Taxation and Smuggling

With precious metals in such abundant supply, royal officials had to be on the alert to see that the Crown did not get cheated of its share. Often frauds were committed in the assaying and minting of the gold and silver. It was no unusual occurrence for royal officials to discover that silver bars had centers of lead, or that coins supposedly of gold were actually an alloy of gold and copper, or that coins supposedly of silver were actually made of platinum (today platinum is far more valuable than silver, but in those days it was considered worthless).

Even more troublesome to the royal officials was the smuggling of gold and silver into Spain. Although between a quarter and a third of the treasure shipped to Spain was usually destined for the royal coffers, the Crown felt-with good reason, considering its investment-that it was entitled to more. Many people sought ways to avoid paying the royal fifth and the import duties that awaited them in Spain. As early as 1510, long before the mining industry reached its peak, an ordinance was issued declaring that any unregistered treasure brought from the Western Hemisphere was subject to confiscation and its owner subject not only to a fine of four times the value of the treasure, but also to any other punishment the Crown cared to mete out.

To thwart smugglers, the procedure for registering cargo shipped to Spain from the colonies was thorough. Every piece of bullion was stamped with its year of casting, tally number, assayer's mark, total value in reals, weight and owner's mark (if the bullion happened to be Crown property, either the king's coat of arms or his name), and the information recorded. Every chest of coins or precious stones was sealed by a royal official, and the value of the contents stamped on the outside and the information recorded. Even ordinary cargo like bales of indigo or barrels of sugar was inspected, and the nature of the contents branded on the outside with an iron and the information recorded. The records went into a registry on the ship carrying the cargo, and there were three copies of each register, one going aboard the capitana of the flota, the second aboard the almiranta, and the third remaining in the port of embarkation until the following year, when it would be sent to Seville to be checked against the original and the two other copies-a precaution against collusive tampering with the records during the long ocean voyages.

One would think that, with all these safeguards and the Crown's standing offer to anyone who reported a smuggling plot of one third of the unregistered treasure involved, no treasure could have been smuggled out of the colonies, and yet it was. Most of the time the gold and silver was concealed in bales, boxes, and chests of ordinary cargo, since it was impossible for the royal officials to search everything completely. Sometimes the smugglers showed great ingenuity; one royal official who wondered why the anchor of one ship was covered with paint scraped the paint away and discovered that the anchor was made of solid gold. Sometimes the amount of unregistered treasure aboard a ship was greater than the amount registered, as was the case when a ship returning from Mexico in 1551 was wrecked on the southern coast of Spain and divers recovered more than three times the amount of treasure that had been registered; the officers of the ship were sent to the galleys for ten years.

No precautions, no threats, no punishments could deter smugglers. It is an axiom of human nature that people who become rich want to become richer, and everyone wanted as much as he could get of the fabulous mineral wealth. Fabulous it certainly was: in 1508 the return of a ship carrying gold and pearls worth 50,000 pesos (pieces of eight) was cause for rejoicing in Spain. By 1523 a single ship carried as much as 400,000 pesos, and in 1535 four ships brought 2,500,000 pesos from Peru.

After the big mines got into full swing, the amount of treasure pouring into Spain soared astronomically, and in 1587 more than 16,000,000 pesos were transported from Mexico alone. Contrary to popular belief, only a small portion of the wealth of the New World came from gold (over the centuries a mere five per cent, most of it shipped to Spain during the years of conquest before 1550), for gold was found to be too expensive to mine, and most of it was obtained from river beds near Bogot'a or from veins of gold found in the silver mines of Mexico and Peru. The real wealth was in silver, and so much silver was mined and put into circulation that its value, nearly equal to that of gold before the silver boom, dropped to a fifteenth of the value of gold.

From the beginning, the Spanish Crown had taken the task of colonizing the New World very seriously. As a result of an imaginary line drawn by the Pope when Spain's discoveries in the West threatened a conflict with Portugal, then acquiring territory in the East, Portugal laid claim to the East Indies, all of Africa south of the Canaries, and Brazil, while Spain laid claim to the rest of South America and all of North America, with her western boundary extending as far as the Philippines. By the middle of the sixteenth century, except for untouched areas of North America where the Spanish Crown thought there was little likelihood of obtaining mineral wealth, most of the New World had been conquered and brought under Spanish rule.

As early as 1503, commerce with the American colonies was put on an organized basis, and a virtual monopoly was granted to the city of Seville. The leading financial center of Spain and the home of the nation's wealthiest bankers and merchants, Seville was geographically suited to maritime trade, being an interior port safe from enemy attack and lying in the heart of a rich agricultural region.

The initial organization formed to regulate navigation to and from the American colonies was the House of Trade, and its functions included seeing that all the royal orders concerning conquest and colonization were carried out, collecting duties on both outward- and inward-bound cargoes, and limiting the passenger list on outgoing vessels to persons of Spanish birth. At first the House of Trade consisted of only three officials -a comptroller, a treasurer, and a business manager-and had its offices in the arsenal of Seville. Within a few years an increase in personnel forced a move to larger headquarters in a building formerly occupied by the Admiralty Court, and before very long the new headquarters was also outgrown. Space was found for the House of Trade in the Cathedral of Seville, but the Spanish Crown received so many complaints about the impropriety of conducting business in a sacred place that in 1572 construction was begun on a new building, which was named the Exchange of Seville (today the building houses the Archives of the Indies and contains millions of documents dealing with the colonies of the New World).

The House of Trade, Seville. Built in the latter part of the sixteenth century, it serves today as the Archives of the Indies. The Tower of Gold in Seville, situated on theGuadalquivir River and a few blocks away from the House of Trade. Here all the gold and silver brought back from the Indies was stored until sent to the king or turned over to the private owners.

Each year two flotas left Seville, the "New Spain Flota" and the "Tierra Firme Flota." The New Spain Flota, comprising ships bound for Mexico (then called New Spain), the Greater Antilles, and Honduras, was usually scheduled to sail in April, its main object being to collect the treasure from the Mexican mines. The majority of the ships reached Vera Cruz two or three months after leaving Seville, and the ships bound for other destinations rejoined the flota in Vera Cruz. There the New Spain Flota remained until February of the following year (from September to January strong north winds made navigation of the Gulf of Mexico perilous) when it departed for Havana. The Tierra Firme Flota, comprising ships bound for the Spanish Main, was usually scheduled to sail in August, its main object being to collect the treasure from the Peruvian mines in Nombre de Dios, Panama. The ships separated for their various ports of destination and reunited in Cartagena, where they remained until January of the following year. Then the Tierra Firme Flota sailed for Havana to rendezvous with the New Spain Flota, and both fleets returned to Spain together.