Review of SIR GREGOR MACGREGOR AND THE LAND THAT NEVER WAS: The Extraordinary Story of the Most Audacious Fraud in History: David Sinclair (Review $59.99)
Listener 5 July 2003.

Keywords: Business & Finance; Political Economy & History;

The story told here is so extraordinary that I wondered whether the book was a hoax. Its writer, David Sinclair, is a reputable English financial journalist with non-fiction books to his credit (notably The Pound: A Biography), but belongs to a profession which often has a hankering for fiction. However, his key references appear in international bibliographies, while a Google search found independent mention of the country of ‘Poyais’ about which the fraud occurred.

Not that you will find Poyais on any reputable map, for it never existed. Rather it was the invention of ‘Sir’ Gregor MacGregor who swanned around London and Paris in the 1820s as its ‘Cazique’, or prince. His fertile imagination generated a detailed guidebook describing an extraordinarily attractive land in Central America, which awaited to be exploited by Europe.

The exploitation proved to be more of the Europeans, for MacGregor issued bonds on this non-existent country to which the British (and French) subscribed perhaps $NZ80m in today’s prices. Most of the proceeds were spent by the Cazique and his acolytes on themselves. The issue was possible because there was a Latin American speculative bubble, in which the newly formed countries of the time were issuing bonds on generous terms. (MacGregor had been a colourful and successful general in their wars of independence and was married to the cousin of the great liberator, Simón Bolívar.) Subscribers lost their money, but Poyais bonds are unique in the London financial market’s history for being issued by a non-existent country.

MacGregor was brazen enough even to send ships of migrants to ‘Poyais’. They found, a muddy uninhabited estuary surrounded by jungle rather than the promised thriving metropolis inhabited by English-speaking docile natives sitting on unexploited natural resources. (This part of the story is not implausible. Just over a decade later Edward Gibbon Wakefield wrote a misleading guidebook about a land he had never visited, and sent colonists halfway round the world to settle there. Welcome to New Zealand.) Incredibly, the handful of survivors who struggled back blamed everyone but the Cazique for the disaster. Despite his frauds, MacGregor spent only a few months in a French jail on remand, was never convicted, and retired to Venezuela on an honoured military pension.

Sinclair tells a rattling good tale. He is fortunate that there are eyewitness accounts of some of the key events, and he is scrupulous about what he does not know, leaving the reader puzzling over whether the Cazique believed his fantasies, so failing to exploit all the opportunities the fraud offered.

It’s a book to be read for entertainment, rather to improve one’s understandings of the potential for dishonest dealings in speculative markets. After all, such a scam could not be repeated, could it? We have the Securities Commission, reference librarians, the world wide web, and maps of the entirety of space. Anyone interested in some dotcom shares I am issuing?