The inter-island trade of the Filipinas Islands is at present quite active, as is shown by the latest reports received. Its importance is well worth consideration, since the commodities which are traded in this way constitute the greater part of the cargoes of the export commerce. Tortoise-shell, gold, birds’-nests, balate, wax, cacao, and other products form cargoes of great value which come from the provinces. The exclusive proprietors of this commerce are the alcaldes-mayor of the provinces, and the rich mestizos and Chinese, who in this traffic have made exorbitant profits, for it is these alone who exclusively avail themselves of the rise in prices which is produced in Manila by the arrival there of foreign vessels together. This causes those posts of alcalde there to be very eagerly sought, since in only three years of holding them they allow [the making of] a fortune; and also that the class of mestizos and Chinese is the only one that is sure of becoming rich in Filipinas …. The result is, that with the exception of the great fortunes which in other times were made in the privileged commerce of Nueva España, it is this [coasting trade] from which have proceeded the fortunes of Manila. [This branch of trade is exempt from all duties, a privilege which does not benefit either the agriculture or the other industries of the Indians, since they always sell at the same price, and have no share in the profits of the trade. Nor is this commerce promoted by the freedom from duties, for it will always continue and always yield great profits to those who carry it on—who can well afford to pay a moderate tax on their lucrative trade, especially as it is partly for their benefit that the government incurs so great expense for curbing the piracies of the Moros. It is recommended:] That all commodities, whether natural products or those of industry, which arrive at the port of Manila by sea from the provinces shall pay one per cent on the prices current in that city; and from this tax shall be exempted only rice (whether in the hull or cleaned), cocoanut oil, and fresh fruits, as being articles of prime necessity for the Indians. That no duty shall be collected for those same products when they are transported by land, or by the rivers and bayous of the island of Luzon. And that, from the time when this law shall go into effect, the power which the municipality of Manila has to tax the value of the provisions which come from the provinces shall be suppressed. The exemption from duties will tend, in regard to the provinces of Luzon, to encourage in that island preëminently, as is desirable, agriculture and industry, and at the same time will save to the custom-house the new expenses which it would [otherwise] have to incur for establishing posts and men to guard against smuggling.
Of money
The Spanish peso is the universal money in the commerce among all the nations of Asia; and, as therefore the exterior commerce is constantly drawing it into circulation, the governments of all the colonies in that part of the world have found themselves obliged to create a colonial money, which on account of its provisional value cannot be taken out of the country, and, being directed into the internal commerce of the province, feeds and multiplies exchanges. In Filipinas there was no need of adopting that measure while its commerce with Nueva España lasted, because then those islands were receiving annually a million of Mexican pesos, and the situado of two hundred and fifty thousand; and, besides this, the business that was carried on during that period in the natural and industrial products of the country was almost insignificant. And if in Filipinas at this present time enough money circulates to support the outside traffic, that results from the fact that the profits which the colony has gained from the commerce with all the nations of Europa (the balance of which is in favor of Filipinas) are greater than the losses of money which it experiences in its commerce with India and China. [This is of course a very precarious situation; for the contingencies of war, diversion of commerce from the islands, or poor crops may at any time compel Filipinas to send out all its money to India or China for the supply of its needed commodities; and this would ruin even the internal commerce, “on account of the serious difficulties which the establishment of a system of public credit there presents.”] Besides that, considering now the matter of giving a strong impulse to the agriculture and industry of those islands, there would be needed for the former project many millions of pesos in constant circulation in the provinces, and there must be a great reversion of the capital employed in commerce to the interior of the islands; and this cannot be practiced in a country in which hardly enough money circulates to support the government and the demands from without, and which had undertaken to promote its interests by commerce before placing its agriculture and industry on a sound basis. In almost all the provinces of the islands very little money circulates, and in some of them there is not even what is necessary in order that the natives can pay the government taxes; and from this has proceeded the necessity of commuting the tribute from money to kind. The Spanish pesos go from and return to the provinces rapidly; and it can be said that the produce of the taxes which has to be sent annually to the capital, and the importations of the alcaldes and the mestizos, are equal. Most of the Indians trade among themselves by means of simple barter, and the mestizos make them pay dearly with their products for the money that they need for clothing themselves and paying their taxes.
There is, then, nothing to hope for—either advance in agriculture and the useful arts, or the great extension and progress of which the consumption of monopolized articles is susceptible—without the creation of a colonial money which will remain within the colony to which it belongs, which will liberate it from the precarious dependence on foreign commerce, which will afford to the Indian the just profits from his labor, which by remaining with him in the provinces will encourage him to obtain possession of it as an easy means of providing him with the necessities of life at the time [when he needs them,] and which likewise may be an allurement to his children—which up to a certain point it is of great importance to encourage in the Indians, as a powerful incentive to make them labor. [Lastly, this colonial money would check the exportation of silver coin by the Chinese,[10] who would then prefer to export from Filipinas its nature products in return for their commodities. In China all the Spanish pesos are, in order to keep them within the empire, disfigured with so many marks that they cannot be used in foreign commerce.] We have no knowledge thus far of there being silver mines in Filipinas; but it is a positive fact that gold abounds there, of so low grade and so mingled with silver that it has little more value than that metal. This circumstance, aided by the introduction of some silver bars from America, carried thither by foreigners, the recoinage of the half-dollars, and of the silver two-real, one-real, and half-real pieces which circulate in the islands, and the use of the great amount of old silver in household articles—which is there sold at very low prices, on account of being alloyed and manufactured in China—would supply the government with easy means for the creation of a colonial currency without need for expense, or for forestalling [the income from] any fund, only by accepting from the persons interested their respective materials in gold or silver, under assay, and returning to them the value of the metal in the coined money which it would yield, after deducting the necessary expenses. Likewise the government could accept, in payment of all taxes, the gold which is obtained from the placers, at the same prices at which the Chinese carry it away, and after it was assayed at its mint—where the learned professors who for this purpose would be sent from Europe would dictate the necessary measures for carrying into effect an undertaking which is the basis for all progress in the islands. I am therefore of opinion that his Majesty should deign to issue the following orders: That a colonial currency be immediately created for internal circulation in the Filipinas Islands. That for this purpose a mint be established there. That the standard for this money be the same as those of the moneys of the same kind which have been adopted in the other colonies of Asia. That the subdivisions of its value be made according to the needs of internal trade. That all the gold and silver, in various forms, which private persons offer for coinage be accepted at the mint, returning it to them in the standard coin which it yields after the expenses are deducted. That the government there be authorized to accept in payment of taxes the gold from the mines of Filipinas, after it is assayed. That regulations be drawn up by competent persons, in which precautions are taken against any fraud in this matter.
Of the charitable funds established in Filipinas
[The obras pías merit full attention from the government,] on account of the advantages which the agriculture and industry of the islands may gain from them. If the limited and privileged dealings of Manila with Nueva España had not been reduced to a merely passive commerce of transfer or transportation, those foundations would, at the same time while they have become wealthy, have given real opulence to that commerce. Of the enormous profit of two hundred and three hundred per cent which the transactions of the galleon yielded at Acapulco, the greater part was for the foreign dealers of India and China, whose wares supplied almost all the lading of the galleons, and for the obras pías; a greatly reduced profit remained for the Manila merchants, which could be shown by a calculation which might be made of the many millions imported from Nueva España by the galleons, and of the comparatively small value, in money or assistance, which has remained [therefrom] in the islands. [The returns from these funds are now greatly diminished, since the cessation of the Acapulco trade, for on that depended the commerce with India and China, which also has practically ended, save for the commodities from those countries which are consumed in Filipinas. This could not have been foreseen by the founders of those funds, many of which, moreover, are impeded by various restrictions and conditions; and the government should interpose its authority not only to secure the fulfilment of the founders’ wishes, but to commute the investment of the funds in such a way that they may be used to promote the agriculture and industry of the country. These funds ought also to be preserved as a most useful resource in case of war or revolution, when the usual revenues of the government would cease. Bernaldez therefore recommends:] That the government of Manila furnish special protection to the charitable foundations of the islands, and keep close watch over their honest administration. That it stimulate the managers to obtain immediately from the competent authority the commutation of the allotments of these funds so as to benefit the agriculture and manufactures of the country, giving reports of what shall be effected in a matter so important for the welfare of the islands. That the funds in the communal treasuries of the Indians and the Chinese, those of the secular revenues,[11] and any others which are not subject to private foundations and regulations, and which hitherto have followed in their investments the rules of the obras pías, shall be by preference set aside for rewards bestowed for enterprises in agriculture, industry, and inter-island trade. Thus will be remedied the injury arising from the failure of those great funds to be in circulation; and the abuse of employing them in favor of foreigners and their commerce, under assumed names, will be corrected.
Of the arsenal of Cavite
[Bernaldez declares that the works of naval construction, etc., for the government can be accomplished for half the cost by means of private contracts awarded to the lowest bidder, which is proved by the history of all the enterprises which have been undertaken by the government in those islands, whether in agriculture, mining, or metal-working; “for, however great the disinterestedness and economy which can be ascribed to the officials who conduct the enterprise, in this direction nothing can take the place of the contractor’s activity and vigilance.” In the cutting and gathering of timber there is abundant cheating and graft, as that work is directed by Indian overseers, or by mestizos and Chinese; the latter have abandoned the system of day wages (“which the natural slothfulness of the Indian renders very costly”), and instead pay the natives so much for a certain amount of work (which they call paqueao). “In this way the Indians, who always are cheated in these calculations, have to redouble their efforts to gain the amount bargained for, thus allowing to the mestizo the benefit of at least one-third of the usual daily wages.” After the timber is cut, its transportation, storage, and seasoning cost more when done by the government than by the mestizo contractor, and occasion much loss and damage. Ships of war could be built at Manila to great advantage, so far as the abundance and cheapness and location of the timber is concerned; but the lack of iron and copper there is a serious hindrance to such plans. There are mines of both metals in the islands, but they are not worked for lack of enterprising persons and suitable machinery. Bernaldez recommends: That the crown offer large rewards for the successful operation of the iron and copper mines in the islands, the supply therefrom of metal sufficient for the construction of ships and cannon, and the introduction of machinery for mining and iron-working. That arrangements be made for building war-ships each year, by contracts for the supply of timber and the manual labor. That competent engineers and constructors be sent from España, at good salaries; that necessary supplies and materials be secured by contracts, bid for in public; and that funds from the royal exchequer be set aside for this purpose to the amount of one hundred thousand to one hundred and fifty thousand pesos annually. That all the construction and repairing of war-ships for Filipinas be done through contracts, at public bidding; and that the arsenal of Cavite be reduced to a simple depository for the articles required for arming the ships, with such officials as may be necessary for the custody of these.]
Of the agriculture of the Filipinas Islands, in general, and of their principal productions
The Filipinas Islands, on account of the fertility of their land, their abundant rains, and the great number of animals for labor, constitute an agricultural colony; and to the readiness with which the country supplies the principal articles for human support has been due the rapid increase of its population. And although the Indians, as a general thing, only devote themselves to the cultivation of what they actually need for subsistence, the annual production so far exceeds the necessities of the people that very seldom has the failure or scarcity of provisions been experienced. The abundance of its arable lands and the excellence of its products have also rendered this colony capable of a considerable commerce with the other nations, at a much greater advantage over the other colonies, inasmuch as the land is tilled by free labor, which costs only the value of its food and clothing; and not by slaves, who, besides those expenses, occasion that of the premium or interest on the money invested in their purchase, which causes a difference of at least a third more in the cost of the manual labor employed in agriculture.