The crisis of 1935

Twice in the twentieth century, in 1935 and again in 1943, Mexico had to resort to the issue of bearer cheques (cheques al portador) to overcome a temporary shortage of small change, caused by the disappearance of silver coins.

This method had been used during the Mexican Revolution, and occasionally since in a few locations, but in these two instances the phenomenon was nationwide. Although some cheques were issued by private businesses for their own employees, the usual procedure was for the local Chamber of Commerce (Cámara Nacional de Comercio) to contract with the local banking institutions. The Chamber would deposit a sum of money to guarantee the cheques and recoup its money when it sold the cheques in bulk to businesses that needed them: the bank would use the deposit to redeem the cheques when they were handed in (originally in multiples of five pesos since that was the smallest banknote, but when the new Banco de México $1 notes arrived, they could redeem smaller amounts).

This procedure could be considered to breach the Federal Government’s monopoly on issuing paper currency and there were occasional complaints but the Secretaría de Hacienda acknowledged the dire circumstances. Thus on 5 May 1935 the Secretaría declared the issue of $1 cheques de caja legal. On 16 May 1935 Secretario de Hacienda Narciso Bassols suggested that the Dirección de Correos y Telégrafos tell all their offices to accept the $1 and $2 cheques al portador that had been issued by local Cámaras de Comercio.

The cheques were of voluntary acceptance, and occasionally public officers refused to accept them, but generally, as they were redeemable on demand, they were readily accepted and helped greatly to relieve the crisis.

Occasionally, existing cheques were overprinted “AL PORTADOR” and with a discrete denomination, but more usually, because of the volume needed, the cheques were specially printed. Though,as can be seen, they followed a simple design.

The 1935 crisis began when the United States passed its American Silver Purchase Act on 19 June 1934: this caused to price of silver to increase and as a result, in Mexico, silver coins began to be hoarded to be remelted at a profit. On 25 April 1935 the Mexican government reacted with a series of reforms, changing the fineness of its coinage, and withdrawing silver coins from circulation. It had ordered 50c coins (tostones) and $1 Banco de México notes from the United States but until these arrived the sudden shortage of small change led to these “necessity notes”.

When the crisis passed most of these cheques were redeemed (out of $10,000 issued by the Uníon Nacional de Industria y Comercio in Guadalajara only $18 was not handed in) and so survivors are extremely rare.

Guadalajara

Cámara de Comercio

In Guadalajara on 29 April a meeting at the offices of the Banco Industrial de Jalisco, on avenida 16 de Septiembre, was attended by the manager of the bank, Antonio Pérez Orñoz and its board of directors Carlos Dávalos, presidente; Carlos Hering, vicepresidente; Ricardo Aguilar, secretario; Felipe Iteves, comisario, Félix Díaz, the manager of the branch of the Banco de México, Trinidad Pérez Vargas, the president of the Cámara de Comercio,and Efrain González Luna, the Cámara’s lawyer. They agreed that the Cámara Nacional de Comercio would issue cheques for $1, $2, $3 and $4, exchangeable in the banks of the city, and the Cámara issued a notice to that effect. Immediately afterwards Félix Díaz summoned a meeting of the manager of the city’s banks, Antonio Pérez Or[ ], of the Banco Industrial de Jalisco; José Pintado, of the Banco Nacional de México; Salvador Veytia, of the Banco Mercantil; Juan Francisco Ortiz, of the Banco Agrícola Ejidal and Francisco Ibarra, of the Banco Refaccionario, to agree the details. The Cámara Nacional de Comercio, Industria y Minería agreed to issue $50,000 for immediate useEl Informador, Año XVIII, Tomo LXVII, Núm. 6354, 30 April 1935. There was a slight hiccough when Enrique Karg, the inspector of the Comisión Nacional Bancaria, who happened to be in the city, suggested that the proposal might be illegal, but telephone calls with the Secretaría de Hacienda y Crédito Público and the Confederación de Cámaras de Comercio led to a telegram from the Secretario Hacienda, Narciso Bassols, permitting the issueEl Informador, Año XVIII, Tomo LXVII, Núm. 6355, 1 May 1935.

In fact the Cámara issued cheques in five denominations drawn on five local banks: the local branch of the Banco Nacional de México ($1); the Banco de México ($1 and $2.50); the Banco Mercantil de Guadalajara ($1, $2 and $3); the Banco Industrial de Jalisco ($1, $2 and $4) and the Banco Refaccionario de Jalisco($1, $2 and $3). The total issued by each bank was:

Sucursal del Banco Nacional de México, S. A. en Guadalajara  
Banco de México, S.A $55,000
Banco Mercantil de Guadalajara, S. A. 47,000
Banco Industrial de Jalisco, S. A. 37,000
Banco Refaccionario de Jalisco, S.A. 51,000
  $ 220,000

 

The notes were signed by members of the Mesa Directiva of the Cámara de Comercio.

Banco Nacional 1 K17384

Banco Nacional 1 K17384 reverse

This $1 note drawn on the Banco Nacional de México, dated 2 May 1935, was signed by E. Sapién and L. G. Castañeda. Others were signed by Felipe Reyes, Ramón J. Fregoso (presidente of the Cámara), Hans Forstner, Salvador Mejía, J. Trinidad Pérez Vargas, José Pintado, Gastón Boyer, Modesto Barreto and Pedro Martinéz Rivas.

$14,000 of cheques for $1 were put into circulation on 2 MayEl Informador, Año XVIII, Tomo LXVII, Núm. 6358, 3 May 1935 and a further $15,000 in $1, $2, $3 and $4 notes on 3 May.El Informador, Año XVIII, Tomo LXVII, Núm. 6357, 4 May 1935. $2.50 notes followed and by 5 May almost $50,000 were in circulationEl Informador, Año XVIII, Tomo LXVII, Núm. 6358, 5 May 1935 and by 9 May over $70,000El Informador, Año XVIII, Tomo LXVII, Núm. 6362, 9 May 1935.

In summary

drawn on date of issue date on note    Series from to
Banco Nacional de México   2 May 1935 $1 X    
Banco de México     $1      
4 May 1935   $2.50      
Banco Mercantil de Guadalajara     $1    
    $2      
    $3      
Banco Industrial de Jalisco     $1      
    $2      
    $4      
Banco Refaccionario de Jalisco      $1      
    $2      
    $3      

Counterfeit notes

On 4 June counterfeits of the $2 cheque drawn on the Banco Refaccionario de Jalisco.had been recognized and the Cámara and banks decided to withdraw the chequesEl Informador, Año XVIII, Tomo LXVII, Núm. 6390, 6 June 1935. The characteristics of the counterfeit $2 cheque were:

GENUINE COUNTERFEIT
printed on green paper on yellow paper
“Banco Refaccionario de Jalisco” in inclined type in straight type
“P” of “PAGUESE” has rasgo en esphal “P” does not have
  “Páguese por este cheque al portador” in larger type
  signatures badly imitated
  On seal on reverse space between lines of “Cámara Nacional de Comercio de Guadalajara” is greater
  Space between “Tesorería” and edge of seal is greater
“$” “S” with a line inked in
  Numbered 42642

 

By 7 July only eight counterfeits had been discovered, as the attempt had obviously been frustratedEl Informador, Año XVIII, Tomo LXVII, Núm. 6392, 8 June 1935.

Although the cheques were being withdraw, demand remained and in first week of June $11,000 in new cheques was issued, bringing the total in circulation to just over $70,000El Informador, Año XVIII, Tomo LXVII, Núm. 6394, 10 June 1935.

Sucesores de Gas y Cia., S. A.

On 8 May, an important clothing business, “La Ciudad de México”, issued 50c, $1 and $2 cheques drawn on the local branch of the Banco Nacional de México. The 50c notes (Serie A, blue on yellow,) and the $2 notes (Serie C) were signed by Clovis Aubert:, while the $1 notes (Serie B. blue on yellowish green, were signed by J. Teissier.

Ciudad de Mexico 50c A 00598

Ciudad de Mexico 50c A 00598 reverse

Ciudad de Mexico 1 B 24579

Ciudad de Mexico 1 B 24579 reverse

Ciudad de Mexico 2 C 40805

Ciudad de Mexico 2 C 40805 reverse

Unión Nacional de Industria y Comercio

On 11 May the Unión Nacional de Industria y Comercio, issued $10,000 in cheques, mainly $1 and a few of $2 and $2.50 drawn on the Banco Industrial de Jalisco, and signed by Ernesto Cárdenas Noriega and Manuel Arellano H, or by Ernesto Cárdenas Noriega and Macario G. Zavala. As stated above, only $18 worth was unredeemed.

Union Nacional 1

Banco Industrial 1 A 3344 reverse

The new Banco de México $1 notes were expected to enter circulation on 15 MayEl Informador, Año XVIII, Tomo LXVII, Núm. 6354, 30 April 1935 but were late. Nevertheless the new notes and bronze coins had been to circulate by 23 May and demand for the Cámara’s cheques had diminished considerablyEl Informador, Año XVIII, Tomo LXVII, Núm. 6376, 23 May 1935.

Ciudad Guzmán

Cámara Nacional de Comercio

On 2 May the Cámara Nacional de Comercio in Ciudad Guzmán, issued cheques for 50c, $1 and $2, drawn on the Banco Mercantil y Refaccionario de OccidenteEl Informador, Año XVIII, Tomo LXVII, Núm. 6355, 1 May 1935; El Informador, Año XVIII, Tomo LXVII, Núm. 6358, 5 May 1935.

Ocotlán

Carlos Ramirez 1

A $1 cheque de caja, dated 5 May 1935, issued by Sr. Carlos Ramírez the correspondent of the Banco de México.