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The First Savings Banks in Latin America

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The First Savings Banks in Latin America 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 (Spain), focuses predominantly on the study of several aspects of the financial history of Spain. 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 Europe 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, France 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 savings bank, whose foundation in Madrid 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 loan 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.
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