Reducing gold to a currency basis at 15d. per milreis (the official valuation adopted in 1906), the budget for 1907 provided for a revenue of 353,590,593 milreis and an expenditure of 409,482,284 milreis, showing a deficit of 55,891,691 milreis. These deficits were common enough under the monarchy, but they have become still more prominent under the republic. According to the “Retrospecto Commercial” for 1906 of the Jornal do Commercio (Rio de Janeiro, March 5, 1907), the aggregate deficits for the eleven years 1891 to 1904 were 692,000,000 milreis, or, say, £43,250,000.
The natural result of such a regime is increasing indebtedness. In 1888, a year before the republic was proclaimed, the internal and external national debts amounted to £74,000,000 sterling, with the currency at par. Ten years later, when the currency had fallen to 55⁄8 pence per milreis, the government found itself unable to meet the interest obligations on its debt and railway guarantees, and an arrangement was made with its creditors in London for the issue of a 5% funding loan to an amount not to exceed £10,000,000, and the suspension of all amortization for thirteen years. On the other hand the government agreed to withdraw currency, which had reached a total of 788,364,614 ½-milreis, pari passu with the issue of the loan, the milreis being computed at 18 pence. The purpose of this condition was in order to improve the value of the paper milreis in order to increase the specie value of the revenues. The scheme came into operation in June 1898, and not only was a complete suspension of payments avoided but the financial situation was greatly improved. The government even withdrew more of its currency issues than required by the agreement, and the value of the milreis steadily improved. At the same time the government carried out the forced conversion of the national loans into lower interest-bearing issues, which greatly reduced the annual interest charges. These measures would have put the financial affairs of the nation on a solid footing in a very few years had the government been able to keep its expenditure within its income. The naval revolt of 1893-1894, however, had aroused the spirit of militarism in the ruling classes, and the effort to perfect the organization and equipment of the army, strengthen the fortifications of Rio de Janeiro, and increase the navy, have kept expenditures in excess of the revenues. The purchase of guaranteed railways owned by foreign companies likewise added largely to the bonded indebtedness, though the onus was in existence in another form. The result of these measures was a large addition to the public debt, which on 31st December 1906 was approximately as follows (apolices being the name given to bonds inscribed to the holder):—
| External debt: | £ s. d. |
| Loans of 1883, 1888 and 1889. | 26,478,500 |
| Oestede Minas R.R. loan | 3,388,100 |
| Loan of 1898 | 7,331,600 |
| Funding loan of 1898 | 8,613,717 9 9 |
| Railway rescission loan of 1901 | 15,467,015 16 1 |
| Port works loan of 1903 | 8,500,000 |
| ——————— | |
| £69,778,933 5 10 | |
| ============== |
| Internal debt, funded: | Milreis |
| 5 % apolices, Law of 1827 | 483,546,600 |
| 4½% ” ” 1879 | 20,548,000 |
| 6 % ” ” 1897 | 37,082,000 |
| 5 % ” ” 1903 | 17,300,000 |
| ————— | |
| Total, funded | 558,476,600 |
| (at 15d. £34,904,787) | ========= |
| Internal debt, not funded: | Milreis |
| Paper money | 664,792,960 |
| Savings bank and other deposits: | |
| In paper | 246,812,407 |
| In gold, 19,053,861 r (say) | 34,296,950 |
| Floating indebtedness (a/cs current, bills, &c.) | ? |
| ————— | |
| Total, not funded, approx. | 945,902,317 |
| (at 15d. £59,118,895 stg.) | ========= |
| Approximate total indebtedness | £163,802,675 |
In addition to these, the government was still responsible for interest guarantees on fourteen railways, or sections of existing lines, with an aggregate capital of about £4,900,000 held in Europe and 12,055,440 milreis held in Brazil, on which the national treasury paid in interest £191,324 and 1,398,493 milreis.
The paper currency of Brazil consists of both treasury issues and bank-notes, the latter issued under government supervision. Its fluctuations in value have been not only a serious inconvenience in commercial transactions, but also the cause of heavy loss to the people. Under the provisions of the funding loan of 1898 a scheme for the withdrawal of the paper money was carried into effect, and by the end of December 1906 the amount in circulation had been reduced from 788,364,614 ½-milreis (the outstanding circulation 31st August 1898) to 664,792,960 ½-milreis. Two funds were created for the redemption and guarantee of paper issues, the latter receiving 5% of the import duties payable in gold. Up to 1906 the Caixa da Amortisação (redemption bureau), which has charge of the service of the internal funded debt, superintended the redemption of the currency, but in that year (December 6, 1906) a Caixa de Conversão (conversion bureau) was created for this special service. It is modelled after the Argentine Conversion office, and is authorized to issue notes to bearer against deposits of gold at the rate of 15 pence per milreis although exchange was above 17d. when the scheme was proposed. The notes are to be redeemable in gold at sight, the Caixa de Conversão to keep the gold paid in for that express purpose. The coffee producers of São Paulo and other states found that the appreciation in value of the milreis was reducing their profits, and they advocated this measure (at first with a valuation of 12d.) to check the upward movement in exchange. Metallic money is limited to nickel and bronze coins, but in 1906 the government was authorized to purchase bar silver for the coinage of pieces of the denomination of two milreis, one milreis and 500 reis (½-milreis). Gold is the nominal standard of value, the monetary unit being the gold milreis worth 2s. 2½d. at par. The 10-milreis gold piece weighs 8.9648 grammes, 916 fine, and contains 8.2178 grammes of pure gold. There is no gold in circulation, however, and gold duties are paid with gold cheques purchased at certain banks with paper money. The banking facilities of the republic have undergone many changes under the new regime. A fruitful cause of disaster has been the practice of issuing agricultural and industrial loans under government authorization. Commercial business at the principal ports is largely transacted through foreign banks, of which there are a large number.
In addition to the indebtedness of the national government, the individual states have also incurred funded debts of their own. The aggregate of these debts in 1904 was £20,199,440, and the several loans made during the next two years, including those of the municipalities of Rio de Janeiro, Santos, Bahia and Manáos, add fully two and a half millions more to the total.
(A. J. L.)
History
Brazil was discovered in February 1499 (o.s.) by Vicente Yañez Pinzon, a companion of Columbus. He descried the land near Cape St Augustine, and sailed along the coast as far as the river Amazon, whence he proceeded to the The Portuguese in Brazil. mouth of the Orinoco. He made no settlement, but took possession of the country in the name of the Spanish government, and carried home, as specimens of its natural productions, some drugs, gems and Brazil-wood. Next year the Portuguese commander, Pedro Alvares Cabral, appointed by his monarch to follow the course of Vasco da Gama in the East, was driven by adverse winds so far from his track, that he reached the Brazilian coast, April 24, and anchored in Porto Seguro (16° S. lat.) on Good Friday. On Easter day an altar was erected, mass celebrated in presence of the natives, the country declared an apanage of Portugal, and a stone cross erected in commemoration of the event. Cabral despatched a small vessel to Lisbon to announce his discovery, and, without forming any settlement, proceeded to India on the 3rd of May. On the arrival of the news in Portugal, Emanuel invited Amerigo Vespucci to enter his service, and despatched him with three vessels to explore the country. The navigator’s first voyage was unsuccessful; but, according to his own account, in a second he discovered a safe port, to which he gave the name of All-Saints and where he erected a small fort. Vespucci’s narrative is, however, suspected of being apocryphal (see [Vespucci, Amerigo]).