Trade and the Colonial Economies, 1500-1828

1 Trade and the Colonial Economies, 1500-1828 Cátia Antunes – Leiden University Regina Grafe – European University Institute, Florence Xabier Lamikiz – University of the Basque Country (UPV/EHU) 16.1 Introduction Economic historians have placed commercialization at the centre of Europe’s early modern capitalism, emphasizing the importance of domestic and international trade, shipbuilding and concomitant industries, the financial sector and urbanization. As the Iberian polities extended geographically to Africa, Asia and the Americas during the early modern period, trade, whether domestic, international or colonial, had a critical effect upon economic development. However, as we will see, the economic impact of colonial expansion was uneven across Iberia. There is now a consensus among economic historians that in Iberia commercial exchange associated with the overseas empires produced surprisingly few backward and forward linkages in the European national economies (O’Brien & Prados de la Escosura, 1999; Costa et al., 2015). The question this chapter seeks to address is thus to what extent and how Iberian trade, especially colonial trade, supported or hindered economic development in the early modern period. The general trends and cycles of economic and commercial expansion are clear. As seen in Chapters 10 and 11, the Iberian Peninsula emerged from the economic and demographic setback brought about by the Black Death (1347–1351) into a period of territorial and maritime expansion. In 1415 the Portuguese conquered Ceuta in Morocco. By 1500 the Portuguese population had recovered to pre-plague levels despite recurrent famines (see Chapter 11). Population growth picked up across the peninsula over the sixteenth century accompanied by an increase in agricultural output, the development of a significant manufacturing sector, and the Christian conquest of the last southern Islamic polity, Granada, coinciding with the early conquests in the Americas. In the last quarter of the sixteenth century, however, gradual changes in geographies of international trade and subsequent processing in the supply chains led the Iberian kingdoms first to stagnation, and then to a period of decline that found its nadir in the 1630s. The Portuguese economy subsequently followed a path of gradual expansion of population and per capita income from the 1630s to the 1755 Lisbon earthquake (with the exception of years of the War of Spanish Succession, 1701–1714). This was followed by a slow-down during the second half of the eighteenth century. Spain recovered more slowly from the crisis in the seventeenth century. Overall the population grew from the 1640s onwards, with the highest annual rates occurring in the eighteenth century. In the aftermath This material has been published in revised form in An Economic History of the Iberian Peninsula, 700-2000 /edited by Lains, P. et alii https:// doi.org/10.1017/9781108770217.018 . This version is free to view and download for private research and study only. Not for re-distribution or re-use. ©2024 Cambridge University Press & Assessment Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 2 of the post-1590s crisis a significant shift saw the centres of economic gravity move permanently from the interior to the coastal regions in the two largest reigns, Castile and Aragon (see Chapter 11 and Álvarez-Nogal & Prados de la Escosura, 2007b). The end of the eighteenth and beginning of the nineteenth century witnessed a relative decline of the Iberian economies, culminating in the French invasion and the ensuing Peninsular War (1807–1814), a conflict that seemed to confirm Portugal’s and Spain’s place as economically backward nations of the European periphery. Recent research stresses the significant divergence in impact of colonial and intercontinental trades between Spain and Portugal. Without the empire, Portugal’s per capita income may have been at least one-fifth lower (Costa, et al., 2015). Nevertheless, the assistance provided by the empire to the domestic economy was not sufficient to offset Portugal’s relative decline in relation to Europe’s advanced nations. Salary levels began to fall behind from the seventeenth century onwards and, after a recovery in the eighteenth century, worsened significantly at the beginning of the nineteenth century. Spain’s domestic economy owed far less to colonial trade at any point in the early modern period. In macroeconomic terms the colonial empire had little weight in the great cycles of the Spanish economy. And yet ‘the Indies were a vital cog in an institutional and economic system that shaped interregional relationships in the period of formation of a [Spanish] national economy’ (Yun-Casalilla, 1998: 148). In order to assess the importance of European trade and the empire in the development of the Iberian economies, this chapter starts by exploring the early geographies and main trading routes of the Iberian commercial expansion in the Atlantic World, Asia and the Pacific, including the rise of the transatlantic slave trade (Section 16.2). Section 16.3 looks at the institutional set up and the protagonists of the expanding extra-European trades. Section 16.4 analyses the eighteenth century reforms to the colonial political economy. Finally, Section 16.5 deals with the goods traded to and from the colonies. We conclude by examining the mutual economic impacts between the Iberian metropoles and their colonies, and between Iberia and Europe. 16.2 Iberians from Europe to the Atlantic, Indian and Pacific Oceans: First Steps Since antiquity, the location of the Iberian Peninsula in south-western Europe, between the Mediterranean and the Atlantic Ocean, and close to the African continent, allowed its kingdoms and regions to participate in important international trading routes in the north and south of Europe, and the eastern Mediterranean. Geography is critical to understanding Iberians’ head start in setting up transoceanic exchanges from the late fifteenth century onward. Grain-deficient coastal areas of the peninsula, especially in Portugal, sought supplies from beyond the sea. At the same time, the late medieval economic Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 3 recovery coincided with the beginning of Ottoman control of both the eastern Mediterranean and the major overland routes that connected Europe and Asia. Iberians were to capitalize on both developments, and the Atlantic World was the natural arena for their commercial expansion. The agricultural sector stood at the core of late medieval and early modern Iberian societies, with a focus on the production of wine, fruits (fresh, salted, in jam or dried), olive oil and grain, accompanied by extractive activities like salt extraction, timber, collection of cork, or iron winning and metallurgy, and last but not least shepherding. These products, produced or extracted domestically, were exported to other European countries; by the sixteenth century in particular to the Low Countries (north and south), England, France and the Italian peninsula. Return cargoes consisted often of specialized textiles and foodstuffs, in many regions grain, and from the later sixteenth century onwards large quantities of dried fish. For Castile, wool exports to the Low Countries, France and Italian territories were particularly important in terms of their backward linkages in the domestic economy. Castilian merchants, particularly from Burgos, but also from other regions such as the Basques provinces, established themselves in Bruges and other major European commercial hubs (Casado Alonso, 1996; Priotti, 2005). Until the third quarter of the sixteenth century, the trade was carried in Iberian ships, departing from the different kingdoms in the Peninsula. However, the participation of vessels from the Spanish regions in European trade declined dramatically with the war interruptions of the late sixteenth century and would only become important again in the eighteenth century. Economic warfare repeatedly led to redirections of trade flows, such as the relative rise of English markets for Spanish wool in the mid-seventeenth century (Grafe, 2005). Portuguese merchants also had an important presence in the main northwestern European and Mediterranean ports. Yet, domestically produced exports took second place behind the redistribution of overseas products that arrived from the empire as soon as the 1450s. The demographic expansion post-Black Death, the need for redistributive rents and lands for a growing nobility, and the economic incentives associated with a Papal Bull of Crusade led to the Portuguese conquest of North African strongholds after 1415. Aiming at participating and reaping the outputs of the east–west Saharan caravan trade, the Portuguese looked for cheap and readily available sources of grain to feed a growing population, military and religious posts for the nobility, and the rights and rents of plundering and enslavement associated with the Bull (Mendes, 2016). Portuguese North African conquests stood as an extension to the discovery and settlement in the Azores Archipelago and Madeira, from where further expansion southwards along the West African coast ensued and came to include the Atlantic Archipelago of Cabo Verde and São Tomé. The Castilian monarchy meanwhile brought the Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 4 Canaries Archipelago under its control in the late fifteenth century. Famously, Castilian armies in 1492 conquered the Kingdom of Granada, while Columbus’s expedition reached the Caribbean, ushering in the conquest and colonization of the Americas. In 1497, the Portuguese Vasco da Gama sailed around the tip of Africa and along the eastern coast of Africa to reach India, and, in 1500, a Portuguese fleet commanded by Pedro Álvares Cabral arrived in Brazil. Simple conquest quickly gave way to colonial exploitation and redistribution with the initiation and rapid increase of sugar production in the island of Madeira after 1455. Sugar became a cornerstone of Iberian colonial trade in the sixteenth and seventeenth centuries. Portuguese investors expanded sugar cultivation and the plantation complex in São Tomé and, after the 1520s, in Brazil as seen in Table 16.1. Their Castilian peers introduced the same practices in the Canaries. Sugars from Madeira, the Canaries, São Tomé and Brazil competed in the same Iberian and international markets, but consumers in Northern Europe apparently favoured the sugar from São Tomé and were willing to pay a premium. In order to impose its production, Brazilian sugar often initially had to be sold as if it originated from São Tomé. But, notwithstanding the cunning of Brazilian producers, Brazilian sugar began to dominate European consumption by the end of the sixteenth century mostly because of continuous slave revolts in São Tomé. The threats revolts posed to production together with the notoriously high death rates on the island, where malaria is endemic to this day, provided a competitive advantage to Brazilian sugar production in detriment to that of São Tomé or Madeira. Table 16.1 Sugar production in the Portuguese colonial empire, 1515-1617 (arrobas) Madeira São Tome Brazil 1515-1525 200,000 100,000 1527-1529 123,170 1535-1536 135,860 1550 40,000 150,000 1578 175,000 1581-1584 38,000-40,000 200,000 350,000 1610 735,000 1617 1,000,000 Source: Costa et al. (2016: 78) Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 5 As island sugar lost out to Brazilian production, Madeira and the Canaries turned to wine cultivation to first complement then substitute sugar. Early imports from the Spanish colonial territories in the Caribbean and the mainland were more varied than those from the Portuguese islands. Plantation production would not become an important part of the Spanish American economy until the late eighteenth century. In contrast to the early Portuguese expansion, Castilian colonizers focused mostly on the control of labour resources in America and the expansion of the ‘domestic’ American market, rather than production for export to the peninsula. The early expansion of the Spanish American economy was therefore less export driven. Cochineal and indigo dyes, hides, pearls, cocoa, non-plantation produced sugar and various other products made up the list of Iberian imports until silver production from Potosi (today’s Bolivia) and Zacatecas (Mexico) took off after the mid-sixteenth century. Silver quickly began to dominate imports to Castile, if not in terms of volume certainly in terms of value. After 1572 imports of Asian textiles and porcelain were trans-shipped via Manila and Acapulco to Seville, though a significant part of the cargoes in fact remained in the Americas and found their way to the major consumption centres of the viceroyalties of New Spain and Peru (Bonialian, 2020). For Portugal, commodified sugar was joined early on by gold imports from Castelo da Mina (today’s Ghana), which increased significantly between 1480 and the 1560s to c. 25 million réis per annum (Godinho, 1982–1984, I: 286). This abundant and continuous influx of gold stimulated conspicuous consumption on the part of the Crown, increased the income of the Exchequer through taxation and, above all, provided Portugal with enough specie to pay for foreign imports, particularly from Flanders, to supply Portuguese consumption of northern manufactured goods. Though gold imports from Castelo da Mina declined by the last quarter of the sixteenth century, a second cycle of Atlantic gold ensued after the discovery of gold mines in Brazil by the end of the seventeenth century. Following a similar trading circuit as sugar, and certainly before large-scale sugar production, brazilwood became a major colonial import in the Iberian Atlantic. The dyewood, in high demand in the textile producing areas of the Low Countries, England and Italy, became a significant source of wealth for the Portuguese Crown and a major colonial export onto the European domestic markets (Antunes et al., 2016: 26). It was the dyewood that stood as collateral for the conspicuous consumption of the Portuguese Crown at the Portuguese Factory of Antwerp and as guarantee for Portuguese public debt in the Antwerp market. The Portuguese so-called Cape Route to Asia was originally organized as a yearly fleet, the Carreira da India. The fleet sailed from Lisbon to Goa with some European products, but mostly administrative, military and church personnel, as well as convicts and emigrants. On the return voyage, the Carreira transported luxury goods (pepper, nutmeg, cinnamon, textiles, precious stones, etc.) from Goa to Lisbon, which were also re-exported to European markets. Cotton textiles and silk grew in importance towards the end of the sixteenth century Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 6 as other Europeans entered the Indian Ocean exchanges and competed in the pepper trade (Godinho, 1982-1984, III: 17, 21, 24, 49; Boyajian 1993: 203). Throughout the sixteenth and seventeenth century, Asian trade was of enormous importance for Portugal and for Portugal's economic relations with the rest of Europe. After 1572, the Manila galleon from Acapulco to Manila was the purest expression of a global pattern of trade, in which Europeans had few goods but silver to offer to Asian markets in exchange for mostly luxury manufactured goods, such as porcelain and silks, which were highly sought after in the Spanish American and European markets. The degree of integration and overlap between Castilian and Portuguese Atlantic trading routes differed by region and product. On the whole, in Asia separate interests were jealously guarded, though economic actors often ignored them. Yet, from the start, one new trade depended on the closest cooperation between the Iberian reigns. First the Caribbean islands and then the densely populated areas of Mesoand South America experienced an unprecedented demographic collapse throughout the sixteenth and early seventeenth centuries (Livi Bacci, 2008). As the arrival of European epidemic diseases dramatically increased mortality, conquest-related social, cultural and economic dislocation and labour exactions decreased fertility. The land-labour ratio increased dramatically, resulting in an ever-growing demand for labour, which from the start was overwhelmingly met by the forced migration of enslaved Africans. In the Spanish territories, enslaved people were employed in urban households, small farms, cattle raising, non-plantation sugar production and as skilled labour in the crafts. Silver mining in Mexico and the viceroyalty of Peru relied mostly on paid free and coerced indigenous labour (mita) and interestingly only marginally on enslaved labour. In 1597 enslaved Africans might have accounted for 14% of the labour force in New Spain's mines and the share fell thereafter (Tutino, 2018). Only the small gold mining sector in today's Colombia drew heavily on enslaved labour among Hispanic American mining centres. By contrast, in Brazil plantation production and later mining dominated the demand for enslaved labour throughout. Portuguese sugar imports relied heavily on a circuit of trade in enslaved Africans that grew concomitantly to the increase and expansion of the sugar production in the Atlantic. Portuguese access to the African coasts especially on the Gold Coast and in Angola, combined with Portuguese shipping and Spanish and Portuguese capital and a trans-Iberian legal and contractual structure drove the initial expansion of the transatlantic slave trade. The first cycle of cross-Iberian collaboration in the slave trade collapsed after 1640 partially due to events in West Africa, partially due to the Portugal’s War of Restoration (Rodrigues, M. G., 2019). By then more than half a million enslaved Africans had been taken to the Spanish territories. The total number of enslaved people arriving in Brazil thereafter, though expanding rapidly, would not exceed that in Spanish America until the early to mid- Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 7 eighteenth century, when the trade in humans experienced another dramatic acceleration as seen in Figure 16.1. The first transatlantic trade in enslaved Africans dated back to the fifteenth-century colonization of Madeira, Cabo Verde and São Tomé by the Portuguese. Patterns developed here were expanded and adapted to the trade with the Americas from the start. Thus, what we now refer to as the transatlantic slave trade was created in the fifteenth, sixteenth and early seventeenth centuries in the Iberian Atlantic (Borucki et al., 2020). It was the only trading circuit that in various forms persisted during the Iberian early modern colonial period, extending still into the nineteenth century with Portugal, Brazil and Angola as by far the largest traders, in demographic terms and voyages, of the transatlantic slave trade, according to the recent findings of the Trans-Atlantic Slave Database. Spanish American demand for enslaved Africans would rise again in the late eighteenth century and the early nineteenth, when also for the first time, Spanish, especially Andalusian and Catalan, investors would be important participants in the trade to Cuba and Puerto Rico. 16.3 Institutional Foundations and Actors In the Iberian empires the control over maritime and colonial expansion was a royal prerogative and, as such, Iberian Monarchs claimed sovereignty over territories and maritime frontiers overseas (mare clausum). However, the capital to be invested in the new colonial territories was entirely private in the Castilian case and overwhelmingly so in Portugal. Hence the distribution of rights over labour services to be performed by subject indigenous populations, the taxation of subsoil natural resources, trade and consumption, 0 50 100 150 200 250 300 350 400 450 500 1501-1525 1526-1550 1551-1575 1576-1600 1601-1625 1626-1650 1651-1675 1676-1700 1701-1725 1726-1750 1751-1775 1776-1800 Figure 16.1 Number of enslaved Africans disembarked in Iberoamerica, 1500-800 (in thousands) Total disembarked in Hispanoamerica Total Disembarked in Brazil Source: Trans-Atlantic Slave Trade Database (www.slavevoyages.org) (accessed March 2018) Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 8 and the deployment of jurisdictions (religious, military, mercantile, civil and criminal) were almost always commodified as a way to provide income and redistributive capacity to the colonial polity as part of royal prerogative. The institutional implementation of such revenue-raising powers took a variety of forms, from proper economic monopolies, to licensing structures, different forms of public-private partnerships and, later on, joint-stock enterprises. As conquered territory, the Spanish Indias became politically subject to the laws of the conqueror and were incorporated into the Castilian monarchy. While Spanish conquerors and settlers recreated familiar political organizations through the foundation of towns, the monarchy rolled out a structure of viceroyalties (initially Peru and New Spain), audiencias and regional treasuries in an attempt to curb the power of the conquistadores. The Portuguese expansion in the Atlantic World and Asia combined territorial control over Brazil and to a lesser extent Angola with a much more complex, dynamic pattern of trading routes across Asia. Brazil was first divided into donatary captaincies, which included religious, military and administrative jurisdictions, bestowed upon donatary captains as reward for their service to the Crown. Since the Portuguese presence on much of the west coast of Africa, in the brim of the Indian Ocean, the South China Sea, the Straits of Malacca, the Indonesian Archipelago, China and Japan rarely went beyond more or less urbanized strongholds on the coast and some land exploitation in the hinterlands, municipal and urban institutions stood at the forefront of colonization. In those areas where Portuguese control was more consolidated, the Crown named the highest officials, such as viceroys (Goa, the seat of the administration for the Estado da Índia), captain majors (Macao, Castelo da Mina, Cabo Verde and São Tomé) or governors (Brazil, Angola). In their own minds, Iberians' claim of sovereignty over conquered territories was at least partially justified by a duty to convert indigenous populations transferred to them by the papacy. In that sense, monarchs had the right of Padroado or patronato, meaning the jurisdictional right to appoint clergymen in the empire and carve a societal space for religious courts, including the Inquisition. The latter, however, had no jurisdiction over the indigenous population in Spanish America, which was considered under the tutelage of the monarchy. As a consequence of that legal conception, which likened indigenous people to minors, the enslavement of indigenous populations was legally banned in the 1540s in Spanish America (though the practice never totally disappeared in the remoter parts of the empire). Recent research suggests that the legislation for Brazil by contrast was kept deliberately ambiguous. As Portuguese settlers and Jesuits vied for control of indigenous labour in the interior, the former captured and traded large numbers of indigenous people declared unwilling to bow to colonial rule until the mid-eighteenth century, while the latter restricted indigenous people’s movement by binding them to the land (Perrone-Moisés, 1992; Zeron, 2011). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 9 The political economy of the Portuguese empire was based on an institutional principle of exploitation that had royal exclusive rights at its core, which were often referred to as monopolies. Contrary to the modern economics usage of the word, royal monopolies provided Portuguese kings mostly with the exclusive right to extract, ship, trade or export a specific product. Legally akin to the right to subsoil mineral resources, which in continental Europe since the high Middle Ages was a royal right, this exclusive right was very often transferred to a selective choice of private entrepreneurs by means of a royal privilege, license or contract. The Crown outsourced the costs and risks of colonial exploitation, but also reserved it to its subjects. In this determination of subjecthood stood implicit the exclusivity of the empire for the Portuguese subjects (colonial exclusive), whether they resided in the Peninsula or abroad, and whether the latter were European or non-European by birth. This premise also implied that ‘foreigners’ were automatically excluded from colonial exploitation. However, royal exemptions and privileges allowed many Italians, Germans, Dutch and Englishmen to heavily and continuously participate in Portugal’s colonial enterprises (Costa, 2002a). From the perspective of the entrepreneurs, being associated with the state increased social capital and boded well for social upward mobility, while also offering significant profit opportunities. The Portuguese king was thus a manager of incomes accruing from the colonial riches rather than a direct operator. This management was effected through a hierarchy of institutions in Lisbon and the main administrative centres of the empire. The Casa da India, in Lisbon, functioned as customs, clearing and administrative house for the overseas possessions, while Praia (Cabo Verde), Luanda (Angola), Bahia (Brazil), Ormuz (Arabian Peninsula), Goa (India), Cochin (India) and Malacca functioned as customs houses and taxation of~ces. More often than not, the revenues controlled by these institutions were also farmed out to (local) private traders and entrepreneurs who became entangled with the Portuguese empire as subjects of the king, although not always part of the empire, particularly in Asia. Even if the Carreira da India was created as a royal monopoly, very soon privileges were given to private merchants to transport their own goods in the bottoms of the fleet against the obligation to declare all imports to the Casa da India (Customs House for Overseas Trade) in Lisbon. The high returns in these exchanges and the intensification of the Carreira offered the king an opportunity to share risks and gains with a privileged minority of businessmen in Lisbon and, at the same time, enforced a monopoly for the Crown on specific products, especially pepper. The Carreira transitioned thus from a general royal monopoly to a public service bestowed upon private entrepreneurs who were expected to respect the royal monopoly over specific products. It was quite efficient in including all Portuguese (and some foreign) merchants trading to Asia. The supremacy of the fleet was only challenged in the beginning of the seventeenth century. The entry of the Dutch and the Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 16 forms of access quite often (Moutoukias, 1988). The merchants of Lima and Mexico City were a match for those in Seville, though the role of large Asian merchant houses in the Portuguese Estado had no equivalent in the Atlantic trades. In general terms, the Iberian Crowns did not issue proper monopoly charters to private companies, as opposed to what became common practice in the American and Asian expansions of their British, Dutch, French and Scandinavian counterparts in the seventeenth century. However, there are a few noteworthy exceptions. Portugal issued several charters in the seventeenth and eighteenth centuries, although the majority were short-lived. Also in the eighteenth century, a small number of monopoly companies would be active in the Spanish territories. Most of these were part of reform attempts, to which we will return below. 16.4 Eighteenth-Century Reforms and Their Impact on Colonial Trade During the War of Spanish Succession (1701-1714), Spain lost control over a significant portion of its colonial trade. Transatlantic communications came to a virtual halt, with the French taking advantage of the Spanish monarchy's weakness. During the peace negotiations, however, the British were awarded what they believed to be two important concessions that were passed to the South Sea Company: the asiento de negros or monopoly on importing enslaved Africans into the Spanish colonies (which had previously been in the hands of Portuguese, Italians, Dutch, Spanish and, since 1701, French contractors) and, included in the contract, the right to send to either Veracruz or Portobelo a 500-ton merchant ship carrying British goods every year. After the war, the new Spanish Bourbon monarchy made efforts to regain control from foreigners and revitalize transatlantic exchanges. Trade was, in fact, one of the first targets of the so-called Bourbon reforms, which gradually were to encompass virtually all spheres of imperial administration and economy throughout the eighteenth century. Reforms affecting colonial trade were both proactive and reactive, war being the main driver of the latter (Kuethe & Andrien, 2014). In 1717 both the House of Trade and the Consulado de Cargadores were relocated to Cádiz, which had become the of~cial port of departure of the Indies fleets in 1680. In 1720, the old fleet system was bolstered by the publication of the Proyecto para Galeones y Flotas, a piece of legislation which, with minor tweaks, was to regulate transatlantic shipping and taxation until 1778 (García-Baquero, 1976, I: 195–215). Although very little was changed regarding the organization of trade, there were clear signs of recovery after 1720. A novelty was introduced in 1728 with the creation of the first Spanish joint-stock privileged trading company, the Royal Guipuzcoan Company of Caracas. It obtained a proper trading monopoly for Venezuela in 1742 that would last until 1784, with a clear mandate to recover from Dutch interlopers the control of cacao exports (Gárate Ojanguren, 1990). The king’s decision to approve an initiative led by a group of Basque businessmen pursued another Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 17 goal: to reduce the smuggling of colonial commodities (mostly tobacco) entering Castile from the Basque provinces. The Caracas Company encouraged the production of crops such as cacao, tobacco and cotton, and constructed both war and merchant ships. Its relative success prompted the creation of other privileged companies, such as the Royal Havana Company (1740–1790), and the Royal Barcelona Trading Company to the Indies (1755–1785). Rather than monopoly rights they were awarded substantial tax cuts. The privileged companies were never seen as an alternative to either the fleet or single ships systems. Instead, they were a means to exert more control over and develop the economies of peripheral American regions or trades. From 1730 to 1778, approximately 20% of all the transatlantic voyages were carried out by ships belonging to these companies (García-Baquero, 1976, I: 136–137). In that sense the first real break in the organization of colonial trade came in the 1740s, when war compelled the Spanish monarchy to suspend temporarily the departure of the Indies fleets. It allowed navíos de registro to depart from Cádiz for any American destination, including the major ports of Veracruz and Callao (Lima’s seaport, which was now directly reached, for the first time, by sailing around Cape Horn). Freed from the timeconsuming, costly preparations that fitting out a whole fleet entailed, transatlantic exchanges became far more frequent and dynamic, providing colonial consumers with a more extensive assortment of European goods at lower prices. Though trade (and competition) grew significantly under the system of single ships, yielding increasing fiscal income to the Crown, the government succumbed to the pressure from the Cádiz merchant elite (whose interests were aligned with those of the foreign merchant communities) and agreed to resume partially the traditional system in 1754: fleets would be resumed for the exchanges with New Spain, whereas the single ships system was permanently adopted in the trade with Peru as well as with other destinations such as Buenos Aires, the Caribbean and Central America (Lamikiz, 2010: 81–94). The flota was meant to depart for New Spain every two years. The first fleet set sail for Veracruz in 1757. But before the system was finally abolished in 1778, only five additional fleets would depart from Cádiz in 1760, 1765, 1768, 1772 and 1776. These final fleets have gathered great historiographical attention, but de facto roughly 80% of Spanish transatlantic trade’s total tonnage was carried by navíos de registro between 1755 and 1778, while the fleets to New Spain accounted for just 13% of the tonnage (García-Baquero, 1976, I: 173). Insofar as their headquarters and trading routes fell outside the orbit of Cádiz, the privileged companies gradually began to undermine the long-held idea that the whole colonial trade should be conducted from a single Iberian staple port. By the 1750s, a growing number of government officials thought that transatlantic trade should be deregulated and opened to more ports on both sides of the Atlantic. The first major step in that direction was taken in 1765, when nine peninsular ports were allowed to trade directly with the Spanish Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 18 Caribbean islands. In 1768 the permission was extended to Louisiana, and in 1770 to Yucatán and Campeche. This gradual liberalization of colonial trade culminated in October 1778 with the promulgation of the so-called comercio libre or free trade regulations. Colonial trade was now opened to 13 peninsular and many more American ports, though it was not applied to Venezuela and New Spain until 1788 and 1789, respectively (Baskes, 2013: 69–86). Foreign participation remained banned. But comercio libre greatly simplified both taxation and the administrative paperwork to get a licence to cross the Atlantic. Its goal was to ‘restore agriculture, industry, and population’ in the Spanish empire. Although it led to commercial expansion, a new body of scholarship has demonstrated that the real growth of trade was a small fraction of that which historians have traditionally indicated (CuencaEsteban, 2008). At any rate, comercio libre was short-lived. It was only fully implemented after the war with Britain ended in 1783 and, although the Carrera de Indias would continue to exist until its final abolition in 1828, the 1797 British blockade of Cádiz marked the beginning of the end for Spain’s colonial trade system. During the French Revolutionary, Napoleonic and Spanish American Independence wars, the Spanish monarchy had no option but to allow neutral foreign ships to carry out Spain’s colonial trade. It was a desperate attempt to get access to the much needed American bullion and keep commercial lifelines open (Marichal, 2007). Reforms in Portuguese colonial trade also started in the earlier eighteenth century. The Brazil convoys were heavily in debt and in 1720 taken into the Crown’s general stores. A new small tax on gold imports from Brazil was used to deal with its financial liabilities and to finance the protection of the convoys. As the century progressed, measures multiplied to push back against the operation of single ships sailing outside the fleets and the presence of foreign ships on the Brazil run, driven in large parts by the dependence on British goods and merchants. As in the case of Spain measures to try and keep the bullion trade in Portuguese hands were of limited success. Ships travelling to the East were permitted to stop over in Brazil, but relatively few did so. At the same time, the growing trade in enslaved Africans became a South Atlantic direct trade dominated by Brazilian and Angolan interests (Florentino, 1995, 103; Candido, 2013; Lopes, 2015: 56). The second half of the eighteenth century witnessed a wave of administrative reforms associated with the intervention of the Marquis of Pombal, minister of King Joseph I. Pombal’s interventions were diverse and their impact domestically and in the colonial sphere were broad and deep. Commercially, Pombal sought to push back against British influence in Portugal’s colonial trade through stricter controls on the shipment of staple products from Brazil and the creation of chartered monopoly companies. The Portuguese East India Company, the Portuguese Company for the Commerce with Brazil, the Company for Trade in Chacheu and the Company for Pernambuco and Grão Pará are but a few Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 19 examples of these chartered companies. Most of them were created to emulate foreign developments, to work as means of protection for a specific territory, or as means of capital lock-in for the capital market in Lisbon. Those for the north-eastern region of Brazil did in addition transform the agricultural sector and trade significantly. Perhaps the two most important reforms in economic terms were the attempt to develop a national textile manufacturing sector for the purpose of import substitution and the confiscation of the properties owned by the Society of Jesus in Europe and the empire. Pombal’s measures to develop Portuguese metropolitan industries, in particular the textile industry, met with mixed success. The idea behind the policies was the substitution of imports of textiles from Great Britain into the metropolitan and Brazilian markets by nationally produced textiles, while at the same time Brazil was legally restricted to producer of primary products and the production of manufactured goods on a larger scale was outlawed. The Portuguese textile industries responded quickly and successfully to the Pombaline incentives, but, in practice, metropolitan textiles did not substitute British textiles. Both British and Portuguese textiles were bought in Portugal and exported to Brazil. De facto they served different segments in the consumption markets. Furthermore, the expansion of economic outputs in the interior of Brazil beyond the mining outputs and the usual cash crops, enlarged the markets that were being serviced by these Pombaline textiles (Costa et al., 2011). The decision to supress the Society of Jesus in Portugal and its colonies in 1759, and force the return of its properties to the Crown, is one of the most notable political and economic achievements of Pombal’s administration. Its extinction met with echoes throughout Europe, and Spain followed suit in 1767. However, the benefits of the confiscation of the assets of the order were less straightforward. Even if the Portuguese Crown confiscated all landed properties of the Society of Jesus in Europe and overseas, these assets were often sold below market value or rented out to local businessmen or civil servants. The returns to the Crown were thus short term and of little impact in the state's or imperial finances (Serrão, 2014: 13). In Spanish America the expropriation of the Jesuits led equally to a mixture of a sell off of their large-scale investments in real estate, haciendas, and large numbers of enslaved Africans owned by the Society, on the one hand, and increasingly desperate attempts by the appointed administrators of the former Jesuit property, the so-called temporalidades, to collect on the myriad of loans that Jesuit institutions had lent to Spanish Americans from all walks of life, on the other. The process foreshadowed the financial havoc that the disentailment policies of the late eighteenth century would wreak on the credit sector in Spanish America (Grafe, 2020). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 20 16.5 Commodities Up to the eighteenth century, there were two main differences between the structures of colonial import and export trades in Portugal and Spain. First, Portugal imported both agricultural commodities (spices and sugar) and manufactured goods (silks and ceramics) from its empire, and colonial trade had a large impact on the Portuguese economy and treasury. In Spain, by contrast, a single colonial import, bullion, had dominated colonial trade since the 1550s. Mercantile profits were mostly the result of re-exports of European manufactured goods to the Americas and the impact of the trade was more circumscribed, both because the internal Spanish American markets were more important and because less of the colonial taxation found its way into the peninsular treasuries (see Chapter 12). Second, Portugal’s trading system was multipolar and Asian (and African) trade was initially much more important than transatlantic exchanges. Spain’s trade was almost exclusively concentrated on the Americas. The Manila trade was not only a very distant second, but de facto controlled from New Spain. Portugal's multipolar colonial trading system initially integrated three circuits of overlapping commodities. The first linked the colonial world to the metropolis. Lisbon imported refined and unrefined cash crops and natural resources from the South Atlantic (sugar, tobacco, coffee and brazilwood) and re-exported most of these goods to the European markets, before or upon their processing. This import and re-distribution system was also applied for the spices and luxury products (dyestuffs and textiles) imported from Asia. The second circuit linked western Africa to Brazil and the rest of the American continent. Merchants born in Portugal, Brazil, the Atlantic Islands (mostly from Cabo Verde) and Angola were active in the export of enslaved Africans from different points on the west coast of Africa, but with particular intensity from Loango and Angola, to Brazil and the Spanish West Indies. African authorities tended to impose the rules for bartering for enslaved Africans, which meant merchants needed to bring cotton textiles with specific patterns, cowry shells, tobacco, alcoholic beverages and, at times, gold as means of exchange. They were supplied in a third circuit met by Portuguese, Brazilian, Cabo Verdian and Angolan traders who imported, sometimes via Bahia and Rio de Janeiro, textiles from Goa, cowry shells from Angola to other points on the west coast of Africa, tobacco, gold and cachaça (a type of rum) from Brazil. By the eighteenth century, however, the differences between Portugal and Spain became less obvious. The ongoing difficulties in Asia caused by European competition and the discovery of gold in Brazil led Portugal to refocus its attention to the Atlantic World and to the export of staple commodities to be re-exported to the rest of Europe. Recent research has stressed that Goa remained a vital part of the Portuguese commercial network, but in relative terms Brazil became the tail that wagged the imperial dog. This also meant that Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 21 Portuguese colonial trade became less diversified and more dominated by the cycles in particular commodity trades, such as gold and sugar. At the same time, Spain, though always giving priority to bullion, tried to expand non-bullion staple imports from the colonies. It also established direct trade with the Philippines from 1765 onward. In terms of the commodities traded by the eighteenth century, Brazilian trade was dominated by the staples of tobacco, sugar, gold and cotton, while rice, hides and other products were also increasingly important. In some of these commodities clear cycles appear, most notably with regard to gold. Others were subject to less obvious swings but also to sometimes significant changes in terms of the regions that produced them. Thus, Bahia remained the main source of Brazilian tobacco in the eighteenth century, which was a crucial product in the exchanges for enslaved Africans. Alden suggests that in the mideighteenth century exports of Bahian tobacco to the Mina Coast almost matched those sent to Portugal for consumption in the metropolis and reexport to the rest of Europe (Alden, 1987: 632–633). Sugar production had expanded over the seventeenth century from maybe 700,000 arrobas to a high of 1.3 million arrobas in 1710, and fell back a bit thereafter (Schwartz, 2004: 168). A significant part of that production was transhipped directly to the Netherlands between 1635 and 1650 (Edel, 1969). Sugar production expanded again in the eighteenth century to an estimated 1.6 or 1.7 million arrobas by 1807, especially in Rio de Janeiro and Bahia, while Pernambuco’s production probably stagnated (Alden, 1987: 630– 631). Coffee, too, took off in the 1770s. The two commodities that have attracted most attention with regard to their impact on the Portuguese colonial economy as a whole in the eighteenth century were gold and cotton. Gold-mining was important in both Spanish America and Portuguese Brazil as seen in Figure 16.2. Yet, the discovery of gold in Brazil had a dramatically larger impact on the economy of Brazil and that of peninsular Portugal (see Chapter 13) than the Spanish American production. In the 1690s, prospectors and explorers from São Paulo found placers on several rivers in Minas Gerais. In 1718, Paulista prospectors discovered gold in the Mato Grosso. In 1725, significant deposits were also found in Goiás though Minas Gerais remained the most productive of the three regions throughout the eighteenth century, with 72% of the total output. Brazilian gold mining from the start was part of the slavery complex. Gold production rose from 4,327 kilograms in the 1690s to an all-time high record of over 145,000 kilograms in the 1740s. Then it dropped gradually to 38,000 kilograms in the first decade of the nineteenth century. Gold deposits were superficial and widely scattered. As a result, colonial gold mining was small-scale, transient and permeated with fraud and smuggled goods. The circulation of unregistered, un-assayed gold was widespread in Brazil, with the most realistic estimates placing it at above 50% of total output (TePaske, 2010: 23). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 22 Just as gold production declined a new sector expanded, especially in Maranhao and Pernambuco, driven in part by the policies of the new Companies created by Pombal's reforms (Figure 16.3). Cotton stood for a new exchange that would see Brazil integrated into the expanding European cotton industries, and not only the English one, from the late eighteenth century onwards. Portuguese intermediation in the sector was key, as were its links with the ever-expanding trade in enslaved people. 0 10 20 30 40 50 60 70 80 90 100 1492-1500 1501-1510 1511-1520 1521-1530 1531-1540 1541-1550 1551-1560 1561-1570 1571-1580 1581-1590 1591-1600 1601-1610 1611-1620 1621-1630 1631-1640 1641-1650 1651-1660 1661-1670 1671-1680 1681-1690 1691-1700 1701-1710 1711-1720 1721-1730 1731-1740 1741-1750 1751-1760 1761-1770 1771-1780 1781-1790 1791-1800 1801-1810 Figure 16.2. New World Gold Output, 1492-1810 (by decade, in millions of pesos of 272 maravedís) Spanish America Brazil Source: Te Paske (2010: 54-55). 0 50 100 150 200 250 300 350 400 450 1758 1760 1762 1764 1766 1768 1770 1772 1774 1776 1778 1780 1782 1784 1786 1788 1790 1792 1794 1796 1798 1800 1802 1804 1806 1808 1810 1812 1814 Figure 16.3 Cotton exports from Maranhao and Pernambuco, 1758-1815 (in thousands of arrobas) Maranhao Pernambuco Sources: Melo and Martins (2022; 2023). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 23 However, one ought to be careful not to see too simple a link between staple productions in Brazil and slavery: Melo & Martins (2022; 2023) show that slavery was crucial for the expansion of cotton in Maranhao, but not in Pernambuco. The Spanish American imperial trade was, by comparison to Portugal, always mainly focused on the attempt to contain, control and tax transatlantic trade within the strict routes and parameters of the two commercial fleets of the Carrera system. As we have seen, the system was rarely completely closed to the prescribed routes and procedures. Nevertheless, the staple feature and the irregularity of the fleets had severe consequences for the colonial economy. By definition, vast regions were initially outside the main channels of exchange via new Spain and Portobelo/Lima. This encumbered regional specialization and made vital imports more expensive. Still, until 1630, the regularity of the fleets meant that secondary American areas not too distant from the transatlantic routes could still export part of their agricultural output to Spain. Thus, Central American indigo production and trade enjoyed significant prosperity from 1580 to 1620. Two or three vessels of the New Spain fleet would call at the main Central American ports and provided the means to export indigo and other commodities to Seville with acceptable regularity, notwithstanding Guatemalan complaints about insufficient tonnage. However, as the fleets became less frequent and carried smaller tonnages after 1630, indigo exports stagnated, even though indigo was a low bulk and high unit value commodity. In the second half of the century, the cabildo (municipal council) of Santiago de los Caballeros (present-day Antigua Guatemala) repeatedly complained that the by then irregular fleets included virtually no ships bound for the Gulf of Honduras (MacLeod, 2008: 199–200). However, it is dif~cult to generalize. Other regions, such as the Rio de la Plata, fared better and regions underserved by the fleet found ways around the problem, as we will see. Silver dominated value but not volume. From 1560 to 1650, bullion and non-bullion commodities made up 82.2% and 17.8%, respectively, of the total value of Spain’s colonial imports (Chaunu & Chaunu, 1955–1956, VI-1: 474). Unfortunately, there is no reliable data on cargo value for the second half of the seventeenth century, so we must turn to volume measures. These show that the total movement of gross register tonnage (i.e. ships’ total internal volume) that criss-crossed the Spanish Atlantic shrank precipitously after the 1630s, as seen in Figure 16.4. The total tonnage of the 1700s amounted to less than a tenth of that of the 1610s (García-Baquero, 1992: 324–325) although the contraction of the outward tonnage was not as acute, as can be seen in Figure 16.4, probably due to the fact that between 1660 and 1708 registration of goods shipped to Spain was not compulsory. It stands to reason that this spectacular decrease reduced even more the share of non-bullion commodities, which occupied most of the shipping space even if we have little knowledge about how the qualities and prices of the shipped goods might have changed. Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 24 The fall in trade was not caused by a fall in production of exportable agricultural commodities (bulky crops such as sugar, cacao, tobacco and dye-wood trees, among others, but also less bulky ones such as indigo and cochineal) and cattle ranching (hides, tallow and dried meat) in the Spanish colonies. Instead, the Spanish American economy of the seventeenth century not only diverged from developments in Brazil, but also from English, Dutch and French Caribbean models. The latter began to develop plantation economies (alongside smuggling with the Spanish colonies), which by definition had a very high reliance on trade. Meanwhile, the Spanish colonial economy became even less trade dependent, with growing regional market integration within rather than between the two main viceroyalties (Assadourian, 1982). Paradoxically, the stronger development of Spanish American internal markets reinforced the role of bullion as the primary driver of Spanish commercial policies and thus the tensions between commercial regulations and the interests of regional elites in the Americas. The prosperity of colonial elites was one of the driving forces of an increasing illegal integration between the Spanish colonies and the Dutch, English and Portuguese colonies in the Americas and towards the end of the eighteenth century between the Spanish islands and the USA. In the seventeenth century some regions began to specialize in exportable commodities that were then sold to foreign interlopers. Mexico continued to produce and export the most precious of all American dyes, cochineal, which had high unit value and therefore occupied little shipping space (in the 1630s cochineal was worth 30 times more 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 1504 1514 1524 1534 1544 1553 1563 1573 1583 1593 1603 1613 1623 1633 1643 1653 1663 1673 1683 1693 1703 1713 1723 1733 1743 1753 1763 1773 Figure 16.4. Total tonnage of merchant ships sailing from the western Andalusian ports (Seville, Sanlúcar and Cádiz) and the Canary Islands to Spanish America, 1550-1778 (tons of 1.376 m3) Total tonnage of merchant ships to Spanish America 7-year moving average Sources: Chaunu and Chaunu (1955-1956, VI-2: 384-391), García-Baquero (1976, II: 126-128) and García Fuentes (1980: 211-213, 224-225). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 25 than an equivalent weight of sugar) but it is unclear how much of it reached Seville. Cuba had perfect soil and climate for sugar and tobacco, but it soon became apparent that Cuba could not compete on price with the plantation sugar produced in English Jamaica, French Haiti and Portuguese Brazil, so it reduced sugarcane cultivation (which would regain importance only after the 1780s) and concentrated on tobacco throughout the seventeenth century. However, a large part of the tobacco was smuggled to non-Iberian European markets, since consumers considered it superior to that of Virginia. Likewise, cacao production (but also tobacco and hides) in Venezuela and parts of the viceroyalty of Peru expanded in the seventeenth and early eighteenth centuries. Dutch smugglers operating from Curaçao and Bonaire initially dominated the former, Spanish trading circuits the latter. After the War of Spanish Succession, the Bourbon administration tried to curtail smuggling and promote colonial agriculture with the aim of increasing fiscal revenue. In the case of Cuba and Venezuela, the strategy adopted was to turn the production of tobacco and cacao into monopolies run by either the state or a privileged trading company such as that of Caracas. The increasing use of navíos de registro after the 1740s also had a positive effect on the overall volume and value of colonial non-bullion goods arriving in Spain. But, despite those efforts, overall agricultural and ranching exports likely remained lower than they would have been had transatlantic trade been open to more American and Iberian regions or if Spain had copied Portugal’s eighteenth-century policies of turning the colonies into producers of primary products dependent on European manufactured goods. 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 1750 1786 1787 1788 1789 1790 1791 1792 1793 1794 1795 1796 1797 1798 1799 1800 1801 1802 1803 1804 1805 1806 1807 1808 1809 1810 1811 1812 1813 1814 1815 Figure 16.5 Sugar exports from Cuba, 1750-1815 (in thousands of arrobas) Sources: Sims Taylor (1970), Klein (1975) and Bosma and Curry Machado (2012). Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 32 However, the single largest difference between the flows of silver towards Spain and gold towards Portugal was likely their impact on the fiscal receipts from the colonial sphere on the peninsular polities. Around 40% of Portuguese revenue in the mid-eighteenth century derived from taxes on Brazilian trade, which included gold prominently; by the 1760s and 1770s the share was still above 20%. On the Spanish side, the same proportion of American revenue accounted for about 12-13% of royal receipts across the eighteenth century, of which silver taxes accounted only for a fraction (Irigoin & Grafe, 2008; Grafe & Pedreira, 2019). 16.6 Conclusion It is impossible to understand the economic history of early modern Iberia without taking stock of its trade, and in particular its imperial expansion. Imperial trade contributed to a dramatic increase of openness of the peninsular economy, quite opposite to the image sometimes painted. The regulatory frameworks used for much of the period by Spain and Portugal differed significantly. Yet, neither constituted a monopoly in the modern economic sense or indeed in the sense of Dutch and English seventeenth-century trading companies. The legal basis for a colonial exclusive were stronger in the Portuguese case, but only in the later eighteenth century could reformers create the conditions for the metropolis to reap more of the benefits of such an exclusive. Generally, the benefits of empire for peninsular Portugal with its smaller European economy and larger empire were substantial, especially in fiscal terms. In Spain, the proportions were inverted, and the process of colonization of a large territorial mass with increasing internal markets meant the room for an 'imperial subsidy' was always modest. In addition, there was simply no legal basis for a colonial exclusive. The rents from the exploitation of indigenous and enslaved Afro-descendent labour in Spanish America went mostly to Spanish American elites, not to the metropolis until the late eighteenth century (Grafe & Irigoin, 2012). Economic conditions account for some of the differences in the development of the two empires over the three centuries under consideration. It should be noted that even during the union of Crowns the regulatory frameworks for trade remained separate though in particular in the trade in enslaved Africans collaboration and inter-imperial trade drove the expansion to 1640. It is an interesting counterfactual to think how commodity flows might have developed had the Portuguese War of Restoration not raised the barriers between the hispanophone and lusophone regions of America. The orientation towards England in foreign policy in the case of Portugal shaped the eighteenth-century empire. In the case of Spain, the alliance with France made much less of a difference to American trade, though re-exports of French textiles to the Americas were one factor. One fact that is too rarely acknowledged is that the Iberians created the transatlantic slave trade long before the Dutch, Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 33 English, French and other Europeans partook. It was the poisonous fruit of intra-Iberian cooperation first and foremost. But neither commodity cycles nor trade conditions would seem suf~cient explanations for the very different role that enslaved people played in either empire until the late eighteenth century. The Achilles heel of both empires was that exports to the Empire mostly consisted of re-exports of northern European manufactured goods. That limited the backward linkages of the trade, though there were impulses to shipbuilding and a large array of services from the start. Agriculture in the peninsula benefitted in the earlier periods. It is even harder to understand the forward linkages. Commodity re-exports were lucrative for Portuguese merchants, but to the extent that they depended on foreign finance the benefits were shared. Silver imports into Spain lubricated trade, but they also contributed to financial conditions that led to urban indebtedness and high local taxation (see Chapter 13 and Grafe, 2012). From the early seventeenth century onward, when primarily north-western European merchants took control of Iberia’s international trade and the manufactured goods coming from their countries of origin flooded into Spain and Portugal, the bulk of the bullion arriving in Seville and Lisbon from the Iberian empires began to be increasingly reshipped to Antwerp, Amsterdam, London, Nantes and other ports. This feature of Iberia’s international trade would continue unabated until the end of the colonial period. A pattern of trade that had bullion at its core had massive ramifications for both European and global trade. A large part of the bullion was used to offset Western Europe’s chronic trade deficits with three areas: the Baltic (whence basic commodities such as grain, timber, hemp, flax, wax, leather and potash were imported, a trade dominated by the Dutch and English), the Levant (which was primarily in the hands of French, Dutch and English merchants), and Asia or the Orient. The latter was the main destination of the American silver, and the two main players in that trade in the seventeenth and eighteenth centuries were the English and Dutch East Indies companies (Barrett, 1990: 250-253). The purpose of shipping silver to Asia was not only to offset Europe's trade deficit. Equally important was the price of silver itself. The fact that more silver than gold was mined in the New World meant that the exchange or price ratio of silver to gold changed significantly. From the mid-sixteenth to the mid-seventeenth century the value of silver fell 60% relative to gold, setting the bimetallic ratio in the Spanish Empire at around 16:1, where it remained until the later nineteenth century. This meant that silver's purchasing power in the Spanish Empire decreased during the colonial period. But the silver to gold ratio differed substantially around the world, a fact that had implications in shaping not only commodity flows in the Atlantic World but also global trade. Differences in the bimetallic ratio gave rise to commercial exchanges between countries and continents. In the late seventeenth century, for instance, in north-western European ports the price of silver relative to gold was as much Publicado en Lains, P. et alii (eds.), An Economic History of the Iberian Peninsula, 700-2000 (Cambridge: Cambridge University Press, 2024), pp. 409-442. 34 as 10% higher than in Spain. Similar differences generated trade between Spain and the rest of Europe, greatly contributing to draining silver away from Iberia. However, the most substantial exchange discrepancy was between the Spanish Empire and China. The relative price of silver to gold in China was about 8:1, that is, twice that of the Americas. This meant that Chinese goods such as silks and ceramics could be sold for silver in the New World or Europe at double the price paid for them in Asia, though transport costs reduced some of that difference. 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