From within a year after the foundation of the Colony up to the second decade of last century direct communication with Mexico was maintained by the State galleons, termed the Naos de Acapulco. The first sailings of the galleons were to Navidad, but for over two centuries Acapulco was the port of destination on the Mexican side, and this inter-communication with New Spain only ceased a few years before that Colony threw off its allegiance to the mother country. But it was not alone the troubled state of political affairs which brought about the discontinuance of the galleons' voyages, although the subsequent secession of Mexico would have produced this effect. The expense of this means of intercourse was found to be bearing too heavily upon the scanty resources of the Exchequer, for the condition of Spain's finances had never, at any period, been so lamentable.

The Commander of the State Nao had the title of General, with a salary of ?40,000 per annum. The chief officer received ?25,000 a year. The quarter-master was remunerated with 9 per cent, on the value of the merchandise shipped, and this amounted to a very considerable sum per voyage.

The last State galleon left Manila for Mexico in 1811, and the last sailing from Acapulco for Manila was in 1815.

These ships are described as having been short fore and aft, but of great beam, light draught, and, when afloat, had a half-moon appearance, being considerably elevated at bows and stern. They were of 1,500 tons burden, had four decks, and carried guns.

The Gov.-General, the clergy, the civil functionaries, troops, prisoners, and occasionally private persons, took passage in these ships to and from the Philippines. It was practically the Spanish Mail.

The Colony had no coin of its own.1 It was simply a dependency of Mexico; and all that it brought in tribute and taxes to its Royal Treasury belonged to the Crown, and was at the King's disposal. For many years these payments were made wholly—and afterwards partially—in kind, and were kept in the Royal Stores. As the junks from China arrived each spring, this colonial produce belonging to the Crown was bartered for Chinese wares and manufactures. These goods, packed in precisely 1,500 bales, each of exactly the same size, constituted the official cargo, and were remitted to Mexico by the annual galleon. The surplus space in the ship was at the disposal of a few chosen merchants who formed the “Consulado,”—a trading ring which required each member to have resided in the Colony a stipulated number of years, and to be possessed of at least eight thousand pesos.

For the support of the Philippine administration Mexico remitted back to Manila, on the return of the galleon, a certain percentage of the realized value of the above-mentioned official cargo, but seeing that in any case—whether the Philippine Treasury were flourishing or not—a certain sum was absolutely necessary for the maintenance of the Colony, this remittance, known as the “Real Situado,” or royal subsidy, was, from time to time, fixed.2

The Philippine Colony was therefore nominally self-supporting, and the Situado was only a guaranteed income, to be covered, as far as it could be, by shipments of foreign bartered manufactures and local produce to Mexico. But, as a matter of fact, the Mexican subsidy seldom, if ever, was so covered.

By Royal Decree of June 6, 1665, the Mexican subsidy to the Philippines was fixed at ?2,500,000, of which ?2,000,000 was remitted in coin and ?500,000 in merchandise for the Royal Stores. Against this was remitted value in goods (Philippine taxes and tribute) ? 176,101.40 so that the net Subsidy, or donation, from Mexico was ? 2,323,898.60.

Hence, in the course of time, coin—Mexican dollars called pesos—found its way in large quantities to the Philippines, and thence to China.

The yearly value of the merchants' shipments was first limited to ?250,000, whilst the return trade could not exceed ?500,000 in coin or stores, and this was on the supposition that 100 per cent. profit would be realized on the sales in Mexico.

The allotment of surplus freight-room in the galleon was regulated by the issue of boletas—documents which, during a long period, served as paper money in fact, for the holders were entitled to use them for shipping goods, or they could transfer them to others who wished to do so. The demand for freight was far greater than the carrying power provided. Shipping warrants were delivered gratis to the members of the Consulado, to certain ecclesiastics, and others. Indeed, it is asserted by some writers that the Governor's favourites were served with preference, to the prejudice of legitimate trade.

The Spaniards were not allowed to go to China to fetch merchandise for transhipment, but they could freely buy what was brought by the Chinese. Indian and Persian goods uninterruptedly found their way to Manila. Spanish goods came exclusively vi Mexico.

The mail galleon usually sailed in the month of July in each year, and the voyage occupied about five months. Very strict regulations were laid down regarding the course to be steered, but many calamities befell the ships, which were not unfrequently lost through the incapacity of the officers who had procured their appointments by favour. For a century and a half there was practically no competition. All was arranged beforehand as to shape, quantity, size, etc., of each bale. There was, however, a deal of trickery practised respecting the declared values, and the boletas were often quoted at high prices. Even the selling-price of the goods sent to Mexico was a preconcerted matter.

The day of the departure of the galleon or its arrival with a couple of millions of pesos or more,3 and new faces, was naturally one of rejoicing—it was almost the event of the year. A Te Deum was chanted in the churches, the bells tolled, and musicians perambulated the streets, which were illuminated and draped with bunting.

So far as commercial affairs were concerned, the Philippine merchants passed very easy lives in those palmy days. One, sometimes two, days in the week were set down in the calendar as Saint-days to be strictly observed; hence an active business life would have been incompatible with the exactions of religion. The only misadventure they had to fear was the loss of the galleon. Market fluctuations were unknown. During the absence of the galleon, there was nothing for the merchants to do but to await the arrival of the Chinese junks in the months of March, April, and May, and prepare their bales. For a century and a half this sort of trading was lucrative; it required no smartness, no spirit of enterprise or special tact. Shippers were busy for only three months in the year, and during the remaining nine months they could enjoy life as they thought fit—cut off from the rest of the world.

Some there were who, without means of their own, speculated with the Obras Piasfunds, lent at interest.4

The Philippine merchants often lost the value of their shipments in the State galleons by shipwreck or seizure by enemies. Mexico frequently lost the Philippine remittances to her, and the specie she sent to the Philippines. The State galleon made only one voyage a year there and back, if all went well; but if it were lost, the shipment had to be renewed, and it often happened that several galleons were seized in a year by Spain's enemies.

The abortive attempt to annex the British Isles to the Spanish Crown in 1588 brought about the collapse of Spain's naval supremacy, enabling English mariners to play havoc with her galleons from America. The Philippine Islands, as a colony, had at that date only just come into existence, but during the series of Anglo-Spanish wars which preceded the “Family Compact” (vide p. 87), Philippine-Mexican galleons laden with treasure became the prey of British commanders, notably Admiral Anson. The coasts were beset by Anson's squadron. He was the terror of the Philippines from the year 1743. His exploits gave rise to consternation, and numerous councils were held to decide what to do to get rid of him. The captured galleon Pilar gave one-and-a-half million pesos to the enemy—the Covadonga was an immense prize. All over the Islands the Spaniards were on the alert for the dreaded foe; every provincial Governor sent look-outs to high promontories with orders to signal by beacons if the daring Britisher's ships were seen hovering about, whilst, in Manila, the citizens were forewarned that, at any moment, they might be called upon to repel the enemy.

Not only in fleets of gold-laden vessels did Spain and her dependencies lose immense wealth through her hostile ambition, for in view of the restrictions on Philippine trade, and the enormous profits accruing to the Spanish merchants on their shipments, British, Dutch, French, and Danish traders competed with them. Shippers of these nationalities bought goods in Canton, where they established their own factories, or collecting-stores. In 1731 over three millions of Mexican dollars (pesos) were taken there for making purchases, and these foreign ships landed the stuffs, etc., in contraband at the American ports, where Spaniards themselves co-operated in the trade which their absolute King declared illicit, whilst the traders considered it a natural right.

As the Southern (Peninsula) Spanish merchants were helpless to stay this competition, which greatly affected their profits, their rancorous greed made them clamour against the Philippine trade, to which they chose to attribute their misfortunes, and the King was petitioned to curtail the commerce of this Colony with Mexico for their exclusive benefit. But it was not Spanish home trade alone which suffered: Acapulco was so beset by smugglers, whose merchandise, surreptitiously introduced, found its way to Mexico City, that, in latter days, the Philippine galleons' cargoes did not always find a market. Moreover, all kinds of frauds were practised about this time in the quality of the goods baled for shipment, and the bad results revealed themselves on the Mexican side. The shippers, unwisely, thought it possible to deceive the Mexicans by sending them inferior articles at old prices; hence their disasters became partly due to “the vaulting ambition that o'erleaps itself and falls on t'other side.” The Governor commissioned four of the most respectable Manila traders to inspect the sorting and classification of the goods shipped. These citizens distinguished themselves so highly, to their own advantage, that the Governor had to suppress the commission and abandon the control, in despair of finding honest colleagues. Besides this fraud, contraband goods were taken to Acapulco in the galleons themselves, hidden in water-jars.

In the time of Governor Pedro de Arandia (1754–59) the 100 per cent. fixed profit was no longer possible. Merchants came down to Acapulco and forced the market, by waiting until the ships were obliged to catch the monsoon back, or lie up for another season, so that often the goods had to be sold for cost, or a little over. In 1754 returns were so reduced that the Consulado was owing to the Obras Pias over ?300,000, and to the Casa Misericordia ?147,000, without any hope of repayment. The Casa Misericordia lent money at 40 per cent., then at 35 per cent., and in 1755 at 20 per cent. interest, but the state of trade made capital hardly acceptable even at this last rate.

Early in the 18th century the Cadiz merchants, jealous of the Philippine shippers, protested that the home trade was much injured by the cargoes carried to Mexico in Philippine bottoms. So effectually did they influence the King in their favour that he issued a decree prohibiting the trade between China and the Philippines in all woven stuffs, skein and woven silk and clothing, except the finest linen. Manila imports from China were thereby limited to fine linen, porcelain, wax, pepper, cinnamon, and cloves. At the expiration of six months after the proclamation of the decree, any remaining stocks of the proscribed articles were to be burnt! Thenceforth trade in such prohibited articles was to be considered illicit, and such goods arriving in Mexico after that date were to be confiscated.

By Royal Decree dated October 27, 1720, and published in Mexico by the Viceroy on February 15, 1724, the following was enacted, viz.:—That in future there should be two galleons per annum, instead of one as heretofore, carrying merchandise to Acapulco, each to be of 500 tons. That the merchandise sent in the two was to be of the value of ?300,000 precisely in gold, cinnamon, wax, porcelain, cloves, pepper, etc., but not silks, or stuffs of any kind containing silk, under pain of confiscation, to be allotted in three equal parts, namely, to the Fiscal officer, the Judge intervening, and the informer, and perpetual banishment from the Indies of all persons concerned in the shipment. That the number of Manila merchants was to be fixed, and any one not included in that number was to be prohibited from trading. No ecclesiastic, or professor of religion, or foreigner could be included in the elected few, whose rights to ship were non-transferable. That if the proceeds of the sale happened to exceed the fixed sum of ?600,000, on account of market prices being higher than was anticipated, only that amount could be brought back in money, and the difference, or excess, in goods. [If it turned out to be less than that amount, the difference could not be remitted in cash by Mexican merchants for further purchases, the spirit of the decree being to curtail the supply of goods from this Colony to Mexico, for the benefit of the Spanish home traders. The infringer of this regulation was subject to the penalties of confiscation and two years' banishment from the Indies.]

By Royal Decree of the year 1726, received and published in Manila on August 9, 1727, the following regulations were made known, viz.:—That the prohibition relating to silk and all-silk goods was revoked. That only one galleon was to be sent each year (instead of two) as formerly. That the prohibition on clothing containing some silk, and a few other articles, was maintained. That for five years certain stuffs of fine linen were permitted to be shipped, to the limit of 4,000 pieces per annum, precisely in boxes containing each 500 pieces.

The Southern Spanish traders in 1729 petitioned the King against the Philippine trade in woven goods, and protested against the five-years' permission granted in the above decree of 1726, declaring that it would bring about the total ruin of the Spanish weaving industry, and that the galleons, on their return to the Philippines, instead of loading Spanish manufactures, took back specie for the continuance of their traffic to the extent of three or four millions of pesos each year. The King, however, refused to modify the decree of 1726 until the five years had expired, after which time the Governor was ordered to load the galleons according to the former decree of 1720.

The Manila merchants were in great excitement. The Governor, under pretext that the original Royal Decree ought to have been transmitted direct to the Philippines and not merely communicated by the Mexican Viceroy, agreed to “obey and not fulfil” its conditions.

From the year 1720, during the period of prohibitions, the Royal Treasury lost about ?50,000 per annum, and many of the taxes were not recovered in full. Besides this, the donations to Government by the citizens, which sometimes had amounted to ?40,000 in one year, ceased. A double loss was also caused to Mexico, for the people there had to pay much higher prices for their stuffs supplied by Spanish (home) monopolists, whilst Mexican coffers were being drained to make good the deficits in the Philippine Treasury. The Manila merchants were terribly alarmed, and meeting after meeting was held. A Congress of Government officials and priests was convened, and each priest was asked to express his opinion on the state of trade.

Commercial depression in the Philippines had never been so marked, and the position of affairs was made known to the King in a petition, which elicited the Royal Decree dated April 8, 1734. It provided that the value of exports should thenceforth not exceed ?500,000, and the amount permitted to return was also raised to ?1,000,000 (always on the supposition that 100 per cent. over cost laid down would be realized). The dues and taxes paid in Acapulco on arrival, and the dues paid in Manila on starting, amounted to 17 per cent. of the million expected to return.5 This covered the whole cost of maintenance of ships, salaries, freight, and charges of all kinds which were paid by Government in the first instance, and then recovered from the Consulado.

The fixed number of merchants was to be decided by the merchants themselves without Government intervention. Licence was granted to allow those of Cavite to be of the number, and both Spaniards and natives were eligible. Military and other professional men, except ecclesiastics, could thenceforth be of the number. Foreigners were strictly excluded. The right to ship (boleta) was not to be transferable, except to poor widows. A sworn invoice of the shipment was to be sent to the royal officials and magistrate of the Supreme Court of Mexico for the value to be verified. The official in charge, or supercargo, was ordered to make a book containing a list of the goods and their respective owners, and to hand this to the commander of the fortress in Acapulco, with a copy of the same for the Viceroy. The Viceroy was to send his copy to the Audit Office to be again copied, and the last copy was to be forwarded to the Royal Indian Council.

Every soldier, sailor, and officer was at liberty to disembark with a box containing goods of which the Philippine value should not exceed ?30, in addition to his private effects. All hidden goods were to be confiscated, one-half to the Royal Treasury, one-fourth to the Judge intervening, and one-fourth to the informer; but, if such confiscated goods amounted to ?50,000 in value, the Viceroy and Mexican Council were to determine the sum to be awarded to the Judge and the informer.

If the shipment met a good market and realized more than 1,000,000 pesos, only 1,000,000 could be remitted in money, and the excess in duty-paid Mexican merchandise. If the shipment failed to fetch 1,000,000, the difference could not be sent in money for making new purchases. (The same restriction as in the decree of 1720.)

The object of these measures was to prevent Mexicans supplying trading capital to the Philippines instead of purchasing Peninsula manufactures. It was especially enacted that all goods sent to Mexico from the Philippines should have been purchased with the capital of the Philippine shippers, and be their exclusive property without lien. If it were discovered that on the return journey of the galleon merchandise was carried to the Philippines belonging to the Mexicans, it was to be confiscated, and a fine imposed on the interested parties of three times the value, payable to the Royal Treasury, on the first conviction. The second conviction entailed confiscation of all the culprits' goods and banishment from Mexico for 10 years.

The weights and measures of the goods shipped were to be Philippine, and, above all, wax was to be sent in pieces of precisely the same weight and size as by custom established.

The Council for freight allotment in Manila was to comprise the Governor, the senior Magistrate, and, failing this latter, the Minister of the Supreme Court next below him; also the Archbishop, or in his stead the Dean of the Cathedral; an ordinary Judge, a Municipal Councillor, and one merchant as Commissioner in representation of the eight who formed the Consulado of merchants.

The expulsion of the non-christian Chinese in 1755 (vide p. 111) caused a deficit in the taxes of ?30,000 per annum. The only exports of Philippine produce at this date were cacao, sugar, wax, and sapanwood. Trade, and consequently the Treasury, were in a deplorable state. To remedy matters, and to make up the above ?30,000, the Government proposed to levy an export duty which was to be applied to the cost of armaments fitted out against pirates. Before the tax was approved of by the King some friars loaded a vessel with export merchandise, and absolutely refused to pay the impost, alleging immunity. The Governor argued that there could be no religious immunity in trade concerns. The friars appealed to Spain, and the tax was disapproved of; meantime, most of the goods and the vessel itself rotted pending the solution of the question by the Royal Indian Council.

There have been three or four periods during which no galleon arrived at the Philippines for two or three consecutive years, and coin became very scarce, giving rise to rebellion on the part of the Chinese and misery to the Filipinos. After the capture of the Covadonga by the British, six years elapsed before a galleon brought the subsidy; then the Rosario arrived with 5,000 gold ounces (nominally ?80,000).

However, besides the subsidy, the Colony had certain other sources of public revenue, as will be seen by the following:—

Philippine Budget for the Year 1757

When the merchant citizens of Manila were in clover, they made donations to the Government to cover the deficits, and loans were raised amongst them to defray extraordinary disbursements, such as expeditions against the Mahometans, etc. In the good years, too, the valuation of the merchandise shipped and the corresponding returns were underrated in the sworn declarations, so that an immensely profitable trade was done on a larger scale than was legally permitted. Between 1754 and 1759, in view of the reduced profits, due to the circumstances already mentioned, the Manila merchants prayed the King for a reduction of the royal dues, which had been originally fixed on the basis of the gross returns being equal to double the cost of the merchandise laid down in Acapulco. To meet the case, another Royal Decree was issued confirming the fixed rate of royal dues and disbursements, but in compensation the cargo was thenceforth permitted to include 4,000 pieces of fine linen, without restriction as to measure or value; the sworn value was abolished, and the maximum return value of the whole shipment was raised to one-and-a-half millions of pesos. Hence the total dues and disbursements became equal to 11? per cent. instead of 17 per cent., as heretofore, on the anticipated return value.

In 1763 the Subsidy, together with the Consulado shippers' returns, amounted in one voyage to two-and-a-half millions of pesos (vide p. 88). After the independence of Mexico (1819), tribute in kind (tobacco) was, until recently, shipped direct to Spain, and Peninsula coin began to circulate in these Islands (vide Currency).

Consequent on the banishment of the non-christian Chinese in 1755, trade became stagnant. The Philippines now experienced what Spain had felt since the reign of PhillipIII., when the expulsion of 900,000 Moorish agriculturists and artisans crippled her home industries, which needed a century and a half to revive. The Acapulco trade was fast on the wane, and the Manila Spanish merchants were anxious to get the local trade into their own hands. Every Chinese shop was closed by Government order, and a joint-stock trading company of Spaniards and half-breeds was formed with a capital of ?76,500, in shares of ?500 each. Stores were opened in the business quarter, each under the control of two Spaniards or half-breeds, the total number of shopmen being 21. The object of the company was to purchase clothing and staple goods of all kinds required in the Islands, and to sell the same at 30 per cent. over cost price. Out of the 30 per cent. were to be paid an 8 per cent. tax, a dividend of 10 per cent. per annum to the shareholders, and the remainder was to cover salaries and form a reserve fund for new investments. The company found it impossible to make the same bargains with the Chinese sellers as the Chinese buyers had done, and a large portion of the capital was soon lost. The funds at that date in the Obras Pias amounted to ?159,000, and the trustees were applied to by the company for financial support, which they refused. The Governor was petitioned; theologians and magistrates were consulted on the subject. The theological objections were overruled by the judicial arguments, and the Governor ordered that ?130,000 of the Obras Pias funds should be loaned to the company on debentures; nevertheless, within a year the company failed.

A commercial company, known as the “CompaÑia Guipuzcoana de CarÁcas,” was then created under royal sanction, and obtained certain privileges. During the term of its existence, it almost monopolized the Philippine-American trade, which was yet carried on exclusively in the State galleons. On the expiration of its charter, about the year 1783, a petition was presented to the Home Government, praying for a renewal of monopolies and privileges in favour of a new trading corporation, to be founded on a modified basis. Consequently, a charter (Real cÉdula) was granted on March 10, 1785, to a company, bearing the style and title of the “Real CompaÑia de Filipinas.” Its capital was ?8,000,000, in 32,000 shares of ?250 each. King Charles III. took up 4,000 shares; another 3,000 shares were reserved for the friars and the Manila Spanish or native residents, and the balance was allotted in the Peninsula.

The defunct company had engaged solely in the American trade, employing the galleons; its successor left that sphere of commerce and proposed to trade with the East and Europe.

”6To the 'Real CompaÑia de Filipinas' was conceded the exclusive privilege of trade between Spain and the Archipelago, with the exception of the traffic between Manila and Acapulco. Its ships could fly the Royal Standard, with a signal to distinguish them from war-vessels. It was allowed two years, counting from the date of charter, to acquire foreign-built vessels and register them under the Spanish flag, free of fees. It could import, duty free, any goods for the fitting out of its ships, or ships' use. It could take into its service royal naval officers, and, whilst these were so employed, their seniority would continue to count, and in all respects they would enjoy the same rights as if they were serving in the navy. It could engage foreign sailors and officers, always provided that the captain and chief officer were Spaniards. All existing Royal Decrees and Orders, forbidding the importation into the Peninsula of stuffs and manufactured articles from India, China, and Japan were abrogated in favour of this company. Philippine produce, too, shipped to Spain by the company, could enter duty free. The prohibition on direct traffic with China and India was thenceforth abolished in favour of all Manila merchants, and the company's ships in particular could call at Chinese ports. The company undertook to support Philippine agriculture, and to spend, with this object, 4 per cent, of its nett profits.”

In order to protect the company's interests, foreign ships were not allowed to bring goods from Europe to the Philippines, although they could land Chinese and Indian wares.

By the Treaties of Tordesillas and Antwerp (q.v.), the Spaniards had agreed that to reach their Oriental possessions they would take only the Western route, which would be viÁ Mexico or round Cape Horn. These treaties, however, were virtually quashed by King Charles III. on the establishment of the “Real CompaÑia de Filipinas.” Holland only lodged a nominal protest when the company's ships were authorized to sail to the Philippines viÁ the Cape of Good Hope, for the Spaniards' ability to compete had, meanwhile, vastly diminished.

With such important immunities, and the credit which ought to have been procurable by a company with ?8,000,000 paid-up capital, its operations might have been relatively vast. However, its balance sheet, closed to October 31, 1790 (five-and-a-half years after it started), shows the total nominal assets to be only ?10,700,194, largely in unrecoverable advances to tillers. The working account is not set out. Although it was never, in itself, a flourishing concern, it brought immense benefit to the Philippines (at the expense of its shareholders) by opening the way for the Colony's future commercial prosperity. This advantage operated in two ways. (1) It gave great impulse to agriculture, which thenceforth began to make important strides. By large sums of money, distributed in anticipation of the 4 per cent, on nett profit, and expended in the rural districts, it imparted life, vigour and development to those germs of husbandry—such as the cultivation of sugar-cane, tobacco, cotton, indigo, pepper, etc.—which, for a long time had been, and to a certain extent are still, the staple dependence of many provinces. (2) It opened the road to final extinction of all those vexatious prohibitions of trade with the Eastern ports and the Peninsula which had checked the energy of the Manila merchants. It was the precursor of free trade—the stepping-stone to commercial liberty in these regions.

The causes of its decline are not difficult to trace. Established as it was on a semi-official basis, all kinds of intrigues were resorted to—all manner of favouritism was besought—to secure appointments, more or less lucrative, in the Great Company. Influential incapacity prevailed over knowledge and ability, and the men intrusted with the direction of the company's operations proved themselves inexperienced and quite unfit to cope with unshackled competition from the outer world. Their very exclusiveness was an irresistible temptation to contrabandists. Manila private merchants, viewing with displeasure monopoly in any form, lost no opportunity of putting obstacles in the way of the company. Again, the willing concurrence of native labourers in an enterprise of magnitude was as impossible to secure then as it is now. The native had a high time at the expense of the company, revelling in the enjoyment of cash advances, for which some gave little, others nothing. Success could only have been achieved by forced labour, and this right was not included in the charter.

In 1825 the company was on the point of collapse, when, to support the tottering fabric, its capital was increased by ?12,500,000 under Real CÉdula of that year, dated June 22. King Charles IV. took 15,772 (?250) shares of this new issue. But nothing could save the wreck, and finally it was decreed, by Real CÉdula of May 28, 1830, that the privileges conceded to the “Real CompaÑia de Filipinas” had expired—and Manila was then opened to Free Trade with the whole world. It marked an epoch in Philippine affairs.

In 1820 the declared independence of Mexico, acknowledged subsequently by the European Powers, forced Spain to a decision, and direct trade between the Philippines and the mother country became a reluctant necessity. No restrictions were placed on the export to Spain of colonial produce, but value limitations were fixed with regard to Chinese goods. The export from the Philippines to Acapulco, Callao, and other South American ports was limited to ?750,000 at that date. In the same year (1820) permission was granted for trade between Manila and the Asiatic ports. Twenty-two years afterwards one-third of all the Manila export trade was done with China.

When the galleons fell into disuse, communication was definitely established with Spain by merchant sailing ships vi the Cape of Good Hope, whilst the opening of the Suez Canal (1869) brought the Philippines within 32 days' journey by steamer from Barcelona.

The voyage vi the Cape of Good Hope occupied from three to six months; the sailings were less frequent than at the present day, and the journey was invariably attended with innumerable discomforts. It was interesting to hear the few old Spanish residents, in my time, compare their privations when they came by the Cape with the luxurious facilities of later times. What is to-day a pleasure was then a hardship, consequently the number of Spaniards in the Islands was small; their movements were always known. It was hardly possible for a Spaniard to acquire a sum of money and migrate secretly from one island to another, and still less easy was it for him to leave the Colony clandestinely.

The Spaniard of that day who settled in the Colony usually became well known during the period of the service which brought him to the Far East. If, after his retirement from public duty, on the conclusion of his tenure of office, he decided to remain in the Colony, it was often due to his being able to count on the pecuniary support and moral protection of the priests. The idea grew, so that needy Spaniards in the Philippines, in the course of time, came to entertain a kind of socialistic notion that those who had means ought to aid and set up those who had nothing, without guarantee of any kind: “Si hubiera quien me proteja!” was the common sigh—the outcome of CÆsarism nurtured by a Government which discountenanced individual effort. Later on, too, many natives seemed to think that the foreign firms, and others employing large capital, might well become philanthropic institutions, paternally assisting them with unsecured capital. The natives were bred in this moral bondage: they had seen trading companies, established under royal sanction, benefit the few and collapse; they had witnessed extensive works, undertaken por vi de administracion miscarry in their ostensible objects but prosper in their real intent, namely, the providing of berths for those who lived by their wits.

The patriarchal system was essayed by a wealthy firm of American merchants (Russell & Sturgis) with very disastrous results to themselves. They distributed capital all over the Colony, and the natives abused their support in a most abominable manner. A native, alleging that he had opened up a plantation, would call on the firm and procure advances against future crops after scant inquiry. Having once advanced, it was necessary to continue doing so to save the first loans.

Under the auspices of the late Mr. Nicholas Loney, great impulse was given to the commerce of Yloilo, and, due to his efforts, the Island of Negros was first opened up. His memory is still revered, and he is often spoken of as the original benefactor to the trading community of that district. Russell & Sturgis subsequently extended their operations to that locality. The result was that they were deceived in every direction by the natives, who, instead of bringing in produce to pay off advances, sent their sons to college, built fine houses, bought pianos, jewellery, etc., and in a hundred ways satisfied their pride and love for outward show in a manner never known before, at the expense of the American capitalists. As bankers, the firm enjoyed the unlimited confidence of those classes who had something to lose as well as to gain; hence it is said that, the original partners having withdrawn their money interest, the firm endeavoured to continue the business with a working capital chiefly derived from the funds deposited by private persons at 8 per cent, per annum. All might have gone well but for the rascality of the native agriculturists, who brought about the failure of the house in 1875 by taking loans and delivering no produce. The news amazed everybody. Trade was, for the moment, completely paralyzed. The great firm, which for years had been the mainspring of all Philippine mercantile enterprise, had failed! But whilst many individuals suffered (principally depositors at interest), fifty times as many families to-day owe their financial position to the generosity of the big firm; and I could mention the names of half a dozen real-estate owners in Yloilo Province who, having started with nothing, somehow found themselves possessing comparatively large fortunes at the time of the liquidation.

Consequent on the smash, a reaction set in which soon proved beneficial to the Colony at large. Foreign and Spanish houses of minor importance, which had laboured in the shade during the existence of the great firm, were now able to extend their operations in branches of trade which had hitherto been practically monopolized.

Before Manila was opened to foreign trade, even in a restricted form, special concessions appear to have been granted to a few traders. One writer mentions that a French mercantile house was founded in Manila many years prior to 1787, and that an English firm obtained permission to establish itself in 1809. In 1789 a foreign ship was allowed to enter the port of Manila and to discharge a cargo. This would appear to have been the first. In olden times the demand for ordinary foreign commodities was supplied by the Chinese traders and a few Americans and Persians. During the latter half of the 18th century a Spanish man-of-war occasionally arrived, bringing European manufactures for sale, and loaded a return cargo of Oriental goods.

The Philippine Islands were but little known in the foreign markets and commercial centres of Europe before the middle of the 19th century. Notwithstanding the special trading concessions granted to one foreigner and another from the beginning of last century, it was not until the port of Manila was unrestrictedly opened to resident foreign merchants in 1834 that a regular export trade with the whole mercantile world gradually came into existence.

It is said that whilst the charter of the “Real CompaÑia de Filipinas” was still in force (1785–1830) a Mr. Butler7 solicited permission to reside in and open up a trade between Manila and foreign ports; but his petition was held to be monstrous and grievously dangerous to the political security of the Colony; hence it was rejected. The Spaniards had had very good reason to doubt foreign intercourse after their experience of 1738, when they preferred a war with England to a gross abuse of the Asiento contract entered into under the Treaty of Utrecht.8 Subsequently the American firm already mentioned, Russell & Sturgis, made a request to be allowed to trade, which, having the support of the Gov.-General of the day, was granted; and Mr. Butler, taking advantage of this recent precedent, also succeeded in founding a commercial house in Manila. To these foreigners is due the initiation of the traffic in those products which became the staple trade of the Colony and paved the way for the bulk of the business being, as it is to-day, in the hands of European and American merchants.

The distrustful sentiment of olden times (justifiable in the 18th century) pervaded the Spaniards' commercial and colonial policy up to their last day. Proposed reforms and solicitations for permission to introduce modern improvements were by no means welcomed. In the provinces clerical opposition was often cast against liberal innovations, and in the Government bureaux they were encompassed with obstructive formalities, objections, and delays.9

By Royal Ordinance of 1844 strangers were excluded from the interior; in 1857 unrepealed decrees were brought forward to urge the prohibition of foreigners to establish themselves in the Colony; and, as late as 1886, their trading here was declared to be “prejudicial to the material interests of the country.”10

The support of the friars referred to in p. 255 became a thing of the past. Colonists had increased tenfold, the means of communication and of exit were too ample for the security of the lenders, who, as members of religious communities, could not seek redress at law, and, moreover, those “lucky hits” which were made by penniless Europeans in former times by pecuniary help “just in the nick of time” were no longer possible, for every known channel of lucrative transaction was in time taken up by capitalists.

It was the capital brought originally to the Philippines through foreign channels which developed the modern commerce of the Colony, and much of the present wealth of the inhabitants engaged in trade and agriculture is indirectly due to foreign enterprise. Negros Island was entirely opened up by foreign capital. In Manila, the fathers of many of the half-castes and pure natives who at this day figure as men of position and standing, commenced their careers as messengers, warehouse-keepers, clerks, etc., of the foreign houses.

There were a great many well-to-do Spaniards in trade, but few whose funds on starting were brought by them from the Peninsula. The first Spanish steamer-owner in the Colony, a baker by trade, owed his prosperity to the support of Russell & Sturgis. One of the richest Spanish merchants (who died in 1894) once kept a little grocer's shop, and after the failure of Russell & Sturgis he developed into a merchant and shipowner whose firm became, in time, the largest Spanish house operating in hemp and other produce.

About 14 Spanish firms of a certain importance were established in Manila, Yloilo, and CebÚ, in addition to the Europeans trading here and there on the coasts of the Islands. In Manila there were (and are still) two foreign bank branches11 (one with a sub-branch in Yloilo), three bank agencies, and the Philippine private banking-house of J.M. Tuason & Co.; also the “Banco EspaÑol-Filipino,” which was instituted in 1852, with a capital of ?400,000, in 2,000 shares of ?200 each. The capital was subsequently increased to ?600.000.12 Authorized by charter, it issued notes payable to bearer on demand from ?10 upwards. The legal maximum limit of note issue was ?1,200,000, whilst the actual circulation was about ?100,000 short of that figure. This bank did a very limited amount of very secure business, and it has paid dividends of 12 to 15 per cent.; hence the shares were always at a premium. In 1888, when 12 per cent, dividend was paid, this stock was quoted at ?420; in 1895 it rose to ?435. The Obras Pias funds (vide p. 245) constituted the orginal capital of the bank. The new position of this institution, under the (American) Insular Government since 1905, is explained in Chapter xxxi.

The first Philippine bank was opened in Manila by a certain Francisco Rodriguez about the year 1830.

From the conquest up to the year 1857 there was no Philippine coinage. Mexican dollars were the only currency, and in default of subsidiary money these dollars, called pesos, were cut. In 1764 cut money was prohibited, and small Spanish silver and copper coins came to the Islands. In 1799 the Gov.-General forbade the exportation of money, and fixed the peso at 8 reales fuertes and the real at 17 cuartos. Shortly afterwards gold came to the Islands, and was plentiful until 1882. In 1837 other copper coins came from Spain, and the real fuerte was fixed at 20 cuartos. In 1857 the Manila mint was established, pesetas were introduced, five being equal to one peso, and 32 cuartos being equal to one peseta. Contemporaneously the coinage in Spain was 34 cuartos to one peseta and 5 pesetas to one duro—the coin nominally equivalent to the peso—but the duro being subdivided into 20 reales vellon, the colonial real fuerte came to be equivalent to 2½ reales vellon. The evident intention was to have one common nominal basis (peso and duro), but subdivided in a manner to limit the currency of the colonial coinage to its own locality. With pesos, reales, cuartos, maravedis, and ounces of gold, bookkeeping was somewhat complicated; however, the Government accounts were rendered easy by a decree dated January 17, 1857, which fixed pesos and cents for official reckoning. Merchants then adopted this standard. Up to 1860 gold was so abundant that as much as 10 per cent, was paid to exchange an onza of gold (?16) for silver. In 1878 gold and silver were worth their nominal relative values. Gold, however, has gradually disappeared from the Colony, large quantities having been exported to China. In 1881 the current premium for purchasing gold was 2 per cent., and at the beginning of 1885 as much as 10 per cent. premium was paid for Philippine gold of the Isabella II or any previous coinage. The gold currency of Alfonso XII. (1875–85) was always of less intrinsic value than the coin of earlier date, the difference averaging about 2 per cent. At the present day gold could only be obtained in very limited quantities at about the same rate as sight drafts on Europe. Philippine gold pieces are rare.

In 1883 Mexican dollars of a later coinage than 1877 were called in, and a term was fixed after which they would cease to be legal tender. In 1885 decimal bronze coins were introduced. In July, 1886, a decree was published calling in all foreign and Chinese chop dollars13 within six months, after which date the introducer of such coin into the Colony would be subject to the penalty of a fine equal to 20 per cent. of the value imported, the obligation to immediately re-export the coin, and civil action for the misdemeanour. At the expiration of the six months the Treasury was not in a position to effect the conversion of the foreign medium in private hands prior to the publication of the decree. The term was extended, but in time the measure became practically void, so far as the legal tender was concerned. However, the importation of Mexican dollars was still prohibited; but, as they remained current in Manila at par value, whilst in Hong-Kong and Singapore they could be bought for 8 to 12 per cent, (and in 189425 per cent.) less than Manila dollars, large quantities were smuggled into the Colony. It is estimated that in the year 1887 the clandestine introduction of Mexican dollars into Manila averaged about ?150,000 per month. I remember a Chinaman was caught in September, 1887, with ?164,000, imported in cases declared to contain matches. In 1890 there was a “boom” in the silver market. Owing to the action of the American Silverites, the Washington Treasury called for a monthly supply of 4,000,000 of silver dollars; consequently sight rate on London in Hong-Kong touched 3s. 10¼d., and in Manila rose to 3s. 10½d., but a rapid reaction set in when the Treasury demand ceased. In 1895 we heard in Manila that the Government were about to coin Philippine pesos and absolutely demonetize Mexicans as a medium in the Islands. But this measure was never carried out, probably because the Government had not the necessary cash with which to effect the conversion. Some few Philippine peso pieces were, however, put into circulation concurrently with the Mexican pesos.

In June, 1903, the ss. Don Juan, owned by Francisco L. Rojas, of Manila, took on board in Hong-Kong about $400,000 Mexicans (i.e., pesos) for the purpose of smuggling them into Manila. On board there were also, as passengers, a SeÑor Rodoreda and a crowd of Chinese coolies. The vessel caught fire off the west coast of Luzon. The captain, the crew, and the Spanish passenger abandoned the ship in boats, leaving the Chinese to their awful fate. A steam launch was sent alongside and saved a few dollars, whilst the despairing Chinese became victims to the flames and sharks. The ship's burnt-out hull was towed to Manila Bay. The remaining dollars were confiscated, and the captain and chief engineer were prosecuted.

The universal monetary crisis due to the depreciation of silver was experienced here, and the Government made matters still worse by coining half-pesos and 20-cent pieces, which had not the intrinsic value expressed, and exchange consequently fell still lower. In September, 1887, a Madrid periodical, Correo de EspaÑa, stated that the bastard Philippine 50-cent pieces were rejected in Madrid even by money-changers. In May, 1888, the peso was quoted at 3s.2¾d. (over 19 per cent. below nominal value), and shippers to the Colony, who had already suffered considerably by the loss on exchange, had their interests still further impaired by this action of the Treasury. For Exchange Fluctuations vide Chap, xxxi., “Trade Statistics.”

A Custom-house was established and port opened in Zamboanga (Mindanao Is.) for direct communication with abroad in 1831; those of Sual (PangasinÁn) and Yloilo (Panay Is.) in 1855, and that of CebÚ in 1863. The Custom-house of Sual was subsequently abolished, and the port having been closed to direct foreign trade, the place has lost its former importance, and lapsed into the state of a lifeless village.

Special permission could be obtained for ships to load in and sail direct from harbours where no Custom-houses were established, on a sum of money being lodged beforehand at the Caja de DepÓsitos in Manila, to cover duties, dues, etc., to be assessed.

After the opening of the port of Yloilo, three years elapsed before a cargo of produce sailed thence to a foreign port. Since then it has gradually become the shipping centre for the crops (chiefly sugar and sapanwood) raised in the islands of Panay and Negros. From about the year 1882 to 1897 it attracted a portion of what was formerly the CebÚ trade. Since then the importance of Yloilo has diminished. Its development as a port was entirely due to foreigners, and considerably aided agriculture in the Visayas Islands. Heretofore the small output of sugar (which had never reached 1,000 tons in any year) had to be sent up to Manila. The expense of local freight, brokerages, and double loading and discharging left so little profit to the planters that the results were then quite discouraging. None but wooden sugar-cane mills were employed at that time, but since then many small steam-power factories have been erected (vide Sugar). The produce shipped in Yloilo14 was principally carried to the United States in American sailing-ships.

For figures relating to Chief Exports from the various ports, vide Chap. xxxi., “Trade Statistics.”

Most of the carrying Import trade was in the hands of subsidized Spanish steamer-owners, whilst the larger portion of the Exports was conveyed in foreign vessels, which arrived in ballast from Eastern ports where they had left cargoes.

Smuggling was carried on to a considerable extent for years, and in 1891 a fresh stimulus was given to contraband by the introduction of a Protectionist Tariff, which came into force on April 1 of that year, and under which Spanish goods brought in Spanish ships were allowed to enter free of duty.15

In order to evade the payment of the Manila Port Works Tax (q.v.), for which no value was given, large quantities of piece-goods for Manila were shipped from Europe to Yloilo, passed through the Custom-house there and re-shipped in inter-island steamers to Manila. In 1890 some two-thirds of the Yloilo foreign imports were for re-shipment.

The circumstances which directly led to the opening of Zamboanga (in 1831) as a commercial port are interesting when it is remembered that Mindanao Island is still quasi-independent in the interior—inhabited by races unconquered by the Spaniards, and where agriculture by civilized settlers is as yet nascent. It appears that the Port of JolÓ (Sulu Is.) had been, for a long time, frequented by foreign ships, whose owners or officers (chiefly British) unscrupulously supplied the Sulus with sundry manufactured goods, including arms of warfare, much to the detriment of Spanish interests there, in exchange for mother-of-pearl, pearls, gums, etc. The Spaniards claimed suzerain rights over the island, but were not strong enough to establish and protect a Custom-house, so they imposed the regulation that ships loading in JolÓ should put in at Zamboanga for clearance to foreign ports. The foreigners who carried on this illicit traffic protested against a sailing-ship being required to go out of her homeward course about one hundred and twenty miles for the mere formality of customs clearance. A British ship (and perhaps many before her) sailed straight away from JolÓ, in defiance of the Spaniards, and the matter was then brought to the notice of the British Government, who intimated that either JolÓ must be declared a free port or a Custom-house must be established there. The former alternative was chosen by the Spaniards, but Zamboanga remained an open port for foreign trade which very rarely came.

The supreme control of merchant shipping and naval forces was vested in the same high official. No foreigner was permitted to own a vessel trading between Spain and her colonies, or between one Spanish colony and another, or doing a coasting trade within the Colony. This difficulty was however readily overcome, and reduced to a mere ineffective formality, by foreigners employing Spaniards to become nominal owners of their vessels. Thus a very large portion of the inter-island steamer carrying-trade was virtually conducted by foreigners, chiefly British.

Mail-steamers, subsidized by the Government, left the capital every fortnight for the different islands, and there was a quarterly Pacific Mail Service to the Ladrone Islands.16 Regular mails arrived from, and left for, Europe every fortnight, but as there were intermediate opportunities of remitting and receiving correspondence, really about three mails were received and three despatched every month. The mail-route for Europe is vi Singapore, but there were some seven or eight sailings of steamers per month between Manila and Hong-Kong (the nearest foreign colony—640 miles), whence mails were forwarded to Europe, Australia, Japan, the United States, etc.

Between the capital and several ports in the adjacent provinces there was a daily service of passenger and light cargo-steamers.

Between Yloilo and the adjoining Province of Antique, the District of Concepcion and the Islands of Negros and CebÚ, there were some half-dozen small steamers, belonging to Filipinos and Spaniards, running regularly with passengers and merchandise, whilst in the sugar-producing season—from January to May—they were fully freighted with cargoes of this staple article.

The carrying-trade in sailing craft between the Islands was chiefly in the hands of natives and half-castes. There were also a few Spanish sailing-ship owners, and in the Port of Yloilo a few schooners (called lorchas), loading from 40 to 100 tons of sugar, were the property of foreigners, under the nominal ownership of Spanish subjects, for the reasons mentioned in the preceding page.

The principal exporters employ middlemen for the collecting of produce, and usually require their guarantee for sales at credit to the provincial purchasers of imports. These middlemen are always persons of means, born in the Colony, and, understanding both the intricacies of the native character and the European mode of transacting business, they serve as very useful—almost indispensable—intermediaries.

It was only when the crisis in the Sugar trade affected the whole world, and began to be felt in the Philippines in 1884, that the majority of the natives engaged in that industry slowly began to understand that the current price of produce fluctuated according to supply and demand. Before transactions were so thoroughly in the hands of middlemen, small producers used to take their samples to the purchasers, “to see how much they cared to pay” as they expressed it—the term “market price” seldom being used or understood in the provinces, because of the belief that prices rose or fell according to the caprice or generosity of the foreign buyer. Accustomed to deal, during the first centuries of the Spanish occupation, with the Chinese, the natives, even among themselves, rarely have fixed prices in retail dealings, and nearly every quotation in small traffic is taken only as a fancy price, subject to considerable rebate before closing. The Chinese understand the native pretty well; they study his likings, and they so fix their prices that an enormous reduction can be made for his satisfaction. He goes away quite contented, whilst the Chinaman chuckles over having got the best of the bargain. Even the import houses, when they advertise their goods for sale, seldom state the prices; it seems as if all regarded the question of price as a shifty one.

The system of giving credit in the retail trade of Manila, and a few provincial towns, was the ruin of many shopkeepers. There were few retailers who had fixed prices; most of them fluctuated according to the race, or nationality, of the intending customer. The Chinese dealer made no secret about his price being merely nominal. If on the first offer the hesitating purchaser were about to move away, he would call after him and politely invite him to haggle over the bargain.17

The only real basis of wealth in the Colony is the raw material obtained by Agriculture, and Forest produce. Nothing was done by the conquerors to foster the Industrial Arts, and the Manufacturing Trades were of insignificant importance. Cigars were the only manufactured export staple, whilst perfumes, a little cordage, and occasionally a parcel of straw or finely-split bamboo hats were shipped.

In the Provinces of Bulacan and Pampanga, split-cane and Nito (lygodium) hats, straw mats, and cigar-cases are made. Some of the finest worked cigar-cases require so much time for making that they cost up to ?20 each. Hats can only be obtained in quantities by shippers through native middlemen.

In Yloilo Province a rough cloth called Sinamay is woven18 from selected hemp fibre. Also in this province and that of Antique (Panay Is.), PiÑa muslin of pure pine-leaf fibre and Husi of mixed pine-leaf and hemp filament are made. Ilocos Province has a reputation in these Islands for its woollen and dyed cotton fabrics. Taal (Batangas) also produces a special make of cotton stuffs. Pasig, on the river of that name, and SulÍpan (Pampanga), are locally known for their rough pottery, and CÁpiz and Romblon for their sugar-bags.

Paete, at the extreme east of the Laguna de Bay, is the centre for white-wood furniture and wood-carving. In Mariquina, near Manila, wooden clogs and native leather shoes are made. Santa Cruz (Manila) is the gold and silver-workers' quarter. The native women in nearly all the civilized provinces produce some very handsome specimens of embroidery on European patterns. Mats to sleep upon (petates) straw bags (bayones), baskets (tampipes), alcohol, bamboo furniture, buffalo-hide leather, wax candles, soap, etc., have their centres of manufacture on a small scale. The first Philippine brewery was opened October 4, 1890, in San Miguel (Manila) by Don Enrique Barretto, to whom was granted a monopoly by the Spanish Government for twenty years. It is now chiefly owned by a Philippine half-caste, Don Pedro P. Rojas (resident in Paris), who formed it into a company which has become a very flourishing concern. Philippine capital alone supports these manufactures. The traffic and consumption being entirely local, the consequent increase of wealth to the Colony is the economized difference between them and imported articles. These industries bring no fresh capital to the Colony, by way of profits, but they contribute to check its egress by the returns of agriculture changing hands to the local manufacturer instead of to the foreign merchant.

Want of cheap means of land-transport has, so far, been the chief drawback to Philippine manufactures, which are of small importance in the total trade of the Colony.

Philippine railways were first officially projected in 1875, when a Royal Decree of that year, dated August 6, determined the legislative basis for works of that nature. The Inspector of Public Works was instructed to form a general plan of a railway system in Luzon Island. The projected system included (1) a line running north from Manila through the Provinces of Bulacan, Pampanga, and PangasinÁn. (2) A line running south from Manila, along the Laguna de Bay shore and eastwards through Tayabas, Camarines, and Albay Provinces. (3) A branch from this line on the Laguna de Bay shore to run almost due south to Batangas. The lines to be constructed were classed under two heads, viz.:—(1) Those of general public utility to be laid down either by the State or by subsidized companies, the concession in this case being given by the Home Government; and (2) those of private interest, for the construction of which concessions could be granted by the Gov.-General.

In 1885 the Government solicited tenders for the laying of the first line of railway from Manila to DagÚpan—a port on the Gulf of Lingayen, and the only practicable outlet for produce from the Province of PangasinÁn and TÁrlac District. The distance by sea is 216 miles—the railway line 196 kilometres (say 120 miles). The subsidy offered by the Government amounted to about ?7,650 per mile, but on three occasions no tender was forthcoming either from Madrid or in Manila, where it was simultaneously solicited. Subsequently a modified offer was made of a guaranteed annual interest of 8 per cent, on a maximum outlay of ?4,964,473.65, and the news was received in Manila in October, 1886, that the contract had been taken up by a London firm of contractors. The prospectus of “The Manila Railway Co., Ltd,” was issued in February, 1888. The line was to be completed within four years from July 21, 1887, and at the end of ninety-nine years the railway and rolling-stock were to revert to the Spanish Government without compensation. The rails, locomotives (36 tons and 12 tons each), tenders, coaches, waggons, and ironwork for bridges all came from England. The first stone of the Central Station in Manila (Bilibid Road, Tondo) was laid by Gov.-General Emilio Terrero on July 31, 1887. In 1890 the original contractors failed, and only the first section of 28 miles was opened to traffic on March 24, 1891.

Many other circumstances, however, contributed to delay the opening of the whole line. Compensation claims were very slowly agreed to; the Government engineers slightly altered the plans; the company's engineers could not find a hard strata in the bed of the Calumpit River19 (a branch of the Rio Grande de Pampanga) on which to build the piers of the bridge; and lastly the Spanish authorities, who had direct intervention in the work, found all sorts of excuses for postponing the opening of the line. When the Civil Director was applied to, he calmly replied that he was going to the baths, and would think about it. Finally, on appeal to the highest authority, Gov.-General Despujols himself went up to TÁrlac, and in an energetic speech, reflecting on the dilatoriness of his subordinates, he declared the first Philippine railway open to traffic on November 23, 1892. For about a year and a half passengers and goods were ferried across the Calumpit River in pontoons. Large caissons had to be sunk in the river in which to build the piers for the iron bridge, which cost an enormous sum of money in excess of the estimate. Later on heavy rains caused a partial inundation of the line, the embankment of which yielded to the accumulated mass of water, and traffic to DagÚpan was temporarily suspended. The total outlay on the line far exceeded the company's original calculation, and to avert a financial collapse fresh capital had to be raised by the issue of 6 per cent. Prior Lien Mortgage Bonds, ranking before the debenture stock. The following official quotations on the London Stock Exchange will show the public appreciation of the Manila Railway Company's shares and bonds:—

Official Quotations.

Up to July 1, 1905, the interest has been regularly paid on the Prior Lien Bonds. No interest has been paid on the debentures (up to December, 1905) since July 1, 1891, nor on the 7 per cent. Cumulative Preference Shares since July 1, 1890. On January 26, 1895, these shares were officially quoted, for sellers, 0.

Including the termini in Manila (Tondo) and DagÚpan, there are 29 stations and 16 bridges along the main line, over which the journey occupies eight hours. There are two branch lines, viz.:—from BigaÁ to CabanatÚan (Nueva Ecija), and from Angeles (Pampanga) to Camp Stotsenberg. From the Manila terminus there is a short line (about a mile) running down to the quay in Binondo for goods traffic only. The country through which this line passes is flat, and has large natural resources, the development of which—without a railway—had not been feasible owing to the ranges of mountains—chiefly the Cordillera of Zambales—which run parallel to the coast.

The railway is ably managed, but when I travelled on it in 1904 much of the rolling-stock needed renewal.

In 1890, under Royal Order No. 508, dated June 11 of that year, a 99 years' concession was granted to a British commercial firm in Manila to lay a 21-mile line of railway, without subsidy, from Manila to Antipolo, to be called the “Centre of Luzon Railway.” The work was to be commenced within one year and finished within two years. The basis of the anticipated traffic was the conveyance of pilgrims to the Shrine of Our Lady of Good Voyage and Peace (vide p. 184); but, moreover, the proposed line connected the parishes of Dilao (then 4,380 pop.), Santa Ana (then 2,115 pop.), Mariquina (then 10,000 pop.), Cainta (then 2,300 pop.), and Taytay (then 6,500 pop.)—branching to Pasig and Angono—with Antipolo (then 3,800; now 2,800 pop.). The estimated outlay was about ?1,000,000, but the concession was abandoned. The project has since been revived under American auspices.

Under Spanish government there was a land Telegraph Service from Manila to all civilized parts of Luzon Island—also in Panay Island from CÁpiz to Yloilo, and in CebÚ Island from the city of CebÚ across the Island and up the west coast as far north as Tuburan. There was a land-line from Manila to Bolinao (Zambales), from which point a submarine cable was laid in April, 1880, by the Eastern Extension Australasia and China Telegraph Company, Ltd., whereby Manila was placed in direct telegraphic communication with the rest of the world. For this service the Spanish Government paid the company ?4,000 a month for a period of 10 years, which expired in June, 1890. In April, 1898, the same company detached the cable from Bolinao and carried it on to Manila in the s.s. Sherard Osborn, 207 nautical miles having been added to the cable for the purpose. In return for this service the Spanish Government gave the company certain exclusive rights and valuable concessions. In May, 1898, the American Admiral Dewey ordered the Manila-Hong-Kong cable to be cut, but the connection was made good again after the Preliminaries of Peace with Spain were signed (August 12, 1898). Cable communication was suspended, therefore, from May 2 until August 21 of that year.

In 1897 another submarine cable was laid by the above company, under contract with the Spanish Government, connecting Manila with the Southern Islands of Panay and CebÚ (Tuburan). The Manila-Panay cable was also cut by order of Admiral Dewey (May 23, 1898), but after August 12, under an arrangement made between the American and Spanish Governments, it was re-opened on a neutral basis, and the company's own staff worked it direct with the Manila public, instead of through the medium of Spanish officials.

Since the American occupation a new cable connecting the Islands with the United States has been laid (opened July 4, 1903), whilst a network of submarine and land-wires has been established throughout the Archipelago.

Owing to their geographical position, none of the Philippine ports are on the line of the regular mail and passenger steamers en route elsewhere; hence, unlike Hong-Kong, Singapore, and other Eastern ports, there is little profit to be derived from a cosmopolitan floating population. Due, probably, to the tedious Customs regulations—the obligation of every person to procure, and carry on his person, a document of identification—the requirement of a passport to enter the Islands, and complicated formalities to recover it on leaving—the absence of railroads and hotels in the interior and the difficulties of travelling—this Colony, during the Spanish rÉgime, was apparently outside the region of tourists and “globe-trotters.” Indeed the Philippine Archipelago formed an isolated settlement in the Far East which traders or pleasure-seekers rarely visited en passant to explore and reveal to the world its natural wealth and beauty. It was a Colony comparatively so little known that, forty years ago, fairly educated people in England used to refer to it as “The Manillas,” whilst up to the end of Spanish rule old residents, on visiting Singapore and Hong-Kong, were often highly amused by the extravagant notions which prevailed, even there, concerning the Philippines. But the regulations above referred to were an advantage to the respectable resident, for they had the desirable effect of excluding many of those nondescript wanderers and social outcasts who invade other colonies.

Since the Revolution there has been a large influx of American tourists to the Islands, arriving in the army-transports, passage free, to see “the new possession,” as the Archipelago is popularly called in the United States.