Finance and Economy

The financial situation of the colony was a constant preoccupation. When the Spaniards arrived they had been disappointed by the scarcity not only of spices but also of gold; and the Manila government became involved in a whole series of expensive military operations, both defensive and offensive the conquest of the Moluccas, ambitions in the Indochinese peninsula, attacks by the Portuguese, the Dutch and the British, and numerous ill-coordinated expeditions against the Muslims in the south, to say nothing of risings in various parts of the country and the repression of the Chinese, who were expelled in 1755, thus disorganizing all the trading activities which had been in their hands. Although the number of Spaniards was always quite small the local income from taxes and tributes was insufficient to meet all this expenditure. The tribute paid by the Filipinos amounted to 8 reals (later increased to 10 and then 12), plus another 6 reals from the tax on the clergy, the common good fund, tithes and two additional taxes by way of contributions towards the cost of defence against Muslim raids on the coasts. In 1884 these various payments were combined in a single income tax (cedula). In addition the Filipinos were required to contribute 40 days labour (polo) on public works, road construction and shipbuilding, and two weeks work for their local community. This practice ran completely counter to successive royal edicts which had laid down that any work for the Spaniards must be paid for at a fair rate.

In order to bolster up the finances of the Philippines, therefore, the government in Mexico sent a subsidy, the real situado, in the galleon which sailed twice a year from Acapulco. This galleon also enjoyed a monopoly of trade with the Philippines, which remain closed to foreigners until the opening of the port of Manila in 1834; but this trade was not to exceed a value of 250,000 pesos (increased to 300,000 in 1702 and to 500,000 in 1734) or a cargo of 300 tons. These limitations were dictated by Spanish apprehension that Chinese products (particularly textiles and silk) would compete with European and that too much money (mainly coming from Mexico) would go to China, which supplied almost the whole of the cargo dispatched to Mexico and from there to Europe. This restricted level of trade did little to encourage the industry and commerce of the archipelago, merely enriching a small number of Spaniards and Chinese shopkeepers. The state monopoly of tobacco, a large-scale enterprise, began to yield substantial profits towards the end of the 18th century, as a result of the stimulus given by the establishment of the Real Compañia de Filipinas in 1785. This company had the sole right of carrying Asiatic commodities, which were exempted from all duties in the Philippines while in transit to Spain; and it put an end to the activities of the galleon which had sailed between Mexico and the Philippines for more than two centuries.

The Real Compañia also developed agriculture and industry. Considerable sums were invested with the object of increasing industrial production, but the Spaniards were unable to develop either the growing of traditional Filipino crops or (with some exceptions) the new crops which they brought to the Philippines, like tomatoes, maize, cassava, cocoa, papaws, groundnuts, guavas, indigo, maguey, sugar-cane and pineapples, nor the rearing of the animals which they had brought from Spain (cattle, horses, pigeons, ducks, etc.). Certain local industries also tended to disappear.