The Paulistas were all profoundly influenced by their intimate association with the Indian tribes. In the early days intermarriages were frequent, but the continual re-enforcement of the European element, and the inferiority in capacity of reproduction which the Indian has shown in Brazil, make the traces of that intermixture hard to discover at the present time. The Paulistas and their descendants in the interior states are taller, slenderer, darker, and more active and graceful than the modern Portuguese. Their hands and feet are smaller, their movements more nervous, their manners more self-confident.

The successful founding of a considerable colony in Brazil aroused interest at home, and many courtiers solicited the Crown for grants. It was decided to partition the whole coast into feudal fiefs, each proprietor undertaking the expenses of colonisation and being given virtually sovereign powers in return for a tax on the expected production. Each of these "captaincies" measured fifty leagues along the coast, and extended indefinitely into the interior. In 1534 twelve such fiefs were created, covering the whole coast from the mouth of the Amazon to the island of Santa Catharina—these being the points where the Tordesillas line met the seaboard.

Six of these proprietors succeeded in establishing permanent colonies. Martim Affonso's settlement has already been described. In 1536 his brother, Pero Lopes, established Santo Amaro within a few miles of São Vicente. Naturally its history soon became confounded with that of the larger settlement. Duarte Coelho founded Pernambuco in 1535, and in it was soon absorbed Itamarica, the second of the two colonies founded by Pero Lopes in 1536. The other three permanent settlements were Victoria, the nucleus of the present state of Espirito Santo, Porto Seguro, and Ilheos. No one of them prospered, and their territories are still among the most backward parts of the Brazilian coast. The donatory of the territory which included the bay of Bahia, started a town, but it was destroyed by Indians. The other five captaincies were not taken hold of seriously by their proprietors. The four nuclei for the settlement of Brazil were São Paulo, Pernambuco, and the later colonies of Bahia and Rio de Janeiro.

Martim Affonso recked little of his fief or its revenues and left his Paulistas to work out their own destiny. Pernambuco was on the track of every ship which came to South America, the neighbouring interior was level and easily accessible from the coast, the soil and climate were suitable for sugar, and from the beginning relations with the mother country were intimate and continuous. Its proprietor, Duarte Coelho, determined to devote himself to his colony, and he personally headed a numerous and carefully selected colonising expedition. He spent the rest of his life there, and died twenty years later, surrounded by a large and prosperous colony, which was already a self-supporting state with all the elements of permanence. A good business man and liberal for that age, he granted land on easy terms; its possession was secure; contributions were moderate; and he resolutely defended himself and his grantees from the exactions of the Crown.

The Portuguese occupation of Brazil was induced solely by commercial considerations. Explorers and emigrants went out to make their fortunes, not to escape religious or political tyranny. When the first voyagers were disappointed in not finding gold mines, they turned their attention to brazil-wood. Soon the suitability of the territory for sugar was discovered. The European demand for this luxury was increasing, and the Portuguese had become familiar with its culture in Africa. Cane was taken from Madeira and the Cape Verdes to Brazil before 1525, and there is a record of exportation at least as early as 1526. Here was found the basis for the real colonisation. From the very start the industry prospered in Pernambuco, and Brazil became the main source of the world's supply.

Near Pernambuco little trouble was experienced with the Indians. Many of the tribes were allies of the Portuguese, though the fierce Aymorés fought the settlers and once reduced the infant colony to the verge of destruction. Although the law of Portugal forbade the enslavement of Indians except as a punishment for crime, they were reduced to bondage on a large scale in Pernambuco, and the Paulistas never paid any attention to this prohibition.

By the middle of the sixteenth century Brazil contained one rapidly expanding colony of sugar-planters, Pernambuco, which gave sure promise of wealth if not attacked from without,—a half dozen moribund settlements on the thousand miles of coast to the south, and an isolated but vigorous and self-sufficing group in São Paulo, whose inhabitants produced little for export, but who were reducing the aborigines to slavery in an expanding circle. In the last there was a considerable proportion of Indian blood and in the first a large number of negroes. The smaller captaincies were little more than resorts for pirates and contraband traders in brazil-wood. The settlers were powerless to prevent the French expeditions which yearly became more numerous. Serious apprehensions were felt that the French would occupy the coast and make Brazil a basis for attacks on Portugal's African and Indian empires.

The best blood of the Portuguese nation was being drained away in exhausting wars and expeditions to India and Africa; absolute government was sapping civic vitality; the extravagances of Court and nobles were impoverishing the country. However, enough vitality remained, before the terrific destruction of Portuguese power and pride at Alcacer-Kibir in 1580, to secure such a firm establishment of the Portuguese race on the whole coast of Brazil that it never has been dislodged, and only once seriously threatened. This result was largely due to the founding of a strong military and naval post at Bahia, around which grew up a prosperous colony, and under whose protection Pernambuco spread out over the north-east coast, São Paulo developed uninterruptedly, and Rio Bay was saved from the French.

The first proprietary settlement in Bahia Bay had been destroyed by the Indians, but this magnificent and central harbour was manifestly the most convenient point whence to send assistance to the other settlements and guard the whole coast. In 1549 the king determined to build a fortress and city there. Thomas de Souza, the illegitimate scion of a great house, was chosen the first governor-general. He sailed in April, 1549, with six vessels, and accompanied by three hundred and twenty officials and a number of colonists. The new capital commanded the entrance to a magnificent inland sea which offered splendid facilities for the establishment of a flourishing state. Bahia Bay is nearly a hundred miles in circumference; its shores are fertile and penetrated by rivers; each plantation has its own wharves. Within a few months a town of a hundred houses had been built, surrounded by a wall and defended by batteries; a cathedral, a custom house, a Jesuit college, and a governor's residence were under way.

Thomas de Souza was instructed to strike at the root of the difficulties that were supposed to have prevented the success of the proprietary captaincies. He was the direct representative of the king and had supreme supervisory power. Other officers, however, were associated with him who were independently responsible in judicial, financial, and naval matters. He was closely bound by instructions covering every detail that could be foreseen, and these instructions clearly show the centralising and jealous spirit of Portuguese institutions and ideas.