TheGreat Potosí Mint Fraud of 1649 was a financial fraud involving thefineness of silver coinage that began inPotosí, SpanishViceroyalty of Peru, nowBolivia. The scandal had worldwide effects that lasted for decades.[1]
Potosí was founded in 1545 as a mining town nearCerro Rico, a mountain that contained enormous quantities ofsilver ore. By 1570, a new process usingmercury amalgamation was developed that allowed the silver ores of the mountain to be profitably exploited using forced labor in hazardous conditions. In 1572, the firstmint of Potosí was constructed to process the smelted silver intoreal coins, which were then shipped toArica on the western coast of South America and from there to theSpanish Main and points around the world.[1] By the early 17th century, Potosí had a population of 160,000.[2] The minted coins were to have a silver content of 93 parts per 100, as decreed by KingPhilip IV of Spain in December 1642.[3][4]
Rumors of the fineness of the silver coins from Potosí began to circulate in the early 17th century.[5] Slave owners and mint officials blamed the mint slaves for the reduced fineness of coins minted at Potosí.[6] Complaints from theKingdom of Aragon and theKingdom of Castile in 1648 asserted the coins to be worth as little as 5 reales instead of 8 reales. Royal trials confirmed the coins from Potosí contained only 75% of the silver they were supposed to contain. In response to this, King Philip sentFrancisco de Nestares Marín, a former inquisitor, to investigate the situation. He began his investigation at the end of 1648.[4][1]
Marín's investigation revealed that the fraud permeated the entire silver operation. Key figures in the fraud wereFrancisco Gómez de la Rocha, a rich formercorregidor of Potosí, and Juan Ramírez de Arellano, anassayer at the mint. Both of them were executed for their crimes, and other assayers at the mint were fined or removed from their positions.[5][7] The corregidor of Potosí was removed from his position and imprisoned. Several silver merchants were also executed.
Marín named Juan Rodríguez de Rodas as the head assayer of the mint, a purpose for which he had been sent from Spain.[4] Coins minted under Rodas were known asrodases, while the debased coins were referred to asrochunas. However the new coins, though better, were still short of the required fineness.[5]
The scandal had a large impact onHabsburg Spain, causing a global panic with effects reaching as far as Southeast Asia.[8][6] Spanish war efforts of the time were impacted. Trade was significantly affected, and while decisions were being made about what to do with the suspect currency, people held onto their Potosí-origin coins. With mistrust of the currency, trade was paralyzed in some places, consumer product availability reduced, and prices increased. Spanish currency in Europe was discredited. In October 1650 King Philip ordered that 8- and 4-real coins were to be devalued. This affected all coins from the Potosí mint that were in circulation, whether they were of appropriate fineness or not.[4] For this purpose, he gaveGarcía Sarmiento de Sotomayor, theViceroy of Peru, discretion to implement the mandate as he saw fit. In January 1652, Sotomayor decreed that therochunas coins would be devalued to 6 reales and submitted for melting. The new 8-realrodases would be worth 7.5 reales, and the 4-realrodases would be worth 3.75 reales. The lower denominations of coins were unchanged. As part of the decision, the newrodases had to be countermarked to indicate their worth. Some of the olderrochunas coins were fraudulently countermarked to indicate they were worth 7.5 reales, which further debased trust in the rodas coins. New, replacement coins with new marks began production in March 1652 with a value of 8 reales. These new coins replaced therochunas androdas in circulation, which were subsequently declared illegal for trade in 1657.[5]
The reissue forced the reactivation of mints also in the European part of the empire. InPamplona,Kingdom of Navarre, silver and gold coins were produced between 1651 and 1652.However the legendPhilippus Dei Gratia Castelle et Navarrae rex ("Philip king of Castile and Navarreby the grace of God") offended theCortes of Navarre, zealous of theircharter, and the king had to issue corrected coins with no mention of Castile and his ordinal as Philip VI corresponding to thelist of Navarrese monarchs.[9]