Miguel A. López-MorellUniversity of Murcia

““Rothschild Rothschild investments investments

in Spain,in Spain, 1856-1930” 1856-1930”

Foreign Financial Institutions & National Financial Systems7-8 June 2013 Warsaw, Poland

European Association for Banking and Financial History (EABH) e.V.

Empire in decadence

Political instability

Rothschilds in Spain. A hazardous context: A Global investment project in a risky country

1800: 20.0 Million km2

1821: 0.5+0.4 Million km2

Spanish national budget, 1814-1900

Empire in decadence

Political instability

A weak economy

Rothschilds in Spain. A hazardous context: A Global investment project in a risky country

1800: 20.0 Million km2

1821: 0.5+0.4 Million km2

Foreign Investments in Spain. Debates:

“Pessimists” (Sánchez Albornoz, Nadal, Tortella(1), Comín, Escudero, Muñoz, etc.)

“Optimists” (Prados, Gómez Mendoza, Fraile, Coll, Tortella(2), etc):

• Railways: compete with industry in capital markets.• Mining: colonial “island”.• “Indirect compensations” to foreign capital.

• Endogenous versus exogenous explanation of Spain’s underdevelopment.• Foreign direct investments helped to attract capital, compensate trade balance and lack of entrepreneur factor, etc.

0

2

4

6

8

10

12

14

16

18

1850

1854

1858

1862

1866

1870

1874

1878

1882

1886

1890

1894

1898

1902

1906

1910

1914

1918

1922

1926

1930

1934

Source: Carreras (1999)

Fixed capital formation in Spain (% of GDP)

•20 biggest entreprises in Spain (By assets). (Foreign entreprises in red)

•R. 1917 1930 1948

1 Caminos de Hierro del NorteFerrocarriles de Madrid a Zaragoza

y AlicanteRed Nacional de los Ferrocarriles Españoles

(R.E.N.F.E)

2Ferrocarriles de Madrid a Zaragoza y

AlicanteCaminos de Hierro del Norte Telefónica Nacional de España

3 Banco de España Hispano-americana de Electricidad (CHADE) Hispano-americana de Electricidad (CHADE)

4 Rio Tinto Co. Ltd. Barcelona Traction Light &Power Co. Ltd. Ebro Irrigation & Power Co. Ltd.

5 Ferrocarriles Andaluces Banco de España Hidroeléctrica Ibérica (IBERDUERO)

6 General Azucarera de España Ebro Irrigation & Power Co. Ltd.Arrendataria del Monopolio de Petróleos

(CAMPSA)

7 Catalana de Gas y Electricidad •Royale Asturienne des Mines Banco Hispano Americano

8 Ferrocarriles de Madrid a Caceres y Portugal •Minera y Metalúrgica Peñarroya Española de Construcción Naval

9 Ebro Irrigation & Power Co. Ltd. Telefónica Nacional de España Banco Español de Crédito

10 Ferrocarriles de Zafra a HuelvaFranco Española del Ferrocarril de Tánger

a FezBanco de Bilbao

11 Energía Eléctrica de Cataluña Ferrocarriles Andaluces Banco de Vizcaya

12 •Minera y Metalúrgica Peñarroya Española de Construcción Naval Unión Eléctrica Madrileña

13Ferroc. de Medina del Campo a Zamora y de Orense a

Vigo.Catalana de Gas y Electricidad Sevillana de Electricidad

14 Tharsis Sulphur & Copper Co. Ltd. Rio Tinto Co. Ltd. Banco de España

15 Barcelonesa de Electricidad Cía. Arrendataria de Tabacos Altos Hornos de Vizcaya

16 Metalúrgica Duró- Felguera Transatlántica Empresa Nacional Bazán

17 Cía. Arrendataria de TabacosArrendataria del Monopolio de Petróleos

(CAMPSA)Unión Española de Explosivos

18 Española de Construcción Naval Ferrocarriles del Oeste de España Empresa Nacional Calvo Sotelo (ENCASO)

19 Transmediterránea General Azucarera de España Tabacalera S.A.

20 Banco Hispanoamericano Banco de Bilbao Hidroeléctrica Española

Source: Carreras y Tafunell (1993) y Tortella, T. (2000).

Finally, consequences and profitability of the process:

Description of main investments (chronology, intensity and sectors)

Quantifying these investments as a whole during each period.

Patterns of behaviour and means used by the Rothschild House to get success.

•For Rothschild family, as private investor.

• For the Spanish economy.

Rothschild Investments in Spain

Stages:Stages:

1: Financing Wellington and Liberals in Spain, 1811-1891.

2: From railway investments to mining, 1856-1918.

3: Crisis, restructuration and flight , 1919-1941.

Mercury from the Almadén, chronology:

1800-1830: State monopoly breakdown. 1830-1847: 1st Rothschild Monopoly.

(Auctions) 1847-1856: 2nd Rothschild Monopoly.

(Mercury backed Loans) 1857-1866: Spanish Government recuperate

direct sales . 1866-1921: 3rd Rothschild Monopoly

(Sales on commission)

Accumulated capital flows from the House of Rothschild to Spanish public institutions and the relation with the deficit, 1830-1900 (millions of pesetas).

Toledo

Albacete

Alicante

Cartagena

Alcazar de San Juan

Manzanares

Zaragoza

MZA railways lines

Legend:

Madrid (Agency)

S. Sebastián

Bayona

Bilbao

Leon

PalenciaBurgos

Valladolid

Alar

Zamora

Pereire railway lines(Norte)

Almadén Mines

2nd: From railway investments to mining, 1856-1918.

BarcelonaZaragoza

Madrid

Toledo

Alcazar de San Juan

Albacete

Alicante

Cartagena

Manzanares

CiudadReal

Seville

Badajoz

Tarragona

MZA railways lines

Huelva

Mérida

To LisbonAnd Porto

Port Bou

Valladolid

Ariza

Peñarroya lead mines

Peñarroya railway lines

Rio Tinto railway lines

Rio Tinto pyrite mines

Other Peñarroya chemical plants

Peñarroya coal mines

Peñarroya lead foundry

Peñarroya sulphuric acid plant

Rio Tinto sulphuric acid plant

Rio tinto Copper foundry

Electric plants

Puertollano

San Quintín

Rio Tinto

MZA coal mines

Peñarroya

Peñarroya zinc foundry

Megrine (Argelia)

Crotona (Italy)

Other Rio Tinto chemical plants

Plombiéres (Belgium)L’Estaque (Marsella)L’Estaque (Marsella)

Saint Lary (French Pirienees)

Port Talbot (Wales)

Descheter (Philadelfia)

Wilmington (Delaware)

Roanake (Virginia)USA

Linares

Deutsch et Cie. refineries

El Ferrol

Badalona

Santander

Peñarroya pyrite mines

CórdobaReunión

Legend:

1881-1920Peñarroya1879-1900

Deutsch et Cie. MZA(2nd)

1874-18981874-1920Second Phase of industrial Investments:

Rio Tinto1889-1920

1938: expulsion from Austria

• Loss of network coordination: End of Family agreements (1909). Gradual dismantling of agencies. (1931 Bauer & Cia breakdown)

3: Crisis, restructuration and flight , 1919-1941

• Economic and political crisis: Worldwide slump of commodities markets (1920 and 1929).

Nationalist policy:• Fiscal pressure.• Nationalizations (1941

RENFE) Anti-Semitisim:

Lost of control and relevance

1940: Rothschild Frères confiscation

Description of main investments (chronology, intensity and sectors)

Quantifying these investments as a whole during each period.

Rothschild Investments in Spain

Table 2. Private and public investments in Spain as a whole, coming from foreign capital and from operations made by the Rothschild House

(Figure in millions of current francs).

Origin of the investment

1851-1860

1861-1870

1871-1880

1881-1890

1891-1900

1901-1913

Totals

National Total (a)

2.282,9 4.443,5 5.148,8 7.374,5 6.814,8 15.137,8 41.202,3

Foreign (b)

338,9 609,9 488,1 718 382,7 737,6 3.265,2

Rothschild (c)

165,9 147,7 270,3 106,6 52,6 173,1 916,2

% (b) about (a)

14,8 13,7 9,5 9,7 5,6 4,9 7,9

% (c) about (b)

50,4 24,2 55,4 14,8 13,7 23,5 28,1

% (c) about (a)

7,3 3,3 5,2 1,4 0,8 1,1 2,2

Sources: Carreras, “industrialización, una perspectiva a largo plazo”, pp. 42, Broder, “Les investtissements étrangers en Espagne pp. 45 y 62,

amended by Chastagnaret, L’Espagne, puissance minière , p. 754), and Appendix 1.

Graph 4. Percentage of participation in Rothschild industries in each subsector in Spain, 1856-1936.

0%10%20%30%40%50%60%70%80%90%

100%18

56

1861

1866

1871

1876

1881

1886

1891

1896

1901

1906

1911

1916

1921

1926

1931

1936

% Railway lines % Commodities transported by railway

% passangers transported by railway % coal extracted

% pyrites extacted % molten copper

% molten lead % refined oil

Sources: Artola (1978), Tortella (1973), Salkied (1987), Carreras (1989), Tomás (1991), Coll and Sudria (1987), Nadal (1975), Pérez de Perceval and Sánchez Picón (2000); MZA and Peñarroya ledgers; Rothschild Archives, Paris, 132AQ139

1. Financial competitiveness.

FOUNDATIONS OF THE ROTHSCHILDS’ ACTIVITIES IN

SPAIN:

Interest rates on Rothschild loans to Spanish public institutions, compared to other reference rates (1860-1900).

Flandreau (1995), p. 218

Royal Mint Refinery (London)

Source: Rothschild Archive

£10.000

£100.000

£1.000.000

£10.000.000

£100.000.000

1857

1861

1865

1869

1873

1877

1881

1885

1889

1893

1897

1901

1905

1909

1913

1917

1921

1925

1929

MZA paid-up equity Bonds (net earnings) MZA

Peñarroya equity Rio Tinto equity

Bonds (net earnings) Rio Tinto Capital in partnership with Deutsch et Cie

Lukus equity

Source: ARP, 132AQ139.

Graph 5: Equity and security issue of the companies controlled by the Rothschilds in Spain, 1857-1930 (Pounds Sterling).

1. Financial competitiveness.

2. Control of markets (reluctance to competition).

FOUNDATIONS OF THE ROTHSCHILDS’ ACTIVITIES IN

SPAIN:

Rio Tinto:

Agreements with Tharsis and Mason &Barry: • 1878-1884 (prices + market sharing)• 1905-1921 (market sharing)

Pirites Association Agreement (1923-1926)

European Pyrites Corporation (1926-1930’)

Copper monopoly (Secretan) (1887-1889)

Copper producers oligopoly 1895-1901

MZA:

Natural Monopoly (no parallel lines in Spain)

Agreements with Norte: • 1876 agreement (common tariffs)• 1899-1920 (market sharing in north Spain)

Peñarroya:

1909: International lead producers Cartel

Lead: agreements with Figueroa

Single sales office: Minerais & Metaux (1917-1936ss).

Superphosphates: agreements with Rio Tinto

Agreements to restrict competition in Spain:

Zinc: agreements with Asturiana

Deutsch et Cie:Cartel of producers (1879-1914):

Restriction of competition, prices, Centralization of purchases etc.

Collusive agreements of Rothschild firms in Spain

1. Financial superiority and self-sufficiency.

2. Control of markets.

3. Flexibility in corporate strategies

FOUNDATIONS OF THE ROTHSCHILDS’ ACTIVITIES IN

SPAIN:

LEGEND: Major Control Participation Major Supply Parctal Supply

Peñarroya

Rio Tinto

Mining Manufacturing

ZincMetallurgy

LeadMetallurgy

Desplatación

Coal Byproducts

Electricity

ChemicalProducts

Peñarroya

Puertollano

Cartagena

Marsella

Bleiberg

Linares

Sociedad Española de Tejidos Industriales

Sociedad de ConstruccionesElectromecánicas

Société des Fonderies de Mégrine

Sociéte des Produits chimiques du Nord (E. Kulhlmann)

Sociedad Franco-Española de Almacenes Generales de Depósitos

Distribution

Ste. Minerais & Metaux

(copper)

(electricity)

Pyrites Company Ltd.Minas de Río TintoPyrites

PhosfatesCompagnie Argelienne

des Phosphates

Coppermetallurgy

Productos Químicos onubenses

Port Talbot (Wales)Deschelter (Philadelfia)

Wilmington (Delaware)Roanake (Virginia)

Río TintoElectricity

ChemicalProducts

BelmezField

PuertollanoField

LeadMinery

Coal

V. del DuqueClaudio

Santa Bárbara

San Quintín

La Carolina

S. de Cartagena

Mazarrón

Cie. Internationale Industrielle et Minière

Compañía Minera de Badajoz

4. Effectiveness of their business network (circulation of information)

1. Financial superiority and self-sufficiency.

2. Control of markets.

3. Flexibility in corporate strategies

FOUNDATIONS OF THE ROTHSCHILDS’ ACTIVITIES IN

SPAIN:

The Madrid Agency in the Rothschild business in the 19th century

Source: own elaboration from the Paris and London Archives.

LONDONN.M. ROTHSCHILD & SONS

(1798-today)

VIENNAS.M. Von Rothschild

(1802-1941)

NAPLESCarl M. Von Rothschild

(1814-1848)

FRANCFORTM.A. Von Rothschild & Shone

(1805-1902)

PARISROTHSCHILD FRÈRES

(1812-1980)

ROTHSCHILD GROUP

MADRID(D. Weisweiller, 18355-1855

Weisweiller & Bauer, 1855-1892I. Bauer, 1892-1894

Bauer &Cia, 1898-1908Gustavo Bauer, 1908-1917Bauer & Cia, 1917-1930

LA HAVANNA(K. Scharfernbert, 1856-1878)

NEW YORK(A. Belmont, 1837-1936)

SAN FRANCISCO (CALIFORNIA-MÉXICO)(B. Davison, 1847-1877?Gansl, Albert & Cullen,

Jeffrey, 1878-1880) TRIESTE(Morpurgo & Parente, 1837-1891)

ANTWERP &BRUXELLS

(Richtenberger, L., 1827; 1835-1841

S. Lambert, 1853-1930)

EL HAVRE1848-1900

AMSTERDAMGoldschmidt, D. L., 1871-1926?

PATNERS & CORRESPONDENTS

SUBSIDIARIES IN THE GROUP

CLIENTELE

Isaac Gabriel Landauer1760-1826

Julie Hamel-Goldscmidt1769-1841

Katarina Landauer1803-1879

Gabriel Landauer1794-

Theresa Landauer1799-

Josef Landauer1793-1855

Rosalie Bauer1796-1864

Gustave Landauer1818-1886

Louisa Landauer1819-1853

Henrietta Landauer1821-1855

Emile Landauer

1817-1840

Fanny Landauer1789-1858

Moriz Bauer1788-1833

Salomon Bauer Cecile Bauer

Ignaz Bauer1784-

Nina Bauer1795-1873

Lisette Bauer1798-

Emmanuel Bauer1789-

Teodore Bauer1822-

Pauline Bauer1821-1903

Ignacio Salomón Ignacio Salomón BauerBauer1827-18951827-1895

Hermine Bauer-1872 Bernard Bauer

1829-1903

¿ ¿

Hermione Landauer1822-1904

Charlotte Landauer1820-1842

Adolf Landauer1829-1855

Maria Landauer1832-1921

Sigmund Landauer1827-

Ignaz Landauer1826-1833

EdouardLandauer 1831-1888

Vinzenze Landauer1824-1856

Moritz Landauer1830-

Virginia Morpurgo

Pauline Landauer1839-1848

¿Emilio Morpurgo

Salomon Morpurgo1800-1849

Joseph Baron Morpurgo1805-

Elio Morpurgo1803-

Lisa Perugia

Aquille Perugia-1865

Lisa Parente

Louisa MorpurgoIda Morpurgo

1844-Emilio Morpurgo

Emile Landauer

Gustavo Gustavo BauerBauer1865-19161865-1916

María de la Concepción Bauer(1869-)

Manuel Bauer1872-1895

Irene Landauer-1936

Rosa Landauer

Eduardo Bauer (?-1939)Ignacio Ignacio BauerBauer

(1891-1961)(1891-1961)Alfredo Alfredo BauerBauer

(1893-1956)(1893-1956)

¿

Louis Cahen d’Anvers

Nina Landauer1825-1892

Freidrich Schey

Otros 5hijos

Ellen H. Worms1836-

Paul Schey1854-

Evelina Landauer1859-1930

0tros 3hijos

Gisela von Ephrussi

Otros 2 hijos

Philipp Schey1881-1957?

Emy Schey1879-

Victor von EphrussiOtros, 3 hijos

Lili von Goldsmih-Rothschild Minka Schey

Alix Schey1911-1982

Guy de Guy de RothschildRothschild1909-20071909-2007

David de David de Rothschild Rothschild 1942-1942-

Moriz Baron Moriz Baron ScheySchey

1

2

3

Ignaz Leopold Weil1800-1873

Henrietta Landauer1858-

Maurice Weil

Alfred J. Alfred J. WeilWeil1849-18881849-1888

Otros 3 hijos

Maria Perugia1862-1937

Fritz Fritz PerugiaPerugia1857-19081857-1908

Henrietta Perugia1855-

Leopold Leopold RothschildRothschild1847-19171847-1917

2

¿1

Jules Morpurgo

Pauline Morpurgo1848-

Giacchino Morpurgo

Mariano Ruiz de AranaDuque de Baena Concepción

García Rendueles

Olga de GunzburgMaría López ChicheriFamilia Goldsmih

Fernando Bauer1873-1943

Calman David Weisweiller1734-1820

Blümle Töplitz

Kinel Busweiler (Pirmasens)

David Weisweiller1774-1818

Güttle Goldschmidt

Daniel Daniel WeisweillerWeisweiller1814-18921814-1892

Leopold Weisweiller-1871

10 hijos

Adeline Helbert-1892

Adela Weisweiller1845-1925

Jifine Weisweiller

Isald Weisweiller

Guillermo EttlingGuillermo Ettling-1882-1882

Sorle (Rothschild) David Weisweiller

¿

Moses Amschel Rothschild

Adeleid Rothschild JacobD. Goldsmidt1783-1847

Leopold-Jacob Golsmidt1811-1885 Amschel Goldsmidt Jetschen Goldsmidt

Nannette Landauer1803-1891

Moses Goldschmidt1803-1891

Alexander Goldschmidt1840-

Otros 5 hijos

Mayer Amschel Mayer Amschel RothschildRothschild1743-1812 1743-1812

Otros 3 hijos

Amschel MosesMoses

Meier (Rothschild o Bauer)Salman Esther

Rudolfine Weisweiller

Auguste Leopoldine Weisweiller

Mathilde Betty Weisweiller (1855-1897)

Henriette Weisweiller1817-1885

Kalman

¿

¿

¿

David Weisweiller

¿

1

2

Lydia Levy Barent Cohen

Otros 6 hijos Hannah Cohen1783-1850

Nathan Mayer Nathan Mayer RothschildRothschild1777-18361777-1836

Adeline Cohen1799-1877

John Helbert1785-1861

= Marriages

Alvaro Gonzalo Mariano

JoséMaría

MaríaConcepción

Source: Rothschild archive, London

Thedore Porges (1843-1907)

Family links between Rothschild agencies in South Europe

The Madrid Agency in the Rothschild business in the 19th century

Source: own elaboration from the Paris and London Archives.

LONDONN.M. ROTHSCHILD & SONS

(1798-today)

VIENNAS.M. Von Rothschild

(1802-1941)

NAPLESCarl M. Von Rothschild

(1814-1848)

FRANCFORTM.A. Von Rothschild & Shone

(1805-1902)

PARISROTHSCHILD FRÈRES

(1812-1980)

ROTHSCHILD GROUP

MADRID(D. Weisweiller, 18355-1855

Weisweiller & Bauer, 1855-1892I. Bauer, 1892-1894

Bauer &Cia, 1898-1908Gustavo Bauer, 1908-1917Bauer & Cia, 1917-1930

LA HAVANNA(K. Scharfernbert, 1856-1878)

NEW YORK(A. Belmont, 1837-1936)

SAN FRANCISCO (CALIFORNIA-MÉXICO)(B. Davison, 1847-1877?Gansl, Albert & Cullen,

Jeffrey, 1878-1880) TRIESTE(Morpurgo & Parente, 1837-1891)

ANTWERP &BRUXELLS

(Richtenberger, L., 1827; 1835-1841

S. Lambert, 1853-1930)

EL HAVRE1848-1900

AMSTERDAMGoldschmidt, D. L., 1871-1926?

PATNERS & CORRESPONDENTS

SUBSIDIARIES IN THE GROUP

CLIENTELE

Members of the MZA Executive Commitee, 1883-1932. Archive FFE

Finally, consequences and profitability of the process:

Description of main investments (intensity and the sectors)

Quantifying these investments as a whole during each period.

Patterns of behaviour and means used by the Rothschild House to achieve success.

•The Rothschild family, as private investor.

•The Spanish economy.

Rothschild Investments in Spain

L/T loans

S/Tcredits Almadén

Bullion sales

Sovereign loans MZA Peñarroya Río Tinto Deutsch

Totals 7.06 17.59 42.69 9.09 2.56 24.31 22.25 269.12 15.87% 1.72% 4.28% 10.40% 2.21% 0.62% 5.92% 5.42% 65.55% 3.87%

Estimate of the net profits that can be accounted from the Rothschilds’ activities in Spain, 1856-1936. (Accumulated figures in millions of pesetas, 1913).

Graph 6. Estimation of yearly profits accountable accrued from the investments made by Spain in the Rothschild House. (1856-1936). (1913 prices).

£0

£100.000

£200.000

£300.000

£400.000

£500.000

£600.000

1857

1861

1865

1869

1873

1877

1881

1885

1889

1893

1897

1901

1905

1909

1913

1917

1921

1925

1929

MZA Peñarroya Rio Tinto Deutsch

MZA Peñarroya Rio Tinto Deutsch

Totals (Pounds) 910.971 785.461 9.202.030 561.588

% 7,33% 6,68% 81,20% 4,79%

Source: Appendix. Prices from Reher and Ballesteros (1993) and Ballesteros (1997

Capital entries from abroad

through investments

generated by the Rothschilds and

their remuneration,

1856-1936 (millions of

current pesetas).

Annual capital flows from abroad to Spanish public

institutions through Rothschild operations

and the financial cost, 1856-1936

(millions of current pesetas).

Graph 7: Development of the stock operations by the Rothschild House in London with Rio Tinto shares, 1892-1914. (Sterling Pounds)

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1892

1894

1896

1898

1900

1902

1904

1906

1908

1910

1912

1914

Ster

ling

Pou

nds

0

10.000

20.000

30.000

40.000

50.000

60.000

Shares in portfolio

Purchase values Sales values Share number at the end of the year

Source: ARL, Stock Ledgers, 1/12/0-22.

CONCLUSIONS

Invigorated monopolies and oligopolistic structures. Promoted administrative corruption.

Compensated the insufficient national saving. Mobilized idle resources. Provided technology. Increased human capital stock.

From the Spanish point of view:

From Rothschilds’ point of view:

Long run investment (not speculative) and diversify.

Success in strategy and profitability.

Key role in industrial and financial growth

Consolidated a model of interaction (collusion) between State and financial sector

Miguel A. López-MorellUniversity of Murcia

““Rothschild Rothschild investments investments

in Spain,in Spain, 1856-1930” 1856-1930”

Foreign Financial Institutions & National Financial Systems7-8 June 2013 Warsaw, Poland

European Association for Banking and Financial History (EABH) e.V.