Unintended Inequality? The Consolidación de Vales Reales in the Lands of El Dorado

In 1798, the Spanish Crown enacted a law to consolidate the public debt by collecting and converting public bonds into a new, lower-interest liability. Known as decreto de consolidación de vales reales, the restructuring involved selling a significant portion of the clerical holdings, with the sale proceeds becoming interest-bearing loans payable by the Crown. In 1804, Spanish authorities extended the consolidación to the Spanish American realms, causing major changes in credit and land markets. This paper explores the impact of the measure by assembling the most extensive data set on consolidación payments in the viceroyalty of the New Kingdom of Granada (present-day Colombia and Ecuador). The research focuses on two related topics. First, the size and structure of the payments, including the importance of property sales and clerical loan recalls in the overall financial flows of the consolidación. Second, the paper examines the policy’s effect on land tenure inequality by analyzing the distribution of payments across social groups and regions. The evidence suggests that New Granada’s structure of land ownership remained largely unscathed, as most of the expropriation targeted the clerical capital borrowed by the laity. The valuation of rural estates proved difficult, while large landowners, through co-optation or litigation, managed to avoid loan recalls. Yet, the paper argues that the consolidación spurred inequality by affecting small and mid-size borrowers.