The Parable of Poyais, Part II
by Sam Hatt
October 2023
Long Read
For credulous investors, Poyais was an exotic land of unparalleled opportunity.
This is Part II of a three-part essay. Read Part I here.
Part II: Post-Poyais
Considering the scale, ambition and implausibility—not to mention the mendacity—of MacGregor’s Poyais scheme: how did it succeed?
Freedom & Finance
While in the late eighteenth century revolutions in America, France and Saint-Domingue had given Britain anxiety, the resounding victory at Waterloo in 1815 delivered renewed confidence and capital. War was an expensive business, but with Europe pacified, young men on the make—military men, as well as excited investors—cast their eyes further afield to lands of burgeoning republics.
There was one very good reason why MacGregor was successful in raising such a substantial loan for the Poyais government on the London capital market: the simple fact that Poyais was in South America.
Britain had looked with envious eyes on Spanish domination of the continent ever since the loss of its North American colonies. Spain had jealously guarded the vast stores of gold, silver and natural resources from the South American continent, maintaining a virtual monopoly on trade with the continent by means of both treaty and force. The British had gained a toehold in the middle of the seventeenth century by establishing a settlement in Belize, the territory measuring just 174 miles by 68 on the east coast between Mexico and Guatemala, but the Spaniards had aggressively defended their sovereignty, and it would not be until 1862 that Britain officially claimed its colony, as British Honduras.
British forces had twice tried, and twice failed, to take for themselves the port of Buenos Aires as the capital of the Viceroyalty of Rio de la Plata in 1806 and 1807. No doubt the government in London had expected victory as a fait accompli on each occasion, only to find itself embarrassed in the face of popular uprisings against the idea of swearing allegiance to yet another monarch. Other than that, fortune-seeking British merchants had to content themselves with whatever South American pickings they could accumulate from naval blockades of Spanish ports—which had the effect of cutting off supplies to the American provinces—and from the use of neutral third-party ships to export and import goods from the continent.
So when, as a consequence of the Napoleonic Wars, Spain's grip on South America began to loosen under the pressure of revolution and civil strife, Britain was quick to try to exploit the situation for commercial advantage, not least to prevent a newly confident United States from seizing the opportunity, under President James Monroe, as its natural sphere of influence. Not only did British merchant vessels supply and maintain communications among the various armies of independence, but British sailors—such as Cochrane in Chile and Peru and Brown in Argentina—commanded navies, while thousands of former British soldiers emulated Gregor MacGregor and devoted their skills to fighting for freedom.
As a result of all this, South America became a subject of intense interest in Britain. There was much airy talk of the cause of liberty and republicanism, and leaders of the independence movement, such as Miranda and Bolívar were fêted as heroes in London. In truth, however, the fashionable obsession with all things Latin American was motivated less by political considerations than by the prospect of making large amounts of money, as the leading magazine the Quarterly Review made clear when it noted that whatever happened—victory for the republicans or the re-imposition of Spanish control—“South America presents a market for the skill and expertise of our merchants, which we hope will not long be withholden from them.” Even those who actively supported the liberation movements often did so for reasons that were less than altruistic, looking forward to a day when new republics would open their borders to Britain.
One dollar, Bank of Poyais, Republic of Poyais (1820s)
While in hindsight the monetary motivations behind MacGregor's modus operandi are clear to see, much of his success was from tapping into the novel and charged political discourse of freedom (I’m sure a number of contemporary examples come to mind…), which can be no better conveyed than in his own words written for a Declaration to the delegates of all American nations at the Congress of Panama—a declaration however, only written and published in French, at the time necessary to defend himself from the French judiciary’s accusations of fraud:
General Gregor MacGregor, Cazique of Poyais, after two years of residence in France—where he was persuaded to go on the basis of negotiations relating to the consolidation of his country's independence—now finds himself, contrary to human rights, held prisoner by the French government for reasons of which he is not aware.
Wishing to participate to the utmost in the conference of the New American States for the purpose of maintaining their common independence, and at the same time to retain intact the body of rights of the country which has given him the responsibility of its administration, the Cazique of Poyais believes it is his duty to set down in a public document, and bring to the attention of the whole of America, the sentiments which he is unable to express in person at the Congress of Panama because of the persecution he is presently suffering as one of the founders of independence in the New World.
He protests to the world about his subjection to the violation of the rights which international law assigns to the head of an independent government, and to foreigners engaged in diplomatic activities.
Of course, with such impassioned and indignant verbosity, how could there be any doubt that the charges laid against him were political in nature, the trumped up charges of a crooked court, and all part of a greater conspiracy by the establishment to thwart him and his followers from their mission of making Poyais great.
Commodities & Companies
The attraction increased as more became “known” and the extent of “the opportunities” offered by Poyais began to emerge. This accessible, peaceful and manageable territory contained many of the valuable natural resources trumpeted by the explorers of South America and the enthusiastic press: gold, an astonishing variety of timber, medicinal plants, spices, and the raw materials of industrial processes such as zinc ore, indigo, rubber, and so on. Equally, since there had been no colonial power supplying Poyais, as a dependency, with manufactured goods, the Poyers represented a completely new and unexploited market for British industry. For the farmer, the merchant, the industrialist, the banker and even the labourer, Poyais was a land of unparalleled opportunity.
So too was it seen in the same glowing light by the City’s financiers. And there was a further layer of banking for which London had become the main centre, again thanks mainly to the upheavals on the Continent. This was merchant banking, so-called because its practitioners most often traded directly in precious metals and commodities as well as in currencies and financial instruments such as bills of exchange, bonds and securities. For example, the renowned Baring brothers, John and Francis, who were among the first in the field, came from a background in the wool trade, using the profits from that to establish their investment banking business in 1762. It was Barings, along with another merchant bank, Hope and Company—which had transferred its business from Amsterdam after the French invasion of Holland in 1795—who managed the loan that allowed the American government to purchase Louisiana from Napoleon for $15 million in 1803. One of Barings' rivals, the former cotton dealers, Rothschilds, raised loans of more than £100 million to help finance the armies of Britain and her allies during the Napoleonic Wars. London banks like these soon became the chief sources of capital. But now, with war over and Napoleon defeated, investors were looking towards new horizons. And MacGregor capitalised on this, feeding investment hungry investors the menu they desired.
Typical of such embellishments was one published in the Glasgow Sentinel. After describing precisely where Poyais lay, it went on:
“The CLIMATE is remarkably healthy, and agrees admirably with the constitution of Europeans; many of whom, having become much debilitated by a long residence in the West Indies, have been completely restored to health by a removal, for a short period, to the Bay of Honduras. - The SOIL is extremely rich and fertile, and produces not only all the necessaries of life in profusion, but is also well adapted for the cultivation of all those valuable Commercial Commodities which have rendered the West Indies so important.”
Moreover, the very limited development in the country thus far meant that, unlike Chile, Colombia and Peru, Poyais had no existing debt to make the first call on its loan capital. The money raised would go directly towards assisting the new settlers to establish productive farms and businesses, which would naturally accelerate the flow of revenue to the government from imports and exports.
It was as much to reassure the market-makers and prospective investors as to add to the numbers of would-be colonists now coming forward that MacGregor published The Sketch of the Mosquito Shore, including the Territory of Poyais, by his aide-de-camp, Thomas Strangeways. True to his commitment to the interests of Scotland, Sir Gregor arranged for the book to be printed in Leith, and nominated the Edinburgh bookseller, William Blackwood, as the main distributor, but he was careful to ensure that plenty of copies were also available in London, from Cadell's bookshop in the Strand—conveniently close to the City and Westminster.
In a preface, the author noted that, “being impressed with a thorough conviction of the immense benefit which not only the native tribes of Mosquitia, but the neighbouring countries in general, must derive, from the civilization and improvement of one of the fairest portions of the globe” he had endeavoured to “attract the attention of enlightened Europeans to the subject, by combining the knowledge of its history, natural productions, the best mode of culture, which he acquired during a portion of his life spent in that part of the world—with the information afforded to him by the few but authentic authors who have written anything on the subject.”
He apologised for the fact that the book might seem dull to the general reader, but he was sure that “those who are likely to be more nearly interested” would appreciate his decision to avoid making any statement which might appear “doubtful or exaggerated, especially to such of his readers as are unacquainted with the circumstances that have until now retarded the civilization of this hitherto neglected country.” This was not the inspirational work of a Darwin or Von Humboldt, but a thoroughly practical guide for the industrious planter or farmer and for hard-headed businessmen who would know a good thing when it was shown to them.
For that purpose, the topography, flora and fauna of Poyais were approached in an intensely utilitarian manner. The Black River was “navigable for small craft till within about twenty miles of its principal source,” while Brewers Lagoon had “a wide mouth, with anchorage off the entrance from twelve to eight fathoms,” and the Rio Grande had “considerable depth of water at its mouth.”
The harbour of St John's was “somewhat obstructed by a bar, on which there is only five feet water, but there was a channel which, although narrow, would admit a vessel drawing twenty-five feet.” The fact that the Kennersley Castle which transported the first of the intrepid Colonists could not have entered the channel was, as we know, the least of their problems.
A map of Mosquitia and the territory of Poyais with the Adjacent Countries
Newness & Nostalgia
There was a burst of optimism in Britain after the glorious defeat of Napoleon. The prospect of lasting peace, which emerged from the Congress of Vienna, gave investors soaring confidence, and a greater willingness to take risks.
By the early 1820s, the public desire to deal in stocks and shares had developed into something of a mania, as people saw the opportunity to make quick and painless profits by betting on the fluctuations in share prices, or being the first to snap up stock in new companies which could be sold later at a much higher price. It was a craving the new class of professional brokers was only too eager to meet, since its livelihood depended on continuously moving and expanding the market.
So widespread and fevered did the trading become that, in 1821, a critical exposé of what we would now call the financial services industry complained that the Stock Exchange, “a body growing out of small beginnings in speculation,” had now reached “a height that has given it the command of this nation—its destinies—its ministers of government—its resources—its morals—its private property.” The newspapers, however, always with an eye on changes in the public mood, and keen to exploit them so as to build their circulations, saw value in encouraging the new passion for investment. They began to provide their readers with business news, financial advice, reports and comment from the City, and even share tips. And it was the press, perhaps more than anything else, that stimulated a sudden and all-consuming national fashion in investment.
At one stage, shares in companies planning or building canals were what everyone wanted to buy, and their prices soared. However, just as Sir Gregor MacGregor was describing the delights of Poyais and the potential for turning them into ready money, it happened that the trend in investment was moving overseas, and especially towards loan issues and bonds from foreign governments.
One reason for this was the very economic growth that had provoked the investment boom. As the British government's revenues increased and its expenditure fell back to the normal levels of peacetime, the Treasury was able dramatically to reduce the national debt, which had tripled to more than £700 million during the course of the European conflict. The diminishing requirement for borrowing meant that the government no longer needed to pay the high rates of interest that had ensured a steady flow of money into its coffers, and in the spring of 1822 it announced that its most popular stocks, which paid an annual five per cent interest, were to be transformed into a new issue paying only four per cent.
This change affected hundreds of thousands of investors, nearly all of whom declined to convert their holdings and instead withdrew their funds and accumulated interest. In consequence, a little less than £3 million unexpectedly became available in the capital market. But where could it go to achieve the sort of returns to which investors had become accustomed?
While South America was in the throes of violent conflict, from which loan-seeking governments had just emerged—and none of them had as yet been recognized by the British government—such concerns did not trouble the market. Other than information that emanated from explorers, it was merchants who acted as unofficial foreign correspondents for the press, and the prospectuses circulated by those who had an interest in promoting investment.
The loans issued would secure the future of the new republics, helping them to exploit the natural resources they said they had, and that must be there in order to have attracted the Spaniards in the first place and sustained them all these years. Why would Spain be fighting so hard to retain territory on the other side of the world if it were worthless?
Meanwhile, the loan contractors were taking healthy commissions—anything between two per cent and five per cent of the nominal value of the loans—and the brokers and market-makers were doing almost more business than they could accommodate. As for the investors, six per cent was more than they could get anywhere else, and there was the best possible security available to ensure that interest and full redemption values were paid.
“Had MacGregor been able to set aside his fantasies, and the prospect of acquiring great riches very quickly by means of deception, he might easily have helped to create a thriving little territory as productive and wealthy as the West Indies.”
The fact that the governments of Colombia, Chile and Peru were not accepted by the British as sovereign states signified nothing but the dawdling of politicians. Far more important was the fact that the Stock Exchange had reacted to this amazing opportunity by bestowing its approval on it and deciding to create an official market in overseas government bonds. So far as Sir Gregor MacGregor and Poyais were concerned, timing could not have been better.
This advantageous investment climate combined perfectly with the excesses of MacGregor’s imagination, leading him to promote Poyais to such an extent that he had found himself organising the ambitious programme of emigration that would ultimately undermine his whole project, and turn what would have been an inspired hoax into a cruel and deadly one. The conclusion which suggests itself is that he had been, in some measure, seduced by his own pretensions.
Fantasist that he had always been, MacGregor may have fallen into the trap of believing that he could become Cazique of Poyais in fact, as well as in name, if he really could establish viable settlements in the territory. There is even some evidence to support this idea.
MacGregor had briefly established himself as the head of a government on Amelia Island in Florida, and it was said that, during his brief occupation of Rio de la Hacha, he took the title of His Majesty the Inca of New Granada. In both cases, there were real communities over which he could rule: the Cazique of Poyais, by contrast, signified nothing much in practical terms. Then there were the roots of his undoubted attachment to South America. A desire to emulate the celebrated General Miranda and Bolivar, along with a desire to make money as a soldier of fortune, are evident.
But there was more.
It is recorded that MacGregor was fond of referring to the disastrous Scottish attempt to colonise the Darién region in the late-1600s, and proud of the fact that one of his ancestors—allegedly—had displayed the enterprise and courage not only to join the expedition, but also to survive its disastrous conclusion. But it was also rumoured that the Darién MacGregor had formed a marriage with a native princess of the country, from which sprung our hero, a lineal and legitimate descendant of the “Children of the Sun.” If that rumour were true—and it was said that Gregor MacGregor did have an unusually dark complexion—it might go some way towards explaining his behaviour in relation to Poyais.
Similarly, his decision to embark on the extremely risky strategy of directing emigration towards a country that did not exist, or at least not in anything like the form he described, may well have been influenced by the Darién connection. One obvious pointer towards such a conclusion is MacGregor's insistence that the bulk of the settlers should come from Scotland. With the Darién venture, the Scots had shown their willingness to take risks in unknown territory, and their endurance in trying to make a new settlement work against all the odds. If part of MacGregor's fantasy was somehow to compensate for the Darién fiasco by actually establishing a colony in Poyais, those were just the sort of foolhardy people he would need.
But in order to attract them, he had to make Poyais seem much more developed than it was, and he was wise enough to see that he needed English capital to finance the project—unlike his Darién predecessors, who gambled the economic future of Scotland on their expedition, and in consequence helped unwittingly to bring about the union with England.
The underlying tragedy of MacGregor's Poyais, aside from the death and financial ruin it wrought, is that a serious programme of British emigration could have been feasible and was likely to have succeeded. Had MacGregor been able to set aside his fantasies, and the prospect of acquiring great riches very quickly by means of deception, he might easily have helped to create a thriving little territory as productive and wealthy as the West Indies.
The economic and social conditions of Britain in the 1820s and 1830s, as the population increased steeply and the industrial revolution gathered pace, were such that emigration was seen as both desirable and necessary, so much so that the government supported it financially in many cases. It would not have been difficult to persuade people of all classes that the virgin territory of the Mosquito Coast offered bright hopes for their future, as it could well have done. If only Gregor MacGregor had told the truth. He might have changed the course of history and made himself the kind of fortune that the Poyais fraud failed to produce, largely because of his own inability to restrain himself.
This is Part II of a three-part essay. Read Part III here.
