The Spanish Royal Trading Companies

By Howard Shakespeare

Published in print (with additional illustrations) in the Journal of the International Bond & Share Society, Spring, Autumn 1989

Copyright ã International Bond & Share Society 2001

Among the finest and most sought-after early share certificates are those of the companies formed in Spain in the 18^th century, under royal patronage. These companies divide into two groups – those formed for overseas trading, and those formed for internal purposes within Spain (primarily to promote the textile industries). The San Fernando de Sevilla company falls in between the two, being formed primarily for the promotion of the textile industry around Seville, but also authorized to carry on a limited range of trade with the colonies (Caracas and Havana excepted).

1. The overseas trading companies

The earliest overseas trading company was the Compania de Honduras, of which not very much is known. It was formed in 1714, or more probably rather later, to import certain timbers and timber products from that area of Central America. The company quickly collapsed ; its certificates are unknown. The earliest company to thrive was the Caracas (formed in 1728), followed by the Galicia (1734), the Havana (1740), the Barcelona (1755) and the Filipinas (1785). The Caracas Company (Real Compania Guipuzcoana de Caracas) was formed by a group of merchants in the Guipuzcoa province, in the Basque part of Spain, to trade with the Caracas province of the colony of Venezuela, with the further aims of (a) developing its agriculture, especially cocoa, and (b) keeping watch on the coast, from the mouth of the Orinoco to the river Hacha (later extended to cover Maracaibo). This latter aim was to prevent illegal (in Spanish eyes) trading by foreigners, particularly the Dutch from Curaçao. The company had the right to send two ships per year from San Sebastian or Pasajes, carrying all types of Spanish goods. For the return voyage the ships brought precious metals, cocoa, sugar, tobacco and leathers. In 1730 the company set about establishing a chain of trading posts along the coast of what is now Venezuela and the offshore islands of Margarita and Trinidad, and in 1732 obtained a monopoly of trade between Caracas and Spain ; in 1742 this was extended for an indefinite period.

From the outset the company was very profitable, paying substantial dividends to its shareholderss. The initial capital was 500,000 reales, soon increased to 2,250,000, then in 1752 to 3,000,000 and finally in 1766 to 4,500,000 reales, the shares being of 7,500 reales each. Its activities expanded rapidly, especially after 1734, when the restrictions on the number of sailings were removed. Caracas production, especially of cocoa, rose sharply. By mid-century the company owned 12 large ocean-going vessels and 19 coastal vessels, with some 2,500 crew, and carrying 2,500 or more tons of freight annually in each direction.

However, all this was not achieved without problems. The first was opposition from the Dutch and the English, reluctant to lose their lucrative trade with the area ; pressure was brought to bear on the Spanish government to curtail the company’s activities. Secondly, the company abused its monopoly powers, by charging exorbitant prices for imported goods, and cutting steadily the already low price paid to Caracas growers for their produce, and this, together with interference in the government of Caracas, eventually in 1749 led to a rebellion by the colonists. Not until 1752 was this finally subdued, and these events led the Spanish government to reduce the company’s privileges and introduce fixed prices for buying cocoa and other produce.

Profits fell sharply, and the company’s fortunes went into steady decline. Its investments in Spain were unsuccesful ; wars against England in 1761-3 and 1779-83 cost it dearly ; the free-trading policies of King Carlos III were the last blow. In 1781 the company lost the monopoly with Venezuela, and in 1785 was absorbed by the Filipinas company. The shares were exchanged for Filipinas, and are of the greatest rarity.

The Compania de Galicia was formed in La Corunina to fill the gap left by the disappearance of the Honduras company ; more precisely, to obtain dye-stuffs from timber in the Campeche area. However, the trade was firmly in English hands, and English armed forces ensured that it stayed that way. This company also soon disappeared. Its certificates are unknown.

The Real Compania de Comercio de la Habana, formed in 1740 with the monopoly of trade between Spain and Cuba, controlled the supply of Spanish goods (primarily textiles, porcelain and flour) to Cuba, and of colonial goods (especially tobacco, sugar and hides) back to the mother country. The company was based in Havana, with both Cuban and Spanish shareholders. It did very large business, and should have been very profitable, but was corruptly run from the start. The director, Martin de Arostegui, operated the company for his own personal gain, concentrating excessively on trading in slaves, and sending tobacco to the British American colonies instead of to Spain. The Spanish shareholders became aware of the frauds in 1752 and Arostegui was arrested. However, even after this, the misuse of the tobacco monopoly continued, and the Spanish government finally rescinded the monopoly. This, together with a prolonged English occupation of Havana in 1762-3, damaged the company very seriously. In 1784 the trade of the company was described as being in total paralysis ; the shareholders had suffered major losses. The company was not formally dissolved, however, until early in the 19^th century.

The shares are occasionally offered in auctions ; they are decorative and printed on paper.

The Real Compania de Comercio de Barcelona is by far the best known of these overseas trading companies, and probably of all Spanish companies of the 18^th century. On its formation in 1755 it was given a monopoly of trade with Santo Domingo, Puerto Rico and Margarita island (off the Venezuela coast), together with tariff and other privileges, including the right of sailings to Honduras and Guatemala. The ships were to load and unload in Barcelona.

The initial capital was one million pesos in 4,000 shares of 250 pesos, although only 1,785 were subscribed. The company’s start was very slow, using only two ships (of which one was captured by the English in the 1761-3 war), and, although the fleet expanded, the company only managed about one sailing per year, sending Catalan merchandise. The monopoly was not a very lucrative one, the islands being poor and thinly populated. The company brought in negro slaves in an attempt to boost agricultural production to improve return cargoes.

In 1765 Spain granted rights to nine other ports to trade with the islands, effectively cancelling the Barcelona company’s monopoly, but the company managed to obtain new concessions – to trade with Cumana (Venezuela) and Buenos Aires. In 1771 it was able to pay its first dividend. However, lack of funds led to a slow but steady decline, leading to its absorbtion in 1785 into the new Compania de Filipinas.

More of the Barcelona company’s certificates have been seen than those of any other 18^th-century Spanish company, but their beauty has ensured a steady demand by collectors. They are printed on vellum. Some seen printed on paper were produced from the original plates early this century for an exhibition ; the plates were in poor condition and the print is very blurred. They cannot be confused with the originals.

The Compania de Filipinas was projected in the light of the excellent results obtained by the Caracas company, and should have been formed in 1733 ; however, its considerable privileges provoked opposition, and formation never took place. However, in the early 1780s the idea was resurrected ; the object of the new company was to carry all types of Spanish goods to the American colonies, sell them for silver to buy oriental goods for sale in Spain. The company was duly formed in 1785, the Caracas and Barcelona companies being dissolved and incorporated into it. It was given the necessary rights of trade with the Philippines for 20 years, and the monopoly of sale in Spain of oriental goods ; the people of the Philippines were allowed to trade freely with India and China, to enable a wide range of goods to be available for the company’s ships to buy. There was much opposition, notably from Holland, on the grounds of alleged violation of treaties, and by domestic interests who did not fancy oriental competition, particularly the cotton textile trade of Catalonia and the silk trade of Valencia.

The capital of the new company was 160 million reales, of which 60 million was subscribed by the King, and the Banco de San Carlos and the Cinco Gremios de Madrid were major shareholders.
The first expeditions made excellent profits and encouraged the company to expand, opening depots in all major Spanish ports in addition to the initial facilities in Madrid and Cadiz. However, in 1789, a decree was passed, allowing the general import into Spain of certain textiles covered by the company’s monopoly. This hurt the company badly, since its warehouses were full of such goods it could not easily sell. Its need for liquid resources led to an issue of bonds, and the position was thereby much strengthened. With the reinforcement of its monopoly in 1793 the company flourished in the mid-1790s, when it was operating no fewer than 16 ships.

In 1796 began the process that was to lead to the downfall of the company. War broke out between Spain and England, and the following year the English captured one of its ships, laden with cargo. The company struggled on, with its fortunes fluctuating with war and peace, but by the end of the Peninsular War in 1815, it was in a sorry state. It managed to survive until 1834, when it was finally dissolved.
The shares are known to collectors but are rare ; they are decorative and printed on paper. The bonds have never been seen.

2. The internal trading companies

These fall into two groups – those formed in the late 1740s (the Extremadura, Zaragoza, San Fernando de Sevilla, Granada and Toledo), and those of the 1760/1770s (the Cinco Gremios Mayores of Madrid, the San Carlos of Burgos and the Ezcaray).

The Compania de Zarza la Mayor of 1746, was formed to manufacture wool and silk textiles in Extremadura, and sell them within Spain, and abroad, especially in Portugal, and also to trade in hides, cattle, fruit, etc. It was granted wide trading privileges, particularly with regard to Portugal. As with other companies, it abused its privileges, buying up most of the local silk production, and reselling it without manufacture. The company amalgamated with that of Granada, and the combined company, the Compania de Extremadura, was a complete failure. The shares are extremely rare, and decorative ; they are printed on vellum.

The Real Compania de Comercio Y Fabricas de Zaragoza was created in 1746 to promote the industrial and commercial development of Aragon, and started silk, wool, paper, etc, factories, looking to export to Catalonia and France. It appeared to prosper, but this was mostly a false impression created by all sorts of malpractice, fraudulent accounting, and so on. The company went bankrupt in 1774. The shares, dated 1752, are extremely rare ; they are decorative, and on vellum, but of very small format.

The Real Compania de San Fernando de Sevilla was formed in Seville in 1747, with the main aim of expanding the textile industry of the province, and selling both its produce and that of neighbouring provinces. It had the right to export this produce to the Indies (i.e. the Spanish American colonies) and to import raw material, all at favourable tariff rates. It also obtained the right to trade with all colonies other than Caracas and Havana. Much of the capital was subscribed by Flemish merchants established in Cadiz, and before long they acquired the majority of the shares. However, the company was slow to show good results, and after the decrees of the 1750s (see below) the Flemish became impatiant ; their demands to withdraw their money led to the stagnation of the company. By the 1770s the company was corrupt and ineffective, and it was dissolved in the following decade. The shares are quite rare but well-known from frequent illustration ; glorious in decoration, and on vellum they are much prized by collectors and quite expensive to buy.

The Compania de Granada dates from 1747 and had similar priveleges to the Sevilla company (other than the general trading rights to the Indies). Soon, however, the company was in trouble over abuse of its monopoly powers. In 1748 it amalgamated to form the Extremadura company and they failed together in the late 1750s. The shares, on vellum, are very rare but smaller and less ornate than the Sevillas or Barcelonas, and less in demand.

The Compania de Comercio y Fabricas de Toledo was incorporated in 1748, and had the objective of restoring and improving the old manufacturing industry of the city ; in practice this meant primarily textiles. It amalgamated with the Extremadura/Granada company, but separated again three years later. Although making modest profits in the first years it went bankrupt in 1755. Revived to an extent by certain privileges, it continued, without any great success, until it was finally dissolved in 1778. These shares too are very rare and on vellum, but smaller and less ornate than the Sevillas or Barcelonas ; they date from 1751, when the Toledo was united with the Extremadura.

All these companies, to some extent, abused their privileges and powers, and King Fernando VI, in 1752/3, extended their privileges to other manufacturers, and in 1756 decreed that many of the privileges would be abolished for everyone. These decrees damaged the companies seriously, and without state support they went into a decline which was to prove terminal.

The Compania General y de Comercio de los Cinco Gremios Mayores de Madrid (the five great guilds of Madrid). While Madrid had some 60 guilds in the late 17^th/early 18^th century, five of them (the silk-, wool- and cloth merchants, the jewellers and the drapers) had shown greater commercial enterprise than the others, had cooperated from 1679, and in 1731 agreed to combine to acquire various privileges and rights. The association flourished, and in 1752 formed a small commercial company to trade with the Indies. This, however, was premature, and was virtually absorbed by its collaborators in Cadiz. The company whose certificates we know dates from 1763, when it was formed with a capital of 15 million reales, of which 5 million were paid up straightaway, 1million by each guild. It was an immediate success and became the most important Spanish commercial undertaking of the century. The range of activities widened steadily, making large profits and paying high dividends. Further capital was raised, eventually reaching 30 million reales. Among the company’s activities were the collection of various royal taxes, controlling the royal silk factories at Valencia and elsewhere, building the Aragon canal, supply of army and navy food and clothing, food supplies for Madrid, etc. It was also active in trade with the Indies, with its own fleet of ships, and trading-posts at Mexico City, Vera Cruz, Lima, Arequipa, Guatemala and Manila, and offices in London, Paris and Hamburg. It also held the monopoly of trade with Morocco, offered marine insurance, and was a bank, being principal lender to the stae. The formation of the Bank of San Carlos in 1782 led to severe competition in some of the company’s most profitable activities, and the Compania de Filipinas hit others. When war came in the 1790s, the interruption to Atlantic trade caused further damage, and the company started to show heavy losses on various activities. In the 19^th century, first Napoleon’s armies caused great damage to several of the company’s factories, and then the independence of Spain’s American colonies led to much trade going elsewhere. The company limped on until 1846, when it was liquidated. Certain of its manufacturing activities were continued by a new Compania Fabril de los Cinco Gremios.

The company’s share certificates came to light in the late 1980s ; about a dozen, dating from the capital increase of 1773, have been found, and are much sought after by collectors. They show the patrons of the company, Our Lady of the Rosary and St. Francis of Assissi. Most of those seen are printed on vellum, but a very few are on paper.

The Compania de Comercio y Fomento de Fabricas de San Carlos, formed in Burgos in 1767 to develop the textile industry of Castile, raised only one-fifth of its intended initial capital. It never really ‘got off the ground’, and the shares soon lost much of their value. The company was dissolved in 1773. The shares have not been seen.

The Compania de Ezcaray (in the Rioja region) dated from 1773 but its short life was one of defaults and arrangements with creditors. The shares have not been seen.

Copyright ã INTERNATIONAL BOND & SHARE SOCIETY 2001

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