The Manila Trade

From the onset of direct trade between Europe and Asia, European merchants were reduced to sending silver east in order to settle their transactions and guarantee their procurement of goods, fuelled by the large demandChinademand for pesos in Asia for the white metal. The discovery of the large silver deposits in Spanish America during the sixteenth century led to the exchange reaching unprecedented proportions. The continuous exchange using Spanish American silver pesos progressively led to Chinese merchants discriminating between different silver methods of payment and developing a preference for the MexicoMexican peso-minted peso. Manila, receiving an annual average of between 2 and 4 million of these coins, was in the perfect position to arbitrage the most direct route between the supply of pesos and its demand. The significance of Manila is therefore not to be understood as simply another commercial harbour where transactions took place but as a port where merchants trading across maritime Asia could obtain liquidity for their own trades.