In 1776, on publishing his famous work, The Wealth of Nations, Adam Smith was convinced that the fiscal structure of the Spanish Empire in Central and South America was more efficient than that of the crumbling British colonial administration in North America. A quarter of a century later, in 1803, on his prolonged visit to Mexico, Alexander von Humboldt obtained a similar impression, which he registered in his widely read Political Essay on the Kingdom of New Spain, underlining the fact that the Mexican fiscal system was an extraordinarily successful tax machine. On the other hand, by the midnineteenth century, both domestic and foreign observers expressed a gloomy and pessimistic view of the finances of the independent Mexican republic, a fact ratified by its incapacity to defend its territory adequately against foreign invasion forces, whether from the United States or from Europe.

These contrasting historical views are testimony to a singular and still unexplained transition of Mexico from rich colony to poor nation, at least from the point of view of state finance. This striking shift is particularly surprising given the fact that Mexico was the largest silver producer and exporter in the world in the late eighteenth century. The Mexican silver peso circulated everywhere – throughout the islands of the Caribbean, in Europe (generally being reminted or restamped), and as far away as China and India, where it had been used for centuries.