# The Economic and Social History of Brazil since 1889 ## Metadata * Author: [Francisco Vidal Luna and Herbert S. Klein](https://www.amazon.com/Francisco-Vidal-Luna/e/B00F5YJWKU/ref=dp_byline_cont_ebooks_1) * ASIN: B00I0UNGH6 * ISBN: 978-1107042506 * Reference: https://www.amazon.com/dp/B00I0UNGH6 * [Kindle link](kindle://book?action=open&asin=B00I0UNGH6) ## Highlights It was one of the few Latin American states able to compete with the North American countries in taking a share of the great European transatlantic migration of the late nineteenth and early twentieth centuries. — location: [396](kindle://book?action=open&asin=B00I0UNGH6&location=396) ^ref-30097 --- The concentration of coffee production in the axis formed by the states of Rio de Janeiro, São Paulo, and Minas Gerais gave to this region an economic and political supremacy within the nation that was unquestionably maintained until 1930. — location: [440](kindle://book?action=open&asin=B00I0UNGH6&location=440) ^ref-53229 --- All of these factors led to delayed responses to changes in supply and demand along with occasional dramatic price fluctuations in the coffee market.30 There were three cycles in coffee prices between 1857 and 1906 with no secular trends in these prices in this period.31 — location: [580](kindle://book?action=open&asin=B00I0UNGH6&location=580) ^ref-65214 Capital cycles in coffee in the late 1800 s --- This transition to wage labor gave particular impulse to manufacturing and service activities in the national economy. — location: [607](kindle://book?action=open&asin=B00I0UNGH6&location=607) ^ref-41701 Brazil moves to wage labour in the 1880 s (abolishing slavery) which had ripple effects across the economy --- This new labor system also had other impacts on the Brazilian economy, primarily in the form of increased demand for credit. — location: [609](kindle://book?action=open&asin=B00I0UNGH6&location=609) ^ref-30932 --- The republican movement grew out of the demands of the urban middle classes for greater political representation and was also closely associated with the abolitionist movement.38 — location: [633](kindle://book?action=open&asin=B00I0UNGH6&location=633) ^ref-8700 --- Thus the power vacuum that occurred after 1888 reflected a lack of political support for the monarchy. — location: [653](kindle://book?action=open&asin=B00I0UNGH6&location=653) ^ref-37199 --- In 1800 Brazil had a per capita income of 91 percent of that of the United States; by 1913 its per capita income had fallen to just 14 percent of the American rate. — location: [662](kindle://book?action=open&asin=B00I0UNGH6&location=662) ^ref-24637 Why did per capita remain stagnant in Brazil while growing 1-2% in the US? Both countries had swaths of untapped land, and both had slavery. What was different? Banking system? Government? --- These numbers show that the origin of the economic backwardness of Brazil in the nineteenth century occurred despite the expansion of coffee. The conservative policies of the empire, including its long defense of slavery, did not permit the dynamism of the coffee industry to spread to the rest of the national economy. — location: [667](kindle://book?action=open&asin=B00I0UNGH6&location=667) ^ref-23190 --- Brazil was more like the United States in this respect, since immigration accounted for less than 10 percent of the total growth in both countries in the century from 1841 to 1940.47 — location: [694](kindle://book?action=open&asin=B00I0UNGH6&location=694) ^ref-36060 --- Although the majority of immigrants were literate, overall the literacy rate in the late-nineteenth- and early-twentieth-century Brazilian censuses was very low. This was because Brazil for most of its imperial and early republican history was a relatively backward nation in terms of providing public education for its population even by Latin American standards. — location: [714](kindle://book?action=open&asin=B00I0UNGH6&location=714) ^ref-32994 --- Brazil between 1899 and 1933 experienced the most rapid change in its literacy rates of any Latin American country.54 — location: [720](kindle://book?action=open&asin=B00I0UNGH6&location=720) ^ref-5502 --- the Portuguese colonial administration rejected the idea of creating local universities in its American colony and did not even permit a colonial printing industry to develop. — location: [732](kindle://book?action=open&asin=B00I0UNGH6&location=732) ^ref-58924 --- This federalist ideology had its origins in the 1870s, with the rise of the republican movement, and appealed to the regional oligarchic groups, who even if they lost control over the central government still had space for maneuvering within their states. The constitution of 1891 provided a classic liberal federalist model that expanded state powers, even to the extent of the states being able to undertake loans.64 — location: [795](kindle://book?action=open&asin=B00I0UNGH6&location=795) ^ref-12093 --- In other respects the 1891 constitution established the classic federal republic, with the division of powers among an executive, a legislature, and a judiciary. — location: [801](kindle://book?action=open&asin=B00I0UNGH6&location=801) ^ref-47662 I wonder more and more about the divergence between the US and Brazil. What happened after the early 20 th century. --- But in 1887, in dealing with a new crisis of liquidity, there was proposed and approved a monetary reform that permitted the emission of currency backed by bonds and metallic money.72 — location: [840](kindle://book?action=open&asin=B00I0UNGH6&location=840) ^ref-26195 --- future uncertainty generated a flight of capital, problems in the balance of payments, and a resulting monetary depreciation. There was a run on the banks to exchange convertible money, thus reducing the money in circulation and weakening the banking system.77 The resolution of this crisis was the issuance of a new monetary reform in January 1890, which resulted in a system of plurality in emission of nonconvertible currency, backed by government securities.78 Needs of commerce and the expansion of the salaried labor force were the reasons used to justify the rapid expansion of the money supply.79 In 1892 the plural currency printing system was replaced by the creation of a major bank with a monopoly over monetary issue.80 — location: [855](kindle://book?action=open&asin=B00I0UNGH6&location=855) ^ref-12842 Brief description of early developments in the banking system. --- It was this banking reform, the cheap credit for agriculture and the legal changes that made it easier to form corporations, which promoted the rapid growth of the money supply in this period.81 All these changes and reforms created a climate of euphoria in the first years of the republic, generating a process of intense speculation in the stock exchange, which resulted in the creation of dozens of new companies that used the market to issue new stocks to finance their operations. These new companies were often founded with modest resources, but then raised large amounts of capital in the market from other investors. As these stocks rapidly increased in value, there was created a market bubble, which has been called the “Encilhamento.” — location: [863](kindle://book?action=open&asin=B00I0UNGH6&location=863) ^ref-11175 Rapid growth and stock market bubble after banking system reform. --- the emission of money was seen as the principal cause of the extraordinary devaluation of the exchange rate, the government tried to control the money supply. In 1896 it finally took over direct control of the monopoly of printing money that had previously been conceded to the banking system. — location: [886](kindle://book?action=open&asin=B00I0UNGH6&location=886) ^ref-4975 Was the monopoly of printing money in the hands of a central bank? In the previous section describing the banking system it says it was in the hands of a major bank. --- This fiscal deterioration, the inflation of prices and the depreciation of the Brazilian currency internationally, made the foreign bankers unwilling to provide new credit to Brazil. — location: [897](kindle://book?action=open&asin=B00I0UNGH6&location=897) ^ref-37243 --- With rising coffee prices and rising exports, along with income generated from foreign loans, there was a great inflow of foreign exchange in this period. The result would have been for the mil réis to rise in value, but the Currency Board bought foreign exchange at a fixed price, and this led to stability in the exchange. In turn, the stability of the exchange rate benefited exporters, who otherwise would have been prejudiced by a change in the value of the mil réis. — location: [990](kindle://book?action=open&asin=B00I0UNGH6&location=990) ^ref-7476 Significant intervention in the coffee market and in the currency market. --- Restricting plantings, taking the excess production off the market, creating a tax on exports to support the servicing of the debt assumed to pay for the stockpiling operation, and creating a Currency Board, all functioned adequately to protect the coffee market until World War I. — location: [1002](kindle://book?action=open&asin=B00I0UNGH6&location=1002) ^ref-38308 --- the federal government transferred operation of the defense of coffee to the state of São Paulo that created the Institute for the Permanent Defense of Coffee, which subsequently became the Coffee Institute of São Paulo. The aim of the institute was to regularize the flow of coffee to the embarkation ports. Keeping coffee in the interior warehouses reduced the pressure on the market. The aim was to supply the market but avoid excess supplies. To make this operation viable it was necessary to finance the state purchase of coffee stocks. This system reduced the importance of coffee merchants (called comissários), particularly in their role of providing credit to the producers. — location: [1029](kindle://book?action=open&asin=B00I0UNGH6&location=1029) ^ref-3458 Government price controls similar to OPEC. --- Brazil entered the market as a residual supplier, allowing competitors to put all their products on the market. It guaranteed these competitors a market at extremely high prices, which permitted these less productive competitors to enter the market. As a result these competitors increased their production and export of coffee at the expense of Brazil — location: [1048](kindle://book?action=open&asin=B00I0UNGH6&location=1048) ^ref-49690 Similar to OPEC, and creating the exact same problem over the long-term. --- the wealthiest coffee planters became entrepreneurs in a wide variety of businesses, especially those derived from or dependent on coffee. These businesses included railroads, the generation of electricity, importing merchant houses, financial services, coffee brokers, and the new industries supplying the expanding internal market. — location: [1313](kindle://book?action=open&asin=B00I0UNGH6&location=1313) ^ref-24963 Accumulated capital from coffee profits was reinvested into other industries. --- Various studies show that the origin of many of the factories came from capital generated in the coffee sector. In fact, the paulista coffee barons could be characterized as significant capitalist entrepreneurs, who participated in a very wide number of major enterprises, often in the form of stock ownership of these corporations. Two of the principal railroads, the Mogiana and the Paulista, had their origin in coffee capital and had shareholders who were coffee planters. — location: [1321](kindle://book?action=open&asin=B00I0UNGH6&location=1321) ^ref-41272 --- In reviewing the evolution of the Old Republic and its economic and social development, it is evident that by the end of the 1920s the country had undergone major transformations since the early days of the republic. Although coffee predominated and the country was still essentially agrarian, the productive structure of the country had been amplified and diversified, especially in the industrial area, which now took a considerable part of national capital, productive capacity, and labor. There was also a growth of population in the state capital cities and along with the expansion of transport and services there had also slowly emerged a new urban middle class. — location: [1428](kindle://book?action=open&asin=B00I0UNGH6&location=1428) ^ref-594 --- the crisis of 1920 created by the recession in the United States, again reduced coffee prices and led to a new government intervention in the market and the creation of a new Currency Board to control the exchange rate and avoid the valorization of national currency. — location: [1452](kindle://book?action=open&asin=B00I0UNGH6&location=1452) ^ref-11667 --- This power structure and the key economic importance of coffee in Brazil led to an economic policy that essentially gave economic and political power to a few powerful states and a central government totally dependent on these local oligarchies. The result was a major and continuous intervention of the state to guarantee the profitability of the coffee economy. — location: [1460](kindle://book?action=open&asin=B00I0UNGH6&location=1460) ^ref-64224 --- the nation remained one where only a minority could read and write. The regional oligarchies took advantage of these conditions to reduce the more democratic aspects of the old imperial regime, by denying the vote to illiterates, which thus reduced the electoral rolls and further guaranteed the predominance of the traditional oligarchies.151 — location: [1485](kindle://book?action=open&asin=B00I0UNGH6&location=1485) ^ref-54875 --- It would take a political revolution and the impact of a major crisis in international trade, due to the world economic crisis of the Great Depression, to finally force more significant changes in Brazil. — location: [1496](kindle://book?action=open&asin=B00I0UNGH6&location=1496) ^ref-20324 --- Franco, in an excellent work on the subject, built a series of the balance of payments for the period and argues that the fluctuation in the exchange rate “was due, undoubtedly, to the instability of Brazil's balance of payments.” The poor trade balance, variations in the inflow of foreign investments, and occasional foreign financing obtained by the government were the main causes of instability in the balance of payments, and therefore the fluctuations in the exchange. Moreover, the foreign exchange market, although of free access, was extremely concentrated and speculative, increasing the effects of external shocks. Gustavo H. B. Franco, “Reforma Monetária e instabilidade durante a transição republicana” — location: [1754](kindle://book?action=open&asin=B00I0UNGH6&location=1754) ^ref-45302 --- On the financial crisis that resulted from the abolition of slavery, see John Schulz, The Financial Crisis of Abolition — location: [1780](kindle://book?action=open&asin=B00I0UNGH6&location=1780) ^ref-1612 --- Banking and Economic Development: Brazil, 1889–1930 (New York: Palgrave, 2000); Annibal — location: [1787](kindle://book?action=open&asin=B00I0UNGH6&location=1787) ^ref-4555 --- The devaluation of the national currency protected determined productive sectors. Some of the new companies, created during the period of the Encilhamento, became permanent parts of the manufacturing sector. According to the pioneering work of Stanley Stein, the Encilhamento deserves greater attention for its importance in the genesis of Brazilian industry. — location: [1825](kindle://book?action=open&asin=B00I0UNGH6&location=1825) ^ref-13344 --- In the 1880s Argentina went through a process similar to the speculation that occurred in Brazil culminating with the collapse of several banks and companies in early 1890, including the traditional Baring Brothers Bank. Breaking the bank caused uproar in the Argentine financial market, with serious repercussions on the London market. — location: [1833](kindle://book?action=open&asin=B00I0UNGH6&location=1833) ^ref-52735 --- “The Baring Crises and the Great Latin American Meltdowns of the 1890s,” available at http://emlab.berkeley.edu/~webfac/eichengreen/e211_fa06/Mitchener.pdf; and Gail Triner and K. Wandschneider, “The Baring Crisis and the Brazilian Encilhamento, 1889–1891: An Early Example of Contagion among Emerging Capital Markets,” Financial History Review 12,2 (2005), 199–225. — location: [1837](kindle://book?action=open&asin=B00I0UNGH6&location=1837) ^ref-29645 --- The slow emergence of an urban middle class and an industrial labor force created new social tensions that the old oligarchic government could not resolve with simple repression. It would take a political revolution and a completely new vision to begin to deal with the question of the incorporation of these new groups into national society in a coherent way. — location: [2112](kindle://book?action=open&asin=B00I0UNGH6&location=2112) ^ref-11581 --- The Revolution of 1930 was initially a political revolution that led to the overthrow of the political system of the Old Republic. But the establishment of a new authoritarian regime that would last 15 years would have a fundamental impact on the economy and society of Brazil. — location: [2121](kindle://book?action=open&asin=B00I0UNGH6&location=2121) ^ref-58333 --- the formal liberal political system would be replaced by an authoritarian interventionist regime that provided new services for large segments of the population as it denied them political autonomy. — location: [2128](kindle://book?action=open&asin=B00I0UNGH6&location=2128) ^ref-34331 --- The decade of the 1920s showed other signs of the fragility of the Old Republic political elite. Aside from the tenentista rebellion, there occurred great popular protests, particularly in Rio de Janeiro. The Artur Bernardes government (1922–1926) was under a state of siege for most of the period. The strong devaluation of the currency, which was reflected in the increasing costs of imported products, partially explains this urban unrest. — location: [2154](kindle://book?action=open&asin=B00I0UNGH6&location=2154) ^ref-22550 --- The old liberalism was replaced by an authoritarian, centralizing and modernizing regime. This type of transition was occurring in many Latin American countries as a result of the Great Depression. According to most scholars, this new authoritarianism signified the transition from an oligarchic state grounded on the landed elite to a new political structure based on compromise between competing groups. — location: [2180](kindle://book?action=open&asin=B00I0UNGH6&location=2180) ^ref-39483 --- The style of government inaugurated by Vargas, classified by some as populism, or by others as a regime of mass politics, sought to lead by manipulating popular aspirations that could only be understood in the context of the political and economic crisis that opened with the revolution of 1930. — location: [2190](kindle://book?action=open&asin=B00I0UNGH6&location=2190) ^ref-56038 --- On assuming the government, Vargas dissolved the national, state, and municipal legislatures and appointed interventors to replace the state governors. He also emphasized the power of the federal government and reduced the powers of the states. — location: [2196](kindle://book?action=open&asin=B00I0UNGH6&location=2196) ^ref-14979 --- Until his overthrow in 1945 Vargas governed by decree without a national legislature. If in its initial period the Vargas regime was authoritarian, with the creation of the Estado Novo in 1937 he moved toward a more repressive state, with the suspension of civil liberties, arbitrary imprisonment, total censorship of the press, and the establishment of an extensive propaganda machine.15 — location: [2207](kindle://book?action=open&asin=B00I0UNGH6&location=2207) ^ref-35274 --- The crisis drastically reduced Brazilian exports and the terms of trade and paralyzed the flow of foreign loans and capital, provoking a strong devaluation of Brazilian currency.24 In 1931 the government negotiated a consolidation of its international debt and gave a monopoly over the foreign exchange market to the Banco do Brasil and established priorities for access to foreign currencies that were official purchases to pay for the public debt, purchases for the import of essential products for the domestic market and for the return to foreigners of interest and dividends on their Brazilian investments.25 — location: [2266](kindle://book?action=open&asin=B00I0UNGH6&location=2266) ^ref-49361 --- The pace of structural reform only increased with the Estado Novo. Given that Congress was closed and the opposition was muzzled, Vargas was able to make major changes unopposed. He abolished the federalist model and put far greater power into the hands of the central government. — location: [2292](kindle://book?action=open&asin=B00I0UNGH6&location=2292) ^ref-55257 --- It is worth stressing the essential role exercised by the Banco do Brasil in the economic area, which now controlled the exchange rate and played a primary role in credit operations in promoting agriculture and industry.37 In 1945 the Banco do Brasil, gained additional power with the creation of the Superintendency of Money and Credit (Superintendência da Moeda e do Crédito).38 This organization represented a major advance in the administration of national monetary policy, exercising in practice part of the functions of a classic central bank, which in the case of Brazil was only created in 1964.39 — location: [2319](kindle://book?action=open&asin=B00I0UNGH6&location=2319) ^ref-32975 --- The government deliberately promoted a policy of import substitution by manipulating a complex system of tariffs, favoring the importation of essential goods, primary materials, and capital goods, and heavily taxing finished products. — location: [2328](kindle://book?action=open&asin=B00I0UNGH6&location=2328) ^ref-2221 Heavy intervention in Bo P and trade. --- The attempts to create a significant university in the Federal District of Rio de Janeiro in the early 1930s died under the control of Capanema, and in fact the first serious university created in Brazil developed out of largely private initiatives and local government support in the state of São Paulo. — location: [2365](kindle://book?action=open&asin=B00I0UNGH6&location=2365) ^ref-43838 --- coffee, cotton, corn, rice, beans, manioc, and sugar – the seven accounting for 85 percent of the value of production between 1938 and 1947. Coffee, cotton, corn, and rice were the most important. In terms of acreage, these three crops occupied more than 90 percent of the area cultivated in this period. — location: [2614](kindle://book?action=open&asin=B00I0UNGH6&location=2614) ^ref-10369 --- the Vargas period was one of significant transformations in the economy of the country. Industry expanded significantly in this period. Externalities also aided the growth of the economy. Both the Great Depression and World War II stimulated the growth in manufacturers. All this was supported by government policy through exchange controls that benefited local production. — location: [2703](kindle://book?action=open&asin=B00I0UNGH6&location=2703) ^ref-11979 Like the US, Brazilian manufacturing must have benefitted immensely from WWII. --- World War II had a dual impact on the Brazilian economy. It stimulated production to satisfy increasing external demand and increased output to provide substitutes for the internal market for imported goods that were no longer available. Not everything was positive, of course. Primary materials, fuels, machines, and equipment became difficult to import and thus were unable to satisfy local demand and were obtained at higher prices. At the same time, increasing exports and declining imports in the war period created surpluses in the balance of trade and led to the accumulation of reserves. — location: [2712](kindle://book?action=open&asin=B00I0UNGH6&location=2712) ^ref-2543 --- In contrast to mortality and life expectancy, there was little change in fertility in the Vargas period. The crude birth rate remained in the mid-40s for this entire period. It has been estimated to be 46 births per thousand resident population in 1900 and again in 1930,103 which placed it among the Latin American countries with the highest birth rates — location: [2894](kindle://book?action=open&asin=B00I0UNGH6&location=2894) ^ref-49155 --- In assessing the Vargas regime, probably its most lasting impact included its new vision of the role of industry in the development of Brazil and its vision of the need to create heavy industry, which only the state could provide in this early period of industrialization. Steel and other basic industries were fostered and developed by the state. Though the coffee elite was protected in its profitability, harsh government control now affected supply conditions in a systematic and long-term way. — location: [2913](kindle://book?action=open&asin=B00I0UNGH6&location=2913) ^ref-6592 --- In the social area there was also significant change under Vargas. Despite much discussion of education reform, the student population grew relatively slowly in this period. But there was the emergence of a very new and very important beginning of industrial education supported by the state and carried out by the associations of regional industrialists that would emerge by the 1950s as one of the world's largest such educational institutions. — location: [2921](kindle://book?action=open&asin=B00I0UNGH6&location=2921) ^ref-27693 --- Even more significantly there was the beginning of a modern pension system and the emergence of technical administrators needed to run these institutions. — location: [2924](kindle://book?action=open&asin=B00I0UNGH6&location=2924) ^ref-61748 How nationalized pensions started? --- all governments that followed the Vargas era, whether military or democratic, would be profoundly influenced by all the changes effected by Vargas. These post-1950 governments no longer questioned their right to intervene in the economy, — location: [2931](kindle://book?action=open&asin=B00I0UNGH6&location=2931) ^ref-9213 --- all the regimes following Vargas were committed to the expansion of the welfare state and its goal of universal access to health, education, and social security. In Brazil, the government was now seen as the major player in the economy and in society, and this belief had as its origin the ideas and practices that emerged in the two decades of the Vargas period. — location: [2935](kindle://book?action=open&asin=B00I0UNGH6&location=2935) ^ref-43394 The root of state intervention is in the Vargas period. --- “State Enterprise in a Liberal Regime: The Banco do Brasil, 1905–1930,” — location: [3100](kindle://book?action=open&asin=B00I0UNGH6&location=3100) ^ref-63998 --- A large part of the deficit was financed by loans from the Bank of Brazil to the Treasury. Since the Bank of Brazil worked as a commercial bank and a central bank, its liabilities to the public were part of the monetary base. Issuing government bonds to finance all this was difficult, since the bond market was quite limited due in part to the mismatch between high inflation, on the order of 25 to 30 percent, and the usury law, which limited interest rates to 12 percent.56 That meant that the financing of the Treasury's deficit was made through the expansion of the money supply, thus generating inflationary pressure. — location: [3757](kindle://book?action=open&asin=B00I0UNGH6&location=3757) ^ref-65320 --- The government pointed to the international and public sectors as the main causes of inflation. So to relieve pressure from the public sector the government proposed increasing taxes, reducing public spending, raising funds from the private sector, and mobilizing financial resources. Although Goulart was determined to carry out the plan, there were no objective conditions for its success. In 1963 inflation rose to 82 percent and there was virtually no growth that year in the GDP.73 In April 1964, after a period of major political turbulence, the army carried out a military coup, overthrew the Goulart government, and established a military dictatorship that would remain in power for 21 years. — location: [4004](kindle://book?action=open&asin=B00I0UNGH6&location=4004) ^ref-29374 --- Political repression now became the norm, and the military arrested thousands of people, including dissident military officers. The government was especially hard on the leaders of the movements of urban and rural workers. During the military regime, censorship, repression, imprisonment, and torture became widespread. — location: [4013](kindle://book?action=open&asin=B00I0UNGH6&location=4013) ^ref-8918 --- Congress was closed and a severe censorship was imposed even affecting artistic expression in all its forms. The political rights of politicians were annulled, civil servants were dismissed, and university professors expelled. Exile was the destination of thousands of Brazilians including the future president of Brazil Fernando Henrique Cardoso, — location: [4057](kindle://book?action=open&asin=B00I0UNGH6&location=4057) ^ref-54099 --- Médici would create the most closed and repressive military regime in Brazilian history. He was president from October 1969 until March 1974. These would be years of great economic euphoria with high rates of growth. The rapid growth provided a better standard of living for the middle class, and job creation in the labor market incorporated large parts of the population. It was also a period of increasing concentration of income. These results gave the government relative popularity, despite its fierce censorship, repression, and constant violation of individual rights. In contrast to other military governments, that of Médici intensively used the media to sell the image that Brazil was a country that was progressing rapidly and would soon become a world power. — location: [4067](kindle://book?action=open&asin=B00I0UNGH6&location=4067) ^ref-16763 An authoritarian government creating high growth at the expense of personal freedom and Censorship and repression. Similar to China? --- There was a debate about the viability of a two-party or multiparty system and even the possibility of establishing a single-party state was proposed. For many, the strength of the official party, which included intimidation of voters, changes in electoral rules, and the muzzling of the opposition leaders indicated that the regime was headed for a one-party solution. The results of the elections of 1970 seemed to point to this outcome. In 1974, however, the situation changed when the opposition won the most significant federal and state legislative elections. It was a surprise because the government believed that the ARENA would win, but the election results showed the total public opposition to the regime. — location: [4090](kindle://book?action=open&asin=B00I0UNGH6&location=4090) ^ref-12063 At one point there was the possibility of a one-party rule in Brazil. --- Despite all the economic growth that occurred, the middle class was clearly against the regime, and even business leaders were beginning to express dissatisfaction. In 1977, the government responded to the opposition victory and increasing civilian pressure by adopting the so-called civil package in April. — location: [4103](kindle://book?action=open&asin=B00I0UNGH6&location=4103) ^ref-30436 --- The leader of the strike movement was Luiz Inacio da Silva, or Lula, then president of the Metalworkers Union of São Bernardo do Campo and Diadema who would later become president of the republic. — location: [4127](kindle://book?action=open&asin=B00I0UNGH6&location=4127) ^ref-1531 --- This procedure was also used for indexing the federal debt, enabling, for the first time, the sale of medium- and long-term government securities. Indexing in fact explains the formation of a relatively sophisticated capital market in Brazil from the 1970s onward, even though inflation never completely disappeared. If this was a positive aspect of the creation of the monetary correction program, the experience of the 1980s and 1990s show that fighting inflation would be virtually impossible as long as indexing existed. With the changes made in the fiscal area, the deficit was sharply reduced and was now funded primarily by the placement of public debt, unlike the previous practice of financing through monetization.84 — location: [4166](kindle://book?action=open&asin=B00I0UNGH6&location=4166) ^ref-36722 --- there was also approved a new Corporate Law code that was designed to better meet the needs of the capital market, especially as concerned the rights of minority shareholders. The administration also created tax incentives for businesses and investors that operated in the stock market. But this action, except for a short-term bubble, was of little importance in mobilizing resources to meet the capital needs of companies in Brazil. — location: [4237](kindle://book?action=open&asin=B00I0UNGH6&location=4237) ^ref-9011 --- The increase in foreign debt and its floating interest rates meant that the country would become more vulnerable to future changes in the international financial market. And already in the decade of the 1970s, despite the rapid growth of the advanced economies, there were signs of deterioration in that scenario, with rising inflation that even affected the richest countries, and resulting fluctuations in their currencies. — location: [4281](kindle://book?action=open&asin=B00I0UNGH6&location=4281) ^ref-42365 The high debt loads taken on by Brazil were to fund the industrial i eatin and growth of the economy. Less support from foreign agencies and increased finding from banks. Important to remember this When researching the LATAM crisis. --- The “economic miracle” occurred in the most reactionary period of the military regimes. At a time when the opposition and the press were muzzled and trade unions controlled, the government's only goal was to show growth at any cost. It did not admit criticism, even unbiased ones, pointing to errors in its economic policy. Even the academic debate was silenced and kept out of the media by the regime. — location: [4285](kindle://book?action=open&asin=B00I0UNGH6&location=4285) ^ref-17096 And look what happened after that. This also sounds a lot like China today. --- Compared to most Latin American countries, Brazil had never had a genuine process of agrarian reform or the free distribution of land for economic exploitation. — location: [4328](kindle://book?action=open&asin=B00I0UNGH6&location=4328) ^ref-59828 Whereas in the U.S. land was given away inexpensively to get westward expansion. --- The operation of the Account Movement, which represented an automatic discount of the Bank of Brazil, gave to this bank a power of currency emission, and represented an effective increase in the money supply.98 The subsidy in credit came from the setting of interest rates in nominal terms, usually below inflation. During the 1970s, the volume of credit multiplied by four, having its best year in 1979. The abundance and negative cost of government credit to the producer funded the modernization of agriculture in terms of equipment and supplies. — location: [4350](kindle://book?action=open&asin=B00I0UNGH6&location=4350) ^ref-3678 --- Thus the government promoted three key proagricultural policies: subsidized credit, minimum prices, and the buying of buffer stocks. — location: [4359](kindle://book?action=open&asin=B00I0UNGH6&location=4359) ^ref-38649 --- In this last year, the interest payments of foreign debt accounted for half the value of all exports. This set the stage for a Brazilian foreign debt crisis in the context of an international financial market crisis. Moreover, the deterioration of public accounts and the internal price shock caused by high oil prices resulted in higher prices even in rich countries. In Brazil inflation resumed its upward trend, rising past 50 percent per annum in 1979 — location: [4406](kindle://book?action=open&asin=B00I0UNGH6&location=4406) ^ref-45052 --- This policy of suppressing the rates and prices that these corporations could charge internally was actually a subsidy to the private sector, and ended up indebting the state by worsening public accounts and increasing the foreign debt of the public sector. — location: [4456](kindle://book?action=open&asin=B00I0UNGH6&location=4456) ^ref-42025 --- By limiting the correction of the outstanding balance of loans in different sectors of the economy, the government was in effect exhausting resources available for new financing, as eventually happened in the housing segment. For several years, it was possible to develop an ambitious program of housing and sanitation. But limiting the correction of the benefits paid by borrowers reduced the return flow of funds, preventing the development of new ventures, especially for low-income families. This lack of public support for housing the poor led to the prevalence of the construction of precarious individual family homes lacking infrastructure and dependent on personal savings for the costs of construction. This deterioration in financial conditions for housing and sanitation is probably one of the causes for the rapid spread of favelas all over Brazil. — location: [4477](kindle://book?action=open&asin=B00I0UNGH6&location=4477) ^ref-43333 Government limited the indexing on loans and bonds, which reduced the real value of Savers assets over time. Eventually resulting in the lack of finds for building proper houses. --- the market for fixed-rate bonds that would finance these operations were limited to periods of 90 days, there being no fixed supply of credit for six or twelve months. This imbalance between the supply of funds and borrowers preferences considerably reduced borrower loans in the consumer credit market. Brazil became a country where even the purchase of cars was done with one's own resources or short-term credit. — location: [4486](kindle://book?action=open&asin=B00I0UNGH6&location=4486) ^ref-19415 The credit market dries up with high inflation and uncertainty about future price & interest rate moves. --- it was about to face the second oil shock. During this period, contrary to what occurred with the first oil crisis of 1973, the international markets drastically reduced their supply of resources to debtor countries, which began to have trouble renewing their external loans. — location: [4494](kindle://book?action=open&asin=B00I0UNGH6&location=4494) ^ref-64677 --- The second oil shock and rising interest rates in the international market dramatically changed the external conditions affecting the debtor countries. This became clear in the Mexican debt crisis of 1982, with most peripheral countries showing deterioration of external accounts — location: [4503](kindle://book?action=open&asin=B00I0UNGH6&location=4503) ^ref-12675 --- It was the beginning of the “debt crisis” that would last the entire decade and affect almost all Latin American countries, which were forced to restructure their foreign debt. This broke the long trajectory of growth that these countries had experienced during most of the second half of the twentieth century. — location: [4508](kindle://book?action=open&asin=B00I0UNGH6&location=4508) ^ref-13998 Also the end of the commodity boom. --- These measures provoked a deep recession, with GDP falling by 4.3 percent. This was the first negative growth rate of this type in the post-1945 period. The trade balance was again positive, showing a surplus of more than U.S.$1 billion, but the balance of payments was still being strongly affected by interest payments of U.S.$10 billion, an excessive amount when one considers that the country exported only U.S.$23 billion. — location: [4526](kindle://book?action=open&asin=B00I0UNGH6&location=4526) ^ref-61654 The recession & corrective measures balanced or normalized the accounts but created the largest growth shook in decades. (inlate80s) --- It is worth remembering that at the time most of the foreign debt was the responsibility of the public sector. To meet the obligations of this foreign debt, the country began to generate significant trade surplus. This, however, was produced by the private sector. The public sector needed to buy foreign currency to honor international commitments or increase reserves. As this purchase was made by increasing the money supply, to sterilize this effect the government sold bonds increasing its level of indebtedness. — location: [4567](kindle://book?action=open&asin=B00I0UNGH6&location=4567) ^ref-47012 --- In the first half of the 1980s, there were proposals for an alternative antiinflationary policy.108 These studies formed the backdrop to the Cruzado Plan, launched in 1986. — location: [4576](kindle://book?action=open&asin=B00I0UNGH6&location=4576) ^ref-9607 --- The rapid industrialization of this period had positive and negative aspects. It generated probably the most open and rapid period of social mobility in the nation's history as a new industrial and managerial elite emerged out of a rural and poorly educated population. But it also led to a massive internal migration from poor to rich zones of the country and the consequent growth of metropolitan areas, and the lack of housing in these ever-expanding centers would lead to the rise of the squatter settlements in all the major cities. — location: [4588](kindle://book?action=open&asin=B00I0UNGH6&location=4588) ^ref-12037 Favell as caused by govern-t intervent in credit allocation and through rapid urbanization? --- Even literacy began to change as the nation finally became predominantly literate by the census of 1960. By the end of the military era Brazil would quickly pass through a demographic transition in which fertility was declining so dramatically that it would profoundly influence the age structure of the nation as well as its capacity for population growth. — location: [4609](kindle://book?action=open&asin=B00I0UNGH6&location=4609) ^ref-52369 Wasn't the same thing happening everywhere in LATAM and EM more broadly? at the same time? Can 't he related to the government --- Given the declining investments in housing, sanitation, and electricity in these centers due to government fiscal retrenchment, the growing metropolitan areas were incapable of housing all the new immigrants. The result was the expansion of the so-called favelas, which were illegal squatter housing settlements on unused land. — location: [4765](kindle://book?action=open&asin=B00I0UNGH6&location=4765) ^ref-19664 --- In economic terms this was the period in which a modern banking and credit system was created, a coherent industrial policy was implemented, and the country was opened up to foreign investment, especially in the industrial sector. Though much of this “pump priming” would lead to long-term deficits and the growing impact of price inflation, there is little question that the government created an industrial base that was fundamental in making Brazil the leading industrial power in Latin America. — location: [4949](kindle://book?action=open&asin=B00I0UNGH6&location=4949) ^ref-7794 --- The long and bitter struggle to return to democratic government and remove the military from power was essential in creating new political alliances and attitudes, which, in turn, was fundamental in establishing a modern democratic state after 1984. This long conflict would eventually create a new set of political parties and a more moderate political atmosphere better related to the realities of Brazilian economic and political structures. — location: [4968](kindle://book?action=open&asin=B00I0UNGH6&location=4968) ^ref-64914 --- there emerged a series of new ideas and new political positions that would become dominant themes in the post-1980 period. The failure of armed struggle by the far left, combined with the major campaign of torture and assassinations carried out by the military regimes, led to a basic reevaluation of the importance of what came to be called “human rights.” — location: [5694](kindle://book?action=open&asin=B00I0UNGH6&location=5694) ^ref-24751 --- In the decade of the 1970s and 1980s there emerged a major environmental movement in Brazil, the first in Latin America.3 — location: [5702](kindle://book?action=open&asin=B00I0UNGH6&location=5702) ^ref-26964 --- The new constitution, though highly advanced in terms of political and social rights, has been widely criticized since its approval in 1988.17 The constitution is very extensive and detailed, reflecting the clash of many segments of society, free from the shackles of dictatorship, but without one group or vision dominating.18 For example, there was a trend of strengthening fiscal decentralization, and states and municipalities increased their share in fiscal revenue relative to the federal government, but without taking corresponding responsibility. In addition, there were created additional commitments to public spending making the execution of the budget and establishing a fiscal balance more difficult. Several public monopolies were enshrined in the constitution under pressure from nationalist groups or as reflections of corporate interests. On the other hand, the Constitution of 1988 was considered one of the most advanced in terms of political and social rights. The extension of voting rights to illiterates and the reduction of the minimum voting age represented major policy innovations. The constitution provided for a presidency to be decided by a majority of voters in two rounds of elections if necessary, with a four-year term without reelection. — location: [5775](kindle://book?action=open&asin=B00I0UNGH6&location=5775) ^ref-34937 [earn more about Brazilian Constitution & its impact on the politics of Brazil since then. --- One of the characteristics of the party system in Brazil is its weakness in terms of party loyalty, with frequent changes of parties even by politicians active in the legislative assembly or the executive branch. — location: [5796](kindle://book?action=open&asin=B00I0UNGH6&location=5796) ^ref-11080 --- Another feature of the Brazilian party system is the creation of parties or the use of small local parties to support the rise of political leaders who find no room in the more traditional associations. The election of the successor of Sarney was an example of this process. — location: [5800](kindle://book?action=open&asin=B00I0UNGH6&location=5800) ^ref-50602 --- These facts led to the implementation of monetary reform of February 28, 1986, known as the Cruzado Plan, which changed the system of national currency, froze all prices, including exchange rates, and eliminated indexing.23 The plan was an instant success. There was a dramatic reduction of inflation and strong popular support for the price freeze. — location: [5824](kindle://book?action=open&asin=B00I0UNGH6&location=5824) ^ref-49991 Breaking the feedback loop between inflation creating further inflation from indexation of prices to inflation. But price freezes and fixed exchange rate caused predictable problems. --- At the start of 1987, the Cruzado Plan was over. Brazil, in the face of external difficulties, and with the closing of the international financial market for Latin American countries, was forced to suspend foreign debt service and to enforce a moratorium.24 — location: [5841](kindle://book?action=open&asin=B00I0UNGH6&location=5841) ^ref-44864 --- It is often said that this was a “lost decade.” From the political point of view there were huge democratic advances. But from the economic perspective, the 1980s disrupted the long growth cycle of the first seven decades of the century. — location: [5867](kindle://book?action=open&asin=B00I0UNGH6&location=5867) ^ref-44392 --- The importance of wheat in the basic diet and the potential political impact of the adoption of a free market led to the delay in implementing changes. But in 1987 subsidies were eliminated and in 1990 the free market for all stages of production and marketing of wheat was introduced. — location: [5935](kindle://book?action=open&asin=B00I0UNGH6&location=5935) ^ref-48082 --- The sugar cane for ethanol production was planted in the best soils in the country with extremely efficient and mechanized cultivation. There also developed a national technology of processing of sugar cane, which became comparable to the best in the world. — location: [5949](kindle://book?action=open&asin=B00I0UNGH6&location=5949) ^ref-35992 --- The novelty in this sector would be the development of flex-fuel engines in 2003, which allowed car owners to consume either petroleum or alcohol. This facilitates the decision-making process of the car buyer and the uncertainty about the future behavior of the price relationship between the two fuels, and by 2008 such flex-fuel engine cars accounted for 91.5 percent of the 2.3 million cars — location: [5954](kindle://book?action=open&asin=B00I0UNGH6&location=5954) ^ref-14163 The development of flex fuel cars in Brazil is really interesting. While it was a top down decision which contributed to the default (big spending] it now means Brazilian consumers are probably least effected by an oil price crisis. Important to remember going forward. --- The integration among producer, supplier, and customer, which began in the 1980s with the sudden withdrawal of government credit, in the following decade would become the primary source of rural credit and remains today the basis of the financing of Brazilian agribusiness. — location: [5968](kindle://book?action=open&asin=B00I0UNGH6&location=5968) ^ref-58537 --- The policy of guaranteed minimum prices and the operation of buffer stocks also would be recast. — location: [6004](kindle://book?action=open&asin=B00I0UNGH6&location=6004) ^ref-40391 Brazil is way ahead of India in creating a free market in agriculture & removing subsidies. --- Given this growth of agriculture in the beginnings of the liberalization process, there would be less opposition for these changes than would occur with industry. The fact that the rural area suffered less may help explain why there was so little opposition to this opening of the Brazilian economy. The deregulation of the economy would receive a major boost with the presidential election of 1989, which was the first by direct vote since 1960. It occurred during a major economic crisis, with inflation reaching around 50 percent per month, thus characterizing the economy as one experiencing hyperinflation. — location: [6034](kindle://book?action=open&asin=B00I0UNGH6&location=6034) ^ref-57053 Does a hyper inflationary crisis create deregulation, when the society sees the government as the cause?. Or was it already moving in this direction? --- Collor also inaugurated the liberal discourse in Brazil known as the Washington Consensus and took the first steps to open the market to international competition, promote foreign investment, privatize the economy, and eliminate state monopolies in the production of goods and services. Considering that his political base was a small party and that he won as an alternative to the leftist candidates, Collor had not assumed any political commitments during the campaign, and felt free to make such radical changes in the economy. — location: [6056](kindle://book?action=open&asin=B00I0UNGH6&location=6056) ^ref-63665 Washington consensus supported market-friendly policies,implemented by an Unknown young politician with no prior political affiliations. --- The continuing deterioration of the economy, and the obvious evidence of major government corruption despite the anticorruption theme of his electoral campaign, led to the impeachment of the president. The anti-Collor campaign provoked massive protests; impeachment, however, took place according to constitutional rules and without institutional crisis – a key indicator of the maturation of Brazil's young democracy. — location: [6090](kindle://book?action=open&asin=B00I0UNGH6&location=6090) ^ref-60736 Brazil has a mature democracy and resilient political system. --- In December of that year, under the direction of Cardoso, there was adopted what became known as the Real Plan, named for the new currency that was established. This proved to be the most successful modern plan ever enacted to stabilize the economy and stem the inflationary process that had persisted for nearly half a century. — location: [6099](kindle://book?action=open&asin=B00I0UNGH6&location=6099) ^ref-17311 --- The Real Plan took place in three distinct phases. The first, announced in December 1993, consisted of a set of fiscal measures to increase tax collections. Those responsible for the plan understood the necessity of ensuring the need to balance state finances before the implementation of new monetary reform could be carried out. — location: [6132](kindle://book?action=open&asin=B00I0UNGH6&location=6132) ^ref-28265 Otherwise continued monetization of fiscal deficits was necessary --- The privatization process carried out by the government of Fernando Henrique Cardoso deserves some consideration. — location: [6232](kindle://book?action=open&asin=B00I0UNGH6&location=6232) ^ref-56437 --- To pay for the servicing of the debt that had been transferred to the federal government, the subnational entities had to pay a percentage of their annual revenues to the federal government.54 But it was necessary to create rules that maintained fiscal balance over the long run, and this was done through the adoption of the Fiscal Responsibility Law, which represents one of the most innovative and important instruments of public governance in Brazil, in terms of providing government transparency and accountability, applying practices that only exist in a few countries with a tradition of good fiscal practice.55 — location: [6305](kindle://book?action=open&asin=B00I0UNGH6&location=6305) ^ref-27811 --- The government systematically refused to promote a change of exchange-rate policy, which could have been done in times of greater tranquility. In January 1999 it was forced to make this change in the midst of a major external crisis. It let the exchange rate float freely, and immediately the real fell by more than 60 percent against the dollar. — location: [6313](kindle://book?action=open&asin=B00I0UNGH6&location=6313) ^ref-51099 --- Output and planted area have been growing systematically over several decades, but what marks the Brazilian agriculture in the last thirty years is the extraordinary increase in productivity, which in previous decades had remained stagnant — location: [6517](kindle://book?action=open&asin=B00I0UNGH6&location=6517) ^ref-37464 --- This barrier is defined by restricted access to the elite public university education, which is denied to the majority of graduates of public secondary schools because of the low quality of these public high schools. Only high-cost private secondary education permits easy access to public universities. The rise of a major private university system that is open to public school graduates has led to a two-tier tertiary education system that, in turn, shunts graduates to different levels of the labor market, as private university graduates receive fewer skills than public university graduates. — location: [6662](kindle://book?action=open&asin=B00I0UNGH6&location=6662) ^ref-4803 I would love to understand the education system in Brazil a bit better. --- this leaves Brazil with one of the highest levels of university privatization in the world, which even the United States does not come close to achieving. These for-profit universities have little interest in research and low standards of admission.85 Despite this reliance on the market, Brazil still has one of the lowest ratios of young adults matriculated in higher education even within Latin America. — location: [6671](kindle://book?action=open&asin=B00I0UNGH6&location=6671) ^ref-7733 --- Thus a perfect combination of push-and-pull factors set off a massive movement of population. By the census of 1980 it was estimated that 46 million Brazilians out of the 119 million resided in a municipality other than the one they were born in – or some 39 percent of the total population. — location: [6872](kindle://book?action=open&asin=B00I0UNGH6&location=6872) ^ref-50267 --- The rural population that had grown throughout the twentieth century reached 41 million persons in 1970, or 44 percent of the total population. But in the next decade it declined to 38.5 million persons (and 32 percent of the national population) and then to 33.8 million by the late 1990s, or just 22 percent of the national population.132 By the census of 2010 they numbered only 29.8 million and now represented only 16 percent of the national population.133 — location: [6909](kindle://book?action=open&asin=B00I0UNGH6&location=6909) ^ref-23298 Steady decline of the rural population over the past 40 decades. --- Brazil essentially deviated from most of the liberalizing pension reforms carried out in Latin America beginning with Chile in the 1980s and expanding to many Latin American countries in the 1990s. Unlike many other nations, Brazil did not privatize its pension scheme but instead solidified and rationalized its pay as you go system, though it did open the door for supplementary private insurance plans. — location: [6987](kindle://book?action=open&asin=B00I0UNGH6&location=6987) ^ref-19411 --- Two major developments occurred in the 1990s that finally brought the economic situation under control, but that resulted in fundamental changes in industrial policy and activity. The first was the opening up of the Brazilian economy, which began under Collor and was fully supported by the Cardoso government. — location: [7197](kindle://book?action=open&asin=B00I0UNGH6&location=7197) ^ref-34689 --- Finally, a quiet but profound revolution has occurred in agriculture, which became the new engine of growth for the post-1980 regimes. Brazilian agriculture today is as efficient and modern as those of any other advanced country, and today Brazil ranks with the United States, Canada, Argentina, and Australia as one of the greatest of the world's agricultural producers. — location: [7228](kindle://book?action=open&asin=B00I0UNGH6&location=7228) ^ref-13627 --- Clearly there remain fundamental problems that still require profound reforms. These include the need to reform the tax system, to restructure the parties, and to change the distorted form of representation of the Chamber of Deputies left over from the military era. There is also the need to totally reform the highly inefficient judiciary and complete the overhaul of the pension system. — location: [7238](kindle://book?action=open&asin=B00I0UNGH6&location=7238) ^ref-19263 --- Grandin, Greg. Fordlandia: The Rise and Fall of Henry Ford's Forgotten Jungle City (New York: Metropolitan Books, 2009). — location: [10694](kindle://book?action=open&asin=B00I0UNGH6&location=10694) ^ref-64913 --- Hanley, Anne G. Native Capital: Financial Institutions and Economic Development in São Paulo, Brazil, 1850–1920 (Stanford, — location: [10703](kindle://book?action=open&asin=B00I0UNGH6&location=10703) ^ref-1269 --- Schulz, John. The Financial Crisis of Abolition (New Haven, CT, and London: Yale University Press, 2008). — location: [11033](kindle://book?action=open&asin=B00I0UNGH6&location=11033) ^ref-64224 --- Triner, Gail D.. Banking and Economic Development: Brazil, 1889–1930 (New York: Palgrave, 2000). Triner, Gail D., and K. Wandschneider. “The Baring Crisis and the Brazilian Encilhamento, 1889–1891: An Early Example of Contagion among Emerging Capital Markets,” Financial History Review 12,2 (2005), 199–225. — location: [11139](kindle://book?action=open&asin=B00I0UNGH6&location=11139) ^ref-9877 --- Weidnmier, Marc D. “The Baring Crises and the Great Latin American Meltdowns of the 1890s.” Available at http://emlab.berkeley.edu/~webfac/eichengreen/e211_fa06/Mitchener.pdf. — location: [11167](kindle://book?action=open&asin=B00I0UNGH6&location=11167) ^ref-46522 ---