On 2 January 1917 Alvarado, by decree núm. 627, authorised the Comisión Reguladora del Mercado de Henequén to take control over the notes issued by the Tesorería General under decree núm. 550, and to continue issuing notes at a rate of 50 US cents for one peso oro nacional. On 27 April 1917 he ordered the withdrawal of the notes restamped as ‘ORO NACIONAL’ within thirty days.
The Reguladora notes were supposedly backed by gold stocks held in Yucatán vaults, or firmly guaranteed by the henequen stored in New York harbour. By decree, Alvarado held that they were to be received at the old 2-1 value of Mexican currency – two pesos for one American dollar, and promised to redeem his paper on demand in either gold or New York exchange.
With the approval of both the federal and state governments, this paper currency circulated until 1919, with businesses and the public accepting that it had sufficient backing. However, at the beginning of 1919 the Comisión began to refuse to issue drafts drawn on New York, and the edifice started to collapse. The notes depreciated so that the Secretaría de Hacienda refused to accept them in payment of taxes after 1 August 1919.
On 25 January 1919 $30,000, on 8 February $30, and on 8 March $40,000, all in $1 notes were incinerated in the patio of the Comisión Reguladora. Then on 10 May $5,010,000 in $5 notes and $20,000,000 in $20 notes were incinerated in the same placeDiario Oficial, Año XXII, No. 6609, 17 May 1919. On 13 May 1919 governor Carlos Castro Morales announced, in his decree núm. 493 that the authorised total of $60,0000 could be reduced to a mere $10,000,000 and ordered the rest to be destroyed.
On 3 October Castro Morales, in decree núm. 558, in ordering the amortization of this issue, felt obliged to again order the destruction of any notes in excess of the permitted $10,000,000. The rest would be gradually withdrawn between November 1919 and November 1920. However, three days later the governor had to rescind this decree and, by decree núm. 562, decommission the issue from 15 November and state that legislation would be passed to establish how the successor to the Comisión Reguladora would withdraw the notesDiario Oficial, Yucatán, Año XXII, Núm. 6730, 7 October 1919.
It is estimated that by 1919 there were more than 34,000,000 paper pesos circulating; much of it in fact was made good by the government, but there still remained in circulation in 1920 more than 10,000,000 pesos worth of Reguladora notes, with only half that amount in henequen stored in New York to back it up. The breaking point came in early spring of 1920 when a banking syndicate which had loaned the commission huge sums of American dollars against future henequen shipments, suddenly foreclosed on a quarter million bales of the fibre stored in New York.
In its final days, the Comisión Reguladora was merged with three major foreign investment groups – all former creditors – The Equitable Trust Company, the Royal Bank of Canada, and Inter-State Trust Company, of New Orleans, thus forming a corporation known simply as “ERIC” (a composite of the three names plus “C” for Commission), in an effort to salvage something from the ruins. The new directors managed only to right the listing ship, but perished all hopes of recouping the losses caused by the waves of Alvarado paper currency.