The patriarchal system was essayed by a wealthy firm of American merchants (Russell & Sturgis) with very disastrous results to themselves. They distributed capital all over the Colony, and the natives abused their support in a most abominable manner. A native, alleging that he had opened up a plantation, would call on the firm and procure advances against future crops after scant inquiry. Having once advanced, it was necessary to continue doing so to save the first loans.

Under the auspices of the late Mr. Nicholas Loney, great impulse was given to the commerce of Yloilo, and, due to his efforts, the Island of Negros was first opened up. His memory is still revered, and he is often spoken of as the original benefactor to the trading community of that district. Russell & Sturgis subsequently extended their operations to that locality. The result was that they were deceived in every direction by the natives, who, instead of bringing in produce to pay off advances, sent their sons to college, built fine houses, bought pianos, jewellery, etc., and in a hundred ways satisfied their pride and love for outward show in a manner never known before, at the expense of the American capitalists. As bankers, the firm enjoyed the unlimited confidence of those cla.s.ses who had something to lose as well as to gain; hence it is said that, the original partners having withdrawn their money interest, the firm endeavoured to continue the business with a working capital chiefly derived from the funds deposited by private persons at 8 per cent, per annum. All might have gone well but for the rascality of the native agriculturists, who brought about the failure of the house in 1875 by taking loans and delivering no produce. The news amazed everybody. Trade was, for the moment, completely paralyzed. The great firm, which for years had been the mainspring of all Philippine mercantile enterprise, had failed! But whilst many individuals suffered (princ.i.p.ally depositors at interest), fifty times as many families to-day owe their financial position to the generosity of the big firm; and I could mention the names of half a dozen real-estate owners in Yloilo Province who, having started with nothing, somehow found themselves possessing comparatively large fortunes at the time of the liquidation.

Consequent on the smash, a reaction set in which soon proved beneficial to the Colony at large. Foreign and Spanish houses of minor importance, which had laboured in the shade during the existence of the great firm, were now able to extend their operations in branches of trade which had hitherto been practically monopolized.

Before Manila was opened to foreign trade, even in a restricted form, special concessions appear to have been granted to a few traders. One writer mentions that a French mercantile house was founded in Manila many years prior to 1787, and that an English firm obtained permission to establish itself in 1809. In 1789 a foreign ship was allowed to enter the port of Manila and to discharge a cargo. This would appear to have been the first. In olden times the demand for ordinary foreign commodities was supplied by the Chinese traders and a few Americans and Persians. During the latter half of the 18th century a Spanish man-of-war occasionally arrived, bringing European manufactures for sale, and loaded a return cargo of Oriental goods.

The Philippine Islands were but little known in the foreign markets and commercial centres of Europe before the middle of the 19th century. Notwithstanding the special trading concessions granted to one foreigner and another from the beginning of last century, it was not until the port of Manila was unrestrictedly opened to resident foreign merchants in 1834 that a regular export trade with the whole mercantile world gradually came into existence.

It is said that whilst the charter of the "_Real Compania de Filipinas_" was still in force (1785-1830) a Mr. Butler [118]

solicited permission to reside in and open up a trade between Manila and foreign ports; but his pet.i.tion was held to be monstrous and grievously dangerous to the political security of the Colony; hence it was rejected. The Spaniards had had very good reason to doubt foreign intercourse after their experience of 1738, when they preferred a war with England to a gross abuse of the _Asiento_ contract entered into under the Treaty of Utrecht. [119] Subsequently the American firm already mentioned, Russell & Sturgis, made a request to be allowed to trade, which, having the support of the Gov.-General of the day, was granted; and Mr. Butler, taking advantage of this recent precedent, also succeeded in founding a commercial house in Manila. To these foreigners is due the initiation of the traffic in those products which became the staple trade of the Colony and paved the way for the bulk of the business being, as it is to-day, in the hands of European and American merchants.

The distrustful sentiment of olden times (justifiable in the 18th century) pervaded the Spaniards' commercial and colonial policy up to their last day. Proposed reforms and solicitations for permission to introduce modern improvements were by no means welcomed. In the provinces clerical opposition was often cast against liberal innovations, and in the Government bureaux they were encompa.s.sed with obstructive formalities, objections, and delays. [120]

By Royal Ordinance of 1844 strangers were excluded from the interior; in 1857 unrepealed decrees were brought forward to urge the prohibition of foreigners to establish themselves in the Colony; and, as late as 1886, their trading here was declared to be "prejudicial to the material interests of the country." [121]

The support of the friars referred to in p. 255 became a thing of the past. Colonists had increased tenfold, the means of communication and of exit were too ample for the security of the lenders, who, as members of religious communities, could not seek redress at law, and, moreover, those "lucky hits" which were made by penniless Europeans in former times by pecuniary help "just in the nick of time" were no longer possible, for every known channel of lucrative transaction was in time taken up by capitalists.

It was the capital brought originally to the Philippines through foreign channels which developed the modern commerce of the Colony, and much of the present wealth of the inhabitants engaged in trade and agriculture is indirectly due to foreign enterprise. Negros Island was entirely opened up by foreign capital. In Manila, the fathers of many of the half-castes and pure natives who at this day figure as men of position and standing, commenced their careers as messengers, warehouse-keepers, clerks, etc., of the foreign houses.

There were a great many well-to-do Spaniards in trade, but few whose funds on starting were brought by them from the Peninsula. The first Spanish steamer-owner in the Colony, a baker by trade, owed his prosperity to the support of Russell & Sturgis. One of the richest Spanish merchants (who died in 1894) once kept a little grocer's shop, and after the failure of Russell & Sturgis he developed into a merchant and shipowner whose firm became, in time, the largest Spanish house operating in hemp and other produce.

About 14 Spanish firms of a certain importance were established in Manila, Yloilo, and Cebu, in addition to the Europeans trading here and there on the coasts of the Islands. In Manila there were (and are still) two foreign bank branches [122] (one with a sub-branch in Yloilo), three bank agencies, and the Philippine private banking-house of J. M. Tuason & Co.; also the "Banco Espanol-Filipino," which was inst.i.tuted in 1852, with a capital of P400,000, in 2,000 shares of P200 each. The capital was subsequently increased to P600.000. [123]

Authorized by charter, it issued notes payable to bearer on demand from P10 upwards. The legal maximum limit of note issue was P1,200,000, whilst the actual circulation was about P100,000 short of that figure. This bank did a very limited amount of very secure business, and it has paid dividends of 12 to 15 per cent.; hence the shares were always at a premium. In 1888, when 12 per cent, dividend was paid, this stock was quoted at P420; in 1895 it rose to P435. The _Obras Pias_ funds (_vide_ p. 245) const.i.tuted the orginal capital of the bank. The new position of this inst.i.tution, under the (American) Insular Government since 1905, is explained in Chapter x.x.xi.

The first Philippine bank was opened in Manila by a certain Francisco Rodriguez about the year 1830.

From the conquest up to the year 1857 there was no Philippine coinage. Mexican dollars were the only currency, and in default of subsidiary money these dollars, called _pesos_, were cut. In 1764 cut money was prohibited, and small Spanish silver and copper coins came to the Islands. In 1799 the Gov.-General forbade the exportation of money, and fixed the peso at 8 _reales fuertes_ and the _real_ at 17 _cuartos._ Shortly afterwards gold came to the Islands, and was plentiful until 1882. In 1837 other copper coins came from Spain, and the _real fuerte_ was fixed at 20 _cuartos_. In 1857 the Manila mint was established, _pesetas_ were introduced, five being equal to one peso, and 32 cuartos being equal to one peseta. Contemporaneously the coinage in Spain was 34 cuartos to one peseta and 5 pesetas to one _duro_--the coin nominally equivalent to the peso--but the duro being subdivided into 20 _reales vellon_, the colonial real fuerte came to be equivalent to 2 1/2 reales vellon. The evident intention was to have one common nominal basis (peso and duro), but subdivided in a manner to limit the currency of the colonial coinage to its own locality. With pesos, reales, cuartos, maravedis, and ounces of gold, bookkeeping was somewhat complicated; however, the Government accounts were rendered easy by a decree dated January 17, 1857, which fixed pesos and cents for official reckoning. Merchants then adopted this standard. Up to 1860 gold was so abundant that as much as 10 per cent, was paid to exchange an _onza_ of gold (P16) for silver. In 1878 gold and silver were worth their nominal relative values. Gold, however, has gradually disappeared from the Colony, large quant.i.ties having been exported to China. In 1881 the current premium for purchasing gold was 2 per cent., and at the beginning of 1885 as much as 10 per cent. premium was paid for Philippine gold of the Isabella II or any previous coinage. The gold currency of Alfonso XII. (1875-85) was always of less intrinsic value than the coin of earlier date, the difference averaging about 2 per cent. At the present day gold could only be obtained in very limited quant.i.ties at about the same rate as sight drafts on Europe. Philippine gold pieces are rare.

In 1883 Mexican dollars of a later coinage than 1877 were called in, and a term was fixed after which they would cease to be legal tender. In 1885 decimal bronze coins were introduced. In July, 1886, a decree was published calling in all foreign and Chinese chop dollars [124] within six months, after which date the introducer of such coin into the Colony would be subject to the penalty of a fine equal to 20 per cent. of the value imported, the obligation to immediately re-export the coin, and civil action for the misdemeanour. At the expiration of the six months the Treasury was not in a position to effect the conversion of the foreign medium in private hands prior to the publication of the decree. The term was extended, but in time the measure became practically void, so far as the legal tender was concerned. However, the importation of Mexican dollars was still prohibited; but, as they remained current in Manila at par value, whilst in Hong-Kong and Singapore they could be bought for 8 to 12 per cent, (and in 1894 25 per cent.) less than Manila dollars, large quant.i.ties were smuggled into the Colony. It is estimated that in the year 1887 the clandestine introduction of Mexican dollars into Manila averaged about P150,000 per month. I remember a Chinaman was caught in September, 1887, with P164,000, imported in cases declared to contain matches. In 1890 there was a "boom" in the silver market. Owing to the action of the American Silverites, the Washington Treasury called for a monthly supply of 4,000,000 of silver dollars; consequently sight rate on London in Hong-Kong touched 3s. 10 1/4d., and in Manila rose to 3s. 10 1/2d., but a rapid reaction set in when the Treasury demand ceased. In 1895 we heard in Manila that the Government were about to coin Philippine pesos and absolutely demonetize Mexicans as a medium in the Islands. But this measure was never carried out, probably because the Government had not the necessary cash with which to effect the conversion. Some few Philippine peso pieces were, however, put into circulation concurrently with the Mexican pesos.

In June, 1903, the ss. _Don Juan_, owned by Francisco L. Rojas, of Manila, took on board in Hong-Kong about $400,000 Mexicans (i.e., pesos) for the purpose of smuggling them into Manila. On board there were also, as pa.s.sengers, a Senor Rodoreda and a crowd of Chinese coolies. The vessel caught fire off the west coast of Luzon. The captain, the crew, and the Spanish pa.s.senger abandoned the ship in boats, leaving the Chinese to their awful fate. A steam launch was sent alongside and saved a few dollars, whilst the despairing Chinese became victims to the flames and sharks. The ship's burnt-out hull was towed to Manila Bay. The remaining dollars were confiscated, and the captain and chief engineer were prosecuted.

The universal monetary crisis due to the depreciation of silver was experienced here, and the Government made matters still worse by coining half-pesos and 20-cent pieces, which had not the intrinsic value expressed, and exchange consequently fell still lower. In September, 1887, a Madrid periodical, _Correo de Espana_, stated that the b.a.s.t.a.r.d Philippine 50-cent pieces were rejected in Madrid even by money-changers. In May, 1888, the peso was quoted at 3s.2 3/4d. (over 19 per cent. below nominal value), and shippers to the Colony, who had already suffered considerably by the loss on exchange, had their interests still further impaired by this action of the Treasury. For Exchange Fluctuations _vide_ Chap, x.x.xi., "Trade Statistics."

A Custom-house was established and port opened in Zamboanga (Mindanao Is.) for direct communication with abroad in 1831; those of Sual (Pangasinan) and Yloilo (Panay Is.) in 1855, and that of Cebu in 1863. The Custom-house of Sual was subsequently abolished, and the port having been closed to direct foreign trade, the place has lost its former importance, and lapsed into the state of a lifeless village.

Special permission could be obtained for ships to load in and sail direct from harbours where no Custom-houses were established, on a sum of money being lodged beforehand at the _Caja de Depositos _in Manila, to cover duties, dues, etc., to be a.s.sessed.

After the opening of the port of Yloilo, three years elapsed before a cargo of produce sailed thence to a foreign port. Since then it has gradually become the shipping centre for the crops (chiefly sugar and sapanwood) raised in the islands of Panay and Negros. From about the year 1882 to 1897 it attracted a portion of what was formerly the Cebu trade. Since then the importance of Yloilo has diminished. Its development as a port was entirely due to foreigners, and considerably aided agriculture in the Visayas Islands. Heretofore the small output of sugar (which had never reached 1,000 tons in any year) had to be sent up to Manila. The expense of local freight, brokerages, and double loading and discharging left so little profit to the planters that the results were then quite discouraging. None but wooden sugar-cane mills were employed at that time, but since then many small steam-power factories have been erected (_vide_ Sugar). The produce shipped in Yloilo [125] was princ.i.p.ally carried to the United States in American sailing-ships.

For figures relating to Chief Exports from the various ports, _vide_ Chap. x.x.xi., "Trade Statistics."

Most of the carrying Import trade was in the hands of subsidized Spanish steamer-owners, whilst the larger portion of the Exports was conveyed in foreign vessels, which arrived in ballast from Eastern ports where they had left cargoes.

Smuggling was carried on to a considerable extent for years, and in 1891 a fresh stimulus was given to contraband by the introduction of a Protectionist Tariff, which came into force on April 1 of that year, and under which Spanish goods brought in Spanish ships were allowed to enter free of duty. [126]

In order to evade the payment of the Manila Port Works Tax (q.v.), for which no value was given, large quant.i.ties of piece-goods for Manila were shipped from Europe to Yloilo, pa.s.sed through the Custom-house there and re-shipped in inter-island steamers to Manila. In 1890 some two-thirds of the Yloilo foreign imports were for re-shipment.

The circ.u.mstances which directly led to the opening of Zamboanga (in 1831) as a commercial port are interesting when it is remembered that Mindanao Island is still quasi-independent in the interior--inhabited by races unconquered by the Spaniards, and where agriculture by civilized settlers is as yet nascent. It appears that the Port of Jolo (Sulu Is.) had been, for a long time, frequented by foreign ships, whose owners or officers (chiefly British) unscrupulously supplied the Sulus with sundry manufactured goods, including _arms of warfare_, much to the detriment of Spanish interests there, in exchange for mother-of-pearl, pearls, gums, etc. The Spaniards claimed suzerain rights over the island, but were not strong enough to establish and protect a Custom-house, so they imposed the regulation that ships loading in Jolo should put in at Zamboanga for clearance to foreign ports. The foreigners who carried on this illicit traffic protested against a sailing-ship being required to go out of her homeward course about one hundred and twenty miles for the mere formality of customs clearance. A British ship (and perhaps many before her) sailed straight away from Jolo, in defiance of the Spaniards, and the matter was then brought to the notice of the British Government, who intimated that either Jolo must be declared a free port or a Custom-house must be established there. The former alternative was chosen by the Spaniards, but Zamboanga remained an open port for foreign trade which very rarely came.

The supreme control of merchant shipping and naval forces was vested in the same high official. No foreigner was permitted to own a vessel trading between Spain and her colonies, or between one Spanish colony and another, or doing a coasting trade within the Colony. This difficulty was however readily overcome, and reduced to a mere ineffective formality, by foreigners employing Spaniards to become nominal owners of their vessels. Thus a very large portion of the inter-island steamer carrying-trade was virtually conducted by foreigners, chiefly British.

Mail-steamers, subsidized by the Government, left the capital every fortnight for the different islands, and there was a quarterly Pacific Mail Service to the Ladrone Islands. [127] Regular mails arrived from, and left for, Europe every fortnight, but as there were intermediate opportunities of remitting and receiving correspondence, really about three mails were received and three despatched every month. The mail-route for Europe is _via_ Singapore, but there were some seven or eight sailings of steamers per month between Manila and Hong-Kong (the nearest foreign colony--640 miles), whence mails were forwarded to Europe, Australia, j.a.pan, the United States, etc.

Between the capital and several ports in the adjacent provinces there was a daily service of pa.s.senger and light cargo-steamers.

Between Yloilo and the adjoining Province of Antique, the District of Concepcion and the Islands of Negros and Cebu, there were some half-dozen small steamers, belonging to Filipinos and Spaniards, running regularly with pa.s.sengers and merchandise, whilst in the sugar-producing season--from January to May--they were fully freighted with cargoes of this staple article.

The carrying-trade in sailing craft between the Islands was chiefly in the hands of natives and half-castes. There were also a few Spanish sailing-ship owners, and in the Port of Yloilo a few schooners (called _lorchas_), loading from 40 to 100 tons of sugar, were the property of foreigners, under the nominal ownership of Spanish subjects, for the reasons mentioned in the preceding page.

The princ.i.p.al exporters employ middlemen for the collecting of produce, and usually require their guarantee for sales at credit to the provincial purchasers of imports. These middlemen are always persons of means, born in the Colony, and, understanding both the intricacies of the native character and the European mode of transacting business, they serve as very useful--almost indispensable--intermediaries.

It was only when the crisis in the Sugar trade affected the whole world, and began to be felt in the Philippines in 1884, that the majority of the natives engaged in that industry slowly began to understand that the current price of produce fluctuated according to supply and demand. Before transactions were so thoroughly in the hands of middlemen, small producers used to take their samples to the purchasers, "to see how much they cared to pay" as they expressed it--the term "market price" seldom being used or understood in the provinces, because of the belief that prices rose or fell according to the caprice or generosity of the foreign buyer. Accustomed to deal, during the first centuries of the Spanish occupation, with the Chinese, the natives, even among themselves, rarely have fixed prices in retail dealings, and nearly every quotation in small traffic is taken only as a fancy price, subject to considerable rebate before closing. The Chinese understand the native pretty well; they study his likings, and they so fix their prices that an enormous reduction can be made for his satisfaction. He goes away quite contented, whilst the Chinaman chuckles over having got the best of the bargain. Even the import houses, when they advertise their goods for sale, seldom state the prices; it seems as if all regarded the question of price as a shifty one.

The system of giving credit in the retail trade of Manila, and a few provincial towns, was the ruin of many shopkeepers. There were few retailers who had fixed prices; most of them fluctuated according to the race, or nationality, of the intending customer. The Chinese dealer made no secret about his price being merely nominal. If on the first offer the hesitating purchaser were about to move away, he would call after him and politely invite him to haggle over the bargain. [128]

The only real basis of wealth in the Colony is the raw material obtained by Agriculture, and Forest produce. Nothing was done by the conquerors to foster the Industrial Arts, and the Manufacturing Trades were of insignificant importance. Cigars were the only _manufactured_ export staple, whilst perfumes, a little cordage, and occasionally a parcel of straw or finely-split bamboo hats were shipped.

In the Provinces of Bulacan and Pampanga, split-cane and Nito (_lyG.o.dium_) hats, straw mats, and cigar-cases are made. Some of the finest worked cigar-cases require so much time for making that they cost up to P20 each. Hats can only be obtained in quant.i.ties by shippers through native middlemen.

In Yloilo Province a rough cloth called _Sinamay_ is woven [129]

from selected hemp fibre. Also in this province and that of Antique (Panay Is.), _Pina_ muslin of pure pine-leaf fibre and _Husi_ of mixed pine-leaf and hemp filament are made. Ilocos Province has a reputation in these Islands for its woollen and dyed cotton fabrics. Taal (Batangas) also produces a special make of cotton stuffs. Pasig, on the river of that name, and Sulipan (Pampanga), are locally known for their rough pottery, and Capiz and Romblon for their sugar-bags.

Paete, at the extreme east of the Laguna de Bay, is the centre for white-wood furniture and wood-carving. In Mariquina, near Manila, wooden clogs and native leather shoes are made. Santa Cruz (Manila) is the gold and silver-workers' quarter. The native women in nearly all the civilized provinces produce some very handsome specimens of embroidery on European patterns. Mats to sleep upon (_petates_) straw bags (_bayones_), baskets (_tampipes_), alcohol, bamboo furniture, buffalo-hide leather, wax candles, soap, etc., have their centres of manufacture on a small scale. The first Philippine brewery was opened October 4, 1890, in San Miguel (Manila) by Don Enrique Barretto, to whom was granted a monopoly by the Spanish Government for twenty years. It is now chiefly owned by a Philippine half-caste, Don Pedro P. Rojas (resident in Paris), who formed it into a company which has become a very flourishing concern. Philippine capital alone supports these manufactures. The traffic and consumption being entirely local, the consequent increase of wealth to the Colony is the economized difference between them and imported articles. These industries bring no fresh capital to the Colony, by way of profits, but they contribute to check its egress by the returns of agriculture changing hands to the local manufacturer instead of to the foreign merchant.

Want of cheap means of land-transport has, so far, been the chief drawback to Philippine manufactures, which are of small importance in the total trade of the Colony.

Philippine railways were first officially projected in 1875, when a Royal Decree of that year, dated August 6, determined the legislative basis for works of that nature. The Inspector of Public Works was instructed to form a general plan of a railway system in Luzon Island. The projected system included (1) a line running north from Manila through the Provinces of Bulacan, Pampanga, and Pangasinan. (2) A line running south from Manila, along the Laguna de Bay sh.o.r.e and eastwards through Tayabas, Camarines, and Albay Provinces. (3) A branch from this line on the Laguna de Bay sh.o.r.e to run almost due south to Batangas. The lines to be constructed were cla.s.sed under two heads, viz.:--(1) Those of general public utility to be laid down either by the State or by subsidized companies, the concession in this case being given by the Home Government; and (2) those of private interest, for the construction of which concessions could be granted by the Gov.-General.

In 1885 the Government solicited tenders for the laying of the first line of railway from Manila to Dagupan--a port on the Gulf of Lingayen, and the only practicable outlet for produce from the Province of Pangasinan and Tarlac District. The distance by sea is 216 miles--the railway line 196 kilometres (say 120 miles). The subsidy offered by the Government amounted to about P7,650 per mile, but on three occasions no tender was forthcoming either from Madrid or in Manila, where it was simultaneously solicited. Subsequently a modified offer was made of a guaranteed annual interest of 8 per cent, on a maximum outlay of P4,964,473.65, and the news was received in Manila in October, 1886, that the contract had been taken up by a London firm of contractors. The prospectus of "The Manila Railway Co., Ltd," was issued in February, 1888. The line was to be completed within four years from July 21, 1887, and at the end of ninety-nine years the railway and rolling-stock were to revert to the Spanish Government without compensation. The rails, locomotives (36 tons and 12 tons each), tenders, coaches, waggons, and ironwork for bridges all came from England. The first stone of the Central Station in Manila (Bilibid Road, Tondo) was laid by Gov.-General Emilio Terrero on July 31, 1887. In 1890 the original contractors failed, and only the first section of 28 miles was opened to traffic on March 24, 1891.

Many other circ.u.mstances, however, contributed to delay the opening of the whole line. Compensation claims were very slowly agreed to; the Government engineers slightly altered the plans; the company's engineers could not find a hard strata in the bed of the Calumpit River [130] (a branch of the Rio Grande de Pampanga) on which to build the piers of the bridge; and lastly the Spanish authorities, who had direct intervention in the work, found all sorts of excuses for postponing the opening of the line. When the Civil Director was applied to, he calmly replied that he was going to the baths, and would think about it. Finally, on appeal to the highest authority, Gov.-General Despujols himself went up to Tarlac, and in an energetic speech, reflecting on the dilatoriness of his subordinates, he declared the first Philippine railway open to traffic on November 23, 1892. For about a year and a half pa.s.sengers and goods were ferried across the Calumpit River in pontoons. Large caissons had to be sunk in the river in which to build the piers for the iron bridge, which cost an enormous sum of money in excess of the estimate. Later on heavy rains caused a partial inundation of the line, the embankment of which yielded to the acc.u.mulated ma.s.s of water, and traffic to Dagupan was temporarily suspended. The total outlay on the line far exceeded the company's original calculation, and to avert a financial collapse fresh capital had to be raised by the issue of 6 per cent. Prior Lien Mortgage Bonds, ranking before the debenture stock. The following official quotations on the London Stock Exchange will show the public appreciation of the Manila Railway Company's shares and bonds:--

OFFICIAL QUOTATIONS.

December.

| 7% c.u.m. Pref. 10 Shares.

| | 6% Deb. 100 Stock.

| | | 6% Prior Lien Mort. Bonds, | | | Series A., 100.

| | | | 6% Prior Lien Mort. Bonds, | | | | Series B., 100.