a t t h e notes or securities p u t in circulation do not
exceed t h e amount which each b a n k is entitled to issue.
They are also required to be present and certify t o t h e
cancellation of notes or securities, to losses b y fire or

Article 113.
79

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Monetary

Commission

otherwise, and to exercise similar supervision over the
coupons of securities. They are required to keep a record
of notes and securities put in circulation with their sanction and such as are canceled and destroyed. It is their
duty to attend auctions and drawings which the banks
may hold and to give immediate notice of any infringement
of the law to the Department of Finance. They are
required to submit in January and July of each year a
detailed report of the discharge of their functions durkig
the preceding half year, with proper statistical data.
Inspectors are prohibited from interfering with the
management of the bank's business; from giving any information to outsiders; from holding shares in the bank
for which they are inspectors; or to apply for loans or in
any way become debtors to the bank. To hold shares or
apply for loans makes their dismissal mandatory. a In the
preparation and revision of the annual balance sheets, the
inspectors are granted the same powers which are granted
by law to the auditors of joint-stock companies. They
must verify the items of the balance sheet by comparing
each statement with the books of the bank, but they can
not demand the accounts in detail or the correspondence,
minutes, contracts, or other papers of the bank, except
under a special order from the Minister of Finance or
when the bank voluntarily agrees to show these papers.
The inspectors are required, in case a bank is liquidated
or dissolved, to represent the holders of the outstanding
notes or securities in enforcing their rights, but the latter
may protect their rights in person or through an attorney.

<* A r t i c l e 116.

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System

Mexico

This system of local inspectors was supplemented in
1904 by the creation of an inspector-general, who supervises and coordinates the work of the local inspectors and
has the same rights as they over the bank. 0 The comparatively small number of banks in Mexico, even after the
expansion of the last ten years, makes it possible for the
Minister of Finance, who stands above the inspectorgeneral and the local inspectors, to exercise a more direct
supervision than if he had under his care several thousand
independent institutions, as in the United States. The
Minister of Finance is constantly in touch with the
inspector-general and examines from time to time the
reports of the local inspectors. It is in the discretion of
the minister, under the limitations of the law, to forfeit
the charter of a bank or to impose upon it severe penalties. Forfeiture may be decreed for failure to bring the
note issue promptly down to the limit of three times the
metallic reserve, for obvious insolvency, and for various
other reasons.
The right to decide whether a bank shall be consolidated with another or whether it shall establish branches
is subject to the discretion of the Minister of Finance.
Banks are prohibited from establishing agencies, even for
the redemption of notes, within the Federal District, and
can not open other branches or agencies except with the
special permission of the Executive. h Consolidation without the previous consent of the Department of Finance
operates forfeiture of a bank's charter. Another provision, designed to prevent undue foreign interference with
a

8648^10

Favre, p. 33.
6

b Article 38.
81

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M on et ar y

Commission

banking in Mexico, declares that a charter shall be forfeited when the majority of the shares of a bank come
into the hands of a foreign government. a Forfeiture shall
not be declared, however, until the bank has had an opportunity to be heard in its own defense.
The Minister of Finance names and dismisses the
inspectors, and thereby exercises a marked degree of control over banking conditions in each locality. Many
executive decrees and circulars of suggestion to the banks
have been based upon the reports of the inspectors and
upon their special recommendations. The control of
the banking system is thus highly concentrated and the
work of the inspectors, according to the observation of
M. Favre, " exceeds the limits of ordinary supervision
and extends to actual collaboration in the improvement
of the banking regime. 6
As M. Favre points out, there are two sides to this
question of executive control. If the Minister of Finance
is a man of experience and capacity, there can be no
better guaranty for the security of the public and the
prosperity of the banks, for not only will he take care that
they shall not depart from the rules laid down, but he
will not allow them to take a step in advance, either by
increase of capital or the foundation of branches, which
is not absolutely justified by the obvious interest of the
depositors and shareholders. On the other hand, if
power should fall into the hands of a reckless or unscrupulous financier, the inspectors might become a terrible
instrument of vexations and blackmail against the banks.
a

Article 109.

& Les Banques au Mexique, p. 32.
82

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System

Mexico

The French author concludes, however, that this system
of surveillance was necessary in Mexico, because in a
country which had long been disturbed, and which had
yet to make its financial education midst all the speculations excited by mining enterprises, the gravest dangers
attended the institutions of credit. In Mexico, under the
administration of Mr. Limantour, the system gives remarkable results precisely because it permits the personal
influence and counsels of the Minister to guide the policy
of the banks. The possibility of abuse of their functions
by inspectors was recognized and guarded against by Mr.
Limantour in his report of 1897. He said upon this subject: a
"The inspectors may be appointed exclusively for
each bank or only for specific cases; and the aim has been
to give such precision to their duties as will avoid the
difficulties which are always to be feared in connection
with so delicate a function. For this purpose it was
necessary to steer between two sets of shoals of different
character, the one arising from the natural tendency of
the inspected to diminish the sum total of the powers of
the inspectors; the other arising from the very common
propensity of inspectors to carry their function to excess.
"Thus there remained no other way than to specify
with all possible clearness the principal duties and powers
of inspectors and to establish, as reciprocal guarantees in
favor of the banks and of the public, definite prohibitions
and severe penalties for inspectors who might abuse their
position; and, on the other hand, the power to extend
a

Instituciones de Credito: Leyes y Circulares Relativas, p. 113.

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Monetary

Commission

the inspection, in special cases, to the complete disclosure
of the facts involved, always provided that the Department of Finance expressly so orders."
CHAPTER

XIV.—Growth of the banks of issue.

Judged by the rapidity with which capital has flowed
into banking enterprises, to meet the demands of Mexican
business expansion, the new system of banks of issue has
proved successful. When the general banking law of 1897
took effect there were only nine banks in Mexico, with a
paid-up capital of $23,010,000 and reserve funds amounting to $5,720,047—a total of $28,730,047. Bills receivable,
the largest items among the assets of these nine banks, stood
at $49,135,683, and creditor current accounts, the chief item
of liability exclusive of notes, were $56,593,226. Outstanding notes stood at $38,497,367, which was below the
amount of coin and bullion, which stood at $42,573,025.
The relative importance of the nine banks, exclusive of the
National Bank and the Bank of London and Mexico at this
date (January, 1897), may be put in summary form as
follows:
Condition of banks of issue, January,

Bank.

Paid-up
capital.

Coin and
bullion.

1897.
Bills
receivable.

$8,000,000 $29,681,612 $23,608,234
National Bank
9,611,548
Bank of London and Mexico, _ 10, 0 0 0 , 000
18, 0 3 2 , 3 8 3
5,010,000
3,279,865
Other banks
7»49S,o76

Total

23,010,000

42,573.025

49.135.683

Creditor current accounts.
$ 3 2 , 4 9 9 , 021
10,105,122
13.989.083
56,593,226

Within less than four and a half years (June, 1901), the
number of banks had increased from nine to nineteen, and

Banking

System

Mexico

bills receivable had increased b y 150 per cent. This was due
to t h e extension of banking facilities to the principal commercial cities of Mexico, scattered over various parts of the
Republic, some of t h e m deriving their importance from t h e
development within a very short interval of mining and
other special interests. The new banks already in operation b y 1901 were t h e Bank of t h e State of Mexico, Bank of
Coahuila, Bank of San Luis Potosi, Bank of Sonora, Occidental Bank of Mexico, Mercantile Bank of Veracruz, Bank
of Jalisco, Mercantile Bank of Monterey, Oriental Bank of
Mexico, Bank of Tabasco, and Bank of Guanajuato.
Within t h e next eight years, from June 30, 1901, to
J u n e 30, 1909, t h e process of banking creation was continued by the incorporation of ten new institutions. The
total capital was reduced somewhat in 1908 by the merger
of the two banks in t h e State of Y u c a t a n — t h e Y u c a t a n
Bank, with a capital of $12,000,000, and the Mercantile
Bank of Yucatan, with a capital of $6,000,000. These
two institutions joined forces under the name of the Peninsular Bank, with a combined capital of $16,500,000, or
$1,500,000 below t h e combined capital of the two older
institutions. The greatest upward movement in capital,
as will be seen by examination of the tables, occurred
during t h e two years 1905 and 1906, after the steps were
consummated for putting t h e country upon the gold
standard. The paid-up capital and reserve funds increased about $28,200,000 for the fiscal year 1905 and
$29,700,000 for t h e fiscal year 1906. The loans and discounts increased from $65,712,000 in 1897 to $309,738,564
in 1907, b u t fell off about $83,000,000 under t h e pressure

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Monetary

Commission

of the winter of 1907-8 and the following spring. The
note issue, after increasing from $44,792,000 in June,
1897, to $97,787,878 in 1906, also declined somewhat with
the contraction of business. Cash on hand, however,
after increasing from $34,297,000 in 1897 to $80,599,993
in 1904, declined somewhat during the years of expansion,
only to increase to $80,928,310 with the relaxation in
business activity in 1908 and to $84,352,541 on June 3.0,
1909.
It is worthy of note that the increase in outstanding
bank notes, while it has been considerable, has not corresponded with the increase in loans and in creditor accounts. The latter increased from $52,920,000 in 1897
to $361,471,004 in 1907. This more rapid increase in accounts than in note issues indicates a growth in the deposit
system which is an interesting indication of the results
of the diffusion of banking facilities under the law of 1897.
As a natural result of these conditions, a large increase has
taken place in the cash reserve for the purpose of protecting deposit liabilities. This has had the further
result, so notable in France and other countries, that the
ratio of the cash to the circulation has steadily increased
until in 1908 it stood at about 88 per cent. It is declared
by Mr. Casasus that—°
"Should this tendency become more marked and continue for a greater number of years, it may perhaps prove
what is already an accomplished fact in other countries,
viz, that in proportion as the banking system of a country
becomes more perfected the note issue decreases in ima

New York Bankers* Magazine, March, 1909, L X X V I I I , p. 399.

Banking

System

Mexico

portance and comes closer to the level of the cash on
hand, because t h e deposits and checks constitute t h e
greatest force of t h e metallic circulation movement, a
force such as notes payable at sight and to bearer are
incapable of giving."
CHAPTER XV.—The banks in the crisis of 1907.
The Mexican banking system was subjected to a severe
test, almost before it had reached maturity, of t h e wisdom
and efficiency of t h e measures adopted to separate commercial banking from t h e locking up of capital in longterm investments. I t was nearly inevitable, in view of
t h e rapid industrial development of Mexico during t h e
present century and t h e limited volume of established
commercial business, t h a t , in spite of these precautions,
t h e banks of issue should be led in some cases to invest
their resources in assets which were not readily convertible. As early as 1906 t h e Minister of Finance took
note of the reduction of cash in the hands of t h e banks
in proportion to outstanding notes and declared t h a t it
was a fact which, if it became more accentuated, would
require timely measures to remedy the situation. Already pledges h a d been secured from several of t h e b a n k s
not to increase their note issues beyond given limits, b u t
only on a scale proportionate to the increase in their cash
holdings. a
The adoption of t h e monetary reform was t h e signal for
an influx of foreign capital into Mexico on a scale far
beyond t h a t of previous years. I t was declared b y t h e
a

Financial Documents, December, 1906, p. 9.
87

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Commission

Minister of Finance that "this influx of money, though
very considerable, has occasioned no surprise to the
authors of the new monetary regime. Indeed, the influx
of foreign capital was precisely one of the objects sought
to be attained by the reform, not only because that capital
fecundates all branches of the national wealth, but
because it constitutes in itself one of the surest guarantees
for the fixity of the gold value of our currency." 0
An estimate of some of the more obvious investments
of foreign capital was presented by the Minister, showing
a total of $86,500,000, which included new banking
capital to the amount of $57,600,000; issues of industrial
shares, $9,900,000; sale of mining properties, $7,500,000;
sale of the Hidalgo Railway, $6,000,000; sales of land,
$3,500,000; and sales of mortgage bonds, $2,000,000.
The amounts invested in banking capital were given in
detail as follows:
Increases of banking capital and sales of shares.
National Bank of Mexico
Bank of London and Mexico
Mexican Central Bank
Bank of Guanajuato
Bank of the State of Mexico
Bank of Yucatan
Mercantile Bank of Veracruz
Occidental Bank
Oriental Bank

$17, 000, 000
20, 000, 000
12, 000, 000
1, 500, 000
800, 000
4, 500, 000
500, 000
300, 000
1, 000, 000

It was added that in this table no account was taken
of investments in the shape of machinery or other articles
imported and not fully paid for, nor of the sums applied
to the payment of previous debts, nor, finally, of the
a

Financial Documents, December, 1906, p. 10.

Banking

System

M ex i c o

money that had come into the country through the sale
of other kinds of securities or of the bonds of the Federal
Government or of the States.
The events of 1907 in the United States and elsewhere
checked this influx of capital. Already, when Minister
Limantour submitted his annual report to Congress in
December, 1907, he was compelled to note that the
money market had become stringent, and that the crisis
in the United States had produced its reaction in Mexico.
Upon this subject he said: a
"At the time of my last report the business situatior
abroad already wore an unfavorable aspect. Money was
with difficulty to be secured even for high-class investments. The stringency, which originated in the United
States, gradually extended to Europe, and by the middle
of the year business in the chief money centers of the
world was almost at a standstill. European capital became more and more reluctant to engage in Mexican
undertakings, and not only new issues, but even old
ones, came to be regarded with disfavor by European
investors, who gradually realized on them, preferring to
have the money lying idle in their strong boxes."
All through the year the Minister of Finance had been
urging prudence upon the banks, with success in some
cases, but without creating sufficient impression in others.
He declared that perhaps some fault might be found with
certain banks for the large proportion of loans made by
them to industrial concerns and to private persons, who
were known to intend to ask for extensions at the end of
a

Financial Documents, December, 1907, p. 19.
89

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Monetary

Commission

the terms of three, four, or six months for which their
notes were drawn. Perhaps also it might be charged
that in certain localities the banks were in the habit of
confining their operations to too narrow a circle of persons and firms. Upon this subject the minister said
further :a
" Whether or not these criticisms be well grounded, the
Department of Finance has constantly endeavored to
impress on the banks the expedience of not tying up
their resources unduly and of extending their facilities to
the largest possible number of customers, while at the
same time restricting the liabilities contracted by one
and the same person or firm. But, in any event, such
ground as there may be for the criticisms in question will
disappear in proportion as institutions of credit are
founded, of which the principal object will be to make
loans for longer periods of time than are customary in
commercial usage; and in the meantime there is no reason to fear that the vicious practices which have been
mentioned will clog the normal activities of the banks of
issue, if, as is to be hoped, they take care not to go altogether beyond the bounds of prudence in that direction.''
In thus referring to the distribution of long-term loans,
Minister Limantour hinted at a project, evidently for some
time in his mind, which matured after the panic. Already
his warnings had been disregarded by the two banks of
Yucatan, with the result that they passed through a period
of serious difficulties. The use of a considerable portion
of their capital in operations capable of very slow realizaa

Financial Documents, December, 1907, p. 16.

Banking

System

Mexico

tion, and in which only a small group of persons were interested, brought their business almost to a standstill and
necessitated the intervention under government auspices
of the National Bank of Mexico and the Banco Central.
The business of the two Yucatan banks was continued by
means of a merger under the name of the Peninsular Bank,
but it was found necessary to write off the reserve funds
of both establishments, amounting to $3,582,185 for the
Bank of Yucatan and $1,911,270 for the Mercantile Bank,
to offset losses.a
It was not an encouraging sign that these reductions in
banking resources reduced the total reserve and emergency
funds of all the banks, in spite of some increases among
those which had been more prudent in their manner of
operation. It was a symptom of conditions which were
more acutely felt after the influx of capital from the United
States was checked in 1907. The manner in which these
conditions reacted upon Mexico was thus set forth by
Minister Iyimantour in his annual report for 1908: 5
" The first effects of the crisis were felt in the Republic in
the second half of December, 1907, on account of the heavy
remittances commonly made in that month by companies
which have to pay interest or dividends abroad. Concurrently, the general lack of confidence throughout the world
checked the flow of capital to Mexico, thus unsettling the
equilibrium of our economic balance. Next, money grew
scarce; collections became difficult; the volume of sales
was reduced; and the prices of the bonds and shares of
a

Financial Documents, December, 1908, p. 19.
b Financial Documents, December, 1908, p. 27.

National

Monetary

Commission

almost all our corporations fell off. About the end of February and beginning of March of the present year the yield
of internal taxes and of the custom-house revenue began
to show a decline, accompanied or preceded by a sympathetic movement in other manifestations of the nation's
economic life.
" It must be said, however, that the crisis, as it affected
Mexico, was not a sharp and sudden catastrophe, as was
the case in the United States, where in the course of a few
days many powerful institutions of credit were wrecked
and thousands of people were ruined; nor was it a violent
shock of several weeks' duration, as in some of the nations
of Europe. Here it was a transition from prosperity to
liquidation, without panic and without upheavals, and,
after all, it is a source of congratulation that the country
has been enabled to give so signal a proof of the solidity of
its business conditions."
The effect of the monetary pressure upon the banks was
indicated by the decline of their specie holdings from
$69,818,349 on December 31, 1907, to $65,131,636 on February 29, 1908. The Department of Finance sought to
impress upon them the desirability of strengthening their
stock of cash and of preparing to resist the pressure on
their resources which was obviously impending. The
action taken was thus explained by Minister Limantour
in his annual report: a
"The attention of the banks wras also drawn to the fact
that some of their funds and the funds intrusted to them
by others were tied up and unavailable, and that it was to
a

Financial Documents, December, 1908, p. 22.

Banking

System

Mexico

be expected that a large portion of the deposits would be
withdrawn and that many check accounts would be closed
up. These and similar points were dwelt on in the circular of February 10, 1908, which pointed out certain
reforms that seemed called for in banking practice, and
even in banking legislation, as well as certain measures
believed by the Department of Finance to be calculated
to improve the situation of the banks; and it was proposed that all these matters should be discussed early in
April at a conference to be attended by representatives of
all the establishments concerned.
"The circular in question was in reality an exposition,
supported by arguments, of the various questions as to
which it was desired to hear the views of persons who,
owing to their special knowledge and their experience,
were in a position to throw light on them; and the conference was attended by over forty representatives of banking institutions, who discussed not only the questions
propounded in the circular but others as well which they
themselves broached."
Some of the banks promptly modified their practices
upon the receipt of the circular from the Minister of
Finance, but others persisted in these practices, pending
the conference or the further restrictions which were imposed by the banking law of June 19, 1908. Reviewing
the subject broadly, after the new legislation had taken
effect, in his annual budget statement of December, 1908,
the Minister of Finance declared: a
" There are persons who maintain, with some show of
reason, that it would have been preferable to allow the
a

Financial Documents, December, 1908, p. 23.
93

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methods of the banks of issue to remain unchanged until
numerous institutions, amply supplied with capital, had
been founded in the Republic for the purpose of making
loans on terms which are not proper for establishments
responsible for notes payable to bearer on demand; and
the Government has even been reproached by some for
not having sought to stimulate the creation of such
institutions in order to accommodate those borrowers
who, from necessity or habit, desire long-time loans.
Such arguments and charges are, in reality, unjust, for,
in the first place, the general banking law, promulgated
more than eleven years ago, granted to the mortgage
banks and banks of encouragement all the privileges,
inducements, and facilities which might have been expected to encourage the foundation of those institutions.
In the second place, though the Department of Finance
has earnestly endeavored to contribute toward the object
in question by helping to secure admittance in foreign
markets for the cash bonds and mortgage bonds issued by
such banks and in various other ways, its efforts have
been of little avail on account of the marked preference of
business men and the public generally for investments in
banks of issue and their indifference toward other kinds of
banks, owing to the special advantage which the issue
privilege carries in multiplying the capital wherewith to
operate; and, finally, to have allowed the errors of the
past to subsist until such time as changed public sentiment had come to regard the mortgage banks and banks
of encouragement with favor would have been to give time
for the evils complained of to strike deeper root, to the

Banking

System

Mexico

detriment of sound economic principles which demanded
t h a t a new direction be given to t h e tendencies of t h e comm u n i t y in this respect.
" F u r t h e r m o r e , some of t h e chief amendments of t h e
banking law, recently enacted, aimed precisely a t diverting some of t h e capital t h a t seeks investment in banks of
issue t o institutions whose specialty is t o promote t h e
development of industrial, agricultural, and other cognate interests. On t h e one hand, it was undoubtedly
desirable t o allow longer time and otherwise to facilitate
t h e loans m a d e by banks of encouragement and b y t h e
mortgage banks, so as to enable those institutions t o
enlarge t h e scope of their operations, and, on the other
hand, it was essential to confine t h e banks of issue t o
their proper functions, for in no other way could their
complete soundness be assured and in no other way could
they be prevented from absorbing, t o t h e detriment of
other institutions, t h e entire banking business of t h e
Republic."
The plan for a new credit organism, hinted at in these
preliminary warnings by Mr. Limantour, was p u t in
definite form after the first effects of the crisis had been
stayed and it had become apparent t h a t even t h e banks
of issue had gone too far in making loans which could not
be turned promptly into cash. Among such loans were
m a n y which were based upon t h e bonds and stock of
irrigation and agricultural development enterprises.
Many of these enterprises were considered b y t h e Government essential t o t h e opening of the great natural
resources of t h e country a n d t h e ultimate development

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Monetary

Commission

of its mineral wealth. The difficulty was not that they
would not prove ultimately sound, but that they were
not of a nature suitable for the assets of banks having
large liabilities payable on demand. With quick apprehension of the scientific solution of this problem, Mr.
Limantour enlisted capital in a new enterprise for loans
for the encouragement of irrigation works and the development of agriculture.
The preliminary arrangements having been made with
leading American financiers, an act was passed by the
Federal Congress, approved by President Diaz on June 17,
1908, putting the credit of the Federal Government
behind the issue of securities for carrying on such works.
The Government was authorized to invest a sum not
exceeding $25,000,000 in works having for their object
the utilization of water for agriculture and stock raising,
either by direct government execution of such works or
by assistance to private enterprises by means of subventions or other pecuniary aid. The Executive was authorized to pledge the guaranty of the nation, under such
terms and conditions as he might consider proper, for the
principal and interest of bonds issued by special institutions which might make loans for long terms and at
moderate rates of interest to agricultural, cattle raising,
combustible mineral, and metallurgical enterprises. a In
order to give them a broad market, the securities of the
institutions making such loans were to be given substantially the character of debenture bonds, similar to
those issued in Europe by mortgage bond companies.
a Irrigation Law. Department of Finance, art. 2.

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System

Mexico

The assets upon which they were based, however, were
the various enterprises to which the money was to be
loaned, and their value to the foreign investor depended
upon the guaranty of the Government.
Under this authority a new institution was formed,
known as the " Caja de Prestamos para Obras de Irrigation y
Fomento de la Agricultural of which the official English
translation was " Institution for Encouragement of Irrigation Works and Development of Agriculture." The
concession under which this institution was formed was
granted on September 3, 1908, to the National Bank of
Mexico, the Bank of London and Mexico, the Banco
Central, and the Mexican Bank of Commerce and Industry. a The initial capital was limited to $10,000,000 and
was divided into three series of shares, one belonging
to the Government, one belonging to the four participating banks, and one to be sold to the public. These banks
were authorized to offer for subscription at least 50 per
cent of the share capital in shares of the third series.
The new company was authorized to make loans secured
by mortgage or pledge, or upon the guaranty of some bank
holding a federal concession, or of either of the banks to
whom this concession was granted. The company was
authorized to issue bonds, which should be a first lien
upon its assets, in the same manner as bank notes issued
by banks of issue. The Federal Government agreed to
guarantee unconditionally, as to principal and interest,
the obligations which might be issued and to place at the
a

The text of the agreement was printed in Spanish and English by the
Ministry of Finance.
8648—10

National

Monetary

Commission

disposal of the company, whenever required to do so, the
amount needed to complete or to cover in full the amounts
necessary for the punctual service of the bonds or obligations.® The new institution was to be managed by a
board of directors, composed of fifteen members, of whom
three were to be elected on behalf of the Government;
five by owners of shares of the second series; and the
remaining seven by owners of the shares of the last
series.
Stripped of technicalities, the project of Mr. Limantour
was to transfer from the loans of the banks of issue into a
permanent investment fund the securities of irrigation and
development companies with which some of the banks were
loaded down. He did not hesitate, in order to protect
the financial situation, to pledge the credit of the Government in full for the new securities. The contract made
with the New York and foreign houses which took the
loan provided that the principal and interest of the bonds
should be payable without deduction for any tax which
the institution might be required to pay thereon under
any present or future law of the Republic or any State or
municipality therein. So rapidly did the plans of the
minister mature that a public subscription for $20,000,000
of the new bonds was announced in New York and Frankfort on October 24, 1908, to close four days later.
By this resolute intervention in the financial situation
the Minister of Finance succeeded in disposing of securities
for long terms in exchange for liquid foreign capital to
the amount of the issue. He thereby improved the charts Article 8.

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acter of the assets of the local banks and was able to
announce, in his annual report for 1908, that he had
saved the financial situation and that banking conditions
were greatly relieved. Summing up the action taken, he
declared: a
"The local banking and monetary situation, since July
1, 1908, in other words, since the period covered by the
analysis thereof already given, has improved day by day
to a marked degree, so much so that it may now be
described, without exaggeration, as satisfactory. Discount operations are larger, long-standing debts are in
the way of being paid off, overdrawn accounts have been
covered, and the rate of interest, which is an unfailing
index of the scarcity or abundance of money, has been
reduced by the metropolitan banks to 8 per cent per annum
for commercial transactions, properly so called, and to 9
per cent for other transactions, determining a proportionate reduction in the rates of most of the^state banks.*1'
CHAPTER

XVI.—Development of Mexican banking under
the law of 1897.

The experience of Mexico under the banking law of
1897, although brief in point of time, has followed welldefined lines. Mr. Limantour, the Minister of Finance,
who is largely responsible for the evolution of the new
system, was able under the conditions existing in Mexico
to carry out plans based upon sound banking principles
with a practically free hand. With the usual clearness
and precision of the Latin mind, he laid down in the report
^Financial

Documents, December, 1908, pp. 23, 32.

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of 1897 a definite programme, which involved the separation of commercial banking from that of mortgage
banks and banks of finance and promotion. Under the
conditions existing in Mexico—a rather limited volume of
settled commercial business, with a great volume of capital seeking investment in mining and agricultural development—the formulation of sound banking principles was
easier than strict adherence to them in practice.
The measure of the difficulty, however, in keeping the
banks of issue from locking up their assets in industrial
enterprises was in a sense the measure of the need for
emphasizing this distinction. From the beginning of
Mr. Limantour's service as Minister of Finance in 1893,
the development of Mexico was rapid. Inevitably, however, much of the capital required for this development
came from abroad—at first from French, Spanish, and
English bankers, but later from the United States. This
influx of capital was checked to a considerable degree by
the sharp fall in the value of silver in 1901 and 1902,
which introduced violent fluctuations in foreign exchange
and impaired the value of dividends remitted abroad.
When the losses caused to investors by this condition had
been corrected by the adoption of the gold-exchange
standard, the mass of capital which had been held in check
for several years again poured into the country with the
force of a stream which had broken through a dam. The
amount of this movement, which was readily ascertainable, without counting many obscure factors, was computed by the Minister of Finance in 1906 as having reached
for that year alone $86,500,000.

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The reorganization of t h e banking system b y the law of
1897 first made it possible to distribute capital and carry
on exchange operations with facility throughout t h e
Republic. Partly b y t h e intended operation of t h e new
law and partly b y t h e influence of circumstances, a banking hierarchy was developed with several distinct parts,
each fulfilling a definite function and contributing its share
toward t h e efficient operation of the whole. A t t h e center
of this hierarchy stood the National Bank of Mexico,
deprived of monopoly of note issue, b u t still exercising
t h e functions of a central bank of rediscount and of collector and custodian of the national revenue. By t h e
side of t h e National Bank in regulating t h e foreign exchanges stood t h e Bank of London and Mexico, with a
considerable note issue, b u t looking chiefly to t h e export
t r a d e and t o exchange operations for t h e employment of its
large resources. For these two banks the business of t h e
capital city was largely reserved by the exclusion of other
banks of issue. To t h e state banks was ascribed t h e
power of issuing notes each in its own State, which were
not legal tender b u t were a first lien on t h e assets of t h e
b a n k and were protected b y a 50 per cent metallic reserve.
W i t h the purpose of knitting together these various
institutions in a system of m u t u a l helpfulness had arisen
another institution in t h e capital, the Banco Central,
which sought no special privileges from t h e State, b u t
acted a t once as clearing agent and support for t h e state
banks.
The state banks of issue which were t h e outgrowth of
t h e law of 1897 were peculiar in a measure t o Mexico, b u t

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were brought into relations of cooperation through the
National Bank of Mexico and the Banco Central. Standing alone, with their notes circulating only within limited
areas, their position bore some resemblance to that of the
French departmental banks prior to 1848, whose notes
were a legal tender only within the departments where
they were established. The inauguration of a clearing
system through the Banco Central tended to keep the
notes of the state banks at par in somewhat the same
manner as the redemption system of the Suffolk Bank in
the history of New England banking prior to the civil
war. The functions of the Banco Central, however, went
further than the mere machinery of clearings and gave a
support to the local banks which they would otherwise
have lacked.
The significant fact that the circulation and cash
resources of the National Bank of Mexico increased at the
expense of the local banks in the crisis of 1907, indicates
the powerful position which it occupies in the hierarchy
of Mexican banking. Its success in meeting the demand
for credit and currency in the autumn of 1907 and the
spring of 1908 may suggest the consideration whether the
function of a central bank in regulating the exchanges and
the movement of gold can not be successfully performed,
even though it does not control the entire circulation of
paper currency. The essential requirement for control of
the exchanges is control of the supply of capital or currency on the margin of supply. It is the sufficiency or
deficiency of this supply on the margin which practically
determines the course of the exchanges. This is indi-

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cated by the fact that even the European banks, including
the Bank of England, do not usually change their rate
of discount sharply at their branches when they change it
at the financial center in order to influence the movement
of gold.
The existence of competing banks with authority to
issue notes in large amounts would undoubtedly defeat
the efforts of the central bank to regulate the exchanges,
if such authority of issue on the part of the local banks
were largely availed of. In Mexico several circumstances
have averted this danger. One of these circumstances
has been the direct influence of the Minister of Finance
upon the state banks, in restricting their circulation within
moderate limits and in requiring them to increase their
metallic reserves whenever they increased their ^circulation. The limitation of the number of the banks to
practically one for each state has been an incident which
has permitted this exercise of direct influence more easily
than if the number of institutions were large and their
creation was only a matter of complying with the forms
of a general incorporation law. The large ratio of the assets and note issues of the National Bank of Mexico to the
total banking assets of the country has also been a factor
whose influence would probably have been greatly impaired if this measure of relative power had been materially less. Beginning in 1900, after the state banks had
been fairly established, with a ratio of note issues and
assets of about 35 per cent of the issues and assets of all the
banks of issue, the National Bank increased its relative
proportion after the crisis of 1907 to about 40 per cent.

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This ratio has not since been impaired and the ability of
the National Bank at that time to support credit and to
expand its issues, while those of the state banks were being
restricted, has added materially to the prestige and future
power of the National Bank.
An important factor in this ability of the National
Bank to control exchanges is found also in the prohibition
imposed upon the state banks to issue notes or to establish redemption agencies in the Federal District, which
includes the City of Mexico and adjacent territory. The
fact that the Banco Central clears notes as well as checks
for the state banks might seem to be an infraction or evasion of these provisions. When it is considered, however,
that such redemptions of the notes of state banks as take
place through the Banco Central come from banks only,
and not from individuals, it is apparent that these conditions do not encourage the circulation of the notes of
the state banks in large amounts in competition with
those of the National Bank in the Federal District.
The fact, however, that these notes can be cleared at
the Banco Central undoubtedly adds to their acceptability in all parts of the country. The fact that the federation of state banks through the Banco Central promises
assistance to any of the federated banks in case of difficulty is also a powerful support for the notes of the state
banks, which offsets in some degree the absence of any
provision for specific security outside the custody of the
bank, a common safety fund, or a government guaranty
for the notes. As the notes are a first lien upon the assets,
it is doubtful if any failure which might occur would dis-

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close assets insufficient to meet the demands of the note
holders; but, if one such failure should occur, it would
have a tendency to impair the acceptability of the notes
of the state banks and to cause more careful scrutiny of
notes tendered in every-day transactions than appears
now to be the case.
That the monetary situation should have been kept so
well under control in 1907 and 1908 is apparently to the
credit of the Mexican financial system, in view of the fact
that both the banking system itself and the monetary
system, resting upon exchange funds abroad, were entities
of very recent creation. The fact that the Government
found itself under the necessity of creating a new institution to take over the obligations of industrial enterprises
which had found their way too largely into the assets of
the commercial banks was only a reflex of conditions in
the United States and elsewhere, where the same service
was performed by private initiative. The new finance
bank, openly supported by the Government, tended to
correct in a large measure the errors of the banks of issue
in allowing inconvertible securities to creep into their
assets and put the capstone upon a banking organization
adapted, as nearly as practicable, upon scientific principles
to the development of a new country.

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APPENDIX

REPORT ON T H E BANKING SYSTEM OF MEXICO.
By the SECRETARY OF F I N A N C E to the Congress of the Union,

November 15, 1897.

Under the exceptionally difficult and dangerous circumstances which beset the Federal Treasury in 1892-93 and
1893-94, the chief object of the efforts of the department
under my charge was necessarily to avert, so far as possible, the disastrous consequences which the economic
crisis then affecting the Republic threatened to bring
upon the country in general and especially upon the
treasury.
The task was a double one: First, to meet the needs of
the budget by providing additional revenue; second, to
diminish the expenditures of the administration by suppressing those that were not absolutely indispensable and
postponing those that were not of immediate urgency.
Happily, the results of this policy were not long in making themselves felt, and in the fiscal year 1894-95 the
federal budget was placed on a footing of complete
equilibrium.
At the same time it became necessary to undertake
the task of putting the public debt in order. This work
was particularly urgent, as being the only means whereby
stability could be given to the national credit and without
which the rapid development of the country's wealth

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would have been delayed indefinitely. The task was a
thorny one, because the continual political upheavals and the numerous economic vicissitudes which have characterized our history as an independent nation had made
the public debt an administrative tangle which could only
be unraveled by arduous labor.
Shortly after, the Department of Finance had to face
another grave problem, which had to be given precedence
in order that the other administrative reforms might
afterwards be undertaken with greater probability of success. I refer to the absolute freedom of internal commerce, to which the authors of our fundamental charter
deservedly gave their foremost attention. In 1895 and
the beginning of 1896 the great fiscal reform of the suppression of tolls on interstate traffic (alcabalas) and of the
offices that collected them was duly studied and prepared, and it was carried out under the most satisfactory
conditions, despite the obstacles that had frustrated previous attempts and in the face of the profound disturbance which the disappearance of so ancient and deeprooted a system could not fail to produce in all the
branches of national activity.
As soon as these imperative needs had been attended
to and the three main objects of the financial policy of
the Government had been attained, there arose the necessity of entering without delay on the preparation of
laws and regulations intended to serve as a complement
and corollary to the suppression of the tolls on interstate
traffic by facilitating the expansion of commerce, agriculture, and all branches of industry by a well-planned

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and far-sighted development of institutions of credit.
This was the motive of the memorial presented to Congress by the department under my charge on April 20 of
last year, requesting authority to prepare a general law
on the chartering, establishment, and operation of banks
of issue, mortgage banks, and banking institutions of
other kinds, and to modify the concessions granted to
existing banks in order to make them conform, so far as
possible, to the general law.
Our legislation on the subject of banks and the condition of our local institutions of credit were indeed in a
state which could no longer be tolerated. The Commercial Code, promulgated on April 20, 1884, contained a
number of provisions on this subject which for the most
part were destined to remain a dead letter, especially as
regards banks of issue, because the temporary articles of
said code, conformably to article 8 of the charter issued
a few days later in favor of the National Bank of Mexico,
established a state of legislation under which the creation
of new banks and even the maintenance of those then in
operation was impossible.
The anomalous condition arising from the fact that provisions of a general character affecting outsiders, which are
properly a matter of common law, had been embodied in a
charter which, even though sanctioned by Congress, still
retains the character of a contract entered into between
two parties; the fact that, despite the stipulations of said
contract, and the protests founded on that contract
which were made by the National Bank, charters were
granted for the establishment of banks of issue in various

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places in the Republic; lastly, the suppression, in the new
Commercial Code of 1889, of the provisions which the
earlier code contained on the subject of banks—all these
circumstances created a state of affairs replete with difficulties, which compelled the Government to adopt a definite attitude, based on a system which, while respecting all
legitimate rights, should at the same time be adapted to the
needs of the country.
As a preliminary problem in the studies and negotiations
that were to be undertaken, it was necessary to ascertain
and decide whether the general interests of the country
required that the issue of bank notes be concentrated in
a single establishment, or whether, on the contrary, the law
should favor the multiplication of institutions enjoying
that privilege.
This is not the place to rehearse the time-honored discussion on the merits of the two opposite systems, that of
monopoly and that of liberty of banking; but it will certainly not be superfluous to set forth here some considerations in favor of the system to which the preference was
given in the memorial of April 20 of last year, and which
was later on embodied in the General Law on Institutions
of Credit, adopted in response to that memorial.
The system of monopoly was at once condemned by the
constitutional provision which had, in fact, been vehemently urged against the charter granted to the National
Bank of Mexico, although that grant did not properly or
legally create any exclusive privilege of issuing bank notes.
Thus a radical solution of the difficulty, by attempting a
reform of the constitution, in the direction of monopoly,

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would have been dangerous on various accounts, because
the idea would not have received the support of public
opinion and would furthermore have wrought injury to the
interests already created in virtue of subsequent grants;
above all, because a monopoly can not be conceived without a close connection between the institution which enjoys
it and the government which grants it; and the disastrous
consequences should not be obscured which might arise in
our country from any intimate connection, no matter how
well planned, which might be established between the
interests of an institution of credit and the policy of the
Government, never exempt from hazards and vicissitudes.
Aside from these somewhat theoretical considerations, if
we examine the subject from the standpoint of the development of public wealth, is it likely that the privilege
granted to a single bank of issuing notes for the entire
Republic would yield the best results ? The examples of
monopoly which might be cited in support of an affirmative
reply are confined to nations of small territory, with
climates and natural resources of no great variety, and
whose population, generally dense, shows great homogeneity; or to countries with strong centralizing tendencies, for the most part absolute monarchies, a system which
readily and naturally admits of the union of the two
supreme powers—the civil power and the power which
regulates credit.
In the Republic of Mexico, with its vast territory, its
sparse population, its imperfect means of communication,
and its immense variety of products, each locality has, as
it were, local interests, the development of which, so far as
8648—10

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the use of credit is concerned, can not be confided to a
single banking institution, which, no matter how many
branches and dependencies it may establish, could never
supply the needs nor remedy the ills of each part of the
national territory.
And it is not unreasonable to declare that branches of a
central bank are incapable of exercising satisfactorily, in
every corner of the country, the beneficent influence of
establishments of this kind, because a branch bank can
have neither the initiative nor the authority to provide
for the exigencies of every economic situation; and, on
the other hand, the general and permanent regulations to
which every administration must be subject, especially
one so complicated as that of a central bank, lack that
flexibility which is necessary to meet the innumerable
and unforeseen emergencies arising from interests so divergent as those of the various localities of the Republic.
From this point of view the creation of local banks
evidently presents undeniable advantages. Managed by
persons whose interests are centered in the same locality,
who are acquainted with the people and the affairs of the
community, and who are so situated as to be able to give
personal attention to the business and to understand the
peculiar needs of a given district, its resources, and their
chances of development, such banks will undoubtedly be
better able to realize the objects of the credit circulation
confided to banking establishments.
Furthermore, the adoption of the system of a plurality
of banks will in the course of time permit the development
of specialization, the sphere of action of local banks being

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marked off from t h a t of the great banks located in t h e
Federal District with their ramifications in t h e States.
There can be no doubt t h a t , through t h e very nature of
b o t h kinds of institutions, t h e general banks, which operate at m a n y points in t h e Republic with large capital and
extensive connections, will develop into banks of rediscount and, by t h a t very fact, become t r u e protectors of
t h e local banks, with which they neither should nor can
come into conflict, because they complement each other
and constitute distinct organs of a homogeneous and wellbalanced system.
I n order to form an accurate judgment of all t h e aspects
of t h e problem, it was necessary, on t h e other hand, to
examine carefully t h e consequences t h a t might arise from
liberty of banking, in order not to r u n t h e risk of inconveniences as grave or even graver, though of different
nature, t h a n those t h a t would have ensued from t h e syst e m sanctioned b y t h e charter of t h e National Bank of
Mexico.
To permit banks of issue to organize anywhere within
t h e Republic without any restriction whatever would be
advised b y no one; b u t to present a general law regulating
t h e power of issuing notes, requiring the necessary guaranties for them, and providing for the supervision t o
which such establishments should submit, authorizing
them in return to begin their operations without previous permit from t h e public authorities, seemed to be a
solution worthy of consideration, in view of t h e fact t h a t
other countries, especially one of our neighbors, had followed t h a t p a t h to their advantage.

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On comparing the political and economic conditions of
the nations whose legislation does not require banks to
apply for a concession to issue notes, it appears at once
that their citizens are familiar with the practice of individual liberty and by that very fact know how to guard
against the grave consequences that might arise from the
abuse, and sometimes even from the normal exercise, of
that liberty. The degree of culture which the masses
have attained, and their experience in business, constitute
the most effective counterweight possible to the reckless
or even tortuous and mischievous tendencies of an illadministered establishment. Finally, the well-understood
interest of the banks themselves prompts them to enter
into close relations of mutual support, whereby they are
almost always shielded against economic crises and adverse incidents.
Can it reasonably be maintained that Mexico is in this
condition? The very recent introduction of banks properly so called; the lack of experience in the use of credit;
the distrust still prevailing, especially in districts outside
the great centers of population, of instruments of credit;
and the pronounced spirit of imitation, which would
assuredly lead to a multiplication of banks out of all proportion to the needs of the country, are some of the reasons
that speak in favor of certain restrictions, until the country shall have become accustomed to those ideas and practices without which absolute liberty of banking involves
extreme danger.
If to these considerations we add the fear of a powerful
reaction against bank notes in case of the failure of any

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establishment, no matter of how little importance, there
will be no disagreement with the conclusion that the Government has acted wisely in deciding that the number of
local banks to be established must not exceed certain
limits.
In following this plan, the new law will no doubt give
birth, at least in the early years of its operation, to a sort
of banking oligarchy, causing the distribution of institutions of credit at all convenient points throughout the
Republic, while their number, nevertheless, will not be
so small as to give color to the statement that the issuing
power constitutes a privilege in favor of a few. In any
case, in a matter so delicate as that of credit, it is more
prudent that the nation shall be in a position later on to
extend the scope of its legislation, in order to favor the
multiplication of banks on a larger scale, than to be driven
by the evil results of a first effort to the restriction of
their number and powers.
Such, in concrete form, and independent of other considerations arising from the nature of the federal power,
are the principal reasons which led the Government to
decide that the authorization to establish institutions of
credit should only be granted on special application and
also to adopt the plan relating to the so-called first banks
in the States.
The fundamental problem having been stated and solved
in a manner opposed to monopoly, the only honorable
policy that the Government could follow was to enter
into negotiations with the National Bank, with a view to
modifying its charter in such terms as would remove all

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doubt concerning the legality of the charters of local
banks already established, and would at the same time
permit new charters to be granted, without embarrassing
the Government or arousing the fears of the grantees.
The text of the charter of May 24, 1884, the text of the
provisions relating to the Commercial Code in force on
that date, the reasons brought forward in the form of a
protest by the National Bank, and, above all, the grave
inconvenience of leaving the local banks exposed to the
consequences which might hereafter result from an
antagonism of law and of practice between those establishments and the most powerful bank of the Republic,
were abundantly sufficient reasons why the situation
arising from the granting of powers objected to by that
bank should be definitively legalized and placed beyond
the reach of future conflicts arising from this cause.
IyOng and elaborate were t h e negotiations carried on for

this purpose with the National Bank in the midst of the
terrible crisis through which the country was then passing,
but the obstacles which tended to frustrate a definitive
arrangement were smoothed over, thanks to the attitude
of the National Bank, which, it is only just to acknowledge, has always shown a disposition to follow the suggestions of the Executive in behalf of the public interest;
thanks also to other circumstances, favorable to the
Government; so that in the early months of 1896 a settlement was arrived at, covering all the points that had been
under discussion and which were directly or indirectly
connected with the main subject. This settlement took
the shape of several agreements, which were signed, in

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accordance with authority granted b y Congress to t h e
Executive, and b y t h e general assembly of stockholders
of t h e National Bank t o its administrative council.
I n virtue of said agreements, t h e National Bank m a d e
t h e following concessions:
i. I t declared its willingness t o relinquish t h e rights
granted in its charter relative to t h e creation of other
banks, and it announced its unreserved assent to t h e
principles of t h e law of J u n e 3, 1896, which authorizes t h e
establishment of banks of issue in t h e States and Territories of t h e Republic.
2. I t agreed t h a t t h e m a x i m u m of t h e standing credit
of t h e Government in current account which t h e b a n k
is obliged t o maintain in favor of t h e General Treasury
of t h e Republic shall hereafter be 4,000,000 pesos, instead
of 2,000,000, which was t h e limit fixed by earlier agreements.
3. I t also agreed t h a t t h e service of collection and
distribution of government funds, which it has to perform
in accordance with its charter, shall continue to be performed for t h e coming ten years at a commission of 1 ^
per cent, instead of t h e 2 per cent which it h a d been receiving, this commission including not only all expenses b u t
also t h e risks of said operations.
4. I t agreed t h a t t h e commission of 2 per cent which
t h e Government, in accordance with contract, was paying
i t for t h e service of t h e consolidated debt, should be
reduced t o 1 per cent.
5. I t assumed t h e obligation to open a credit, not t o
exceed 500,000 pesos, in current account, in favor of t h e

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National Loan Office (Monte de Piedad), without special
guaranty and with interest of only 3 per cent per annum.
In return for these concessions, the National Bank
obtained two advantages: An addition of fifteen years to
the term of its charter, and a guaranty that during ten
years the National Loan Office should not avail itself of
nor grant to third parties the authority which it received
from the Government to put in circulation certificates of
deposit or notes payable at sight and to bearer.
The mere enumeration of the points covered by said
agreements suffices to demonstrate the benefits which were
obtained by the two contracting parties.
The Government secured from the bank the recognition
of the legality of the system which it desired to establish,
leaving free from obstacles the creation of new banks and
the unhampered progress of those already in operation,
without other limitation than (as regards the Federal
District) the stipulation that paragraph A of article 8 of
the original charter of the National Bank should continue
in force.
The other advantages, although of a different nature,
are none the less of pecuniary importance to the Government. On the one hand, they mean a saving of expenses
which, expressed in figures, represents some tens of thousands of pesos (over 50,000); and, on the other hand, they
mean a broadening of credit, which, while not needed
under present conditions, will be of unquestionable utility
in time of financial trouble. Indeed, without any such
compulsory enlargement of credit, the balance which the
current account showed in favor of the Government from

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1892 to 1895 almost always exceeded, and greatly exceeded,
t h e agreed limit of 2,000,000 pesos. Hence it might be
inferred t h a t t h e obligation recently assumed by the
National Bank, to make advances to t h e Government till
t h e balance reaches t h e sum of 4,000,000 pesos, is not as
important as might at first sight be apparent; b u t considering t h e diverse circumstances in which t h e Government might be placed, and, above all, t h e fact t h a t t h e
precedent created in no wise bound t h e National Bank for
the future, and t h a t its consent might have to be obtained
through special agreements, in which diverse guaranties,
a high rate of interest, and other onerous conditions might
be stipulated, t h e importance becomes clear of the concession thus obtained.
After t h e painful experience with t h e privilege granted
by the Government to t h e National Loan Office, to issue
notes payable at sight and to bearer, it would not have
been prudent to revive t h e authorization of which such
unfortunate use h a d been m a d e ; and it is thought t h a t
t h e Government has adopted t h e most prudent course in
leaving things as they are for some time and advising t h e
National Loan Office to shape its action in accordance
with t h e important advantage accruing to it from t h e
fact t h a t t h e National Bank offers to it an advance under
exceptionally favorable conditions, requiring in exchange
t h a t t h e loan office shall for ten years postpone t h e
exercise of a privilege t h e legitimacy of which the bank
has constantly denied.
The negotiations carried on with t h e National Bank
were approaching their termination, when t h e representatives of the Bank of London and Mexico (the only bank

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which shares with the National Bank the right to issue
notes payable at sight and to bearer in the Federal District) approached this department with a request for
modifications in their charter. It was proposed in connection therewith to widen the scope of that institution
and to impart to it greater stability, enabling it to offer
to the public ampler facilities and more advantageous
conditions.
The Government was in full sympathy with the plan to
strengthen an establishment which till then had been of
comparatively modest dimensions, and which on every
ground deserved to be utilized as an element of equilibrium
in the powerful influence destined to be exercised on the
market by the great banks of issue ramified throughout the
Republic. This was the motive which led the Government to grant to the Bank of London and Mexico an extension of the time of its charter, which was the surest
means to attract all the capital that it needed. The
result justified this forecast, and the Bank of London and
Mexico, whose legal duration was so extended by the
Executive as to make its charter terminate at about the
same time as that of the National Bank, was enabled,
without any difficulty, to raise its capital to 10,000,000
pesos, fully subscribed and paid.
On the same day on which the law of Congress was promulgated, authorizing the Executive to prepare the
general law on institutions of credit, a commission of experts was appointed to study the project. This commission, consisted of the managers of the three great banks
established in the capital—the National Bank of Mexico,

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the Bank of London and Mexico, and the International
and Mortgage Bank, to wit, Messrs. Carlos de Varona,
H. C. Waters, and Joaquin de Trueba; one of the best
reputed bankers, Mr. Hugo Scherer; and three lawyers
of recognized competency in economic and financial
studies—Messrs. Joaquin D. Casastis, Jose Maria Gamboa,
and Miguel S. Macedo, licentiates. It was presided over
by Mr. Joaquin D. Casastis, licentiate, who organized the
work, presided over the numerous meetings held by the
commission, and was the author of the luminous and
interesting report which the commission adopted and
presented on November 30th last, with the bill formulated
as a result of its deliberations.
These labors were of great assistance to the present
writer in the preparation of the law brought in by the
Executive and promulgated under date of March 19 last.
I take pleasure in stating this as a new mark of gratitude
to these gentlemen for their intelligent and disinterested
collaboration in the examination of one of the most
important problems of our economic and financial system.
The argumentative part of the project just referred to
presents with remarkable clearness the principal questions
which occasioned the most discussion and most prolonged
consideration, while at the same time it permits the
proportions of this report to be restricted to setting forth
the reasons which led the present writer to differ from the
opinion of the commission on some fundamental points
or which may render it desirable to give additional support to that opinion, when it relates to doubtful subjects
or much-debated questions.

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By the decree of June 3, 1896, the Executive was
authorized to prepare a general law regulating the franchises, establishment and operations of banks of issue in
the States of the Republic and in the federal territories,
and also to include in the same law, or to formulate in a
special law, the provisions which are to regulate other
institutions of credit. It was accordingly found necessary to determine, in the draft of the new law, the class of
establishments whose functions were to be regulated, as
well as the classes of credit operations which were to be
the object of the same law.
There were weighty reasons for making the law apply
to all institutions whose essential aim is to seek the most
useful employment for their own capital and that of
others by carrying on operations based on the issue of
instruments of credit, which, being intended to circulate
readily among the public, create rights in favor of third
parties who have made no direct or personal contract
with the said institutions. With this view it was at one
time proposed to at least enumerate the diverse kinds of
banks for the creation of which the previous and formal
authorization by the Government was, for the above
reasons, deemed indispensable.
This idea was, however, abandoned, first of all, because
the work would have been didactic rather than legislative in character; second, because in the case of many
kinds of banks, any regulations, or even the mere enumeration of such multiplied classes of establishments,
would for many years have remained a dead letter, in
view of the fact that neither the circumstances of the

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country nor the practices or customs of the inhabitants in
general, require the legislator to busy himself with fixing
rules for operations of credit practiced only on a very
small scale, or perhaps even at one or two places abroad.
There was another potent reason for abandoning the
idea of enacting a law to embrace all the points just mentioned, namely, the time which would have been required
to examine it and to formulate it in appropriate terms.
Inasmuch as all authorizations for the creation of banks
had been suspended since 1892, it was not wise to postpone
the law intended to facilitate the development of commercial, agricultural and industrial credit until a code could be
adopted containing in condensed form all the legislation
on the subject of banks, because, as above set forth, it
would be a work of long duration.
For these reasons, the law of March 19 does not define
institutions of credit in general nor designate those which
are to be subject to the requirement of making preliminary
application to the government for a charter. The law confines itself to the declaration that, for its purposes, only the
following are considered as institutions of credit, namely:
Banks of issue, mortgage banks, and credit banks (bancos
refaccionarios); that is, the provisions of the law are applicable only to the three classes of banks enumerated, leaving untouched the principles and rules which govern the
establishment, the mode of existence, and the operations
of the other classes of institutions not comprised within
said law.
In omitting to deal with the loan-pledge banks, savings
banks, and storage and warehouse institutions, treated by

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the commission in its draft of a bill, t h e guiding motive
was t h e convenience of dealing separately with operations
sharply distinguished in their n a t u r e from those usually
carried on b y t h e three classes of banks just mentioned.
As time goes on, profiting by t h e experience acquired, it is
proposed, a t t h e most favorable opportunity, to complete
t h e work begun, by enacting t h e special laws required for
t h e regulation of t h e institutions of credit n o t included in
t h e law of March 19, which will in t h e meantime continue
to be governed by article 640 of t h e Commercial Code.
The programme of the Executive having t h u s been
reduced to t h e three classes of banks mentioned, it became
essential, first of all, to define as briefly and precisely as
possible t h e dominant and distinctive features of each, a n d
next to proceed to t h e systematic arrangement of t h e law.
At t h e same time, t h e object of articles 3, 4, and 5 was
not to give a precise definition of what is to be understood
by banks of issue, mortgage banks, and credit banks. T h e
sole object of these articles was t o define, a t t h e very start,
each class of said institutions, a n d t o facilitate t h e examination and consideration of all t h e pertinent provisions b y
taking as point of departure t h e definitions laid down b y
t h e law.
In t h e order of t h e governing principles a system was
followed which differs somewhat from t h a t of t h e commission. I n t h e bill submitted by t h e commission, t h e provisions applicable to all t h e banks form t h e first chapter,
without distinction of any sort, while in t h e law those provisions which are so to speak preliminary, referring t o t h e
granting of charters or t o t h e constitution of companies

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that are to operate under these charters, are separated from
the other provisions. By this method, instead of combining, as was done in the bill, certain regulations with others
which have no visible connection with them, and which are
rather related to those contained in the following chapters,
the first chapter contains only the conditions which have to
be fulfilled in order to obtain the grant of the charter and
to organize the joint-stock companies to which the charter
is to be granted; and then, after the provisions peculiar
to each kind of banks, there have been inserted the provisions common to all, some referring to their mode of operation, others to the exemptions and privileges that go with
the charters.
Great care has been taken to require in the creation of
banks those conditions that are deemed most essential and
effective, in order that these enterprises may be undertaken
only with adequate resources, and that the institutions
may be organized with that stability, strength, and prestige which may assure to them a long and prosperous
existence.
Such is the aim of the provisions relating to a large
deposit of Mexican government bonds, as a guaranty that
the bank will be established within four months from the
date of the charter; of those which stipulate that only
joint-stock companies, and not private individuals, can
operate banks, and that, when the grantees are private
individuals, they shall never be more than three in number, nor shall they be holders of the grant for any longer
time than is necessary to organize the joint-stock company
to which the charter is to be granted; of those which forbid

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that in one and the same establishment authorizations and
prerogatives be combined which by their nature ought to
belong to institutions of different character; and, finally, of
those relating to the organization of the joint-stock companies which are to operate under the charters, these provisions being in some points more severe in their conditions and restrictions than those of the Commercial Code,
for the better protection of the interests of the public.
Article 12 of the law contains two important provisions
dictated by the same thought and which require special
explanation.
The duration of the charters, according to said article,
shall not exceed thirty years for banks of issue and fifty
years for the others, said period beginning with the date of
the law. The nature of the operations and of the credit
instruments to be issued in accordance therewith justifies
sufficiently the difference established by the law between
the duration of the two classes of establishments; but the
principal innovation consists in this, that the period of the
charter begins not with the date on which it is issued, but
with the date of the law, a circumstance which affords
opportunity to future governments to introduce into the
system and into banking legislation all the modifications
that may be deemed requisite, without being restrained by
the stipulations contained in existing charters. The banking history of many countries presents examples of the
innumerable difficulties in which governments have been
involved through banking privileges already granted,
when they tried to make any change in legislation or in the
existing order of things; and thus, when introducing, for

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the first time in our country, a law on a matter in which
we have had so little experience, it seemed advisable to fix
a period at the end of which all charters should terminate
on the same date, thus leaving the action of the Government free and unembarrassed, to the end that, with all
franchises terminating simultaneously, it might follow the
line of action counseled by experience or circumstances.
Directed to the same end is the second provision of article 12, according to which the charters granted under the
new law are nothing more than a mere authorization to
establish and operate the institution of credit in question,
the grantees being bound by the laws actually in force on
the subject.
It might seem at first sight that this provision makes the
preceding one superfluous, and that when it has been once
decreed that whatever laws may hereafter be in force on
the subject of banks shall apply to existing ones, the provision in regard to the uniform date at which the charters
terminate becomes useless, in view of the fact that this
date has been fixed in order to afford to the Government at
a given moment complete liberty of action, the fact being
that, in virtue of the provision in question, it enjoys such
liberty of action. But it is not in this way that the
second part of Article 12 is to be understood.
The authorization to establish and operate a bank has
to be given under well-defined conditions, relating to the
nature of the establishment, the organization of the
proper joint-stock company, and the privileges and duration of the franchise, all of which elements go to form an
integral part of the contract between the Government
8648—10

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and the bank, and which a new law can not alter without
attacking, in its fundamental bases, the very existence of
the company which operates under the franchise. These
are rights and obligations which a new law can not alter
without the consent of the interested parties, and these
are precisely the rights and obligations whose extinction,
through the lapse of a fixed period, it was necessary to
provide for, in order not to create difficulties for future
generations which might be insuperable, in case a radical
change in the banking system should be deemed desirable.
In whatever relates to the existence of the grant, the
fundamental bases of the company holding it, and the
inducements in the form of exemptions or reduction of
taxes offered by the law, the banks need have no fear
that a subsequent law may create a condition less advantageous for them, because that would be equivalent to
robbing them of a right which was fully vested. But the
same is not true of the provisions of a general character,
which are not the object of any stipulation in the charter
nor in the contract of the company, and which rather
form a part of the legislation which establishes and regulates the rights and obligations of the bank toward the
public or toward the Government in its character as the
representative of social interests; because this legislation,
like all other laws, can not remain immutable and should
not contain restrictions which might prevent the Government from changing it at such time and in such manner
as it may deem requisite for the general well-being.
The series of special titles of the new law opens with
the one which deals with banks of issue; and indeed this

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precedence in t h e order of exposition is properly given to
t h e provisions which regulate the operations of those
institutions of credit t h a t are of greatest importance,
b o t h b y reason of the p a r t which they play in modern
society and b y reason of their great number and the
a m o u n t of capital which they employ.
This would be a proper place for t h e considerations set
forth in t h e beginning of t h e present report, in order to
m a k e clear t h e motives which led to t h e adoption of the
system established by t h e decree of J u n e 3, 1896, and
developed in t h e recent law on institutions of credit; b u t
as this was done elsewhere, I will merely say in this place,
by way of summary and record, t h a t under t h e new
banking legislation there will be (1) two great banks of
issue in the Federal District, with authority to create
branches throughout t h e country, and (2) a number of
banks in t h e States and Territories, with special privileges
for the first b a n k established in any one of them, and
with authority to establish branches (under fixed conditions) in any p a r t of t h e Republic, except for t h e exchange
of notes in t h e Federal District.
Sufficient explanation and basis had already been given,
in m y opinion, for the attitude taken b y the Government
in this matter, as set forth in articles 15, 38, 128, and 129
of the law, an a t t i t u d e which is further justified b y the
necessity of guarding against the grave consequences t h a t
might arise from t h e abrupt transition from a restrictive
system (like t h a t of t h e past) to one of absolute liberty for
banks of issue.

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The authority to issue instruments of credit payable at
par, at sight, and to bearer, constitutes the most potent
lever used in the present century to mobilize capital and
put it in the hands of those who are able to most advantageously utilize it; but it is at the same time the most
delicate instrument possessed by institutions of credit for
multiplying their operations, and therefore requires a set of
effective guaranties to insure the immediate and punctual
reimbursement of the notes to those who accept them in
full confidence in the fidelity and the solvency of the bank.
It is not an easy task to choose the right course in devising
this set of guarantees, and this very difficulty has led governments and publicists to pursue a variety of methods in
striving to reach the same goal. As regards governments,
history teaches that some considerations of another order,
nearly always related to the needs of the Treasury, have
had their influence and have at times been superimposed
on those properly belonging to the subject; but, fortunately, in Mexico these extraneous considerations have
had no weight in the preparation of the law which has been
presented to the chambers except that this law has been
inspired exclusively by the desire to reconcile the greatest
liberty and the greatest facility of operation by the banks
with the solid assurance of the interests of the public.
As undeniable evidence of the motives of the Government may be indicated the numerous exemptions and reductions of taxes; the privileges in favor of the banks,
which constitute exceptions in civil and commercial legislation; and, lastly, the absolute independence granted to
said establishments with regard to the Government, which

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has, either in their administration or in their operations,
no right of intervention properly so called, but is limited,
in the function of its representatives, merely to the duty
of supervision.
So strong was the desire to guard the banks against all
outside influences, and especially against political influence, that, notwithstanding the precedents created by
earlier charters, requiring that the circulation be guaranteed in part by a deposit of government bonds, it was
deemed inadvisable to retain this requirement and to provide for a deposit, more or less substantial in amount, of
evidences of the public debt as guaranty for the redemption of the notes. What would be the influence of such a
deposit upon the credit of a bank in case that, in consequence of the vicissitudes of foreign or domestic politics,
the securities of the state should precipitately decline?
Would not rather the intensity of the evil be enhanced by
the decline in the value of the guaranty at the very moment when business was paralyzed by the general crisis,
cash was hoarded, and payments were delayed?
It is hoped that no reproach will be cast on the Government for having abstained from making such use of the
government bonds, since it is preferable, for the reasons
set forth, not to associate the credit of the banks in any
manner with that of the Government, but to leave these
establishments in condition to face periods of difficulty
with their own resources, free from any extraneous
influence and from any pecuniary connection with the
Government.

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From this line of reasoning have arisen also the limitations
which the law imposes on banks, both as regards the right
to put notes in circulation and that of carrying on certain
operations more or less connected with that of issuing
notes. In these restrictions are found the guaranties in
behalf of the public, which, though not absolutely beyond
evasion (for what restrictions are so?), nevertheless constitute a solid ground for inspiring confidence. I will
briefly discuss the two points to which I refer.
In the first place, there has been a departure from the
precedents created by most of the earlier charters as
regards the proportion between the amount of notes in
circulation and the cash on hand, either in coin or in bars of
precious metals.
It has been the rule to allow the credit circulation to
attain three times the amount of the metallic reserve,
while the law just referred to allows it to attain only
double the amount, and furthermore introduces a new
feature, providing that to the amount of the notes issued
there shall be added the amount of deposits payable at
sight or at most within three days, and that the resulting
sum be used as the basis for computing the maximum
limit of the note circulation.
The reason for this new feature is obvious. In any
banking system the first care must be to establish a strict
relation between the nature and period of the instruments
of credit issued by the bank, on the one hand, and the
obligations to the bank on the other. This rule can not
be disregarded without giving rise to a danger more or
less serious, according to the type of bank, but far more

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serious in t h e case of banks of issue, where there is no adequate measure of t h e a m o u n t of t h e obligations immediately payable in favor of t h e b a n k against t h e a m o u n t
of obligations t h e p a y m e n t of which m a y be demanded of
the b a n k at a given moment.
On this account it would be a grave error to think t h a t
t h e only serious danger for banks of issue m a y arise from
the possibility of a simultaneous presentation for p a y m e n t
of the larger p a r t or all of its notes, since there exists another danger of equal, sometimes even greater, magnitude
in t h e demand for p a y m e n t of demand or short-time
deposits.
The special mission of banks is to serve as intermediaries between persons or firms having availble capital
and those who need funds to apply to production.
Strictly speaking, we might conceive of a b a n k without
capital of its own. If, in fact, the law requires t h a t it shall
have capital, and t h a t t h e amount thereof shall be commensurate with t h e a m o u n t of paper issued, this is solely
for t h e greater security of t h e public; b u t even this provision does not alter t h e fact t h a t the greater p a r t of the
movement due to banking operations is carried on with
outside capital, subsequently deposited in t h e establishment, some of it to obtain a return, the remainder for
safety.
The last-mentioned depositors constitute t h e class t h a t
has most frequent recourse to banks. They m a k e deposits
which a t t h e pleasure of t h e depositor are payable either
through t h e medium of checks or on t h e mere presentation of t h e b a n k book. Thus, from t h e point of view of

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immediate reimbursement, these deposits are upon an equal
plane with bank notes, being likely, in fact, under certain
conditions, to constitute a greater danger than the notes,
because they represent, as a rule, larger amounts and thus
are capable of exhausting more rapidly the metallic reserve
of the bank.
Hence it was natural, in fixing the conditions regulating
the issues of banks, to assimilate to each other the notes
and the deposits payable at sight or on short time. This
presented the most effective means of avoiding the abuses
and dangers of the note issue, since its limits are determined by double the amount of the cash reserve in connection with the total amount of obligations payable on
demand.
This provision of the new law may seem too restrictive,
but in presence of the doubt which everyone feels regarding the manner in which the right to issue notes will be
used in our country, it is preferable to sin by an excess of
caution (seeing that there will always be time to enlarge
the scope of the right in question), and not to expose the
bank note, which has with such difficulty begun to penetrate among the mass of our population, to a disaster
which would throw us back a long way on the road that
has led other nations to prosperity.
Moreover, the rigor of the provision is greatly modified
by the exception set forth in the law, according to which
in computing the maximum limit of issue, no account is
to be taken of interest-bearing deposits in current account,
an exception grounded not so much on the nature of the
deposit (since it is in the main just as capable of presen-

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tation for redemption as those which bear no interest) as
on the necessity of inducing banks to remunerate the capital which the public brings to them, and on the desirability of facilitating the creation of current accounts, so
beneficial for commerce and for all the branches of national
production.
Furthermore, the aim has been to give every possible
security to the bank note by the provisions relating to
the preference which it is to enjoy over other obligations
of the bank; those which give the right of summary suit
to the holder of a note against an establishment which
issued the note and refuses to pay it; those which prohibit
these establishments from carrying on ordinary banking
operations involving a period of more than six months
and from discounting commercial paper not indorsed by
two firms of known solvency or secured by some collateral;
and, lastly, those provisions which aim to prevent the immobilization of capital in loans of long terms and difficult
repayment.
It is proper to explain one of the provisions of a precautionary character just alluded to, namely, the prohibition to make mortgage loans, a provision to which the
law makes two exceptions, one of which, at least, might
be considered as contrary to the principle laid down and
at the same time a possible cause of disorder.
The legislation of many countries expressly sanctions
the right of banks of issue to accept mortgage security
from their debtors when there is a decline in the credit
of some of the indorsers of the obligations which the
bank holds in its assets, but very few countries grant to

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said banks the right to make mortgage loans, and it may
even be said that the nations which authorize such operations are in a situation very different from ours and
have established certain restrictions which diminish, if
they do not completely remove, the inconveniences of a
system which, in the light of the strict principles of economic science, can not but meet with disapproval.
If the Executive has decided to follow the latter
method—that is to say, to allow the banks in certain
cases, on previous authorization by the Minister of
Finance, to make mortgage loans—it was only after a
mature examination of the conditions of the country, and
especially of the practices and views prevailing among
those in Mexico engaged in the business of making loans.
It might justly be objected that the main object of
banks of issue should be the development of commercial
interests, properly so called, and incidentally of agricultural and industrial wealth—an argument which becomes
all the stronger in view of the fact that the immemorial
practice of mortgage investment does not and did not
exist except for the purpose of making loans to persons
who are not properly merchants.
It is indisputable, nevertheless, that the mai tenance
in all its rigor of the scientific principle of not confounding the operations peculiar to banks of issue with those
that belong exclusively to mortgage banks (a principle
which the new law recognizes implicitly in its first articles
when it prohibits both the establishment of two different
institutions of credit under the same charter and the issue
by the same bank of different kinds of instruments of

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credit which by their nature correspond to institutions of
different kinds) would be equivalent to depriving agriculturists and manufacturers of the immediate facilities
which institutions of credit are able to afford them for
the proper development of their lands and factories.
It is true that for this purpose the very law on institutions of credit authorizes the creation of mortgage banks
and of credit banks (bancos ref accionarios), which are
intended to serve in a more direct manner the interests
of agriculturists and manufacturers; but we should not
delude ourselves with the belief that these institutions
will multiply rapidly, because such will not be the case
until the spirit of enterprise is sufficiently developed
among us and the working of these banks and the benefits to be derived from them become practically known.
Banks of issue are better known among us, and it is
almost certain that under the new law they will multiply
in the country rapidly enough until they attain the number and size corresponding to the genuine social needs
which they are intended to satisfy. Thus it may naturally be expected that the good effect produced by these
establishments will promptly become known among many
classes of the community, and hence it has been deemed
wise to give legality to mortgage loans, stipulating, however, that the total amount of mortgages in favor of the
bank shall not exceed the fourth part of the capital actually paid up; that the mortgage shall become due within
not more than two years; and that, finally, the express
authorization of the Minister of Finance shall be sought,
who will take car not to grant it except in terms that shall

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well define its supplementary and transitional character.
In this way the bank will not be deprived of its true
character by diverting an important part of its capital
from the operations peculiar to banks of issue; the capital
invested in mortgage operations will not be long immobilized; and, finally, this exceptional departure from one
of the fundamental principles of banking science will signify no more than the adoption of a means to supply an
important public need temporarily, and only while this
need is not supplied by other establishments more adapted
to the purpose. There can be no doubt that the authorization here spoken of will cease to be granted and will
disappear from our legislation as soon as the mortgage
and credit banks shall be organized and multiply.
With the creation of banks which, besides conducting
all kinds of banking operations properly so called, shall
issue notes payable at sight and to bearer, the needs of
commerce will be satisfied so far as relates to the mobilization of capital and short-time loans; but it has already
been pointed out that this kind of establishment can not
render the same degree of service to agriculture and
industry, which, while occasionally asking for temporary
aid, require for the most part loans on long term and
made under conditions more stable and less onerous as
regards payment.
The merchant buys and sells in a short time, and only
in exceptional cases does it take him many months to
realize on his merchandise. On an average, his operations
allow him to contract debts on short terms, and it is to his
interest to multiply and renew his operations as much as

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possible; so t h a t for his purpose the banks of issue suffice
a n d operate under exactly appropriate conditions. T h e
obligations which constitute t h e assets of said banks are
payable a t sight or on very short time, just as is t h e case
with t h e notes and obligations of t h e liabilities., whence
function in perfect harmony t h e operations of these establishments with those of the commerce which they are
intended to promote and serve.
I n industrial enterprises the case is different, because,
although such capital as is employed in t h e purchase of
raw material and fuel, as well as in the p a y m e n t of wages,
can be recovered speedily enough, relatively speaking,
through t h e sale of manufactured goods, this is not t h e
case with money invested in buildings and machinery.
This distinction is still more perceptible in the case of
capital applied t o agriculture, which is immobilized for a
longer time when devoted t o t h e improvement of t h e soil
and t o similar purposes.
Real estate in general, and especially country real estate,
makes b u t slow return on the capital invested in it, and
the increase of t h e product, due t o the improvements
introduced, hardly leaves enough surplus for the amortization of t h e capital, after covering t h e interest. The
credit operations which furnish this capital m u s t necessarily cover long periods, proportionate to t h e great length
of time it takes the farmer t o get returns for t h e expense
of improving his property, and the p a y m e n t of t h e principal, moreover, has to be made gradually in order t h a t it
m a y be covered by t h e products of the farm.

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As the loans repayable in the course of years are not, as
a rule, sufficiently secured by the personal guaranty of
the debtor, wThose credit is exposed to unforeseen contingencies, the said loans are almost always conditioned on
the giving of a guaranty in real estate, in the form either
of a pledge or of a mortgage, and this has suggested to the
legislators of different countries the idea of making the
mortgage loan payable in numerous annual payments,
comprising the installments on the principal and the
interest.
The mortgage banks which aim to accomplish this
object have assumed quite a variety of forms in different
countries, some aiming to associate the capital which furnishes the funds, others to associate the farmers who may
need the funds, while in other cases these establishments
are made to bear the character of intermediaries between
the persons who have funds to invest and the owners of
rural or urban property who are looking for the means to
improve that property and increase its production. The
new law has adopted this last form, because it undoubtedly
conforms better to the customs of our country, the character of its inhabitants, and the general principles of the
national legislation, and also because it presents the bestdefined type of this sort of institutions of credit.
A preliminary question was presented to the consideration of the Department by the terms of the charter
granted to the Mexican Mortgage Bank, established in
the capital of the Republic in 1882. Was it advisable or
not to include in the law the regulations to which mortgage banks are to be subject?

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According to the said terms, the Government bound
itself (art. 16) to make no grant to any other person,
company, or corporation for the establishment of mortgage banks in the Republic during the period of twenty
years, beginning with the date on which the Mexican
Mortgage Bank began operations. This obligation, however, was not absolute, but on the contrary was subject
to the express condition that during the said twenty years
the bank should completely supply the needs for such an
institution—a circumstance which by itself implied that
the Government might find itself compelled to consider
the possibility that, in case this condition was not
realized, it would be free to authorize the establishment
of other institutions of the same class. In regulating the
matter and treating of mortgage banks in the new law/
the Government did not in any manner prejudge its own
attitude for the future—indicating whether it would or
would not make use of its power to grant charters to other
mortgage banks.
Accordingly the Executive did not hesitate on this
point, but accepted the idea of a plurality of mortgage
banks, all the more because this was the logical consequence of the attitude taken in regard to banks of issue.
In fact, if for the circulation of bank notes it was deemed
advisable to decentralize the establishments which issue
them, it was still more necessary, when dealing with real
estate, to promote the creation of local banks, which, by
«
the sale of securities adapted to the purpose, might furnish sufficient resources for the improvement of agricultural
property.

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The operations peculiar to mortgage banks are on the
one hand the investment of funds in loans repayable
within a'period of greater or less length and guaranteed
by mortgage, and on the other hand the correlative operation of issuing interest-bearing bonds for amounts equal
to those of the loans, these bonds being payable within
periods and on conditions equivalent to those of the loans.
The principle that the total amount of the bonds in
circulation must correspond exactly to that of the mortgage loans which the bank holds among its assets presents
serious difficulties in practice. In fact it is not possible
that, in proportion as the bank advances funds to individuals or the latter repay their loans in whole or in part,
the circulation of the mortgage bonds shall be instantly
enlarged or restricted, adapting itself completely to the
exact amount of the outstanding loans. Moreover it is
often found, and in other countries it is the general rule,
that the issue of bonds precedes the loans, this being
usually the method of obtaining funds wherewith to
make such loans. Was it advisable to forbid this practice
in Mexico, or should some flexibility be given to the
principle we have just examined? The Executive decided
in favor of the second alternative, agreeing with the
arguments advanced by the commission, although departing from its recommendations as regards the wording
and scope of the respective articles.
The articles in question provide, first, that the banks
shall not issue mortgage bonds whose nominal value
exceeds in the aggregate the amount of the loans made on
mortgage security; second, that when the lots are drawn,

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which shall be done at least twice a year, such number of
bonds shall be called in for redemption as may be necessary in order that the nominal value of those remaining
in circulation shall not exceed the amount of the mortgages
which the bank holds among its assets; third, that no
loan shall be made with money that has to be obtained
through an issue of bonds, unless the loan be conditional
and its completion subject to the results of the issue of
bonds to be made later; and, fourth, that between two
drawings of lots it be permissible, for the reasons set forth
above, to alter the proportion between the mortgage
bonds in circulation and the amount of outstanding loans
held by the bank, the equilibrium being restored at the
next drawing of lots.
The rigor of the above-mentioned principle having thus
been attenuated, care had next to be taken to insert the
provisions necessary to avoid all abuses in practice, as
well as to assure the sufficiency and efficacy of the mortgage guarantees—the fundamental basis of the confidence
of the public in the securities which might be issued.
For this reason it was deemed desirable to state expressly that the mortgage bonds are issued on the strength
of the obligations which the bank holds among its assets
through its loan operations with mortgage guarantee, and
that this guarantee is collective; in other words, that the
aggregate of the mortgage obligations in favor of the bank
guarantees the aggregate of the mortgage bonds in circulation.
Among the numerous provisions which tend to realize,
in the most equitable and effective manner, the objects
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indicated there is one that deserves special mention, because it is not commonly found in the banking legislation
of other countries. This is the provision relating to the
formation of a special fund in cash, intended to cover the
service of the mortgage bonds for at least six months—a
provision dictated by the desire to safeguard the banks
against an unforeseen stringency of money, which might
compromise the regular service of its bonds.
Of a similar nature is the article which creates in favor of
said bonds special inducements to investors, in order that
the public may receive them with favor. These inducements are: The right of preference on the reserve and
guarantee funds of the issuing bank, as well as on its capital, whether paid-up or not; the prohibition to withhold
the payment of principal and interest, even upon order of
the court, except in case of loss or robbery of bonds, or in
accordance with previous laws; and the option that, whenever the funds of corporations or of persons legally incapacitated are by law or contract to be invested in the
purchase of real estate or of mortgages, these funds may
also be invested in mortgage bonds.
Owing to the conditions established, not only for the
issue and circulation of the mortgage bonds, but also for
the security of the capital which they represent and the
interest thereon, as well as for the ease, cheapness, and
ready means of making the guaranty effective, it is very
likely that these securities will find wide acceptance, provided the banks which issue them take care to accommodate themselves not only to the provisions of the law and
the counsels of prudence, but also to what their knowledge

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of the market in which they operate may indicate regarding the interest on money, the habits of trade, the normal
period for the amortization of capital invested in the promotion of enterprises, etc.
This knowledge will guide the banks in the drawing up
of the tables of annuities, so that the public may choose,
out of a variety, the kind of operations which is most suitable to the circumstances of each. The tact which it will
be necessary for the directors of these establishments to
show in this respect will need to be even greater when the
loans are not made in ready cash but in the very bonds
which have to be issued for the purpose of the operations,
because, unless the indispensable conditions of the bonds
are such that the debtor can realize on them without loss,
the public will have a strong motive to refrain from dealing with the bank, no matter what may be its facilities for
the repayment of the debt. Hence it is supremely important that the mortgage banks to be established shall combine their operations in such way that the bonds put in
circulation shall find an easy market and a price approaching their face value.
Besides the essential operations just spoken of, the mortgage banks may engage in all the others which are of a
purely banking character and do not constitute the exclusive object of some of the other classes of institutions of
credit. The law, however, fixes some limitations and
imposes certain prohibitions which tend to strengthen the
confidence which these establishments should inspire, in
order to avoid the danger that, through operations of a
secondary character, the bank should find itself some day

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compelled to give the preference to these dealings over the
primary objects for which it was established.
The loans with real estate guaranty, as the only resource
to which the owner of the real estate can have recourse in
order to obtain the means which he requires for the development of his business, are capable of involving dangers of
a new order when these funds are sought, not in order to be
immobilized in the property, by being invested either in the
improvement of the soil or in buildings, or in the purchase
of machinery, but to be applied to the payment of wages,
the purchase of seed or raw material, or to other expenditures which may readily be covered in a short time by the
returns from one harvest or by the normal output of a
factory.
When a landowner (hacendado) needs funds for the purposes last mentioned, he finds himself in this dilemma:
Either he has to apply to banks of issue, giving collateral
security or an indorsement by a responsible party, and in
that case he exposes himself to the possibility that, at the
end of the term of payment, which must necessarily be
brief, the loan may not be renewed, while he may still be
unable to realize on the product of his estate in order to
cover the loan; or he may have to apply to a mortgage
bank and encumber his property for a long time and for a
large sum, greater than he needs, because both these are
generally conditions required in mortgage loans; and then,
having more money, he spends more than he intended, and
the property will be more highly encumbered, which later
on will render it difficult for him to obtain new loans, even
when he needs them more urgently.

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The fact is that the demand for capital for agriculture
has two distinct objects, and hence must also be satisfied in
different ways. If the object is to incorporate the new
capital with that alrady represented by the property and
its immobilized accessories, then the loan can only be
repaid from the increased product of the estate, due to its
improvement, and hence only in the space of many years;
but if it is intended merely to cover the expense of working
the same property up to the time when the crop can be
realized on, then recourse must be had to operations the
period of which shall not be long, although long enough to
enable the return from the crop to be awaited without
anxiety.
Few problems have given rise to so many disappointments throughout the world as the one relating to agricultural credit, a problem which, it may be said without exaggeration, has never yet been solved in a manner completely
satisfactory. Hence I congratulate myself because the
work undertaken on this subject by the Banking Commission, which has greatly facilitated my task, relieves me of a
large part of the moral responsibility involved in the
paternity of a new idea in a field that has been much
explored by others, with little result.
The system devised by the Commission consists in the
creation of institutions of credit which shall fill the void
left between banks of issue and mortgage banks; in other
words, which shall make loans for a period not as short as
those fixed by banks of issue, but not as long as those
required by mortgage banks; and, above all, without the
security of the estate.

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In accordance with the project adopted by the Executive, these loans may extend over a period not to exceed
two years, which will suffice, in case the crops of the first
year are lost, to enable the farmer by means of the crops of
the second year to fulfill his obligations; and, as a consequence of these operations, the banks are to be empowered
to issue special securities repayable within fixed periods,
also not to exceed two years, and which, naturally, are to
draw interest.
In order that the banks in question may operate with the
requisite security it was necessary also to modify the civil
legislation, in such way that the guaranty might be established readily and with due privileges on the products of
the estate, which privileges are all the more justified because, if such crop is harvested, it will be due in large part
to the resources placed by the loan at the command of the
owner of the estate. These facilities and privileges also
have their precedent in the civil and commercial law, in the
shape of the obligations called restitutional (refaccionarios),
a term which the Commission very appropriately adopted
to designate the establishments of credit above described.
The idea of creating credit banks (bancos refaccionarios) is not only fruitful as a means of solving the agricultural problem, but also for satisfying the just claims
of another branch of industry, which is for us as important
as the other. I refer to mining.
The peculiar character of mining property and of mining securities, and the exceptional dangers to which they
are exposed, have greatly hampered the use of credit for
the development of the mining industry. Where a real-

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estate guaranty offers complete security, credit founded
on such guaranty is easily obtained; b u t when t h e
property offered as guaranty is exposed to so m a n y contingencies, as is t h e case with mines, real-estate credit has
to struggle with serious impediments.
In t h e opinion of m a n y people t h e mining business is
equivalent to a game of chance, and even among those
who have more confidence in this kind of business there
is a disposition to estimate the elements of security which
it offers in the immense majority of cases as of very brief
duration. I t is to be hoped, however, t h a t with t h e
application of scientific methods and the constant improvement of industrial processes many of the causes of
error and deception will be eliminated, and greater insight
and certainty will be attained in the anticipations regarding t h e producing capacity of mines and the duration of
their output.
F r o m this point of view there is some resemblance
between t h e loans made to farmers to enable t h e m to
wait for t h e harvest and t h e loans made t o miners whose
property is developed in such way as to permit t h e probable return within a comparatively short period to be
calculated; and it is this analogy t h a t inspires wellgrounded hopes t h a t the credit banks may be of great
utility not only to agriculture b u t also to mining and
other industries, few of which are so unfavorably situated
as regards t h e confidence which they inspire as t h e mining
business, whose securities are not acceptable to the banks
of issue because not suited to them, nor to the mortgage
banks because t h e law forbids.

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Will these banks fulfill the object of their creation? If
they are established, will their work be successful and
will they improVfc the condition of industry, mining, and
agriculture? These are questions which the Commission
very justly asks at the close of that part of its report
which relates to these institutions. The Government
believes, in accord with the Commission, that the future
of these banks will depend on the acceptance given to
their bonds, and hence that no one will do more for their
development than by bringing these securities into favor
and creating for them an assured and extended market.
The last part of the law consists of the provisions
applicable to all banks, when once established, which for
greater clearness have been classified under two heads—
one which treats of those common to all banks, thje other
of the privileges and taxes relating to the subject.
The first of these heads contains: The provisions relating to the establishment of branch banks and agencies;
the prohibition to carry on certain kinds of operations,
which, being dangerous or improper, can not be considered as included among the powers enjoyed by any institution of credit; certain provisions establishing special
privileges in the matter of procedure and of legal preference in favor of banks; and, finally, the means of surveillance and control which have been deemed effectual as
well as equitable, for protecting the public (so far as is
possible and so far as depends on the Government)
against the mismanagement to which these establishments may be exposed.

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The surveillance over institutions of credit will be exercised in two ways—on t h e one h a n d by t h e Department
of Finance, b y t h e appointment of inspectors; on t h e
other b y t h e general public, b y virtue of t h e publicity
which the banks are required t o give to certain d a t a and
documents.
The inspectors m a y be appointed exclusively for each
bank or only for specific cases; and t h e aim has been t o
give such precision to their duties as will avoid t h e difficulties which are always to be feared in connection with
so delicate a function. For this purpose it was necessary
to steer between two sets of shoals of different character,
t h e one arising from t h e natural tendency of the inspected
to diminish t h e sum total of t h e powers of t h e inspectors,
t h e other arising from t h e very common propensity of
inspectors to carry their functions to excess.
Thus there remained no other way t h a n to specify with
all possible clearness t h e principal duties and powers of
inspectors and to establish, as reciprocal guaranties in
favor of t h e banks and of t h e public, definite prohibitions
and severe penalties for inspectors who might abuse their
position, and, on t h e other hand, t h e power to extend
the inspection, in special cases, to the complete disclosure
of t h e facts involved, always provided t h a t t h e Department of Finance expressly so orders.
As regards indirect surveillance, provision has been
made for the publication of t h e monthly balance sheets
of the institutions of credit and of an annual report on
their condition. The monthly reports have been t h e
object of careful study as regards the d a t a which they

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are to contain, in order that the situation of the banks
may be made as clear as possible. Among other data,
they will hereafter contain, for the first time, on the credit
side, the investments in public securities and in stocks
or bonds on which it is possible to realize at once, as well
as the distinctions between securities held against discounts
and the amount held against loans on collateral and on
mortgages; and on the debit side distinct enumeration
will also be made, among the other debts, of the deposits
repayable at sight or on notice of three days or less—
a class of deposits which plays a great part in banks of
issue, in view of'the provisions regulating the circulation,
which are elsewhere set forth.
As regards the provisions whose aim is to guarantee the
shareholders and the public in general against mismanagement by the directors, it will be noticed that one of these
provisions prohibits members of the administrative council,
during the first year of the existence of the bank, from
becoming debtors to the bank; while another clause provides that, after the first year, they shall be permitted to
become debtors to the bank only when they are in a position of joint liability, as regards indebtedness, with some
other firm of well-known solvency, or when they give a
collateral guaranty of double the amount of said indebtedness or responsibility.
Unfortunately, experience has shown that banks may
establish themselves with a fictitious capital, by their
organizers reserving to themselves the places in the
administrative council and making loans to themselves
in account current for amounts equal to those which they

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have brought together in order to establish t h e bank.
There have also been cases where influential persons who
manage these establishments have absorbed for their own
operations a considerable p a r t of t h e corporate capital,
without giving t h e same guaranties which they would
have required of outsiders. These illegal methods,
extremely dangerous t o banks established with a modest
capital in u n i m p o r t a n t centers, will be altogether impossible under t h e new law, unless the directors are ready,
knowingly, to incur not only civil b u t also criminal
liability.
Lastly, to m a k e sure t h a t no omission in the law shall
fetter t h e action of t h e Government, it has been provided t h a t any failure on t h e p a r t of a bank to comply
with any of t h e requisites or conditions required by the
law for t h e security or benefit of the public, and which do
not constitute a sufficient reason for forfeiting t h e charter,
may furnish ground to t h e Department of Finance, after
due hearing given to the b a n k in question, to order the
suspension of all its operations until t h e legal requirements and conditions shall be fulfilled.
The Executive is of opinion that, in order to facilitate
t h e creation of banks in t h e Republic, t h e legislation in t h e
m a t t e r of taxes ought t o be exceedingly liberal, while on
the other h a n d there would be no risk of diminishing t h e
a m o u n t of t h e present revenue, seeing t h a t t h e aim is to
promote operations which, in most cases, would not t a k e
place without t h e existence of banks, and which, by
means of t h e banks, will be multiplied so as to produce,
directly or indirectly, important revenues for t h e treasury.

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Of course the privileges which had been granted in this
respect in most of the cases of special charters had to be
respected, and on this account the law provided that the
capital of the banks, the shares which represent it, the
dividends paid by them, and the various instruments of
credit which they issue, should be exempt from all kinds
of taxes in the federation, in the states and municipalities
(with certain exceptions, set forth in the law itself). It
granted exemption from stamp tax for the documents
used by institutions of credit in their internal administration, for the contracts which they may make with the Federal Government or with the local governments, and for
the extracts from accounts and notes of payment or other
documents and operations which they carry on with said
governments in prescribed cases. Besides these exemptions, the new law grants an additional one, namely, that
whatever be the value of the bank notes, mortgage bonds,
certificates of deposit, and cash certificates (bonos de caja)
which the institutions of credit may put in circulation,
the stamp by which said documents are to be legalized
shall never exceed 5 centavos. Similarly the law takes
care that the rather large expenditures generally attending contracts of loan, security, pledge, or mortgage, either
in the way of tax or of legal fees, shall be greatly reduced,
principally as regards taxes, the reduction of fees being
naturally left subject to such contracts as the interested
parties may make among themselves.
On the ground of the right belonging to the Federation
to legislate on everything relating to commercial matters,
and supported by the precedent which placed a limitation

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on t h e right of States to impose taxes on mining, t h e
Executive decided to incorporate a similar provision in
t h e law on institutions of credit, to t h e effect t h a t local
legislation can in no case hamper t h e operations of banks
by fiscal measures while the Federation is striving to free
t h e m from most of t h e taxes imposed by t h e general laws.
The articles forming the last heading of the law close
with two sections which confirm the principle established
in t h e law of J u n e 3, 1896, according t o which t h e exemptions or reductions of taxes can only be granted to t h e
first b a n k t h a t is established in any one of t h e States of
t h e Republic or in any one of t h e Federal Territories; t h e
other banks, established subsequently, having t o pay all
t h e taxes imposed b y the general laws, and, furthermore,
a special t a x in behalf of the Federation of 2 per cent a
year on t h e a m o u n t of capital disclosed. I n virtue of this
provision t h e banks t h a t m a y be set up subsequently t o
the first will be placed under such disadvantages in their
competition with the first b a n k t h a t a plurality of banks
in one and t h e same State will only be possible where t h e
transactions are so active and the demands for credit so
great t h a t they can not be satisfied b y a single bank, no
m a t t e r how powerful.
I t is t o be noted t h a t it has not been the spirit of t h e
law to invest with the character of first bank, and t h e
exemptions and privileges attached thereto, t h e branch
banks which m a y be established in some of t h e States or
Territories of t h e Republic, because t h a t would lead to
t h e absorption of all the markets in t h e interior of t h e
country b y a very small number of institutions of credit,

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which, having established their head offices in three or
four States, would try to set up branches in all the rest
of the country in order to impede the creation of other
banks with equal rights and privileges. This view is borne
out by the considerations set forth in another part of this
report, with the purpose of demonstrating that branch
banks fall far short of fulfilling with the same degree of
efficiency the same ends as the bank on which they depend. On this account the Executive deemed it proper
to promote the creation of local banks, notwithstanding
the existence of branches maintained by the great banks
of the capital at many points in the Republic, and was
influenced by similar reasoning in favor of the creation of
banks in all the States and Territories of the Federation,
notwithstanding the branches that may exist in each one
of them, whether of banks of the Federal District or of
local banks.
The transitional articles of the law contain two very
important principles—the recognition of the rights previously acquired by existing banks, either in the capital
or in the States, and the privilege granted to the latter,
whatever be their number, of acquiring the character of
first banks in the locality where the parent house is established if they declare to the Department of Finance that
they submit their charters to the new law.
The article relating to obligations contracted naturally
served as a guide to the Government in preparing the
general law on institutions of credit, and I should not
touch on this point were it not that I wish to point out
that the present was deemed a favorable opportunity, by

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means of law, t o impart all t h e necessary authority t o the
repeated decrees of t h e President of t h e Republic, by
which t h e meaning of an article contained in nearly all
t h e earlier charters was defined in t h e sense t h a t all institutions of credit m u s t be subject to t h e laws of t h e count r y and to t h e other provisions of a general character
which were afterwards promulgated in t h e m a t t e r of
banks when such laws and provisions are not opposed t o
t h e charter or statutes of the bank.
I t is within t h e scope of t h e executive power, when duly
authorized, to grant rights and privileges b y means of a
charter or contract, b u t it can never renounce the right
or p a r t with t h e obligation to legislate or issue regulations
on those points or questions which were not expressly
provided for in t h e charter or agreement in question.
Moreover, charters are special laws (leyes privativas), and
t h e interpretation of a special law must be made in t h e
sense of restricting t h e privileges or exemptions t h a t dep a r t from t h e general law, rather t h a n of enlarging t h e m ;
and hence t h e clause whose tenor might lead some banks
to think t h a t they were subject to none b u t their own
special legislation, based on t h e charter and by-laws, m u s t
not be understood in this exclusive sense, b u t in t h e sense
just pointed o u t — t h a t is to say, admitting t h e application
of the general law in everything which does not impugn
their special legislation.
One of the aims of t h e decree of J u n e 3, as already
noted, was t o enable the Executive to introduce uniformity into t h e heterogeneous legislation created b y earlier
charters, so far as such reform might be compatible on

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the one hand with the conditions of the business of existing banks and on the other with the respect due to rights
which their charters conferred.
This need was urgent in order to enable the Government to enter on its task of reducing the charters, so far
as possible, to general types, inasmuch as the diversity
and dissimilarity of these charters made it impossible to
follow in the matter of banks a uniform and well-defined
policy, which would allow all the establishments to take
advantage, in the best possible manner and for the common benefit, of the admirable instrument of progress
which instruments of credit afford.
Seven banks were operating in the States when the
decree of June 3, 1896, was promulgated, and no two of
them had identical charters, but all differed in various
points, more or less essential. Thus, for example, one
charter terminated in 1904, the others at later dates up
to 1939. The issue was regulated in the case of some banks
by the amount of capital; in the case of others by three
times the capital. To guarantee the circulation, sureties
were required of some banks, deposits of others, and of
yet others neither sureties nor deposits, but a different
kind of guaranty. The reserve funds differed greatly in
amount with the different establishments. The right to
establish branch banks was unlimited for some banks,
while for others it was subject to various restrictions. The
value of the notes which they were allowed to issue was
in some cases 25 centavos as a minimum, while in others
1 peso was the smallest value authorized. There was one
bank which was authorized to make loans subject to

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extension u p t o twelve months, while the operations of
t h e others were not to exceed six months. Similar differences existed in t h e guaranties for loans and discounts, as
well as in privileges and exemptions from taxation, and
in other fundamental requirements of t h e charter.
W i t h a view to p u t t i n g an end to this capricious diversity in legislation, the second transitional article of t h e
law fixed a t e r m within which the banks established in t h e
States were to submit to t h e provisions of this law, offering to t h e m in exchange t h e character of first b a n k in each
of t h e respective States, with the full rights and privileges
granted to first banks.
This inducement proved insufficient to secure the desired
object. Most of the institutions of credit t h a t were in
operation in t h e country when the law of March 19 last
was enacted agreed to subject their charters to t h e law;
b u t since, according to article 12 of t h a t law, the said
charters bear only t h e character of a mere authorization,
and t h e banks are obliged to accept the modifications
which t h e law m a y undergo hereafter, they decided not
to exchange t h e rights and obligations of their original
contracts, which could not be altered (during t h e life of
the charter) except b y the consent of both parties, for
other rights and obligations, which, though in their aggregate more to their interest, yet presented the grave drawback of not being immutable to the same degree as the
former.
No definitive result could be obtained in the course
of t h e four months allowed for the existing banks to declare their unqualified adhesion t o the new law, surrendering
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their earlier charters; but since, according to paragraph III of article 2 of the law of June 3, 1896, the
Executive was authorized to conclude agreements with
the banks of the States during the six months following
the enactment of the general law on institutions of credit,
without further stipulation than that the banks should
surrender the rights granted to them by their respective
charters, it seemed advisable to take advantage of the
good will shown by most of the banks to conform to the
new law, leaving them free not to accept such modifications as the law might undergo hereafter, unless they
deemed it conducive to their interest.
This condition, by which the establishments antedating
the general banking law are safeguarded against any
change of legislation that might curtail the rights expressly conferred by the present law, is in the main the
same that they enjoy in virtue of their original charters;
and it may even be said that the very vague terms in
which one of the clauses contained in all the charters was
couched, and which led the said banks to think that they
were entitled to claim the benefit of any law, regulation,
or part thereof, which they thought advantageous to their
establishments, and to claim exemption from any law that
did not suit them, it may be said, I repeat, that this
vagueness left the banks in a better condition than they
now enjoy in virtue of the new arrangements with the
department under my charge.
In fact, the fundamental basis of these arrangements
was the surrender on the part of the banks of all the
rights conferred on them by their earlier charters, and

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the acceptance of the general law of institutions of credit,
with the limitation just mentioned. According to this
limitation, any future legal enactments in the m a t t e r of
banks will affect these establishments only in those matters which are not opposed to the provisions of t h e law
of March 19 and to the express stipulations of the said
agreements; b u t it was also agreed t h a t , if the provisions
of a general character, or the stipulations contained in subsequent charters, should grant greater privileges to t h e
banks, the establishments in question could claim t h e
benefit of them, provided they made express application
for the purpose to t h e Department of Finance; and t h a t ,
if said privileges were associated with certain obligations
or legal requirements, the benefit of the privileges should
accrue to the banks only in case they accepted at t h e
same time these obligations or legal requirements. This
arrangement cut the root of the claim of the old banks t o
accept only such parts of future laws as were favorable t o
them, and to insist on exemption from the rest.
The term for coming to an agreement with the local
banks was about t o expire, when the agreements referred
to were signed, being subscribed by the representatives of
t h e Banco Minero of Chihuahua, the Banco Mercantil
of Yucatan, the Banco Yucateco, the Banco Comercial of
Chihuahua, pnd the Banco of Durango—that is t o say,
five out of the seven banks which were in operation a t t h e
time t h e general law of institutions of credit was enacted.
In these agreements, besides the clauses relating to t h e
point just mentioned and those relating t o the capital, the
main office of the bank and the branch banks t h a t m a y be

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established, there were included the identical provisions
contained in these charters granted by the Government
for the establishment of new banks—provisions which were
in a manner complementary to the law, and which, after
its enactment, it was deemed advisable to impose on the
banks for the clearer understanding of the law and for
the better safeguarding of the public interest.
The term for which authority had been granted to the
Executive had just expired when the Banco de Zacatecas
sent in its adhesion to the bases accepted by the other
banks, and thus the agreement with this bank had to be
submitted to the sanction of the chambers. At the same
time the Banco de Nuevo Leon petitioned anew, before
the Department of Finance, to be allowed to participate
in some of the prerogatives of the general law in return
for its abandonment of part of the rights secured to it by
its charter. The conferences held for this purpose resulted
in a special agreement which had to be submitted for
approval to the chambers, and which, in the opinion of
the Executive, conforms, so far as circumstances will
allow, with the policy of unification pursued by the Government in banking matters.
The terms in which this agreement was drawn up are
identical with those of the agreements with the five banks
above mentioned, differing from them only in one point,
which deserves explanation.
Like some others of the earlier banks, the Banco de
Nuevo Leon was authorized by its charter to issue notes
up to three times its cash on hand in coin or in silver and
gold bars; but, unlike all the other credit establishments,

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this bank had been the only one whose circulation h a d
approached t h e m a x i m u m fixed, and which for a long time
maintained it a t more t h a n double its metallic reserve.
Thus it h a d a powerful motive for declining t o p a r t with
a right from which it had for a good while derived considerable advantage, and which it was in a position to
continue to enjoy with the same degree of security and
benefit.
If the requirement t h a t the bank should subject itself
to t h e provisions of article 16 of the law, establishing t h e
double proportion as the maximum, had been p u t forward b y the Government as a sine qua non, it could not
have induced t h e bank to surrender, like the others, all
the rights of its original charter, and accordingly t h e
Executive deemed it wise not to insist on this point so
long as t h e adhesion of t h e bank t o t h e provisions of the
general law was secured, on t h e same terms on which they
h a d been accepted by t h e other establishments.
As a compromise, in order t h a t the metallic reserve
guaranteeing the circulation should not descend below
the limit of one-third of the notes in the hands of the public, it was agreed t h a t said circulation should be computed
b y adding to the value of the outstanding notes the a m o u n t
of deposits payable on sight or on notice not to exceed
three days, and t h a t the sum of t h e , t w o amounts should
not exceed three times the cash reserve, in coin or in gold
or silver bars. This was a virtual curtailment of the privilege which t h e Banco de Nuevo Leon enjoyed, in virtue
of its old charter, to issue notes up to three times its
metallic reserve.

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But in order to arrive at this solution, some supplemental guaranty for the notes had to be found, in order
to avoid an absolute departure from the rule laid down
by the government itself in this matter, in fixing the
limit of security which in its opinion should be accepted
in the new system. Accordingly it seemed natural to
retain the deposit of government bonds stipulated in the
old charter of that bank, since, although that practice
involves the inconvenience pointed out elsewhere, it must
still be regarded as adequate for the purpose, under the
circumstances, seeing that there was question of modifying an earlier charter and not of granting a new one.
Furthermore, when the Banco de Nuevo Leon obtained
its charter, the 3 per cent bonds of the consolidated debt
were quoted at 33 per cent, more or less, of their value,
at which price they were computed in making the deposit
of said bonds, in accordance with the respective clause;
whereas, according to the new arrangement, in making
the deposit, the 3 per cent bonds are to be computed at
40 per cent, and the 5 per cent bonds of the redeemable
debt at 65 per cent, although the market price of the two
sets of bonds has for some time maintained itself above
54 per cent and 78 per cent, respectively.
Lastly, according to the agreement made with the
Department of Finance, the Banco de Nuevo Leon acquires
the character of first bank only in order to enjoy the
exemptions and reductions of taxes, but not to prevent any
other bank which may be established in the same State
from enjoying the same privileges and exemptions.

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I n a word, t h e Banco de Nuevo Leon, under date of
September 18 last, accepted t h e bases of the agreement
contracted with t h e other banks, and on t h e same terms
as they, with only this difference, t h a t it retains its right
to issue notes up to three times its cash reserve, t h a t right
being limited by the stipulation of computing t h e deposits
payable at sight or on short term together with t h e notes
it has in circulation; and in exchange, it will continue to
guarantee its circulation with Government bonds, to t h e
amount of one-third of its capital on hand, computing said
bonds at a value considerably lower t h a n the market
value; and furthermore t h e bank will remain subject to
t h e possibility of t h e competition of some other establishment of the same kind t h a t may be founded in t h a t State,
which would enjoy all t h e rights and privileges granted b y
the general law on t h e subject.
The work undertaken by the Executive since t h e necessary authorization was requested and obtained from Congress may be summarized as follows: The general law of
institutions of credit, t h e principal object of said authorizations, was carefully considered and enacted; an agreement was arrived a t with the National Bank of Mexico,
which furnishes solid ground for the existence of t h e
earlier local banks, and inspires t h e hope of rich fruit to be
garnered from the new banking legislation; facilities have
been obtained for t h e development of the other establishm e n t of credit a t t h e capital, t h e only one, aside from the
National Bank of Mexico, t h a t can issue notes in t h e Federal District; six banks out of the seven t h a t existed
before t h e promulgation of said law were induced to adhere

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to the new law by an identical type of agreement; the
seventh bank also was induced to give its adhesion, in
terms not differing greatly from those of the others; and
lastly, six new charters have been granted in a short time,
in entire conformity to the new law, for the establishment
of banks of issue in the States of Mexico, San Luis Potosi,
Coahuila, Sonora, Sinaloa, and Veracruz.
The Executive does not flatter himself with the belief
that he has accomplished a work approaching perfection,
and which will not before long require more or less important alterations. He simply tried to attain, and he hopes
to have attained, a solution which at one and the same
time respects rights previously created by heterogeneous
charters, and establishes a liberal and uniform system,
adapted to the ideas and the present needs of the country.
He is also persuaded that the new legislation, the fruit of
mature study, careful observation, and the most earnest
desire to diffuse the sane and prudent use of credit among
our people, will lend itself to a profitable trial, which offers
not a shadow of danger, and which will, probably, in the
course of some years lead to the establishment of a more
stable system, lending still greater stimulus to the development of the national wealth and corresponding still more
closely to its needs. It would give me pleasure to learn
that this is also the opinion of the distinguished members of the legislative chambers, to whom this report is
addressed.
I beg you to accept once more the assurance of my most
distinguished consideration.

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APPENDIX

THE BANKING LAWS OF MEXICO.*
T H E PRELIMINARY LAW OF

1896.

The Congress of the United States of Mexico decrees;
ARTICLE I . The Executive of the Union is hereby authorized to prepare the general laws which are to govern
the concessions, establishment, and operations of banks
of issue in the States of the Republic and federal territories, in accordance with the following conditions:
I. No concession shall be granted unless the beneficiaries thereof shall make a deposit in bonds of the
national public debt, whose nominal par value shall be
equal at least to 20 per cent of the sum which the banks
are required to have in cash before commencing operations.
II. The minimum subscribed capital shall be $500,000,
of which at least half must be paid up in cash before the
bank commences operations.
III. The cash balance in each bank must never fall
below half of the value of its notes in circulation, added
to the amount of deposits payable on demand or on not
more than three days' notice.
IV. No bank shall be authorized to issue notes for a
greater amount than three times its paid-up capital.
V. The notes shall have a voluntary circulation, and
their minimum value shall be five pesos.
VI. Only the first bank that may be established in any
State of the Republic or in any of the federal territories,
shall be granted exemption from or rebate on the payment of taxes.

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T h e other banks shall p a y all t h e taxes as provided b y
t h e general laws, a n d they shall also p a y a special t a x
t o t h e federation of 2 per cent per a n n u m on t h e a m o u n t
of their paid-up capital.
For the purposes of this section, those banks which are
already established shall be considered as t h e first banks,
always provided t h a t they subject themselves t o t h e
provisions of t h e general laws.
V I I . The banks which m a y be established in a n y
S t a t e will not be allowed to open branches outside of
t h e territory of t h a t State for the purpose of redeeming
their notes without .special permission from t h e Executive, which permission will only be granted when there
is a strong connection in commercial interest between
different States, and will not be granted in a n y case for
t h e opening of such branches in the City of Mexico or in
t h e Federal District.
V I I I . The Federal Executive shall appoint an inspector, whose functions shall be defined, and who will h a v e
the same authority in regard to t h e revision of a n n u a l
balance sheets t h a t the laws grant to the auditors of
joint-stock companies.
I X . The banks shall publish monthly a cash statement,
which, besides showing the balances of accounts as
required b y law, shall also set forth the a m o u n t of coin
on hand, the a m o u n t of notes in circulation, a n d also t h e
a m o u n t of the deposits payable on demand, or on previous
notice of not more t h a n three days.
X . T h e Executive of t h e Union shall not grant any concession whatever until after t h e issue of t h e General Banking Law and in accordance with its provisions.

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A R T . 2. T h e Executive is likewise authorized:
I. To m a k e arrangements with t h e National Bank of
Mexico, by virtue of which and on payment of the compensation t h a t m a y be considered equitable, all conflict
shall be terminated between t h e privileges of t h a t bank
and t h e provisions of t h e general law referred to in t h e preceding article.
I I . To come to an agreement with the banks t h a t already exist under special concessions, on t h e understanding t h a t in order t o enjoy t h e benefits of t h e general law,
t h e banks of t h e States shall be obliged to waive t h e concessions under which they have been created.
I I I . The powers granted to t h e Executive under t h e
present article shall expire, as regards t h e making of agreements with t h e banks of t h e States, six months after the
publication of the general law, and as regards the others,
on the 15th of September next.
A R T . 3. The provisions to be made for the regulation
of institutions of credit m a y be treated in t h e same law or
in another special law which the Executive shall issue, as
he m a y consider most desirable.
A R T . 4. Within t h e period of the session immediately
following t h e publication of the decree or decrees relating
t o t h e subject, t h e Executive shall report to Congress on
t h e use t h a t he m a y have m a d e of the powers granted to
him under t h e present law.
Given in t h e Palace of t h e Executive, in Mexico, on t h e
third day of June, one thousand eight hundred and ninetysix.
PORFIRIO

DIAZ.

To Lie. J o s £ Y V E S LIMANTOUR,
Secretary of State and of the Department of the Treasury
and Public Credit,

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T H E GENERAL LAW ON INSTITUTIONS OF CREDIT.
[Law of March 19, 1897, as amended to June 19, 1908.]
CHAPTER

I.—Of institutions of credit and their organization.

For the purposes of this law the following
only shall be considered as institutions of credit:
I. Banks of issue.
II. Mortgage banks.
III. Banks of promotion.
Other institutions doing a banking business shall continue to be governed by general laws or by concessions
granted by the Executive, until such time as special laws
are issued for their government.
ART. 2. Institutions of credit have in common the character of intermediaries in the negotiation of credit, and are
distinguished from one another by the character of the
particular securities which they place in circulation.
ART. 3. Banks of issue are those which issue notes of
fixed denominations, payable at par, on demand and to
bearer.
ART. 4. Mortgage banks are those which make loans
secured by urban or rural estates and issue bonds which
are secured by the same guaranty, which bear interest,
and are redeemable under fixed circumstances and at fixed
times.
ART. 5. Banks of promotion are those which are specially designed to encourage mining, agricultural, and industrial enterprise, which make preferred loans, unsecured
by mortgage, which guarantee given undertakings, and
ARTICLE I .

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which issue short time bonds or certificates running for a
fixed time and payable on given dates.
ART. 6. Institutions of credit can only be established in
the Republic under a concession granted by the Executive,
subject to the requirements and conditions of the present
law.
ART. 7. The establishment of two separate institutions
of credit shall not be authorized by one and the same concession, nor shall any institution be empowered to issue
securities other than those which, according to the foregoing articles, appertain to each of the several classes of
banks.
ART. 8. On no account shall a concession be granted for
the establishment of an institution of credit until the applicants have deposited, in the national treasury or in the
National Bank of Mexico, government bonds of a nominal
value equivalent at lease to 20 per cent of the sum which
the bank must have on hand in order to be incorporated.
This deposit shall be returned as soon as the bank is
opened fox" business.
ART. 9. Concessions for the establishment of institutions
of credit may be granted to private individuals or to limited liability companies; but the operation of such institutions shall be carried on only by limited liability companies
duly organized according to the laws of the Republic.
ART. 10. Concessions to private individuals shall not be
granted to less than three persons, who must, within four
months, show that they have organized a limited liability
company to operate the concession and that they have
transferred the concession to said company.

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ART. I i. Limited liability companies, organized to operate banking concessions, shall be subject to the general
provisions of the Code of Commerce, except as provided in
the following paragraphs:
I. The number of members shall be at least seven.
II. The capital stock shall in no case be less than
$i,ooo,ooo. a
III. The express authorization of the Department of
Finance shall be necessary for the increase or diminution of
the capital of a bank.
IV. No banking corporation can be organized until the
capital is fully subscribed and at least 50 per cent has been
paid up in cash.
V. The legal domicile of a banking corporation in the
Republic shall be at the place where it has established its
head office.
VI. Shares shall be registered in the name of their
holder until their value is fully paid up.
VII. Ten per cent of the net profit shall annually be set
aside to form a reserve until said reserve amounts to onethird or more of the capital stock.
ART. 12. The duration of concessions shall in no case
exceed thirty years, counted from the date of this law,
for banks of issue, and fifty years for mortgage banks and
banks of promotion. The concessions shall have no
other character than a mere authorization to establish
and operate an institution of credit in accordance with
the laws which may be in force on the subject.
«This limit was fixed by the law of 1908. The requirement of the law
of 1897 was a minimum capital of $500,000 for banks of issue and mortgage banks and $200,000 for banks of promotion.

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ART. 13. Foreign institutions of credit issuing notes to
bearer shall not be allowed to open in the Republic agencies or branches for the issue or redemption of such'notes.
ART. 14.^ The articles of association and the statutes
of any company organized for the operation of an institution of credit shall be submitted for approval to the
Department of Finance before the bank opens for business, in order that said articles and statutes may conform to the provisions of the Code of Commerce, to the
special provisions of this law, and to the general administrative enactments in force in regard to banking.
The obligation imposed by this article extends to all
subsequent modifications of the constitution and bylaws.
CHAPTER II.—Of banks of issue.
ART. 15. Banks of issue may be established and do
business in the States and Federal Territories of the Republic under no other requirements than those contained
in the present law. The foundation of banks of issue in
the Federal District shall continue subject to existing
contracts and regulations.
ART. 16.b The issue of notes shall not exceed three
times the paid-up capital, nor shall it, together with
a The second paragraph was first enacted by the law of June 19, 1908.
&The provisions of articles 16 and 17 were modified by the law of May
13, 1905, which provided that the fact of drawing interest should not
acquit an account of the character of a deposit for the purposes of the law,
but t h a t current accounts growing out of loan operations should continue
to be excluded from classification as deposits. I t was also provided by the
law of 1905 t h a t silver bars should no longer be counted as a part of the
metallic reserve and t h a t gold bars could be counted only when the free
coinage of gold should be resumed.—Instituciones de Credito: Leyes y Circulares Relativas, p. 11.

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deposits payable on demand or subject to withdrawal at
not more than three days* notice, exceed twice the holdings of the bank in cash and gold and silver bullion.
ART. 17. Deposits in current account and at reciprocal
or differential interest, even though subject to check,
shall not be regarded, for the purposes of the foregoing
article, as payable on demand or subject to withdrawal
at three days' notice.
ART. 18. Whenever the note circulation exceeds either
of the limits fixed by article 16, the bank shall communicate the fact in writing immediately to the government
inspector and shall abstain from making new loans until
the circulation has been reduced within the limits fixed
by the law.
If such reduction has not been effected within fifteen
days, the Department of Finance shall allow the bank a
reasonable period, which shall in no event exceed one
month, to adjust its circulation to legal limits, on pain
of the forfeiture of its concession and enforced liquidation.
ART. 19. The circulation of bank notes shall be entirely
voluntary on the part of the public, and on no account
shall they be considered as legal tender.
ART. 20. Only notes of the following denominations
shall be put in circulation, viz, $5, $10, $20, $50, $100,
$500, a n d $1,000.

ART. 21. Bank notes must contain, in Spanish, a
promise on the part of the bank to pay to bearer in cash
at par and on demand the amount of the note. They
must also state the date of their issue, together with the

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series and number t o which t h e note belongs, and m u s t
bear t h e signatures of t h e government inspector, of one
of t h e directors of t h e bank, and of its manager or cashier.
A R T . 22. Bank notes bear no interest and do not lapse
as long as t h e issuing institution exists. They shall only
lapse, and t h a t after five years, when t h e bank is declared
b a n k r u p t or goes into liquidation.
A R T . 23. a Banks of issue are obliged in t h e manner
stated in article 21 t o redeem their notes p u t in circulation.
Notes m u s t be redeemed either at t h e head office of the
bank or a t its branches immediately on their being presented; b u t t h e branches shall be required t o redeem only
t h e notes which they m a y have p u t in circulation.
Banks of issue shall periodically exchange t h e notes of
other banks in their possession and shall, in t h e absence
of express agreement between the parties, pay t h e balances
in cash. The Government shall prescribe b y means of a
regulation the basis of the exchange and settlement,
prescribing a t the same time t h e corresponding safeguards.
A R T . 24. The failure of a b a n k t o redeem a n o t e which
it has issued gives t o t h e bearer t h e right of summary
action against t h e issuing institution, after summons to
pay has been formulated b y a notary, and places t h e bank
in a state of bankruptcy, unless p a y m e n t has been refused
on account of t h e note being counterfeit, in which case
t h e bank m u s t notify t h e government inspector and refer
t h e m a t t e r t o t h e proper authority.
a

The second paragraph was first enacted in the law of June 19, 1908.

8648—10

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A R T . 25. Bank notes represent debts of t h e issuing b a n k
a n d enjoy preference over all other debts with t h e following exceptions:
I. Claims t o the ownership of property pledged t o t h e
bank, under the terms of t h e Civil Code a n d t h e Code of
Commerce.
I I . Mortgage debts, when such mortgage has been
registered previous to t h e transaction whereby t h e
b a n k acquires the mortgaged property.
I I I . Debts referred to in article 106 of t h e present law.
A R T . 26. No note shall be p u t in circulation without
t h e proper s t a m p , which shall be engraved on t h e note b y
t h e stamp-printing department. Permission t o engrave
t h e s t a m p on t h e proposed issue m u s t be obtained from
t h e Finance D e p a r t m e n t and shall only be granted when
it has been proved t o t h e satisfaction of t h e d e p a r t m e n t
t h a t t h e a m o u n t involved does not exceed t h e limits of
issue fixed b y t h e first p a r t of article 116.
A R T . 27. Banks are obliged t o redeem worn notes
presented for collection, even though t h e y be divided,
provided t h e number, series, value, and signatures continue distinguishable.
A R T . 28. The worn notes which a b a n k m a y desire t o
withdraw from circulation shall be destroyed b y fire
under requirements t o be established b y regulation.
A R T . 29. a I t is prohibited to banks of issue:
I. To make loans or t o discount notes or other paper
running for more t h a n six months.
a
From Clause IV, all these requirements were first enacted in the law
of 1908, except that those which now appear as Clauses V and VI appeared
in the law of 1897 as Clauses V and IV.

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I I . To discount notes or other commercial paper without at least two signatures of well-known solvency, unless
collateral security is given.
I I I . To make loans secured by mortgage except in t h e
cases set forth in t h e following article.
IV. To make loans without sufficient collateral t o persons or associations not domiciled nor having business of
importance in t h e States or Territories wherein t h e home
office, branches, or agencies expressly authorized b y t h e
Treasury Department m a y be located. F r o m this provision are excepted operations between banks.
V. To mortgage their real property or borrow on their
credits.
VI. To pledge or pawn their bank notes or to contract
obligations respecting them.
V I I . a To accept uncovered bills of exchange or drafts,
or to open credits not revocable at discretion by the bank.
V I I I . To hold corporation stocks or bonds exceeding 10
per cent of t h e amount of paid-up capital and reserve a t
the time. Securities representing the federal debt and
others where t h e capital or revenues are guaranteed by t h e
Government are not included in this limitation.
I X . To operate on their own account mines, metallurgical offices, mercantile establishments, industrial or
agricultural enterprises, or to t a k e part, either by general
or silent partnership, in associations, except under circumstances analogous to those set forth in article ioo, in
a
I t became necessary to issue a circular regarding this clause, setting
forth that the right to revoke credit, therein referred to, meant only that
portion of a credit granted to a client which was still unused and did not
impair the contracts usual in banking practice.—Circular of August 20,
1908, Department of Credit and Commerce, No. 12.

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which case t h e provisions of article 101 shall be complied
with.
X . To engage in insurance operations.
X I . To accept responsibilities, whether direct, indirect,
or associate, from any single person or association, which
in t h e aggregate exceed 10 per cent of t h e paid-up capital
of t h e establishment. Rediscounts between banks are
excepted.
A R T . 30.° Banks of issue m a y accept mortgage security
only in t h e following cases:
I. When t h e credit has become impaired of any of t h e
signers of an obligation held b y t h e bank.
I I . When express authority has been given b y t h e
Department of Finance. This authority shall be granted
only on condition t h a t t h e total amount of mortgages in
favor of t h e b a n k shall not exceed one-fourth of t h e paidu p capital and provided t h a t t h e debts so secured m a t u r e
within a period of not more t h a n two years.
Banks shall in no case m a k e new extensions in favor of
debtors when t h e time has expired of t h e hypothecary
credits arising under t h e two previous sections, a n d they
shall have t h e power, a t t h e expiration of one year from
t h e date of m a t u r i t y of the loan, to exercise their rights
t o proceed to t h e foreclosure of t h e security.
A R T . 3 1 . h U p o n t h e m a t u r i t y of a loan m a d e on collateral consisting of bonds of t h e national public debt or
of t h e States or municipalities, of stock or obligations of
a Clause I of this article differed slightly in language in the law of 1897
and the second paragraph of Clause I I first appeared in the law of 1908.
& The second paragraph first appears in the law of 1908.

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commercial or general associations or of personal property,
t h e bank m a y sell such collateral through two brokers, or,
lacking these, through two merchants in trade, t h e sale
being a t t h e current price for t h e day. T h e b a n k shall
have t h e right to acquire such collateral at this price, the
brokers or merchants intervening in t h e operation certifying t h e price upon their responsibility.
In order t h a t banks shall have the preferential right
t h a t hypothecation gives to t h e creditor in respect to
other creditors, it shall be sufficient t h a t t h e securities
representing the collateral be set out in t h e same document
which constitutes t h e evidence of t h e debt.
A R T . 32. If t h e collateral security consists of invoices
of goods for collection, t h e bank shall collect such invoices
on its own account, and if it consist of invoices of goods
receivable, it shall receive t h e goods and sell t h e m at public
auction.
A R T . 33. When t h e price of goods given as collateral
declines in such manner as not to cover t h e a m o u n t of the
debt and 10 per cent in addition, t h e debtor m u s t reinforce his collateral within three^days after demand in
writing, when t h e bank accompanies its demand with a
certificate of two licensed brokers testifying to t h e depreciation of t h e collateral. If t h e collateral is not reinforced,
the bank m a y proceed t o sell the same at auction or otherwise, in t h e same manner as if t h e term of t h e loan had
matured.
A R T . 34. If t h e collateral consists of shares of stock
standing in t h e n a m e of the holder, they shall be transferred to t h e b a n k at t h e time of t h e contract which is t h e

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object of the guaranty, but the holder shall be protected
by a certificate stating the specific object of the transfer.
ART. 35. When the proceeds of securities or goods offered as collateral are not sufficient to cover fully the debt
to the bank, and interest thereon, the bank may sue the
debtor for the difference, but when, on the contrary, the
proceeds are more than sufficient, the bank must pay the
difference to the borrower, after deduction of the expenses
of the sale or auction.
ART. 36. When banks of issue are under the necessity
of foreclosing on mortgages executed in their favor, in
the cases permitted by this law, they shall enjoy all the
rights and privileges conveyed by article 78 and those
following.
ART. 37. No private individual or corporation not authorized by the terms of this law shall issue notes or any
other document containing a promise to pay cash to bearer
on demand. Documents issued in violation of this clause
carry with them no civil rights and are not enforceable in
the tribunals.
ART. 38. Banks established in the States and federal
Territories shall not open branches or agencies for the redemption of their notes outside of the State or Territory
where they are authorized to operate, save with the special
permission of the Executive, which shall only be granted
when there is close community of commercial interests
among the States covered by the permission. On no account shall permission be granted for the establishment
of such agencies or branches in the federal district.

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A R T . 38 a (bis). Banks of issue m a y at any time be converted into banks of promotion by renouncing t h e special
rights conferred on t h e m b y the law, provided they are so
authorized t o do b y t h e D e p a r t m e n t of Finance, which
shall t a k e care t h a t t h e charter shall be modified in t h e
terms required b y t h e new character of t h e b a n k and shall
m a k e proper regulations for the retirement or g u a r a n t y
of t h e notes in circulation.
CHAPTER III.—Of mortgage

banks.

A R T . 39. The loans on mortgage authorized t o be m a d e
b y t h e banks dealt with in this chapter are of t h e following two kinds:
I. Loans at simple interest payable on fixed dates, with
principal reimbursable within short periods.
I I . Loans reimbursable in long periods b y means of
annual installments comprising interest, p a r t of t h e principal, and the commission of t h e bank.
A R T . 40. Short-time mortgage loans are those which are
payable in one or more installments, b u t in all cases in
less t h a n ten years.
A R T . 41. I n t h e case of loans payable in annual installments t h e number of such installments shall not be less
t h a n ten nor more t h a n forty, whether t h e p a y m e n t s be
quarterly, semiannual, or annual.
A R T . 42. Mortgage banks shall prepare for t h e information of the public a series of tables showing t h e p a y m e n t s
t o be made on the several classes of loans, and copy of
said tables shall be attached t o the mortgage deeds.
a

This article first appeared in the law of 1908.
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ART. 43. Mortgages executed in favor of these banks
must always have a first lien, either on account of the
property being previously unincumbered or because existing mortgages are subordinated to the claims of the
bank, either by transfer with the express consent of the
earlier creditors or by any other of the methods provided
by law.
ART. 44. A mortgage loan shall never exceed one-half
the value of the property mortgaged, nor shall an annual
installment payable under the terms of the loan, according to clause II of article 39, be larger than the proceeds of the capital represented by the property, estimated at stated rates of interest as provided by the
statutes.
ART. 45. For the purposes of the foregoing article the
value of the property which it is desired to mortgage
shall be appraised by experts appointed by the bank,
unless there be a fiscal valuation and the Department of
Finance authorizes the bank to operate on said valuation.
ART. 46. Mortgages can only be taken on estates situated in the district, State, or territory where the bank
has its head office or branches and on estates entered at
the property registration office in the name of the
mortgagor.
ART. 47. Mortgages shall not be taken on estates held
"pro indiviso" or on estates of which the reversion and
the usufruct belong to different persons, unless all the
coproprietors and the usufructuary, when there is one, give
their express consent to the mortgage. A similar requirement shall be made when the estate is divided up among

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several owners, and when there is an agreement for t h e
return of t h e estate t o a vendor under stated circumstances.
A R T . 48. Banks shall not accept mortgages on mines,
forests, fixtures, or churches, or on buildings specially intended for federal, state, or municipal purposes.
A R T . 49. The limit fixed for loans by article 44 shall be
reduced t o 30 per cent of the value of the property when
buildings constitute more t h a n half of such value, unless
the owner binds himself to insure t h e buildings for the
time t h a t t h e loan is to run for a sum exceeding the
amount of t h e mortgage. In t h e latter case t h e bank, in
default of t h e policy holder, may pay the premiums and
renew t h e insurance for as long as may be necessary,
charging t h e sums so paid to t h e mortgagor.
The bank shall always hold a prior claim to t h a t of any
other creditor on t h e amount of t h e security.
A R T . 50. The aggregate amount of loans on mortgage
shall never at any one time exceed twenty times t h e paidup'capital of t h e bank, nor shall t h e loans to a single person
or corporation exceed t h e fifth p a r t of said capital.
A R T . 51. Loans on mortgage m a y be repaid before the
stipulated time, provided t h a t such payment be made in
t h e manner and form agreed upon and the terms of the
deed as t o notification and settlement of interest be complied with. Partial p a y m e n t shall be subject to the rules
and limitations contained in the statutes of each bank.
A R T . 52. When a mortgaged estate depreciates in value
in such manner t h a t half, or in t h e special case above mentioned 30 per cent, of its' value is insufficient to cover t h e
amount of t h e loan, the bank, acting on the report of two

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appraisers, one of whom is to be appointed by the bank and
the other by the government inspector, may require the
debtor to give additional security or demand the immediate payment of outstanding principal and interest.
After a notification has been served on the debtor the latter
has three months from the date of the notification within
which he must elect to either give supplementary security
or repay the loan.
ART. 53. Payments due to mortgage banks for principal
or interest are on no account to be subject to attachment,
even though application be made in due form of law to the
competent judicial authorities.
ART. 54. Default in the payment of principal or interest
on the dates and in the manner agreed upon confers on the
bank the right to foreclose at once and to enforce payment
of the outstanding principal and interest in conformity
with articles 78 and the following.
ART. 55. The nominal value of the mortgage bonds
which the banks are authorized to issue shall never exceed
the amount of the loans on mortgage made by said banks.
ART. 56. Said bonds shall bear interest, whose rate and
times of payment and other conditions shall be determined
by the banks themselves either in their statutes or by
the resolutions of their directors.
ART. 57. The denominations of the bonds shall be $100,
$500, and $1,000, and they shall be transferable by simple
transfer or by indorsement, according as they are to
bearer or in the name of the holder.
ART. 58. Mortgage bonds may be issued with or without
a fixed date for their redemption.

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Those issued without a fixed date for redemption shall be
paid off by means of drawings.
ART. 59. The express authorization of the Department
of Finance is necessary for the issue of bonds carrying a
right not only to the repayment of principal and interest,
but to money or other premiums.
ART. 60. The terms of the issue, the particulars for
identification, and the conditions as to interest and redemption shall be stated in Spanish on each bond. The
bonds shall be signed by the government inspector, by one
of the board of directors and the manager or cashier, and
on their back shall be printed the text of the articles determining the rights and obligations attached to the bonds.
ART. 61. The drawings shall take place at least twice
a year, and at each one of those drawings enough bonds
must be redeemed to keep the nominal value of those
outstanding at a figure not exceeding the net amount of
mortgage loans made by the bank.
ART. 62. The place, date, and hour on which the drawings are to take place shall be advertised a week in advance in the official journal, or, if there be none, in one
of the newspapers of largest circulation in the place.
ART. 63. The drawing shall be public and shall be
presided over by the government inspector. A notary
public shall be present and shall draw up and certify a
statement as to the drawing.
Within a week after the drawing the numbers of the
bonds drawn for redemption shall be advertised in the
papers above mentioned and a date shall be fixed on and
after which the bonds are to be paid.

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ART. 64. Bonds drawn for redemption shall cease to
bear interest from the date appointed for their collection,
but such date shall not be less than one month after the
drawing.
ART. 65. In addition to the ordinary drawings, the
banks may hold extraordinary drawings whenever they
think fit or whenever the statutes require, but subject in
all cases to the rules for ordinary drawings.
ART. 66. Bonds drawn for redemption shall be canceled immediately after they have been paid off, and at
stated intervals canceled bonds shall be destroyed in
presence of the government inspector and with proper
legal formalities.
ART. 67. When in payment of loans or in any other
way the banks come into possession of mortgage bonds
issued by them, said bonds shall not be considered as
withdrawn from circulation, for the purposes of article 61,
until they are redeemed in due form.
ART. 68. Mortgage bonds are issued as the token of
mortgages owned by the bank as a result of loans made
by such bank, and, in consequence, said bonds with their
interest and premiums, when there are any, shall be
guaranteed by such mortgages to the fullest extent,
preferably to any claim of a third party.
ART. 69. The guaranty mentioned in the foregoing
article is collective; that is to say, the aggregate of property mortgaged to the bank constitutes security for the
aggregate of bonds put in circulation by the same institution, save as provided by the closing part of article 76.

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The holders of bonds can enforce their claims only
against t h e issuing bank.
A R T . 70. A special cash guarantee fund shall be formed
in all mortgage banks to secure t h e interest and redemption service of t h e mortgage bonds. This fund shall
. always be larger t h a n a half-yearly interest service on
t h e bonds outstanding.
A R T . 71. Mortgage bonds also enjoy t h e following
privileges:
I. The right of priority to the reserve and guaranty
funds of the issuing bank,as also to its capital, whether paid
up or uncalled.
I I . The principal, interest, and premiums of bonds, as
soon as p a y m e n t is due, give the right of s u m m a r y action
against t h e bank, after summons to pay has been served
on the bank by a notary.
I I I . The p a y m e n t of principal and interest can not be
withheld even by judicial order, except when t h e securities have been lost or stolen, and then only in accordance
with law.
IV. In all cases in which b y law or contract the funds
of corporations or of persons legally disqualified are t o be
employed in the purchase of estates or in loans on mortgage, said funds m a y also be invested in the purchase of
mortgage bonds.
A R T . 72. Notwithstanding their character, mortgage
bonds are to be considered as personal property in all t h a t
relates to their transfer, and when they are issued in the
n a m e of given individuals they shall be assimilated t o
commercial paper subject to indorsement.

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ART. 73. In addition to loans on mortgage and the
issue of mortgage bonds, mortgage banks are empowered
to carry on any of the following operations:
I.a To invest their funds in the purchase of their own
mortgage bonds or of other classes of securities of the first
class, those being considered such which are described in
article 102 (bis) of the present law.
II. To make loans to run not more than six months on
collateral constituted by first-class securities.
III. To receive deposits on current account, whether
with or without interest.
IV. To draw, purchase, sell, and discount letters of
exchange, drafts, orders, or checks, payable in the Republic
or abroad, and maturing within not more than six months.
V. To sell, purchase, or collect on commissions, either
directly or through brokers, all kinds of securities.
VI. To loan their own mortgage bonds on suitable
collateral, so as to enable the borrower to offer them as
bail or as a pledge.
VII. To make loans for public works or improvements
by virtue of contracts entered into with the federal, state,
or municipal governments.
ART. 74. In order to have the right of investing money
or making loans under Clauses I and II of the foregoing
article, it is indispensable that the securities accepted
shall be not mining stock; that they be quoted in some
one of the markets of the country or on the principal
a In the law of 1897 this clause read: " T o invest their funds in the purchase of their own mortgage bonds or of other classes of securities of t h e
first class."

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foreign bourses; t h a t they be dividend-paying or interest-bearing, and t h a t such dividend or interest has been
paid with regularity for at least two years prior t o the
date of the loan.
A R T . 75. a Mortgage banks may receive deposits only u p
to twice t h e a m o u n t of t h e sum of their paid-up capital
and reserve. These banks shall always hold in cash onehalf at least of their deposits on sight or at three days'
call. The remaining 50 per cent m a y consist of sums
immediately realizable or negotiable and in paper discounted for not longer t h a n six months, the latter not to
exceed 25 per cent of t h e whole a m o u n t of t h e deposits.
The guaranty fund mentioned in article 70 of this law
shall not be considered as p a r t of the cash reserve required
b y this article for the guaranty of deposits.
A R T . 76. The capital and interest of loans m a d e t o t h e
government of any of the States of the federation or t o a
municipal corporation for the purposes mentioned in
Clause V I I of article 73 must be suitably secured, either
by the mortgage of property not included in t h e exceptions mentioned in article 48 or b y an assignment of taxes
or b y securities issued on account of the works or improvements in question. I n all cases t h e contract m u s t be submitted for approval to t h e Department of Finance, which
shall decide whether the mortgage bonds issued as a loan
o This article in the law of 1897 read thus: " Mortgage banks may receive
deposits only when the total amount of deposits already held is less than
five times the paid-up capital of the institution, and they shall always hold
in specie or gold or silver bullion or in immediately realizable securities of
the kinds referred to in clauses I and I I of article 73, an amount equivalent
to two-thirds or more of the aggregate of such deposits."

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for the improvements in question are to enjoy the same
privileges as all the other bonds or are only to be guaranteed by the property or securities offered as a pledge for
the particular loan in question, instead of by the aggregate
of the property mortgaged to the bank.
ART. 77. Mortgage banks are forbidden to issue bank
notes or any other document payable to bearer on demand.
ART. 78. When the banks are compelled to foreclose
a mortgage, owing to nonpayment of principal or interest,
on the terms agreed upon, they are entitled, after summons
to pay has been served by a notary not less than five days
in advance, to have recourse to a competent tribunal, and,
on the mere presentation of the mortgage deed duly
registered, to be placed in provisional possession of the
mortgaged property; or they may obtain an order for the
appointment of a receiver. In the latter case the receiver
shall be appointed by the bank and shall not be required
to give bond.
ART. 79. The order placing the bank in provisional
possession or appointing a receiver shall be published in
the official journal; shall be entered in the books of the
public registry office; and shall have the same legal effects
as is given by the legislation of the federal district to
mortgage decrees. The powers and duties of the receiver
shall also be subject to the same legislation.
ART. 80. Within eight days from the date of the order
placing the bank in provisional possession or appointing
a receiver, the mortgagor shall be entitled to equity of
redemption or to the privilege of discharging all the
obligations of which the previous nonfulfillment gave rise

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t o t h e action against such mortgagor, b u t no proof of
such discharge shall be accepted except t h e receipt in
writing of t h e bank. After the lapse of t h e period of
eight days without such proof having been presented, t h e
judge shall give to t h e b a n k t h e necessary authorization
t o proceed to sell t h e property at auction.
A R T . 8 I . The auctions shall always be held in t h e
office of t h e bank, in presence of t h e government inspector
a n d with t h e assistance of a notary public. Such auctions
shall be advertised in the Official Gazette and in one of t h e
other papers of largest circulation in the place, a t such
interval, in advance of t h e sale, as m a y be provided b y
t h e statutes of t h e bank, b u t which shall in no case be
less t h a n nine days.
A R T . 82. At t h e sale any bid shall be admissible, which,
if paid cash down, shall suffice to cover two-thirds of t h e
valuation serving as t h e basis of the auction, provided
t h a t said bid suffices also to meet t h e sum owing to t h e
b a n k for principal, interest, and costs. The expert
valuation of t h e property, which served as a basis for t h e
loan shall also serve as t h e basis for t h e auction, saving
an agreement t o t h e contrary.
A R T . 83. If there be no bidders, t h e bank m a y t a k e over
t h e property a t two-thirds of its price; b u t if a bid is
made which is rejected on account of its not sufficing t o
meet t h e claim of t h e bank and t h e expenses, b u t which is
equivalent t o two-thirds t h e price of the property, then t h e
b a n k m a y take over t h e property; and when there are no
bidders, t h e b a n k m a y hold new auctions, after advertising t h e m as in t h e case of t h e first auction and making
8648—10

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in each case a reduction of 10 per cent on the valuation
adopted for the preceding auction. At any of the auctions
the bank has the right of taking over the property on the
terms above stated.
ART. 84. With a view to the execution of the deed of
sale following on an auction or on the taking over of the
property by the bank, the papers, accompanied by a
notarial attestation of the auction, shall be returned to
the judge who authorized the sale and said judge shall
deliver the documents to a notary designated by the purchaser or the bank, in order that such notary may draw
up the deeds of transfer. At the same time notification
shall be served on the mortgagor requiring him to sign
such deeds within a fixed term which shall in no case exceed
ten days, and if he fails to sign within the time allowed,
the judge shall sign for him.
ART. 85. All judicial expenses, the expenses of the
receivership, and all other expenses arising from the foreclosure, shall be borne by the mortgagor. If, at the time
of the auction he make no objection to the bill for expenses,
which shall be posted in a visible place and the amount of
which shall be stated in the notarial attestation, said bill
shall be regarded as approved and the mortgagor shall
forfeit all right to subsequent claim under this head. If
the mortgagor takes exception to the bill, such exception
shall be judicially decided and the bank must abide by
such decision, but the objection shall not be allowed to
delay the execution of the deed of sale.
ART. 86. Mortgage banks shall not be bound to give
bond in cases where a bond is exacted from other litigants
as a preliminary to litigation.

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ART. 87. No control of third parties or preferential
rights shall be recognized over property mortgaged to a
bank, unless, in support of such claims, deeds be forthcoming antedating the deeds executed in favor of the
bank. Nor shall mortgage banks be obliged to associate
themselves with other creditors for the purpose of enforcing their claims. Other creditors, whatever be their
claims, shall only be entitled to require the bank to pay
to them the surplus proceeds of property sold at auction
or taken over, after the sum owing to the bank has been
fully met.
CHAPTER

IV.—Of banks of promotion.

ART. 88. Banks of promotion (bancos refaccionarios)
are authorized to engage in the following operations:
I.a To make cash loans for a period not exceeding three
years on agricultural, mining, and industrial transactions,
for the payment of wages, for the purchase of seeds, raw
materials, implements, or machinery, or for expenses of
administration or conservation. The time of these loans
shall not be extended.
II. To give- their guaranty with a view to facilitating
the discount or negotiation of notes or other securities
running for not more than six months.
III. & To issue interest-bearing treasury bonds redeemable in periods which shall not be less than three months
nor more than three years.
o The language of this paragraph in the law of 1897 was: " T o make loans
in cash for a period not exceeding two years to mining, industrial, and agricultural undertakings."
b The maximum limit fixed by this clause in the law of 1897 was two
years.

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ART. 89.a The loan contracts referred to in Clause I of
the preceding article shall set forth the purpose of the loan
in the form of a notarial contract, which shall be inscribed
in the registry of mortgages according to the location of
the properties involved. The amount of such loans shall
not exceed 15 per cent of the value of the properties benefited, as fixed by appraisers named by the bank. Banks
of promotion which make the loans provided for in this
article shall take care that the sums advanced are employed for the objects set forth in the contract, under
penalty of losing, with respect to prior mortgage creditors,
the preferences given by article 91 of this law.
ART. 90. When the loan is made for mining purposes the
following conditions shall also be enforced:
I. It must be proved that the title deed of the mining
property is recorded in the name of the contracting party
and that all legal taxes have been paid.
II. Experts appointed by the bank must give their
opinion to the effect that in view of the ore in sight and the
other conditions of the property, the loan, with interest
thereon, can be paid within the time agreed upon.
III. In all cases the bank shall exercise a rigorous supervision at the mine to insure the employment of the loan
in the development of the property and to secure the proceeds of the work, out of which shall be paid the expenses
of the concern, with preference for the mining tax.
a This section of the law of 1897 simply declared that " t h e loans referred
to in section I of the foregoing article shall be effected by means of a notarial
contract, which shall be entered in the registry office of the locality where
the borrowing concern is situated." '

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A R T . 9 i . a In all cases t h e loan of t h e b a n k shall be considered as an expense incurred for t h e conservation and
management of t h e property for t h e purposes of article
1934, Clause I I , of t h e Civil Code of t h e Federal District,
which in t h e m a t t e r of promotion loans shall be applicable
throughout t h e Republic.
A R T . 92. The prior rights mentioned in t h e foregoing
article shall not be affected by t h e transfer of t h e property
on which money has been borrowed, to a third p a r t y ,
whatever m a y be t h e n a t u r e of the transfer or conveyance.
A R T . 9 3 . b In addition to t h e loans referred t o in t h e
preceding article, banks of promotion m a y make loans,
for a m a x i m u m of two years, to t h e owners of agricultural
or industrial enterprises, or to those conducting t h e same,
upon security of products, crops, raw material, live stock,
implements, machinery, or utensils. In this class of loans
it is not necessary t h a t t h e security be turned over to
t h e bank, b u t the same m a y remain in possession of t h e
debtor, who shall b e considered at all times a trustee,
without prejudice to t h e right which the b a n k m a y have
as fixed by s t a t u t e law to establish a special intervention
in t h e transaction referred to.
a The language of this article in the law of 1897 was: " I n all cases the
loan of the bank shall be considered as an expense incurred for the conservation and management of the property for the purposes of article 1002,
Clause I, letter B, of the Code of Commerce, and article 1934, Clause II, of
the Civil Code of the Federal District, which, in this instance, shall be applicable throughout the Republic."
& Articles 93 and 94 in their present form were enacted in 1908. I n the
law of 1897 articles 93 and 94 embodied substantially the same provisions,
but with somewhat less precision, that are now brought together in article
93, making the present article 94 a new provision.

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ART. 94. The loans referred to in articles 89 and 93
shall not exceed two-thirds of the amount of the paid-up
capital of the bank and its treasury bonds in circulation.
ART. 95. The loans on collateral referred to in article
93 shall be registered in the mortgage registry office
within whose jurisdiction the property is situated, and
from the date of such registry the loan, as far as the
goods pledged are concerned, shall have preference over
any other subsequent claim, even when secured by
mortgage.
ART. 95 bis. a In order to make effective this credit for
promotion in case of default in paying principal or interest within the term stipulated, the provisions of articles
78 to 86, relating to mortgage banks, shall be applicable
to banks of promotion.
ART. 96. The rules governing loans on collateral made
by banks of issue shall be applicable to loans made by
banks of promotion.
ART. 97. b The amount of treasury bonds in circulation
shall not exceed at any one time double the paid-up
capital stock. The principal and interest of said bonds
shall have, in respect to other creditors, the same preference in redemption as is established for bank notes by
article 25 of this law.
ART. 97 bis. c Banks of promotion are required to keep
in cash on hand at least 40 per cent of the sum of deposa

This article was first embodied in the law of 1908.
& In the law of 1897 this article was as follows: " T h e amount of treasurybonds issued by banks of promotion shall a t no time exceed the holdings
of the bank in cash and bullion and immediately realizable securities."
c This article first appeared in the law of 1908.

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its payable on demand or within not more t h a n three
days, with t h e option, however, of substituting for cash,
u p t o one-half of said 40 per cent, securities immediately
convertible. The remaining 60 per cent shall be guaranteed b y paper discounted for a period of not more t h a n
six months.
A R T . 98. Banks of promotion are prohibited to do the
following things:
I. To issue b a n k notes.
I I . a To give their treasury bonds in pledge or to cont r a c t any obligation in respect thereto.
I I I . To engage in any of the operations set forth in
paragraphs I, I I , I I I , IV, V, I X , X , and X I of article 29
of this law, except under t h e provisions of said paragraphs.
CHAPTER

V.—Enactments common to all banks.

A R T . 99. The establishment of branches and agencies
outside of t h e State, Federal District, or territory where
the bank has its headquarters shall be governed by t h e
bank's concession, with t h e limitation contained in article
38 of this law with respect to banks of issue.
A R T . 100. Institutions of credit are forbidden to acquire
real estate on any account, except such as is necessary
for office purposes and such as they are obliged t o t a k e
a
In the law of 1897 the provisions of paragraphs II and I I I were as
follows:
" I I . To make loans on real estate mortgages or to issue mortgage
bonds.
" I I I . To operate mines, metallurgical works, factories, or farms on their
own account or to enter into any kind of partnership with persons engaged
in those businesses."

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over in settlement of claims or by virtue of any of the
rights pertinent to the business transacted by them.
ART. IOI. In the exceptional cases mentioned in the
foregoing article a mortgage bank must sell real estate
which it has been obliged to take over within three years
from the date of the acquisition, and a bank of issue or
promotion within two years from the same date. If the
property has not been sold within the periods above stated,
the Department of Finance shall cause it to be sold at
auction.
ART. I 02. Institutions of credit are forbidden to purchase their own shares or to do business on the security
of such shares.
ART. 102 bis. a For the purposes of this law bonds or
obligations immediately realizable or negotiable or firstclass securities shall be understood to be:
I. Bonds or certificates of the Mexican Government and
others whose principal or interest the said Government
may guarantee.
II. Bonds of foreign countries or corporations that capitalize at 4 per cent or a less rate on the official exchanges
where they are quoted.
III. Bonds of the States or municipalities of the federation that capitalize at 6 per cent or at a less rate.
IV. Bank notes, mortgage bonds, treasury bonds, and
collateral bonds, provided that all these be issued by institutions with federal charters.
V. Stock or obligations issued by national (Mexican)
companies, provided that these securities are quoted on
« This article first appeared in the law of 1908.

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any of the markets of the country or of foreign countries,
and which, as to the first, have paid dividends, and as to
the second, have regularly paid interest, in both cases at
least for five years prior to acquisition by the bank.
ART. 103. The principal of securities issued by banks
shall become forfeited in favor of said banks when ten
years have elapsed from the date when payment was due,
except in the case mentioned in article 22. Interest on
said securities shall be forfeited when five years have
elapsed from its falling due; but if it has been capitalized
it shall be treated in the same manner as the principal.
ART. 103 bis. a The deposits received by the banks
without interest, referred to in this law, represent credits
against the banks proper and shall have preference over
any others except the credits enumerated in article 25 of
this law, outstanding notes of banks of issue, and treasury
bonds issued by banks of promotion, which shall enjoy
preference with respect to the said deposits.
ART. 104. The claims of the mass of creditors on the
assets of a bankrupt estate shall in no manner interfere
with the rights granted to banks by this law.
ART. 105. The objections of the debtors of a bank in case
of auctions shall only be taken into account when the bank
has been fully paid and shall be the subject of special proceedings, which shall not be allowed to stand in the way of
the auction or to affect its validity. In such cases the
bank shall be answerable for damages occasioned to the
debtor, when it shall be proved that there is ground for
damages according to law.
a This article first appeared in the law of 1908.

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ART. 106. Debts to the federation and to state or municipal governments shall enjoy preference in the order named
over debts owing to banks, whatever be the nature of the
latter, but only when the former arise from taxes accrued
within the three preceding years. Claims of the public
treasury having any other origin shall rank as provided
by law.
ART. 107. The consolidation of two or more banks shall
not take place without the consent of the Department of
Finance, whether the consolidation involves the continued
existence of one of the banks and the disappearance of the
others or the creation of an entirely new institution.
ART. 108. When a bank fails to comply with any of the
requirements of this law looking to the protection or advantage of the public, and when such failure is not of a
nature to warrant the forfeiture of the bank's concession
under the next article, the Department of Finance, after
hearing to the bank, may order it to suspend any or all of
its business until the requirements or conditions of the law
are complied with.
ART. 109. The concession of an institution of credit shall
be forfeited for any of the following reasons:
I.a For default in attestation, within the period provided in article 10, for the organization of the stock company in whose favor the charter should be assigned, when
such has been issued in behalf of private persons; for not
submitting the by-laws to the Department of Finance
one month after organizing the company; or on account
a This clause in the law of 1897 was as follows: " F o r failure to prove
within the term allowed by article 10 that a limited liability company has
been organized to take over the concession when such concession has been
granted to private individuals."

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of t h e b a n k not beginning operations for one m o n t h after
approval of t h e by-laws by t h e Department of Finance.
I I . For the reason stated in article 18.
I I I . For excess in the circulation of securities in violation of the provisions of articles 55, 61, 67, and 97.
IV. For consolidation with another banking company
without t h e previous consent of t h e D e p a r t m e n t of
Finance.
V. On account of t h e dissolution or liquidation of the
company operating the concession.
VI. Cases of b a n k r u p t c y legally declared.
V I I . I n case t h e majority of t h e shares of a b a n k come
into t h e hands of a foreign government.
The declaration of forfeiture shall be made in executive
form b y the Department of Finance after the b a n k has
been heard in its own defense. I n t h e case contemplated
b y Clause I I I the formalities set forth in article 18 shall
also be adhered to.
A R T . 110. The members of t h e board of administration
shall be held civilly responsible for every infringement
of t h e provisions of this law sanctioned b y them, and the
manager carrying out such infringements shall also be
held liable, unless he has acted under express orders from
the board of administration. The civil liability of t h e
board and manager shall not impair t h e criminal liability
they m a y incur in accordance with federal or local laws.
A R T . n i . a Members of t h e council of administration
a n d companies in which in general or silent partnership
a
Under the law of 1897 this article did not apply to partnerships of
which members of the council of administration might be members. The
last three paragraphs appear for the first time in the law of 1908.

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said members are interested shall not, during the first
year of the bank's establishment, engage in any transaction by virtue of which it shall result or may result that
the said members or companies become indebted to the
bank, and after the first year such business may be engaged in only when another firm of well-known solvency
is associated in the debt or responsibility or when an effective collateral guaranty for double the debt or responsibility
is given.
In every case it shall be necessary in any transaction in
which any of the persons referred to in the preceding paragraph become or may become indebted to the bank that
there be a unanimous agreement by the members of the
council present at the session in regard to accepting the
proposed firm or as to the value of the collateral offered,
provided always that the collateral be not among those
mentioned in article io2bis of this law.
Managers and officers shall not on any account transact
private business in the bank nor obligate thereto their
private firms; neither shall they become sureties in any
transaction.
Violation of these provisions shall, without prejudice to
the responsibility established in the prior article, incapacitate a member of the council from continuing as a member thereof and a manager or officer from exercising
functions as such.
ART. 112. No member of the board of administration
shall enter on the discharge of his duties without giving
bond, for which purpose he shall make a deposit in the
bank either in cash or in the shares of the institution for
an amount to be determined by its statutes.

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A R T . 113. The power of supervision of all institutions
of credit pertains to the Department of Finance, a n d shall
be exercised either through inspectors permanently appointed for each b a n k or through special inspectors
appointed for particular cases, to whom t h e Minister of
Finance shall give such instructions as he sees fit with a
view to t h e satisfactory discharge of their duties.
A R T . 114. I n addition to other obligations imposed on
t h e m b y this law and the instructions given to t h e m b y
t h e D e p a r t m e n t of Finance, the duties of t h e inspectors
are as follows:
I. To satisfy themselves of the total or partial subscription to, and p a y m e n t of, the capital of the bank.
I I . To t a k e p a r t in drawing up and to sign the monthly
cash statement and general balance sheet showing t h e
actual position of each bank.
I I I . To see t h a t the special balance sheets requested by
t h e D e p a r t m e n t of Finance are duly drawn up.
IV. To demand proof, whenever they see fit, of t h e cash
holdings of t h e b a n k and of the number and value of t h e
securities which it has issued.
V. To sanction by their signature t h e notes or securities
about to be issued by banks after they have been stamped
b y t h e Government and gone through t h e other official
requisites for validity.
V I . To see t h a t t h e notes or securities p u t in circulation
do not exceed t h e a m o u n t which each bank is entitled to
issue in accordance with t h e provisions and restrictions of
this law.
V I I . To be present at, and to certify to, t h e cancellation
of notes or securities and t h e destruction by fire or other-

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wise of such notes or securities, together with their
coupons, when there are such, and to sign the notarial
attestation along with the manager, cashier, or accountant
of the bank.
VIII. To keep a special account in a book of the number,
series, and value of the notes or securities put in circulation with their sanction and of such as are canceled and
destroyed.
IX. To attend auctions and drawings which the banks
may hold in their offices.
X. a To see to the strict fulfillment on the part of the bank
of the terms of the laws and mercantile code, and especially
the banking laws, and of the concession and the bank's
statutes, without interfering in its business, and to give
immediate notification to the Department of Finance of any
infringement they may observe, while at the same time
advising the board of administration of such infringement.
XI. To submit in the months of January and July of
each year a detailed report of all that they have done in the
discharge of their duties during the preceding half year,
with statistical data as to the volume of cash handled, the
circulation in notes or securities, and other particulars to
be determined by regulation.
ART. 115. Inspectors are strictly prohibited from doing
the following things:
I. 6 To accept and discharge duties, employments, or
commissions from the State in which the bank has its head
office, branches, or agencies.
o The language of this clause, a t it was amended by the law of May 13,
1905, amplifies somewhat the language of the original law of 1897.
&This clause first appears in the law of 1908. Clause I of the law of
1897, now superseded, forbade inspectors " to interfere in the management
of the affairs of the b a n k . "

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I I . To furnish t o anyone whatsoever any kind of information as to t h e bank's business, inasmuch as they are
limited to making written reports to the D e p a r t m e n t of
Finance as t o m a t t e r s coming within their sphere of action.
I I I . To hold shares in t h e bank of which they are inspectors.
IV. To apply for loans to t h e institution with which they
are connected or in any manner to become its debtors.
A R T . I I 6 . When inspectors fail to perform any of t h e
obligations to which they are subject under article 114, or
when they disobey any of t h e prohibitions of article 115,
they shall be liable to such executive penalties as m a y be
imposed on t h e m by t h e Minister of Finance, including t h e
loss of their positions, which penalty shall invariably be
applied in case of infringement of Clauses I I I or IV of the
foregoing article. Moreover, all executive penalties are
without prejudice to t h e civil or criminal liability incurred
by inspectors.
A R T . 117.° The monthly balance sheets which institutions of credit are required to publish monthly shall comprehend at least t h e following:
ASSETS.

I. Capital stock unpaid.
I I . Cash on hand, setting out the kinds of which composed.
I I I . Notes of other banks.
a This article was redrafted in the law of 1908 so as to extend the classifications under assets from eight to thirteen and under liabilities from five
to eleven. The principal changes involved requirements that the cash
and various forms of current accounts be more carefully classified. The
final clause first appeared in the law of 1908.

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IV. Bonds or obligations immediately realizable or
negotiable.
V. Discounted paper.
VI. Loans upon collateral.
VII. Mortgage transactions.
VIII. Credits on current accounts.
IX. Sundry debtors.
X. Value of real estate.
XI. Value of furniture, fixtures, etc.
XII. Impersonal debtor accounts.
XIII. Ordinary accounts.
LIABILITIES.

I.
II.
III.
IV.

Capital stock.
The obligatory reserve fund.
Other reserve or provisional funds.
Deposits at sight or not longer than three days,
segregating such as bear interest and such as
do not.
V. Time deposits, for longer than three days.
VI. Bank notes in circulation.
VII. Treasury bonds in circulation.
VIII. Mortgage bonds in circulation.
IX. Sundry creditors.
X. Impersonal creditor accounts.
XI. Ordinary accounts.
The treasury department may order that the items,
which by virtue of this article must appear in the balances,
be set out in detail.

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ART. n 8 . a The same powers shall belong to inspectors
which are granted by the statutes of the bank to auditors.
They shall revise the balances by proving the various
items and comparing them with the books. In general,
and always when they consider it necessary in order to
exercise proper vigilance, to verify the details of accounts
by the correspondence, minutes, and other papers of the
bank, they may apply in writing to the manager of the
bank to show them the necessary documents, and in case
they are refused they may apply to the Department of
Finance, setting forth what they desire to examine and
the object of the investigation, in order that the department, if it is deemed advisable, may require the bank, on
condition of applying the suspension, total or partial, set
forth in article 108 of the law on institutions of credit, to
show to the inspector the accounts, books, and documents
involved.
ART. 119. In case of liquidation or dissolution of a
banking corporation, the inspectors shall represent the
owners of the outstanding notes or securities, in enforcing
the rights of such owners, excepting always when the
latter decide to protect their own rights in person or
through an attorney.
a This article was amended by the law of May 13, 1905, the law of 1897
having provided: " I n the formation and revision of annual balance sheets
prepared by institutions of credit, the inspectors are to enjoy the same
powers as are granted by the law to the auditors of limited liability companies and they shall proceed together with the auditors to verify the
items of the balance by comparing each account with the books of the
bank, but they can not demand to be shown the accounts in detail, or
the correspondence, minutes, contracts or other papers of the bank, unless
they obtain in each case a special order from the Minister of Finance, or
unless the bank voluntarily agrees to show the papers in question.
8648—10

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ART. I 20. The Department of Finance shall publish
annually a report as to the condition of institutions of
credit operating in the Republic, and shall include in such
report the statistical information supplied by the
inspectors.
CHAPTER

VI.—Franchises and taxes.

ART. 121. The capital of institutions of credit, the
shares by which it is represented, the dividends which
they distribute to their shareholders, and the several
kinds of securities which they issue, shall be exempt from
all classes of federal, state, and municipal taxation, with
the exception of the predial tax on the buildings occupied
by them for office purposes and of the taxes comprised in
the stamp law, both of which shall be paid in accordance
with the enactments in force relating thereto and the
provisions of the following articles:
ART. 122. No stamp tax shall be payable on documents of which institutions of credit make use for their
internal management or on documents passing between
the head institution and its agencies or branches, provided
such documents do not create rights either in favor of the
bank or of third parties extraneous to the institution,
including its employees when in a personal capacity they
have dealings with the bank.
ART. 123. Stamp duties are not payable in the following
cases:
I. On contracts entered into by institutions of credit
with the Federal Government, with the governments of
States, and with municipal corporations.

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II. On summaries of accounts, advices of payment or
receipt, drafts, letters of exchange, promissory notes,
telegraphic or other forms of money transfer, when such
documents relate to business done with the Federal, State,
or municipal governments of Mexico.
ART. 124. Bank notes, mortgage bonds, certificates of
deposits, and treasury bonds put in circulation by institutions of credit, as well as checks uttered by them or
drawn against them, shall be stamped according to law,
but with the limitation that, whatever be the amount
mentioned in them, the stamp shall never exceed 5
centavos.
ART. 125. Notarial contracts for loans, sureties, pledges,
or mortgages, executed either in favor of or against
institutions of credit, shall be subject to a stamp duty of
2 per thousand, unless the stamp laws fix a lower rate. The
same contracts, when they are drawn up in a private form,
shall be subject to a stamp duty of 1 per thousand.
ART. 126. The States of the Federation shall not impose
any tax on banking business, properly so called, when
transacted by institutions of credit, except on mortgage loans, and even in this case the tax shall not exceed
one-quarter of 1 per cent on the amount of the transaction.
ART. 127. Saving an agreement to the contrary, the
fees of experts, notaries, and other persons whose remuneration is subject to schedule according to local legislation shall, when their services are engaged by institutions of credit, be reduced to two-thirds of the schedule
rates. In no case shall the enactment be observed which

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authorizes higher charges on the ground of one of the
contracting parties being a corporation.
ART. 128. The exemptions or reductions in taxation
mentioned in the foregoing articles shall continue for
twenty-five years from the date of this law; but with
respect to banks of issue they shall only be enjoyed
according to Clause VI, article 1 of the law of June 3,1896,
by the first bank established in each of the States or
Federal territories.
ART. 129. Concessions which are applied for with a
view to the creation of other banks of issue in any State
or Territory of the Republic where a bank already exists
can only be granted with the requirement that the new
banks shall be subject to all the taxes imposed by general
laws, as well as to a special tax to the Federation of 2 per
cent per annum on the paid-up capital, as provided by
said Clause VI, article 1, of the law of June 3, 1896.
This tax shall be collected at the end of each quarter in a
manner to be prescribed by regulations. 0
TRANSIENT ARTICLES.

The National Bank of Mexico, the Bank of
London and Mexico, and the International and Mortgage
Bank of Mexico, as well as the banks now operating in the
States of the Federation, which shall not make use of the
ARTICLE I .

I t was provided by article 5 of the law of May 13, 1905, t h a t no further
charters for banks of issue should be granted until after December 31,
1909, and that such banks incorporated after t h a t date should enjoy no
exemptions from taxation. These limitations were extended by the law
of June 19, 1908, to March 19, 1922, when the special exemptions granted
to existing banks will expire.—Instituciones de Cridito: Leyes y Circulares
Relativas, p. 31.

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right contained in the next article, shall continue to be
governed by their concessions and statutes, while subjecting themselves, in all points in which it is not at
varience with said concessions and statutes, to this law,
as well as to all future enactments of a general character
in regard to banks.
ART. 2. For the purposes of the closing provision of
Art. 128 of this law, those banks already existing in any
of the States of the Federation shall be considered as first
banks of issue, whatever be their number, provided that,
within four months from this date they shall signify in
writing to the Department of Finance their readiness to
adjust their concessions to the provisions of this law. In
consequence, for the prescribed term of four months no
concessions shall be granted for the foundation, in States in
which banks of issue are already in operation, for new
banks of the same kind and with the franchises to which
first banks are entitled, unless the existing banks shall
declare to the Department of Finance their unwillingness
to adjust their concessions to the provisions of this law.

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APPENDIX

REPORT OF THE EXCHANGE AND CURRENCY
COMMISSION,
MAY 1, 1905, T O JUNE 30, 1909.

The vice-president of the exchange and currency commission, Lie. Pablo Macedo, submitted, under date of September 25,1909, to the minister of finance a report detailing
the operations of the commission from May 1, 1905, to
June 30, 1909.
The report was accompanied by the following note:
"We have the honor of submitting to you, begging you
in turn to lay it before the President of the Republic, the
first report of the exchange and currency commission, covering the operations effected and the work done from May
1, 1905, to June 30, 1909, said report having been approved
by the commission at a session held to-day.
"We avail ourselves of this occasion to reiterate to you
the assurances of our respect and consideration.
" (Signed)
PABLO MACEDO,
" Vice-President.
" (Signed)
L. UHINK,
" Chief of the Office.
"MEXICO, September 25, igog.
"To

the

MINISTER OF FINANCE AND P U B U C

"Lie. Jos6 Y

CREDIT.

LIMANTOUR,

"Present."
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The text of Mr. Macedo's report was as follows:
The exchange and currency commission was created by
decree of April 3, 1905, issued in compliance with the
provisions of article 32 of the law of March 25 of the same
year, which established the new monetary regime of the
Republic, and it entered upon the exercise of its functions on the 8th day of April, 1905, devoting itself forthwith to the organization and regulation of its offices and
work, a task which occupied the remainder of the month.
In consequence, the actual operations of the commission,
including its accounts, date from May 1, 1905.
Since then, when presenting to the general treasury of
the federation a statement of its accounts and a resume
of its operations at the close of each fiscal year, as with
all punctuality it has done, the commission ought also to
have submitted to the finance department a detailed report of its labors during each of those years; but a variety
of circumstances, among which must be mentioned in
particular the attention which the undersigned vice-president of the commission has been obliged to give to important public business, on which he has twice had to absent
himself from the Republic, have prevented the preparation of the annual reports, so that the present report
embraces the entire period that elapsed between May 1,
1905, and June 30, 1909, or a little more than four years.
Those four years have afforded occasions for the stability of the new monetary regime to be put to the most
searching tests, by causes completely the opposite of one
another in their nature—first, the appreciation of silver
and then its decline accompanied by the effects of the

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severe economic crisis which the whole world has suffered
since the beginning of 1908 and which has not yet altogether come to an end,—effects which could not but be felt
in the Mexican Republic, not only in the restriction of
transactions of every kind, mercantile, mining, industrial,
and even agricultural, but in the complete paralysis of
many enterprises and in the necessity entailed on our
country of repaying to foreign markets considerable sums
of money which under normal circumstances would have
been retained here, and even have been added to, in the
form either of loans or permanent investments. Thus
the history of the operations of the exchange and currency
commission during the period under review will be particularly interesting and instructive; and, related, as it will
be, with scrupulous veracity, without glossing over or withholding anything, it will serve to strengthen, let us hope,
the confidence already felt both at home and abroad in the
stability of our currency reform.
I.
METHOD WHICH W I U , BE FOLLOWED I N THIS REPORT

Slight interest attaches to the operations of the commission during the months of May and June, 1905, considered
by themselves, for though the commission was not idle for
a single day during those two months, its work at that time
chiefly consisted in adopting measures and making arrangements of a preparatory character of which the results
were perceptible later on; and for that reason the figures
and returns for those two months will be included in this

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report and in the accompanying tables and statements,
with the figures and returns for the fiscal year following,
so that the period embraced is from May i, 1905, to June
30, 1906.

For the rest, the operations of the commission may be
classified under four main heads: First, what has been
done to demonetize the old coins; secondly, the mintage
and distribution of the new coins; thirdly, the sale or other
disposal of the bulk of the country's stock of silver pesos;
fourthly, what has been done to influence the exchange
market in the direction of maintaining the rate of exchange on gold-standard countries at the parity established by our monetary laws, a parity based, as is known,
on the quantity of pure gold which each foreign coin contains.
Naturally all these operations are intimately bound up
with one another, and, strictly speaking, constitute a
single subject-matter which is almost indivisible; but
the exigencies of method necessary for clearness indicate
the above division, and it will be followed in the present
report, which will conclude with certain considerations
and suggestions of a practical character and the exposition of some facts relating to the internal order or economy of the commission and its offices. In some passages,
too, allusion will be made to the enactment of laws and
the adoption of measures which, though not constituting,
properly speaking, acts of the exchange and currency
commission, are intimately connected with those acts and
with the subjects being discussed, so that it is absolutely
necessary to refer to the laws and measures in question.

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II.
DEMONETIZATION OF OLD COINS.

Under our former currency laws the subsidiary silver
coins were unlimited legal tender; and probably to t h a t
circumstance, combined with the equally vicious and
mischievous system of the free coinage of silver, which
made the Mexican peso our staple export, was due t h e
fact t h a t the subsidiary coins preferably sought our sea
ports, whence they could not be shipped abroad owing
to t h e considerable loss from wear which such coins
undergo and could not be returned to t h e interior of t h e
country because nobody would pay t h e freight. On
the other hand, the inconvenience of handling large
quantities of subsidiary coins had led to their agglomeration in the banks of the Republic, which computed t h e m
as p a r t of their obligatory cash holdings; so t h a t whereas
at t h e sea ports and in other places small change had
accumulated to an undue extent, most of t h e mercantile,
industrial, and agricultural centers of the Republic had
to complain of a scarcity of the cash tokens necessary
for minor transactions, which are the most frequent and
numerous.
On the other hand, though the law of March 25, 1905,
did not demonetize t h e old coins, it did introduce changes
in the style, size, denominations, fineness, and even t h e
constituent metal of the various subsidiary coins, so t h a t
the commission addressed itself, first, to the retirement of
the old coins, endeavoring to remedy the uneven internal
distribution to which allusion has been made, and, above

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all, obviating all occasion for alarm or inconvenience to
t h e public, for it was remembered t h a t here, as everywhere else, the masses are the chief users of t h e subsidiary
coinage, and inasmuch as they are unable to grasp certain
economic phenomena, they do not lend themselves readily
t o help or cooperate in innovations, even though these do
t h e m no immediate h a r m and will in the long run be
advantageous to them.
I n order to attain the desired object the commission,
n o t being able to acquire bar silver for mintage into new
coins, as this is prohibited by t h e law of March 25, 1905,
decided t o melt down a portion of t h e 10,000,000 pesos
placed at its disposal as a fund for t h e regulation of t h e
currency, and to m a k e arrangements with t h e banks,
especially with the National Bank of Mexico, for t h e m to
t u r n in at this capital, on their own behalf or on behalf
of t h e Government, as t h e case might be, such quantities
of the old subsidiary coins as they already held or might
subsequently accumulate. Moreover, the commission
established a t t h e capital, with t h e aid of certain public
offices, a money-exchange service, and in this way between May 1, 1905, and J u n e 30, 1909, $6,518,330 in silver
pesos and $11,732,511.01 in old subsidiary silver coins,
making a total of $18,250,841.01, have been consigned t o
t h e melting pot. (See Annex No. 1.)
A t the same time efforts were made to retire from circulation t h e old copper centavos; and though this has
been rather difficult and costly, owing to t h e great n u m ber of coins which it has been necessary to transport and
handle and owing to the low price a t which copper has

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been quoted, it has been possible to retire the not inconsiderable sum of $332,668.07, of which $74,940.35 has been
melted down and $257,727.72 awaits similar treatment.
The losses in this connection, without including freight
charges, a m o u n t to $32,148.70, or nearly 43 per cent of
the coinage value of the copper centavos demonetized.
(See Annex No. 2.)
As the result of these various operations, together with
t h e mintage of new coins, which forms the subject-matter
of the following chapter, it is beginning to be observed
t h a t few of the old subsidiary coins remain in circulation,
except in certain sections of the more populous States,
and to deal with these cases the commission has recently
adopted special measures from which good results are
expected. And this has been accomplished without occasioning the least inconvenience, without giving rise to
complaints or abuses of any kind, and in strict accordance
with the provisions of the law of March 25, 1905, which
limit t h e powers of the commission in this particular so
as t o obviate a glut of subsidiary coins which would necessarily result in their depreciation, with its inevitable
train of serious evils and perturbations. In this context,
it seems worthy of special mention t h a t nickel coinage in
5-cent pieces is now in circulation to the value of $904,308
and t h a t t h e demand for these coins is incessant, so t h a t
it will soon be necessary to coin larger quantities. These
facts are very significant, taking into consideration the
troubles and even the popular uprisings which occurred
in this capital in the year 1883 owing to the introduction
of nickel coins. The difference is t h a t , whereas in 1883

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the coins were unloaded in a hurry, almost in a heap, it
may be said, in settlement of liabilities of the federal exchequer and were made unlimited legal tender, the present nickel coins are only legal tender to the amount of i
peso in each payment, and they have been issued in proportion to the public demand and in every case for an
equivalent in other coins.
In regard to the old gold coins, article 10 of the law of
March 25, 1905, fixed July 1, 1906, as the date on which
they were to cease to be legal tender, and therefore the
commission established a service for the exchange of those
coins at the rates and for the values specified in article 2,
transient, of the law in question. Through the instrumentality of this service, gold coins to the value of $737,674.85
were retired from circulation. (See Annex No. 3.)
Before leaving the subject-matter of the present chapter, it is necessary to mention the anomalous and very
singular conditions in which some districts of the State
of Chiapas have been placed for years past, it may be said
from time immemorial, in the matter of monetary circulation, conditions which, though modified to a great extent by the measures and efforts of the commission about
to be mentioned, can not be said to have disappeared and
can not be expected to disappear altogether, unless the
steps suggested in the closing portion of this report, or
other steps which the National Government considers
better or more expedient, be adopted.
Reference is here intended to the circulation, in the
districts of the State of Chiapas that border on the Republic of Guatemala, of the coins known by the name of

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" c a c h u c a , " which include all silver coins, large and small,
from t h e mints of the Central and South American republics. Whether it be due to the frequency of commercial relations between the population along our southern
border and t h e Republic of Guatemala, where, it is said,
there is an a b u n d a n t circulation of coins belonging to t h e
other Central and South American republics, or t o t h e
lack of communication and intercourse with the rest of
t h e Republic and even with t h e other districts of t h e State
of Chiapas, or to both causes combined, as well, perhaps,
as to local circumstances of which t h e commission is unaware, the fact remains t h a t the currency of t h a t frontier
region has consisted of t h e " c a c h u c a " coins, so much so
t h a t not so long ago t h e peso and other Mexican coins were
almost unknown to a large portion of the common people
of t h a t section. For this reason, and owing to t h e exigencies of t h e case, t h e local authorities came to sanction
arrangements whereby the " c a c h u c a " coins were received
in the public offices of certain districts of the State at a
given discount with respect to t h e native coins; and this
practice, while, as could not help being the case, it caused
the use of the " c a c h u c a " coins to strike deeper root, also
gave rise to private speculations almost always advantageous to the parties engaging in them, who thus became
interested in t h e maintenance of this abnormal state of
things, which the federal authorities have not yet been
able to do away with, in spite of repeated orders and rulings made b y t h e m of late to the effect t h a t no federal
office shall on any account receive any sum whatever in
the foreign money in question.

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The commission, having been informed of these circumstances, and availing itself of the favorable conjuncture offered by a rise in the gold price of silver,
resolved to bring about a change in so far as lay in its
power, and in the first place forwarded considerable quantities of subsidiary silver coins to the branches of the
National Bank at Tuxtla, Gutierrez, and Tapachula, and
also endeavored to encourage similar remittances by private parties to their correspondents. At the same time
purchases were made of the "cachuca" coins in circulation at their bullion value, and subject to the usual discounts, for purposes of recoinage into Mexican money, and
by this means the commission retired $333,571 in silver
pesos and $533,452.05 in subsidiary silver coins, face value,
or a total of $867,023.05, face value, at an actual cost of
$736,257.74. Reminted, this silver produced $754,294.89,
thus yielding a net profit of $18,037.15. (See Annex No. 4.)
The effect of these measures, according to information
received by the commission, has been favorable, inasmuch
as a material change has been brought about in monetary
conditions prevailing in the border districts of the State
of Chiapas; but unfortunately the evil has not been
altogether extirpated and the commission has suspended
the purchases of the coins in question, fearing that, owing
to the fluctuations in the gold price of silver, those purr
chases may not be attended with practical results, by
reason of the refusal of the holders of "cachuca" to part
with it below its traditional current value, or that, far
from exhausting the stock thereof, they may even stimulate the importation of more coins of the kind alluded t o ;

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for, according to the custom-house tariff, all foreign coins
enter our territory duty free.
Toward the conclusion of this report, as has already
been stated, reference will again be made to this subject.
For the moment, it is proper here to declare that certain
measures are being matured which come within the powers
of the commission and which it is hoped will at least contribute in no small degree to put an end to an anomalous
and mischievous monetary situation, though by themselves
alone they will assuredly not suffice to remedy it altogether.

lIL
MINTAGE OF N E W COINS—EXPORTATION OF SILVER P E S O S —
PURCHASE OF GOLD B U U J O N .

Toward the close of the year 1905 an event took place
which nobody had looked for and which facilitated and
expedited in an extraordinary degree the practical consummation of our monetary reform. The white metal,
which in November, 1902, had reached its lowest point,
being quoted at 2ixid. the standard ounce in the I/ondon
market, had been gradually though slowly rising; when
the monetary reform was decreed, in March, 1905, it was
worth between 25xfd. and 27xid. per ounce, and in the
following October the minimum price was 28^-d. and the
maximum 28ffd. The commission at once bethought
itself of taking advantage of so favorable an opportunity
for demonetizing the Mexican peso by selling its silver
content for gold, which was feasible even if at a slight
loss, seeing that parity between the silver content of
8648—10

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C ommis s ton

our peso and 75 centigrams of pure gold, which is the
theoretical unit of our monetary system, is attained when
the standard ounce of silver is worth 28-ffd. in gold.
In order to succeed in this object it was necessary to
act with great dispatch, for it was impossible to foresee
how long the higher prices of silver would last, and at the
same time with much caution; for, as is known, the silver
market is extremely sensitive, and any excess, however
small, of the supply over the immediate demand suffices
to cause a heavy break in the prices. Without haste,
therefore, but with a thoroughly consistent purpose, and
following with close and anxious interest the fluctuations
of the market, the commission began to sell for gold the
stock of silver pesos which it held in the fund for the regulation of the currency; and when it had disposed of that
stock at remunerative prices, which was soon, it began to
make arrangements with the banks that they should dispose of their holdings in silver pesos and should be enabled
to sell them on the London market without loss, notwithstanding the great diversity of their location, which, as
can readily be understood, entailed a considerable difference in the expenses and conditions of each transaction;
for it is not the same thing to sell a commodity when it is
on the Pacific coast and needs months to arrive in London as it is to sell that same commodity when it is on
the Gulf coast or near our northern border and can be
delivered within a few days after the adjustment of the
sale by wire.
It was the invariable policy of the commission, in the
numerous transactions of this nature in which it inter-

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vened, to allow the banks which agreed to part with their
silver pesos for exportation to retain all or nearly all the
margin of profit obtained; for it considered that in doing
so it was not only acting justly, but was also living up
to the object of its existence, which is not to earn
profits but to contribute to placing and maintaining the
currency of the Republic on a sound and solid basis.
The commission also had another object in view in observing the policy alluded to, viz, by making its services
practically free of charge, to eliminate any interest which
the banks and private parties might have in engaging
directly in the exportation of silver pesos, and thus to prevent any unsettlement of the market, such as would undoubtedly have occurred if Mexico's offers of pesos for sale
had been multiplied unsystematically instead of being made
through a single channel having facilities for close observation of passing conditions, for prompt and efficient action and for an economy in the matter of expenses such as
is possible to few private exporters.
Thus the commission succeeded in exporting from November 17, 1905, to September 24, 1907, the substantial
sum of $60,727,500 in silver pesos, of which only $2,710,000
remained unsold, owing to a sudden and rapid decline in
prices, said unsold balance having been reimported into
the Republic in February, 1908. (See Annex No. 5.)
Notwithstanding all the efforts of the commission, as
already mentioned, to retain control over the exportation
of silver pesos, it constantly feared that a moment might
arrive when it would lose that control, for it was unquestioned that, if the appreciation of silver continued, the

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love of gain and the speculative spirit would lead many
private persons to engage in such transactions on their
own account; and the danger in such case would not have
been confined to the perturbations occasioned in the purchasing markets but would also have consisted in the fact
that, by reason of the rapid withdrawal from the country
of large amounts of silver pesos, a disastrous contraction
of the currency might first occur, succeeded by a permanent curtailment of the monetary circulation, seeing that
private individuals might easily fail, having no direct interest in the matter, to restore in gold what they had withdrawn from that circulation in silver, a point which the
commission had not overlooked, as will be shown later on.
Fortunately, this evil did not assume serious proportions, as shown by the daily telegraphic reports from the
maritime and frontier custom-houses, until toward the
close of 1906, when the commission had already exported
and converted into gold $45,108,500, and it then became
necessary to obviate the danger, as much as possible, in so
far as the permanent curtailment of the circulation was
concerned, which was done by means of the law of November 19, 1906, which the federal chambers passed with
commendable dispatch. That law respected, as was
proper, the unquestionable right of the owners of silver
pesos to export them if they found it expedient or profitable to do so; but it imposed an export duty of 10 per
cent ad valorem on silver pesos sent abroad, a duty which
was to be remitted if, within thirty days, the exporters
should deliver to the exchange and currency commission,
for free coinage, gold bullion or foreign gold coin to an

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amount equivalent at legal parity to the value of the silver pesos exported. This law, which respected alike the
rights of the private citizen and the rights of the community, was well received by public opinion and has been
carried out to the letter without encountering opposition,
so that under its provisions the exportations that have
been made of silver pesos have been the means of the
commission receiving for coinage gold bullion and foreign
gold coin to the value of $8,264,447.65. (See Annex
No. 6.)
Thus the exportations of silver pesos amounted to
$68,991,947, as follows:
Exported by the commission
Exported by private persons

$60, 727, 500
8, 264, 447

Total

68, 991, 947

This figure is less by $15,856,073 than the actual exportation of Mexican silver pesos as shown by fiscal statistics,
as appears from the following table:
Exportation of pesos according to fiscal statistics.
Exportation of Mexican silver pesos during the fiscal year
1905-6
$49, 671, 025
Exportation of Mexican silver pesos during the fiscal year
1906-7
24, 521, 921
Exportation of Mexican silver pesos during the fiscal year
1907-8
10,655,074
Total
Exportation of Mexican silver pesos by the commission and
b y private parties under the law of November 19, 1906
Difference

84,848,020
68, 991, 947
15, 856, 073

This sum, it may be presumed with high probability,
represents the exportations of pesos effected by private
parties before the law of November 19, 1906, went into
effect.

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It is now time to take up the proper subject-matter of
this chapter, viz, the coinage of the new currency, for if
hitherto it has been sought merely to throw light on the
exportation of silver pesos, it is because that exportation
was the means of which the country availed itself in order
to secure the gold which it needed for the mintage of its
new money and to get, de facto, on the gold basis.
Many very weighty problems had to be solved in coining the new currency, owing to the celerity with which it
was necessary to act, not only in order to replace the
silver pesos exported but also in order to remedy the contraction which it was to be feared would occur, and which
did, in effect, occur in the circulating medium, as soon as
the bullion value of the peso came to exceed the coinage
value assigned to it under the new monetary regime.
Everyone, in fact, both banks and private parties, throughout the Republic, began to accumulate silver pesos, some
for immediate profit and others influenced simply by their
knowledge that the coins in question were at a premium,
even though it was inconsiderable and though they had
no idea how or when to realize on it. What happens in
the case of social phenomena of this nature is well known.
The mere fact of many persons seeking to get hold of a
certain thing suffices to make those who possess it reluctant to part with it; and if the thing in question is money,
which everyone handles, the phenomenon spreads rapidly
and the contraction grows until it eventuates in absolute
depletion, everyone considering himself fortunate in the
possession of what everyone else wants to take away from
him, and on that account alone, without stopping to listen

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to any other arguments or considerations. This is what
happened in the case of our silver pesos. A time came
(August, 1907) when the visible stock of pesos in the
banks and other institutions of credit throughout the
Republic barely amounted to $8,084,133; but when silver
began to decline and the demand for exportation ceased
that stock gradually increased until on June 30, 1909, it
amounted, with the quantity on hand in the general
treasury of the federation, to $30,099,472, and deducting
$10,105,000 newly coined, as will be shown later on, .it
appears beyond all question that there remained a visible
stock of $19,994,472, coined prior to the monetary reform,
a sum which exceeded by $11,910,339 the visible stock in
August, 1907, which, as stated, was only $8,084,133.
In order to prevent a contraction of the currency it was
urgently necessary, as has been said, to make haste in
striking the new coins; and to this end the commission
considered that the most expeditious method was to secure
gold coins in the United States, seeing that they are of the
same fineness as ours and are very carefully minted, so
that only a slight loss is sustained in the process of recoinage. But it was not enough to coin gold, which, according to law, is only turned out in pieces of 10 and 5 pesos;
it was necessary also to supply silver coins, chiefly 50-cent
pieces, in order to take the place of the peso, which day by
day was becoming scarcer, for the minor transactions of
commerce, and also to distribute the new coins all over the
national territory. On the other hand, the exportation of
pesos could not be suspended, for it was impossible to forsee how long the appreciation of silver would continue.

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Then it was that two classes of measures were adopted in
order to meet the twofold exigency of the situation. The
only other expedient would have been to legalize the circulation of foreign coins, a measure that would have been
attended with many drawbacks and would have exposed
us to the risk of having almost to renounce the hope of
having a circulation of our own, or at least to the risk of
having a hybrid and very unsettled circulation for a considerable time, for everyone knows how difficult it is to
eliminate from use a coin which once becomes current.
On the one hand, the decree of December 22, 1905,
authorized the commission to issue in favor of the banks
gold deposit certificates which might be computed as part
of their cash reserves and of which the equivalent in gold
bullion or native or foreign gold coin was to be held constantly by the commission in order to redeem the certificates on presentation at any moment. This requirement
seemed necessary in order to prevent anyone thinking that
the commission and, back of the commission, the National
Government, were having recourse to a fiduciary token to
take the place of a metallic currency.
In the second place, at the same time that the Mexico
mint was set to work at its full capacity with improved
machinery, orders were placed for the mintage at Birmingham, England, subject to the vigilance and supervision
of Mexican officials, of the nickel 5-cent pieces and the
bronze 1 and 2 cent pieces, and the courteous permission
of the Government of the United States was obtained that
the mints of that Government at Philadelphia, San Francisco, New Orleans, and Denver should coin at cost,

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without charging any profit, and subject also to the supervision of Mexican officials, gold pieces of 5 and 10 pesos
and silver 50 and 20 cent pieces. In this way, in the
space of twenty-six months (from May 1, 1905, to June
30, 1907), the new coins which were either in actual circulation or were held by the commission ready to be
placed in circulation amounted to $95,561,570.70, as
follows:
In
In
In
In

gold, $10 and
silver, 50, 20,
nickel, 5-cent
bronze, i and

$5 pieces
and 10 cent pieces
pieces
2 cent pieces

$65, 026, 500. 00
28, 796, 923. 80
801, 728. 00
936, 418. 90

Total

95>56i,570-70

If we consider the number of pieces which the coinage
of the above sum represents, and bear in mind also the
necessity of acquiring and remitting to the mints the precious metals from which the coins were struck, as well as
the intricacy and multiplicity of the operations incidental
to the distribution of the coins over the whole of the
national territory, we can form an idea of the foresight,
care, and industry which the work involved, especially as
it almost always synchronized with the manifold and complicated labors connected with the acquisition and exportation of pesos.
In the two subsequent fiscal years (July 1, 1907, to
June 30, 1909) the work of coinage continued, though on
a lesser scale, as follows:
In
In
In
In

gold, $10 and $5 pieces
silver, $1 pieces
silver, 50, 20, and 10 cent pieces
nickel, 5-cent pieces

$18, 360, 000. 00
10, 105, 000. 00
3, 826, 619. 50
102, 580. 00
32,394, 199.50
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In consequence, the total quantity of money coined and
in circulation, seeing that there has been no appreciable
exportation, from the time when the new monetary
regime was implanted until June 30, 1909, is $127,955,770.20, a sum which, it may be mentioned, is considerably
in excess of the amount which, as the result of the estimates and investigations of the monetary commission
appointed by the ministry of finance in 1903 to study our
currency problem, was assigned even on the most liberal
calculations as the volume of cash then in circulation, viz,
$120,000,000, especially bearing in mind that no pesos
have been imported, at any rate on a considerable scale;
and if to the amount of new coins struck be added the
sum of $19,994,472 in old silver pesos, which, as has been
said, formed part of the cash holdings of the banks and
the general treasury of the federation on June 30, 1909,
we get a total volume of $147,950,242.20 as the stock of
metallic money at present in circulation. (See Annex
No. 7.)
Before concluding this chapter it seems indispensable
to make special reference to two facts, one of which has
been already referred to, though incidentally, and it is
the coinage of $1 silver pieces.
The commission hesitated much as to whether, after
demonetizing successfully such considerable sums of the
old traditional peso, totaling nearly $85,000,000, it was
desirable again to mint the same coin.
The principal
and most obvious argument against such action was that
it would be a step backward in the realization of the ideal
of all countries which are on the gold basis, viz, to use no

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other money than gold as unlimited legal tender, and it
can not be denied that this argument was a weighty one.
Per contra, various facts and circumstances worthy of
consideration militated on the opposite side.
In the first place, it was quite certain that a considerable
number of silver pesos, how many was not known, still
remained in the Republic. The banks, first of all, though
they had parted with a considerable number of their
pesos, never disposed of their entire stock, the lowest
figure shown by their balance sheets being $8,084,133 on
August 31, 1907, as already stated. Again, it was undoubted that private parties were hoarding considerable
quantities of pesos, which, sooner or later, were bound to
come to light. Facts have fully corroborated the accuracy of this view, as has been shown, and thus the argument that to coin silver pesos would be to run counter to
the gold standard, with circulation consisting exclusively
of gold, lost much of its force, for since a goodly stock of
silver pesos still remained outstanding no great harm
would be done by adding to that stock, provided that
the addition were not very large.
But there was still another reason which seemed decisive. Unless the new monetary regime were to be radically modified by the open demonetization of the peso,
through the purchase thereof in gold at the legal value—
and this could not have been done without manifest
imprudence, for, at the time when the problem presented
itself, coinciding with a decline in the price of silver, the
economic crisis, marked by alarming symptoms, was
already in sight—it was necessary to comply with the

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provisions of the law as they now stand, according to
which, and inasmuch as the coinage of gold is not yet free,
anyone holding that metal is entitled to present it to the
commission in refined bars or in the form of foreign specie
and to receive in exchange new silver coins at the rate of
75 centigrams of pure gold per peso. (Art. n of Law of
March 25, 1905.) Now the case was every day coming up
before the commission, owing to the fact that native producers of refined gold, as will be explained fully later on,
find it convenient, in order to save expenses, to deliver
their gold to said commission in considerable amounts instead of exporting it. Thus it became necessary to deliver
to them silver coins in exchange for the gold; and as the
country already had subsidiary silver coins to the value of
more than $31,000,000, as has been already explained, it
did not seem advisable, at any rate just then, to add to the
supply of such coins, under penalty of producing a plethora thereof. And as, on the other hand, it was not expedient to coin more gold, owing to the necessity of having
a stock of domestic gold bullion available, in order to
influence the exchange market, which was beginning to
show symptoms of an alarming scarcity of drafts on foreign
parts, there was no alternative but to coin silver pesos;
and this was the course finally adopted. There was
another advantage in such a course, though a subsidiary
one and not of great importance. The decline in the price
of silver was getting worse and worse, and it was desirable
to use as much as possible of the domestic output at home,
without allowing it to reach foreign markets, subject always to the limitations wisely laid down by the law of

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1905. And thus it came about that in February, 1908,
the commission began to buy refined domestic silver in
bars, suspending those purchases in April, 1909, after
acquiring a little more than 185,564 kilograms at a cost
of $6,509,033.11. From the bars thus bought silver
pesos were coined to the value of $7,593,036.51; and
pesos to the value of $2,511,963.49, making a total of
$10,105,000, thus coined from the old subsidiary silver
money withdrawn from circulation. (See Annex No. 8.)
The ether point that must be referred to before closing
the present chapter is that which relates to the purchase
of domestic gold bullion.
One of the most urgent necessities incidental to the
new monetary regime was the acquisition of gold for
coinage purposes, for it had been foreseen, and facts later
on showed, that the gold obtained from melting down the
old Mexican and colonial gold coins would be of no great
amount. On the other hand, to acquire gold abroad by
selling silver pesos belonging to the fund for the regulation
of the currency, when the price of the latter metal was
rather far from the legal parity, would have been a very
costly operation. No other course, then, was open than to
endeavor to retain in the country the gold mined therein,
and for that purpose it was indispensable to encourage
the refinement of gold at home and to derive the fullest
possible benefits from the stability of exchange rates,
which, following on the official announcement of the establishment of the new regime, settled very near to the
legal parity, owing to the great confidence felt at once in
the soundness of the regime in question. In this manner,

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the domestic producers of refined gold, who, according to
the law of March 25, 1905, were to be entitled and
actually became entitled to receive silver money in exchange for gold, at the rate of 75 centigrams of pure gold
per peso, found that, in availing themselves of this privilege, they saved freight charges, commissions, and other
expenses incidental to the exportation of their bars and
therefore had an inducement to offer them voluntarily to
the exchange and currency commission.
To this end, as well as with the laudable object, among
others, of affording reasonable and proper protection to
a native industry, was directed the decree of June 19,
1905, which reduced t o i ^ per cent the former stamp tax
of 2% per cent on the value of silver or gold bars when
refined to 0.999 o r over, a decree enacted by virtue of
the powers with which the Executive was clothed by the
law of taxation on and franchises to the mining industry, promulgated at the same time as the law which
established the new monetary regime.
The measure was a wise one and proved efficacious, for
very soon gold began to flow into the offices of the commission; and as before long a rise in the price of silver took
place, enabling silver pesos to be exported at a profit,
the problem of how to acquire bullion for the coinage of
gold was soon solved. Even if that rise had not taken
place, the problem would also have been solved but more
gradually; for, as the rates of foreign exchange have been
stabilized, we can when we choose retain the gold which
we produce and refine. A document which is appended as
Annex No. 9 shows that the commission has acquired

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pure gold to the value of $52,096,882.38 of which the
whole might have been coined, and if it has not, it is due
to reasons which will be set forth in the following chapter.
IV.
MEASURES

ADOPTED

INFLUENCE

THE

FOREIGN

EX-

CHANGE MARKET.

In the latter part of the year 1907 some foreign markets,
especially those of the United States of America, began
to show alarming symptoms of perturbation, which
rapidly grew worse until eventuating in a positive business
crisis, involving all the branches of commerce and industry and producing most serious effects on the money
market, for it occasioned not only a scarcity, but the complete disappearance of specie and other forms of currency,
so that for the settlement of banking debts it was necessary to have recourse to the system of clearing-house certificates, which, as is known, constitute a sort of paper
money of purely private origin and which owe their existence and circulation to an agreement freely entered into
between individuals by virtue of a collective guaranty.
The intensity and suddenness of the crisis, caused in
the last analysis by an irrational and unprecedented
appreciation of all values, involved other markets and
important centers in Europe which made strenuous
efforts to retain their gold and other specie; so that not
only was there everywhere a formidable calling in of
debts, but all credit was completely withdrawn in all the
important centers of the world simultaneously.

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So profound a crisis could not but affect us, and affect
us it did, not only stopping the influx of foreign capital,
which still enters so largely into our economic life, but
closing almost wholly the doors of credit on us and obliging us to settle in haste our debts abroad. To the above
must be added the fact that for several years past our
crops have barely been even middling, and that last year
the cotton crop was lost and the corn and wheat crops were
very poor; that all our metals and other articles of export declined in price, especially silver, copper, lead, and
henequen; that in Yucatan a period of wild and feverish
speculation had ruined some of the most important firms
and even jeopardized the solidity of the local banks; that
the establishment of new industries throughout the Republic and the construction in this capital of handsome
residence sections had locked up considerable sums of
money; and, finally, that importers, perhaps largely encouraged by the stability or fixity of the exchange rates,
had laid in excessive stocks of foreign merchandise which
had not been sold and yet had to be paid for.
In view of these causes, all of which tended to reduce
the amounts standing to our credit abroad and to oblige
us to settle our debts to foreign countries, it is not to be
wondered at that the exchange market became seriously
affected, and the commission, if it was to fulfill the most
important of the functions which the law and the confidence of the Government had intrusted to it, could not
fail to interest itself in this matter, and, in consequence,
it acted with decision.

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Not only was the supply of foreign exchange manifestly
insufficient to meet the demand, but our banks and bankers, in spite of meritorious sacrifices, had reached the limit
of their individual credit. Moreover, the cash holdings
of the banks had fallen off considerably, arid while it is
true that their discount operations had also largely increased, they could not easily realize on them without
occasioning bankruptcies and suspensions of payments.
The Government sought to remedy these evils by means
of sundry provisions and other measures which aimed at
preventing the banks of issue, particularly the banks of
issue in the States, from persisting in the mischievous practice of locking up their assets and resources in long-time
transactions, encouraging them, even in their own despite
and regardless of the clamor of mistaken public opinion, to
reduce their loans to within the limits marked by prudence
and to strengthen their holdings in cash. But none of
these precautions availed rapidly to ward off the crisis in
exchange, which called for measures of a totally different
character.
Rich and powerful nations, whose currency has from
time immemorial been based on the broad foundation of
an abundant circulation in specie, have recourse, under
such circumstances, to the exportation of a portion of
their gold coin, which loses none of its value when going
abroad beyond the relatively inconsiderable cost of transportation; and thus we very frequently observe gold sovereigns arriving in America or American double eagles going to Europe, and alternately serving to settle the balances of the immense trade and transactions of every kind
8648—10

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of the Old World and the New. We shall be able to do the
same, no doubt, in time, if peace and public order, which
are the foundations of our business prosperity, are not disturbed, for the possibility of doing it is one of the many
advantages of our adoption of the gold standard; but to
export our gold money, at a time when there was not much
of it and we had just got hold of it, and that to the surprise
of not a few among us, would have been simply an act of
folly which public opinion both at home and abroad would
at once have stigmatized as ruinous and which alone might
have been capable of compromising not only the success
of the monetary reform but the material progress of the
Republic in all its branches. It was necessary, therefore,
at all costs to save our gold coins from exportation; and
after using up almost the whole of the fund for the regulation of the currency and a portion of that part of its reserves which the National Exchequer with praiseworthy
foresight holds in gold in Europe (£900,000) the commission availed itself of its own credit, with exact and scrupulous regard for the provisions of the law as to method, conditions, and restrictions
Thus, early in January, 1908, arrangements were made
with a group of French bankers, at whose head was the
powerful institution known as the " Banque de Paris et des
Pays-Bas," whereby the commission was authorized to
draw on them at three months from date, to the order and
with the indorsement of the National Bank of Mexico, for
25,000,000 francs, the drafts to be renewable once only for
the same length of time. The conditions of this loan,
which in its form was quite usual and strictly adjusted to

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mercantile practice, were the conditions that are customary in such cases, nay, rather more favorable; a commission of three-eights per cent on acceptance and one-fourth
per cent on payment was stipulated, and the drafts were
discounted at the current rate of the Bank of France.
Other measures had been devised and other preparations had been made in other markets in the possible
event of the 25,000,000 francs not being sufficient to tide
over the difficulty; but fortunately no further sum was
necessary, for conditions gradually improved, and the
only problem that demanded attention was how to meet
in July, 1908, the drafts made in January of that year
which had been renewed when maturing in April. The
conditions of the exchange market, as has been said, had
been improving and the supply of drafts sufficed for the
demand, even enabling the banks to cover the balances
standing against them; but beyond this the improvement
did not go. Arrangements were therefore concluded
at New York toward the close of May, 1908, for the commission to issue six-month \]/2 per cent notes at 9 9 ^ P e r
cent, also to the order of the National Bank of Mexico,
and indorsed by that bank, for $2,500,000 United States
currency, which was used to take up in the following July
13,000,000 francs of the drafts which had been renewed
in April, the remaining drafts—i. e., for 12,000,000 francs—
being again renewed so as to mature in the following
October. Even when this month arrived, the supply of
exchange was far from being plentiful, and it was necessary
to make another issue of six-month notes in New York
for $2,500,000 United States currency to pay off the

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balance of 12,000,000 francs of the Paris drafts, thus
winding up that transaction. But the object sought had
been attained; better times had come to foreign markets;
business had almost entirely become normal again; and
fresh capital, including the proceeds of the bond issue
successfully floated by the institution of loans for irrigation works and the encouragement of agriculture, was
again flowing into the Republic, as usual, enabling the
commission to meet its obligations at New York at, nay,
before, maturity. In like manner that portion of the
gold reserves of the federal treasury held in Europe of
which use had been made was refunded, and at the close
of the fiscal year 1908 the commission had placed once
more with its correspondents in London and New York
the portions of the fund for the regulation of the currency
which it is in the habit of keeping on hand in those cities
and which amounted on June 30 last to £16,945 16s. n d .
and $3,666,664.18 United States currency, respectively.
To complete the information under this head it must
be stated that the commission created another fund
abroad on which to draw by shipping and selling the
domestic gold bullion which, as already explained,
it is in the habit of acquiring at this capital. The detail
of these shipments (Annex No. 10) shows that the proceeds in Mexican currency, at the legal parity, of
11,469.120984 kilos of gold shipped, were $15,286,741.24
received by the commission, as against a cost, including
freight charges and other expenses, of $15,342,343.81,
resulting in a loss of $55,602.57, which is a little more
than 3.62 per mill or 36.2 cents per $100. This loss,

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calculated, as has been said, at the legal parity, was
ultimately reduced to $53,706.59, as part of it was recovered when the commission sold its drafts.
These facts afford, it is to be hoped, a clear view of
one phase of the question; but another and not less
interesting one remains to be referred to.
What use was to be made of the proceeds of the foreign
exchange when sold? It seems proper, in this context,
to remember that, according to article 30 of the law
of March 25, 1905, that part of the fund for the regulation
of the currency which is kept in the Republic and which
was the part in question, "must consist of specie, and, in
exceptional cases, of gold or silver bullion intended for coinage, to the exclusion of bank notes or any other security.''
According to this article, therefore, it would have been
absolutely necessary to withdraw from circulation suddenly, say within a week, large volumes of specie, exceeding probably at certain moments the sum of
$20,000,000. Now, the effect of such a contraction of
the currency would not only have been disastrous to business in general, causing an abnormal rise in the rate
of discount, which already stood at 10 per cent, but
would also perhaps have injured the credit of our banks,
which, as it was, remained unimpaired, notwithstanding
the fact that their cash holdings, as already stated, had
been materially curtailed.
The commission therefore considered it expedient and
opportune to engage in certain banking operations, by
means of which it was enabled to maintain in circulation
in the country the proceeds of the foreign exchange sold

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by it, acting in this respect in complete conformity with
section H, article 3 of the law of April 3, 1905, by which
the commission was created, and which permits it " t o
make use of the regulating fund for all banking transactions and for the exchange of coins in a manner tending to
promote stability in the rates of foreign exchange and to
meet interior currency requirements." The commission
might legally have taken this action on its own authority,
for the law above mentioned enables it to " exercise freely,
to the exclusion of any other authority," the attributions
which the article already quoted enumerates; but the
situation was a new one; it was possible that an error of
judgment might be committed in the operations contemplated; and the commission preferred to solicit the authorization of the finance department, not only for the transactions in general, but in each concrete case. The authorization in question was secured, and the approval of the
department given for each separate loan.
In this way loans were made aggregating $11,000,000, at
various rates of interest not exceeding 9 per cent, to a number of companies and corporations; but these loans were
in all cases guaranteed unconditionally by one of the three
principal banks of the capital, and in one case by all three
banks jointly, while in another case the loan was secured
by first-class collateral. The commission also used some
of its funds in purchasing from the same banks certain
high-class securities, including bonds of the 3 per cent
interior consolidated debt and bonds of the International
and Mortgage Bank of Mexico. These purchases aggregated $2,624,000.

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The mercantile character of these transactions seems a
sufficient reason for not entering into the details thereof
in this report, which, by its very nature, is intended for
publication. Suffice it to say that all.figure in full on the
books of the commission and that the several accounts
were liquidated in due course without any difficulty. As
for the securities purchased, they were realized as soon as
the conditions of the market made it possible.
As to the pecuniary results of these manifold transactions, they were as follows, considered apart from other
operations in exchange during the course of last fiscal
year:
Discounts, commissions, and expenses on 62,000,000 francs,
viz, 714,617.70 francs, which at varying rates of exchange
amounted to
$276, 354. 34
Interest, commissions, and expenses on $5,000,000 United
States currency, viz, $111,902.28 United States currency,
which at varying rates of exchange amounted to
224, 688. 34
Commissions paid to" the National Bank of Mexico
5, 022. 82
Total of discounts, commissions, interest, and expenses
Loss in remitting 25,000,000 francs
$90, 434. 03
Loss in remitting $5,000,000 United States currency
9, 069. 00
Loss in remittances

506,065. 50

99, 503. 03

Gross loss
Less interest earned in Mexico and abroad
Net loss

605, 568. 53
567, 476. 07
38, 092. 46

On the other hand, the operations in bonds and other
securities resulted in a profit, as follows:
Cost of bonds and other securities bought
Coupons collected and selling price realized
Profit

$2, 624,000.00
2, 700, 392. 50
76, 392. 50

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On the whole, then, the various operations may be said
to have been wound up with an actual profit of $38,300.04;
but on the books of the commission, it is credited with the
full profit of $76,392.50, for the general treasury, by order
of the finance department, refunded the $38,092.46 lost on
the transactions in Paris and New York.
In conclusion, it seems proper to state that the dealings
of the commission in exchange have been effected not
directly by the sale of drafts to the public, which, on
account of its being so unusual, would have attracted
attention and perhaps occasioned some alarm, but by
turning over the drafts for sale to the banks of the capital
or placing funds at their disposal in different foreign centers to be drawn against. Thus, as the public found that
its requirements in the matter of exchange were being
met in the usual form and through the usual channels, no
undue stimulus was applied to the demand, as would have
been the case if the ordinary practices had been departed
from and if the intervention of the commission had been
obtrusive, though, on the other hand, no mystery was
made of the matter.
V.
AGGREGATE RESULTS OF OPERATIONS FROM MAY I, 1905,
TO JUNE 30, 1909.

With a view to the ready comprehension of the aggregate results of operations from the creation of the exchange
and currency commission to June 30, 1909, profit and
loss accounts for each of the fiscal years embraced in the
period have been drawn up, as well as a general resum£,
and the following reflections seem in order:

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The commission received $10,000,000 as a fund for t h e
regulation of t h e currency.

Operating with t h a t fund and

never going outside of the limitations or the methods laid
down b y t h e law under which t h e commission was created,
it has attained t h e following results:
1. I t has retired from circulation and demonetized the
following a m o u n t s :
Old gold coins
Old subsidiary silver coins
Copper cents
Central and South American pesos circulating in the
State of Chiapas
Central and South American subsidiary coins circulating
in the State of Chiapas
Mexican silver pesos
Total

$737,674. 85
11, 732, 511. 01
332, 668. 07
333, 571. 00
533, 452. 05
72, 800, 277. 00
86,470, 153.98

2. I t has coined and p u t into circulation the following:
Gold coins
Silver pesos
Silver 50, 20, and 10 cent pieces
Nickel 5-cent pieces
Bronze 2 and 1 cent pieces

$83, 386, 500. 00
10, 105, 000. 00
32, 623, 543. 30
904, 308. 00
936, 418. 90

Total

127, 955, 770. 20

3. I t has purchased refined silver bars to the value of
$6,509,033.11.
4. I t has purchased refined gold bullion to the value of
$52,096,882.38 and has exported same to the value of
$15,342,343.81.
5. I t has realized for the federal exchequer a profit of
$8,102,091.15, which is more t h a n 81 per cent in four years
and two months, increasing the fund for the regulation of
the currency to $18,102,091.15, which was its a m o u n t on
J u n e 30, 1909.

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6. Finally, the stability of foreign exchange, which is
the fundamental object of the commission's labors, has
been invariably maintained, not excepting one single day,
as everyone knows, and to present a table showing the
very slight oscillations-that have occurred in the rates of
exchange, owing to the exigencies of dealings in arbitrages rather than to any other cause, would be quite
superfluous. Suffice it to say that the rates for sight
drafts were, respectively, as follows on the dates named:
May i,
1905.

Francs
_
Pounds sterling. _
_
American dollars.
__ _
Marks
__

. pence

2-554
24-39
0.4944
2.079
3-36i

June 30,
1909.

2. 562
24.46
o.4975*
2. 084
2. 795

Finally the maximum and minimum rates during the
same period have been as follows:
Maximum.
Francs
Pounds sterling

pence _

2-55
24-35
0.4942
2. 07
2-75

Minimum.

24.90
0.5025

VI.
SOME CONSIDERATIONS AND OBSERVATIONS OF A G E N E R A L
CHARACTER.

A careful observation of facts with which it has had to
do, or which it has witnessed at close range, has enabled
the commission to form opinions on some matters con-

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nected with the monetary reform, and, therefore, it does
not seem out of place to include in this report certain considerations of a general character.
In the first place, it is worth while noting that the domestic production of refined gold shows a marked tendency
to increase. In the fiscal year 1905-6 the amount
bought was, in round numbers, only 3,538 kilograms; next
year it rose to 9,548 kilograms; the year following it was
10,239 kilograms, and in 1908-9 it reached 15,747 kilograms, with a coinage value approximating $21,000,000.
These figures warrant the expectation that, as soon as
equilibrium shall have been thoroughly restored in exchange conditions, which assuredly will only be a matter
of a few months, it will be possible to resume the coinage
of gold, of which the supply is still inconsiderable, although
the $83,000,000 coined is not far short of the total quantity of silver pesos withdrawn from circulation. But a
gold coin is everywhere propitious to hoarding, and especially is this the case with us, so little accustomed to employ a gold currency or to turn our accumulations to profitable account, and it is to be observed that for some time
past very few gold coins circulate, and, as we shall see
more in detail later on, only about $50,000,000 of the
cash holdings of our banks consist of gold, the remainder
of the grand total of about $85,000,000 being silver.
It is true that the commission generally holds about
six or seven million pesos in gold, and the general treasury of the federation another ten or eleven million, the
gold circulation held by the public being something like
$15,000,000. But this latter sum is doubtless hoarded,

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for it is the daily experience of the banks that the gold
which they pay out over their counters is very long in
returning to their coffers. Hence they now frequently
refuse to pay out gold, and this circumstance serves to
increase the demand, by virtue of the social phenomenon
alluded to elsewhere in this report. Now, the commission
is of the opinion that efforts should be made to increase
as much as possible our stock of gold money, so that when
foreign exchange becomes scarce our banks and bankers
may be enabled to ship gold specie abroad without causing alarm or producing any perceptible curtailment in
the volume of our circulating medium. Only then will
it be possible to declare the coinage of gold free and attain
to the plenitude of currency reform. It will be said that
the same result can be achieved by holding gold bullion,
and to a certain extent this is true as long as the exchange
and currency commission remains in existence; but that
commission, owing to its very nature, is a temporary
organization, and, besides, in order that the monetary
reform may become a fully accomplished fact the circulation must operate automatically, and to that end it
is necessary to accustom the public of all ranks to make
use of gold coin in their daily transactions and not to
regard it as a mere rare curiosity.
In regard to silver, nickel, and bronze subsidiary coins,
the supply seems to meet the requirements of circulation,
seeing that they do not accumulate in the banks, which
generally hold from 5,000,000 to 6,000,000 pesos in such
coins, while the remainder, or about 28,000,000 pesos, is
in the hands of the public, completing the 34,500,000 pesos

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of such coins struck. It is to be observed, nevertheless,
that certain agricultural centers, especially Toluca, Puebla,
Morelia, and Aguascalientes, frequently accumulate in
their local banks and in the local branches of the National
Bank of Mexico considerable quantities of the coins in
question which are needed elsewhere. The commission
has made every endeavor to obviate such accumulations,
which, among other drawbacks, entail an unnecessary outlay, sometimes on the Government and sometimes on the
banks and private persons, for transportation of these coins.
But so far it seems that the evil can not easily be eradicated.
The service of free exchange of subsidiary coins for
silver pesos, and vice versa, in amounts of $100 or exact
multiples thereof, for which provision is made by article 16
of the law of March 25, 1905, has not yet been established,
for the order of the finance department of April 20, 1905,
deferred sine die the designation of the public offices having
charge of this service, as at that time the coinage of the
new currency had not begun. Later a difficulty arose in
the fact that article 16 speaks of the exchange of subsidiary
coins for silver pesos, and vice versa, without making any
mention of gold; and as the commission undertook, without expense to private parties, to distribute the new currency all over the Republic, as well as to transport the
silver pesos exported, the necessity of such a service has
not been very urgently felt. Nevertheless, it is time that
it should be established, and the commission considers that
it would be well to confide the service in question not to
public offices, as it is hardly compatible with their proper
functions, but to the National Bank of Mexico and its

National

Monetary

Commission

numerous branches all over the Republic. The annual expense entailed by this service would be insignificant compared with its utility. Moreover, it should seem necessary
to amend article 16 in such manner as to provide that the
exchange offices shall for subsidiary coins pay out either
silver pesos or gold coins and subsidiary coins for gold coins
or silver pesos, whichever the public chooses to present,
and that it shall not be obligatory but optional to give gold
in exchange for silver pesos, or vice versa, in order to preclude the danger of loss in the event of silver rising again
so as to realize the contingency mentioned in article 12 of
the monetary law as well as the danger of an immoderate
withdrawal of gold from the banks for speculative purposes.
The commission has followed closely month by month
the various phases presented by the transformation of our
monetary system and to this end has availed itself of the
balance sheets of the banks and other institutions of
credit, regularly published by the finance department as
well as of the tables courteously furnished by the National
Bank of Mexico showing holdings in cash at the head
office in this capital and in its several branches. And
since a substantial fund in cash has been created in the
general treasury of the federation, account has also been
taken of it in determining the amount and kinds of our
visible metallic currency. The publication in connection
with this report of the monthly tables that have been
drawn up would not be without interest; but the more
important of those tables are the ones corresponding to
the period comprised between January 31, 1907, and June
30,1909, and based thereon three resumes have been formed,

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including each kind of coin—gold, silver pesos, and subsidiary coins of every kind. (See Annexes, Nos. n , 12,13.)
A comparative examination of these tables suggests some
interesting reflections, but to enter into them would swell
this report to undue proportions, and the only point that
will be referred to is the important question, as yet undetermined, as to the*amount of specie circulation in the Republic.
The new money of all kinds coined, as has been said, is
$127,955,770.20. Of this total, fiscal statistics show that
none has been exported except the truly insignificant sum
of $29,990, in gold (in the fiscal year 1906-7), which may
be left out of account.
Now the banks, the general treasury, and the commission
on June 30,1909, had cash holdings of the following amounts:
In gold
In silver pesos
In subsidiary coins

$67, 889, 015. 00
30, 099, 472. 00
6,293,370.99

Total
104, 281, 857. 99
Amount in the hands of the public or in
actual circulation:
In gold
$15,497,485.00
In subsidiary coins
28, 170, 899. 21
43,668,384.21
Total
Amount coined

147, 950, 242. 20
127, 955, 770. 20

Excess of circulation over coinage
This difference is undoubtedly due to the fact that the
public has returned to the banks and to the general
treasury an equivalent sum at least in old silver pesos,
for if we consider the total amount of silver pesos held
by the banks and the general treasury on June 30,
1909, viz
And even assuming that those holdings include all the
new silver pesos coined (a fact which it is impossible to
determine), viz
We get the above-named difference of

255

19, 994, 472. 00

30,099,472.00

10, 105, 000. 00
19, 994, 472. 00

National

Monetary

Commission

On the other hand there must still be in circulation considerable amounts of the old subsidiary coins, to judge by
the fact that the commission retired those coins during the
whole of the fiscal year ended June 30, last, at the rate of
$120,000 per month, in round figures, and moreover it is to
be observed that the holdings of the banks in silver pesos
have increased steadily from month to month since September, 1907.
What is the amount of these two unknown quantities
in the problem of determining the volume of specie in circulation? This question it is impossible to answer; the
only thing quite certain is that on June 30, last, the amount
of old pesos, i. e., of pesos prior to the monetary reform, was
$19,994,472 which must be added to the $12^,955,770.20 of
new coinage.
Such is the conclusion attainable for the time being, but
in order to determine conclusively and definitively the
country's specie circulation—a result which is important
on many accounts and not a mere curious statistical
datum—it would be necessary to adopt measures of another sort, of which perhaps the most efficacious would be
to decree the demonetization of the old subsidiary silver
coins and the copper cent, fixing a suitable period of time
after which they would cease to be legal tender. These
coins, especially the silver 25 and 5 cent pieces and the
copper cent, are a stumbling block in our circulation and
give rise to confusion from which the humbler classes, particularly entitled to the protection of the law and the
authorities, are the chief sufferers. Yet, even the demonetization proposed might be detrimental to those same

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classes if the outstanding amounts of the old coins are still
considerable, owing to the abuses frequently committed
by petty merchants in refusing prematurely to receive the
coins that are going to be demonetized; and so the best
course seems to be to expedite the retirement and recoinage
of the old subsidiary currency; and to this object the commission will address itself now that its other work leaves it
free to do so.
Connected with the above subject is the question of the
striking of a new silver peso, and it will not be out of place
to say a few words on this topic.
In connection with the first centennial of our Independence, which will be celebrated next year, the finance department has ordered the preparation of a new die for the
silver peso, which, while departing from the traditional design of our historical coin, is much more artistic, being the
work of one of the most famous engravers in Europe. This
die might well be adopted, not only for the peso of 1910 but
for all time, serving for the remintage of the old pesos, for,
as specialists are well aware, and as an experience of more
than four years has fully proved, the old Mexican peso is no
longer particularly sought for on account of its time-honored emblems or for use as money in certain parts of the
Far East, but exclusively on account of the quantity of
refined silver which it contains. Of the many millions of
pesos exported since November, 1905, not a single one,
though many of them were completely new, was sold otherwise than for its bullion value, and it appears that all of
them went to the melting pot. Those communities in the
Far East which formerly used our peso for currency pur8648—10

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Commission

poses have now a currency of their own or use the money
minted for them by the English, of the same fineness as our
peso and superior in design; and the advantage which
many persons supposed Mexico might derive from the retention of the traditional design of her peso belongs to conditions that are now long since past and are never likely
to prevail again.
Again, as the finance department is aware, there are
strong grounds for believing that at certain points on
our northern border silver pesos are smuggled into the
country, in defiance of the law, and though these importations, made chiefly by laborers having their homes on
this side of the line who are paid in Mexican pesos for
work done on the other side, may not be considerable,
they nevertheless constitute a proof that contraband operations of this nature are possible, and whether the pesos
thus introduced have only been recently exported or
whether considerable quantities of the coin are held in
American border towns—it is not known which is the
case—the fact remains that the clandestine introduction
of pesos is illegal, and to a greater or less extent detrimental, all of which would be radically avoided by recoining the present peso and later on demonetizing all pesos
bearing the old design.
By this means, also, it would be possible to find out the
volume of the Republic's specie circulation, provided
that the copper cent and the old subsidiary silver coins
were likewise demonetized. But it must be borne in
mind that the operation would be an expensive one, on
which account it would perhaps be advisable to distribute

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it over several years, for the cost of mintage, freight
charges, wear and loss in minting are considerable, especially when millions of coin have to be handled.
There seems to be no question as to the desirability of
putting a stop to the circulation of "cachuca" coins in
the State of Chiapas, and if the importation of Central
and South American coins is not absolutely prohibited,
under penalty of their being melted down into bars at
the cost of the importer, it is at least obviously expedient
that the federal and local authorities of the State in question, especially the local authorities, should be reminded
that they are not allowed to receive in payment of taxes
and other pecuniary liabilities any other than national
currency; and the attention of private parties should in
particular be drawn to the terms of article 26 of the
monetary law, whereby they are forbidden, under penalty
of a fine of the second class, to make payments by means
of any instrumentality other than the legal coin of the
Republic. At the same time the commission will take
steps to increase the supply of subsidiary coins in that
region and will buy up the "cachuca" coins purely at
their bullion value, in order not to cause loss to the persons who in good faith have come into possession of them,
and by these concurrent measures it is to be hoped that
this anomaly in our currency system, which is unique,
will soon disappear.
It would be very interesting to learn and to be able to
state in figures the saving which the nation has realized in
its payments abroad as a consequence of the monetary
reform, of which the immediate and chief effect has been

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Commission

to dissociate the rates of foreign exchange from the price
of silver. Some efforts have been made to arrive at numerical results, even though approximate, in so important
a matter, but, unfortunately, complete data are lacking,
owing to the absolute impossibility of finding out exactly,
or even approximately, the amount of our economic balance, if among the factors thereof are to be included, as
they would have to be included, all our liabilities abroad
for premiums, interest, dividends, repayment of capital,
and other accounts, in connection both with the national
debt and the debts of private parties. So multifarious and
complex are our business relations with foreign parts, and
so varied are the conditions under which they are conducted that it is no exaggeration to say that it is almost
impossible to determine the amount which we have to
remit abroad year by year. It will be remembered that
the monetary commission which met under the auspices
of the finance department in 1903, in order to study our
currency problems, was unable, in spite of its manifold
investigations, to reach any definite result on the subject.
The treasury statistics, for example, to take a very clear
case, give us the figures of imports and exports; but they
do not and can not tell us what portion of the imports,
such as machinery and other articles, represents new permanent investments in the country and has not to be
paid for, at any rate, at once, nor what portion of the values
exported remains abroad, being spent by Mexicans for traveling or living expenses. And so on, in regard to all ascertainable figures. In regard to each, observations suggest themselves which show that it would be a gross error to take them

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lightly as a sure basis for calculations as to the balance of liabilities which we are called on to settle abroad. Moreover,
circumstances have changed radically since that date, and
it is quite certain that the figures of 1903 would be as unreliable now as the present figures will be in six years' time.
It is, in consequence, necessary to give up the hope of
arriving at a complete solution of the problem; but what
can be done is to determine, with close approximation to
accuracy, the amount which the country, owing to the
stability of exchange rates, has saved on certain obligatory
remittances representing interest and sinking-fund service
on gold debts contracted by the Government and some of
our more important corporations.
Now, under the budget for last fiscal year, 1908-9, the
Government had to remit abroad the following sums:
For the service of the public debt
£ 1 , 505, 000
For salaries and expenses of legations and
consulates
70,500
1

>575>b°Q

Furthermore, from reports officially secured
from the managements of some of our chief
railways, the latter remitted abroad during
the fiscal year 1908-9 the following sums:
Mexican International
Interoceanic
Mexican Central
National Railroad of Mexico
National Railways of Mexico
Mexican Railway
United Railways of Yucatan
Mexican Tramways Company
Total

U. S. currency.
$ 1, 860,000. 00
325,000.00
2,185,000.00

2,008

1, 370, 000. 00
372,864.90
3, 564, 131.08
1, 255, 000. po
5, 905, 000. 00
244,152.69
285, 761. 16
519,461.88

2,084,888

15,701,371.71

226,980

280,400

These sums, at the average exchange rate which was in
force, viz, 24.5od. and $0.4975 United States currency,
respectively, entailed a disbursement in Mexican currency

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of $51,983,897.99, whereas if the same sums had been remitted at the average rate of exchange that would have
prevailed if depending on the average price of silver, viz,
19.83d. on London and $0.3980 (gold) on New York, the
disbursement in Mexican currency would have been
$64,658,396.54, or a gain of $12,674,498.55.
Examples might be multiplied almost indefinitely;
but this seems useless, when all are convinced of the primary truth that unfortunately the financial balance is
still against us and, like all young nations in the early
stages of their development, we are permanently in debt
to foreign countries and can only wipe out that liability
definitively by increased productiveness, while meeting it
provisionally through the investment of foreign capital
which older nations send here for the cultivation of our
soil and the exploitation of our other natural resources.
For the rest, the Government of the nation well knows,
and has long known, while the immense majority of the
inhabitants of the Republic, giving proof of their sound
sense, have also become convinced of the fact, that what
the Republic needs for its aggrandizement is the construction of more railways, the opening up of new routes of
communication, the carrying out of extensive irrigation
works, the encouragement, on a liberal and ample scale, of
agriculture, industrial enterprises, and immigration, so that
opportunities for lucrative endeavor may be multiplied
and, like our northern neighbors, we may be enabled to pay
back the borrowed capital of which we now stand in need
and may come to have an economic life of our own.
The silver-mining interest still complains, it is true,
of the abolition of its time-honored right of free coinage,

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which was nothing but a privilege by virtue of which
all the inhabitants of the nation had to buy the product
at a fixed price, and at the cost of an actual decline
in salaries and wages, though in appearance they might
seem to rise, and of a depreciation, as unjust as it was
general, in every branch of public and private wealth.
The mining interest, in thus complaining, forgets that
under the new regime, it alone profited, as, indeed, was
only fair, when the price of silver rose, selling it not at
the old coinage value of that metal, which was $40.91
per kilogram, but at $43 and even more; it also forgets
the permanent reduction in taxes decreed in its favor
when the monetary reform came into force, and that it
also derives advantages from the fixity of exchange
when it makes purchases abroad of machinery, tools,
apparatus, and many other articles which it needs in
the development of its industry, an industry which is
important, very important indeed, and one in whose fortunes we ought all to feel a concern, but which, after all,
is, fortunately, not the nation's only industry.
The department of finance, to which this report is
addressed, will, no doubt, pardon the commission for
thus examining the monetary question in its general
aspect, when the object of such report is more immediate
and modest and when the commission ought, perhaps,
to confine itself to considerations of a more specific
character. The commission can only plead in excuse
the motive under which it has acted, viz, that having
been created to cooperate in the realization of an object
set before itself by the Government of the nation, it

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should not be charged with irrelevancy when it affirms
and seeks to prove once more that the object in question
is sound, just, patriotic, and praiseworthy.
It seems desirable to make another observation which
also perhaps does not come directly within the scope of
the commission, but which is necessary for the completeness of the present report.
It has been said that the fund for the regulation of
the currency has increased from ten to more than eighteen
million pesos; and this statement, without explanation,
might create the impression that the difference between
the two sums mentioned constitutes a net profit to the
federal exchequer, giving rise to unfavorable comment
on the part of the public, as the privilege of coining money ought not, according to the principles of a sound
and careful administration, to be a source of revenue to
the state, for it seems like taking advantage of the community to oblige it to accept for currency purposes a
piece of metal of which the nominal value is higher than
its intrinsic value. Incidentally, it may be remarked
that this evil bears an inverse ratio to the value of the
coin, and that in many cases, in order to satisfy certain
requirements as to hardness, etc., the currency has to
be alloyed with certain inferior metals. In any case,
it might be supposed that the commission was taking
credit to itself, a credit to which it acknowledges it is
not entitled, for having earned for the exchequer a net
profit of more than f* 2,000,000 per annum during the
four years of its existence.
The finance department and all persons acquainted with
our monetary legislation know very well that this is not

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the case. The law of March 25, 1905, to which reference
has been so often made, lays down (art. 29) that "the only
expenses or losses that will be charged to the fund are
those that may be incurred strictly in connection with the
deposit of said fund, the handling or remittance of specie
or bars of the precious metals constituting it, and the
transactions in foreign exchange effected with it." Article
29 goes on to state that "all other expenses that may be
incurred, either in the form of salaries to employees, coinage
of money, or any other purpose, will be met out of the
appropriations provided by the budget of expenditure."
Under this clause, of which the object is to bring about
the gradual and insensible increase of the fund for the regulation of the currency, the disbursements for the abovenamed purposes, as far as the commission has been able
to ascertain from its own accounts, and the statements of
the federal treasury presented every year to Congress, were
as follows from May 1, 1905, to June 30, 1909:
Salaries and expenses of the commission
Salaries and expenses of the Mexico City mint, including the
wear of money recoined and loss in the process of coinage:
Fiscal year 1904-5 (two months), approximately
Fiscal year 1905-6
Fiscal year 1906-7
Fiscal year 1907-8
Fiscal year 1908-9 (subject to revision, the accounts for
the year not having been fully made up)
Expenses of mintage of money abroad (not including
cost of metal)
Freight charges paid by the general treasury of the
federation and the Mexico City mint

$119, 248. 74

89, 125. 56
461,786.23
500, 448. 91
397,044.86
383, 185. 22
527, 856. 71
271, 073. 96

Total
2, 749, 770. 19
Deducting the above sum from the increase which there has
been in the fund for the regulation of the currency, viz__ 8, 102, 091. 15
The actual profit is reduced to

265

5, 352, 320. 96

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Perhaps even this figure is not quite correct, and it may
still be necessary to make further deductions from the
amount of profits realized; but even as it is, it will be seen
that the net profit to the federal exchequer is substantially
smaller than the total increase in the fund for the regulation of the currency.
By the express desire of the members of the commission
and as an act of strict justice, the undersigned places on
record that in the discharge of their functions they have
been aided by the good will and efficient cooperation of all
the authorities, of many banking firms of this capital, of
almost all the chartered banks of the Republic, and particularly of the National Bank of Mexico, which, in a manner befitting its position as the foremost of our institutions
of credit, has contributed, with all the manifold elements
at its disposal, to facilitate in every way the labors of the
commission, not only furnishing it with data and information of special interest, but affording it aid and material
assistance, whenever necessary, with the unwavering determination of uniting its efforts with those of the Federal
Government to maintain the fixity of foreign exchange
rates, an object in whose attainment both the board and
higher officials of the bank always expressed the utmost
confidence.
VII.
PERSONNEL OF THE COMMISSION.

According to the law whereby the commission was instituted, its ex officio chairman is the minister of finance and
public credit, and in that capacity Sr. Lie. Jose Yves Limantour has always done it the honor of presiding at its

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sessions, following very closely and with untiring interest
the commission's debates and allowing the subcommission
or executive committee to address to him all the frequent
queries that were involved in its daily work—the work of
which it has charge by virtue of its internal regulations—
when the matter at issue was too urgent to brook delay.
During the few months in 1906 when Sr. Limantour was
absent, Sr. Lie. Don Roberto Nunez, subsecretary of
finance and acting minister, performed like functions with
the same painstaking assiduity.
Furthermore, and also according to the law by which
it was instituted, the commission consists of nine members,
two of whom are members ex officio, viz, the general
treasurer of the federation and the director-general of
the mints; three are appointed, severally by the National
Bank of Mexico, the Bank of London and Mexico, and
the Mexican Central Bank from among their directors or
higher officials, and four are appointed by the Federal
Government.
The following have belonged or still belong to the commission through the above-named appointments:
As treasurer-general of the federation, Don Manuel de
Zamacona e Inclan, and since his resignation in April, 1906,
Don Javier Arrangoiz.
As director-general of the mints, Eng. Manuel Fernandez
Leal, until his lamented death on July 2 last, and later
his successor in that office, Don Miguel de Mendizabal.
By appointment of the National Bank of Mexico, Don
Gustavo Struck, until February, 1906, when his regretted
demise occurred; after him, Don Luis G. Lavie until June

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21, 1908, when, unhappily, he too died; and subsequently
Don Ernesto Otto, all directors of the bank.
By appointment of the Bank of London and Mexico,
Don Enrique Tron, one of its directors.
By appointment of the Mexican Central Bank, Don
Federico Kladt, assistant manager.
The members appointed by the Federal Government,
such appointments being renewed at the close of each
fiscal year, have been Don Andres Bermejillo, head of the
old and well-known firm of Bermejillo & Co., of this capital;
Don Hugo Scherer, jr., head of the banking firm which
bears his name; James Walker, manager of the Mexican
Bank of Commerce and Industry, established in this city,
and the undersigned. During a brief absence of Messrs.
Scherer, jr., and Walker, in the year 1905, their places
were taken, respectively, by Don Ernesto Otto, of the
firm of Sommer, Herrmann & Co. (successors), and by
Don H. M. Dieffenbach, manager of the Pefioles Mining
Company. Although Mr. Scherer, jr., is now again absent,
the temporary vacancy has not yet been filled.
In accordance both with the law by which it was instituted and its internal regulations, the commission has
elected from among its members a vice-president, and the
undersigned has on each occasion been honored by his colleagues in being clothed with that office. In addition three
subcommittees, each consisting of three members, have been
appointed, viz, the executive committee having charge of
current business and business not admitting of delay, the
second having charge of cash and bookkeeping, and the
third having charge of office matters and office personnel.

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The first or executive committee consists of the undersigned vice-president, ex officio, Don Hugo Scherer, jr.,
and Don Federico Kladt, the second of whom has been replaced, when absent, on this subcommittee by Don Enrique Tron; the second subcommittee consists of Don Ernesto Otto, Don Enrique Tron, and Don Javier Arrangoiz;
and the third subcommittee consists of Messrs. James
Walker, Andres Bermejillo, and Miguel de Mendizabal.
The executive committee has naturally had most to do
with the matters coining within the commission's province, and the undersigned takes this occasion of discharging the pleasant duty of thanking his colleagues for their
important and valued aid and the unremitting attention
which they have devoted to the work of this committee.
The law lays down that membership in the exchange and
currency commission is purely honorary, and by virtue of
this precept the members, whose names have been given,
have received no remuneration. All of them have expressly charged the undersigned to declare that they consider themselves amply recompensed by the honor which
they feel in having their names associated with the illustrious name of the President of the Republic and with that
of his distinguished finance minister in the important task
of reducing to practice, so far without a single drawback,
the currency reform laws enacted in 1905, one of the main
factors in the economic progress and future of this country, to which all the members of the commission are attached, some because it is the country of their birth and
others because they are indebted to it for a generous and
liberal hospitality.

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VIII.
PERSONNEL AND EXPENSES OF THE COMMISSION'S OFFICE.

On account of the simple and wholly businesslike
methods followed in systematizing the work of the commission, that work has been performed by a very small
personnel, which, even at times when the press of matters demanding attention was greatest, has consisted
only of a chief, Don Luis Uhink; of a cashier, Don Rafael
Arrillaga; of an accountant, Don Juan Boy Munoz; a
clerk for correspondence, Don Adolfo Graue; two assistants, Don Manuel Rodriguez and Don Fiacro Arrangoiz
(the latter succeeding Don Juan Manual Carrillo, who
resigned); and an office boy. Moreover, from March i,
1906, to June 30, 1908, Don Rosendo Esparza was engaged in the laborious task of sorting the vouchers for
the statement of accounts that had to be rendered and
was, in effect, punctually rendered to the general treasury
of the federation as to all the business transacted.
Thus the work of the office has been done by a chief
and two higher employees, a clerk, two or three assistants and an office boy, and it is not, therefore, to be
wondered at that in no fiscal year has the whole of the
appropriation of 50,000 pesos assigned in the budget
to the commission for its expenses been used.
In fact, including the purchase of office furniture and
office supplies, rent, cost of books, printing, lighting,
and salaries, the expenses have been as follows:
May
July
July
July

1,
1,
1,
1,

1905,
1906,
1907,
1908,

to June
to June
to June
to June

30, 1906:
30, 1907
30, 1908
30, 1909

.. .

Total in four years and two months.

270

$30, 432. 78
21, 927. 49
33*234.75
33*653. 72
119,248.74

Banking

System

Mexico

or an average of $2,384.98 per month, including the value
of office furniture and equipment, the most valuable of
which, viz, the safe and sample scales, costing $2,632.88,
are as good as new.
It should be observed that the correspondence, bookkeeping, cash, and other departments of the office work
have been kept scrupulously up to date; that the differences in the cash account, notwithstanding the immense
sums of specie of all kinds that have been handled, have
amounted only to $1,140; that in the shipments of silver
pesos abroad the claims for losses have aggregated only
$1,682; and finally, that all the work of the office has been
conducted in such manner that neither the public i*or the
members of the commission have had a single ground for
complaint.
The accounts for the general treasury of the federation
(for each fiscal year ending June 30) have always been
presented before August 31, and the audit office of the
federation has already approved the accounts for the fiscal
years 1905 and 1906-7.
For these reasons the commission has charged the undersigned to thank the staff of the office without distinction
of persons, for each in his sphere has rendered services
which without exaggeration may be described as highly
meritorious.
IX.
CONCLUSION.

It is now time, perhaps more than time, to conclude the
present report.
But, before concluding, the commission begs to express
the hope that the foregoing accurate statement will con-

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tribute to strengthen more and more the confidence which
has been felt both at home and abroad in the success of
the monetary reform of 1905 ever since its fundamental
features were known. Severe are the tests to which it
has been put, especially in the last two years, and yet it
emerged from them unimpaired, its maintenance not
having entailed any sacrifice of any kind on the Republic.
If, in addition, we compare the resources that were
available in 1905 with those now available to surmount
any temporary perturbation in foreign exchange, the confidence in final success will be still further strengthened.
In 1905 we had no other funds in gold but those which
the finance department has been accustomed to hold
abroad since the treasury reserves began to accumulate
as a consequence of the annual budget surpluses, whereas
at the present time those funds have not only not diminished, but amount to £1,500,000 approximately. At
home we had no gold currency at all in 1905 and at present
we have more than $83,000,000 in gold coins, of which, on
June 30 last, the exchange and currency commission held
five millions and the general treasury more than eleven millions, while the remainder of the fund for the regulation of
the currency, some thirteen millions, was held on the same
date, partly at home and partly abroad, almost exclusively in gold, and the domestic production of refined gold
has increased from $4,718,104.87 in 1905-6 to nearly
$21,000,000 in 1908-9. Furthermore, the experience
acquired during the late crisis shows that the exchange
and currency commission constitutes an efficient instrumentality for the regulation of exchange, when neces-

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sary, without producing alarm or occasioning upheavals.
And, finally, the credit of the nation has daily grown
stronger, for from 1905 to date t h e Republic has shown
t h a t under t h e aegis of peace, internal a n d external, its
resources have steadily expanded and every confidence
m a y be felt t h a t the sound sense of its people will preserve
intact t h a t essential factor of their economic, intellectual,
a n d moral progress.
(Signed)

P A B L O MACEDO,

Vice-President.
MEXICO,

September <?, 1909.

8648—10

273

ANNEXES.
A N N E X I.—Statement of old silver coins withdrawn from circulation and sent
to the mint for recoinage.
Silver pesos.

Subsidiary
silver coins.

$800,000.00
5,718,330-00

$4,584,593.87
3,212,347.39
2,477,506. 15

6,518,330.00

11,73 2 ,5ii> 01

Withdrawn from circulation from. May i, 1905, to
Withdrawn from circulation in fiscal year 1906-7
Withdrawn from circulation in fiscal year 1908-9

R£SUM£.
Retired in silver pesos
Retired in subsidiary silver coins

$6, 518,330. 00
11,732, 511. 01

Total of old silver coins retired June 30, 1909

18, 250, 841.01

A N N E X 2.—Statement of copper coins withdrawn from circulation and sent io
the mint to he melted down.
Withdrawn
Withdrawn
Withdrawn
Withdrawn

from
from
from
from

circulation
circulation
circulation
circulation

between May 1, 1905, and June 30, 1906
in fiscal year 1906-7
in fiscal year 1907-8
in fiscal year 1908-9

Total of copper coins withdrawn from circulation
LIQUIDATION.
Total of copper coins retired between May 1, 1905, and June 30, 1909-Deduct coins melted:
Fiscal year 1906-7
Fiscal year 1907-8
Fiscal year 1908-9

$28,482.32
30,511. 55
15, 946. 48

Not yet melted.

$57, 577. 85
84,074. 06
109, 002. 60
82,013.56
332, 668. 07
$332, 668. 07

74, 940.35
257, 727.72
332,668.07

Profit and loss~ account of copper coins melted.
1906-7: Amount realized from sale of 21,344.465 kilos of copper obtained by melting down $28,482.32 of copper
coins
$21,344.47
1907-8: Amount realized from sale of 22,790.878 kilos of copper obtained by melting down $30,511.55
13,674. 53
1908-9: Amount realized from sale of 11,957.923 kilos of copper obtained by melting down $15,946.48
7, 772. 65
$42,791.65

Loss ©wing to difference between amounts realized from sales
of copper and the coinage value of the coins:
Fiscal year 1906-7
Fiscal year 1907-8
Fiscal year 1908-9
-

7. *37- 85
16,837.02
8, 173. 83
32, 148. 70

Total equal to amount melted down.
MEXICO, June 30, JQOQ.

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74. 940.35

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A N N E X 3.—Statement of old gold coins withdrawn from circulation and sent
to the mint for recoinage.
Value at legal
parity.
Withdrawn from circulation during the fiscal year
1905-6
Withdrawn from circulation during the fiscal year
1906-7
737,674.85
Mexico, June 30, IQOQ.
A N N E X 4.—Statement of Central and South American coins withdrawn from
circulation in the State of Chiapas and sent to the mint in this capital to be
melted down and recoined into Mexican money.

Pesos.

Subsidiary
coins.

Withdrawn from circulation during the fiscal year
$96,605.00

1907—8-_

$287,977.49

Withdrawn from circulation during the fiscal year
236,966.00

245.474.56

333, 57I.OO

533.452.05

LIQUIDATION.
Cost of coins withdrawn from circulation during fiscal year 1907-8:
$287,977.49 a t 83 per cent
$239,021.31
$96,605 at 88 per cent
85, 012. 40
Cost of coins withdrawn from circulation during fiscal year 1908-9:
$231,967.50 at 88 per cent
$5,000 at 87 per cent
$245,473.06 at 83 per cent
Obtained b y melting and recoinage into Mexican money:
Fiscal year 1907-8
Fiscal year 1908-9
Profit:
Fiscal year 1907-8
Fiscal year 1908-9

204, 131. 40
4, 350. 00
203, 742.63
412,224.03

$330, 211. 10

424,083. 79
6, 17739
11,859. 76

754,294.89
MEXICO, June 30, IQOQ.

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A N N E X 5.—Exportation of silver

pesos.

Pesos exported:
From November, 1905. to June, 1906
During fiscal year 1906-7
During fiscal year 1907-8

$39,253,500.00
13, 439, 000. 00
8, 035, 000. 00

Total exported

60, 727, 500. 00

Pesos sold:
Proceeds of sales from November, 1905, to June, 1906
Proceeds of sales during fiscal year 1906-7
Proceeds of sales during fiscal year 1907-8

36, 732,500.00
14, 776, 000. 00
6, 509, 000. 00

Total sales
Total reimported

58, 017, 500. 00
2, 710, 000. 00
60,727,500.00

MEXICO, June 30. IQOQ.

A N N E X 6 . — S t a t e m e n t of amounts received in gold bullion and foreign gold
coins as the equivalent of silver pesos exported under the law of November
19, 1906.
Total value received a t the legal parity:
Fiscal year 1906-7
Fiscal year 1907-8

$5, 750, 740.37
2,513, 707. 28
8,264,44765

Fiscal year 1906-7:
Net proceeds of liquidation
Loss in melting
Fiscal year 1907-8:
Net proceeds of liquidation
Loss in melting

5, 696, 623. 83
3. 966. 54
2, 561, 529. 38
2, 327. 90
8,264,447-65

MEXICO, June 30, IQOQ.

A N N E X 7 . — S t a t e m e n t of money coined from May 1, 1905, to June
under the law of March 25, 1905, establishing
the new monetary
Gold:
In $10 pieces
In $5 pieces

30, 1909,
regime.

$54, 666, 120. 00
28, 720, 380. 00
$83,386,500.00

Silver:
In
In
In
In

$1 pieces (pesos)
50-cent pieces
20-cent pieces
10-cent pieces

10, 105, 000. 00
26, 830, 619. 50
3,846,923.80
1, 946, 000. 00
42,728,543-30
9°4» 308. 00

Nickel, in 5-cent pieces
Bronze:
In 2-cent pieces
In i-cent pieces

$200, 968. 00
735. 45°- 9o
936,418.90
127, 955, 770. 20

Total coined

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R£SUM£ OF COINAGE BY FISCAL YEARS.
Fiscal year 1904-5:
Silver
Bronze

$350, 000. 00
3, 300. 00
#353.3oo.oo

Fiscal year 1905-6:
Gold
Silver
Nickel
Bronze

41, 776, 500.
5, 079, 000.
235, 000.
182, 100.

00
00
00
00
47,272,600.00

Fiscal year 1906—7:
Gold
Silver
Nickel
Bronze

23, 250, 000. 00
23, 367, 923. 80
566, 728. 00
751, 018. 90
47,935.670.70

Fiscal year 1907-8:
Gold
Silver

16, 600, 000. 00
7, 403, 619. 50
24,003,619.50

Fiscal year 1908-9:
Gold
Silver
Nickel

1, 760, 000. 00
6, 528, 000. 00
102, 580. 00

Total coinage
This money was coined at the following mints:
Mexico City mint:
In gold
In silver
In nickel
In bronze

8,390,580.00
127, 955, 770. 20

$53,386,500. 00
32,321, 000. 00
301, 728. 00
336, 418. 90
86,345,646.90

Philadelphia mint:
In gold
San Francisco mint:
In silver
New Orleans mint:
In silver
Denver mint:
In silver
Birmingham (England) mint:
In nickel
In bronze

30, 000, 000. 00
6, 221, 000. 00
1, 086, 923. 80
3, 099, 619. so
$602, 580. 00
600, 000. 00
1,202,580.00

Total
MEXICO, June 30

127,955, 770. 20
IQOQ.

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ANNEX 8.—Statement of domestic silver bars bought by the exchange and cur'
rency commission and sent to the mint for coinage.
Number
of bars.
Bought in fiscal year
1907—8
Bought in fiscal year
1908—9
Total

2,588

Pure silver contents in kilos.

Cost.

Coinage value.

85,503.982599 $3,174,248.83

$3,498,698.07

3.027

100,060.719158

3,334,784.28

4,094,338.44

5,615

185,564.701757

6,509,033-11

7,593.036. 51

LIQUIDATION.
Cost of 85,503.982599 kilos of pure silver bought in the
fiscal year 1907-8
$3,174, 248. 83
Coinage value of same
$3, 498, 698. 07 '
Cost of 100,060.719158 kilos of pure silver bought in the
fiscal year 1908-9
3, 334, 784. 28
Coinage value of same
4, 094, 338. 44
Profit realized:
In 1907-8
_
$324,449.24
In 1908-9
—
759, 554.16
1,084,003.40
7,593,036.51

Mexico, June 30, IQOQ.

7.593.036.51

A N N E X 9.—Statement of domestic gold bullion bought.
Pure gold.
Fiscal year—
1905-6--.
1906-7 —
1907-8--.
1908-9 —

Kilos.
3,538.590788

15.747-079395

$4,718, 104.87
12,730,244.30
13,652,479.97
20,996,053. 24

39,072.768979

52,096,882.38

9.547-707190
10,239.385606

Total .

Coinage value.

DISPOSAL.
Pure gold.
Sent to the mint for coinage:
Fiscal year—
1905-6

Kilos.
3,538.596788

1906-7

9,547-707190
10, 239.385606

1907-8
1908-9

716.693576

3,561.264835
39,072. 768979

52,096,882.38

11,469.120984

Total.
MEXICO, June 30, IQOQ.

278

$4, 718, 104.87
12, 730, 244.30
13,652, 479.97
955.589.05
32,056,418. 19
15,292,122.96
4.748,341. 23

24,042.383160

Exported, fiscal year 1908-9On hand June 30, 1909

Coinage value.

Banking

System

ANNEX

Mexico

IO.—Statement of domestic gold bullion

exported.

DEBIT.

Value.

Expenses
of remittance.

246.602849

$328,802.98

5i, 078. 07

$329,881.05

1,185.817242

1,581,085.69

5. I93.9I

1,586,279.60

972.485870

1,296,644.58

4.256.43

1,300,901.01

1,878,087. 79

6, 178.80

1,884,266.59

Pure gold.

1908.

Totals.

Kilos.

July

August
September
October

1,408.569352

November

884.196145

1,178,925-19

3,871.61

1, 182,796.80

December

1,167.471207

1,556,624.36

5. 110.39

I.56I,734.75

January

1,808.135405

2,410,841.14

7,910.48

2,418,751.62

February

I.543-70933 7
1.751-385196
500.748381

2,058,273.97

6,761.92

2,065,035.89

2,335. 174.43
667,662.83

7,655.09

2,342,829.52

2,204.15

669,866.98

11,469.120984

15,292,122.96

50,220.85

1909.

March
April

i5,342,343-8i

CREDIT.
Proceeds in Mexican currency.

Loss.

Totals.

1908
July

.-._

$328,706.49

$1, 174.56

$329,881.05

August

1,580,44493

5,834.67

I,586,279.60

September

1,296,560.18

4,340.83

1,300,901. 01

October

1,877,333.09

6,9335o

1,884,266.59

November

1.178,558.82

4,23798

1,182,796.80

December

1,556,088.14

5,646.61

i.56i,734.75

January
February

2, 410, 067. 67

2,418,751.62

March

2,334,065.63

8,683.95
7,490.28
8,763.89
2,496.30
55,602.57

I5.342,343.8i

1909

April

2,057,545-61
667,370. 68
15,286,741-24

MEXICO, June 30, igog

279

2,065,035.89
2,342,829.52
669.866.98

National

Monetary
ANNEX

I I .—Specie

Held b y the Held by general treasury
banks.

Commission
circulation—Gold.

Held by com
mission.

In hands of
public.

1907
January _ _

I$i3, 511,005

$ 4 0 , 595.495

14.042,075

February _

4 2 , 884,425

March

44. 266,585

550,000

15,049.915

April

45. 0 6 2 , 7 3 0

450,000

16,833,

May

46. 6 6 4 , 2 9 5

900,000

15,982,205

June

46. 7 0 6 , 2 4 0

2,400,000

15,920,260

July

48, 6 2 0 , 1 0 0
Si. 677,205

1,155,000

16,971,400

August
September
October _ _.
November.
December.

770

16,621,765

$247,530

52, 992,550
53. 352,980

372,250

200,OOO

16,781,700

413.890

1,080,000

17,319.630

53. 394,160
53. 400,150

993,325

I,IOO,OOO

17,879,015

2,017,515

920,000

18,148,835

1908.
49. 980,235
48, 631,920

3,019,605

4,000,000

18,646,660

4,825,000

4,840,000

18,189,580

49, 123,455
So, 962,940

5,870,000

4,200,000

17,893,045

6,032,000

3,760,000

17. 3 3 L 560

May

5i. 763.215

6,070,000

5,000,000

17,173,285

June

52. 730,470
49, 776,3io

7,420,000

6,100,000

15.376,030

9,170,000

7,520,000

16,580,190

47. 064,760
47. 191,580

10,170,000

9,740,000

16,411,740

10,210,000

9,740,000

16,244,920

46. 898,330
47, 702,670

10,210,000

IO,OOO,OOO

16,278,170

November.

io,240,000

9,300,000

16,143,830

December.

46, 873,680

11,275,000

9, 3 0 0 , 0 0 0

15,937,820

January _ _

46,997,060

11,290,000

9.300,000

15.799.440

February _

46,499, 130

11,300,000

9,680,000

i5.907.37o

March

47,184,460

11,320,000

9.000,000

15,882,040

April

47,710,745

11,320,000

8,500,000

15.855.755

May

49.697.540

11,340,000

6,500,000

15,848,960

June

51.549,015

11,340,000

5,ooo,000

15,497,485

January _ _
February _
March
April

July
August
September
October

1909.

MEXICO, June 30, igog.

280

Banking

System

M e x ic

A N N E X 12.—Specie circulation—Silver

Held by the
banks.

Held by
general
treasury.

pesos.

Held by
commission.

1907
$16,444: 017
13,944: 885
12, 596, 685
12,328 557
13.428, 335
14.379: 036
12,576, 527
8,084, 133
8.330, 741
9,086, 235
9,965, o n
io,86r, 485

January
February
March
April
May
June
July
August
September
October
November
December

$1,400, 000
1,400, 000
1,400, 000
1,140, 000
850, 000
850, 000
850, 000

$5,812
5,868
5,890
5,9io
6,340

850, 000
850, 000
850, 000
863, 000
863, 000

1908
January
February
March
April
May
June
July
August
September
October
November
December

n . 4 7 3 . 129
11,958,516
13,079,247
13,985,462
15,612,029
17,763,545
20,523,594
21,857,162
23,356,872
24,488,924
25,605,708
26,449,445

8,810
14,850
28,750

2,050,000

43,ooo

2,770,000

53,ooo

3,880,000

74,000

3,000,000

80,000

1,000,000

90,000

1,000,000

113,000

500,000

130,000

200,000

158,000
164,000

1909
January
February
March
April
May
June

27,224,115
27,754,347
28,326,616
28,820,917
29,531, 549
29,869,472

MEXICO, June 30, 1909.

281

863,000
1, 193,000

289,000
190,000
206,000
216,000
220,000
230,000

National

Monetary

Commission

A N N E X 13.—Specie circulation—Subsidiary
Held by
the
banks.

-|$3,898, 397.65
4,737, 220.95
4,908, 748.89
5.283, 706.66
6,167, 694.53
6,685, 180.84
7,106, 389.46
6,662, 689.82
6,100, 319- 08
5,313, 692.44
4,963, 968.74
5.095, 850.67

,299, 332.62
, 202,742.33
,336, I55-56
, 012,741.24
, 230,242.31
203.68
,145,
026.10
,826,
655-97
7,099,
639.13
7,399,
7,421, 075-27
7,3o6, 739- 26
6,991, 221.48
6,368,795.00
5,855,973-42
6,331,216.72
5,680,491- 73
5,709,360. 28
6,063,919. 48

Held by
the
treasury.

$6,030.95
6,743-52
I,606.34
2, 526. 64
838.73

Held by
commission.

coins.

In hands of
public.

Total coined.

$64,500 |$I3.4I2, 249.25 517,375 146.90
90,700 16,414, 225.95 2 1 , 2 4 2 , 146.90
52,000 18,517. 398.01 2 3 , 4 7 8 , 146.90
43.000 20,038, 364.04 2 5 , 3 6 5 070.70
41,000 21,556, 376.17 2 7 , 7 6 5 , 070.70
628,000 23,221, 889.86 3 0 , 5 3 5 070.70
568,000 24.340, 300. 74 3 2 , 0 1 4 690.20
245,000 25,660, 969.43 3 2 , 5 7 4 690.20
104,000 26,753. 627. 60 3 2 , 9 6 4 , 690.20
66,000 27.843, 391-42 3 3 , 2 2 4 , 690.20
28,000 28,470, 194.82 3 3 . 4 6 4 690.20
145.000 28,683, 000.80 3 3 . 9 2 4 , 690. 20
102,000
50,500
71,500

23.358.33
9,836.86
20,914. 79
15,466.87

47,000
25,000
19,000
125,000
164,000
206,500
126,000
i2i,500
120,500

28,600, 830.26
29,846, 102.13
29,774, 36i.49
29, U S .002.89
28,933, 303.28
28,024, 672.25
27, 286,822.98
26,973. 816.54
26,609, 192.74
26,681, 778.07
26,789, 536. 15
27, i n ,501.85

34,004, 690.20
34, 104,690.20
34,194, 690.20
34,194. 690.20
34,194, 690.20
34,194, 690.20
34,238, 690.20
34. 238,690.20
34,238, 690.20
34.238, 690.20
34,238, 690.20
34,238, 690.20

14,358.36
2,647.01
3,531.68
3,101.79
2,955-87
3.371.51

119,500
i8«,500
232,000
195,000
184,500
226,080

27. 736,036. 84
28,267,569.77
27.794,94i8o
28,483,096.68
28,464,874. 05
28,170,899.21

34,238,690.
34,308,690.
34,361,690.
34,361,690.
34,361,690.
34,464, 270.

2, 527.32
5.345-74
12,673. 15
19,946.07
6,144.61
5,814.27
841.12
1,217. 69

282

20
20
20
20
20
20

B a n king

System

A N N E X 14.—Statement showing increase of fund
currency.

Mexico

for the regulation

of the

[Condensed table.]
Profit:
On coinage of gold
On coinage of silver
On coinage of nickel
On coinage of bronze
On dealings in exchange
Interest
Sundry

$3,302. 26
6,111,973. 05
548, 963. 25
548, 223. 48
369, 190. 85
469, 863. 21
86, 219.89

•

Total profit
Loss:
On copper coins withdrawn from circulation and melted down to
date
Expenses of refining

8, 137, 735-99
32, 148. 70
3, 496. 14

Total loss

35, 644. 84
R£SUM£.

Total profit
Total loss

$8,137,735.99
35, 644. 84

Net profit

8,102, 091.15

Original fund for the regulation of the currency

10, 000, 000. 00

Amount of fund for regulation of the currency on June 30, 1909. _ 18, 102, 091. 15
Net profit of $8,102,091.15 earned was—
From May 1, 1905, to June 30, 1906
Fiscal year—
1906-7
1907-8 _
1908-9

1, 747, 573. 62
4, 064, 203. 71
1, 288, 563. 02
1, 001, 750. 80
8,io2,091.15

MEXICO, June 30, IQOQ.

A N N E X 15.—Statement of cash handled by office of exchange and
commission from May i, 1905, to June 30, igog.
Received.
$ 1 1 , 8 9 1 . 06

May 1, 1904, to June 30, 1905
Fiscal year 1905-6:
July
-_
August
September
October
November
December
January
February
March
April
May
June

Paid out.
$ 1 1 , 891. 06

12,933-52

10,678.92

213.395-23
163,629.07

214,429.21

1 4 7 , 8 8 2 . 06

178,836.40

124,789.91
2 6 3 , 2 8 1 . 89

271, 1 2 9 . 4 5
4,023,576.94

4, 0 1 2 , 8 2 4 . 4 0

3,996,164.28

4, 0 0 7 , 2 5 9 . 8 0

4,144,210.40
4,200,982.99

4. 138,396.30
4,217,452.37

3,621,466.52

3.623,384.07

5.946,31503

5.945.520.69
6,979.923.46

6 , 9 7 7 . 4 6 9 . 77

283

currency

National

Monetary

Commission

A N N E X 15.—Statement of cash handled by office of exchange and currency
commission from May 1, 1905, to June 30, 1909—Continued.
Paid out.
Fiscal year 1906-7:
July
August
September
October
November
December
January
February
March
April
May
June
Fiscal year 1907-8
July
August
September
October
November
December
January
February
March
April
May
June
Fiscal y e a r 1908-9
July
August
September
October
November
December
January
February
March
April
May
June

$3,002, 122.85
4,025, 791.52
4,217, 927.17
5,356, 008.81
6 , 2 3 5 , 55 7 - o 8
8,738, 040.56
12,980, 171.68
16,793, 201.44
14,293, 230.09
13,961, 345-98
7,746, 126.20
7,761, 469.01

811.28
388.74
496.82
421.77
099-33
179-53
812.82
094.45
457-52
335-42
476.50
048.51

1 3 , 5 2 4 , 595-90
1 2 , 9 0 6 , 553-19
8 . 7 9 7 , 433-49
, 0 5 7 , 660.13
, 6 0 s , 319.08
, 6 1 6 , 243-23
, 0 6 6 , 317.95
, 9 6 2 , 785.28
, 244, 197- 76
, 9 5 8 , 260.25
, 702, 995-36
, 9 4 2 , 414.21

7, 627 026.98
791.16
33i-13
361.81
570.07
070.54
246.66
202.66
7, 767 844. 64
3,784 765.71
4,759 441-93
3,6n 433•83

7, 6 2 1 , 820.61
6 , 7 6 9 , 086.26
4 , 6 1 1 , 791.23
5 , 1 6 2 , 223.12
3 , 8 5 4 , 352.93
2 , 6 5 4 , 223.78
3 1 3 , 197.03
639. 79
767, 716.72
7 8 3 , 049-46
757, 935-87
599, 972.88

13.524,
12,904,
8,798,
7,o57,
4,605,
4,617,
7,066,
2,962,
5.245.
5,959,
5,702,
6,941,

6, 77i
4, 602
5, 162
3,854
2,654
5.315
5,213

Total
M E X I C O , June

372.93
894.28
753-95
228.95
6, 230, 014-83
8 , 7 3 7 , 022.75
1 2 , 9 8 0 , 619.09
i 6 , 7 9 3 , 046.84
1 4 , 2 9 s . I73.56
1 3 , 9 5 9 , 147- 08
7 , 7 4 6 , 357.78
7 , 7 6 2 , 213.89

$3,009,
4,024,
4,215,
5-357,

285,350,602.06
30,

IQOQ.

284

285,333,146.33

^ P I P E J S m i X D . - T a b l e N o . 1.
R e p o r t s of Condition o f M e x i c a n I n s t i t u t i o n s of Credit, J u n e 3 0 , 1 9 0 9 .
LIABILITIES.

CLASS AND NAME OF INSTITUTION.

CASH HOLDINGS.

Capital not
paid.
Gold.

Silver.

Fractional
money.

Total metal.

N o t e s of other
banks.

Stocks and
bonds.

Discounts.

Loans on collateral.

Creditor current
accounts.

Various credits.

Participations.

Real estate.

Fixtures.

Impersonal
credits.

Mortgage loans.

Promotion
loans.

Other securities.

Deposits in
Property in
process of sale. different bants,

Total.

Authorized
capital.

Reserve funds.

Deposits for more
than three d a y s .

Special guaranty
funds.

W i t h o u t interest.

Other accounts.

Total cash.

ACCOUNTS IN

DEPOSITS AT SIGHT OR AT NO MORE
THAN THREE DAYS.

ACCOUNTS IN TRUST.

Notes in circulation.

Cash bonds in
circulation.

Mortgage bonds
in circulation.

Various debits.

CLASS A N D N A M E OF I N S T I T U T I O N .

TRUST.

Current accounts.

Impersonal
debtor accounts.
Securities.

Total.

Other accounts.

A t interest.
BANKS OP ISSUE.

BANKS OT ISSUB.

Banco Nacional de Mexico
Banco de Londres y Mexico
B anco Minero de Chihuahua
Banco Peninsular Mexicano>-_
Banco de Durango
Banco d e Zacatecas
Banco de N u e v o Leon
Banco del E s t a d o de Mexico
Banco de Coahuila
Banco de San Luis Potosi
Banco d e Sonora
~
B a n c o Occidental de Mexico
Banco Mercantil de Veracruz. _ ..
Banco d e Jalisco
Banco Mercantil de Monterrey
B a n c o Oriental de Mexico
B a n c o d e Guanajuato
B anco d e Tabasco
i
B a n c o de Hidalgo
B a n c o de Tamaulipas
^~_
B a n c o de Aguascalientes^
B a n c o de Morelos
B a n c o de Queretaro
B a n c o de Guerrero

$ 3 6 9 , 3 0 0 . 00

$29,330,465.00
8,I93» 200.00
1.058,310.00
1,988,230,00

400,000.00

i , 0 1 9 , 3 0 0 . 00

321 ,900. 00

,807.76

$50,059 ,685.82
11,298

042.47

IS1.578 , 220.00
304 530.00

S51,63 7 905.82
12,602 572.47

$10,278, 576.05
10,856, 486.97

1,696 , 9 0 7 . 9 9

84 675.50

1,781 ,583.49

800.00

2,388 .737-76

2,005, 7 3 6 - 0 0
4, 70o, 1 4 5 - 9 4

32, 735-00

574. 295-41

465, 0 0 0 . 0 0

35 , 965.00

482, 523'12

ISO, 0 0 0 . 0 0

23. 375-oo

918, 229.90

782, 9 0 0 . 0 0

234,260.00

296 , 8 8 7 . 0 0

413-41

2 , 3 3 1 , 9 3 7- 76
560.41
541 ,

179.465.OO

249 , 7 9 2 . 0 0

17 3 0 I . 12
66 8 0 O . 9 0

12
446 ,55^894 , 8 5 4 . 9 0

147 4 0 8 . 2 5
14 4 2 3 . 0 8

678.25

38. 94i.oo

1,626, 619.25

433. 778.50

,495.o8
950 ,605.81
1 . 3 2 7 . 263.58
1 , 4 9 5 . 376.43
2 , 1 8 6 , 546.27
1 , 1 7 2 , 642.25
750, 403.28
2 , 8 8 1 , 268.08
6 1 8 , 252.43
5 2 8 , 076. 64
6 1 6 , 934-63
704, 408.30
3 7 7 , 006.91
3 7 9 . 479.56

3 2 , 800.00

736, 295.08

240, 0 0 0 . 0 0

567,160.00

260 , 8 9 4 . 0 0

634,760.00

805,, 5 1 0 . 0 0

574

470.00

1 1 4 ,, 6 0 2 . 0 0

379t835oo
550,420.00
501,405.00

540,, 9 0 3 . 0 0

I,154, 730.00
539,210.00
SI9.875.0O
538,515.00
233*120.00
288,855.00
318,245-00
508,785-00
215,500.00
35,565-00
4i9,36o.oo
86,685.00

T o t a l . __

$16,51a , 9 8 6 . 0 0 [ $ 4 , 2 1 6 , 2 3 4 . 8 2
2,723 ,477-oo
38x , 3 6 5 . 4 7
521 ,899.00
n 6 ,698.99

49,050,425-00

676,. 8 9 8 . 0 0
8 8 6 , I75-OD
873, 986.00

29, 8 6 7 . 8 1
99, 9 4 5 - 5 8
J07, 7 9 6 . 4 3
157, 8 3 O . 2 7

611, 328.00

104.25

163, 0 4 7 , 0 0
2, 078 5 6 6 . 0 0

67 4 8 1 . 2 8
264 1 8 7 . 0 8

373 801.00

33L43

230 5 3 6 . 0 0

685.64

2 4 8 , C&8.00

5o, 6 2 1 . 6 3

175. 2 1 2 . 0 0

20,

159. 4 2 2 . 0 0

317 ,879.00
200 2 7 7 . 0 0
71 0 9 8 . 0 0
29,415

143.00

26:
II,
14

4H.30
084-91
035.56
392.31
744.64

5.886,973.92

1,587
703

S&, 165.00

1,008, 770.81

5i8, 1 2 5 . 0 0

105, 6 3 5 . 0 0

1,432, 898.58

HO, 856.00

76, I93-0O
168, 23S-oo
75, 0 8 5 . 0 0
93. 3 7 5 - 0 0

1.571. 569-43

658, 225.00

2.354, 781.27

If 170, 0 0 4 . 0 0

1,247, 727.25

669, 169.75

8 4 3 , 778.28

753. 298.30
5,075, 123.91

264, 4 8 5 . 0 0

3.145. 753.o8

55, 8 0 0 . 0 0

674. 052.43

5, 940.00
109, 760.00
31. 520.00
I 895.00
I35-0O

631, 029.31
172 5 2 7 . 6 4

485.00

84.352*541-92

4,273.794.5o

045.00

534, or6.64
726, 694.63

735. 928.30
378, 9 0 1 . 9 1
393, 6 1 4 . 5 6
654, 0 7 4 . 3 1
r75. 0 1 2 . 6 4

646, 953-75
154. 942.75
183. 9 1 0 . 0 0
401, 876.00
95. 425.00
150, 0 0 0 . 0 0

877-46
3 0 , 7 9 5 . 514.So
4,029. 325-15
3.22s, 774-49
1.446, 647.86
S98, 0 5 1 . 0 3
1 . U S , 541.04
1 . 515, 6 4 4 . 9 4
830, 965.53
1,765, 452.89
410.82
1,913.
390.00
9S8,
815-75
3.667,
565-74
4,375,
1S6.79
809,
327.95
2.653,
925-98
1.634.
953.35
778,
829. 76
476,

$22,979,

88,626,336.42

$45,934. 706.27

388, 68l.

2 0 2 , 665.70

68 ; 4 9 1 - 4 1

202, 044.85

107,144.63

10,076, 134.25

2 0 2 , 500.00

546.65

2,072, 102.42

13,375.248.71

4,142,172.92

n o . 76
179, 733-94

3,088, 0 6 1 . 5 9

437. 3 2 1 . 9 4

2 0 2 , 089. 96

29, 3 5 3 - 3 4

119, 739- 14

1, 6 9 0 , 8 4 5 - 3 1

51,524.94

100,829-35

1,739. 824.67

559, 704.15

7 0 , 321.47

20 9 4 7 . 0 6

58, 9 5 9 - 7 2

1 . 5 3 0 , 9 7 1 . 20

5,000.00

231,222. 50

740, 211. 99

2,963. 855.06

892, 727.81

2 2 5 , 000.00

000.00

96,067.94

715. 879.20

360, 949-33

1 2 4 , 053.78

72, 0 0 0 . 0 0
45. 9 5 2 - 5 2

4 , 6 9 4 , 239. 00

2,760, 166.09

129, 830.09

2,380, 825.05

2, 267, 9 3 0 . 4 7

3 2 6 , 758.46

165,

4.053,281.46

1 4 6 , 096.76
1 7 S , 947-25

377, 044- 20
9i6, 7I3-I7

3.921. 299.38

1,312, 017.51

3.065, 150. 0 0

3,705, 094-70

431. 462.37
976, 693-64

1,343. 692.12

1,773, 473-Q4

ss, 501.45

2, 4 6 6 , 7 7 2 . 1 0

I 5 S . 000. 0 0
2 4 5 . 134.65

199, 335-72
475. 180.52
2, 220, 532.96

2,660, 456.04
2,519, 0 0 0 . 0 0
3.758, 250.78

2, 0 2 6 , 1 6 4 . 5 1
689, 800,41

3 4 9 . 649.67
3 0 0 , 000.00

976, 6 0 3 . 8 4

11, 729, 3 6 4 . 8 0
1, 1 2 7 . 7 2 3 . 9 7

4 0 9 , 818.71

214.97

1.178,
13

170.19

395. 708,16

859.31

104,774-35
327,640.96

7 6 , 1 0 1 . 29

S3.2i9.342.6i

1,645,586.64
980,249.25

1 0 1 , 160.74

334, 839.46
35. 211.81

2 5 . 253.39
2 4 1 . 022. 65

2.495, 448.56
852, 016.54

8 7 . 323.01
3 7 . 848.18
1 0 , 1S0.24

267, 342-42
1,388, 318.54

8 5 . 000.00
4 6 , 040.28

6, 2 9 7 - 5 0
9 6 , 7 6 7 , 0 2 5 . 71

74.552,616.43

3,274,291.06

6,985.146.38

S92.31
762.28
384.23
059-47
435-87
971.89
243-05
224-35
166. 40
499.31
423.43
862.7t
982.50
773.09
431-20
945-68
917.78
925.926.37

913. 224.02

78, 614, 382.

10,414,932.22

3.947.695.35

188, 6 1 0 . 0 6
141, 9 2 8 . 2 8
27, 5 2 2 . 5 0

219,709.63

211,677-50

$248,745-09

159.400.00

256,176.52

1.34I.735-00
2,357.350.26

372.576.43

120, 072.81

5,519,000.00

365,631.67

393* 739-31
588, 6 0 7 . 3 7

6,903,878.84

366,178.33

260,000.00

4 8 9 , 2 6 2 . 22

411.081.05

929,912.28

255. 0 2 4 . 2 4

124,957.00

60,106.71

54, 348.68
321, 755-76
144. 658.98
4 2 , 638.84
461.93
42,

21,858.03
2 , 5 5 4 , 7 2 2 . 74

223,089.59
69.045-35

488,584.07

63,000.00

175,561.00

175.215.44
44. 59o. 00

000.86

22,187, 702.41

$ 4 , 5 0 5 , 3 6 5 . 17

48,112.51

109, 6 7 0 . 7 0
75, 148.69

St.

$379,400.00

186,584.90

1,391,807.62

9 0 , 541-43

186,370,663.94

56.303,557-29

$16,000, 000.00
$32,000,000.00
10,750 000.00
21,500,000.00
180,143.356.76
5,000,000.00
1,413. 077.15
18,434,433-04
16,500,000.00
73 4 5 7 - 3 7
46,178,629.39
2,000,000.00
2 3 1 154-31
13,346,612.48
267, o o o . 0 0
1,000,000.00
6,576,003.95
2,ooo,000.00
365. 6 4 9 - 1 9
12,517,772.74
3,000,000.00
205, 579-75
9.611,031.44
2IO, 4 0 2 . 9 7
1,600,000.00
11,027,716.25
211, .183.98
r,100,000.00
9,709.187.97
1,500,000.00
472, 6 5 1 . 8 8
11,914,634.79
l6o, 3 9 3 - 8 2
1,500.000.00
8,375,505-33
3,000,000.00
645, 7 3 4 . 9 8
1 4 , 2 0 9 , 3 5 3 . 19
6,000,000.00
65 , 7 8 0 . 0 1
12,556,372.70
222 , 0 8 3 . 8 8
2,500,000.00
12,538,130.13
6lO , 3 1 3 . 7 8
8 , 0 0 0 , 0 0 0 . 00
36,730,135-07
3, 0 0 0 , 0 0 0 . 0 0
133 , 9 9 6 . 7 6
7,705.004.58
1,000,000.00
70 7 1 7 - 7 4
2,559.438.32
129 9 5 * - ° 4
1,000,000.00
3.004.347.58
228 , 4 0 4 . 8 2
2,500,000.00
8,980,581.85
16 . 8 9 3 . 4 3
600,000.00
2,695. 540.00
1,000,000.00
52 , 6 2 4 . 2 8
2.765.015.4i
1,000,000.00
47 , 3 7 4 - 4 6
3,261,215.94
500,000.00
996,158.48

$300,455,221.00

$1,117., 209.96

1,025, 733-07

100, 054. 0 8
160, 023.13

87,058,205.27

$16,055. 949.30 | $ I O I ,

7.086, 254-43

155. 254. 0 0

907,

|$2,2o6, 8 7 5 - 2 8 $328 8 6 2 . 7 1
34, 7 4 9 . 6 s
,006, 4 0 6 . 2 0

160.63

634.73

53.

$3,274,291.06

434. 168.01

i,944.

8,030, 686.51

042.92

152,

225.30

$25,694,681.15

$i.7i5.937'76
627.626.75

21,105, 183.00

997.
346, 643-45
68, 57S.78

468, 505.00
183, 175-00

$19,188, 304-50

2.562,357.92

10,432,603.40

4.505.365-i7

736,191,398.39

24S,745-09

I 118,800,000.00

32,584,425.60

$11,800,000.00

[$1,398,215.33

4.350,000.00

$40, 2 1 4 , 8 7 4 . 0 0

$13,421,189.95

|$IOI,388,68I.44

$t,117,209.96

$40,416,731-56

$16,675, 5 9 3 - 4 1

$26,022,725-35

;$300,455.22I.OO

1 0 , 4 1 4 , 9 3 2 . 22

180,143.356.76

8,243,804-78

78,614.382.00

1.372. 2 5 5 - 5 4

14,175,096-00

3,669,070.08

27.053.816.14

2,859. 5 0 0 . 0 7

3,070,805.00

604. 8 4 2 . 3 6

4, 2 9 1 , 1 7 8 . 0 0

59,292-39

375,000.00

143,057.83

29,425-32

6,912.56
xs.Sio.19
48,255*24

133,000.00

333.4io.96
43.287,94
51,580.68

15.911-90

533,853-29

59.299-69
289.783.39
181,503.44

84,140.79
439,702.74
26,220.31
156,546.75

1 0 , 0 3 0 . 01

215,000.00
315.596.33

306,308.14

223,091.77

17.529.55

4,093-22

40,000.00

11.029.51

8l.l47.45

433,000.00
4,864.59

68,378.90
346,139.92
136,408.90

i,57o.i5
12,339-64
18,318.45

34,000.00
6,500.00

24,387-18
12,658.00

593.64
I.930 5 7 o . 8 o
1.936 0 9 3 . 0 6
i,88r, 155-24
1, 263,3 2 8 . 2 0
4.9SO 0 9 2 . 3 1
3.134., 2 7 2 . 7 9
2.145. 644.62
3.187. 0 7 6 . S i
1.785. 3 9 8 . 1 3
1,637. 0 1 1 . 8 2
5.3ii. 90S.42
2 , 2 4 1 ,, 0 7 2 . 9 0
7 3 . ,655-23
3 2 9 ., 0 3 2 . 0 5
6 6 i ,, 7 5 0 . 9 2

2, 402

117,764.65

837,204.00
751.959-00 I
2, 023,756* 00
2, 0 8 0 , 9 1 5 . 0 0

i,354.57S-oo
1.549. 115.00
2,434.275.00
2 , 1 0 9 , 7 2 5 - 00
3.596,605.00
1,740,035-°°
r, 1 4 8 , 6 7 5 . 0 0
4 , 6 0 0 , 6 9 0 . 00
1 , 0 1 5 , 4 1 0 . 00
962,755-00
807,470.00
882,215.00

10,810.29

40,052.n

906,, 8 7 9 - 3 6

686,685.00

-15,861.37

4 1 ,. 8 1 8 . 7 3
794 , 4 2 3 - 6 0

625,980.00

656.06

92,159.26

5.549,6i3-8o
5.9I4.483-58
78i,538.77
827,481.79
479,037-8o
258,244-84
2,396 419-01
1,261,946.74
3,226,454-47
125,929.5i
573,487.or
2,330,869.94
612,046.56
io,o77.474.13
796,817.54
53,022,31
348,102.62
1,822,500.26
347,205.48
264,853.22
218,027.80
278,418.46

1,049,240.00
212,240.00

5,276,361.54 '
309,718.92

98,683-28
585.635-75
305.37i.oi
169.875-57
418,692.50
553,827.67
80,985.85
351. 9 9 9 - 6 6
393.668.30
168,036.49
711,722.4S
252,842.79
295.338.99
24,812.31
iSi.875-58
74.356.33
74,637-68
59,990.82

4.975.792.88

107,144.63

18,434,433-04

13.375.248.71

46,178,629-39

1 , 6 9 0 , 8 4 5 . 31

13,346,612.48

I . S 3 0 . 9 7 I . 20

6.576,003.95

4.694.239-00

12,517.772.74

3.947.695-35

i.34i.735-oo
3,357.350.26
5,519,000.00

2,250,566.60

875.718.79

58,125,969-71

60,208,970.37

92,221,477-°°

40,050,226. 92

$676,153-65

6.903,878.84
260,000.00

2.554.722.74

186,370,663.94

56,303.557-29

676.153-65

Total

___

i,500,000.00

1,500,000.00

281, 6 9 0 . 0 0
519, 4 6 0 . 0 0
801, 150.00

69,200.00

32.262.54

383,152.54

498,765.00

881,917.54

2,675, 248.00

20,020.00

19.954.64

S59.434-64

17,825.00

577,259.64

297.936.80

89, 220. 00

5 2 , 2 1 7 . 18

942,587.18

516,590.00

1. 4 5 9 . 1 7 7 - 1 8

2,973.184.80

243.638.42

475.636.35

1 , 0 4 9 , 6 2 6 . 12

2 , 5 2 6 , 728. 52

411,155-79

35,255-56

422,265.41

1 6 , 0 9 0 , 5 2 8 . 72

268, 2S0.00

26,580,280.43

5,000,000.00

535,000.00

257.455. 17

50,335-90

633.809,36

300,000.00

2,497-IS

1,926,628.37

2 1 , 3 0 2 , 598. 02

5,301.00

25.353.821.41

5,000,000.OO

128,030.00

243.638.42

1.099,962.02

3,160,537.88

273,581-00

37,393,126.74

2,348,893-78

51,934.101.84

1 0 , 0 0 0 , 0 0 0 . OO

663,030.00

1,461,663.10

54,888.79

2 2 0 , 7 8 2 . 48

-I-

1,682,445-58

54,888.79

1,233,350.32
•

143,900.92

1.377,251.24

$16,066,400. 00

2,027,990.04

200,988.18

2,5i5>423.73

575,884.28

2 6 , 5 8 0 , 2 8 0 . 43
25.3s3.821.41

16, 7 6 9 , 8 0 0 . 0 0

4,543.413-77

776,872. 46

5L934,101.84

32,836,200. 0 0

Central Mexicano
Comercial Refaccionario de C h i h u a h u a - . .
Mexicano de Comercio £ Industria
de " L a Laguna'' (Refaccionario)
..
de Campeche
de Michoacan
»
Total_

S648—10.

3,000,000.00

( T o follow p a g e 284.)

N o . 1.

1.Soo,710.00
49,010.00
107,215.00
36.515.00
2, 420. 00
1. S7O.O0
1, 6 9 7 , 4 4 0 . 0 0

305.477.oo
503.00
$, i n . 00
7, 089. 00
35,385.00
11,544. 00
3^5,109.00

73.053.92

1, 879, 240.92

,710,766.00

3,590,006.92

3.885,577.49

13,649,884. 12

2 2 , 4 7 6 , 8 8 7 . 16.

50, 076. 16

52,630.00

102,706.16

83,039.53

395.5^3-11

15,881.78

128, 207. 78

610, 2 7 5 . 0 0

738,482.78

2, 034, 6 9 0 . 0 7

3,447.945- 24

20,313.21

63,917- 21

4.160.90

41,965.90

12,055.00

5 4 , 0 2 0 . 90

147.156.63

112,973-94

4,250.00

10,755.41

23,869.41

49. 7 2 0 . 0 0

73.589.41

92,400,00

8oo,935-89

2 2 , 6 0 6 . 12

5^3-16

124,728.38

2,187.277-38

16,

645.00

2,452,091.00

8 0 , 5 6 2 . 21

4,639,368.38

86,419.63

6,329*283.35

368,685.93

18,775,928.23

6,360. 00
3.113.857.35
1,955.090.05

27.579,050.68

11, 279, 234. 28

8 , 8 7 2 , 256. 76

518,940.91

24,248.25

1.893,929.70

2,315,270.71

356,060.67

955.3o6.o2

148,790.29
86,206.93
428,428.92

15.003,471-58

11,875.201,86

59I.595-50

10,000. 00

3.267.23

402,045-57

6,000. 00

30,360.00
39.859.49
95,000.00

t,158,860.56

13.315-83
5,146.45
10,706.53
48,436.04

,920, 736. 12

14,398.570,43

207,075-53

311.12
,o8l, 198.67
74,382.67
50,396.34

8,003,758.00
1, 740, 3 0 0 . 0 0
22,340.16

80,559-28
4,207,584.20

201, 134-57

jfc>2, 245.989- 30
82,809.38
300,825.68
Si.747-95

941.1S7.43

20,006.83
615-70
116,840. 67

410,700.00
122,277.33

24,164,968.59

5,884,047*89

2.681,372.31

6,021,511.09

!
j
!
281,820.02
i
i 1,666,987.80
'

948,807.82

I
I
I
;
:

89,011,861.50
1,217,185.69
24,820,958.36

3 0 , 0 0 0 , 0 0 0 . OO

9,592,709.86
1,888,972.56
I,843.344.15
128,375,032.12

1,625,636.37

4.950,000.00

8,692,940.09
27.568.85

200.000.00

14.738.66

5,004.87

1 0 , 0 0 0 , 0 0 0 . OO

108,544.89

75,000.00

6 , 0 0 0 , 0 0 0 . OO

23,896.40

11,092.22

I,000,000.00

4 4 . 4 5 1 - 17

600,000.00

29.752.15

800,000.00

1,847.019- 64

1 2 , 5 0 0 . 00

255.554-98
76.526.97

1.341-67
5,041*097.09

13,841-67

9,052,590.89

Total.

6,392,411-87

4.865,143*73

,504,225.41
i, 134.88
959.059-62

307,447-64

1 7 2 , 3 2 1 . 10

507,690.52

307,422.56

----$5,555,900.00

11.892,177*33

66,000.00

902,738.43

541,397- 14 j
1,261,125.53 !
7,068. 15
574,987.79
8,776,990.48

Banco Internacional € Hipotecario de Mexico.
Banco Hipotecario de Credito Territorial Mexicano.
Total.
BANKS OF PROMOTION.

BANKS OF PROMOTION.

Banco
Banco
Banco
Banco
Banco
Banco

736,191.398.39

Banco de Tabasco.
Banco de Hidalgo.
Banco de Tamaulipas.
Banco de Aguascalientes.
B a n c o de Morelos.
Banco de Queretaro.
Banco de Guerrero.

MORTGAGE BANKS.

Banco Internacional e Hipotecario de Mexico
Banco Hipotecario de Credito Territorial M e x i c a n o .

9.709,i87.97
1 1 , 9 1 4 , 6 3 4 - 79
8.275,505.33
1 4 . 2 0 9 . 3 5 3 - 19
12,556.372.70
1 2 , 5 3 8 , 130. 13
36,730,135.07
7,705,004-58
2.559.438.32
3,004,347-58
8,980.581.85
2,695,54o.00
2,765,015-41
3,261,215-94
996.158.48

488,584.07

5,500.02
18.723,668.52

9,611,031.44
1 1 , 0 2 7 , 716. 25

1.391.807.62

Banco Nacional de Mexico.
Banco de Londres y Mexico.
Banco Minero de Chihuahua.
Banco Peninsular Mexicano,
Banco de Durango.
Banco de Zacatecas.
Banco de N u e v o Leon,
B a n c o del Estado de Mexico.
B a n c o de Coahuila.
B a n c o de San Luis Potost.
Banco de Sonora.
Banco Occidental de Mexico.
Banco Mercantil de Veracruz.
Banco de Jalisco.
Banco Mercantil de Monterrey.
B a n c o Oriental de Mexico.
Banco de Guanajuato.

5,621,900. 0 0

509,120. 8 6

128,141.68

18,984,3x8.51

7.072.305-25

8 9 , 0 1 1 , 8 6 1 , 50

14,398.570.43

1 , 2 1 7 , 1 8 5 . 69
8,003, 758.00

24. 8 2 0 , 9 5 8 . 3 6

1, 7 4 0 , 3 0 0 . 0 0
22,340.16

9, 5 9 2 , 7 ° 9 - 8 6
1,888,972.56
1,843.344.IS

|-----

24.164.968.59

-----

128,375,032.12

Banco
Banco
Banco
Banco

Central Mexicano.
Comercial Refaccionario de Chihuahua.
Mexicano de Comercio £ Industria.
de " L a Laguna" (Refaccionario).

B a n c o de Campeche.
B a n c o de Michoacan.
Total.

A P P E N D I X r > . - T a b l e N"o. 2.
B a l a n c e S h e e t of B A N K S O F P E O M O T I O N a t E n d of E a c h H a l f Y e a r , 1 8 9 8 - 1 9 0 9 .
ASSETS.

LIABILITIES.

CASH HOLDINGS.

DATE.
Capital
unpaid.

Gold.

Silver pesos.

Fractional
money.

Total metal.

Bank notes.

Total cash.

Stocks and
bonds.

Discounts.

Loans on
collateral.

Mortgage
loans.

Promotion
loans.

Various
credits.

Real estate,
etc.

Authorized
capital.

Reserve
fund.

Special guaranty fund.

Deposits at
sight or at no
more than
three days.

Deposits for
more than
three days

Cash bonds in
circulation.

;$2,770,330. -3
5,063,924.48
7,215,774.93
6,997,844-31
4,489,412.38
6,819,614.91
9.461,410.84
7,220,473-79
7. 1 7 9 , 5 8 6 . 8 0

$185,023.23
691,513.73
1, 002, 510. 62
1,251,484- 27
i, 7 5 1 . 4 0 5 . 8 1
2,635,685.24
5.337,o78.11
6, 2 3 8 , 3 9 1 . 6 2
7.215,346.15

$Soi, 6 0 0 . 0 0
1,802, 3 0 0 . 0 0
3.39J. 1 0 0 . 0 0
2.155, 6 0 0 . 0 0
1.769, 6 0 0 . 0 0
3 , 182, 1 0 0 . 0 0
2,392, 4 0 0 . 0 0
809, 0 0 0 . 0 0
2,562, 9 0 0 . 0 0

Various
debits.

Total.

December 31—
1899
1900
1901
1902
1903
1904
1905
1906

1907
1908
June 3 0 —
1898-99

|$3,ooo, 0 0 0 . 0 0
105, 0 0 0 . 0 0
163, 8 0 0 . 0 0

$1,668,859.83
1 , 4 7 6 , 3 9 1 . 21
i» 27S.253-6s
1, 2 5 7 . 4 1 0 . 5 9
i,284.579-39

100, 000. 00
1 0 0 , OOO.OO
1 0 0 , OOO.OO
5,000, 000.00

945.00
5.500. 0 0 0 . 0 0

11,915.

$1,029,465-00
1,039.615.00
1,606,290.00

$168,008.00
169,925.00
55,681.00

$23,624.09
74,125.38
107,468.51

1, 2 2 1 , 0 9 7 . 0 9

1,283,665.38
i,769.439-5i

$ 8 4 9 , 8 6 7 . 00
913,873.00
2,139,604.OO
2,388,851.00
2 , 5 0 I , 3 8 5 - OO
2, 150,642. OO
2,004,759.OO
2 , 8 l 7 , 9 2 0 . OO

3,000,000.00

1899-19001900-1901.

240. 0 0 0 . 0 0

1901-2

104. 3 0 0 . 0 0

1902-3

1,429. 900. 00

1903-4
1904-5
1905-6
1906-7
1907-8
1908-9

100, 000. 00

8648—10.

70. 8 0 0 . 0 0
5.000 000.00
8,000, 000.00
3.000, 000.00

934,885.00
1 , 0 8 3 , 6 0 0 . 00
1 , 1 9 6 , 8 4 0 . 00
1, 6 9 7 . 4 4 0 . 0 0

(To follow page 284.)

No. 2.

217,934.00
164,724.00
28, 396.00
3^5* 109.00

26,667.93
113,667.63
105,169.63
124,728.38

, 120,827. 18
, 662, 260.80
, 708, 790. 87
,349.825.27
,493.398.53
,179,486.93
,361,991.63
,330,305.63
,187,277.36

2 , 5 4 7 , 9 2 0 . OO
2 , 0 0 2 , 8 7 8 . OO
3,228,384. 00
2 , 0 1 9 , 0 7 4 . OO
2 , 6 3 2 , 8 5 0 . OO
1 , 8 0 7 , 6 4 5 . OO
I.7S5.775-00
2, 287,480. OO
2, 452, 09I. OO

$1,825,
1,464,
2,518,
2.390,
3.404,
3.646.
3.785.
3.371,
3.288,
4.587.

907-59
089.25
726.82
264.21
857.62
261.59
964.39
739.09
424.38

359-51

,244 , 6 0 3 . S 9
546, 3 0 4 . 6 6
668, 747- 18
665, 138.80
937, 174.87
368, 899-27
1 2 6 , 248.53
987. 131.93
147, 766.63
617, 7&S-63
639, 3 6 8 . 3 8

$750, 8 2 0 . 7 0
1.384, 796.06
2 . 9 3 3 . 004.96
3,868, 236.03
3. * o i , 765.50
7 . 7 4 3 . 853.26
6,095, 031.53
6,889, 160.87
9 , 6 0 4 . 323.01

695, 794.41
590, 904.25
968, 8 4 2 . 5 4
383, 238.76
086, 709.75
509. 734.98
108,

190.66

178, 79t-96
870, 3 0 1 . 6 8
329, 283.35

$3,460, 2 9 5 . 0 9
3 . 5 3 o , 497-07
7.042, 7 0 5 - 0 0
8 , 3 2 7 . 342.91
5,437. 781.20
4,800, 219.66
7.556, 1 5 8 . 9 9
i t . 5 7 L 381.62
13.270, 479.46
13,847. 930.27
2 , 2 1 0 , 326.00
4.057, 661.59
4,783. 000.76
7,229, 94S-17
6,331, 495-39
5.050, 327.26
6,405, 2 1 5 . 3 4
S . 4 4 3 . 751-42
11,872, 595-19
584-23
13.989.
928.23
18.775.

$i, 016,858.51
299.568.50
914.992.04

56&*473-i3

$520, 000.00
954.500.00

248,436.60
694,285.38
743. i n - 26
778,599-54
406,394.60
073.75I-37

289,
1.327,
1,514.
2.915.
3.278,
3,051,
3.658,

$70,127.90
73.534.02
42,967. 19
78,117.06
414,108.67

1,040,246.25

2,774,438.71
2,810,427.77
2, 670, 717. 18
5.169,955.56

693.75

060.94
768.72
687.73
740.22
9ii.13
589.98
3,200,
6 , 2 8 7 , 796.63
2 1 . 8 9 6 , 790-47
2 7 . 5 7 9 . 050. 68

520,000.00
1, 2 5 7 , 5 0 0 . 0 0

78,412-05
65,900.62
47.90i.55
78.675.77
941, 187.43

1,329.080.16
2, 7 8 0 , 8 0 1 . 29
2 , 9 4 7 . 7 7 0 . 10

3,695.933-23
2, 6 8 1 , 3 7 2 . 3 1

$ 1 , 5 5 3 . 020.39
4 , 0 5 6 , 74I.02
3 , 2 4 4 . 73I-38
8 , 5 9 4 , ,817.86
1 3 , 8 5 8 , 946.61
1 4 . 5 4 3 . 651.40
2 5 . 3 9 9 . 842.64
4 2 , 6 8 8 , 487-92
52.252.

635-07

56,685. 48l.01
1 . 5 5 3 . 667.06
2 , 8 5 8 , 083.50
1 , 1 8 0 , 541-37
3 . 5 I S . 855-23
14.149. 266.10
14.119. 226.08
21,383, 407.66
27,512, 498.57
51.924, 946.03
45.858, 881.28
6 3 , 2 2 1 , 545-14

$339, 679-58
386, 8 9 5 . 8 9
391, 730.72

$10,856, 081.58

$ 6 , 0 0 0 , 000.00

11,546, 396. 12

6,300, 000.00

17,656, 647.19

7,600, 000.00

26,825, 633-7^

7,Soo,000.00

$19,443-69
168,496.05

410, 000.00

3 0 , 282, 758.06

10,200, 000.00

233.133-93
1,626.93

$916,526.34

400, 0 0 0 . 0 0

30,396, 557-68

10,200, 000.00

1,041,200.19

2 , 0 0 0 . 00

390,
651.
652,
895.

000.00

51,466, 903.27

21,200, 000.00

028.63
392.74
249.29

77,009. 663.29

31.200. 000.00

zoo,424, 266.36

40, 200,000.00

121,778, 158.69

46,200, OOO.OO

2,048,389.63
2,178,631.16
5,934.008.37
1 . 3 1 0 , 5 9 2 . 96

3,004.87
4,004- 87
5 , 0 3 0 , 0 0 4 - 87

281,
383.
3S8,
409,
408,
395.
390,
651.
687,

8,297. 290.70

6,000 000.00

II, 766,892.89

6,000 0 0 0 . 0 0

I4,36l. 037.67

7, 600 000.00

18,788. 176.18

7, 600 000.00

735-15
783.17
325.72
135-05
375-23

33,438, 897.90

10,500 OOO.OO

30,442, 777.8i

10,200 OOO.OO

000.00

43,955. 809.85

21,200 0 0 0 . 0 0

000.00

50,488, 864.47

21,200 OOO.OO

224.34
425-06
296.60

88,058, 792.43

31.200 , 0 0 0 . 0 0

104.695, 377-35

46,200 0 0 0 . 0 0

128,375, 032.12

47.800 0 0 0 . 0 0

2,000. 00

19.443-69
168,496.05
233,133-93
925,013.73
1.039, 5 2 9 . 6 6
958,082.03
2,178,631.16
2,474,008.37
1,308,085.61
1,847,019.64

1,000.00
2,000.00

3,004.87
4,004.87
5 , 0 3 0 , 004.87
5,041,097-09

2,667,
3.391.
6,071,
7,666,
4,634,
5.77L
5.914,
9.695,
7.7ii,
9.o66,

712.73
396.22
671. 92
575-52
899-58
970.10
3i6.13
925-42
185.12
432.56

422,024.54
344,043.01
922,741.65
1,035,148.78
1,165,836.76
922,633.17
3,211,864.90
5.173.622.01
6,033,579.49
8, 7 7 6 . 9 9 0 . 4 8

428,
748,
.787,
,797
.932,

400.00
200.00
300.00
800.00
000.00

. 700, 6 0 0 . 0 0

.596, 9 0 0 . 0 0
.590, 5 0 0 . 0 0
624, 4 0 0 . 0 0
. 621, 5 0 0 . 0 0

081.58
998.47
412.94
114.30
676.21
1 1 , 3 2 2 , 939-30
15.579. 113-49
2 6 , 4 3 7 . 138.31
40,O28, 387.71
5 2 . 2 7 9 , 727.91

$ 1 0 , 8 5 6 , 0S1.58
n . 5 4 6 , 396.12
17.656, 6 4 7 . 1 9
26,825, 633-78
30, 282, 758.06
3 0 . 3 9 6 , 557-63
5 1 . 4 6 6 , 903.27
77,009, 6 6 3 . 2 9

2.297, 290.70
2,229, 3 H - 9 3
2,108, 9 0 3 . 3 9
I.173, 328.68
9.514. 359.87
11,469. 511.81
12,40O, 52S-55
I S . 3 8 4 . 147-41
3 7 . 9 2 0 , 731-76
37.788. 1 2 2 . 2 6
5 0 , 2 2 1 , 592.35

8,297,290.70
11,766,892.89
14,361,037.67
18,788,176.18
33.438,897.90
30,442,777-81
43.955.809.85
5 0 , 4 8 8 , 8 6 4 . 47
8 8 , 0 5 8 , 7 9 2 . 43
104,695,377.35
1 2 8 , 3 7 5 , 0 3 2 . 12

$4,856,
1,469.
2.330,
7.179,
8.759,

100,424,
121.778,

266.36
158.69

A P P E N D I X D.—Table !N~o. 3.
Balance Sheet of M O R T GA.GE! B-AJSTKS at E n d of E a c h H a l f Y e a r , 1898-1909.
ASSETS.

LIABILITIES.

CASH HOLDINGS.

DATE.
Capital unpaid.
Gold.

Silver pesos.

Fractional
money.

Total metal.

Notes of other
banks.

Total cash.

Loans on collateral.

Mortgage loans.

$258, 900.37
116, 898.47
*3o, 8 9 6 . 9 1
307, 0 3 6 . 0 0
496, 138.24
798, 217-75
I , 1 6 2 , 706.16
1,827. 914-19
1,033. 572.62
887, 6 2 9 . 9 4
700, 3 2 1 . 2 0

$ 4 , 9 3 3 ,. 8 0 7 . 5 7
7.176, , 7SO-54
7,808, , 4 4 5 - 4 2
10,633, , 4 9 2 . 8 8
12,138, , 5 6 1 . 2 1
12,844, , 9 4 2 . 2 2
13,803, , 4 2 1 . 6 4
15. i 3 t . 726.97
18,350, , 9 0 6 . 6 5
21,692, 8 8 7 . 5 2
30,247, , 6 0 3 . 5 8

;

$177,189-47
21,751.62
3S.327-5o
3,652,003.26
3 265,936.36
3,227,003.94
2 , 9 8 4 , 6 0 4 . 79

$1,084,354.48
848,961.51
901,444.31
799.308.63
1.428,516.14
703.945-12
529,860.70
302,017.74
341,663.24
334,960.03
229,871.85

185,644.70

11, 602. 50
4,984.33
1,134,404.31
2,266,179.03
3,192,680.83
2 , 8 t o , 210.31
2,973.184.80

919. 4 8 2 . 2 5
989. 734-01
1.023. 9 7 3 - 2 4
774. 749-53
779. 934-91
465. 214-35
478. 4S6.6s
340. 4 9 7 - 0 0
358, 1 9 2 . 8 0
258, 2 0 0 . 4 3
343. 6 3 8 . 4 2

6,733. 6 8 0 . 3 7
6,530, 691.65
10, 154. 750.85
I I . I 5 5 . 261.78
1 2 , 2 7 1 , 150.95
13.694. 830.40
14, 014, 3 2 8 . 9 0
1 6 , 3 6 8 , 130.51
1 9 . 3 6 1 , 939-57
26,041 9 2 5 . 8 5
37,393 1 2 6 . 7 4

3 . 1 4 2 . 852. 70
3 . 3 3 2 , 128.57
3,945. 152.63
4,447. 116.10
3.460, 956.04
2, 9 2 6 , 294-13
4. o o i , 4 6 4 . 4 9
4 . 3 3 4 , 597-64
S.403. 087.13
5.339. 170.64
6,882, 974.68

Stocks and
bonds.

Vatious credits.

Real estate,
etc.

Total.

Authorized
capital.

Reserve fund.

at sight
Special guaranty Deposits
or at no more
fund.
than three days.

Deposits for
more than three
days.

Mortgage bonds
in circulation.

Total.

Various debits.

December 31—
1898

$1,500,000.00
1,500,000.00

18991900
1901
1902
3903
1904
1905
1906
1907-1908
June 3 0 —
1898-99
1899-1900
1900-1901
1901-2
1902-3
1903-4
1904-5
1905-6
1906-7
1907-8
1908-9

1 , 5 0 0 , 0 0 0 . 00
2,500,000.00
1,500,000.00
i, 500,000.00
1 , 5 0 0 , 0 0 0 . 00

----

1,500,000.00
1, 5 0 0 , 0 0 0 . 0 0

$203,745.00

1,500,000.00

323,400.OO

1,500,000.00

73o.125-00

$40,925.00
13.536.00
29,050.00

$26,355-71
35,601.00
16,543-04

$206,276.41
131.671.45
234,976-55
278,434.21
340,387-17
271,025.71
372.537-00
775.718.04

$576,835.00
336,045-00
267.703.00
358.035.00
428,830.00
860,200.00
412.055.00
1.i75»390.00

1,500,000.00
1,500,000.00
2 , 5 0 0 , 0 0 0 . 00
1,500,000.00
1 , 5 0 0 , 0 0 0 . 00
1,500,000.00
1,500,000.00
1 , 5 0 0 , 0 0 0 . 00
1,500,000.00
1,500,000.00

1,500,000.00

383,925.00
181,640.00
4 4 2 , 2 0 0 . 00
8 0 1 , 1 5 0 . 00

37.723.00
150,2tO.OO

3 8 , I39.0O
89,220.00
I

2,370. 12
69, n o . 67
40.7S3.03
53,217. 18

241,721.10
218,608.61
i3o,354'9i
213,803.52
231,610. 26
424.0I8.t2
4 0 0 , 9 6 0 . 67
521,092.03
942.587- l8

287,072.00
650,740.00
501,235.00
361,

270. 00

362,045.00

353.38i.oo
45o,995-oo
502, 960. 00
516,590.00

$824.
684,
97o,
783,
467,
502,

735-03
102.70
255-75
ill.41
716.45
679.55
636, 4 6 9 . 2 1
769. 217.17
1 . 1 3 1 , 225.71
784. 5 9 2 . 0 0
1 . 9 S i . 108.04
783,316.45
S76,633.72
528,793.10
869.348.61
631.589.91
575.073-52
593.655.26
777.399-12
851.955-67
,024,052.03
. 4 5 9 . 177- 18

127,512.97
2 9 8 , 2 1 9 . 67
293.315.76
631,181.44
, 137,680. 66
886,295.76
, 1 2 9 , 5 0 6 . 13
.434.725.56
797.570.46
733.091.52

3.o96,
3.313,
3.056,
4.237,
3.134.
2.937.
3.9t2,
2.454.
3.33&.
3.666,
6, 624,

055.48
379.07
216. n
089.23
279.87
OS3-79
405.39
657.65
288.89
312.44
892.97

$291.
281,
270,
273,
273,
521,
73L
75o,
741,
743.
7ii.

500.00
475-co
000.00
124.65
124.65
189.33
387.06
924.45
155-79
801.65
155-79

287,500.00
2 7 2 , 5 0 0 . 00
270,000.00
273.124.65
414,045.80
621,388.51
743.217.29
737.383.31
741,723.29
743.958.85
748,908.50

$11,989. 352.93
13.921, 567.29
14.737. 2 5 8 . 5 0
19.533. 162.80
19.615, 526.03
19, 829, 7 7 9 . 3 8
2 2 , 3 1 1 , 577-66
26,388, 461.43
2 9 . 7 0 2 , 749-26
3 2 , 8 3 7 . 187.52
44,949. 558.22
13.552
13.329
18,720
19.312,
19. 7oo,
20,925,
23.351,
27.453,
32,844,
38,5iS
5L934

476.47
200.92
S89.49
916.43
461.55
465.90
822.66
692.74
304.85
088.57
IOI.84

$5,000, 000.00
S.ooo,000.00
S.ooo, 000.00
7.000, 000.00
7,ooo, 000.00
7. 000,000.00
7,000, 000.00
7.000,000.00
7, 000 000.00
10,000, 000.00
10,000, 000.00

$68,600.
78,000.
90,000.
103,500.
122,085.
143.660.
252.599344.5II412,483.
497.972.
578,334.

5.000. 000.00
5,000, 000.00
7,000, 000.00
7, 000,000.00
7,000, 000.00
7,000, 000.00
7,000, 000.00
7,000, 000.00
10,000, 000.00
10,000, 000.00
10,000, 000.00

78,000.
90,000.
103,500.
116,500.
143,660.
252,599344,511412,483.
505,622.
579,084.
663,030.

$i9,735-oo
30, 700. 00
30,688. 00
143,021.24
170,001.29
459.777-47

$672, 96o.7S
388, 5 9 6 . 7 2
204. 0 8 2 . 4 1
342. 8 1 5 . 9 6
282, 0 4 S . 7 9
662, 6 8 9 . 2 5
454. 1 6 8 . 1 4
1,061, 363-44
I.560, 020.34
1 . 4 9 5 . 170.58
1,083. 964.79

$711,689.77

458,227.22

8,065.00
28,795.00
30,880.00
1 2 9 , 0 9 4 . 24
171,850.29

408,999.39 j
239,216.ot
253.483.82
172,186.28
477.636.73
621,966.68
1. 1 3 3 . 3 6 2 . 3 9
1,108,106.96

321,277.47
54.888.79

1,263,820.09
1,682,445-58

326,823-34
I.377.251.24

$4,797, 600.00
6,962,800.00
7.679.000.00
9.616,700.00
9.851. 200.00
10,387, 900.00
11,636,500.00
12,541,300.00
16,474,600.00
800.00
17.075.
29,000, 500.00
546,400.00
381,516.00
164,700.00
947,000. 00
101,000.00
164,900.00
782,400. 00
047,100.00
276,000.00
212,600.00
836,200. 00

$1,450,192.18
1,492,170.57
1,764,176.09
2,470,S46.84
2,360,191.43
1.615,794.77
2.937,610.05
5,410,598.93
4,112,624.32
3.598,243.31
3.115.291.81
469.849.25
448,685.53
213.473.48
995.932.6i
375.549.91
001,534.70
572, 064.92
731,652.75
782,725.26
811,483-29
,320,286.23

$11.
13.
14,
19,
19.
19,
22,
26,
29.
32,
44-

989.353-93
921,567.29
737.258.50
533.162.80
615,526.03
829,779.38
311,577.66
388,461.43
702,749.26
837.187.52
949.5S8.22

13,552
13.329
18,720
19,312
19, 700 :
20,935

476.47
200.92

S89.49
916.43
461.5s
465.90
23.351 822.66
27.453 692.74
32.844 304-85
3 8 , 5 1 5 .088.57
51.934 101.84

A P P E N D I X D . - T a b l e N o . 4=.
B a l a n c e S h e e t of B A N K S O F I S S U E at E n d of E a c h H a l f Y e a r , 1 8 9 8 - 1 9 0 9 .
ASSETS.

LIABILITIES.

CASH HOLDINGS.

DATE.
Capital unpaid.
Gold.
December 31—
1898
_
1899

Silver pesos.

Fractional
money.

Notes of other
banks.

Total metal.

$14,705, 000.00
&.3SS.

755-00

1900

6,670, 900.00

1901

2,550, 000.00

__!_

Loans on
collateral.

Stocks and bonds.
Total cash.

Mortgage loans.

Various credits.

Real estate,
etc.

Reserve fund.

at sight
Special guaranty- Increase of capi- Deposits
for more
or at no more Deposits
fund.
tal and reserves. than
three days. than three days.

$694, 436.35

$56,588, 275.24

$ 2 2 , 4 4 0 , 691.65

$418, 268.17

$36,380, 8 4 3 . 5 4

$768. 447.52

$170, 650.776.04

$44,000, OOO.OO

51.357. 730.76

1.053. 628.37

78,909, 412-59

3 4 . 0 4 8 , 160.73

492, 0 9 7 . 1 8

3 3 , - 8 8 6 , 935.48

772, 479.38

208, 876,199.49

47.7io, OOO.OO

4.735. 907.44

3.316, 716.88

49.394, 761.03

2,122, 160.09

89,868, 042.11

3 5 . 1 7 8 , 814.57

462, 2 7 0 . 3 4

4t,8oo, 5 6 5 . 8 8

, 113,830.85

226, 611,344-87

62,200, OOO.OO

8.730, 902.74

56.213, 408.73

3.620, 151.28

92.254. 035-67

3 9 , 3 3 8 , 594.07

5 5 . 8 8 3 , 188.95

.556, 809.15

252, 191,386.85

65.700, OOO.OO

7 0 , 8 7 8 , 941.50

- 036,359.39

306, 277.371-54

8 8 , 2 5 1 , 775.21

,883, 586.89
574, 544.3^

360, 144.145-71
417. 481, 449.64

561, 593.27
785. 854.70

I l 6 , 1 7 4 , 127-43

4 9 . 5 1 3 , 139.27

12, 012, 728.82

124,859. 061.67
140.035. 239.04

6 2 , 8 1 8 , 661.65
6 2 , 3 0 9 , 686.55

1,237. 944. 80
1.548, 8 4 3 . 4 2

69,862, 390.38

15.157. 896.13

I60,472, 904-56

68,055, 572.23

16,141, 123.32

182,571. 819.36

1,704. 427.74
1,903, 860.70

1 6 9 , 8 2 6 , 092.07

4.638,350.00

8 6 , 0 9 8 , 254. 86
1 0 2 , 2 4 0 , 713-97

68,162,147.25

6,652, 775-oo

74.814, 922.25

t72,30I, 933-77

107,393.

5i7.4i

6, 240, 8 2 S . 4 4

2 3 3 . 8 4 1 , 270.21

77.753,5a3-4i

6,208,538.00

83,962, 041.41

23,802, 304.66
46,239. 834-81

91,I06, 399-6i

56,012,

818.95

10, 504. 6 7 7 . 6 6

4 0 5 , 7 3 9 . 981.78

289, 268.09
929, 989.98

$4,189,662. 00

Authorized
capital.

$38,654, 8I3-S7

775. 1 9 9 . 0 0
926, 8 1 4 . 4 3

$52,023,746.73 [

Total.

1903

5. 139, 3 2 0 . 0 0

51, 400,669.82

3, 262,360. 0 0

54.663, 029.82

1903..-----

5.3i6,

250.00

60,054, 751.96

3,614, 222. 0 0

63.668. 973.96

6,955. 639.70
11, 107, 8 9 1 . 5 3

1904

5, 0 0 2 , 4 0 9 . 0 0

76,797,865.43

3,802.128.50

80,599, 993-93

1905

3.oi7, 607.00

66,687,038.38

3,175-352.00

1906

2,43o, 056. 00

$41,095-293-61

$19,169,464.00

$3,152. 464.

63,417, 222. 23

1907

1,803, 152.00

52, 491, S81. 96

10, 684, 141.00

4 , 9 8 6 , 124.

1908

1, 0 2 6 , 5 0 0 . 0 0

44.43i.39o.oo

26,441,935.00

6 . 8 8 0 , 178.

1 1 2 , 3 9 8 , 004.57

1 9 3 , 3 3 4 , 672.66

Notes in
circulation.

Various debits.

Total.

$170, 650,776.04

6,361, 357.43

$54,375, 769.35
63,196, 832.50

$61,961, 253-14

994, 540.30

75.o6o, 844.94

208, 876,199-49

.371. 698.15

809, 726.20

6.636, 379-37

64,012, 464.75

80,850, 173-66

226, 611,344-87

10,353. 906.66

.613. 391.28

92S, 534.27

6,715, 866.02

7L357. 626.50

93.622, 062.12

252, t9i.386.85

74.550. OOO.OO

12.413, 252.39

,029, 719-20

I.079. 321. 6l

5,324, 048.58

86,145. 227.00

122.735, 802.76

3o6, 277,371.54

88,650, OOO.OO

14,377, 825.16

.509. 257.07

599. 220.09

4,773, 183.86

84, 203, 709.75

163.031, 950.78

360, 144,145-71

92,400. OOO. OO

16,069, 886.34

.777. 839- 70

616, 309.85

83,525. 876.00

214.983. 787.50

417. 481,449-64

510, 701,166.01

113,859, 350. 00

21,727, 810.19

,869. 33o.o6

20,781, 084.03

5.107. 750.35
20,012, 249.95

94,141, 407.50

234.309. 934.28

5IO, 701,166.01

57i. 463,672.94

119,900, OOO.OO

41,244, 161.24

10,075. 455.33

25.433. 674.26

97,787. 878.00

258,668. 546.97

571. 463,672.94

627, 487,196.83

121,400, OOO.OO

7.663. 329-71

29,157. 575.0S

119,900, OOO.OO

17,973. 811.90

64,162, 230.89

48,097. 893.00

91.475. 982.00
8 7 . 5 0 4 , 630. 00

3io,977. 906.31
334.754. 206.55

627, 487,196.83

704. 522, 244.20

45,476. 880.72
32t 129, 471.86

i8,353, 957-14
21.335. 523.04

$3,757. 864.79

$1,143. 623,09

$3,212, 379-13
$7,500,000.00

$2,199. 886.

704. 522,244.20

June 30—
1898-99---

II,790,000.00

46,333 ,293.21

4 6 4 . 240.OO

66,103, 905.96

2 4 , 9 2 5 , 231. 04

436. S 3 6 . 1 7

189,115, 217.36

44.360, 000.00

4.634, 6 1 5 . 0 0

3.193. 332-63

1.094. 045.27

3.122, 549.46

58,208, 340.75

71.998. 521-75

189, 115,217.36

8,757,5oo.oo

53.955 489. 43

1,526, 3 0 2 . i s

93.119. 869.66

3 3 , 7 2 3 . I73.60

460, 4 2 5 - 7 6

38,265. 388.87
4 L 4 4 7 . 984.00

796, 332. 11

1899-1900-

887, 995-87

233.878, 740.47

58,600. 000.00

8,058. 475-99

3.477, 180.47

I.281, 734-69

7,364. 633. 22

65.937. 617.25

89.159. 099-8S

1900-1

2, 3 0 0 , 000. 00

52,756,121.18

3.137, 910.00

55.894 031. 18

2,424. 833.32

86,058, 663.35

3 7 . I 2 0 , 889.58

437. 6 1 8 . 7 0

4 5 , 3 7 0 , 549-35

371, 523.64

230,978, 109.12

63, 700, OOO.OO

zo.115. 986.83

3,452, 516.66

I.053. 454-33

6,378. 896.29

63,629, 245.00

82,648, 010.ot

1901-2

3.245.7O0.00

61,039,245.18

3,953, 821. 00

64,993 066. 18

4, 480, 4 3 0 . 9 9

100,789, 717.00

4 3 . 5 5 5 . 465-77

902, 423-28

5 8 , 9 5 9 , 549-57

682, 022.88

278,608, 375-67

68,700, 000.00

12,I30, 659.26

3.891, 042. 87

I.134. 949-88

6,498, 793.96

77.466, 988.25

108,785. 941.45

1902-3

56,176,726.99

6,050, 327.00

62,227 053-99

8,783, 724.09

H 5 . 7 5 4 . 809. 19

5 L 9 0 4 , 034.71

977. 5 3 8 - 6 0

8 0 , 9 7 2 , 940.88

420, 746.50

326.385. 847.96

80,650, 000.00

14.283, 792.16

4,4S0, 489.02

4.575, 73o.99

88,033, 539-75

133-545. 668.S3

62,357,816.00

4,oi5, 3 6 7 . 0 0

66,373

183.00

I I , SOI, 2 3 9 . 3 3

126,588, 715.75

6 4 , 8 4 4 , 95°-°3

1, 264, 9 8 6 . 3 0

1 0 3 , 8 6 3 , 143-71

239, 910.61

383.776. 786.73

92.150, 000.00

15,964. 832. 70

4.726. 067.04

816, 627. 21
528. 107.42

5.176, 766.P8

82,989, 221.00

182,241,.791.69

70,486,137-30

5.409. 487.00

75,895 624.30

12,351. 573.88

148,199. 269.90

6 7 , 7 0 1 , 307-25

1,630, 423.06

467,300, 328.68

92,400, 000.00

20,9l8, 948.80

5.209, 330.24

89,454, 2S5-75

232,126,,482.30

41,063,027-71

872. 331.

1, 692 ,649.

70,628,008.51

3.9SO, 863. 0 0

9 1 , 7 0 6 , 387-69

1,680, 224.57

987. 554.36

550.939, 277-63

118, 400, 000.00

41,462, 665.38

9,3l6. 373-15

17,640, 631.68

97.*34, 976.75

239,3i8,.471.37

1906-7

3, 101, 4 3 2 . 0 0

4 6 , 3 1 8 , 2 0 4 . 01

064, 302.

6,502 402.

66,884.908.75

4.362, 569.00

71.247, 477-75

15,045. 242.19
17,652. 090.15

167,621, 625.49

31.172, 553-94
27,666, I59.30

6,018, 757-65

74,578 871.51

1 5 2 . 9 5 7 . 155-29
1 9 1 , 9 1 4 , 888.82

989, 593-00

1905-6

3.345.ooo.oo
6, IOO, 658.00
4.575.382.oo
3.404,483.00

233, 878,740.47
230, 978,109.12
278 608,375-67
326 385,847.96

189,063, 935-56

n o , 2 4 4 , 160.93

2, 910, 7 4 4 - 4 0

2 0 3 , 6 2 8 , 149.70

, 012,497.20

602,86o, 487.68

121, 400, 000.00

45.353. 842.25

7,488, 029.71

282,231,,500.28

6 4 , 6 0 9 , 118.75

86s.45

2 9 6 , 1 4 4 , 073.38
4 4 6 , 7 7 3 , 325.02

,630, n o . 5 1

613.311, 843.58

119,900, 000.00

32,OOI, 133.26

92.253 ,293.50

301,605 ,215.96

911, 072.75

736,191, 398.39

Il8,8oo, 000.00

32,584, 425.60

I7.9S3. 248.38
18,723 .668.52

22,451, 704.54
25.643. 649.18

9 8 . 4 7 0 ,, 5 2 8 . 0 0

123,137, 910.00
87,058, 205.27

25.464,,882.90
23.955i,303.30
72,126 ,285.39

58,125, 969.71

9 2 , 2 2 1 ,477-OQ

343.6o9 .572.19

1903-4
1904-5

004.47

1907-8

1. 7 3 8 , 4 5 1 . 0 0

51,149,105.00

697. 110.

5.999 281.

74,845.496.02

6,082, 814.00

80,928, 310.02

3L350.

1908-9

1. 0 1 9 , 3 0 0 . 0 0

4 9 . 0 5 0 , 4 2 5 . 00

415, 143.

5.886 973-

84.352,541-92

4.273. 794-SO

88,626, 336.42

4 1 , 1 5 2 . 212. 92

8648—10.

(To follow p a g e 284.)

5 3 - 2 1 9 , 342.61

7,773.

603.40

No. 4.

3,503,812.50

383
467
550
602

776,786.73
300,328.68
939,277.63
860,487-68

613 311,843.58
736 191,398.39

Full text of The Banking System of Mexico

FRASER