Office of the Historian

No. 376.
Mr. Foster to Mr. Evarts.

Legation of the United States,
Mexico, October 29, 1878.
No. 821.]

Sir: The decline in silver which has recently occurred in London has had a very unfavorable influence upon commercial affairs in Mexico, and indirectly upon all branches of industry. The basis of all monetary transactions in this country is silver. Although the double standard of gold and silver is provided by law, and the government is constantly minting coins of both metals, for a number of years past the gold coinage has commanded a considerable premium over silver, and during the past two or three years gold has not only ceased to be a circulating medium, but has almost entirely left the country. It is now very difficult to purchase on short notice in this city only a few thousand dollars in gold, and it commands a premium of from 14 to 18 per cent., according to the fluctuations of the London silver market. Silver is by law an unlimited legal tender for all debts, public and private.

As indicating the injurious effects on business affairs of the depreciation in the value of silver, I inclose herewith a communication which the minister of finance has addressed to Congress, conveying to that body the telegraphic quotations of the London market, which have resulted in placing foreign exchange at a premium of 22 per cent.

For some weeks previous to the recent decline exchange on New York has ruled at 18 per cent. The main object of the minister’s communication was to bring again to the attention of Congress the recommendation of the Executive, submitted to the last Congress, for a repeal of the export duty of 5 per cent, which is now charged by the government on [Page 664] all siver, coined and uncoined, shipped abroad, which repeal would reduce the price of exchange to that extent. Mr. Romero, the minister of finance, has for many years been a strong advocate of this wise measure of the repeal of all duties on the exportation of silver and other natural products 5 but thus far the necessities of the national and State treasuries have defeated it. Besides the export duty collected by the federal government, there are heavy export taxes by the States, coinage duties, and other charges, which add to the depressing influence of the London market. A careful estimate of the taxes, duties, and various charges on silver shows that it costs from 13½ to 15½ per cent. to place the silver produced in the Mexican mines in London or in New York. When it is remembered that silver constitutes four-fifths of the entire value of export products of Mexico, the effect of these heavy internal taxes and the decline in value in London upon the general trade and business of this country can be easily estimated. In the present depressed condition of all industries in Mexico, the late decline in silver must be regarded for this country as a great national calamity.

I am, &c.,

JOHN W. FOSTER.
[Inclosure in No. 821.—Translation.]

Proposal for repeal of duty on exportation of silver.

department of finance and public credit—section 1.

The Executive considers it its duty to inform the Chamber of Deputies that, according to telegraphic information received from Europe, the price of silver in London (which for a long time was at 56 pence per English ounce, on an average, giving to our dollar a value in the republic equivalent to about 45 pence in London, causing exchange upon that place to be worth on an average about 6 or 7 per cent, to the prejudice of the republic) has suddenly fallen to 48¾ pence per English ounce of silver, which gives to our dollar a value in the republic equivalent to 39 pence in London. This causes exchange upon that market to be at present about 22 per cent. to the prejudice of the nation.

Although it is to be hoped that this depreciation in the value of silver is due to temporary circumstances, such as the heavy failures which have recently occurred in Great Britain, and that for this reason there will soon be a reaction in the value of silver, the mercantile interests of Mexico cannot but be greatly depressed by the present decline, and with the object of relieving the evil results which the said decline may produce upon our country the President has decided that the Chamber of Deputies be recommended to approve of the initiative which was submitted to Congress on the 30th of October, 1877, concerning the release from duties on the exportation of national products.

Which I have the honor to communicate to you in order that you may be pleased to report it to the chamber.

Liberty in the constitution Mexico.

Mexico, October 26, 1878.

M. ROMERO.

To the Deputy Secretaries of the Chamber of Deputies, present.