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 thir 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.

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.

In Monterrey, on 6 May the Cámara Nacional de Comercio held a meeting of local businessmen.  Although the problem was less severe than in other cities, they agreed that the five local banks should issue $1 cheques drawn on the Banco de MéxicoEl Porvenir, Núm. 6874, 7 May 1935. The issue would at first be limited to $2,000 for each bank or $10,000 in total. The first issue was taken up in less than two hours, and by 12 May $17,000 had been issuedEl Porvenir, Núm. 6879, 12 May 1935.

On 27 May the Compañía Fundidora de Fierro y Acero de Monterrey announced that their $1 cheques had been counterfeited and so were being withdrawn. Holders were given until 31 May to present them for payment at the Crédito Industrial de MonterreyEl Porvenir, Núm. 6895, 28 May 1935: El Siglo de Torreón, 31 May 1935. Coronel Cejudo, of the secret service, set his staff on the trail of the counterfeiters. Agent Vicente Montemayor discovered that the Imprenta y Litografía “El Modelo” had sold 60 sheets of security paper to Fidencio Novoa Ramírez, who had a printing press at calle del 5 de Febrero no. 52 (Colonia de la Independencia). There the agents found blanks ready for printing, and Novoa Ramírez confessed that two individuals had asked him to print counterfeit Fundición chequesEl Porvenir, Núm. 6896, 29 May 1935.