Wind Rises in North America 1625

Chapter 328 Economic Ecosystem
"bite……"

A gold coin flicked from old Garza's fingertips, tracing a dazzling arc inside the carriage. Sunlight streamed through the gaps in the silver-threaded curtains, casting an eerie glow on the coin's surface before it was finally caught steadily in the old man's calloused hand.

“Look, even the gold coins used in smuggling transactions are made by the Chinese in New China with higher purity and more exquisite designs than ours.” Old Garza squinted, turning the gold coin so that the light flowed over the “1634” minting year.

This minting technology far surpasses the level of the Mexico City Mint!

“Hehe…” Alonso Pablo Garza, the second son who had just returned to Mexico from Black Shark Island, chuckled and said softly, “Father, the amount of gold coins in the hands of the new Chinese seems astonishing. Last time, they paid with a whole box of gold coins; the sound of the box hitting the ground was deeper than the tolling of church bells.”

As he spoke, his voice unconsciously lowered a little, and a look of eagerness appeared on his face: "There is a rumor that the new Chinese have discovered a gold mine in their territory and are constantly organizing laborers to mine it."

"Oh, is this rumor reliable?" Old Garza raised an eyebrow, his fingertips unconsciously tracing the unfamiliar characters embossed on the gold coin.

"Although all the new Chinese who dealt with us kept their mouths shut and were very secretive when it came to gold mining, I was still able to deduce through various indirect means that they must have discovered a gold mine and may have been mining it to some extent before the outbreak of the war."

"If they have gold mines, why would they go to such lengths to produce and manufacture these goods to smuggle and sell in Mexico?" Old Garza asked, looking puzzled.

If you have a mine at home and money in your pocket, shouldn't you be like us Spaniards, carrying handfuls of gold and silver, going around the world buying things?
“Uh…” Alonso was taken aback by his father’s question. He scratched his head and said uncertainly, “Maybe they want to earn more gold and silver.”

"Is that so?" Old Garza glanced at him and said slowly, "Alonso, you've been dealing with the new Chinese for a year now. Haven't you noticed that they don't seem to care much about bringing back the gold and silver earned from smuggling?"

"Huh?" Alonso paused, blinking hard, as if he didn't understand what his father meant.

"So far, although the new Chinese can provide us with more than 20 kinds of smuggled goods, and the quantity is increasing year by year, they do not seem to care about obtaining higher profits, and the prices are generally kept very low. Moreover, every year they try their best to exchange all the gold and silver they earn for wool, livestock, saltpeter, copper, sugar, dye, cocoa, and even large amounts of grain, and haul them back ship by ship."

“Hiss…” Alonso quickly nodded in agreement, “Yes, Father. It seems that’s how they do it. Every time there’s a transaction, they hand us a long list of purchases and ask us to exchange as much of the proceeds as possible for supplies.”

"Oh, right, they even spent a lot of gold and silver to buy bird droppings from the Maria Islands. ... It's hard to imagine that these once worthless bird droppings from the islands could be exchanged for lovely silver coins."

"Hehe, bird droppings..." Old Garza immediately smiled knowingly upon hearing this.

Two years ago, when the new Chinese people proposed to buy the bird droppings on these deserted islands, old Garza was very surprised and felt a strange sense of absurdity.

It's important to know that there are many barren islands like the Maria Islands along the Pacific coast of Spanish America, covered in bird droppings. Apart from being a habitat for countless migratory birds, they have absolutely no value.

Moreover, these guano islands are generally small in size and lack sufficient fresh water, and have long been considered unsuitable for colonial settlement.

They didn't even have any military strategic significance and never received any attention from the colonial authorities.

Of course, during this period, European agriculture was still mainly based on traditional crop rotation and sporadic manure, so the demand for high-efficiency fertilizers was relatively low.

In the Spanish American colonies, agricultural development mainly relied on natural soil fertility, and with the vast land and sparse population (nearly 90% of the Native Americans had been wiped out), the problem of soil fertility depletion had not yet arisen.

Anyway, the colonies are vast, and if the soil becomes fertile after years of cultivation, they can simply be abandoned and replaced with new land.

In addition, at that time, chemical fertilizers and soil nutrition science had not yet emerged, so who would have thought that these sour and smelly bird droppings would be a high-quality organic fertilizer rich in nitrogen, phosphorus, potassium and other nutrients?

Therefore, although both were white mines (guano mines were once called white gold), the Spanish only had eyes for silver.

Unexpectedly, Xinhua purchased a large quantity of the product at a price of 1-2 pesos per ton.

Based on the principle that even a small mosquito is still meat, Garza immediately used various means to take over the Maria Islands and handed them over to his second son, Alonso, to manage. He then conscripted a group of Indian laborers under the "guardianship" of the family to the islands for mining.

They also vaguely learned from the new Chinese that guano mines might maximize soil fertility and significantly promote crop growth and harvest.

However, the Garza family was not interested in this, because they had enough land in their plantations to maintain normal agricultural output through crop rotation.

In other words, the Xinhua area is located in the cold north, which may have led to their land being relatively barren and producing insufficient output. This is why they have spent so much money to purchase guano mines to improve and enhance soil fertility.

For Garza, the guano mine was just a small business, bringing in only three to five thousand pesos a year, but it was highly symbolic in balancing their trade deficit with the new Chinese.

It should be noted that in addition to selling their own manufactured industrial products, the new Chinese also smuggled large quantities of goods from the Ming Dynasty, with the value often reaching hundreds of thousands or even millions of pesos.

However, the Garza family did not have many valuable items to sell to the new Chinese.

Wool, livestock, sugar, cocoa, copper, saltpeter, tequila, and grain—these commodities, though numerous, were generally of low value. When trading with the new Chinese, an imbalance between income and expenditure was inevitable, forcing the Garza family to pay a large amount of extra silver.

Xinhua also realized that this problem, if continued in the long term, might affect the long-term cooperation between the two sides, so it always tried to eliminate the trade imbalance by increasing the amount of purchases.

At the same time, they also subsidize their trading partners in other special ways.

This special "subsidy" method involved privately exchanging gold and silver on a large scale.

Because Mexico is the world's most important silver producer, its gold-silver exchange rate is relatively high, far exceeding that of other countries and regions.

At this time, the gold-silver exchange rate in the Ming Dynasty was usually 1:8, while the exchange rate in Japan was slightly lower, generally 1:5 to 1:6. In Europe, the gold-silver exchange rate was 1:12, due to the large influx of silver from the Americas, which caused silver to depreciate relatively.

In Mexico, a country that exports silver, the gold-silver exchange rate fluctuates between approximately 1:12 and 1:15.

The new Chinese exchanged large amounts of silver through the Garza family at a fixed exchange rate of 1:10.

The Garza family doesn't need to do anything; they can simply exchange gold and silver to obtain substantial arbitrage profits.

In Mexico, 10 taels of silver could be exchanged for 1 tael of gold.

In Europe, one tael of gold could be exchanged for twelve taels of silver.

With one transaction, he made a net profit of 2 taels of silver, a profit margin of about 20%.

This gold and silver arbitrage trade was not created by the new Chinese; they simply followed the example of the Portuguese and Dutch and copied it exactly.

As early as the mid-20th century, when the Portuguese first arrived in Asia, they discovered that Japan was in the midst of the Warring States period and had not yet established its own monetary system. Moreover, due to its high silver production, the gold-silver exchange rate in Japan was relatively low.

At that time, the Ming Dynasty had an extremely strong demand for silver due to policies such as the "Single Whip Law," resulting in a high gold-silver exchange rate.

The Portuguese exploited this difference, exchanging European matchlock guns for silver with the Japanese, then using the silver to purchase Ming Dynasty goods in Macau. Finally, they sold silk and porcelain as luxury items to Europe at high prices. Through this gold and silver arbitrage trade and trade with the East, the Portuguese made a fortune.

At the beginning of this century, after the Dutch East India Company was established, it actively participated in East Asian trade and also began to engage in gold and silver arbitrage, which also yielded considerable profits.

Several years ago, the Xinhua people cooperated with the Portuguese to transport Ming Dynasty immigrants using their idle merchant ships. In order to pay the high transportation costs, the Xinhua authorities had to organize people to mine gold in the Jinchuan River basin (now the Fraser River), and then mint gold coins to pay the Portuguese.

At that time, Xinhua was unaware of the trap of gold and silver arbitrage and generously paid a large amount of gold to the Portuguese directly using the gold-silver exchange rate of the Ming Dynasty.

This move will surely make the Portuguese laugh in their sleep.

No wonder the Portuguese, in the years that followed, were so eager to participate in the Chinese immigration program, even if it meant their ships were empty on the return journey.

Not to mention that the new Chinese set an extremely high price for each immigrant, the Portuguese could still earn a 30% profit on each trip through gold and silver arbitrage trade.

Once they realized what was happening, the newly arrived Chinese immediately followed suit, bringing chests of gold to Spanish America to exchange for silver with the Spanish. They then used the silver to pay for the procurement of goods in the Ming Dynasty and the long-distance migration costs, thereby maximizing their trade profits.

Through smuggling and gold and silver arbitrage, Xinhua made substantial profits, effectively supporting its ever-growing immigration costs and the needs of domestic colonization and development.

Of course, the Garza family also amassed unimaginable wealth from it.

Working in finance is ultimately easier than the hard work of mining and farming!

“Oh, right, Father,” Alonso suddenly remembered something, “the new Chinese want to use us to buy large quantities of cotton in Mexico.”

"A lot of cotton?" Old Garza asked dismissively. "How much do they need?"

"The more the better. Well, they also promised that they would buy as much as we could provide."

"Oh, do they want to weave cotton cloth?"

“Perhaps.” Alonso shrugged and said with a smile, “Father, you know. Xinhua is located in the cold north, and they probably need to buy a lot of cotton for warmth. Hmm, I heard that they bring in a lot of immigrants from Ming every year, so their demand for cotton is probably not small.”

"What about the price?"

“The current market selling price can be appropriately increased by 10% to 20%.”

"Hmm?" Old Garza was taken aback. "The Chinese are really willing to spend a lot of money to get cotton!"

“Yes, Father.” Alonso nodded: “The new Chinese wanted to get into wool, and as a result, wool prices across Mexico rose by 5%-10%. If they want to produce cotton cloth, it is foreseeable that this will encourage many plantation owners to switch their crops to cotton on a large scale.”

“As far as I know, Mexico’s cotton-growing areas are mainly located in the Yucatan Peninsula, Veracruz, and other Gulf Coast regions,” Old Garza shook his head slightly. “The soil in these areas has good aeration and drainage, and the climate is also suitable for cotton cultivation. As for other regions, well, if they want to switch to cotton cultivation, they will probably encounter considerable problems and may not be able to achieve a satisfactory harvest.”

"Father, should we go to Yucatan to buy some land?"

"Hmm, we can go take a look," old Garza said noncommittally.

“Father…” Alonso hesitated.

“What do you want to say, my child?”

“Father, on Black Shark Island, when I was communicating with the Chinese from Xinhua, they tried to sell me a grand idea,” Alonso said. “They said that Mexico has abundant silver, countless cattle and sheep, as well as wool and leather; Peru has cocoa, sugarcane (coastal areas like Trujillo), alpacas, and mercury mines; Chile has copper mines and nitrates; New Granada has dyes such as carmine and indigo; and Xinhua can provide various manufactured goods. In this way, these regions can build a self-sufficient, circular trans-Pacific trade network, forming a perfect economic ecosystem.”

"A perfect economic ecosystem?" Old Garza chewed on this new term, a strange look appearing on his face. "If I'm not mistaken, this so-called trans-Pacific trade network is mainly led by the new Chinese, isn't it?"

"Silver from Mexico and Peru served as a common currency, which was used to pay Xinhua for industrial goods. Xinhua then used efficient production methods to manufacture tools, weapons, textiles, and other products, thereby improving the overall productivity of the Americas."

"Chilean copper and nitrate support the military and mining industries, while New Granada dyes enhance the added value of textiles."

"Peruvian alpaca wool and Mexican wool are processed by Xinhua and then resold, forming an industrial cycle."

"Oh, right, there's also labor mobility. Xinhua is constantly increasing its immigration efforts, while our American territories are consolidating the Native American slaves within their borders or importing Black slaves from Africa to fill the labor shortage..."

“Father, you are so wise. This is probably what the new Chinese people mean…” Alonso admired his father’s accurate summary to the fullest extent.

"Have the new Chinese said anything about what to do with the many factories and workshops that still exist in the Americas?" Old Garza said quietly. "Are those factories going to face a survival crisis like the wool industry, or eventually disappear?"

Despite its underdeveloped industry and rudimentary technology, the Americas have, through nearly a century of tenacious growth, developed many industries vital to people's livelihoods.

For example, in the textile industry, local workshops used imported Spanish Merino wool to produce coarse cloth. Although the quality was far inferior to European and Ming Dynasty products, it was still barely usable by miners and farmers.

There is also the continuation of local Native American traditional crafts, producing inexpensive unbleached cotton cloth for slave clothing and everyday wrappings.

There is a small amount of silkworm farming in Puebla and Oaxaca, producing low-quality raw silk, which is mostly used for religious embroidery.

In addition to the textile industry, there is also metal processing. Silversmiths in mining areas such as Zacatecas and Guanajuato create religious artifacts and tableware, some of which are exported to Europe.

There are also copperware products made using techniques originating from the Basque region of Spain, producing cookware and equestrian accessories.

Relying on imported pig iron from the mainland, the colonies produced small quantities, which could be used to manufacture simple agricultural tools and implements.

In addition, there were ceramics (glazed pottery and earthenware), food processing (sugar production, cocoa processing and tequila brewing), covering many aspects of colonial life.

These handicrafts had a simple division of labor: Native Americans generally engaged in cotton and linen textiles and pottery, mixed-race people dominated leather and woodworking, while white people controlled the silverware and luxury goods trade.

The vast majority of these goods were for consumption within the colonies, with only silver, dyes (cochineal), and a small number of luxury items participating in global trade.

According to the "perfect economic ecosystem" envisioned by the new Chinese, the handicrafts of these colonies should no longer exist, and all of them should be provided by the new Chinese.

Xinhua's manufactured goods are not only of superior quality but also affordable, which can definitely maximize the well-being of people throughout the Americas.

So, what about the Spanish nobles and merchants who monopolize trade?
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(End of this chapter)