Paper Money of Chihuahua

.. by Simon Prendergast

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Home The History Private issues

Introduction

Chihuahua's private scrip can be divided into three groups, the earliest being the mining pieces of the 1870s and 1880s; the second those issued in the heyday of Chihuahua's prosperity around the turn of the century, and the last the necessity notes issued by companies in 1912 and 1913 to overcome a lack of small change.

The Chihuahuan historian Francisco AlmadaFrancisco Almada, Resumen de Historia del Estado de Chihuahua, Mexico, 1955 states that the first company to issue scrip was Herrera, González, Salazar y Compañía in 1871 but this might be just the earliest reference that he could find, as we know of paper tokens dated 1869 and 1870. Mining and timber companies in the United States were issuing scrip by the time of the Civil War and metallic tokens had been in use in Mexico since colonial times. Moreover, the Herrera, González, Salazar scrip was in fact wooden tokens and so really outside the scope of this work.

True debt peonage which elsewhere in Mexico ensured a supply of cheap labour by keeping the local peones mortgaged to the neighbouring hacendado was not an important part of the economy of the north; farmers, hacendados, and cattle ranchers relied primarily on free labour. Nevertheless, paydays were often infrequent and employers allowed their workers to purchase goods on credit or occasionally to draw advances against their wages.

In northern Mexico, as elsewhere, mining and timber enterprises were often located in isolated mountainous areas with low population densities significantly distant from commercial centres. Mining entrepreneurs, therefore, had unique problems to contend with in organizing their enterprises. Their common problem was a lack of infrastructure—no streets, no churches, no schools, no residences, no utilities, and no banks or financial intermediaries. The specialized industries that might otherwise have provided these services were dissuaded from doing so by the high start-up costs and the enduring uncertainties of dealing with low-income communities that might be there today and gone tomorrow. Mining companies, therefore, built residences, churches, schools, and water works, and opened company stores or commissaries. This kind of organization invited the use of scrip in lieu of ordinary money.

This could all be done by book-keeping in the payroll office and the company store, the tienda de raya, with accounts being reckoned up and balances paid out or carried forward every payday. Ledger credit scrip, however, could be refined in ways that eliminated the tedious bookkeeping chores that were incident to over-the-counter credit (day book or journal entries followed by ledger entries). These included:
(a)     scrip coupon books, whereby an employee signs for a book of coupons, the value of which is deducted from his pay. When the employee buys goods from the company store, he pays in coupons, just as he would pay in cash, and the coupons are kept and counted the same as cash;
(b)     notes with particular values.

The advantages of the scrip system to the operator were:
(a)     the company could pay almost its entire payroll in company scrip, requiring only a few pesos of actual working capital (though it did need to finance the stock in the tienda de raya). As it was costly and dangerous to transport specie to remote areas, this was particularly advantageous: Alexander Shepherd of the Batopilas Mining Company secured permission from the state government to issue his own notes for this very reason;
(b)     even when local banknotes appeared, in outlying areas notes issued in the state capital were not accepted or heavily discounted;
(c)     scrip was one worker perquisite an owner could offer to attract labour into a somewhat unattractive environment. By issuing scrip against future wages he provided commercial credit with virtually no interest charges to the borrowers;
(d)     the company had a quasi-monopoly on basic goods and could charge what it liked. Reports vary from companies being accused of exploitation, selling low-grade goods at exorbitant prices, to being praised for subsidising the cost of living. The company store in Pinos Altos, for instance, provided supplies for the entire community of 2,000 people and the directors believed that the low prices helped to draw labour to the town. Complaints often came from other merchants who resented the near monopolies.

Disadvantages for the employee included the fact that if the scrip was accepted by others than the company store, by independent shopkeepers or cantinas, it would be at a sizeable discount.

Not surprisingly, workers did not like this system: it had been prohibited by the 1857 Constitution and when Angel Trias was state governor he prohibited mining, industrial and commercial companies from paying employees in scrip or merchandisePeriódico Oficial, 23 December 1878. An exception was made for those issues that had gained the approval of Congress and given sufficient security, an action that might have contributed to his downfall and certainly indicated that by that time the practice was rife. During the subsequent governorship of Luis Terrazas this law fell into disuse and the tiendas de raya returned.

In the second period, i.e. the first decade of the twentieth century, there was sufficient specie circulating for the use of the scrip to be solely for the benefit of employers, and all references are to employees' grievances.

Finally, with the breakdown in communications at the beginning of the revolution many mining companies, commercial houses and even individuals issued notes to take the place of traditional currency. Most of the examples that survive come from companies in Parral that received permission from General Manuel Chao.

This section discusses the companies that are known to have issued scrip but the list, of course, is not exhaustive. No one had any incentive to leave scrip behind and little survived. Demanders of such currency would not regard it as a store of value for any time longer than the period between paydays. Suppliers, to whom the scrip was an outstanding obligation, would redeem it first if they liquidated, merged, or closed down their enterprises. In addition, everyone who used it and benefited from it was aware of its questionable legality. Indeed, the main party interested in such scrip, apart from the issuers, was the local authorities who had to administer the law. With the exception of unissued remainders, almost all the surviving pieces are unique examples that surfaced in the Garcia auction in 1974. This suggests that they were assembled by one person, perhaps a contemporaneous collector but much more probably someone who was in a position in later years to detach them from the reports from local officials to the state government that had accumulated in the Chihuahuan state archivesUnfortunately, the Chihuahuan State Archives were destroyed by fire on 21 June 1941.