Withdrawal of the Gobierno Provisional de México notes

On 21 July 1915 the Constitutionalist Secretario de Hacienda, at Veracruz, declared that unification of the currency was the most important step to restoring monetary stability. This could be accomplished by withdrawing the old paper currency from circulation and replacing it with a new paper currency. After Carranza authorised the infalsificable issue on 21 July he therefore, a week later, made provisions for the withdrawal of the Mexico and Veracruz Gobierno Provisional currency.

The withdrawal of the old money and the introduction of the new infalsicables was effected in three ways: though its receipt in payment of taxes; through the exchange of the money for provisional gold certificates; and finally through direct exchange.

The first method was through the receipt of the old money for taxes. The 27 April decree placing the infalsificables into circulation contained a provision stating that all federal, state and municipal taxes not required in national gold should for the time being continue to be made in Veracruz and Ejército Constitucionalista paper money and that this money should also be receivable for telegraph and postal fees. The decree stated that all the old money taken in by the tax offices was to be marked immediately with a stamp stating that they had been withdrawn (con un sello bien visible que indique que quedan retiradas de la circulación) and sent to the Tesorería de la Federación.

In May the government, in order to confront the activities of speculators, resolved to acquire Veracruz and Ejército Constitutionalista notes, paying for it in national gold, at the current rate. The Secretaría de Hacienda set up offices in the Comisión de Cambios y Moneda (in the Banco Mexicano de Comercio e Industria building. in 2a. calle de Capuchinas); the Nacional Monte de Piedad; the Comisión Algodonera de La Laguna (at Gante número 1); the Ferrocarriles Constitucionalistas de México (at the corner of Bolivar and Cinco de Mayo.) and the Caja de Préstamos para la Irrigación y Fomento de la Agricultura (also in the Banco de Comercio e Industria building)^{El Pueblo, Año III, Tomo I, Núm. 549, 4 May 1916}.

An official circular (núm. 103) of 16 June declared that the old notes would continue to be accepted until 30 June at their nominal value in payment of taxes that were not made specifically payable in metallic money, and that they would be acceptable as equivalent to five centavos national gold per peso in payment of certain past due taxes and surtaxes in connection with mining and as the equivalent of ten centavos gold to the peso in payments of imposts which were payable in gold. An order of 23 June 1916 announced that for the fiscal year beginning 1 July, the old paper money would be accepted in payment of common revenue stamps at the rate of ten pesos of the old money to one peso of the new infalsificable money.

On 28 June a tax department decree stated in what kinds of money the taxes for the new fiscal year would be payable, some only in gold, some in metallic money or its equivalent in infalsificables (20 centavos national gold to the peso), some exclusively in infalsificables, and some in infalsificables or their equivalent in Veracruz or Ejército Constitucionalista money at the rate of ten to one.

Carranza decreed on 31 May 1916, that from 5 June, the $20, $50 and $100 notes would be retired from circulation, but that such notes would be accepted during the remainder of the year in payment of obligations which did not require metallic money. Holders were instructed to deposit their notes with the Jefaturas de Hacienda, Administraciones Principales del Timbre, in the Comisión Monetaria and its branches or in the Tesorería General de la Nación during the months of June and July. Lower value notes and the old fractional money were to be permitted to circulate until 30 June, after which they would not be valid for private transactions but would continue to be accepted in payment of taxes where metallic payment was not required until 31 December. Those individuals who did not wish to use these notes for private transactions or for taxes were required to deposit them with the agencies mentioned above from 1 June onwards. From 1 October the Tesorería General would begin to exchange the provisional certificates of deposit of such notes for definite National gold certificates at a rate of ten centavos National gold for each paper peso^{Cabrera argued that any injury caused by the exchange would be temporary, that the public should wait a bit to recover the value of their money and that the government would compensate for the delay. The market value at the end of May 1916 was 4 centavos oro nacional so the certificates at 10 centavos oro nacional offered a gain of 150%, and the old money was likely to continue to depreciate (El Pueblo, 9 June 1916). The decree was modified on 4 September 1916 to state that the certificates would be paid in five annual payment, from 30 June 1917 to 30 June 1921 (CEHM, Fondo XXI, leg. 9245), though only the first was actually paid. It has been calculated that in this way about $50,000,000 in Ejército Constitucionalista and Veracruz paper was collected (Edwin Walter Kemmerer, Inflation and Revolution: Mexico's Experience of 1912-1917, p. 192)}. There was to be no direct exchange.

The markets anticipated the withdrawal of the higher values and as they were being consistently refused they were demonetarized on 3 June^{El Pueblo, 2 June 1916}.

The provisional certificates involved a lot of red tape so despite the last clause of the above decree an official order (circular núm. 97), on 5 June, authorised the various Treasury departments for five days to give to ‘the poorer classes’ infalsificable notes in exchange for Veracruz or Ejército Constitucionalista notes at the rate of one new peso for eight old in sums not exceeding 100 pesos. This rate represented a concession to the poorer classes since it was more favourable than the general rate of one to ten.

Due to the continuing scarcity of small denomination currency, the government issued an order (circular núm. 106) on 10 June providing that $1, $2, $5 and $10 notes of the old currency should continue in circulation at a fixed rate of ten to one in relation to infalsificables, and that at this rate, the former, as also the fractional cardboard currency, should be exchangeable for the latter in unlimited quantities. The circulation of the old higher values was discontinued at once, although these notes were to be accepted on deposit in exchange for provisional gold certificates until 31 July (this date was extended to 31 August, by a decree of 2 August), and were to be acceptable until further orders by railroads in payment for freight and passenger service. The above dispensations were modified by a decree of 28 June which declared that the new infalsificable currency should be established as soon as possible, discontinued the circulation of the old $10 notes and the fractional cardboard currency after 30 June, and ordered the Treasury offices throughout the country to give infalsificables in exchange for this money at the rate of one for ten until August 30. The same order extended until 31 October the legal circulation of lower value Veracruz and Ejército Constitucionalista money (by a decree of 16 October, the date was extended until 30 November), but limited their legal tender quality to a ten to one basis to payments not exceeding twenty pesos infalsificables: in other words, made them limited legal tender fractional money equivalent to fifty, twenty and ten centavos respectively of infalsificable money. This order also provided for their redemption at Treasury offices throughout the Republic in infalsificable money at the rate of ten to one. It reaffirmed the privilege given to the public by the decree of 31 May of exchanging this money at the rate of ten to one for provisional gold certificates. The decree of 16 October extended the period to 31 January 1917.

All these decree led to government edicts and circulars in the various states, either repeating Carranza’s decrees or attempting to enforce acceptance of the rapidly depreciating notes.

Thus, on 30 April 1916, the Governor of San Luis Potosí, Federico Chapoy, had to reassure people that the government was not going to repudiate the old money and that it would be accepted in payment of local and federal taxes until the end of the year^{Periódico Oficial, 10 May 1916}.

On 8 May, because businesses were refusing to accept the $5 and $10 Ejército Constitucionalista and Gobierno Provisional (Veracruz) issues, the Presidencia Municipal of Guadalajara, Jalisco, ordered that all the $1 and $2 notes were collected from government shops and offices so that they could be used to exchange the $5 and $10 notes^{Periódico Oficial, San Luis Potosí, 13 May 1916}.

By 7 June people in Querétaro were refusing the five and ten peso Ejército Constitucionalista and Veracruz, sometimes claiming not to have change and other times simply refusing to accept them and Governor Federico Montes had to issue another warning.

Incinerations – Veracruz issue

On 15 May 1916 $39,700,400 in Veracruz notes that had not been put into circulation were converted into cardboard in the Oficina Impresora de Timbres y Billetes^{acción mundial, vol. I, núm. 27, 15 May 1916. The process was witnessed by Rafael Nieto, Nicéforo Zambrano and Alberto J. Pani; Braulio [He]riarte, [C]arlos Marerassuza, Ricardo Hernedo, and Francisco F. de la Vega, representing the Banco de Londres y México: Carlos B. Zetana, Carlos S. Soane (Secretary of the Comisión Monetaria), A. Villar, Vicente Echegaray, Carlos Arellano, Dámazo Ferrer (Cajero de Valores of the Banco Nacional de México), Manuel Berriozábal, Emilio Elcoro, Ignacio Rivera, José M. Dosamantes, Jesús Revilla, Hubert Andragnez (Director of the Banco de Londres y México), C. Hugo Hahn (Manager of the Banco Germánico de la Ameríca del Sur), Hermann Samuel and others unnamed. The invitees went to the boiler department where. Manricio Gómez showed them 95 packages of notes with a total of $39,700,400, which were torn to pieces by a guillotine and sheets of cardboard were made from the waste that resulted.} .

Also on 15 May 1916 $10,000,000 in Veracruz and Ejército Constitucionalista notes, that had come from the Tesorería General and the Ferrocarriles Constitucionalistas, were incinerated in the boilers of the Oficina Impresora de Timbres y Billetes^{acción mundial,. vol. I, núm. 27, 15 May 1916.}.

On 15 June the Comisión Monetaria invited people to deposit their Veracruz and Ejército Constitucionalista notes, as well as other issues.

On 22 July the Secretaría de Hacienda announced that it had collected $225,000,000 in Veracruz and Ejército Constitucionalista notes and that $50,000,000 were ready for incineration, and would be available for inspection until the following Monday. The public was also invited to the incinerations which would take place daily in the Oficina Impresora^{El Pueblo, Año III, Tomo I, Núm. 625, 23 July 1916: El Pueblo, Año III, Tomo I, Núm. 627, 25 July 1916: La Tribuna, 26 July 1916}.

On 25 July the Comisión Monetaria incinerated $4,000,000.00 in Veracruz notes, on 26 July, $10,080,000.00; on 28 July, $7,180,000 and on 29 July $2,740,000.00. This was made up of $5,000,000 in $10, $16,000,000 in $20, $2,000,000 in $50 and $2,000,000 in $100 notes^{El Pueblo, Año III, Tomo I, Núm. 629, 27 July 1916: El Nacional, No. 58, 29 July 1916. Actually the two totals do not match. The incinerations were witnessed by Angel Silva, Carlos F. Seoane and Mauricio Gómez, of the Comisión Monetaria, and Claudio M. Cárdenas, inspector de la Tesorería General de la Nación}.

On 2 August $159,515.00 in $5, $215,420.00 in $10, and $681,280.00 in $20, a total of $1,056,215.00 were destroyed by the hydraulic method in the presence of Carlos M. Seoane, secretario de la Comisión Monetaria: Angel Silva, jefe del Departamento de Amortización of the Comisión: Claudio Cárdenas, inspector de la Tesorería de la Federación, and Daniel Estrada, repreenting the Oficina Impresora^{El Demócrata, Tomo III, Núm. 362, 5 August 1916}. The next day a total of 528,000 $1 (10856001 al 11384000) in 33,000 sheets were similarly destroyed^ibid..

In the week up to 12 August $21,000,000 were incinerated. In total, to date the Comisión Monetaria has withdrawn $52,200,000 from circulation. Also the amount deposited in banknotes that had been withdrawn from circulation exceeded $225,000^{El Nacional, Núm. 69, 14 August 1916}.

On 14 August $4,200,000 in $10 Veracruz notes were destroyed by guillotine^{El Nacional, Núm. 69, 14 August 1916: El Demócrata, Tomo III, Núm. 372, 15 August 1916. The acta was signed by C. M. Seoane, Secretary of the Comisión Monetaria; Angel Silva, jefe del Departamento de Amortización of the Comisión Monetaria; Claudio M. Cárdenas, inspector de la Tesorería General de la Nación; and. Daniel Estrada, representing the Oficina Impresora.}.

On 15 August $1,050,000 in $5, $840,000 in $10, $1,680,000 in $20 and $1,800,000 in $50, a total of $5,370,000 was destroyed^{El Demócrata, Tomo III, Núm. 373, 16 August 1916}. On the same day 400,000 $1 notes (44000001 to 44400000) that had not been put into circulation was also destroyed^ibid..

On 16 August another 300,000 $1 notes (44400001 to 44700000) that had not been put into circulation was also destroyed by the hydraulic process^{El Demócrata, Tomo III, Núm. 374, 17 August 1916}.On the same day $1,680,000 in $5 and $840,000 in $10, a total of $2,520.000 was destroyed^ibid.

On 17 August another 300,000 $1 notes (44700001 to 45000000) that had not been put into circulation was also destroyed by the hydraulic process^{El Demócrata, Tomo III, Núm. 376, 19 August 1916}.On the same day $1,980,000 in $5 and $840,000 in $10, a total of $2,820.000 was destroyed by guillotine^ibid..

It was reported that the strips made by the guillotining were being turned into artistic fans, to be sold to raise money for schools. These would also convince reluctant members of the public with the naked eye that the notes were really being destroyed^{El Nacional, Núm. 79, 25 August 1916}.

On 31 August $294,000 in $1, $420,000 in $5, $840,000 in $10 and $1,680,000 in $20 in Veracruz (or Veracruz and Ejército Constitucionalista notes), a total of $3,234,000, were destroyed. Also $2,850 in 5c cartones and $9,000 in 10c cartones were destroyed^{El Demócrata, Tomo III, Núm. 388, 1 September 1916}.

From July 25, the date on which the amortization began, until the last day of August, $95,531,000 in Veracruz notes were incinerated, and from 1 September to 4 September another $6,476,800, making a total of $102,007,800.. In addition to this, other offices of the Secretaria de Hacienda as well as private institutions, have made amortizations of the Veracruz currency, so it was probable that, due to the efforts of the government and private initiatives of the entire Republic. the respectable figure of two hundred million pesos has been withdrawn from circulation^{El Pueblo, 5 September 1916}.

On 9 September $12,000,000 was incinerated^{El Demócrata, 9 September 1916}.

The foregoing, in tabular form:

Up to 30 September 1916 $176,946,300 in Ejército Constitucionalista and Veracruz paper had been destroyed, and from then until 12 October another $37,458,450 was destroyed, making a total of $214,404,750^{El Demócrata, 13 October 1916}.

By 24 October $240,000,000 in Veracruz and $10,000,000 in Ejército Constitucionalista notes had been received and checked by the personnel of the Departamento de Amortización de la Deuda, a branch of the Comisión Monetaria run by Angel Silva, and incinerated. Another $50,000,000 was ready to be burnt^{El Pueblo, Año, III, Tomo I, Núm. 727, 24 October 1916}.

In a report to Congress on 1 September 1917 Carranza reported that the incinerations by the Comisión Monetaria and other government offices had reached $547,471,960.06. In addition they had destroyed $48,658,355.00, in notes that came from the Oficina Impresora of the Secretaría de Hacienda and had never been put into circulation^{Periódico Oficial, Tamaulipas, Tomo XLII, Núm. 75, 19 September 1917}.