First Brazilian Republic - Developments Under The Old Republic

Developments Under The Old Republic

Demographic changes and structural shifts in the economy, however, threatened the primacy of the agrarian oligarchies. Under the Old Republic (1889–1930), the growth of the urban middle sectors, though retarded by dependency and entrenched oligarchy, was eventually strong enough to propel itself to the forefront of Brazilian political life. In time, growing trade, commerce, and industry in São Paulo undermined the domination of the republic's politics by the landed gentries of that state (dominated by the coffee industry) and Minas Gerais, dominated by dairy interests, known then by observers as the politics of café com leite; 'coffee with milk'.

Long before the first revolts of the urban middle classes to seize power from the coffee oligarchs in the 1920s, however, Brazil's intelligentsia, influenced by the tenets of European positivism, and farsighted agro-capitalists, dreamed of forging a modern, industrialized society—the "world power of the future". This sentiment was later nurtured throughout the Vargas years and under successive populist governments before the 1964 military junta repudiated Brazilian populism. Although such lofty visionaries were somewhat ineffectual under the Old Republic (1889–1930), the structural changes in the Brazilian economy opened up by the Great War strengthened these demands.

The outbreak of World War I in August 1914 was the turning point for the dynamic urban sectors. Temporarily abating Britain's overseas economic connections with Brazil, the war was an impetus for domestic manufacturing because of the unavailability of British imports. These structural shifts in the Brazilian economy helped to increase the ranks of the new urban middle classes. Meanwhile, Brazil's manufacturers and those employed by them enjoyed these gains at the expense of the agrarian oligarchies. Coffee being a nonessential though habit-forming product which affords it a measure of stability and resilience, world demand declined sharply. The central government, dominated by rural gentries, responded to falling world coffee demand by bailing out the oligarchs, reinstating the soon-to-be disastrous valorization program. Sixteen years later, world coffee demand plunged even more precipitously with the Great Depression. Valorization, government intervention to maintain coffee prices by withholding stocks from the market or restricting plantings, then proved to be unsustainable, incapable of curbing insurmountable decline in coffee prices in world markets. By World War I, the reinstatement of government price supports foreshadowed the vulnerability of Brazil's coffee oligarchy to the Great Depression.

Paradoxically, economic crisis spurred industrialization and a resultant boost to the urban middle and working classes. The depressed coffee sector freed up the capital and labor needed for manufacturing finished goods. A chronically adverse balance of trade and declining rate of exchange against foreign currencies was also helpful; Brazilian goods were simply cheaper in the Brazilian market. The state of São Paulo, with its relatively large capital-base, large immigrant population from Southern and Eastern Europe, and wealth of natural resources, led the trend, eclipsing Rio de Janeiro as center of Brazilian industry. Industrial production, though concentrated in light industry (food processing, small shops, and textiles) doubled during the war, and the number of enterprises (which stood at about 3,000 in 1908) grew by 5,940 between 1915 and 1918. The war was also a stimulus for the diversification of agriculture. Growing wartime demand of the Allies for staple products, sugar, beans, and raw materials sparked a new boom for products other than sugar or coffee. Foreign interests, however, continued to control the more capital-intensive industries, distinguishing Brazil's industrial revolution from that of the rest of the West.