The Royal Company.
The second important event during Basco’s rule was the establishment of the “Real Compañía de Filipinas” by royal decrece of March 10, 1785. The capital of the company was fixed at eight million pesos divided into 32,000 shares of two hundred and fifty pesos each; the king bought four thousand shares, and the citizens of Manila were allowed three thousand. The chief object of the company was to establish commercial relations among the different colonies, and also between the colonies and Spain; to supply Manila with the products of Europe, and, in return, to carry to Spain not only the products of the Philippines, but also the merchandise coming from the Oriental countries. The second important object was the encouragement of Philippine agriculture, as shown in section four of the charter, which required the company to invest four per cent. of its net profits in some extractive industries, chiefly agriculture. In order to help the company, all the laws and decrees which prohibited the importation of Oriental cloths into Spain, were repealed, and the products of the Philippines were exempted from all kinds of duties both in Manila and in Spain. Furthermore, the merchants of Manila were allowed to go to the Asiatic ports for trade, and the Chinese who came to Manila were allowed to trade freely without subjecting themselves to any restrictions. However, the old Manila-Acapulco trade was not to be disturbed, for the company could not send ships to Acapulco.
The company encouraged the production of silk,[4] indigo,[5] sugar,[6] cotton,[7] and especially of pepper and other spices. For this purpose it bought lands, established posts in Ilocos, Bataan, Cavite, and Camarines, and offered prizes. It also gave stimulus to manufacturing by establishing textile factories.
In spite of the special protection and privileges granted to the company, it declined from year to year. In 1805 it was rechartered, and given fifteen years of life and the same privileges as before; its capital was fixed at twelve and a half million pesos divided into shares of two hundred and fifty pesos each; foreigners were allowed to own shares; and the ships were allowed to sail directly from the Asiatic ports without stopping at Manila; and finally the three-year privilege,[8] allowed to foreigners at the request of the company in 1789, of importing into Manila Asiatic goods, and exporting the products of the country, was made perpetual. In 1830 its privileges were revoked, and Manila was left open to foreign commerce and navigation.
What were the causes that led to the ill success of the Royal Company? Among the minor causes mentioned was the indifference of the residents of the Philippines; for, as Zuñiga says,[9] “taught to gain in New Spain what is necessary for their comfort, without any more work than sending a memorial once every year, it is hard for them to engage in a commerce which is servile and vexatious; and, accustomed to exorbitant profits, they cannot adapt themselves to the gradual profits in a store; * * *. Furthermore, the company neglected to import the goods from Europe, such as wines and groceries, which the foreign ships brought at great profit.”
It also failed to establish direct trade relations with China and India, but depended solely on buying the goods which were brought there by the Chinese and other foreign traders; hence, it had to pay higher prices for the Oriental goods it sent to Europe. The company, too, overestimated the importance of certain Philippine products, especially spices, which were produced much more cheaply in Sumatra and Java. Though allowed to invest only four per cent of its net profits in agriculture during the first years of its existence, it invested great sums in buying lands, made advances to the producers; in other words, it engaged in much speculation, which proved disastrous. It also gave premature attention to the development of manufacturing. The chief cause, however, of the failure of the company was the fact that it was not given control of the Manila-Acapulco trade, which continued to absorb the attention of the very men, who, because of experience in the country, would have helped the Company during its formative years.[10]
According to Dr. Tavera, the Royal Company introduced capital, which was essential for economic development.[11]