Economic History of Argentina - Colonial Economy

Colonial Economy

During the colonial period, present-day Argentina offered fewer economic advantages compared to other parts of the Spanish Empire such as Mexico or Peru, which caused it to assume a peripheral position within the Spanish colonial economy. It lacked deposits of gold or other precious metals, nor did it have established native civilizations to subject to the encomienda.

Only two-thirds of its present territory were occupied during the colonial period, as the remaining third consisted of the Patagonian Plateau, which remains sparsely populated to this day. The agricultural and livestock sector's output was principally consumed by the producers themselves and by the small local market, and only became associated with foreign trade towards the end of the 18th century. The period between the 16th and the end of the 18th century was characterized by the existence of self-sufficient regional economies separated by considerable distances, a lack of road, maritime or river communications, and the hazards and hardship of land transport. By the end of the 18th century, a significant national economy came into being, as Argentina developed a market in which reciprocal flows of capital, labour, and goods could take place on a significant scale between its different regions, which it had hitherto lacked.

Historians like Milcíades Peña consider this historical period of the Americas as pre-capitalist, as most production of the coastal cities was destined to overseas markets. Rodolfo Puiggrós consider it instead a feudalist society, based on work relations such as the encomienda or the slavery. Norberto Galasso and Enrique Rivera consider that it was neither capitalist nor feudalist, but an hybrid system result of the interaction of the Spanish civilization, on the transition from feudalism to capitalism, and the natives, still living in the prehistory.

The Argentine territories, held back by their closed economies, lack of any activity closely linked to foreign trade, and the scant amounts of labour and capital they consequently received, fell far behind those of other areas of the colonial world that participated in foreign trade. Only activities associated with a dynamic exporting centre enjoyed some degree of prosperity, as occurred in Tucuman, where cloth was manufactured, and in Córdoba and the Litoral, where livestock was raised to supply the mines of Upper Peru.

This trade was legally limited to Spain: the Spanish Crown enforced a monopsony which limited supplies and enabled Spanish merchants to mark up prices and increase profits. British and Portuguese merchants broke this monopsony by resorting to contraband trade.

The British desire to trade with South America grew during the Industrial Revolution and the loss of their 13 colonies in North America during the American Revolution. To achieve their economic objectives, Britain initially launched the British invasions of the Río de la Plata to conquer key cities in Spanish America. When they allied to Spain during the Napoleonic Wars, they requested the Spanish authorities to open commerce to Britain in return.

The first Argentine historians, such as Bartolomé Mitre, attributed the free trade to the The Representation of the Hacendados economic report by Mariano Moreno, but is currently considered the result of a general negotiation between Britain and Spain, as reflected in the Apodaca-Canning treaty of 1809. The actions of Baltasar Hidalgo de Cisneros in Buenos Aires reflected similar outcomes emanating from the other Spanish cities of South America.

Compared to other parts of Latin America, slavery played a much lesser role in the development of the Argentine economy, mostly because of the absence of gold mines and sugar plantations, which would have demanded huge numbers of slave workers. Colonial Brazil, for example, imported as many as 2.5 million Africans in the 18th century. By contrast, an estimated 100,000 African slaves arrived at the port of Buenos Aires in the 17th and 18th centuries, and many were destined for Paraguay, Chile and Bolivia.

The colonial livestock ranches were established toward the middle of the 18th century. The pace of growth in the region increased dramatically with the establishment in 1776 of the new Viceroyalty of Rio de la Plata with Buenos Aires as its capital, and increased legal trading allowed by the Free Trade Act of 1778, which allowed for "free and protected" trade between Spain and its colonies. This trade system disintegrated during the Napoleonic era, and contraband became common again.