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Don José tells the narrator that he was born José Lizzarrabengoa to an old Christian family of Basque nobility in Navarre. He studied to join the church per his family’s wishes, but far preferred the game of tennis to working. One day he and another young man got into a fight with their maquilas (a traditional Basque walking stick equipped with an iron spike) after a match stirred their passions, and as a consequence Don José was forced to leave his home. He enlisted in the Almanza Cavalry Regiment and was swiftly promoted to the rank of corporal, with hopes of soon becoming a sergeant.
He first meets Carmen when guarding a factory in Seville, which employs 500 women to roll cigars. Unlike the Spanish soldiers, Don José is diligent while on duty, busy making himself a chain for his priming pin. As the women return to the factory, they are catcalled, none more so than Carmen, who responds saucily to every compliment. In Navarre, Carmen’s immodest style of attire would be considered scandalous. Don José has no interest in any girl who isn’t Basque, so he ignores her. His indifference draws her attention and she approaches, mocking him when he refuses to gift her the chain he’s making. She tosses one of the acacia blossoms she’s wearing in his face, and despite himself Don José surreptitiously picks it up and keeps it once she’s returned to work.
Several hours later, a commotion occurs on the factory floor, and Don José is sent in to restore order. He discovers that Carmen got into an argument with another woman. When the other woman’s insults offended her, Carmen slashed the woman’s face open with a knife. Don José arrests Carmen and escorts her to prison with two of his men. On the way Carmen attempts to flatter Don José and bribe him into releasing her, but he remains firm. She speaks to him in Basque, having recognized his accent, and claims to be from a region near his home; she is working here to afford passage for her ailing mother after Roma kidnapped her. She says that she attacked the other girl because she insulted their homeland, and that the other factory workers banded together against her because she’d asserted the superiority of Basque men over the locals. Even though she doesn’t sound like a native speaker of Basque, Don José believes her, moved both by nationalist pride and the sound of his mother tongue. In an aside, Don José laments briefly that he won’t be able to give his final confession to a priest who speaks his own language.
When Carmen again asks him to release her, he agrees. She pushes him and he pretends to fall, obstructing the other guards and allowing her to escape. They’re unable to catch up with her and must return to their superiors emptyhanded. Due to the suspicious circumstances of the escape, Don José is demoted and sentenced to a month in prison. He spends the time mourning the loss of his superiors’ confidence and his chance of promotion, and sniffing the perfume of the dried blossom from Carmen. The jailor brings him a bread roll sent by Carmen, who’d claimed to be Don José’s cousin. Baked into it, Don José finds a file and a gold coin. He knows that Carmen’s people value freedom above all else. Although he could use the file to saw through the bars and escape, he chooses to serve out his term. He’s touched that Carmen remembered him, but is offended by the coin.
Upon his release, Don José is deeply ashamed to find himself further punished with guard duty, where he acts as a sentry outside the colonel’s home. Carmen arrives at the house to entertain a party. While catching glimpses of her dancing, Don José feels stirrings of jealous rage at the shameless remarks directed toward her by the guests. He believes this to be the moment he fell in love with her. As she leaves, she directs Don José to a Romani restaurant owned by her associate Pastia, where he meets her after his shift. He thanks her for the gifts she sent him in prison. He says that although he’ll keep the file as a token, he’d like to return the money. She laughs, and spends it all, along with what little money Don José has, on a massive haul of sweets and treats. They take their bounty to a small, sparse room. Its inhabitant, an elderly Roma woman named Dorotea, leaves the couple in exchange for a handful of sweets. Carmen and Don José spend the whole day in the room indulging in their treats while Carmen cavorts wildly and makes all kinds of mischief. She jokingly calls Don José her “rom” or husband, and embraces him while declaring that as a Calé, she always repays her debts.
Don José tries to leave when he hears the evening drums summoning the soldiers to barracks for roll call. Carmen protests and mocks him until he cedes and stays the night with her instead, resigning himself to further punishment. In the morning, however, she is the one to send him away. She says that she didn’t really owe him anything because he isn’t Roma. She took a fancy to him, but now things are over between them. She tells him firmly to leave and forget about her or else she’ll drive him to ruin and he’ll end up hanged.
Don José leaves but remains obsessed with her, even though Dorotea and another tell him she’s left for Portugal. One day as he’s guarding a hole in the city wall from smugglers, Pastia approaches and tells him he’ll soon hear from Carmen. That night Carmen meets him at the wall and tells him to let several men, smugglers, through the hole. He refuses money or her company for dinner in exchange for letting them through. She mocks him and threatens to approach his superior with the offer. Don José cedes and allows Pastia and his associates through with bundles of English goods. They meet the next day but Carmen is angry that he resisted her initial offer since his first act of kindness for her was done without any expectation of reward. She tries to pay him again and they argue before Don José storms off, having barely resisted the urge to attack her. Carmen later finds him crying to himself in a church, and they reconcile.
She agrees to meet with him again, but doesn’t. Dorotea once more claims that Carmen is in Portugal. Don José knows better than to believe her now and keeps returning to Carmen’s usual haunts. He’s with Dorotea when Carmen appears with a lieutenant in tow. They both try to make Don José leave, but he refuses, and the two men come to blows. Don José ends up stabbing the lieutenant, and flees alongside Carmen. She calls him a fool, but helps him to dispose of his uniform and disguise himself as a Valencian peasant.
In the room of another Roma woman, she dresses his wounds with care and competency before giving him something to help him sleep. The following day she tells him to leave the city—lest he be captured and shot—and become a smuggler. He agrees, believing that so wild and dangerous a life will bind them more closely together, and that he’ll at last be certain of her love when they’re hiding in the mountains with no rivals. She laughs at his naïve fantasy, and says that she must love him because she’s never taken money from him.
She helps him to flee the city with a letter of introduction from Pastia to a gang of smugglers in Jerez. He is initiated into the group by their leader, El Dancaire, and they travel to meet Carmen in Gaucin where she’s acting as their spy and informant. She’s already secured them a job smuggling English goods from the coast through the mountains. The business goes well, as do the next several jobs. Don José finds he prefers smuggling to being a soldier because he earns more money and is able to spend a lot of time with Carmen. The smugglers only come together at decisive moments, spending most of their time separated and posing as respectable tradesmen. They all respect Don José because he has the distinction of having murdered someone.
Carmen is very affectionate toward him but swears him to secrecy regarding their liaison. He agrees happily, believing this to be her first display of feminine modesty and discretion. Then he learns that Carmen is married, and that she has just succeeded in orchestrating her husband’s escape from the prison galleys where he’s been incarcerated these past two years. The husband, Garcia el Tuerto, joins their gang of smugglers, and the furious Don José finds him to be a loathsome “brute.” The following morning, the smugglers realize that a dozen cavalrymen are at their heels, and the majority of them flee in a panic. Garcia, Don José, Carmen, El Dancaire, and a young man named El Remendado stay calm and take the best of their loot on their backs, abandoning the mules and making their escape down a steep slope as the soldiers shoot at them. They all escape unscathed save for El Remendado, whom Don José tries to carry to safety until Garcia shoots the wounded man in the face, killing him and obscuring his identity from the soldiers.
While Don José muses melancholically on the young man’s death, Garcia and El Dancaire play cards. Carmen surreptitiously kisses Don José, who calls her the “devil.” The loss of their mules threatens them with ruination. Carmen travels alone to Gaucin and manages to procure them two new mules, as well as a fine outfit for herself that saw the men almost unable to recognize her. She returns to Gibraltar on “gypsy business” and tells Don Jose that she’ll meet him again before he ends up hanged. She sends money to the men and intel that two wealthy English lords will be passing close by them. The smugglers rob the lords, making the transition from smugglers to bandits, but veto Garcia’s suggestion that they also murder their victims.
Don José says that he fell into banditry out of thoughtlessness. He mentions meeting the infamous bandit José Maria, who he claims to be the worst of rogues. The one time they worked together, José Maria kept all of the profit himself and foisted all the trouble onto the rest of them. José Maria had a refined and dedicated mistress whom he mistreated badly, once slashing her arm open in a jealous rage. She nonetheless stayed loyal to him, wearing the scar like a badge of honor.
When no news comes of Carmen, Don José is sent to Gibraltar to check on her. He finds their contact absent, explaining the lack of communication, and eventually locates Carmen while in the guise of an orange seller. Carmen is living with a wealthy Englishman, who invites Don José into his apartment to buy oranges. Carmen claims Don José can only speak Basque, and mistranslates his threats and inane pleasantries, much to her own amusement. She invites Don José to visit again the following day, and tells him where she plans to lead the Englishman outside of the city for them to rob him. She suggests, given the Englishman’s skill with a gun, that Don Jose let him kill her husband.
Instead, when Don José returns to the group he challenges Garcia to a knife fight over a contrived disagreement about a card game. El Dancaire tries to mediate, but Don José ends up winning the fight and stabbing Garcia in the throat. Despite their diminished number, they succeed in ambushing and killing the Englishman with Carmen’s help. When she learns of Garcia’s death, she says it was simply fate that he die at this time. Don José says she too will die if she’s unfaithful to him as his wife, a threat that she accepts since she’s already foretold with her spells that they’ll end their lives together.
They assemble a new, more trustworthy group of comrades and prosper with Carmen’s help. She and Don José live happily as husband and wife, although they argue harshly when she attempts to seduce a wealthy merchant as she had the Englishman, and Don José rides into town and abducts her. She says she doesn’t like him nearly as much as a husband as she did a lover, and that if he tries too hard to threaten her freedom she’ll find someone to murder him as she did with her last husband. They eventually reconcile, but the relationship remains soured. They are ambushed once more by soldiers, and this time nearly all of their group are killed or captured, including El Dancaire. Don José is badly wounded. It takes almost six weeks for him to recover, during which time Carmen tends to him with unparalleled care, dedication, and skill. He spends his convalescence rethinking their lifestyle, and proposes they move to the New World to live an honest life together. Carmen refuses and upon his recovery they go back to smuggling.
Carmen becomes enamored with an incredibly skilled picador named Lucas, which causes Don José no small amount of jealousy. She proposes that they either rob Lucas for the money he earns bullfighting or enlist him to join their gang, but Don José refuses, forbidding her from speaking of him again. It is at this point that they encounter the narrator, and Don José confesses that in a violent quarrel about killing him he struck Carmen. This left her pale, weak, and sulking despite his apologies. When she suddenly reverts to her prior warmth toward him after several days of separation, he is suspicious that she’s found some way to avenge herself on him. His fears are proven correct; he learns of Lucas’s presence in a nearby bullfight and observes Carmen flirting with him there. Lucas gives Carmen the cockade snatched from the bull (a gesture that is the height of gallantry), which she places in her hair. Before the end of the fight, Lucas is badly injured by the bull and Carmen leaves.
Don José waits for Carmen at home. When she returns around 2 am, he has her follow him through the night to an inn out by a hermitage. He tells her all is forgiven if she’ll join him in the New World to live honestly together, and promises to kill her if she refuses. He begs her to agree and gives her time to think, walking to the hermitage to organize a mass to be said for her soul. He returns half-hoping that Carmen will have fled, but she is waiting for him as she casts spells to discern her fortune. She tells him that she’ll follow him to her death, but that she won’t live with him anymore because she no longer loves him. She knows he’ll kill her and has accepted it since he’s her husband and it’s his right, but she won’t give in or surrender her freedom to him. Don José begs her to love him again, and threatens her with a knife when she once more refuses. She is unafraid, and he stabs her to death. He buries her in the woods as she’d always wanted, and surrenders himself to the authorities.
Unlike the rest of the novella, this chapter is told from Don José’s perspective. The chapter explores Carmen and Don José’s tumultuous affair and comprises the main plot of the novella and bulk of its wordcount. Exoticism and Racial Prejudice are omnipresent through the portrayal of Carmen and other Roma. All of them display the offensive stereotypes that Mérimée and his contemporaries associated with Roma, and racist assumptions color many of the characters. Carmen, for instance, is promiscuous, violent, and manipulative. She dresses immodestly, slashes another woman’s face, and lies and connives so that Don José will not bring her to prison. She also lies about having a husband and tries to manipulate Don José into killing him. Dorotea, the old Roma woman, is described as a “hag.”
The events of Chapter 3 are centered on Don José’s experience and perception. Carmen’s character is filtered through Don José’s biases, which are colored by the fact that he murdered her. Don José and even Carmen and her associates are shown to be morally dubious, but with redeeming qualities. They harm other people, but do so out of necessity and desperation as much as for any other reason. They are relatively impotent due to Power Imbalances in Relationships and Society, making them sympathetic. Only Garcia is shown in a completely unsympathetic light. This hints at the unreliability of Don José’s account; Garcia was the only character Don José truly despised, and the only victim of Don José’s whose death was premeditated.
Over the course of the chapter, Don José falls from his privileged and happy state to the very lowest rung of society as a prisoner awaiting execution. He ascribes this fall to his association with Carmen, believing her to have corrupted him, but his trajectory better reflects that of a classic tragic hero. His reversal of fortune is brought about by his own actions, and his fatal flaw of excessive passion and propensity for violence. Through Don José, the novella depicts Passion as an Overwhelming Force and its destructive, potentially lethal nature.