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Overview of State and Federal Copper and Brass Coinage (1824 – 1872)

by Don Baileyfrom Don Bailey, State and Federal Copper And Brass Coinage Of Mexico (1824 – 1872), Don Bailey Institute for Mexican Numismatic & Historical research, 2008

To begin the intelligent study of Mexican state coinage we must understand why such coinage carne into existence. The answer is basically found in the Mexican governmental system. With independence from Spain in 1821, there was great demand for state power or control. This did not happen with the Empire of Iturbide in 1822-23, which centralized government and was a factor in the Empire's demise.

The formation of a republic in 1824 saw the granting of more extensive powers to the states although a central government was necessary to hold it all together. The next three and a half decades were to be a period of conflict between those who favored a strong central government with subservient states, and those who opted for a republican system with strong and independent states.

The issuance of coinage was considered by some to be a mark of sovereignty, as coin legends such as "ESTADO LIBRE Y SOBERANO" indicate. These legends would later make a political statement about the form of government in power. States the furthest from Mexico City were almost independent entities and others like Jalisco were especially outspoken in their quest for local autonomy. Ideally, by issuing copper coins the states would become financially responsible and would relieve the central government from the function of minor coin production.

Profitability, at least at first, was not a large factor but over time it became very important. The central government initially was prohibited from striking copper coins but when profitability became apparent, the national Congress authorized it on 28 March 1829[text needed].

The constitution of 4 October 1824, which established a republic, and related legislation, recognized the states as free and sovereign in affairs within their borders including taxation and fiscal matters. The states were to volunteer a yearly monetary grant to the federal government for its expenses. The state legislatures elected the president, vice president and members of the Federal Supreme Court. Thus, the provinces created the nation.

Article 49, section IV states that "it is the prerogative of Congress to fix and determine the weight, fineness, value and type of monetary denomination of the country as well as of the coins issued by any of the federal states of the republic". Further legislation on 16 November 1824[text needed], gave the states the right to take charge of mints within their boundaries and the power to establish new ones if desired. However, the states were expected to conform to the law of 1 August 1823[text needed], which established specifications for coinage. This was largely ignored with each state doing as it pleased. Nevertheless, the legal mechanism of state coinage was in place.

The central government's first amortization was to redeem old colonial copper. This was by Congressional decree of 28 March 1829[text needed], which authorized 600,000 pesos of copper coins to be minted to redeem the colonial coppers at equal exchange. The overproduction of copper coins beginning in the late 1820s soon caused inflation and devaluation, while at the same time silver became scarce. Central and South Mexico were starved for silver coins as foreign export merchants, located in the provinces and smaller ports where they had access to mine production and shipping, were able to export large quantities. Silver represented over 70 percent of Mexico's total exports. Hoarding was also prevalent as people were unwilling to exchange silver for the overabundant copper. Counterfeit copper flooded the market during this period. Discounting of copper began at 5 to 6 percent and rose to a reported 75 percent by 1835. From July 1834 to July 1835, the face value of copper minted climbed to more than a million pesos, double that of the previous 12 months. The total copper in circulation reached five to six million pesos. Public discontent was considerable. Copper was of so little value the government attempted to require most taxes to be paid only in silver.

In a law of 23 October 1835[text needed], the national Congress revoked the rights of states to establish mints and reduced their power to authorize them. However, the central government was not in a position to enforce it if the states were of a mind to resist. The constitution of 1836, Los Siete Leyes (The Seven Laws), took power from the states to be consolidated in the central government. The states were henceforth known as departments, which were controlled by Mexico City.

On 17 January 1837, the government decreed[text needed]] that no more copper coins were to be minted in the Republic. Thus, there were no state issues of copper between 1837 and 1845 except for the 1842 Durango octavo. The federal octavos of 1841 and 1842 were not state issues and were to replace the older amortized copper. Panic developed over fears of demonetizations of copper. A bank, the Banco de Amortización, was created to amortize circulating copper. The exchange was to be for silver coin, new copper coin, or bonds, depending on the bank's liquidity but this was not successful due to under capitalization. The 1837 amortization eventually brought in 43,000 pesos in copper, which reportedly weighed 200 tons. On 8 March 1837, half of these excluding the Zacatecas brass issues, which held their value, were officially devalued. There was some temporary relief to the copper situation but it soon reverted to the same problems. Another attempt at amortization of copper was made in 1839, which was again unsuccessful due to the unstable political and financial situation of the country.

The situation again became critical in 1841 when from August to October revolution against President Bustamante caused collapse of law and order. There was uncontrolled devaluation and counterfeiting was especially rampant. As Antonio Lopez Santa Anna returned to power (he was president 11 different times) he attacked the copper money problem in several ways. Counterfeiters were court-martialed (in military court) and property owners caught with counterfeiting equipment were fined or jailed. A new ⅛ real (octavo) was to be issued that would replace old copper. A plan emerged that would remove the old copper in the Department of Mexico within 30 days of issue of the new octavos and remove the old copper elsewhere in the republic within 60 days.

The problem of counterfeiting is reflected in surviving Republican copper encountered by today's collectors. A very large portion of the copper seen is false but due to its quantity, most are accepted as genuine. This is an area that especially needs study.

On 18 December 1841, the new coins began to be released, which eventually had a calming effect on the populace. Stability began to return, but the same problems would reemerge when copper was again struck in excessive quantities. Various states attempted to solve the copper money problem, including the state-coin-producing states of Jalisco, Zacatecas and Guanajuato, which had their own amortizations.

On 22 August 1846, the charter of 1824 was restored. The departments were again to be known as states with their own constitutions and elected officials. Power was decentralized, with the states resuming their importance. Nevertheless, on 17 September 1846, the national government again tried to terminate all rights that states had over mints stating that coinage was to be its exclusive right. However, powerful states ignored the new law and the central government lacked the muscle to enforce it.

The constitution of 1857 effectively made coinage the prerogative of the federal government. However, the troubled and chaotic times and the War of Reform (1858 to 1860) made resolute enforcement impossible. The metric system was established by decree of President Benito Juárez on 15 March 1861. Weights and values were given including a "unique" copper centavo weighing 0.32 ounce with a value of 100th of a peso. This would seem to be a reaffirmation of the demise of state coinage. With the exception of the centavo in 1863 this decree was not put into effect due to political events of the time. Finally, on 27 November 1867, after the fall of the Maximilian’s Empire, Juárez was able to have the 1861 law ratified and establish the decimal system.

Porfirio Diaz officially ended all nonfederal issues, including the prívate and municipal issues. A law of 1 January 1885[text needed] states that all old copper would cease to circulate. Since old species still continued to circulate, the law was postponed on 31 December 1886[text needed]. Not until 19 January 1899, was the law effective, which specified the decimal system for the entire republic.

In summary, between 1824 and 1837, the federal government of Mexico authorized the states to mint copper coinage. In 1829 the federal government issued coinage along with the state mints. With ten mints issuing copper coins, along with all of the commercial tokens in use, problems and confusion resulted in the merchants discounting the commercial tokens, as well as the mint issues. The 1837 coinage reform banned further issuance of the copper pieces, but this was partially rescinded. The reforms also declared the value of the coppers to be one-half of face value.