Plantation Mortgage-Backed Securities: Evidence from Surinam in the 18th Century
40 Pages Posted: 19 Jun 2020 Last revised: 29 Jul 2022
Date Written: May 25, 2022
Abstract
In the second half of the 18th century, Dutch bankers channeled investors’ funds to sugar and coffee plantations in the Caribbean, Surinam in particular. Agency problems between plantation owners, bankers, and investors led to an arrangement called negotiaties. Bankers oversaw plantations’ cash-flows and placed mortgage-debt with investors. We demonstrate how this securitization arrangement worked using market-wide data and detailed records from banker F.W. Hudig. During the boom, debt contracts and their securitization were an effective solution for planters, bankers, and investors. However, the market crashed after an oversupply of credit. This led to inefficient restructuring due to debt overhang.
Keywords: Caribbean plantations, mortgage-backed securities, 18th century colonial investment, financial intermediation, negotiaties
JEL Classification: N23, N56, N83
Suggested Citation: Suggested Citation