War Among All Puerto Ricans: From Pesos to Dollars


When the United States seized Puerto Rico, it immediately started to shape its new colony in accordance to American standards.  One of the many things changed was the local currency.  This is what is found in the actual report by the Government of United States.

“Section 2 of the act of Congress approved April 12, 1900, contained provisions authorizing the Secretary of the Treasury to redeem the Porto Rican coins in circulation and to substitute therefor the coins of the United States at the previously authorized rate  of exchange (60 United States currency for 100 Porto Rican currency, Executive Order of January 20,1899). The act limited the exchange to Porto Rican silver and copper coins in circulation on February 1, 1900.”

1peso

“The Porto Rican peso has a relative value to the United States silver dollar of 93.5 to 100. As the bullion value of the American dollar in  1900 was about 46.5 cents in gold, the Porto Rican is worth only about 43.5 cents gold. The United States paid for these coins in gold sixty one-hundredths of their face value. So the Government paid for the Porto Rican money nearly $903,000 more than it was worth as bullion, and also met the cost of the exchange, which for salaries, etc., had reached $12,409 in August, 1900.

It therefore appears that it has already cost the United States about 915,000 to substitute our own for the the local coinage in Puerto Rico, and when the whole operation is completed the cost will probably reach $1,000,000.”

Reports of the War Department. 1900. Civil affairs in Porto Rico. Oct. 18,1898 – April 30,1900 56th Congress, 2nd Session 1900-1901.  Annual Reports of the War Department for the Fiscal Year Ended June 30, 1900. Part. 13. Report of the Military Governor of Porto Rico on Civil Affairs. (1902) (San Juan, P.R.: Reprint by Academia Puertorriqueña de la Historia, Ediciones Puerto, 2003), 171, 173. 

Here is how it has been interpreted by economic historians.

“The U.S. first confronted the problem of silver currencies in a Third World Country when it seized control of Puerto Rico from Spain in 1898 and occupied it as permanent colony. Fortunately for the imperialists Puerto Rico was ripe for currency manipulation…

[This is an anachronism for the concept of a Third World did not exist until the post-WWII era when in response to a bipolar world emerged the non-aligned movement.]

Only three years earlier, in 1895, Spain had destroyed the full-bodied Mexican silver currency that its colony had previously enjoyed and replaced it with a silver “dollar,” worth only 41 cents in U.S. currency. The Spanish government had pocketed the large seigniorage profits from the debasement…

[The difference between the face value of the coins and the cost of acquiring the metal and minting them generated a financial benefit for the State treasury, known as seigniorage.]

peso
The U.S. was therefore easily able to substitute its own debased silver dollar, worth only 45.6 cents in gold. Thus the U.S. silver currency replaced an even more debased one and the Puerto Ricans had no tradition of loyalty to a currency recently imposed by the Spaniards. There was therefore little or no opposition in Puerto Rico to the U.S. monetary takeover…

The major controversial question was the exchange rate the American authorities would fix between the two debased coins, the old Puerto Rican peso and the U.S. silver dollar…

The heavy debtors in Puerto Rico- mainly sugar planters- naturally wanted to pay their peso obligations as cheap a rate as possible; they lobbied for a peso worth 50 cents American. In contrast the Puerto Rican bankers-creditors wanted the rate fixed at 75 cents. Since the exchange rate was arbitrary  anyway, [Economist, Jacob] Hollander and the other American officials decided in the time-honored way of governments; more or less splitting the difference, and fixing a peso equal to 60 cents.”

Murray N. Rothbard, History of Money and Banking in the United States: The Colonial Era to World War II, 220-21.

40 Percent of the Porto Rican’s wealth did not disappear overnight. That is not say that merchants- as usual- took advantage of the people’s ignorance, and instead of adjusting their prices to the new currency, charged more for the same products. For example if a pound of X product had been sold at 1 Porto Rican peso, merchants sold it at 1 American dollar after the exchange, in effect stealing from their costumers.

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