The money that circulated in Puerto Rico at the time of the U.S. invasion was the provincial peso. This had been the case since August 17, 1895, when Spain decreed that the Mexican peso would no longer be used on the island. The new currency was similar to that which circulated in Spain, but it had “Isla de Puerto Rico” engraved on the back. The change was motivated by complaints by residents of Puerto Rico that the depreciation of the Mexican currency made products more expensive and reduced business owners’ reserves. The provincial peso had a short life, because three years later the political relationship with Spain came to an end and Puerto Rico passed to U.S. control.
The U.S. invasion established a military regime and a little more than a month after the signing of the Treaty of Paris, it declared that the new currency would be the U.S. dollar. Through an executive order on January 20, 1899, the regime established that the exchange rate would be 60 cents per peso. The rate did not reflect the true value of the provincial peso, which scholars estimate was about 66 cents. This had a very negative impact on Puerto Ricans and devalued the national capital. Salaries were quickly adjusted and limited the buying power of the island’s residents.
On April 12, 1900, the United States Congress approved the Foraker Act, which ratified the U.S. dollar as the official currency. In the Act, Congress authorized the Treasury to exchange pesos for dollars for a period of three months. The authorities collected approximately 5,750,000 pesos, which were later melted down to coin new money. At the end of that term, the peso was no longer recognized by the government and thus lost all its value. For people who had debts, this time period was very short, because the debts incurred in pesos became debts in dollars, which made them more onerous. During the transition there was also a scarcity of coins in circulation. Unscrupulous businesses simply kept their prices the same, but in dollars instead of pesos, thus artificially raising the cost. There were also business people who spread fear in remote areas by saying that people should spend their money quickly because the peso could lose its value at any moment. These abuses took advantage of poor Puerto Ricans who had no choice but to buy essential goods at inflated prices.
There are various perspectives on the impact of the change of currency in terms of landholdings. Traditionally, it has been proposed that the change to the dollar increased the cost of land, making it difficult to buy. On the other hand, for U.S. investors, buying land on the island was relatively inexpensive. This situation led to land speculation in which Puerto Ricans sold their land to handle the new economic challenges and the land passed to foreign hands, mostly sugar corporations. The net result was the concentration of land ownership into fewer hands. Later, a revisionist perspective proposed that the process of the concentration of land ownership in the hands of large sugar businesses did not begin with the arrival of the United States but had already begun before the occupation. A study of census reports and tax payments appears to show that there had already been a trend toward larger farms. Therefore the impact of the devaluation of the peso and the imposition of the dollar was not as devastating as originally proposed.
Finally, coffee industry workers’ salaries fell because of the change of currency. The owners of the coffee estates had faced serious challenges, such as the loss of the crop due to Hurricane San Ciriaco and the approval of the Foraker Act, which did not help them with protectionist measures. Many workers decided to leave the coffee estates to work in the sugar and tobacco industries, which saw greater investments of U.S. capital that allowed payment of better wages to workers. By 1901, the transition to the dollar had been concluded satisfactorily from the perspective of the government, but Puerto Rico still had to face other challenges, such as the need for investment capital and the strengthening of banks to provide financing for industry.
Author: Gricel Surillo Luna
Published: September 15, 2014.
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