San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The Economic History of Brazil (Brasil)

Synopsis of
Brazilian History
Booms and Busts
of Brazilian
Regional Policy
in Brazil
The Jari Project
The Carajas Region
Estado Novo of
Getulio Vargas
in Brazil
The Plan for
National Integration
Population Density
by State in
Brazil, 1995
The Settlement Program
in Rondonia
The Cruzado Plan

Booms and Busts in Brazilian History

Brazil's economic history, as least up until recent times, has been characterized by a pattern of booms and busts; i.e.,


The sugar industry was established in northeast Brazil in the 16th century and it brought great prosperity to the region until competing sources of sugar were created in the Caribbean by the French (Haiti) and the British (Jamaica) in the eighteenth century. The sugar industry consisted of sugarcane plantations and plants for processing the sugarcane into sugar. The sugarcane plantations were worked by slaves brought from the Portuguese-controlled areas of southern Africa (Angola and Mozambique).

Most of the prosperity of the sugar boom went for imported luxuries for the plantation owners. One element of the ostentatiousness of the wealthy was that they shipped their dirty laundry to Portugal rather than having it done locally. Thus the wealth of the sugar industry was concentrated in the hands of the elite and very little spread to the rest of the economy.

After the end of slavery the seasonality of sugar growing and processing created special problems. The large labor force that was necessary to plant and harvest the sugar cane was largely idle and destitute through much of the year. Sugar cane growing also required the land to be left fallow at frequent intervals. Thus in the sugar cane areas there was a great deal of idle resources.

Even during the sugar boom there were very limit effects on the local economy. The Portuguese discouraged the development of local industry that would compete with enterprises in Portugal. Thus the prosperity of the sugar industry did not spread throughout the economy.


There has been a sequence of gold booms in Brazil. The first came in 1698 in Minas Gerais, followed 21 years later in 1719 by another in Mato Grosso and then another six years later in 1725 in Goias. In recent decades there was the gold deposit at Serra Pelada worked by thousands of gold prospectors (garimpieros) in the Carajas Region.

These gold rushes were the classic examples of boom and bust. Often the the intial development was in the form of small scale panning operations. The winners would take their fortunes out of the area. Usually their prosperity did not spread in the local economy because the gold rushes were in isolated areas where the only people there were garimpieros. Even if entrepreneurs had been present they would have been reluctant to invest capital in an area that could not sustain economic activity for very long. Thus there were no "spread effects" from the gold rush.


Coffee growing developed in Brazil in the nineteenth century becoming important only in the latter half of that century. The coffee industry was centered around São Paulo in the south. Coffee growing did produce local effects and São Paulo went on to become one of the largest metropolitan areas in the world, exceded in population only by Tokyo and Mexico City. Immigrant labor from Europe supplied much of the manpower needed.

There came a bust to the coffee boom as a result of the glut on the market resulting from the headlong expansion of coffee plantations. But this was a different problem from the busts to the gold booms resulting from the exhaustion of the deposits. This came, at least in part, from the four years between the planting of a coffee tree and its production of coffee beans. Planters typically based there planting decisions on past prices and these were sadly out of date when new production came onto the market.


Rubber trees are native to the Amazon Region and the native peoples long ago discovered the unique properties of rubber. They collected latex from the trees and converted it into solid rubber over open fires. When the outside world discovered numerous uses for this product, especially after Charles Goodyear developed vulcanization to improve rubber's property, there was a boom in the Amazon region. Individuals who secured the right to collect the latex from large sections of the Amazon rain forest became fabulously rich. The latex was actually collected by hordes of serengeiros (rubber tappers). But during the rubber boom all benefited from the high price of natural rubber. Some who became rich in the rubber boom built an opera house in Manaus, deep in the interior of the Amazon Basin to provide a place for the opera greats of that day to come to sing. It was a tremendously expensive indulgence of the rubber barons' love for opera.

But the rubber boom eventually ended. The high price of rubber stimulated the search for alternative sources of rubber. A British citizen smuggled seeds of the rubber tree out of Brazil and they were taken to Southeast Asia where they were planted. In Southeast Asia where rubber trees have no natural enemies they can be grown in plantations, thus reducing the cost of collecting the latex. In Brazil all of the rubber trees in a plantation would be destroyed by the common plant diseases and insects indigineous to the area. But even if the rubber tree seeds had not been smuggled out of Brazil the boom would have ended eventually because of the incentive the high price of rubber provided; e.g., through the development of synthetic rubber.

HOME PAGE OF applet-magic
HOME PAGE OF Thayer Watkins