The First Savings Banks in Latin America:

Cuba and Puerto Rico (1840-1898-

Angel Pascual MARTINEZ SOTO

March 2011

World Savings Banks Institute - aisbl – European Savings Banks Group – aisbl Rue Marie-Thérèse, 11 ￭ B-1000 Bruxelles ￭ Tel: + 32 2 211 11 11 ￭ Fax: + 32 2 211 11 99 E-mail: first [email protected] ￭ Website: www.savings-banks.com THE FIRST SAVINGS BANKS IN LATIN AMERICA: CUBA AND PUERTO RICO (1840-1898)

Angel Pascual Martinez Soto, Professor, University of Murcia

Angel Pascual Martinez Soto (1955), Senior Lecturer in Economic History and Director of the Department of Applied Economics of the University of Murcia (), focuses predominantly on the study of several aspects of the financial . He contributes to the main Spanish journals in the field, mainly on credit cooperatives and saving banks. Other research topics are the demography and standards of living in the Spanish mining industry. His recent work examines the financial system during the Spanish colonial period in Cuba, Puerto Rico and the Philippines.

Despite the progress made in researching the history of savings banks in Spain, there are still aspects that remain largely unknown, especially with regard to their introduction in the colonial environments of Hispanic America and the Philippines. This paper studies these hitherto largely ignored institutions in Cuba and Puerto Rico during the period from 1835 to 1898.1 We are therefore dealing with a subject that is novel and, in our opinion, important in order to better understand the history of this type of entity both in and in other non-European territories. We will develop two themes in this introduction: first, a brief insight into the founding process of the new savings banks and the main setbacks endured by these institutions over the period covered and; second, a heuristic analysis of the sources used over the course of our research.

1 This paper is part of a larger corpus of work being undertaken alongside Francisco Comín and Inés Roldán. A book will be published in the near future (it is currently being printed) which is the result of this study: Las Cajas de Ahorros de las provincias de Ultramar: Cuba y Puerto Rico, 1840-1898, published by the Fundación de las Cajas de Ahorros.

87 In the early 19th century, Spain lost its colonies in the Americas through various independence movements. Eventually, its empire in the continent was reduced to the islands of Cuba and Puerto Rico. Liberal governments turned their attention towards these lands and endeavoured to improve their economic development as a means of obtaining revenue sources that would compensate for the loss of the other colonies. Sugar, coffee and tobacco became the focal point for commercial development on these islands. In this new context, Havana established itself as the primary commercial and financial centre. The city experienced not only an influx of all kinds of goods, but also the liberal political and economic ideas that fuelled the ideological drive behind the economic development. The Patriotic Society of Havana played a crucial role in this transformation. Its members included the leading intellectuals and businessmen of the city, and their meetings and reports were the source of myriad projects that fed the economic and social innovations.

Credit became a hindrance to productive development, because high interest rate payments consumed the earnings of the islands’ growers. It was not until the middle of the century that banks were formed as corporations in Cuba, and until the 1870s in Puerto Rico. Merchant lenders with ties to foreign business networks played a key role as financial intermediaries.2 During most of the 19th century, credit was controlled by commercial undertakings carrying out the business of banking. Lending mechanisms that gave the sugar and coffee grower access to financial capital via merchant lenders remained in place until the end of the colonial era.

Between 1830 and 1860, sugar plantation boomed on both islands. The introduction of new steam technologies and innovative production methods transformed Cuba into the largest sugar producer in the world.3 This progress was closely related to the development of railways connecting the production centres with the ports from whence exports were sent to the United States, England, and Spain. Between 1837 and 1870 more than 1,000 kilometres of railways were built and several companies with indigenous capital were founded.4 Infrastructure linked to the sugar trade (port installations, wharves, warehouses, etc.) grew at breakneck speed during those years.

2 On this subject in Cuba see García López (1996) and Ely (2006) and (1961). For Puerto Rico: Picó (2006) and Szaszdi (1963). 3 Moreno Fraginals (1978). 4 On the development of the railway, see the works of Zanetti and García Álvarez (1897) and Santamaría García (1995).

88 These developments in Cuba and Puerto Rico, in addition to the clearing of new land for the planting of sugar and, to a lesser extent, coffee, required substantial investments. This context was favourable to the growth of the financial sector, leading to the emergence of institutions in the form of joint-stock companies.

Similar to the first Spanish , whose foundation in was the fruit of a project by the Madrid Economic Society of Friends of the Country (Sociedad Económica Matritense de Amigos del País), Havana’s first savings bank was born out of its own Patriotic Society. As in its mother country, in 1835 this institution started to disseminate through its reports the knowledge and information concerning the nature of savings banks and mounts of piety and their role in England and France, as well as the benefits they brought to the “needy” classes. Within this institution Havana’s first caja, or savings bank, was created in 1840, the work of partners Auber and Bachiller. The heads of the colonial administration at the time, the Governor Prince of Anglona and Superintendent Martínez de Pinillos, welcomed an idea that was well received by a group of businessmen in the city, notably including Carlos del Castillo, member of one of the most important families in the colony. In 1840, merely two years after the Madrid Savings Bank was founded, the first savings bank was founded in Latin America under the name Caja de Ahorros, Descuentos y Dépositos de la Habana (Havana Savings, Discount and Deposit Bank). This bank continued in existence until 1884, during which time it became the largest in the country in terms of managed capital. This founding process continued on the island with the establishment of the Santiago de Cuba Savings Bank in 1849, created and run by the Santiago Patriotic Society. Numerous initiatives followed to form such institutions in other cities, albeit to little avail.

The Havana city council proposed the creation of a mount of piety, also at the behest of the Patriotic Society, in 1835, although it was not approved by the government in Madrid until 1844 at the request of Treasury Superintendent Martínez de Pinillos. The creation of this establishment gave rise to a different situation from that in Madrid and other cities in the Spanish mainland, due to the fact that the Mount of Piety operated independently from the Savings, Discount and Deposit Bank. At the time it was the only mount in Spanish territory to operate independently from a savings bank. Its functioning depended entirely on the colonial administration, and it thus evolved into one more institution within this structure and remained as such until 1898.

89 The second step took place in Puerto Rico. In 1859 the Economic Society of Friends of the Country drafted a project to introduce a mount of piety in San Juan under the stewardship of the island’s authorities, but it did not prosper. In 1860 the governor received a letter from the director of the Madrid Savings Bank, León García Villareal, in which he offered his collaboration for the creation of a similar establishment in San Juan. In 1861 General Echagüe, who at the time headed the local government, wrote to the director of the Madrid entity requesting a copy of its statutes, which he dispatched to the Economic Society. Thus the first steps were taken towards the new establishment, yet the process only became a reality in 1865 with the presentation of a definitive project signed by some of the partners, among whom figured some of the future leaders of the Puerto Rican autonomist movement such as Román Baldorioty de Castro.

The San Juan Bautista Savings Bank was established, like those in Cuba, as a joint-stock company, in compliance with the Royal Decree of 29 November 1859. Its by-laws incorporated many of the organisational and operational elements of the Madrid Savings Bank. Despite authorisation from the island’s Governor General, the new entity was undermined by the authorities in the mainland in 1867, placing it in a difficult situation that was not resolved until June of that year. The legal status of the entity was expiring in 1875 and its managers did not initiate the procedures to renew its validity. Consequently, the existence of the entity between 1875 and 1879 was illegal, although no authority stepped in to resolve the issue. Mismanagement – including illegal activity outside the procedures laid down in its founding by-laws – brought about its bankruptcy in 1879; the bank had placed nearly the entirety of its funds in a loan to businessman Leonardo Igaravídez, whose bankruptcy inevitably brought down the institution.

This precedent led the authorities to increase oversight measures and requirements for authorising new banks on the island. Nevertheless, in spite of these difficulties, from 1872 to 1895 a series of new establishments was formed in the towns of Ponce, Mayagüez, Humacao, San Germán, Cabo Rojo and Sabana Grande. The Overseas Ministry introduced a gamut of obstacles to the creation of these new entities, including denying some the right to use the name “savings bank”, instead requiring the use of “bank of economies and ” (caja de economías y préstamos) in the cases of those in San Germán and San Juan in 1893.

90 Be that as it may, unlike Cuba, Puerto Rico succeeded in establishing several banks in the main towns and many of these survived the 1898 Spanish American War, operating under the administration of the United States.

The creation of each of these shared a common trait: the administrative processes that needed to be overcome. These were made up of torturous procedures starting in the territory and continuing to mainland Spain with the intervention of the Overseas Ministry and the Council of State, with the latter advising the former in its decision-making. These complicated proceedings could take several years, during which time, in many cases, the entities operated by circumventing prohibition through the consent of the local authorities.

The greatest obstacle stemmed from the non-application of Spanish legislation in the colonial territories, which had their own set of specific laws. Projects in Cuba and Puerto Rico therefore adjusted to conform to the legislation pertaining to the formation of corporations in the Overseas territories (Royal Decree of 29 November 1853 and, subsequently, Royal Decree of 16 August 1878). The savings banks found themselves obliged to form as joint-stock companies and operate within this legal framework. At no stage were they awarded the status of charitable institutions as was the case for their counterparts in Iberian Spain, despite clauses contained in the statutes and by-laws regarding their purposes and objectives to this end. In many cases their creation was subject to the vagaries of colonial politics, such that those backed by liberal reformist and autonomist personalities, as was the case for the savings banks in Ponce, San Germán and San Juan (1893), encountered numerous obstacles to gaining approval that took several years to overcome, with repeated requests to amend all kinds of documents. As mentioned above, these obstacles went as far as denying the use of the name “savings bank” and enforcing the use of the euphemistic “bank of economies and loans”.

With the enactment of the Savings Banks Act in 1880 in Iberian Spain and the abolition of slavery, the Overseas Ministry changed strategy and ordered the colonial authorities, in the case of Cuba, to set up savings banks and mounts of piety in all the island’s . This measure was taken as a precaution against potential social conflicts that could have been caused by the former slaves, acknowledging, like in Iberian Spain, that the cajas had significant potential to prevent them by making use of their educational value in terms of savings and financial planning.

91 Despite repeated calls from the Governor General and from the various provinces, no new entities were created for lack of economic resources to make it happen. The Spanish government neither contributed nor provided any funds to assist these new establishments and the provincial governors made it known that the provincial councils were virtually bankrupt and therefore unable to contribute. This latest attempt at forming savings banks vanished with the outbreak of the Independence War.

1. Savings banks in Cuba, 1836-1890: The Havana Savings, Discount and Deposit Bank

1.1. Who were the founders?

The shares in the entity were subscribed for by 128 people (Table 1), of which the largest group was merchants (24.3%), followed by landowners (17%) and high civil servants (12.5%); these three groups represented high urban society and together accounted for more than half of the shareholder base. The remainder of the groups represented the middle and upper Creole social classes. The group of shareholders comprising merchants, landowners, high civil servants and industrialists together held 76.8% of the share capital of the new entity, with merchants notably holding 31.7%.

A breakdown of the shareholder base by filiation shows that the “del Castillo-Loyzaga” family were represented by 16 shareholders holding a total of 684 shares (65.4% of the total), which gave them total control over the entity. Within this group there were six female shareholders with a total of 150 shares (14.3% of the total). This was one of the main families of the local high society, which controlled a broad network of businesses in the commercial and financial sectors, in addition to sugar refineries. Within this group was one of the largest commercial enterprises of the period, “Drake del Castillo”, specialised in sugar exports.5 The central figure in this group was Carlos del Castillo Loyzaga, who held 9.5% of the entity’s shares and represented the group’s interests at the savings bank.

5 On this commercial undertaking and its network of business and financial ties, see Ely (2001), pp. 342-384.

92 This family group controlled the savings bank and appointed those who would occupy the main managerial positions. The only position that escaped its control was that of president, who was appointed by the island’s Governor General. This post was occupied by the Count of Cañongo, a major businessman in Havana. The positions of director and secretary of the board were awarded to eminent members of the family group, namely Carlos del Castillo Loyzaga and Antonio Bachiller Morales, respectively. Both positions were remunerated, with an annual salary of 4,000 pesos for the director, plus 6% of net earnings, and 1,104 pesos for the secretary.

Of note is the fact that the professional nature of the entity’s managerial posts differed from the unpaid functions of the corresponding positions in Iberian Spain’s savings banks. In addition, the managerial team was made up of individuals with ample experience in the world of business, with legal training and knowledge of accounting. The advanced technical and intellectual level of the board members was crucial to the development and sustainability of the entity.

Table 1: Breakdown by profession of the Havana Savings, Discount and Deposit Bank shareholder base, 1841 (as percentage and in pesos)

% total Capital Profession shareholders % shares subscribers Merchants 24.3 31.7 66,570 Lawyers 5.6 4.8 10,080 High civil servants 12.5 16.3 34,230 Second-tier civil servants 3.5 2.7 5,670 Military (officers) 8.6 4.5 9,450 Industrialists 9.8 10.2 21,420 Doctors and pharmacists 7.5 3.5 7,350 Land and plantation owners 17.0 18.6 39,060 Priests 4.1 3.1 6,510 Teachers 2.6 1.9 3,990 Artists 1.7 0.6 1,260 Women with no profession 2.8 2.1 4,410

Source: Author’s own work based on the Spanish National History Archive (AHN), Ultramar, leg. 4638, exp. 10, doc. 5.

93 As for the transactions provided for in its by-laws, the entity would accept deposits of three or more pesos; when these were lodged for a period exceeding six months they would pay an interest of 6% per annum, compounding every six months. As for asset transactions, the company used its funds to discount bills and negotiable notes with a maturity of six months, guaranteed by two firms, which was a novelty in the functioning of finance companies at the time, which discounted for only three months with the guarantee of three firms. In addition, the by-laws provided for mortgage loans on urban property.

Concurrent with the Havana Savings, Discount and Deposit Bank, another project was initiated by the Presbyterian Domingo de Aguirre, who had formed an entourage comprising a number of the city’s important businessmen – some of whom, such as Julián Zulueta, were involved in the clandestine African slave trade – to found an entity under the name “Havana Charitable Savings and Deposit and Discount Bank” (Caja Benéfica de Ahorros y Banco de Depósitos y Descuentos de La Habana). This group passed the institution’s articles of incorporation, which were very similar to the by-laws of the other entity, although despite amassing 212,000 pesos in capital, it did not receive the approval of the Governor General Prince of Anglona. Some of its backers subsequently became shareholders of the Havana Savings, Discount and Deposit Bank.

1.2. Who were the clients?

Depositors in the institution were for the most part of European origin, although they also included a significant number of coloured individuals, both free and enslaved. From the moment of its inception, the savings bank accepted savings from slaves, so long as they carried written permission from their owners, which was in the form of a template designed by the institution. The objective of these savings was to obtain coartación, or self-emancipation. Cuban slavery law provided for the principle of coartación and recognised the slave’s right to gain freedom by paying his owner his price. This possibility, however, was only within the reach of urban slaves, who were often rented out by their owners and thus received a small wage. For slaves who formed part of the workforces of the sugar refineries of the interior, coartación was unattainable.

From a history of savings banks viewpoint, the presence of slaves among depositors at the Havana Savings Bank is one of the most notable features, a reflection of the slave- and sugar plantation-based economy on the island of Cuba.

94 The number of black slaves and black free men among total depositors in the entity was modest, barely exceeding 100 in a given year. The proportion of coloured people (free and slaves) in the total number of depositors decreased over the course of this period, from 20% for the 1840-1841 fiscal year to 2.6% in 1867-1868.

Similar to the trend for savings banks in Iberian Spain, women and children accounted for approximately one-quarter of depositors (24.5%) during the period 1840-1868 (Table 2). Within this group, white women were clearly predominant (22.4%) over coloured women (3.2%). Coloured women were a minority, with slaves and free women accounting for respectively 1.3% and 1.6% of depositors. Most of these women worked as servants, although some did work in tobacco plants or held urban jobs (washers, pressers, etc.).

Figure 1: Havana Savings, Discount and Deposit Bank, breakdown of depositors, 1840-1868

10,000

1,000

100

10

1 1840-41 1841-42 1842-43 1843-44 1844-45 1845-46 1846-47 1847-48 1848-49 1849-50 1850-51 1851-52 1852-53 1853-54 1854-55 1855-56 1856-57 1857-58 1858-59 1859-60 1860-61 1861-62 1862-63 1863-64 1864-65 1865-66 1866-67 1867-68

n Total – White --Coloured free – Coloured slaves

Source: Author’s own work based on data from the records of the Havana Savings, Discount and Deposit Bank 1840-1868.

95 Other groups with significant representation were merchants of all kinds (12.9%) and workers (11%). Within the latter, “white collar” office and business employees (7.5%) were predominant, having a greater savings capacity. Furthermore, a whole range of urban trades and professions were represented, which was also the case for the European savings banks: craftsmen (7.5%), farm owners (7.5%), civil servants (6.5%), industrialists (4.8%), liberal professionals (4.5%), military officers (2.7%), among others. In a port city with a vibrant business sector, large groups of both resident and non-resident foreigners (6.5% and 2.1% respectively) were also among the savings bank’s list of clients.

Merchants (18.2%) deposited the most funds in the savings bank among professionals, followed by women of classes (13.1%) and industrialists (11.3%). Next came other groups representing the middle class with similar contributions: owner-farmers (9.2%), civil servants (7.4%), liberal professionals (7.4%) and workers (7.1%). The presence of the middle urban class among the depositors was crucial in the initial phase of the savings bank’s development, as they provided stability and the necessary funds for entering into other transactions. Operating in this manner enabled the bank to portray a solid image that facilitated growth in confidence among the “needy classes” with respect to depositing their savings in the entity in quantities that grew over time. Thus, when the savings bank suspended payments in 1884, the majority of its 14,000 depositors were workers of all types.

1.3. Growth in deposits at the Havana Savings, Discount and Deposit Bank

Throughout this period, deposit transactions took place according to one of two methods: with interest or without interest (Figure 2). Deposits of three pesos and above were accepted and when these deposits were placed for a period exceeding six months they were paid an annual interest rate of 6%. Deposits for shorter periods therefore paid no interest and were considered as current accounts. This second method was used widely by the city’s merchants as it facilitated their receipts and payments, while they were more sensitive to the financial changes and fluctuations besetting the Cuban economy and, in particular, Havana’s trading centre.

96 Table 2: Breakdown of depositors and funds deposited by profession, social status and gender at the Havana Savings Bank, 1840-1868 (percentage)

CATEGORIES % total depositors % total funds deposited Women 22.4 13.1 White 19.7 10.8 Coloured (slaves/free) 3.2 2.3 Slaves 4.1 4.9 Men 2.8 3.9 Women 1.3 1.0 Free coloured 3.4 3.7 Men 1.8 2.4 Women 1.6 1.3 Children 2.1 1.4 Liberal professionals 4.5 7.2 Doctors 1.8 2.1 Lawyers 1.7 1.8 Surveyors 0.5 2.1 Dentists 0.5 1.1 Farmers/landowners 7.5 9.2 Landowners 1.5 6.3 Farmers 6.0 2.9 Clergy 1.9 2.3 Military 2.7 3.2 Civil servants 6.6 7.4 Industrialists 4.8 11.3 Workers 11.0 7.1 Sales clerks 3.3 1.9 Office employees 4.2 2.3 Labourers 2.2 1.8 Servants 1.3 2.1 Craftsmen 7.6 3.5 Merchants 12.9 18.2 Foreigners 6.5 4.2 Non-resident foreigners 2.1 2.2 No profession declared 2.8 3.4

Source: Author’s own work based on data from the records of the Havana Savings, Discount and Deposit Bank, 1840-1868.

97 Figure 2: Havana Savings, Discount and Deposit Bank, growth in deposits, 1840-1868 (thousands of pesos)

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 1840-41 1841-42 1842-43 1843-44 1844-45 1845-46 1846-47 1847-48 1848-49 1849-50 1850-51 1851-52 1852-53 1853-54 1854-55 1855-56 1856-57 1857-58 1858-59 1859-60 1860-61 1861-62 1862-63 1863-64 1864-65 1865-66 1866-67 1867-68

– Total --Deposits without interest – Deposits with interest

Source: Author’s own work based on data from the records of the Havana Savings, Discount and Deposit Bank, 1840-1868.

Growth in deposits was constant from the savings bank’s inception until 1852. All in all, between 1840 and 1868 the entity’s stock of deposits grew from 315,104 pesos to 3.4 million pesos, with an average annual growth rate of 8.9%. Growth in interest-bearing deposits was faster between 1848 and 1862, after which the stocks of both account types tended to converge.

Comparative data with the Madrid Savings Bank help to better understand the level that interest-bearing deposits reached at the Havana entity in 1850. As shown by Table 3, the ratio between depositors at the Havana and Madrid Savings Banks and the total population in each city was much greater for the latter. In fact, for every 1,000 inhabitants, Havana counted 8.09 depositors, whereas in the monarchy’s capital this figure was almost double, at 16.64, demonstrating the superior penetration of the Madrid Savings Bank in the wider social fabric.

98 The remaining indicators, such as the volume of deposits, their average value and their size per inhabitant, were superior in the case of the Havana Savings Bank. It is likely that this situation stemmed from the socioeconomic makeup of the Havanan clientele, in which the middle and upper classes still played a greater role than the lower-income classes. The average value of deposits at the Havana Savings Bank was also higher than that at their French and English counterparts, which that same year averaged respectively 524 pesetas and 590 pesetas per deposit.6

Table 3: Comparison between the Havana and Madrid savings banks in 1850 (pesetas)

Average Total % urban Total value per Deposit per depositors population deposits deposit inhabitant Havana 998 8.09 4,254,840 4,263.50 34.50 Madrid 4,679 16.64 2,709,366 579 9.63

Source: Author’s own work based on the Memorias of both entities. Those for Madrid are found in the population census of 1857; those for Havana in García de Arboleya (1859), p. 104. The data for Havana are for interest-bearing deposits.

The funds collected by the Havana entity were not only double those of its counterpart in Madrid, but were also equivalent in value to the total deposits of the savings banks operating in Iberian Spain combined.7 Figure 3 shows the growth in the savings stocks of the Havana and Madrid savings banks between 1840 and 1867, and gives a fairly good impression of the scope of the Cuban undertaking.

6 Memoria (1851), p. 7. Data for France and England are provided by Antonio Bachiller himself. 7 Martínez Soto (2003), p. 183.

99 Figure 3: Total savings at the Spanish savings banks combined and at the Havana Savings Bank, 1840-1867 (in millions of pesetas)

18

16

14

12

10

8

6

4

2

0 1840 1841 1842 1843 1844 1845 1846 1847 1848 1849 1850 1851 1852 1853 1854 1855 1856 1857 1858 1859 1860 1861 1862 1863 1864 1865 1866 1867

– Spain --Havana

Source: Author’s own work based on the records of both entities. For the Spanish savings banks, Martínez Soto, Ángel P. (2003), p. 83.

Despite a wave of successive crises that engulfed the island of Cuba (1857, 1860, 1866 and 1868) the savings bank emerged strengthened from each of these, thereby evolving into the most solid Cuban private financial institution and a safe haven for deposits in times of crisis.

The insurrection of 1868 signalled the start of the Ten Years’ War. During this time the savings bank was faced with serious problems with respect to both its finances and governance. Amidst this context of war, Antonio Bachiller fled to the United States, thereby escaping arrest, while Carlos del Castillo was detained and deported to the island of Fernando Po, now part of Equatorial Guinea. Thus the savings bank lost its core leadership. Furthermore, its prestige was jeopardised to such an extent that the bank’s customers arrived en masse to withdraw their deposits, and in one day the bank was forced to pay out more than 500,000 pesos.

100 The savings bank responded by restructuring in the hope of resolving these problems, and formed a new entity pursuant to the by-law of 1871. This provided the institution with a fresh impetus that was reflected in the volume of business it generated from this date onwards. Nothing suggested the imminence of the crisis that the savings bank would be faced with in 1883, and which would drag it into bankruptcy.

Figure 4: Havana Savings, Discount and Deposit Bank, growth in deposits, 1840-1868 (thousands of pesos)

12

10

8

6

4

2

0 1868 1863 1864 1865 1867 1869 1871 1866 1870 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883

– Total --Deposits without interest – Deposits with interest

Source: Author’s own work based on data taken from the Cuban national archive, Miscelánea de Libros, and balance sheets of the Havana Savings, Discount and Deposit Bank from 1863 to 1884.

During this period, the Havana Savings, Discount and Deposit Bank was faced with serious problems with respect to both its finances and its governance, which were aggravated by the onset of the Ten Years’ War (1868-1878). Soon after its coming into legal existence, the company was nearing its end. Another reorganisation followed, leading to a third company with the passing of a new by-law in 1871. This enabled the savings bank to return to its financial business with a renewed impetus, which was reflected, as we shall see, by an extraordinary period of growth after 1878.

101 2. Savings banks in Puerto Rico, 1865-1898

The economic development of the island stemming from growth in sugar, coffee and tobacco production led to an increase in financing needs of landowners and farmers. Initially, these were covered by merchant lenders and foreign financing. But this supply was expensive and ultimately created the absolute dependency of farmers and landowners on the merchants through a continuous chain of debt. The only way to break from this situation was to develop formal financial institutions (banks and savings banks) in order to standardise the credit market. The failure of projects to form banks and financial entities continued from 1813 to 1865, when the San Juan Bautista Savings Bank was formed. Like its Cuban counterpart, this institution evolved into the largest of its kind in operation on the island.

This entity did not gain official approval to operate until 1867. Similar to what occurred with its Havanan counterpart, the San Juan Savings Bank was backed by the Economic Society of Friends of the Country, including eminent figures of the Creole liberal reformist movement such as Román Baldorioty de Castro. In 1875 the entity lost its legal status due to the expiry and non-renewal of its articles of incorporation. In addition, the founding partners left, while the institution’s managers operated in a reckless manner. Such mismanagement went so far as to commit nearly the entirety of the savings bank’s funds to a loan to businessman Leonardo Igaravídez, who was attempting to put in place a “head office” on his ranch in San Vicente. Igaravídez’ bankruptcy immediately brought down the San Juan Savings Bank, which dissolved in 1879.

Between 1871 and 1895 other savings banks were founded in the towns of Ponce, Mayagüez, San Germán, Humacao, San Juan, Cabo Rojo and Sabana Grande.

102 Table 4: Savings Banks in Puerto Rico, 1865-1898

Entity Year of establishment SAN JUAN BAUTISTA SAVINGS BANK PUERTO RICO 1865 PONCE SAVINGS BANK 1872 MAYAGÜEZ SAVINGS BANK 1874 SAN GERMÁN SAVINGS BANK 1882 HUMACAO SAVINGS BANK 1882 CABO ROJO SAVINGS BANK 1895 SABANA GRANDE SAVINGS BANK 1895 Other entities with character similar to a savings bank SAN JUAN BANK OF ECONOMIES AND LOANS LTD. (PEOPLE’S BANK) 1893

Source: On these savings banks, Comín, Martínez Soto, and Roldán de Montaud (2010), currently being printed.

These were small centres operating in the main regional nuclei of the island, linked to the growth primarily of the sugar and coffee plantations in these areas. The groups of backers were led by branches of the Creole bourgeoisie of liberal and autonomist tendencies. This characteristic was an impediment to their respective projects, which entailed withstanding all kinds of administrative obstacles, above all from the Overseas Ministry which, as a precondition to granting approval, demanded that the entities prove their charitable character, whereas they were only able to form under the existing regulations pertaining to corporations in the overseas territories. In some cases the complications, as mentioned above, went as far as requiring these entities to change their name to “bank of economies and loans”. Despite the obstacles, once in operation these institutions enjoyed rapid growth within modest funding constraints and played a very important role in their respective localities, where they were able to collect savings and introduce cheap credit to meet the financing needs of farmers, small businessmen, craftsmen and even workers. In this way they managed to distance themselves from the merchant lenders and reduced the cost of borrowing.

103 Table 5: Deposits at Iberian Spanish and overseas savings banks in 1875 (in thousands of current pesetas)

Deposits Average (in thousands % of Number of deposit Savings Bank of pesetas) total depositors (pesetas) 1 Havana-Cuba* 22,412 47.75 - - 2 Madrid 13,247 28,22 15,136 875.2 3 Barcelona 6,121 13,04 20,197 303.1 4 Seville 2,944 6,27 2,640 1,115.2 5 San Juan-Puerto Rico 467 0,99 563 829.5 6 Sabadell 377 0,80 1,173 321.4 7 Mataró 311 0,66 520 598.1 8 Burgos 308 0,66 153 2,013.1 9 Jerez 244 0,52 306 797.4 10 Vitoria 225 0,48 603 373.1 11 Ponce-Puerto Rico 85 0,18 205 414.6 12 Alcoy 58 0,12 323 179.6 13 Sagunto 47 0,10 158 297.5 14 Mayagüez-Puerto Rico 47 0,10 163 288.3 15 Malaga 32 0,07 144 222.2 16 Manresa 16 0,03 70 228.6 TOTAL 46,940 100.00 42,354 1,108

Sources: Taken from the records and general accounts of the Madrid Mount of Piety and Savings Bank for the year 1875; Havana: AHNC, Miscelánea de Libros, Libro nº 4072; AHNE, Mayagüez: Fondo de Ultramar, AHNE, Legajo 328, Expediente15, Documento 12. Report by the Governor General of Puerto Rico for the Overseas Ministry on the functioning of the Mayagüez Savings Bank Corporation, 22-I-1890; Ponce: El Avisador 17-VI-1876. Records from the Ponce Savings Bank for the year 1875; San Juan: Boletín Mercantil, 24-V-1876. * Data for the Havana Savings, Discount and Deposit Bank are for 1876.

104 Figure 5: Growth in deposits at the Puerto Rican savings banks, 1871-1898 (thousands of pesos)

2,500

2,000

1,500

1,000

500

0 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898

n Total – Mayagüez --Humacao – San German --San Juan • Economias San Juan

Source: On these savings banks, Comín, Martínez Soto, and Roldán de Montaud (2010), currently being printed.

105