It was necessary because of the growing demand for food, i.e., beef and beasts of burden. Coffee production was mostly concentrated in the states of Rio de Janeiro, Sao Paulo and later in Parana.
The growth of coffee sector, in its wake, contributed to large scale foreign immigration, development of railways, and stimulated urbanisation and promoted domestic market that favoured the growth of indigenous industry. Each economic cycle developed in isolation and remained unrelated to the other and also, prospered during different time periods, as stated earlier. More so, the cycle of limited period/ duration, such as gold and rubber, left behind vacuum, causing stagnation and economic recession in the Brazilian economy. The prosperous period of each cycle was heavily dependent on the peak export of the product.
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As and when the periods of decline in exports approached, the boom was nearly over. In the third quarter of the 17th Century, international prices of sugar fell to half their former level, thus causing a decline in real income. The decline in gold production at the end of 18th Century gave rise to a search for new exports.
Cotton came to occupy a pre-eminent position just at the beginning of 19th Century. Together with the United States, Brazil was for a while the principal cotton exporter to England, but it rapidly lost its position to USA. Also, at the same time a recovery in sugarcane was noticed, yet Brazil’s sugar suffered strong competition from Cuba. It was at this moment that coffee plantation gained ground and occupied a spectacular position in Brazilian economic history for the next century to come. However, at the beginning of the 20th Century, there was an important growth in the exportation of rubber from the Amazon region for a short period, but later the British moved this industry to other regions of the world, especially to Southeast Asian countries and particularly, Malaysia. Summing up the periods of economic cycles in Brazil, we can say that in Brazil’s long history of ever changing production cycles; none ever assumed the character of a broad based development drive. The cycles created economic islands in the various regions of the country, which were isolated from each other and which prospered during different time periods. The result was a dispersed colonisation, an expansion based on the export of raw materials, and little national economic integration.
Impact on Economic and Social Formation
a) Economic Impact:
Brazil witnessed development of ‘Enclave Economy’ as a result of outward expansion. Each ‘economic cycle’ in Brazil originated in its own style and had limited linkage effects with the rest of the economy- Although Brazil wood initiated the process of development, it was sugar cycle, which really began to transform the economic and social environment of Brazil in the next 150 years. Factors responsible for sugar boom were i) high overseas demand for sugar; ii) imported slave labour from West Africa for plantation; iii) development of infrastructure facilities by Dutch to ship sugar from Brazil to European markets; iv) creation of demand for beasts of burden and development of ranching. Despite those favourable factors, sugar boom in Northeast of Brazil lost its position when the Dutch developed competitive sugar plantation estates in Caribbean with cheap labour and low cost transportation to European markets.
Further, in the third quarter of the 17th Century, sugar price fell sharply and caused a decline in real income of the Brazilians. Similarly, the mining centres of gold and diamond Serra do Espinhaco in Minas Gerais became the centres of economic activity in the days of gold rush. Both sugar and mining created a demand for beasts of burden and the population required food-beef-so that on the peripheries of the sugar and gold economy, cattle ranching was developed in two regions the Sertao and south of Sao Paulo. Ranching was in support of the sugar industry but it also produced a valuable byproduct in hides. Thus, the demise of sugar cycle and the short-lived gold rush of the 18th Century had a limited impact on the Brazilian economic development. Similarly cotton economy of Northeast languished in the face of competition from southern US cotton producers.
Tobacco, leather, rice and cocoa were minor products whose markets did not afford great possibilities of expansion. Therefore in the late 19th Century and the beginning of the 20th Century, it was the coffee cycle which dominated the economic scene till 1930. Except for coffee cycle which sowed the seeds of industrialisation in Sao Paulo under adverse international economic environment, no other product had a similar wide ranging impact on the Brazilian economy. Even the coffee economy could not have widespread effect on the whole of Brazil and its effects were limited to the Sao Paulo and Rio de Janeiro areas. Commodity exporters faced invariably adverse terms of trade.
Fluctuating prices of commodities have had deleterious impact on the Brazilian economy and its population in its process of development. Starting from decline in sugar prices to crash in coffee prices during the ‘Great Depression’ in 1929-34, the economy suffered because the investible resources in the bust periods were almost negligible. The boom Period of each cycle indulged in excessive consumption but invested little in diversified activities to sustain the economic life in slump. Predominance of foreign capital through the issue of bonds in world capital markets constituted an important source of funds for Brazilian development ever since its independence. As early as 1824, when sterling bonds were first sold, Brazil bought them at an average discount of about 10per cent; the actual proceeds from the bonds varied between 80 and 90 per cent of then par value after accounting for commissions and brokerage. The bulk of the loans went into productive investment such as construction of railroads, port facilities, sanitation and waterworks arid other facilities for urban development. With the marginal productivity of these projects not exceeding the real cost of borrowing substantially the external debt of Brazil rapidly accumulated from less than $200 million in 1880 to nearly $1.3 billion in 1930.
High debt service obligations were met out of rising export proceeds especially from the coffee sector. Although cycles of ‘booms and busts’ varied in terms of their duration, and impact, these created acute problem of regional imbalances, giving rise to massive migration, for instance, of labour and capital from Northeast to state of Sao Paulo around the coffee boom. By way of measuring inequality in income and assets, the gap has been increasingly widening between the poor Northeast and rich Sao Paulo. Brazil, thus, presents an extreme case of inequality of income among its population and this has worsened over the years.
b) Social Effect:
In its sugar cycle, it was the imported West African slave labour responsible for plantation of sugarcane crop.
The gold rush of the 18th Century attracted immigrants from Portugal, led to the growth of Rio and extended Portuguese influence and settlement into the interior of the country. In the late nineteenth and early twentieth century’s the Europeans, mostly Germans and Italians, migrated in large number to southeast Brazil to engage them in agricultural activities. Their participation in coffee plantation economy of Sao Paulo was also invaluable. Further, the large requirement of labour in coffee plantation was also met through internal migration of labour and capital from Northeast of Brazil to Sao Paulo area. Thus, Brazil became a melting pot of several races in its process of economic development.
Importantly, males of all races outnumbered females. Nonetheless, the high growth rate of population (mainly by immigration) had its economic impact in each economic cycle. For instance, in spite of the rise in sugar production, the massive increase if population meant decline in per capita income. Second, in mining centres/ food became expensive in the face of increasing pressure of population- This pattern of development in Brazil resulted in environmental degradation. In the gold cycle period the mining centres in Minas Gerais witnessed increasing requirement of timber and charcoal by the excessive rush of population.
This turned the hills of central Minas Gerais barren. No doubt, in Brazil where land was the sole production factor abundantly available, this resource was used extensively unmindful of maintaining its fertility. The case of Northeast is a single pointer. The drought-stricken Northeast of Brazil has lost not only the plentiful timber and forest resources but also the poor and intermittent rains have caused ecological disaster of unprecedented magnitude in this region.