Colonial credit and financial diversity in the Global South: Spanish America 1600-1820

ongoing

Did the Spanish Empire bequeath weak credit markets to Spanish American Republics? Scholars cite a colonial legacy of extractive institutions as the root cause of financial and fiscal crises in Spanish America since Independence (1808-20s). Colonial credit was archaic. Modern European private banking institutions only arrived in Spanish America after 1850. The credit sector remained unstable, failed to service large parts of the population, and the cost of capital (the interest rate) was very high. The consequences were low private and public investment, poor economic growth, inequality, and political instability. COFILA challenges this Euro-centric narrative, which assumes that only the adoption of Global North banking institutions could result in a functioning credit market. It offers the first holistic study of colonial private credit and its interactions with public credit. It builds on initial research by historians of religion and gender who studied the outsized role of religious endowments (often women’s convents) in the provision of private and public credit. Studies of public finance and colonial merchant associations in turn have begun to show that colonial treasuries mobilised via credit syndicates enormous financial resources at interest rates that matched the most competitive European markets. The project team will build a diachronic study (1600-1820s) with a methodology that compares three key sites (Mexico City, Lima, Buenos Aires), and that combines financial and economic history with postcolonial approaches to the cultural, social, and political genesis of Spanish American colonial spaces and their eventual Independence. We analyse how the double invisibility of the financial sector in colonial Spanish America resulted from credit being controlled by unfamiliar institutions and often by women. The team engages in theory building in asking how entirely different credit sectors could co-exist for centuries without convergence in two world regions.