Tobacco revenue.Of all the productions of the country tobacco is the most important, so far (at least) as concerns the Government, which have the cultivation of this plant, its manipulation, and sale, the subjects of an extensive and strictly guarded monopoly, and derives a very considerable portion of the public revenue therefrom.1 As to the objections raised against this revenue on the score of its being opposed to justice and morality, many other sources of revenue in the colonial budget might be condemned (such as the poll-tax, gaming and opium licenses, the brandy trade, and the sale of indulgences); yet none is so invidious and pernicious as the tobacco monopoly.

Injustice of the monopoly.Often in the course of this narrative of my travels I have had occasion to commend the clemency of the Spanish Government. In glaring contrast therewith, however, stands the management of the tobacco regulations. They appropriated the fields of the peasantry without the slightest indemnification—fields which had been brought under cultivation for their necessary means of sustenance; forced them, under penalty of bodily punishment, to raise, on the confiscated property, an article which required an immense amount of trouble and attention, and which yielded a very uncertain crop; and they then valued the harvested leaves arbitrarily and without any appeal, and, in the most favorable case, paid for them at a nominal price fixed by themselves. To be paid at all, indeed, appears to have been a favor, for it has not been done in full now for several years in succession. Spain regularly remains indebted to the unlucky peasants in the amount of the miserable pittance allowed, from one year’s end to another. The Government ordered the officials to exact a higher return from the impoverished population of the tobacco districts; and even rewarded informers who, after pointing out fields already owned, but which were considered suitable to the cultivation of tobacco, were installed into possession of the proclaimed lands in the place of the original owners.

For proofs of these accusations, one need only peruse a few paragraphs contained in the following stringent regulations, entitled “General Instructions,”2 and, further, a few extracts from the official dispatches of Intendant-General Agius to the Colonial Minister:—3

The following sections regulate the action of the local authorities:—

Tobacco from Mexico.Tobacco (Nicotiana tabacum, L.) was introduced into the Philippines soon after the arrival of the Spaniards by the missionaries, who brought the seed with them from Mexico.4 The soil and climate being favorable to its production, and the pleasure derived from it being speedily discovered by the natives, naturally assisted in its rapid adoption. Next to the Cuban tobacco and a few sorts of Turkish5it is admitted to be the best; and in the colony it is asserted by competent judges that it would soon surpass all others, if the existing regulations were abolished and free trade established. There can be no doubt in the minds of impartial observers that the quality and quantity of the produce might be considerably increased by such a change; on the other hand, many of the prejudiced officials certainly maintain the direct contrary. The real question is, to what extent these expectations may be realized in the fulfilment of such a measure; of course, bearing in mind that the judgment is swayed by a strong desire for the abolition of a system which interferes at present with their prospects of gain. But the fact is that, even now, the native grown tobacco, notwithstanding all the defects inseparable from an illicit trade, is equal to that produced by the High grade of Philippine product.Government officials in their own factories, and is valued at the same rate with many of the Havana brands; and the Government cigars of the Philippines are preferred to all others throughout Eastern Asia. Indeed, rich merchants, to whom a difference of price is no object, as a rule take the Manila cigars before Havanas.

Manila tobacco handicapped.According to Agius (“Memoria,” 1871), in the European market the Manila tobacco was admitted to be without any rival, with the sole exception of the Vuelta abajo of Cuba; and most certainly in the Asiatic and Oceanic ports its superior quality was undisputed, as the Havana tobacco loses its flavor on the long voyage to these countries; but now, from year to year, it is surely losing its reputation. If, then, the Manila cigars have not hitherto succeeded in making themselves acceptable in Europe on account of their inferiority, the blame is attributable simply to the system of compulsory labor, and the chronic insolvency of the Insular Treasury, whilst the produce of other tobacco countries has steadily progressed in quality in consequence of free competition. The fame of the Manila cigars may also have suffered in some slight measure from the wide-spread, though perfectly erroneous, idea that they contained opium.

Hampered by government restrictions.How greatly the produce might be increased by means of free trade is shown under other circumstances by the example of Cuba. At the time when the Government there monopolized the tobacco trade, the crops were only partly sufficient to cover the home consumption; whereas, at the present time, Cuba supplies all the markets of the world.6 The decision of Captain-General De la Gandara upon this question is in the highest degree worthy of notice. In a MS. Report to the Colonial Minister, March, 1858, concerning a measure for rendering the regulations of the tobacco monopoly still more stringent, he says: “If the tobacco cultivation is placed without restriction into the hands of private traders, we shall most probably, in a few years, be in a position to command nearly all the markets in the world.” Most of the islands produce tobacco. According to the quality of the produce, the tobacco provinces rank in the following order: First, Cagayan and Isabela; Second, Igorots; Third, Island of Mindanao; Fourth, Bisayas; Fifth, Nueva Ecija.

Origin of monopoly.From the Government Order, dated November 20, 1625, it is evident that even at that early period the sale of betel nut, palm spirit (toddy), tobacco, etc., was a Government monopoly: but it does not seem to have been very strictly carried out. The tobacco monopoly, as it stands at present, the whole trade of which from the sowing of the seedling plants to the sale of the manufactured article is exclusively in the hands of the Government, was first introduced by Captain-General JosÉ Basco y Vargas. And a Government Order, under date of January 9, 1780 (confirmed by Departmental Regulations, December 13, 1781), further enacted that the tobacco regulations should be extended to the Philippine Islands, in like manner as in all Spanish possessions in this and the other hemisphere (de uno y otto mundo).

Governor Basco’s innovations.Before the administration of this very jealous Governor, for a period of two hundred years the colony received annual contributions from New Spain (Situado de Nueva EspaÑa). In order to relieve the Spanish Exchequer, from this charge Basco introduced (at that time national economic ideas prevailed of making the natural resources of a State supply its immediate wants) a plan upon which, fifty years later, Java modelled its “Culture System.” In the Philippines, however, the conditions for this system were less favorable. In addition to the very slight submissiveness of the population, there were two great obstacles in the opposition of the priests and the want of trustworthy officials. Of all the provincial trades brought into existence by the energy of Basco, the indigo cultivation is the only one that remains in the hands of private individuals, the tobacco trade still being a Government monopoly.7 Basco first of all confined the monopoly to the provinces immediately contiguous to the capital, in all of which the cultivation of tobacco was forbidden under penalty of severe punishment, except by persons duly authorized and in the service of the Government.8 In the other provinces the cultivation was to a certain extent permitted; but the supply remaining after deduction of what was consumed in each province was to be sold to the Government only.

Speculation with public funds.In the Bisayas the magistrates purchased the tobacco for the Government and paid for it at the rate previously fixed by the Government factories at Manila; and they were allowed to employ the surplus money of the Government treasury chest for this purpose. A worse system than this could scarcely be devised. Officials, thinking only of their own private advantage, suffered no competition in their provinces, employed their official power to oppress the producer to the utmost extent, and thereby naturally checked the production; and the Government treasury chest consequently suffered frequent losses through bankruptcies, inasmuch as the magistrates, who drew a salary of $600 and paid a license of from $100 to $300 for the right of trading, in order to make money quickly, engaged in the most hazardous speculations. In 1814 this stupid arrangement was first put an end to; and forthwith the tobacco supplies from the Bisayas increased, through the competition of the private dealers, who then, for the first time, had the power of purchase; and from 1839 the planters were empowered to obtain higher prices than those afforded by the greedy monopolizing magistrates. At present, the following general regulations are in force, subject, however, to continual variation in details.

Changes bring improvement.By a Departmental Order, September 5, 1865, the cultivation of tobacco was permitted in all the provinces, though the produce was allowed to be sold only to the Government at the price regulated by them. The wholesale purchases are made in Luzon and the adjacent islands in fardos,9 by “colleccion,” that is, direct through the finance officials, who have the management of the plants from the sowing; but in the Bisayas by acopio; that is, the Government officials buy up the tobacco tendered by the growers or speculators by the cwt.

Different usages in Bisayas and Mindanao.In the Bisayas and in Mindanao everybody is allowed to manufacture cigars for his own particular use, though trade therein is strictly prohibited; and advances to the tobacco growers are also made there; while in Luzon and the neighboring islands the Government provides seed and seedling plants. Here, however, no land which is adapted to the cultivation of tobacco is allowed to be used for any other purpose of agriculture.

Crude system of grading.As the Financial Administration is unable to classify the tobacco at its true value, as might be done were free competition permitted, they have adopted the expedient of determining the price by the size of the leaves; the care necessary to be bestowed upon the training of the plants in order to produce leaves of the required size being at least a guarantee of a certain amount of proper attention and handling, even if it be productive of no other direct good.10

Burden knowingly increased.It is well known at Madrid how the tobacco monopoly, by oppressing the wretched population, interferes with the prosperity of the colony; yet, to the present day, the Government measures have been so arranged as to exact a still larger gain from this very impolitic source of revenue.“Killing the goose that lays the golden egg.”A Government Order of January, 1866, directed the tobacco cultivation in the Philippines to be extended as much as possible, in order to satisfy the requirements of the colony, the mother country, and also the export trade; and in the memorial already quoted, “reforms” are proposed by the Captain-General, in the spirit of the goose with golden eggs. By grafting new monopolies upon those already existing, he believes that the tobacco produce can be increased from 182,102 cwt. (average of the years 1860 to 1857) to 500,000, and even 800,000 cwt. Meantime, with a view to obtaining increased prices, the Government resolved to export the tobacco themselves to the usual markets for sale; and in the year 1868 this resolution was really carried out. It was sent to London, where it secured so favorable a market that it was at once decreed that no tobacco in Manila should thenceforth be sold at less than $25 per cwt.12 This decree, however, referred only to the first three qualities, the quantity of which decreased in a relative measure with the increased pressure upon the population. Even in the table annexed to the record of La Gandara this is very clearly shown. Whilst the total produce for 1867 stood at 176,018 cwt. (not much under the average of the years 1860 to 1857, viz., 182,102 cwt.), the tobacco of the first class had decreased in quantity since 1862 from over 13,000 to less than 5,000 cwt.

Gift to Spain of unusable tobacco.The fourth, fifth, and sixth classes, the greater part of which would before have been burnt, but which now form no inconsiderable portion of the total crop, are in the open markets positively unsaleable, and can be utilized only in the form of a bonus to Spain, which annually receives, under the title of atenciones Á la peninsula, upwards of 100,000 cwt. If the colony were not compelled to pay half the freight of these gifts, Spain would certainly ask to be relieved of these “marks of attention.” Seeing that, according to the decision of the chief of the Government, the greater portion of this tobacco is of such inferior quality that it can find no purchaser at any price, it is impossible that its value should cover either the cost of carriage or the customs duty. Moreover, this tobacco tribute is a great burden on the colonial budget; which, in spite of all deficits, is charged with the expenses attending the collection of the tobacco, its packing, its cost of local transport, and half the expense of its carriage to Europe.

De La Gandara’s proposed reforms.Dated in March, 1871,—the beginning of a Golden Age, if De La Gandara’s plans had been carried out and his expectations realized,—there exists an excellent statement from the Intendant-General addressed to the Minister of Colonies pointing out plainly to the chief of the Government the disadvantages arising from this mode of administration, and urging the immediate repeal of the monopoly. In the next place proof was adduced, supported by official vouchers, that the profits derived from the tobacco monopoly were much smaller than usual. The total average receipts of the tobacco administration for the five years 1855 to 1869, according to official accounts, amounted to $5,367,262; for the years 1866 to 1870, only $5,240,935. The expenses cannot be accurately estimated, inasmuch as there are no strict accounts obtainable; if, however, the respective expenses charged in the colonial budget are added together, they amount to $3,717,322 of which $1,812,250 is for purchase of raw tobacco.

Slight real profit from monopoly.Besides these expenses pertaining exclusively to the tobacco administration there are still many other different items to be taken into account; yet the cost incurred in this branch of the service would be saved, if not altogether, at least largely, if the State surrendered the tobacco monopoly. The total of the disbursements must certainly, at the very lowest, be estimated at $4,000,000; so, therefore, the State receives only a net profit of $1,357,000; but even this is not to be reckoned on in the future, for if the Government does not speedily cease carrying on this trade, they will be forced into a very considerable and unavoidable expense. To begin with, they must erect new factories and warehouses; better machinery must be bought; wages will have to be considerably increased; and, above all, means must be devised to pay off the enormous sum of $1,600,000 in which the Government is indebted to the peasants for the crops of 1869 and 1870, and to assure cash payments for future harvests. “This is the only possible mode of preventing the decay of the tobacco cultivation in the different provinces, as well as relieving the misery of the wretched inhabitants.”

Suffering and law-breaking thru the monopoly.Later Agius proved how trifling in reality the arrears were on account of which the Government was abandoning the future of the colony, and showed the misfortunes, of which I shall mention, these briefly, only a few, resulting from the monopoly. He represented that the people of the tobacco district, who were the richest and most contented of all in the Archipelago, found themselves plunged into the deepest distress after the increase of the Government dues. They were, in fact, far more cruelly treated than the slaves in Cuba, who, from self-interested motives, are well-nourished and taken care of; whereas in this case, the produce of compulsory labor has to be delivered to the State at an arbitrarily determined price; and even this price is paid only when the condition of the treasury, which is invariably in difficulties, permits. Frequently their very means of subsistence failed them, in consequence of their being forbidden to carry on the cultivation; and the unfortunate people, having no other resources for the relief of their pressing necessities, were compelled to alienate the debtor’s bond, which purchased the fruits of their enforced toil but had been left unpaid. Thus, for an inconsiderable deficit of about $1,330,000, the whole population of one of the richest provinces is thrown into abject misery; a deep-rooted hatred naturally arises between the people and their rulers; and incessant war ensues between the authorities and their subjects. Besides which, an extremely dangerous class of smugglers have recently arisen, who even now do not confine themselves to mere smuggling, but who, on the very first opportunity presented by the prevailing discontent, will band themselves together in one solid body. The official administrators, too, are charged with gross bribery and corruption; which, whether true or not, occasions great scandal, and engenders increasing disrespect and distrust of the colonial administration as well as of the Spanish people generally.13

Growing opposition to the monopoly.The preceding memorial has been not only written, but also printed; and it seems to indicate that gradually in Spain, and also in wider circles, people are becoming convinced of the untenableness of the tobacco monopoly; yet, in spite of this powerful review, it is considered doubtful by competent judges whether it will be given up so long as there are any apparent or appreciable returns derived therefrom. These acknowledged evils have long been known to the Colonial Government; but, from the frequent changes of ministers, and the increasing want of money, the Government is compelled, so long as they are in office, to use all possible means of obtaining profits, and to abstain from carrying out these urgent reforms lest their own immediate downfall should be involved therein. Let us, however, cherish the hope that increased demand will cause a rise in the prices; a few particularly good crops, and other propitious circumstances, would relieve at once the Insular Treasury from its difficulties; and then the tobacco monopoly might be cheerfully surrendered. One circumstance favorable to the economical management of the State that would be produced by the surrender of the tobacco monopoly would be the abolition of the numerous army of officials which its administration requires. This might, however, operate reversely in Spain. The number of place-hunters created must be very welcome to the ministers in power, who thus have the opportunity of providing their creatures with profitable places, or of shipping off inconvenient persons to the Antipodes from the mother-country, free of cost. The colony, be it known, has not only to pay the salaries, but also to bear the cost of their outward and homeward voyages. Any way, the custom is so liberally patronized that occasionally new places have to be created in order to make room for the newly-arrived nominees.14Wholesale rate highter than retail government.At the time of my visit, the royal factories could not turn out a supply of cigars commensurate with the requirements of commerce; and this brought about a peculiar condition of things; the wholesale dealer, who purchased cigars in very considerable quantities at the government auctions, paying higher than the retail rates at which he could buy them singly in the estancia. In order, therefore, to prevent the merchants drawing their stocks from the estancias, it was determined that only a certain quantity should be purchased, which limit no merchant dared exceed. A very intricate system of control, assisted by espionage, had to be employed in seeing that no one, through different agents and different estancias, collected more than the authorized supply; and violation of this rule, when discovered, was punished by confiscation of the offender’s stock. Everybody was free to purchase cigars in the estancia, but nobody was permitted to sell a chest of cigars to an acquaintance at cost price. Several Spaniards with whom I have spoken concerning these strange regulations maintained them to be perfectly just, as otherwise all the cigars would be carried off by foreigners, and they would not be able themselves in their own colony to smoke a decent cigar.

Money juggling.There was, as I afterwards learnt, a still more urgent reason for the existence of these decrees. The government valued their own gold at sixteen dollars per ounce, while in commerce it fetched less, and the premium on silver had, at one time, risen to thirty-three per cent. Moreover, on account of the insufficient quantity of copper money for minor currency, the small change frequently gained a premium on the silver dollar, so much so that by every purchaser not less than half a dollar was realized. In exchanging the dollar from five to fifteen per cent discount was charged; it was profitable, therefore, to purchase cigars in the estancias with the gold ounce, and then to retail them in smaller quantities nominally at the rate of the estancias. Both premiums together might in an extreme case amount to as much as forty-three per cent.15

Directions for cultivating tobaccoNot being able to give a description of the cultivation of tobacco from personal knowledge and experience, I refer the reader to the following short extract from the Cartilla Agricola:—