Tuesday, April 21, 2009

Francis Falconnet

While in Mexico, Henri stayed at the home of François de Palezieux-Falconnet in Tacubaya (now part of Mexico City), the agent for the Committee of Mexican Bond holders. He was in the midst of securing payment for the Mexican debt to the British bond holders. The following excerpts are from Michael Costeloe's article The Extraordinary Case of Mr. Falconnet and 2,500,000 Silver Dollars: London and Mexico, 1850-1853.

Tucubaya, Mexico. Illustration by Henri de Büren, 1853.

"Amid the euphoria following independence from Spain in 1821, Mexico, like many other newly emancipated nations in Spanish America, borrowed money in London by means of the sale of interest-bearing bonds. Within a few years, Mexico began to miss the interest payments. It was soon evident from political and economic circumstances in Mexico that no Mexican government of any political persuasion was going to have the resources, at least in the foreseeable future, to pay off its debts. Hence, starting in 1830 and thereafter every few years, there were so-called conversions of the debt whereby British creditors and the Mexican authorities agreed upon new terms of repayment. Usually these arrangements were beneficial to Mexico in that the creditors agreed to write off interest debts or to capitalize them. Old bonds were withdrawn and exchanged for new ones on more favorable terms for the debtor. Such conversions were agreed to in 1830, 1837, 1842, and 1846 but even so, no Mexican government was able to meet all of its obligations to its creditors. Hence, dividends continued to go unpaid and the debt accumulated.

The terms of the 1846 settlement provided for a new issue of bonds worth 51,208,250 pesos at 5 percent interest. Mexico saved 4,805,625 pesos by this contract. The twice yearly interest payments – due in January and July – were immediately missed but for good reason. War against the United States was declared in 1846. Hostilities were brought to an end in February 1848 with the signing of a peace treaty in the Mexican town of Guadalupe Hidalgo. Under the terms of the treaty, ratified on 30 May 1848, Mexico was forced to concede about half of its territory to the United States. In consideration of this concession, the United States promised to pay Mexico the sum of $15 million. Of this indemnity, $3 million in gold or silver Mexican coinage, was to be given to the Mexican government in Mexico City as soon as the treaty was ratified. (This coinage would be used to pay their debts)

British bondholders viewed the treaty of Guadalupe Hidalgo with mixed feelings. On the one hand, the loss of so much of Mexico's territory reduced both the value of the security of their debt and the possibility of land grants instead of cash payments. Also, it seemed certain to reduce Mexico's revenues that were assigned to payment of interest on the debt. On the other hand, the news that the United States was to pay an indemnity of $15 million to Mexico caused considerable excitement in London and elsewhere.

The 2,500,000 pesos, in silver coin, was kept at the premises of Jecker, Torre & Co. at Monterrilla Street, 31 where it remained until 18 June when, in the presence of Forstall and Falconnet, it was checked and boxed for shipment. By now, everybody in the city knew where it was and there had been rumors of attempted theft and even of a military coup designed to seize it. Worried at the rumors, Forstall asked for protection. The U.S. minister, Robert P Letcher, approached the Mexican government, which promised to provide a military guard if there were any signs of trouble. Forstall had also agreed to accompany the wagons carrying the money to Veracruz and he was given a U.S. flag to show that the convoy was under U.S. protection. All went smoothly and the 2,500,000 pesos was taken out of Mexico City, under guard, on 18 June. A couple of days later, it reached Veracruz where it was stored until the arrival of the branch packet, Medway where it would sail to England."

Interesting Historical Tidbit:
François de Palezieux-Falconnet would later become in the late 1850s Constantinople Manager of the Ottoman Bank.

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