The Philippine Colony was therefore nominally self-supporting, and the Situado was only a guaranteed income, to be covered, as far as it could be, by shipments of foreign bartered manufactures and local produce to Mexico. But, as a matter of fact, the Mexican subsidy seldom, if ever, was so covered.
By Royal Decree of June 6, 1665, the Mexican subsidy to the Philippines was fixed at ₱2,500,000, of which ₱2,000,000 was remitted in coin and ₱500,000 in merchandise for the Royal Stores. Against this was remitted value in goods (Philippine taxes and tribute) ₱ 176,101.40 so that the net Subsidy, or donation, from Mexico was ₱ 2,323,898.60.
Hence, in the course of time, coin—Mexican dollars called pesos—found its way in large quantities to the Philippines, and thence to China.
The yearly value of the merchantsʼ shipments was first limited to ₱250,000, whilst the return trade could not exceed ₱500,000 in coin or stores, and this was on the supposition that 100 per cent. profit would be realized on the sales in Mexico.
The allotment of surplus freight-room in the galleon was regulated by the issue of boletas—documents which, during a long period, served as paper money in fact, for the holders were entitled to use them for shipping goods, or they could transfer them to others who wished to do so. The demand for freight was far greater than the carrying power provided. Shipping warrants were delivered gratis to the members of the Consulado, to certain ecclesiastics, and others. Indeed, it is asserted by some writers that the Governorʼs favourites were served with preference, to the prejudice of legitimate trade.
The Spaniards were not allowed to go to China to fetch merchandise for transhipment, but they could freely buy what was brought by the Chinese. Indian and Persian goods uninterruptedly found their way to Manila. Spanish goods came exclusively viâ Mexico.
The mail galleon usually sailed in the month of July in each year, and the voyage occupied about five months. Very strict regulations were laid down regarding the course to be steered, but many calamities befell the ships, which were not unfrequently lost through the incapacity of the officers who had procured their appointments by favour. For a century and a half there was practically no competition. All was arranged beforehand as to shape, quantity, size, etc., of each bale. There was, however, a deal of trickery practised respecting the declared values, and the boletas were often quoted at high prices. Even the selling-price of the goods sent to Mexico was a preconcerted matter.
The day of the departure of the galleon or its arrival with a couple of millions of pesos or more,[3] and new faces, was naturally one of rejoicing—it was almost the event of the year. A Te Deum was chanted in the churches, the bells tolled, and musicians perambulated the streets, which were illuminated and draped with bunting.
So far as commercial affairs were concerned, the Philippine merchants passed very easy lives in those palmy days. One, sometimes two, days in the week were set down in the calendar as Saint-days to be strictly observed; hence an active business life would have been incompatible with the exactions of religion. The only misadventure they had to fear was the loss of the galleon. Market fluctuations were unknown. During the absence of the galleon, there was nothing for the merchants to do but to await the arrival of the Chinese junks in the months of March, April, and May, and prepare their bales. For a century and a half this sort of trading was lucrative; it required no smartness, no spirit of enterprise or special tact. Shippers were busy for only three months in the year, and during the remaining nine months they could enjoy life as they thought fit—cut off from the rest of the world.
Some there were who, without means of their own, speculated with the Obras Piasfunds, lent at interest.[4]