Published by EH.NET (September 2003)

Michael P. Costeloe, Bonds and Bondholders: British Investors and Mexico’s Foreign Debt, 1824-1888. Westport, CT: Praeger, 2003. xxii + 359 pp. $69.95 (cloth), ISBN: 0-275-97939-3.

Reviewed for EH.NET by Carlos Marichal, El Colegio de M?xico.

The work under review is a rather curious specimen of historical research insofar as it provides much new and detailed information on the history of the Mexican foreign debt in the nineteenth century but is virtually innocent of modern analytical analyses of the subject. This is rather surprising since Mexico has become a paradigm case of a country faced by debt crises. Indeed, Mexico experienced what was perhaps the longest period of suspension of payments on its foreign debt in modern history, spanning the period from 1828 to 1886. Of course, there were years when British bondholders received some payments on the early loans that had been originally issued in 1824 and 1825, but generally speaking, the Mexican state was bankrupt throughout the greater part of the century.

While Michael Costeloe recognizes that there exist a considerable number of studies on the agitated and prolonged history of Mexican foreign debts, including both nineteenth-century classics as well as recent monographs and essays, his objective is not to fit his research into this literature but rather to provide new, empirical data. The author sets out to explore two sets of information which have not been extensively researched. Appropriately enough, his book is divided into two sections. The first deals with the very specific subject of the securities themselves, providing literally a guide to each of the Mexican issues of foreign bonds, as well as numerous conversions of the same. His book also provides numerous illustrations of the different bonds, loan scrip and coupons issued abroad by the Mexican government and its foreign bankers. The second part of the book recounts the story of the various committees of British bondholders that held Mexican bonds at different times in the nineteenth century.

The details of Mexican debt history provided by Costeloe do constitute an addition to the literature and certainly will prove quite useful for future economic historians interested in extracting analytical mileage from the documents and materials consulted. The list of archival references as well as newspapers is in itself a useful research tool, and more so if the footnotes are carefully appraised. But the present reader feels that the author could have profitably developed arguments that have already been broached by other researchers interested in explaining why the nineteenth century Mexican governments had such extraordinary difficulties in renewing payments and coming to terms with foreign creditors.

Explaining the striking phenomenon of Mexican bankruptcy is not irrelevant to a general understanding of the complex history of Latin American foreign debts over the last two centuries. A recent and ambitious attempt to explain the dynamics of the relations between the Mexican government, the foreign bondholders, domestic financiers and the European powers has been advanced by Vinod Aggarwal in a long book titled Debt Games: Strategic Interaction in International Debt Rescheduling (Cambridge University Press, 1996). Aggarwal uses game theory to develop his analytical model and focuses heavily on the Mexican historical case. Surprisingly, however, Costeloe does not even cite this study, which suggests the rather peculiar gap that exists between what traditional historians may focus on and the kind of questions raised by what is now an important literature by economists and political scientists on financial history.

The last two chapters of Costeloe’s work are indicative of the empirical originality of his research. In chapter five, he provides detailed analysis of the social and economic origins of the British investors in nineteenth-century Mexican bonds, and this is in many ways a first in the historical literature on Latin American debts. And in the final chapter, Costeloe shows how the British government eventually did come to be influenced by the bondholder committees in its increasingly aggressive diplomacy towards Mexico. In summary, this is a book with many empirical nuggets and few analytical ones.

Carlos Marichal is Professor of Latin American economic history at El Colegio de M?xico, a leading postgraduate center of teaching and research in the social sciences in Mexico. He has recently edited a book titled La banca regional en M?xico, 1870-1940, Fondo de Cultura Econ?mica, 2003.