Grain Market Integration in Late Colonial Mexico

This paper assesses the degree of integration of grain markets in late-Bourbon New Spain using standard econometric tools applied in other international cases. I find that grain market integration in Bourbon Mexico attained a degree comparable to other regions in the world, despite its poor transportation technology. Bourbon Mexico was not a market economy, but markets were effective tools in funneling resources from the countryside to the cities. An increase in prices in a leading market increased prices throughout the viceroyalty. For example, maize prices in Antequera, in the southern region of Oaxaca, within a year absorbed changes in prices in markets as distant as Guadalajara or San Luis Potosí (800 km). Likewise, wheat prices in Mexico City reacted to changes in the flour markets of the Gulf, such as Campeche (900 km away). These findings place grain markets in New Spain at a level of performance that is comparable to that found in the United States and some European regions. Spatial arbitrage (the buying in high-price regions and selling in low-price regions) was a driving force that broke local monopolies, opened the participation to other actors and created more diversified and integrated grain markets.