For the most part, the financial history of Europe, and perhaps its commercial history generally, from the 14th century to the 19th century, is a northward travelogue as the paramount financial center moved from the cities of Northern Italy to those of the Low Countries and then to London. However, a caveat to this story, or rather a detour, existed. In the 16th century, there was a commercial, and therefore a financial, flourishing on the Iberian Peninsula, and nowhere more so than in Seville. The reason was Spanish control of the Americas and a monopoly on American trade conferred by the Spanish crown on Seville.
Seville and the New World
Prior to the Spanish discovery of America, Seville was a small inland port. The city may have been fifty miles from the sea but because it was connected to the Atlantic by the Guadalquivir River, navigable up to Seville and a short distance beyond, the city could benefit from the advent of American trade. It did so in vast disproportion to its size because Seville benefited from a lucrative monopoly. All ships bound to America from Spain were required to leave from Seville and similarly had to arrive in Seville upon their return.
The city thus developed a large trade with the Americas. From Spain, olives, wheat, ceramics, and leather were exported to the colonies and ships returned with gold and silver. The arrival of a fleet from the New World was among the most exciting events in the city’s regular life in the 16th century and these fleets grew in size with time. In 1530, one million pesos of precious metals were arriving in Seville annually. This rose to thirty-five million pesos by 1595.
The city’s population also grew over the same period, from under 50,000 residents in 1530 to 90,000 in 1594. Seville was an international city and much of this growth came from foreign expatriates. Perhaps the most famous of these today was the Italian navigator, Amerigo Vespucci, who’s name would be lent to the name of the new continents visited by Columbus. Amerigo Vespucci was a Florentine resident in Seville.
Seville was also home to a Genoese merchant and banking community as well as Dutch and English merchants. In a departure from aristocratic norms, even local nobility engaged in trade in the city. Less surprisingly, the port city was home to many ordinary mariners from abroad. Seville was also on the map for merchants elsewhere as many operated in Seville through agents.
By 1600, Seville was the largest city in Spain and one of the wealthiest in Europe. In the Andalusian city, merchandise from America and all over Southern and Western Europe was marketed, both in shops and auctions. One could find wares in Seville unfamiliar to outsiders. The commercial life of the city was recorded by the friar Tomas de Mercado in his editions of Suma de Tratos y Contratos (“Compilation of Deals and Contracts”). This was something of a handbook for merchants, especially those active in trade with the Indies.
Casa de Contratación
In 1503, the Casa de Contratación, was established to regulate trade with the Americas. The institution was charged with administering Seville’s monopoly; it regulated vessels by licensing ships and the traffic in goods and people between the colonies and Spain. The goal of this control was to ensure the state got its share. Requiring trade of such value to be conducted out of a single port and managed by single entity simplified taxation. The Spanish crown then claimed the quinto del rey, or one-fifth of the precious metals arriving in the port, as a tax.
The Casa de Contratación ran its own naval yard and organized convoys to safely get ships across the ocean. Amerigo Vespucci served as its piloto mayor, or chief navigator. The offices became busy at the arrival of fleets from the New World. Precious metals would be onloaded at port and deposited at the Casa de Contratación before being coined into money at the Royal Mint. The Mint employed two hundred men and had to be complemented by a second facility late in the 16th century. The Casa de Contratación would lose some of its importance over the course of the century but the most crucial fact for Seville, the monopoly it held on so much trade, remained.
Merchant-Bankers and Credit
Seville had become as important a European commercial center as the cities of Northern Italy. There was a strong connection between Italy and Seville in the form of the Genoese bankers active in the city. As elsewhere at this time, even outside Italy, where there was a need for finance there were Italians. They were very involved in many aspects of financial life in Spain.
Seville’s bankers congregated on the marble terrace around the city’s cathedral, between the cathedral building itself and the adjacent streets. Not far was the Plaza de San Francisco where the Casa de Contratación was located. Business later moved to an exchange building at the start of the 17th century.
In the mid-16th century, bankers were licensed by the Municipality of Seville itself and the reigning Emperor Charles V. These licenses were tightly controlled. With them in hand though, bankers accepted deposits from merchants with excess funds. Bankers in Seville used deposits in their own businesses, such as investing in trading fleets, and to make loans. Beyond the flow of precious metals into the city, the banks made money readily available.
“… for all of them [the bankers] it is a common and general rule to be able to take wages from those who place money in their bank, either a certain amount each year or a certain amount for each thousand, as they serve them and keep their patrimony.” However, “those of this city, it is true, are so regal and noble that they do not ask for or take any wage.”Tomas de Mercado in Suma de Tratos y Contratos, 1571
Bankers’ activities allowed merchants to buy and sell goods on credit. Credit was also extended to buyers of European exports in the Americas. A merchant could make returns of perhaps 50% or so on a single transatlantic shipment, profits earned with borrowed money.
Towards what did all this money go? Some was invested in trade but much went towards a luxury trade that was substantial. Much of this product was imported though some of it was local. The city’s industry was oriented towards producing luxuries, with the largest guilds being those of the embroiderers, silversmiths, engravers, painters, and glaziers. Significant credit was also extended to the Emperor.
The state borrowed a lot of money under the reign of Charles V, much of it for wars which, in addition to creating a borrowing requirement, also reduced revenues by disrupting shipments into Seville. In need of money, the Emperor even confiscated the precious metal holdings of bankers kept in the safes of the Casa de Contratación in 1545. The confiscation weakened the banks’ liquid reserves, threatening them when depositors made withdraws. The act may have encouraged bankers to make more private loans with their deposits, a form of safekeeping against loss by theft.
However, the monarchy also borrowed from merchants in Seville, merchants who in turn borrowed from bankers. The bankers could not escape from the indebtedness of Charles V who abdicated in 1556 in part because of the fiscal problems of his country. Spain’s treasury was bankrupted by the borrowing and the crown defaulted on its debts under Charles’ successor Philip II in 1575. Though they had overcome past crises, the only two banks then licensed to conduct business in Seville failed in 1576. They had made loans to individuals who in turn made loans to the bankrupted monarchy.
In Seville, which still received the riches of the New World as it would continue doing for decades, money became scarce. The city’s merchant guild had to implement a stop-gap measure giving merchants more time to make payment on their debts. A moratorium on the liquidation of bankers’ assets was implemented. Because of the demise of the bankers, making international transfers became challenging, a development that affected even the Catholic Church in Spain, which struggled to transfer money to Rome because of the ruin and poor credit of the Genoese bankers in the country.
The story of Seville, its merchants and bankers, and arguably the Spanish economy of the 16th century generally, is a tale of riches to ruin. The city was enriched by Spanish control over the New World, especially so because of the monopoly conferred by the monarchy on the city. However, the unrivaled wealth the state giveth it also taketh away with the state default of 1575. As it happens, Seville’s financial significance rested far too much on the favor shown it by the Spanish monarchy. Validating this vulnerability, the city’s control over American trade was transferred by decree to Cadiz and thereafter Seville ceased to have any particular global commercial importance.
More from the Tontine Coffee-House
Read about Sir Thomas Gresham, who once engaged in a precious metal exporting deal involving bankers in Seville. Also learn how inflation depressed the Spanish economy in the 16th and 17th centuries. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.
1. Cavendish, Richard. “The Casa de Contratacion Established in Seville.” History Today, 2003.
2. Huerta de Soto, Jesús. “New light on the prehistory of the theory of banking and the School of Salamanca.” The Review of Austrian Economics, vol. 9, no. 2, 1996, pp. 59–81.
3. Pike, Ruth. “Seville in the Sixteenth Century.” The Hispanic American Historical Review, vol. 41, no. 1, Feb. 1961, pp. 1–30.
4. Weber, Klaus, and Torsten Dos Santos Arnold. “Chapter 8 – Ports to ‘New Worlds’: Lisbon, Seville, Cádiz.” The Power of Cities: The Iberian Peninsula from Late Antiquity to the Early Modern Period, edited by Sabine Panzram, Brill, Leiden, 2019, pp. 321–361.
5. Álvarez-Nogal, Carlos, and Christophe Chamley. “Philip II against the Cortes and the credit freeze of 1575-1577.” Revista de Historia Económica / Journal of Iberian and Latin American Economic History, vol. 34, no. 3, 2016, pp. 351–382.