Smuggling was the main way to make a living in Puerto Rico for more than two centuries. The island could trade only with Spain, and only with the ports of Seville (and later Cadiz) from the port of San Juan. It was completely illegal to do business with foreign countries or any of the other of the islands of the West Indies, whether Spanish or foreign. For the inhabitants of Puerto Rico, there was no contradiction at all between being loyal to Spain, on the one hand, and trafficking with her enemies, on the other. It was a question of survival and the reasons were many. The geographical proximity of Puerto Rico to the Lesser Antilles, the increase in trade in the area, and the great need for trade contacts – given the isolation from Spain and Puerto Rico’s depressed economic situation –in large measure explain the development of smuggling in Puerto Rico.
At the beginning of the 17th century, Puerto Rico was in a very bad economic and social state after a century of foreign attacks that had culminated with the Dutch attack led by Balduino Enrico in 1625. Sugar production had declined from 250 tons in the mid 16th century to just 38 tons at the beginning of the 17th. The country was also virtually depopulated as a result of the emigration that began in the mid 16th century.
The difficult economic situation of the country coincided with greater isolation from Spain. As a result of the fleet system implemented by Spain in the mid 16th century for reasons of security, the number of Spanish ships that stopped in Puerto Rico decreased. There were constant complaints by the colonists about the irregularity of trading contacts between the two countries, and there were periods, such as that between 1651 and 1662, when no ships at all passed by. The lack of contact can be explained, too, because the Spanish authorities saw Puerto Rico at that time as a military post, with only limited potential for trade.
However, Spain’s mercantilist policy – maintaining a monopoly of trade with its colonies – continued over the greater part of the 17th century. While Spain was in decline, its principal rivals – England, France, Holland, and later Denmark (at the end of the 17th century) – began to populate the Lesser Antilles on a permanent basis. The key points for trade with foreigners in the West Indies were Curacao for Holland, Jamaica for England, and Martinique for France, all key future bases for illicit trade. Contrary to the experience of Spain with its colonies, the other Western European countries experienced economic growth in their colonies, particularly in the production of sugar. These new neighbors had a lively interest in trading with the Spanish colonies, and they made a number of efforts in the 17th century to establish a legitimate trade relationship with the Spanish colonies. But Spain refused. Unable to establish legal trading ties, these new neighbors became the principal illicit contacts for the Puerto Ricans, who could sell their agricultural products and hides for slaves, manufactured products, and European food and drink. In general, the foreigners offered more, and more varied, products, and at a better price, than the legitimate Spanish traders, since there were no taxes to pay.
The Effort to Stop the Smuggling
Spain’s efforts to eliminate smuggling varied, from minor restrictions to offensive measures such as the corsairs of the 18th century, and later to greater freedom for trade under the Bourbon reforms in that century. In general, it proved impossible to eradicate smuggling in Puerto Rico.
One of the first restrictive measures Spain took, in 1602, was to ban the production of ginger, a product that, together with hides, was among the greatest stimuli to smuggling. Just as they did with most t Spanish restrictions, the colonists ignored the order and continued to plant ginger until market forces caused the price and profitability of the product to decline in mid-century.
An attempt was made to reduce smuggling by establishing legal supply routes. An example of this strategy was the contract with the Genovese traders Domingo Grillo and Ambrosio Lomelin to carry slaves to the New World. Another example was the agreement of 1713, which permitted the English to import slaves as a result of the Peace of Utrecht. As in the case of other initiatives over two centuries, the limited opening permitted by the legitimate trading channels could never compete with the dynamism of smuggling, and often the legitimate channels were used to carry illegal goods to Puerto Rico under the mantle of legal contracts.
One of the most creative measures the Spanish took to end smuggling was to issue letters of marque, first to Spaniards and then to criollos, at the end of the 17th century. In theory, these allowed for interception of ships carrying trade goods, seizing the merchandise for the crown, and keeping a part of the profits. In fact, the practice was a great opportunity for ambitious individuals to get rich, especially government officials.
The best example of the magnificent opportunity that letters of marque offered to the criollos is the case of the mulatto Miguel Henríquez. Through his activities, he became the richest man in Puerto Rico, with the greatest political power at the beginning of the 18th century. Ironically, the practice of issuing letters of marque came to be a way of controlling, not eliminating, smuggling. Proof of this is the figure of Governor Matías de Abadía, who was appointed in 1731. While he fervently attacked smuggling by the British, he made use of the letters of marque to enrich himself personally from illegal trade with the French, the Dutch, and the Danes. The use of letters of marque became a strategy that was counterproductive for Spain, for in generating so many conflicts during the century, it worsened relations with England.
Another strategy for decreasing smuggling was liberalization and reform, which probably reflected Enlightenment rationalist tendencies. The reform process began in the reign of Felipe V (1700-1746), when the construction of ships to sail to the colonies was promoted, the port of Cadiz was opened to trade with overseas possessions, and monopolies in the form of companies were created. These measures did little to end smuggling, and the proof is that, as Mariscal Alejandro O’Reilly relates in his report to the king, when he arrived in Puerto Rico, illegal traffic was rife. Even so, the visit by O’Reilly contributed to a new stage of liberalization in Spain’s trade with the colonies. The Bourbon reforms accelerated in the second half of the 18th century. Carlos III increased the number of Spanish ports with which Spain’s colonies could trade from two to nine, and the levels of the tariffs were made uniform in 1765. Free trade between the colonies was extended to all the overseas territories beginning in 1778.
In addition to these initiatives, there were other important measures that liberalized trade: 1) the 1778 decree that allowed legal immigration of foreign workers into the colonies (if they were Catholic); 2) the 1789 decree that allowed for the free (tax-free) importation of slaves. Spain accompanied these trade reform measures with new and more severe prohibitions on smuggling; these consisted of stressing, through the Church, that smuggling was a mortal sin and introducing the death penalty as a punishment. Though there were indications that the reforms increased legal trade, they did not achieve the purpose of ending smuggling. This is evident from the account of Fray Iñigo Abbad y Lasierra in 1782, in which he points out that illegal transactions with foreigners continued to dominate the economic activity of Puerto Rico.
It turned out to be impossible to eradicate smuggling, since it had become the principal economic source for meeting the basic needs of the people of Puerto Rico. At the same time, it offered very tempting opportunities for great wealth for the elite of the island, which included the governors, the military, privateers and churchmen, among others. It was by then clear, at the end of the 18th century, that the monopolistic and mercantilist policies of Spain were an anachronism. In a sense, smuggling was in the vanguard and reflected the spirit of free trade and modern capitalism.
The Effects of Smuggling
Smuggling was negative for Spain, in both economic and geopolitical terms. It worsened the economic circumstances of Spain in depriving her of significant income, and it benefited Spain’s principal competitors. It also contributed to the weakening of Spain’s political control over her colonies by increasing the power of the governors, who participated actively in such trade. Similarly, it helped to create a local culture of fraud and hypocrisy that fostered non-compliance with the laws of Spain.
However, smuggling turned out to be very positive for Puerto Rico in economic terms. As a direct result of smuggling, Puerto Rico was able to begin to overcome the crises of poverty and depopulation that were evident during the greater part of the 16th and 17th centuries. The population of Puerto Rico increased from 6,000 at the beginning of the 18th century to 155,000 at the end of the century, a result of the greater economic activity produced by smuggling. O’Reilly himself observed in his report that smuggling had been positive for the inhabitants of Puerto Rico.
Another interesting perspective on the effects of smuggling was provided by Fray Iñigo Abbad, when he said that it produced a net loss of capital for Puerto Rico. That was consistent with the mercantilist policy touted by Spain, according to which economic success was the result of net exports, since the riches of a country were measured by its accumulation of gold and silver. Still, that view of things failed to take into account the significant improvements in the quality of life of the Puerto Ricans during the 18th century as a result of smuggling.
An important social effect of smuggling was that it strengthened the existing division between San Juan and la Isla – the rest of Puerto Rico – as pointed out by Arturo Morales Carrión in his book, Puerto Rico y la lucha por la hegemonía en el Caribe. It was much easier and safer for foreign traders to enter the island through ports that were far from San Juan, since these were not protected either by walls or militias. That is why most of the smuggling took place on the western and southern parts of the island.
Perhaps the most harmful effect of smuggling, in the long run, was that it institutionalized corruption in Puerto Rican society at all levels. Most of the governors of the time pretended to respect the laws imposed by Spain, but in fact they benefited directly from smuggling. In addition to the governors, the political, military, and even ecclesiastical elites were involved in smuggling. At all levels of society, a culture of fraud and hypocrisy reigned.
Author: Maria Elena Carrión
Published: September 12, 2014.
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