In 1868, a retired naval officer by the name of Charles Mallard was living in 5 Woodland Road, Bristol, now the University’s Department of English. While not one of Bristol’s wealthy elite, he was well off, owning houses in Bristol, farm land in Gloucestershire and £1,100 in Mexican bonds. But why had a retired naval officer invested what was then a substantial sum of money in Mexican bonds?

In the early 1820s, Spain’s 300-year-old empire came to an end and the map of the American continent changed with the formation of the new nations of Central and South America. From Chile in the south to Mexico in the north, independent republics were formed and, after a decade of war that had devastated their economies, all were in urgent need of capital investment. London was then the world’s financial capital, so six of the new Spanish American states – including Mexico – hastened to the City to seek loans. Between 1822 and 1826 they raised £21 million between them, a huge sum then and equivalent to hundreds of millions now. But unlike today when capital transfers of this magnitude are the business of international financial organisations, in the 1820s the money was raised from the pockets of private investors.

Mexico floated two loans on the London market. The first was announced in January 1824, the second a year later. Each loan was for £3.2 million. The money was raised by the sale of Bearer bonds which were like bank notes that are payable to the bearer, rather than to a named owner. Both loans were oversubscribed and thousands of small investors were lured into the market. In addition to the ornate design of the bonds, buyers were enticed by the attractive terms. In particular, the dividend rates of 5% and 6% were very tempting because rates on British government stocks at the time were being reduced to around 3% or 4%. Furthermore, it appeared that the investment was entirely secure because, it was thought, Mexico’s prolific natural resources, especially silver, had almost inexhaustible reserves that the benefits of British capital, expertise and steam power would soon turn into immense wealth.

In addition, the country’s strategic location midway between the two great oceans of the world was said to offer it an unrivalled opportunity to benefit from the growth in trade that was certain to follow the liberation of the American continent.

Even though the London newspapers warned of the risks of stock market investment, investors scrambled to get the bonds Mexican Bonds

There was, therefore, no shortage of very encouraging and positive information about Mexico’s prospects and even though the London newspapers warned of the risks of stock market investment and The Bristol Mirror advised its readers to be cautious ‘in dealing with these foreign loans’, investors scrambled to get the bonds. Among the buyers were many prominent and wealthy members of the London mercantile and financial community, but these wealthy investors were not typical. Most of those who risked their savings were of more modest means.

For the first couple of years all went well. Dividends were paid and the bonds maintained their price in the market. But then the situation changed as revolution and political conflict destroyed Mexico’s hopes of economic prosperity. Unable to pay the dividends, Mexico defaulted on the loans.

The dividend due in October 1827 was not paid and from that time onwards the bondholders and their heirs waged a 60-year campaign to retrieve their money. Some certainly suffered much hardship from their involvement in the bond market. The Reverend Thomas Hare of Hackney, for example, wrote to the British Foreign Secretary in 1858: ‘All my property is invested in the Mexican security and my income (as a clergyman) is precarious and small – and wholly insufficient to maintain myself and family exclusively of the dividends. There is no escape by selling out now … the act would be suicidal.’

There must be many investors today thinking along much the same lines.

Department of Hispanic, Portuguese and Latin American Studies