State Enterprise in Bourbon Mexico: Profits, Policies, and Politics of the Tobacco Monopoly, 1765–1821

Abstract

In 1765, as part of a series of economic and political reforms implemented by the Spanish Bourbons in their American colonies, the tobacco trade of colonial Mexico was monopolized and its management placed in the hands of royal bureaucrats. By the 1790s, Mexico's tobacco monopoly was one of the largest organized industries in colonial Mexico (along with silver mining and textiles) and employed almost 20,000 individuals. In fiscal terms, tobacco revenues were second only to the silver tithe as the most valuable source of government income and accounted for almost one-fifth of total state revenues at the peak of its production. Its organization approximated a vertically integrated industry: Production and supply of tobacco leaf was regulated through a series of contracts that determined who produced tobacco, how much they produced, the prices paid for it, and where it was to be grown. The reorganization of the tobacco trade under Bourbon management resulted in the restriction of tobacco production to one small specific geographical area in southeastern Mexico: the two small villas of Orizaba and Córdoba in the modern-day state of Veracruz. The tobacco produced, in turn, was manufactured into cigarettes and cigars in six state-managed tobacco manufactories, the largest located in Mexico City, the political and commercial capital. Monopoly goods were marketed through government licensed stores throughout Mexico. Private trading and manufacture in tobacco goods became an illegal offense. Compliance with such regulations was enforced by a military corps employed by the monopoly administration, although contraband trade of tobacco was never eliminated.