Chapter VI: The Financial Organization of the Revolution

Interested observers among the Americans and foreigners were wondering how the Constitutionalists could keep up a revolution against an organized military dictatorship like Huerta which had millions at its disposal; and strange to relate instead of getting weaker the revolutionists grew stronger and better organized; they seemed to have money to buy arms and ammunition, to run their local governments and even to send representatives to the United States, and Paris, London, Madrid and Barcelona, as well as social and political investigators into America and Europe. The Huerta Government was as surprised as the foreigners; they were certain that after a year of fighting, the backbone of the revolution would be broken, but instead, the offensive became so dangerous that General Huerta invited American intervention so as to save himself as well as his partisans from complete political annihilation.

The Huerta agents in America accused the Constitutionalists of having borrowed money from great trusts or syndicates, and a New York paper published stolen letters to prove that Carranza had succeeded in getting loans from corporations. The letters served no other purpose than to advertise the lawyer who had been in the service of the Madero revolution, but as far as the source of financial support, it was as mysterious as ever.

“How can they fight, eat and dress without money?” was asked. “How can they get the fighting material across the border when it is patrolled by American soldiers?” Everybody asked the question and nobody could answer it satisfactorily. But the suspicion was in the air that the revolutionists with their agents in the United States had received millions at a high rate and bartered in return for it oil, mining and railroad concessions. The senatorial investigation which had labored for months and published its results in a voluminous report did not prove that Madero had financed the revolution of 1910 with the help of American money. The money used by Gustavo Madero to finance his brother’s revolution seemed so small that the senators looked for greater sums borrowed from the United States to convince them in their suspicion that all Central American revolutions were started in Wall Street. But they forgot that Madero’s revolution was not initialed in New York’s financial centre, and that no great movement can succeed unless the lower or middle class fight for it.

The fact is clear that no Mexican political leader or military chief could afford to be linked in any shape or manner with any foreign corporation, as that would have discredited him forever in the eyes of his countrymen.

As a convincing example illustrating this assertion, the Madero revolutionary loan can be referred to. When Francisco I. Madero came into power his brother, Gustavo, put in a bill for 750,000 pesos ($375,000) for expenses incurred by him during the revolution. As no vouchers or explanations were offered as to the origin of the money, accusations were made against Gustavo Madero that he had borrowed money at a high rate of interest from an American oil company and given in exchange valuable oil concessions to the detriment of a British oil company. After Gustavo’s death it was discovered that he had misappropriated $375,000 from the funds of a railroad company, organized in Mexico and financed in Paris to build a railroad from Camacho to Gomez Farias, and instead of using the money for railroad construction he had sunk it to buy arms and ammunition for his brother’s revolution. By his desperate and bold action, Gustavo Madero had risked his reputation and liberty and was saved in the nick of time from extradition proceedings by the success of the revolution.

Later, instead of telling the truth, Gustavo Madero kept silent and in Mexico his enemies went so far as to accuse him of having practically delivered his brother’s government into the hands of a Yankee corporation. Those accusations cast a shadow on the whole Madero régime and were a great handicap to its success.

Carranza, who is an older man of political and financial experience, realized from the beginning that he could not borrow money from American or foreign companies and decided to rely entirely on the resources of his own country. Impoverished as Mexico was by two successive revolutions, the work was slower and entailed great loss of lives and foreign property. Nevertheless, Carranza reasoned that if Mexico could not organize a revolution without foreign help it might as well give up the task and bend under the yoke of the dictator. The faith of Carranza in the resources of his country proved that he was right.

It demonstrated first, that Mexico would go to any length rather than submit to the murderous régime of Huerta; secondly by forcing his adherents to organize local governments in every conquered state and city for the purpose of contribution and order, Carranza facilitated and accelerated the final political reconstruction of the government when his troops should enter Mexico City, and third and last he would create for himself and his supporters an impregnable position from the foreign as well as the Mexican enemies of his cause.

Carranza is fifty-five years old, young enough to take the field personally and wise enough not to walk into pitfalls and mistakes excusable but not pardonable in a younger man. The blunders of the Madero régime were not lost upon him. Two of the most grievous mistakes committed by the Madero revolutionist leaders were the acceptance of foreign financial assistance and a compromise with the power which was being overthrown.

As revolutions cost money and none was forthcoming or could be had after the murder of President Madero and Vice-president Suarez, Carranza convened the state legislation of Coahuila demanding from it the refusal of allegiance asked by General Huerta, and a vote to turn over to him the money of the state treasury for revolutionary purposes. Then he rode with a few followers on horseback through the federal lines across the mountains of the States of Durango and Sinaloa into Sonora, a State not connected directly by rail with Mexico City. Being more free there from molestation by federal soldiers than the other border States he helped to organize the government and made his headquarters for a while in Hermosillo, Sonora. The seizure of the border towns of Nogales and Agua Prieta opened the way to the importation of arms and ammunition and to the receipts of the custom houses. As the revolutionary troops on the border States captured more custom houses, as happened in Juarez, Ciudad P. Diaz, Nuevo Laredo, Matamoros and finally the seaport of Tampico, the revenues increased as well as the facilities for the importation of foodstuffs, clothing and ammunition.

Carranza and his sub-chiefs had five different methods of acquiring financial support in northern Mexico.

1. The interior war tax, which was paid by Mexican and foreign commercial mining and industrial firms doing business in the northern States, besides the taxes paid by the “haciendados” or land owners, farmers.

2. Custom house duties at all the border towns on imports and exports, that is to say on foodstuffs, cattle, ore, metal, clothing, etc., which were paid in gold as arms and ammunition bought by the rebels had to be paid in gold.

3. Forced loans from the enemies of the Constitutionalists.

4. Voluntary loans by the friends of the revolution such as rich Mexican landowners, capitalists and miners.

5. The creation of an interior debt by the issue of paper money to be circulated in all the territory under the power of the revolution and the prohibition to circulate the bills issued by the Banco Nacional of Mexico City on February 18th, 1913, at the order of General Huerta.

In a pamphlet of recent date there will be found the decrees and other transactions of the Constitutionalist army. The official publication born in Chihuahua, 1914, prints the date of each one of the decrees permitting the printing of paper money. The first issue of paper money was emitted for 5,000,000 pesos on the 26th of April, 1913, the second one for fifteen millions on February 28th, 1913, and the third one for ten millions on February 12th, 1914, for bills of five, ten, fifty and hundred pesos denominations. As the circulation of those three issues tended to raise prices in general by paralyzing the transactions with fractional money, Carranza authorized three more issues of paper money. One for two hundred thousand, the second for eight hundred thousand and the third for one million, for five and ten cents denominations, on the 26th of April, 28th of December, 1913, and on February 12th, 1914.

Up to May, 1914, altogether thirty-two million pesos in paper money were issued to cover the expenses of the revolution.

The governors and military chiefs were empowered to do the same in the States under their jurisdiction: Generals Villa and Chao in the State of Chihuahua, Governor Riveros in Sinaloa, General Caballeros in Tamaulipas and Villareal in Nuevo Leon.

When it is considered that the Constitutionalists had almost 100,000 men under arms, the Madero revolution by comparison will seem an amateurish and insignificant affair.

General Obregon was supposed to have 20,000, General Villa another 20,000, General Gonzalez 22,000, General Carrera 20,000, General Natera and the Arrietas 6,000, without counting the Zapatistas with over 20,000 men.

On an average and in fairly round figures the revolution cost about $200,000 a week or $800,000 a month. For a revolution which has lasted over a year and three months the performance is quite wonderful and shows remarkable organizing qualities in Carranza and the amazing vitality of Mexico.

When General Huerta waded through Madero’s blood into the dictator’s chair he was able to get over fifty million dollars in gold from American and French bankers, besides voluntary and enforced contributions from the Catholic clergy, foreign corporations and commercial and industrial concerns with headquarters in Mexico City and unwilling loans from Mexican haciendados. Huerta had all the power of the government concentrated in Mexico City in his hands, the support of all the foreign powers with the exception of the United States, and in spite of all he failed.

American bankers who had hastily but unwisely loaned several millions to General Huerta in the forlorn hope that he could prove a second Diaz to subdue Mexico, lost faith in the dictator’s ability and sent an agent to offer six million dollars to Carranza if he would promise to guarantee Huerta’s loans. It goes without saying that the offer was rejected.

Another committee of American bankers sent an emissary to Mexico City to offer General Huerta three million dollars if he would only resign and get out. In the first case the aforementioned banker learned to his surprise that the revolutionary chief was a man of principles and could not be bought; the mistake would have been avoided if the American financier had read the answer of Carranza to Felix Diaz and General Huerta offering him a huge bribe to retract his challenge against the dictatorship. In the second instance they offered Huerta three millions when he had decided to throw up the sponge, and instead of accelerating his exit from Mexico, only retarded it long enough for Huerta to pocket their money.

In both cases the American bankers have shown a fundamental lack of knowledge of the Mexican situation and of Mexican ways.

The Mexican revolution was essentially a Mexican affair and even a superficial review of Mexican history would have revealed a great similarity between it and the Three Years’ War. It took the name of Constitutionalist Revolution from the Constitution of 1857, for which the Liberals of that period were fighting as against the clerical dictatorship.

Even if General Huerta had been able to borrow 150 million dollars in Paris as he expected to do, he would have been defeated in the end; it would have taken longer to destroy his power, but the result would have been the same. It would pay American bankers to seek the advice of unbiased observers, men who are in sympathy with Mexican aims and ambitions, who have a thorough knowledge of the people and their history, and not from agents or individuals who are interested concessionaires and foreigners or Americans who in spite of their long residence in the country are as ignorant of Mexican conditions as on the first day of their arrival in Mexico.