Manila in Financial History

The Manila trade and its financing cannot be understood without analysing it in the context of the market structure in which it operated. Asian demand for silver specie, particularly MexicoMexican peso-minted pesos, guaranteed the profitability of the exchange at the expense of altering the balance of power in favour of Mexican wholesaleMexican wholesalers merchants that controlled their flows. Barred from vertically integrating the trade, Manileños decided to specialise on the provision of silver pesos and to maintain profit margins high at the expense of increasing in scalescale. The comparative model of the East IndiaEast India Companies, where silver specie was acquired through financial market operations in Europe and was much scarcer, led to a different model in which scale in intra-Asian dealings allowed the companies to exert some level of local market control to mitigate the need for specie, yet at the cost of expanding extra-commercial costscosts and slimming profit margins. The study of both business models side by side reveals the inherent logic behind each of them and explains the institutional framework of Manila and the Pacific trade.