Federal Debts
On the outbreak of war in Europe in August, 1914, the foreign debts of the Federal Government of the United States of Brazil amounted to something over £102,000,000. President Wencesláo Braz inherited obligations which had been enhanced by about £30,000,000 during the previous four-year régime of Marechal Hermes da Fonseca. Brazil’s reputation as a good world customer had long permitted her to borrow freely, often paying old debts or interest with new loans, and piling up deficits as the most facile solution of economic complications.
The world shock of 1914 brought exchange down with a run, and, although it recovered from the first fall, it was soon evident that Brazilian credit could not bring it back to its old level, and that the financial burden of the country, its obligation to pay foreign debts, would be rendered still more onerous by this depression; it would take just so many more milreis, with Federal receipts perilously lessened by the stoppage of imports, to buy pounds sterling, than in normal times.
Brazil asked her foreign creditors for relief, obtained a Funding Loan by which payments on interest and amortization were suspended until October, 1917. As the specie payments called for by the foreign debt would have needed about £5,200,000 in both 1915 and 1916, a burden was lightened, for the time, which the increased balances of trade during the intervening period have also helped to lift. But between 1914 and 1918 the Foreign Debt was increased by nearly £12,000,000 of accumulated interest, and the sums required for annual service were more difficult to find after the depreciation of the milreis in 1920. In 1920 the total nominal Foreign Debt was £120,400,000, plus 325,000,000 francs. Later, Brazil borrowed a few millions from the United States, and in early 1922 again borrowed successfully in London. The internal debt, at the beginning of 1921, amounted to over one million contos. It will be seen from the following list that while nearly £12,000,000 came from France yet the great bulk of the borrowed sums came from England originally: a considerable proportion of the original sums—apparently about forty per cent—were destined to the construction or acquisition of railways and port works in the Republic.
| BRAZIL’S EXTERNAL STERLING DEBT, DECEMBER 31st, 1920 | |||
|---|---|---|---|
| Sterling | |||
| Loan— | £ | s. | d. |
| 1883 | 4,599,600 | 0 | 0 |
| 1888 | 6,297,300 | 0 | 0 |
| 1889 | 19,837,000 | 0 | 0 |
| 1895 | 7,442,000 | 0 | 0 |
| 1898 (Funding) | 8,613,717 | ||
| 1901 (Recision) | 16,619,320 | 0 | 0 |
| 1903 (Port Works, Rio de Janeiro) | 8,500,000 | 0 | 0 |
| 1908 | 4,000,000 | 0 | 0 |
| 1910 | 10,000,000 | 0 | 0 |
| 1911 (Port Works, Rio de Janeiro) | 4,500,000 | 0 | 0 |
| Ceará Railways, 1911 | 2,400,000 | 0 | 0 |
| Lloyd Braziliero, 1906–1911 | 2,100,000 | 0 | 0 |
| Loan— | |||
| 1913 | 11,000,000 | 0 | 0 |
| 1914 (Funding) | 14,502,396 | ||
| Total nominal | 120,411,334 | 0 | 0 |
| Franc Debt | |
|---|---|
| 1908–1909—Loan for the construction of the Itapura to Corumbá Railway | 100,000,000 |
| 1909—Loan for the Port Works at Pernambuco | 40,000,000 |
| 1910—Loan for the construction of the Goyaz Railway | 100,000,000 |
| 1911—Loan for the construction of the Viação Bahiana network of railways | 60,000,000 |
| 1916—Goyaz Railway loan, responsibility for which was assumed by the Government by Decree No. 12,183 of August 30th, 1916 | 25,000,0000 |
| Total nominal | Fr 325,000,000 |
This would be an exceedingly heavy debt if Brazil were an old, exploited, filled up country with no spare lands and her natural resources tapped; Brazil’s reason for hopefulness lies in her youth, the vast undeveloped land and mineral resources of her patrimony, her good credit among the nations, and the sincerity with which her statesmen are attacking the task of resuming interest payments.
Brazil has a big income, but it needs to be increased before she can pay her debts without a strain; the President has repeatedly declared his firm intention to sustain payments at whatever sacrifice, and has recently called the States into conference with a view to devising new methods of raising revenue. In the Budget estimates of the Federal Government for 1921 revenue was reckoned at 102,000 contos gold (milreis = twenty-seven pence) and 624,761 contos paper (probably a fraction over twelve pence); expenditure at the same time was calculated at 75,680 gold and 711,640 paper contos, including in the gold payments the service of the foreign debt.
The Federal Government’s chief revenues are derived from import taxes, impartially placed upon entries into all the States; income of the States is mainly derived from export dues, while municipalities get revenues from imposts upon professions and industries, and manage sometimes to get a share in export dues. The Acre Territory, purchased by the Brazilian Government from Bolivia in 1903, is the only part of Brazil paying export as well as import dues to the Federal authorities, this contribution coming from rubber.
To help raise new revenues, impostos do consumo (excise) have been increased on articles consumed in the country, the addition to the burden of the retailer and the consumer himself raising some outcry, as has also the suggestion to put on railway freight imposts. The States, exporting larger quantities of goods than normally, are not so badly placed as the Federal Government, but that they look upon the matter of raising income from produce exported with different eyes in different parts of the republic is shown by a look at some of the export tax figures for 1922; these figures are not constant, as the pauta is frequently changed by the officials of exporting points in response to conditions in international markets: