The Brazilian Cotton Manufacture: Textile Enterprise in an Underdeveloped Area, 1850–1950 [Reprint 2014 ed.] 9780674592575, 9780674592544

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The Brazilian Cotton Manufacture

STUDIES IN ENTREPRENEURIAL HISTORY Published in Cooperation with the Research Center in Entrepreneurial History Harvard University

The Brazilian Cotton Manufacture Textile Enterprise in an Underdeveloped Area, 1850-1950

Stanley J. Stein Princeton University

Harvard University Press Cambridge · Massachusetts · 1957

© Copyright 1957, by the President and Fellows of Harvard College

Distributed in Great Britain by Oxford University Press, London

Library of Congress Catalog Card Number 57-7617

Printed in the United States of America

Preface In recent years an abundant literature has appeared on the economic development of underdeveloped areas. Most of the contributions have come from economists interested primarily in improving the economic conditions of non-industrialized nations. That they have overlooked the historical setting may be blamed on the absence of monographic studies of economic history in underdeveloped areas. Even in Latin American historiography, which has a considerable literature in comparison with that of other underdeveloped areas, economic history is relatively neglected. Research on the Brazilian cotton industry was undertaken therefore as a contribution to this neglected sector of Latin American studies. This monograph investigates two aspects of the evolution of the industry. It examines its growth in an "essentially agricultural economy" and the reaction of the Brazilian industrialist-entrepreneur to changing domestic and foreign conditions. In part, too, the monograph traces aspects of the process of modernization which spread first from Europe, and, later, from the United States. In this wider context the development of the cotton manufacture in Brazil is a product of modernization — of the international migration of technicians, technical knowledge, and machinery as well as of the integration of the Brazilian economy and the world economy. Analysis of the principal phases of the Brazilian cotton industry's development has been divided into three parts. In Part I Brazilian economic conditions are surveyed from the end of the eighteenth century to the "gilded age" of the republic (1890-1892), with emphasis upon factors favoring industrialization. Emphasis then shifts to the elements that were fitted together to create the early cotton mills. Part II treats the formation of ties forged between industrialist-entrepreneurs and the state during the depression of 1892, the tariff campaign at the end of the nineties, the disequilibrium caused by the

vi

Preface

First World War and during the late 1920s when the coffee valorization program collapsed and depression engulfed Brazil. In the final part there is an analysis of policies advocated by the cotton textile manufacturers' associations to meet the problems of overproduction and subsequently of domestic and foreign demand for cotton goods during the Second World War and in the first five years of postwar adjustment. This monograph merely seeks to sketch the essential patterns of the industry's development, to cover certain episodes in some detail and to generalize sparingly. While Part I analyzes specific technical problems of the early industry, the following parts focus upon response of the manufacturers to critical problems. This shift in focus was dictated by limited time and the complete absence of monographic literature on corporate organization, finance, raw materials, labor, type of product, and distribution. It was also not feasible to include within the scope of this monograph a comparison of the evolution of the Brazilian cotton industry with its counterparts in Latin America and the United States, in England and on the European continent, and in India, Japan, or China. To Harvard University's Research Center in Entrepreneurial History and the Institute for Brazilian Studies at Vanderbilt University this study owes its inception and support. I am particularly indebted to Professor Arthur H. Cole and Professor Leland H. Jenks of the Research Center for counsel and criticism, and to Miss Ruth Crandall for her many kindnesses. The manuscript received the searching criticism of Professor Jenks, of Dr. Miron Bürgin of the Department of State, and of Professor Clarence H. Haring of Harvard University. To these friends and colleagues I owe and express my thanks. For the errors of commission and omission I am entirely responsible. A grant from the Carnegie Corporation of New York financed the research, but that corporation is not the owner, publisher, or proprietor of this publication and is not to be understood as approving by virtue of its grant any of the statements made or views expressed. I am also deeply indebted to many Brazilians without whose hospitality and cooperation research would have been impossible. Through the courtesy of Dr. Vicente de Paulo Galliez, secretary-general of the Sindicato das Industrias de Fiaçâo e Tecelagem do Rio de Janeiro, it was possible to consult that organization's well organized archive. Dr. Adhemar C. Jobim of the Companhia Petropolitana and Dr. Cyro Berlinck of the Companhia Santa Basilissa and director of the Escola

Preface

vii

de Sociología de Säo Paulo permitted me to use their respective companies' archives. Equally helpful was Dr. Ernesto Street of the Departamento Económico of the Confederaçâo Nacional da Industria. I also wish to thank the director of the Biblioteca Nacional of Rio de Janeiro and the chief of that institution's periodical section for the many courtesies shown me, and Dr. Waldemar Falcäo and Dr. Artur Cesar Ferreira Reis of the Ministerio do Traballio, Industria e Comercio. The research assistance, criticism and encouragement of my wife, Barbara Hadley Stein, were invaluable. Princeton, New Jersey May 18, 1957

S. J. S.

Contents

Parti

1840-1890

1. The Economic Climate of Brazil, 1800-1890 Background to 1808. Agriculture, commerce and industry in nineteenth-century Brazil. Rise of economic nationalism: tariff commission of 1853, national expositions of 1861, 1866. Brazilian customs inspectors abroad. Prospectus of the Companhia Brazil Industrial. The Industrial Association. 2. Location and Product Bahia, first cotton textile center. Factors in the shift of the industry southward. Importance of coarse cloth. 3. Organization, Finance, and Machinery Individual proprietors. Partnerships. The corporations. Capitalization and early financing. Companhia Petropolitana and Companhia America Fabril. Mill construction. Procurement, installation, and maintenance of machinery. The weaving mills. Descriptions of early mills. 4. Cotton Cotton exports, 1780-1860. Cotton boom of the 1860's. Supplies for domestic mills. Cultivation, ginning, and baling. 5. Labor Factors conditioning the labor force. Procurement. Management's attitude toward labor. Labor supply. Housing and company stores. Technical training. Hours and wages. Strikes.

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Contents

6. Products and Distribution Improvement of production. Distributive system. Resistance of local cloth wholesalers. Entry of Portuguese merchants into production. Expansion from regional to national markets.

Partii

1890-1930

7. Industry and Government Tariff policy: rise of protection. Arguments of industrialists. Development of protectionist policy, 1880-1900. The boom (encühamento) 1890-1891. Aid to industry campaign, 1892. 8. The Golden Years Growth, 1885-1921. Concentration in Rio and Sao Paulo areas, 1910. Profitability of mills. The industry during the First World War. Growth, 1921-1927. Exposition of 1922. Concentration, 1927. 9. Onset of the Depression Factors undermining prosperity: agricultural recession, coarse cloth production. Improvement in types of cloth. Textile manufacturers versus cotton brokers and cloth wholesalers. Innovations in distribution. Tariff campaign, 1928-1929. Abortive export campaign. Depression, 1930. Proposals for production cartels.

Partili

1930-1950

10. The Crisis of the Thirties Political, social, and economic factors, 1930-1945. The industry and the Vargas Administration, 1930-1931. Restrictions on machinery imports. Opposition to renewal of restrictions, 1937: working hours, domestic loom manufacture. The case of Machine Cottons, Ltd. Objections of small interior mills. The campaign to renew restrictions, 1936-1939: proposals of Säo Paulo and Rio manufacturers' associations. Overproduction: analyses of the textile industry's allegations. Proposed limits on working hours. Lundgren Brothers' memorial. New solution for overproduction: exports, minimum wages.

Contents

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11. The War and its Aftermath Effect of wartime exports and prosperity. Convenio Textil, "utility cloth," Commissao Executiva Textil. Factors behind suspension of exports, 1946. Reaction to high prices. Price control, costs of production and distribution. Criticism of wartime earnings and their application. Industry and government. Pressure for government financing of exports, mill modernization. Conclusions of United Nations' report on "backwardness."

165

12. Summary and Conclusions

185

Appendixes

191

Bibliography

199

Notes

209

Index

269

Tables 1. Estimated geographical distribution of Brazilian cotton mills, 1866, 1875, 1885.

21

2. Costs of mounting the Companhia Brazil Industrial mill, 1870-1874.

29

3. Shareholders and their holdings, Companhia America Fabril, July 1890. 4. Brazilian raw cotton exports, 1860-61 to 1875-76.

33 45

5. Types of goods produced in eleven cotton mills of the Rio area, 1894.

68

6. Prices of the Petropolitana's coarse ginghams, 1885-1889.

74

7. Capital expansion of cotton mills listed on the Rio stock exchange, 1889-1892.

88

8. Rate of exchange in Rio de Janeiro on London, 1880-1900. 9. Growth of Brazilian cotton mills, 1905-1921. 10. Distribution of Brazil's population in 1900 and 1920.

89 101 102

11. Comparison of distribution of population and of the cotton textile industry in four districts of Brazil, 1900-1921.

102

12. Brazilian textile machinery imports, 1913-1921.

103

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Tables

13. Geographical distribution and statistics of Brazil's largest cotton mills, 1910.

104

14. Exports of Brazilian coffee, 1917-1925, with price per 60 kilos and percentage of total exports by value.

109

15. Geographical distribution and share in output of Brazil's largest cotton mills, 1927.

113

16. Exports of Brazilian coffee, 1925-1930, with price per 60 kilos.

115

17. Nominal and effective Brazilian tariff rates on all goods, 1905-1913 and 1927-1929, and on cotton goods, 19271929.

124

18. Average percentage of total income of selected groups in capital cities and counties of the interior of Brazil expended for various categories, 1939.

162

19. Ratio of dividends and bonus to capital in nineteen Brazilian cotton mills, 1943.

167

20. Estimated Brazilian domestic consumption, deliveries, and exports of cotton cloth, 1943-1945.

174

21. Retail price index of principal foodstuffs in twenty-two capital cities of Brazil, 1940-1945.

176

Appendix I.

The Brazilian cotton textile industry, 1853-1948.

191

II.

Cotton cloth production of Brazil, 1911-1948.

192

III.

Cotton cloth imports into Brazil, 1901-1950.

193

IV.

Cotton cloth exports from Brazil, 1902-1950.

194

V. VI. VII. VIII.

Textile machinery imports into Brazil, 1913-1950.

195

Raw cotton production of Brazil, 1926-1950.

196

Raw cotton production of Säo Paulo, 1900-1930.

197

Raw cotton exports of Brazil, 1821-1950.

198

Part I

1840-1850

The Economic Climate of Brazil 1800-1890

During the nineteenth century two revolutionary movements developed in Latin America. In the first quarter of the century the colonies of Portugal and Spain completed one revolution, achieving political independence from Europe. With the attainment of nationhood, another movement appeared and slowly gathered momentum. While the first revolution was accompanied by the massing of troops and spectacular marches, the second — an economic movement — got under way with little fanfare and far less apparent success. Nevertheless, that another radical change was in the making was evident in the widening channels of trade with Europe and the United States, and in the appearance of scattered factories in the midst of an economy dominated by agriculture, commerce, and mining. The new movement mirrored economic transformations elsewhere. Western Europe, followed later by the United States, was also in the throes of revolutionary economic change. Beginning in the late eighteenth century, continental industrialization made vast strides in the nineteenth. Factories needed widening markets for their output, while equally in demand were the raw materials vital for expanding industries. Both these requirements Latin America could help fulfill. Yet, even as the Latin American nations became spokes in the wheel of the world economy whose hub was Western Europe, some Latin Americans perceived that industrial progress also fell within the potentialities of their countries. They reasoned that the raw materials shipped abroad and returned in the form of manufactured goods

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The Brazilian Cotton Manufacture

could be transformed at home at profitable returns to those willing to undertake the establishment of domestic manufactures. The practical achievement of this possibility, however, required markets, money, machinery, and men. As the nineteenth century advanced, Brazil's experiments with these ingredients prepared a foundation for its industrial expansion in the twentieth century. As elsewhere in Latin America, Brazilian industrial progress in the nineteenth century was slower than the theorists envisaged. Only in the last decades of the century was it recognized that Brazil had made any progress in domestic manufacture. Throughout the century agriculture and commerce, whose expansion was greatly stimulated by the needs of the industrializing nations of the world, remained the exclusive pillars of the nation's economy. In the shadow of this edifice, industry grew with difficulty. 1 Important factors favoring the maintenance of commerce oriented to overseas markets and of plantation agriculture were present in the Brazilian colonial economy at the close of the eighteenth century. Prior to the arrival in Rio de Janeiro of the Portuguese royal refugees fleeing from Napoleon's invading armies in 1808, mercantilist policies of the metropolitan government placed the handling of agricultural and mining production as well as of all imports in the hands of a small Portuguese merchant group with agents located in the Brazilian port towns of Pernambuco, Bahia, and Rio de Janeiro. Exports were shipped to Portugal, thence to London and other European ports in Portuguese or Brazilian vessels. The enforcement of a number of decrees enacted at the end of the eighteenth century suppressed such native industries as had appeared to satisfy the requirements of colonial subsistence. Textile manufacture in particular was crippled by a decree of 1785 which exempted only the production of coarse cottons "fit for the use . . . of Negroes and for the wrapping and packaging of goods in general." The reasoning behind this action was openly stated. Colonial agriculture lacked manpower and no hands were to be diverted from the land or mining, for "real wealth" came from the fruits and produce of the soil, not through "artisans or craftsmen." Furthermore, the "products of the soil" provided the basis of the commerce and navigation of Brazil and Portugal.1 Aside from the export of Brazil's mineral wealth in gold and dia-

The Economic Climate of Brazil

3

monds, sugar and cotton formed the bulk of shipments from the colony. Cotton exports increased rapidly with the development of the British cotton manufacture after 1770. Sugar production rose steadily in the same period, if not spectacularly. Meanwhile, the production and export of coffee — the mainstay of the nineteenth-century Brazilian economy — were still insignificant at the end of the eighteenth.2 Increased production and export of these staple crops strengthened the system of plantation agriculture. Large tracts of land, traditionally conferred by the Portuguese Crown, were now granted to individuals, many of them merchants, on the condition of ownership of an adequate slave labor force and of effective cultivation within a certain period of time. The nature of Brazil's export staples — sugar, cotton, and later coffee — made the maintenance of large reserves of virgin land and a large slave labor force essential to the success of the agricultural economy. The concentration of land ownership, as well as of the ownership of a large number of slaves, in the hands of relatively few families dominated the rural economy.

2 The arrival of the royal court in 1808 brought far-reaching changes in Brazil's commercial patterns, intensifying trends apparent in the late eighteenth century. The royal administration required new sources of revenue to support itself in exile and an expanded commerce could supply needed funds. Opening the ports of Brazil to the world was the first step and it brought to the former colony and particularly to the capital, Rio de Janeiro, merchants and commercial establishments, Portuguese, English, American, and French. 3 And, although the declared freedom of trade and industry was qualified by preferential treatment to Portuguese shipping and immediately afterward to British imports, the Brazilian commercial structure had changed irrevocably. By 1822, after the return of the Portuguese king to Portugal threatened to re-subordinate Brazil to the mother country, it was evident even to the monarch that the clock could not be turned back. 4 Brazil became an independent constitutional empire under the rule of the son of the Portuguese king. By 1830 the success of Brazilian export agriculture, coffee now overshadowing both cotton and sugar, fixed the economic pattern to which Brazil conformed for the next eighty years. This pattern determined the type of labor that came to Brazil, the nature of Bra-

4

The Brazilian Cotton Manufacture

zilian commerce, the role of government, and, as a result of these factors, the pace of Brazilian industrialization. The production of coffee was largely responsible for the spread of large landholdings in south central Brazil. Coffee cultivation demanded reserves of virgin soil which the provident planter had to secure; and to work the advancing plantations, planters imported African slaves. A tremendous expansion of the slave trade occurred between 1830 and 1850. As long as the trade continued, slaves were cheap and easily supplied and there was no incentive to raise their standard of living, which was kept as low as possible. After the end of the trade in 1850, interest developed in extending the slaves' productive years, while the scarcity of slaves forced planters to utilize as much of their labor force in the field as was possible. The impact of plantation agriculture based upon slavery on Brazilian industrial development was far-reaching. In the first place, it discouraged the entry of free European immigrants until the abolition of slavery in 1888 created a new milieu for free labor. It inhibited the development of a stratum of free citizens between the slaves at the base of the social pyramid and the plantation oligarchy at its apex, a group able to supply technical skills for local industry and to purchase industry's finished goods. Per capita income distribution remained low for the mass of the Brazilian population. Second, the successful plantation economy, stimulated by rising prices for staples, absorbed national productive resources and paid for the importation of cheap manufactured goods. The expansion of trade with Western Europe, particularly with Great Britain under the preferential agreements which that country enjoyed until 1843, effectively discouraged Brazilian industry, both handicraft and manufacturing. The development of a few abortive enterprises in the first three decades of the nineteenth century was of small significance; their appearance was favored by some government support and by the absence of foreign competition for a brief period after 1808. By the 1830's most of these had succumbed to the influx of imported manufactures. Handicraft production gradually disappeared in all but remote areas of Brazil as improved transport facilitated the distribution of imported goods. Hand-spinning and weaving survived in the interior until well into the nineteenth century; in the province of Minas Gérais hand-loomed cotton cloth amounted to almost six million yards a year in the middle 1830's, according to one observer. 5 But by 1862 the production of "Minas cloth," known for its weight and

The Economic Climate of Brazil

5

durability, suffered a severe decline as the result of inroads of imported British imitations and of the production of a few Brazilian mills.® After 1850 in particular, the development of "agriculture and animal husbandry absorbed labor, and the fall in the prices of goods imported from abroad resulting from European industrial progress and the invention of more efficient machinery which multiplied the quantity of goods, improving their quality and reducing their cost, made unprofitable the labor demanded for cotton cloth produced at home and hence the abandonment of hand production." 7 Third, the nexus of commercial transactions in this agricultural and commercial complex were the planter, the town factor, and the exporter and importer. Commerce was left to the Portuguese and other foreign merchants who became the middlemen between the planters and overseas markets; and to supply the needs of the mercantile community, banks and bill-brokerage houses appeared from the thirties onward.8 The profitable activities of these nineteenth-century entrepreneurs mobilized and absorbed most of the available investment capital. Planters, isolated on their plantations, left the management of their finances largely to the factors to whom they consigned their crops; indeed, most planters called upon their factors not only to sell to exporters, but to purchase the goods required by the plantation, the labor force, and the planter and his family, and to supply credit on the promise of future harvests.9 As a result of his multiple role, the town factor earned a correspondingly larger proportion of the profits of monoculture than the planter. He and other members of the seaport merchant community were the entrepreneurs in whose hands investment capital accumulated. Fourth, merchant entrepreneurs of the nineteenth century employed capital and credit for enterprises in which they were experienced. The pattern of merchant investment fell into two periods, the end of the slave trade in 1850 marking a dividing point. Until 1850 the slave trade probably absorbed the largest amount of capital. In eleven years, 1840-1851, 374,625 slaves entered Brazil, or more than three times the number for the preceding twenty-two years.10 This expansion took place despite a treaty with Great Britain ending the trade by 1831. British naval patrol of the south Atlantic and the urgent demand for slaves on coffee plantations, coupled with the tolerance of the Brazilian Imperial Government, made the trade as profitable as it was speculative. Merchants also traded in exports of plantation produce and in

6

The Brazilian Cotton Manufacture

imports of manufactures whose lowest prices in Brazil were often "double the market value in Europe." 1 1 Trade in local foodstuffs, frequently the object of monopoly, and small investment in a few local banks, complete the pre-1850 investment picture. It was claimed that banks fostered the formation of monopoly among merchants by granting excessively large loans to a few commercial enterprises organized by speculators.12 The government's decision to terminate the slave trade released approximately 15,000-20,000 contos ($8,700,000-$H,600,000) 13 for other investment. Exports and imports continued to dominate the interests of merchant entrepreneurs, but more capital went into the establishment of banks of discount and deposit, a notable feature of the 1850's and 1860's. An even more notable development of this period was investment in road construction companies, coach lines, coastal shipping, and railroads, designed to facilitate the export of Brazilian staples. Without roots in the national economy and overshadowed by the mercantile society of the towns, scattered nascent industrial enterprises were the first to suffer lack of credit in any crisis. In 1875 the directors of the Brazil Industrial textile mill near Rio pointed out the distrust with which banks viewed industrial enterprise in the depression years of the 1870's. They reported that, in the banking crisis and general credit contraction of the time, loans were obtained only under carefully defined guarantees that industrial undertakings could not offer. They affirmed that they could not increase their capitalization via stock issue because the money market was "dominated by a reaction against industrial enterprise." 14 Others felt that the failure of a few industrial enterprises showed that Brazil was "unprepared" for large-scale industry and that capital so invested would be lost. 15 Again, in the eighties few contested the view that cotton manufacture's greatest obstacle was lack of funds. In a few words the situation of the industry was defined: "Capital finds in commerce secure and remunerative employment, and it will not be adventured in manufactures, of whose operations our capitalists can not form a perfectly clear idea at first sight, or quickly estimate the profits." 16 The fifth consequence of Brazil's agricultural and commercial complex involved the political influence of planters and merchants, and the effect of government policy on the formation of industrial establishments. For these entrepreneurs, economic diversification beyond agriculture or commerce was unnecessary and free-trade theories

The Economic Climate of Brazil

7

predicated on the international division of labor complemented this outlook. Throughout the Imperial regime, which lasted until 1889, the interests of planters — first of the sugar-growing north, later of the south central coffee areas — were paramount. The close liaison between the Empire and its planters and merchants resulted in government subsidization of railway construction designed primarily to tie the plantations of the hinterland directly to the seaports, for no lateral lines were constructed to stimulate internal commerce. In the field of tariff legislation the political influence of planters was also predominant. Aside from the short-lived Alves Branco tariff of 1844, Brazilian tariffs were designed largely for revenue purposes. By 1857, when the 1844 legislation was overhauled for the first time, protection was reduced and duties placed on imports of raw materials for native mills. Any protection which developed before 1879 was incidental, the product of higher duties to cover increased governmental expenditures.17 Among the causes of limited investment in industrial enterprises, few were singled out for more criticism than the financial policies of the Imperial Government. In 1853 government bond offerings were attacked for siphoning off funds.18 A few years later it was observed that the "Government is looked to as the source from whence all progress is to originate, and capital is held back unless it can be embarked under the aegis of a government concession." 19 In 1883 the cotton manufacturers of Bahia declared that "the greatest enemy of national production is the government [whose] bonds absorb available capital for developing industry through the purchase of better machinery for improving production." The investors ("generally the wealthier classes") preferred government securities because they were taxexempt. Complained the proprietors of Bahia's ten spinning and weaving mills: "Industry must limit itself to its own resources and can not expand." Everywhere industrialists encountered stumbling blocks in the "treasury, lack of confidence and of patriotism." 20 It was the attempt of the Imperial Government to force upon jointstock companies adequate guarantees for potential shareholders that undoubtedly further limited industrial expansion down to the 1890's. The history of the development of the Brazilian corporation in the latter half of the nineteenth century is one of gradual relaxation of paternalistic supervision. According to the Brazilian Commercial Code of 1850 and the law of August 22, 1860, joint-stock companies operated only after securing the Imperial Government's authorization. First,

8

The Brazilian Cotton

Manufacture

however, the Council of State examined the company's purposes to determine whether it aimed at a monopoly of foodstuffs, and to evaluate the property of the proposed organization.21 Tavares Bastos, an ardent exponent of classical liberalism, viewed such governmental intervention as state "tutelage of industry." 2 2 In 1878, even the Imperial Government was ready to agree with its republican opponents that official "tutelage" had failed to prevent abuses and irregularities. Casting an eye upon the success of "well controlled" nations in applying the principle of "freedom to gather funds," the Minister of Agriculture claimed that both publicity and responsibility could replace government examination and authorization.23 Adopted in 1882, a policy more "elastic to the industrial spirit" offered investors guarantees and fixed the responsibilities of both incorporators and company officials. Incorporators were responsible henceforth individually and as a group for illegal acts, and sellers of stock for the full value of stock transferred; company officials had to reimburse dividends unduly distributed, a provision applicable to the receivers of dividends as well.24 Almost two months to the day after proclamation of the republic in November 1889, certain of these measures were removed to facilitate the formation of new joint-stock companies with limited liability. Those who sold their stock were responsible only for the acts occurring while they owned the shares; shareholders at a general meeting were empowered to exempt company executives from all financial and criminal responsibility by voting approval of their acts and accounts. Finally, no special stockholders' meeting could reopen discussion of executives' actions and accounts once the general meeting had voted its approval. Frenzied speculation which followed brought ten months later a further reform raising from 10 per cent to 30 per cent the necessary deposit of funds before a charter could be granted any company, and prohibiting trading in shares until 40 per cent of the capital was paid in.25 Thus, the first half of the century saw Brazilian agriculture and commerce move into the current of the world economy as the national economy expanded along the lines formed during the period of the colonial hegemony of Portugal. Population and commerce grew remarkably in the first fifty years. Between 1817 and 1864, population increased from 3,545,900 to 11,780,000. In the city of Rio de Janeiro alone, 450,000 people lived in 1864 where only 80,000 had been numbered in 1799.28 Trade showed a comparable growth. In 1854—55 of a total of manufactured imports of 81,000 contos ($45,360,000), cotton

The Economic Climate of Brazil

9

manufactures amounted to 22,200 contos ($12,432,000); in 1863-64 cotton manufactures represented 25,000 contos ($13,750,000) of a total of 104,600 contos ($60,530,000). 27 Expansion of Brazil's raw material exports, particularly the main prop of the economy, coffee, was significant. Brazil shipped approximately 47,727 metric tons of coffee in 1834-35, 90,909 metric tons in 1843-44, and 210,909 metric tons in 1860-61. Raw cotton shipments were less spectacular: 11,360 metric tons (1834-35), 11,840 (1843-44), and 19,461 (1863-64). Exports of sugar rose steadily from 70,749 metric tons in 1834r-35, to 115,200 tons in 1863-64. 28 These figures made impressive totals to observers during the 1860's. Yet despite these indications of growing national wealth and prosperity, there were those who emphasized as a major weakness the invisible items in the balance of trade: they referred to the profits recorded in the account books of foreign merchants which were immediately withdrawn from the country. In 1865, Sebastiäo Ferreira Soares, a Brazilian civil servant by occupation and economist by avocation, marshalled facts to prove that although agricultural production had moved upward in the decades before the sixties, the unfavorable merchandise balance of trade was a quicksand beneath the economic edifice. He reached the conclusion that over the nineteenyear period 1834-1863, Brazil had accumulated an average annual trade deficit of 1,124 contos ($573,240) or a total of 33,722 contos ($17,198,220). He urged that Brazil establish textile mills and other industries to produce "objects of most common use, or we will always labor for the industries of foreign neighbors, producing and selling raw materials only to receive them later at high prices after they have been manufactured; by setting up mills, the major portion of the capital which leaves to pay for objects of ordinary use would remain." 29 3 The analysis of Ferreira Soares did not represent an entirely new or isolated point of view. His was merely a lucid restatement of ideas current since the early forties. By that time a host of novel economic concepts had entered Brazil on the sails and steampower of the Atlantic carrying trade.30 The multiplicity of commercial houses, many of them foreign-owned, revealed the influx of foreign merchants who brought not only goods but the seeds of change.31 Brazilian consular and diplomatic agents abroad brought back information, doctrines, and

10

The Brazilian Cotton Manufacture

books. New ideas were distributed by Brazilian printing presses on a scale wider than in the colonial centuries when the colony was deprived of a press of any sort. After 1808 many Brazilians, freeing themselves from the narrow intellectual walls of Roman law, the classics, religious tracts, and eighteenth-century poetical academies, became conversant with the ideas of Smith, List, Carey, McCulloch, and Bastiat. One of the signal results of the migration of foreign ideas to Brazil was the enactment of the protective (Alves Branco) tariff of 1844, which levied duties of 30 per cent on most foreign manufactured goods, including cottons. Although ostensibly enacted to retaliate against British duties on Brazilian sugar, this tariff gave protectionists an opportunity to expound upon the new economic doctrines. The protection it afforded was transitory but the principle it embodied found fertile ground during succeeding decades of economic instability caused by the end of the slave trade in 1850 and the commercial crises of 1857 and 1864. Several reports illuminate the thinking of this period. The first, a report of the tariff commission organized in 1853 to review the consequences of the tariff of 1844, took the position that the backwardness of Brazilian industry was caused neither by lack of adequate protection nor by the competition of foreign goods. Firm in its faith in laissezfaire liberalism, the commission attributed the slow development of domestic manufacture to the customary deficiencies of infant industry in any land: shortage of capital, application of existing capital to more productive channels, difficulty in securing machinery and "suitable instruments of modern invention," and a strong tendency toward visionary enthusiasm followed by disinterest. The commission stressed that agriculture "always absorbed and will continue to absorb a vast sum of capital to the great advantage of our land." Other fields of investment, it was also pointed out, had long competed favorably with industrial enterprise. Until 1850 neither agriculture nor mining could compare with the attraction of the illicit slave trade for which even the industrially-minded had abandoned their projects for the possibility of "colossal wealth." 32 Importing houses in the fifties were "dazzled" by easy credit, extending their operations by borrowing large sums which they sent to Europe to cover purchases.33 Finally, there were the advantages of government securities. When some joint-stock enterprises collapsed in the early fifties, the security and promptly paid interest of government offerings

The Economic Climate of Brazil

11

drew investors and brought to the "doors of the Treasury a class of society which converts its savings into public securities and becomes a rentier of the State." 3 4 Lack of general and technical education was attributed to the traditional forms of agriculture and commerce which demanded no new knowledge. In the very nature of Brazil's settlers the commission uncovered one of the main causes for Brazilian backwardness. Unlike the English settlers in the United States who brought professional training and the "industrial spirit" acquired by their forefathers in agriculture and industry, commerce, and shipping, the first Brazilian colonists were "brutish slaves" from Africa, and peasants from the fields of the Iberian peninsula, an agricultural land where manufacture "poorly or never prospered." 35 It was observed that even the education given to Brazilian upper-class children was not that which manufacture required. This was not uncommon on the continent where the French cultivated the classics, too; the same love of classical studies was present in Portugal and logically appeared in Brazil. As in Portugal, the desire of every Brazilian father was to send his son to the University of Coimbra and the same tradition continued after separation from the metropolis. Assuming the presence of other favorable factors, how could any domestic manufacture take root without the importation of machinery? The commission recognized that fomenting domestic industry with primitive and inefficient mechanical processes would represent no advancement. "The condition of several branches of French, German, and Belgian manufacture gives clear proof of the ineffectiveness of such procedures, and the backwardness of India's mills adds further evidence." 3 6 There was the example of French industrialists who had spent heavily to sneak a few contraband British machines past zealous government officials until the revocation of the prohibition in 1843. Pessimistically the commission noted: if France, close to the "home of invention," encountered so much difficulty, what chance did Brazil have to lay hold of instruments and machines? "Who could manipulate them if they did arrive? " 3 7 In its conclusions on the backwardness of Brazilian manufacture, the tariff commission of 1853 made clear that it considered tariff protection a throwback to Portuguese mercantilist policies. For supporting arguments it turned to the fifty-year-old writings of José da Silva Lisboa, the Bahian influenced by Adam Smith, who had counseled the Portuguese prince regent on his arrival in 1808 to open Brazilian ports

12

The Brazilian Cotton Manufacture

to the commerce of the world. "We are satisfied that liberty has been granted to all manufacture," a reference no doubt to the termination of the decree of 1785. Domestic manufacture had to seek its own level because European-style industry which depended upon "superabundant accumulation of capital, labor, and machines" could not be introduced in Brazil "forcibly or prematurely." Where the Brazilian government intervened to favor enterprise, its steps had been dogged by failure. Agriculture remained the "supreme activity." 38 Although the views of the 1853 tariff commission continued for many years to enjoy official sanction and wide dissemination, changes were occurring which brought new strength to the protectionists. The commission seems to have overlooked the hopeful signs of Brazilian industrial progress.39 The protective tariff, followed by the lifting of duties on machinery and raw materials in 1846 and 1847, stimulated the founding of Brazilian cotton spinning and weaving mills, two of which in the forties — the Santo Aleixo mill of Rio and the Todos os Santos mill of Bahia — "gave a truly industrial aspect" to cotton manufacture. Most of the nine cotton mills enumerated in national expositions twenty years later dated their establishment in this period, especially those of the first Brazilian cotton manufacturing center, Bahia.40 Recognition of a growing industrial spirit came at the Brazilian exposition of 1861. The opening day was hailed as bringing the "first inventory of Brazil's natural wealth and industries, clearing a new road to prosperity." Frederico Burlamaque, who prepared the official account of the exposition, countered the charge of "materialism," leveled at sponsors of the exposition, with the comment that "nothing is less materialist than dedication to work." Science, he argued, from the earliest years of the nineteenth century sought to learn nature's secrets to apply them to the moral and material improvement of human societies. Rivers, mountains, or climate no longer tied mankind to one locality; ideas circulated swiftly on the "electric wire, forcing all peoples to march with quickened pace." 41 Such enthusiasm was counterbalanced in 1861 by the comments of the ardent free-trader, Tavares Bastos, on the significance and results of the exposition. His acrimony stemmed from the belief, shared with José da Silva Lisboa, that the "supreme law of industry" — liberty — spelled freedom from government intervention, favoritism, and privilege granted to a few. Only competition "in its irresistible force" controlled the flow of capital. Tavares Bastos scoffed at those who concluded that the exposition revealed Brazil's "aptitude" for manu-

The Economic Climate of Brazil

13

facture. Despite the desire of some to "precipitate" domestic manufacture through government favors or other official stimuli, Brazilian mills were an "accident" and the exposition showed that agriculture was the "great, the real national industry." Capital, population density, transportation, and trained labor were still unavailable for industrial development.42 The analysis and arguments of the exponents of free trade, represented by Tavares Bastos, received a formal and coherent critique in the review of the industrial section of the exposition of 1866. While granting that Brazil in 1866 still lacked the requisites for becoming a "truly industrial" nation, the section's rapporteur, Α. V. de Borja Castro, concluded that the artifacts on display showed Brazilians' aptitude for industry and strengthened the hope that the day would arrive when "large-scale manufacturing would develop upon this wealthy continent." 43 Rejecting the assumption of the Brazilian followers of Adam Smith, from Silva Lisboa to Tavares Bastos, Borja Castro denied that agriculture and commerce were the necessary prerequisites for industrial progress, stating that the development of domestic manufacture would prove the "direct" and "positive" cause of augmented commerce and agriculture. Manufacture, he complained, had not been put foremost because of the currently sanctioned theory that the rigors of a tropical climate made industrial progress impossible, and that Brazil was "predestined" to be an agricultural nation because soil fertility facilitated the concentration upon "colonial" products.44 This theory Borja Castro proposed to demolish. It could be observed, he reasoned, that agriculture prospered where industry brought together large numbers of trained workmen utilizing machinery for varied ends. In such nations industry stimulated agricultural diversification and consequently limited imported raw materials to a few supplied by the tropical nations. Although the specialized agriculture of a tropical area might prosper, imported necessities of life remained both costly and scarce and therefore prevented economic progress. Borja Castro concluded, then, that an "agricultural nation. . . must resign itself to the perpetual yoke of the industrial and merchant nations, resting content with the modest role of supplier of raw materials." 45 He cited the analysis of Anglo-Brazilian trade relations prepared by a Brazilian diplomat in London to exemplify how, in fact, "liberty of commerce" and the international division of labor had operated. Not only did British imports of Brazilian raw materials

14

The Brazilian Cotton Manufacture

appear insignificant beside the value of manufactured goods Britain exported to Brazil, but the trade between the two nations was organized by British entrepreneurs, financed by British capital, and carried by British ships.46 Thus, the shipfitters' profits, interest on capital, seamen's wages, insurance, commissions, and earnings of the trade, all flowed into the pockets of the British. Meanwhile the Brazilian producer paid for what he consumed with the products of his fields which the British undertook to market throughout the world, except in Britain where import restrictions favored coffee grown in its possessions.47 The real barrier to industrial progress in Brazil, Borja Castro expounded, was not the tropical climate, which hard work and the application of science could surmount. He believed the most serious barrier to be Britain's industrial and political hegemony. The contrasting fate of two victims of British "oppression and despotism" — India and the United States — furnished him with excellent case studies. Under British rule, India had seen its flourishing hand-loom textile industry yield to the machine-made textiles of Lancashire. The United States, on the contrary, had destroyed the "monopoly" of the motherland along with the idea that the colonies should confine their activity to agricultural pursuits, and had taken the course of establishing a more solid base of wealth in agriculture, commerce, and manufacture. 48 Borja Castro conceded that the government's policy of concentrating upon agriculture was justifiable in the opening years of the nineteenth century. In the intervening years, however, Brazilian economic conditions had changed and the time had come to foment industry. The progress of the domestic cotton manufacture had been slow; yet this only proved, he argued, that Brazil should profit from the experience of "more enlightened" nations by joining the "effective protection of the State" to the purchase of machinery.49 Thus, Borja Castro's emphasis upon external factors inhibiting Brazil's industrial progress, in his report of the industrial section of the exposition of 1866, developed into a plea for protection to infant industry. Nowhere had industry developed without temporarily excluding from the domestic market the competition of the "strongest and best prepared" until local establishments could survive without "State tutelage." For proof of this assertion he singled out the Brazilian preferential tariff of 1810 which had permitted the introduction of British manufactures, the "first cause" of the elimination of artisan manufacture and of the impossibility of establishing industries until

The Economic Climate of Brazil

15

the tariff of 1844. Besides, he commented, the history of industrial nations showed that they abandoned the protective system only when domestic manufacture could withstand the competition of "more developed" nations.50 It was illogical to expect private citizens to venture into industrial enterprises if they were sure to lose their money unless the government provided tangible support; how could they bear losses in the hope that "some day" their products might compete with those of the foreign producer who had "begun sooner and was better prepared?" Behind the tariff of 1844 Brazil had obtained the few cotton mills of Rio and Bahia, the "beginnings of manufacture"; for greater progress it was necessary that the government "protect domestic manufacture" in the early stages of industrialization.51 Although effective protection did not come until the 1880's, tariff rates rose slowly between 1860 and 1879 and made investment in the cotton manufacture attractive. The tariff legislation of 1860 consolidated previous legislation, revised specific duties in the light of worldwide price increases in the fifties, and established a general tariff level of approximately 30 per cent; what slight increases were written into the law were due to the government's unwillingness to raise export duties on raw materials.52 The Paraguayan war, 1865-1870, in which Brazil actively participated, obliged the Brazilian government to raise duties to meet rising expenditures. The logical place to obtain added revenue was the Customs House, which furnished the Imperial regime's income.53 This was apparent in the increased duties of 1867. In 1874, in an attempt to lower the prices of basic goods consumed by the lower classes, the duties on coarse cottons were slightly diminished. But government requirements kept mounting and in 1878, and more specifically in 1879, an increase in additional to the tariff countered the reductions of 1874 and amounted to moderate protection, "a concession to the protection which began to dominate the thinking of the nation's leaders." 5 4 With the ostensible purpose of improving customs administration, the government resolved in 1878 to send abroad two of the most competent employees of the Rio Customs House to visit factories in the United States and in Europe. The two commissioners were to concentrate upon improved methods of classifying dutiable goods, to take note of innovations in various industries as well as the "administrative systems of the Customs of the principal States." They were urged to observe closely the manufacture of various cotton fabrics "especially those imported by Brazil. . ." The project was lauded by

16

The Brazilian Cotton Manufacture

Brazilian textile manufacturers who had long complained of the inroads of European cotton mills, many of whose Brazilian representatives took advantage of customs officers' ignorance of technical details in manufacture to classify incorrectly incoming merchandise.55 As preparation for the inspection of mills, the commissioners, Sattamini and Sampaio Vianna, took courses in industrial chemistry and cotton spinning and weaving at the Paris Conservatoire des Arts et Offices, and visited the industrial museums of London and Berlin and the textile center of Lille. Careful tours of large mills where "it is often almost impossible to enter" were everywhere facilitated by retired merchants, formerly established in Brazil.58 It was the impressive transformation of the English midlands in a relatively brief period that excited their amazement. Viewing the smokestacks of England's industrial heartland, they argued that the textile industry was the key to industrial development; for it had brought an increase in the output of coal and iron, in the production of machines, internal distribution, and foreign trade. They did not overlook their own nation's role in such industrial prosperity, for they noted that British commerce flourished on the transport of finished goods to those "distant climes." Everywhere they saw the remarkable results of the application of the principles of mechanics and the production of machinery upon the textile manufacture.57 Aside from their observations of industrial progress in both the United States and Europe, the commissioners appear to have been strongly influenced by the general abandonment of free trade. Other contacts with rising protectionist groups in the United States and on the continent altered the hitherto free trade orientation of the Imperial Government.58 The finance minister in 1880 denied the charge of being a rigid adherent of protectionist principles but affirmed his belief that all legislation should be based upon the special conditions of each land. If the tariff of 1879 showed protectionist tendencies, it was nevertheless "no defect in young countries like ours, whose industry does not yet have the necessary strength to cope with the foreigner." The free-trade school had a "magnificent" theory, remarked the minister's report of 1880, to be preached and followed by nations whose "production, outstripping consumption, must locate free markets everywhere." On the other hand, were Brazil to adopt the theory, it would represent "self-condemnation" to the status of a "dependent, and to a slackening of progress." 5 9 After all, continued the minister, the basis of competition was equality of conditions and he urged

The Economic Climate of Brazil

17

Brazil to profit by the example of the "immensely prosperous" United States.60 Those who sought to promote Brazil's industrialization received support from the instability of agricultural prices after 1860 and the risks of agricultural enterprise in general. A notable example of agriculture's instability came as a result of the cotton famine caused by civil war in the United States. When United States cotton exports were resumed, the Brazilian boom collapsed, for there was more unshipped cotton in Brazilian ports than the nascent local textile industry could absorb. Subsequently, the cotton debacle merged into the world-wide downward trend in agricultural prices, usually dated from 1873 to 1896. There was consequent concern over the continued dependence of Brazil's economy upon overseas markets for disposal of her raw materials. In the seventies and eighties a sword of Damocles was suspended over the heads of the coffee planters of the Parahyba Valley as the producers of Brazil's major export felt the combined effects of eroded land, an aging slave labor force, and the threatened abolition of slavery — which finally came in 1888. That the changing economic climate directly stimulated the development of the cotton manufacture was made clear in a prospectus published in Bio in 1870 for the Brazil Industrial cotton mill then being projected. The title clearly stated the prospectus' nature: The Industry of Brazil. Advantages of Establishing Cotton Factories at the Fazenda of Macacos. The men behind the Brazil Industrial mill stressed a new element overlooked by earlier pro-industry propagandists. They suggested that some important deficiencies impeding industrialization could be remedied. Lacking coal, Brazil could use the water power in her provinces as New Englanders had done with the Merrimac, the Kennebec, and other rivers. Among the cotton producing centers of the world, Brazil ranked fourth. A pool of "able-bodied and skilled mechanics" existed in Europe, and immigrants could be attracted to Brazil as well as to the United States. Industrial nations had revealed how labor and capital could be combined in corporate enterprise to build factories. Moreover, the Brazil Industrial's promoters introduced a note of urgency as they reminded their readers that the "vital importance of national manufactures" had become acute and increased the possibilities of lucrative employment of capital in industry. Formerly, Brazilian consumption of imported cottons had been lower and exchange rates more favorable. By 1870, they reasoned, the expanding

18

The Brazilian Cotton Manufacture

consumption of manufactured goods everywhere, their "growing dearness in foreign countries," Brazilian customs duties, and unfavorable exchange all argued for immediate establishment of the cotton textile industry.61 Developments overseas provided added stimulus for national industrialization. Mexican mills and those commencing operation in the southern United States, where production was similar to the coarse cottons turned out by the few Brazilian mills, were spotlighted.62 To prick national pride in manufacture one writer turned to sarcasm as he commented on Egypt's mounting cotton exports and growing cotton mills. "And in this Empire," asked a columnist of Rio's Jornal do Commercio, "are we condemned to be eternally inferior to Egypt in agriculture and industry? " 63 Inspired by reading Chevalier's chronicle of a trip to Lowell, another writer of 1875 concluded: "Blessed be he who founds a Lowell in Brazil." For "Lowell is the realization of the desideratum of the general commonweal, for which democracy incessantly strives."64 The Imperial Government's interest in domestic manufacture, increasingly evident after 1879, was paralleled by the vehement, outspoken ideas of Brazilian industrialists of the eighties. In manifestoes, on the occasion of an industrial exposition, in a subsidized newspaper, industrialists — several of them textile entrepreneurs — campaigned for governmental support for industry through tariff protection, and for "organized" rather than "haphazard" protection. For the first time industrial entrepreneurs in Brazil banded together in an organization designed to further their special interests. The Industrial Association (Associaçâo Industrial) was founded in 1881 by the "more active industrialists to campaign for the progress of domestic manufacture and to defend its just interests."65 Evidence of the government's changing attitude toward industry was the way a Rio cotton stocking manufacturer convinced the government, after "tremendous" effort, to raise the tariff in the early eighties to protect his product from foreign competition. The proprietor's success was held up to the public as an example of how he had shown the government how to defend "national enterprise" by aiding its full development.66 At the close of the eighth decade the small group of Brazilian entrepreneurs proclaimed that domestic manufacture was no longer "embryonic."67 No longer was industrial progress a vague "aspiration" whose realization depended solely upon "theoretical propaganda."68 Brazilian entrepreneurs of the quarter century 1850-1875 managed to

The Economic Climate of Brazil

19

dot the Brazilian landscape with small mills whose coarse cottons competed with English imports. They claimed that abundant and cheap raw materials, perfection and cheapness of product, and adequate demand assured domestic manufacture a stable future.69 To the question, how had the basis of a textile industry been laid, those involved were ready to answer that it was the "energetic will" of a few manufacturers that achieved a "miracle" despite the inevitable sacrifices.70

Location and Product

"Despite the difficulties obstructing the cotton spinning and weaving industry for some time, no one can contest the fact that the progressive movement of its development has not been broken," a Brazilian parliamentary commission affirmed in 1882. Looking back over thirty years of the cotton manufacture, the commission noted that "new mills were founded, [which] struggle valiantly and courageously to conquer the obstacles in their path, confident of surmounting them and of constructing a firm foundation for future industrial prosperity in Brazil." 1 By 1866 Brazil's nine cotton mills with 13,977 spindles produced approximately four million meters. Between 1866-1885 the rate of expansion was considerable; for, at the end of the period, forty-eight mills with 66,466 spindles were turning out more than twenty million meters. Looms in operation jumped more than fivefold in the same period, and the number of workers rose from 795 to 3,172.2 In 1866 the city of Bahia and environs contained five of Brazil's nine cotton mills. That the industry was concentrated first in this area may be traced to the presence of raw material, power sites, ruralurban markets. Since the end of the eighteenth century, Bahia exported raw cotton raised in the surrounding hinterland; in the colonial era, moreover, Bahia had grown in importance as a sugar-growing area, as commercial entrepôt, and as administrative capital. Despite the backwardness of Bahia's sugar industry by the middle of the nineteenth century and the shift of government headquarters to Rio, Bahia was still a large city by Brazilian standards. Ample supplies of raw cotton were available, as was both local and some foreign capital; its

Location and Product

21

excellent harbor and river system facilitated the handling of heavy machinery; both city and hinterland had a large slave population and reservoir of free labor to consume coarse cloth; and finally, there were several excellent water-power sites. Added impetus to Bahia's industrialists in the 1840's and 1850's came from two other developments: the provincial legislature which placed supplementary export taxes upon all produce exported in imported bagging, and the difficulties faced by inefficient sugar planters and associated exporters, some of whom were ready for new investment opportunities. These factors maintained Bahia as the first nucleus of the cotton textile industry from 1844 to the late 1860's. Subsequently, from 1866 to 1885, the number of Bahia's textile mills grew from five to twelve, but its percentage of Brazilian mills dropped. (Table 1) By 1885 thirty-three of Brazil's forty-eight mills were TABLE

1.

ESTIMATED

GEOGRAPHICAL

COTTON M I L L S , 1 8 6 6 ,

Province Maranhäo Pernambuco Alagoas Bahia Rio ( City, Province ) Säo Paulo Minas Gérais Total

1866

DISTRIBUTION OF 1875,

BRAZILIAN

1885."

1875

1885

1

1 1 1 11 5 6 5

1 1 12 11 9 13

9

30

48

1 5 2

1

" Since the data are incomplete, these statistics merely indicate the general trend. Source: Commissäo da tarifa, pp. 160, 342; Borja Castro, "Relatorio do segundo grupo," p. 49; Inquerito industrial, p. 15; Branner, Cotton in the Empire of Brazil, pp. 42-43; Consul Rhind, "Precis of an Article," Report, C 9497-2, xcvii ( 1 8 9 9 ) , 3.

located in the south central provinces of Rio de Janeiro, Säo Paulo, and Minas Gérais, with the greatest concentration of spindles and looms in the city and suburbs of Rio de Janeiro. The more rapid growth of cotton mills in south central Brazil and especially in and around the city of Rio reflected the increasing political and economic importance of the area after 1850. In the next four decades coffee cultivation flourished in south central Brazil; the city of Rio, and later Santos, developed as the leading coffee ports;

22

The Brazilian Cotton Manufacture

Rio became both main commercial entrepôt and administrative center of the empire; within the city, population expanded rapidly, while increasing numbers of both Negro slaves and subsequently free European immigrants labored on the coffee plantations, creating a steady market for cotton goods. A few local planters and merchants in the Rio area invested in cotton mills in the seventies and eighties when a combination of low coffee prices, soil erosion, and inadequate slave labor threatened the stability of coffee cultivation. Further incentive for cotton manufacture came at the close of the Brazilian cotton boom which developed during the American civil war. Säo Paulo had expanded cotton production, and the return of American cotton exports after 1865 left Brazil with surplus, low-priced cotton which favored the founding of mills in both Säo Paulo and Rio. Finally, water-power sites abounded throughout south central Brazil, near the city of Rio, in the provinces of Minas and Säo Paulo. To another factor, supplementing population growth and agricultural and commercial activity, may also be ascribed the concentration of looms and spindles in the Rio area by 1885. This was the ability of Rio mills to shift from water to steam turbines as a source of power after 1860. During the first years of the cotton manufacture it was recognized that the industry should utilize water, one of Brazil's most abundant power sources, rather than coal. Early mill owners found coal expensive, making it difficult for locally produced cotton goods to compete with imported cloth. The United States, one early cotton mill proprietor pointed out, derived from water a "great reduction in the costs of production in its cotton mills" and he suggested that "in a young nation, as in Brazil. . . it is wise to locate mills near water or on river banks [because] we do not mine coal . . . and Brazil is rich in streams."3 Several of the earliest mills, built in the 1840's, were run initially by water power.4 Nevertheless, dependence upon water power, however cheap and accessible, brought certain disadvantages. Irregularity of rainfall in the latter half of the nineteenth century,6 and deforestation of local watersheds brought a short season of flash floods 6 followed by a prolonged period of inadequate water supply. This situation led mill owners to supplement water with combustibles.7 The Conceiçâo and Queimado mills of Bahia soon had to add boilers to their machinery. To be sure, a small number of mills were run wholly by steam, their boilers heated by firewood from surrounding forested areas, or by coal.8 It appears that the mills of the Rio de Janeiro area profited most from

Location and Product

23

Rio's development as a shipping center because of the availability of imported coal. In the last quarter of the nineteenth century accessibility to coal supplies imported from Western Europe helps account for the expansion of the cotton manufacture in and around Rio de Janeiro. By the end of the century, many cotton mills there, particularly the largest establishments, had shifted from water to steam power. According to an 1899 survey of eighteen cotton mills in the city and state of Rio de Janeiro, eleven mills (205,698 spindles and 7,083 looms) used steam, while seven mills (73,968 spindles and 2,817 looms ) still depended upon water. The eleven, which included almost all the large mills, turned out more than double the total cotton cloth output of the mills dependent upon water power (88,660,000 meters compared to 31,850,000).® On the whole, poor transport facilities made the cost of coal prohibitive for cotton mills of the interior. Construction of a railway network linking Rio de Janeiro to both Minas Gérais and Säo Paulo after the 1860's provides a final factor in the shift of the textile industry from Bahia to south central Brazil. The impact of the railroad revolution is underscored by the fact that, of Minas Gérais' twelve small mills reported in 1887, eight were located on railway lines, finished or projected, while a number of Säo Paulo mills sprang up around Sorocaba, Salto, and Tatuhy — areas supplied with cotton, water power, and, by the eighties, with railway lines.10 As for the Rio de Janeiro area, the directors of the Brazil Industrial mill in 1870, in the Advantages Possessed by Brazil Most Essential for Success in Manufacture, emphasized that their mill was situated at the terminus of a trunk line of the Dom Pedro Segundo railway "one and a half hours' ride" from Rio and that the Imperial Government's concession included "free transport of all machinery, parts of machines, tools, etc., and all materials for the factory . . . " 1 1 In 1885, when the directors of the reorganized Petropolitana mill considered expansion of plant facilities, their "justifying material" stressed the advantages to be derived from a new railroad line to pass nearby. "We hope," they stated, "that not only building material but also raw material and finished goods will enjoy special freight rates on that line." 12 2 That the "progressive movement" of the industry remained steady can be ascribed to the type of cloth produced by the early cotton mills. In effect, the mills catered to the largest available market in the

24

The Brazilian Cotton

Manufacture

economy of an underdeveloped area of the nineteenth century: clothing for laborers, slave and free, of the town and countryside, bagging for sugar, and particularly for coffee production shipped abroad in ever larger amounts in the course of the century. The product was one readily mastered by untrained workers, machinery was of the simplest, and the market was relatively assured. The manufacture of coarse cotton cloth served as an apprenticeship for the early industry. Statistics of cloth production in the early decades of the industry failed to discriminate type and quantity, and consequently a variety of descriptions of cotton mill output must be utilized. 13 The Santo Aleixo mill of Rio produced in 1855 cotton wicks, thread, heavy cloths of various sizes for clothing workers, and bagging. Bahia's three mills (1861) were reported producing an excellent quality of coarse cotton twist and coarse cloths "only used for bagging and Negro clothing;" in the same year, Santo Aleixo's products were still confined to coarse cloth "suitable for clothing slaves and European colonists, and bagging." 1 4 Reports of operations in Bahia's Queimado mill (1866) mentioned products similar to those of the southern mills: slave clothing and blankets, and sailcloth for small vessels. So well had the techniques of coarse cloth production been mastered by the seventies that several Brazilian mills received awards or honorable mention at the Vienna Exposition of 1873. 15 In 1874 the seven cotton mills of Bahia and Alagoas were still making twist, coarse cloth for bagging and for clothing "blacks." Although the Petropolitana mill of the Province of Rio offered the same "heavy, adequate" cloths as the other mills of the time to the "classes of society less favored by fortune," it did vary from the rule by producing some twills in various colors. Reports from northern mills of the seventies, eighties, and nineties stressed repeatedly output of sugar bagging and clothing of the "colored people," and only in the nineties did there appear scattered references to calicoes, ginghams, or madapolams. The chief cloths manufactured in Pernambuco mills as late as 1894 were "coarse white bagging for sugar, manioc flour, and shirtings or regattas." 1 8 Although a few well-established mills at the end of the eighties had mastered enough of the industry's technical aspects to produce intermediate cotton goods, most mills limited production to a narrow range of staple products until the end of the First World War.

Organization, Finance, and Machinery

Molded by the restricted local investment market, general distrust of industrial enterprise, and close government supervision of jointstock companies until the early nineties, the organizational form of the cotton manufacture progressed from individual proprietorship to partnership and finally to the corporation. Although changes in corporate form reflected European developments, Brazilian entrepreneurs consistently followed the practice of limiting participation to a narrow group of investors, thereby continuing patterns of earlier economic organization. Partly as a result of this tradition, and partly because of the generally unfavorable investment climate, shortage of capital in the early mills was endemic to the industry. Many early Brazilian cotton mills were one-man enterprises. A description of the ownership of the early Conceiçâo mill of Bahia indicates such a case. "There was a small mill which operated until 1837, when public disorders caused considerable damage; its proprietor, Domingos José de Amorim, could not keep up the establishment with his own resources and he took in a partner, Domingos Gomes Ferreira." 1 Of the Queimado mill, another in the early textile nucleus at Bahia, it was announced in 1867 that an "individual erected it in 1840, selling it in 1844 to Paulo Pereira Monteiro, who still owns it." 2 Frederico Guilherme built a mill in a Rio suburb in 1841, but lack of capital and a market for his production forced him to close it.3 Similarly the pattern of the single entrepreneur found in the cotton mills of Bahia and Rio in the fifties extended to Säo Paulo where a provincial newspaper in Sorocaba announced that "due to the efforts of that worthy Sorocaban, Manuel Lopes de Oliveira, a steam cotton spinning and weaving mill is in process of erection." 4

26

The Brazilian Cotton Manufacture

Concurrent with the one-man textile mill enterprises were those begun by partnerships. At Valença in the province of Bahia, the Todos os Santos mill developed in 1844 when a "company of merchants from Bahia," Antonio Pedroso de Albuquerque, Antonio Francisco de Lacerda, and an American, J. Guillmer, pooled their resources under the name of Lacerda & Cia. Sixteen years of operation found the mill in a poor financial condition and Lacerda proposed the dissolution of the partnership; Pedroso de Albuquerque bought out the other partners.® H e held on to the mill for approximately twenty-two years, selling out finally to another partnership, Moreira, Oliveira & Cia., which had also bought the nearby Amparo cotton mill formerly owned by two partners. 0 Three partners banded to form the Säo Luiz mill near Itú, Säo Paulo, in 1873, including the Baräo de Piracicaba, Angelo Custodio Moraes, and Luiz Antonio Anhaia. Two years later the Baräo sold his land near Itú to an "English Association" which planned to build a mill to produce "coarse and fine cloth on a large scale." Anhaia, eleven years later, put into operation his own mill in the Bom Retiro section of the city of Säo Paulo. 7 Textile mill partnerships were also common near the city of Rio and in the province of Minas Gérais. 8 The Beribery mill in Minas Gérais provides a good example of an intra-family partnership. In the early seventies the Bishop of Diamantina (Minas Gérais), interested in relieving unemployment among diamond workers affected by the discovery of diamonds in South Africa, and unable to obtain the support of local capitalists who "feared the short supply of cotton, the transport over our roads, and foreign competition," sold the idea of setting up a cotton mill to his brothers, Antonio Felicio and Joaquim Felicio dos Santos, to a nephew, and to one other commanditaire. The enterprise took the name of Santos & Cia., responsibility for setting up the mill being divided among members of the family. One of the Santos brothers later ( 1878 ) joined with two partners to form Santos, Peixoto & Cia., which erected the Pau Grande mill in Rio. 9 There were examples of foreign textile engineers who came out to Brazil to put mills into operation or to supervise operating mills and who later joined as partners in new mill ventures. Joseph Revault, contracted in France to erect machinery for the Queimado mill of Paulo Pereira Monteiro in Bahia, left in 1857 to found the nearby Modelo mill; later he became managing partner in the commandite formed to operate the new mill. 10

Organization, Finance, Machinery

27

Until the relaxation of government limitations on joint-stock companies, which began in 1882, individual businesses and partnerships predominated in the cotton manufacture. Nevertheless, joint-stock companies did exist as a form of business association adopted by some early cotton mills.11 After the advent of the republic in 1889, further relaxation of government restrictions on the formation of business corporations led to more general use of the corporate form. It would be erroneous, however, to credit the corporate form of business with an attempt to widen appreciably the number of investors in the cotton manufacture of this period. The corporation continued the textile establishment as family enterprise, or as one which involved extended family, business associates, and close friends.12 Through these personal and business relations, limited multiple ownership by means of interlocking partners and directors was made possible. An important factor in limiting the ownership of the Brazilian business corporation was the traditional commercial outlook of the Portuguese based on the precept "Secrecy is the soul of business."13 Applied to industrial enterprises, this made it desirable to limit the number of original stockholders, and to seek added capital from the same sources. In practice, when the original stockholders' disposable capital was exhausted, public subscription offered no solution because, it was reasoned, if the compact circle of wealthy stockholders knotted their purse strings, the company's financial condition was unsound and the mill not worth buying into. Consequently, in times of crises the companies went to the banks for loans. Company statutes were fashioned "as far as possible to avoid, within the law, entrance of outsiders into the corporation without the consent, tacit or expressed, of all the stockholders, as well as to maintain an equitable system of stock transfers and to guarantee the stability of the Company administration." 14 Eight months after the Petropolitana mill decided to issue a new stock subscription of 5,000 shares, "there was verified the fact that part of the shareholders failed to respond, and it is not possible without risk to the Company's credit, to offer the subscription publicly."15 To maintain auto-financing, the America Fabril company in 1892 resolved to follow the practices of other mills in increasing its capital for the construction of a new mill in a Rio suburb. This capital expansion was viewed as a loan from the stock subscribers; 7 per cent interest was paid semi-annually on the new capital "and this sum debited to the construction account of the new mill." When it was

28

The Brazilian Cotton Manufacture

proposed, two years later (1894), to increase capital stock from 1,800 contos to 2,400 contos ($360,000 to $480,000), preference in purchasing new stock went to holders of paid-up shares even to the point of allowing them to make partial down payments.16 Clearly, industrial enterprise, as was the case with the Brazilian plantation or the merchant house, was strictly a family affair. Participation in the formation of industrial companies depended upon who you were rather than upon the impersonal considerations of a largely non-existent capital market. 2 Few data are available on the amount of capital and number of shares issued until the 1890's. Most of the textile mills founded before 1880 were capitalized at between 200 contos and 500 contos ($100,000 to $250,000), a very few at 1,000 contos ($500,000). Frequently initial capitalization proved insufficient to carry a textile enterprise into operation. Estimates of capital requirements were rough, and, once having decided to invest in the textile manufacture, entrepreneurs probably operated in much the same fashion as early investors in Southern cotton mills of the United States: "They put in their money and made it go as far as it would." 17 Inevitably there came moments which upset even the most carefully calculated mill estimates, and when mill construction was well under way, or when mills were about to commence operations, textile entrepreneurs ran out of working capital.18 This sometimes obliged the directors to seek additional capital from outside sources, usually commercial banks. As the directors of the Brazil Industrial mill near Rio explained company developments in the seventies: "Because of the inadequacy of the respective budgets and the occurrence of many unforeseen circumstances which confounded all calculations, the capital . . . with which the company was incorporated was not enough to complete the enterprise." Unable to float a new stock subscription among its shareholders during the period following the financial crisis of 1873, the company negotiated a loan from the German-Brazilian Bank of Rio. This bank was liquidated in 1874 at a time when cotton cloth buyers of the interior avoided a yellow fever epidemic in Rio and when the commercial crisis put limits on any credit transactions. Without the opportunity to sell its stock on hand or production in process to supply working capital, and facing the refusal of other lending establishments, the Brazil Industrial directors turned to the Imperial Government for a loan of 300 contos ($150,000) 19 which was

29

Organization, Finance, Machinery

not granted. Despite these setbacks, the company managed to survive. A balance sheet of the Brazil Industrial establishment offers a plausible breakdown of the funds raised with difficulty to set up an early Brazilian cotton mill between 1870 and 1874. By consolidating the costs of principal items it is found that the largest outlays went for the purchase, shipping, and installation of machinery (45 per cent) and for construction of factory and other buildings, water supply and a railroad spur (42 per cent); remaining disbursements were applied to purchase of the site (10 per cent) and general expenses (3 per cent.) (See Table 2.) TABLE 2.

COSTS OF MOUNTING T H E COMPANHIA INDUSTRIAL M I L L ,

Item Acquisition of the Fazenda Macacos Construction, factory building Machinery Purchase price Freight Port charges Warehousing, erection Water supply (piping, freight, duties, dams) Other construction General expenses Railroad spur

Milreis

368:472 27:104 15:416 76:416

Total

Source: Adapted

BRAZIL

1870-1874.

from Companhia Brazil Industrial,

Per cent

107:186 359:641

10 33

487:408

45

51:885 36:529 34:735 10:700

05 03 03 01

1,088:284

100

Primeiro relatorio,

pp. 39-40.

Capitalized at 1000 contos ($450,000) at its incorporation in 1870, the company had "exhausted" its capital in four years, practically completing its installations but still lacking funds "to put the Enterprise in condition to obtain the hoped-for advantages from the investment." 20 At approximately the same period, the Uniâo Itabirana mill started with 100 contos ($50,000) but "it was necessary to contract a loan of 60 contos ($30,000) to erect the mill properly, not only because the original calculations were badly made, but because foodstuffs were high when construction was undertaken." 21 It is possible to trace the financial arrangements of two mills in their early phases, the Petropolitana and the America Fabril, both of

30

The Brazilian Cotton Manufacture

the province of Rio de Janeiro. To say to what degree the cases are representative is difficult; however, they illustrate how it was possible in the last quarter of the nineteenth century for two local cotton mills to obtain capital for construction, current expenses, and expansion. A Cuban entrepreneur in Brazil, Bernardo Caymari, combining the roles of general entrepreneur, promoter-financier, construction contractor, and industrialist, created the Petropolitana between 1873 and 1885. According to the company charter, share capital totaled 1,000 contos ($530,000); at first, subscribers were required to pay only 50 per cent of subscribed capital. Caymari was elected president at the first meeting of the board of directors; it was agreed to buy from him ownership of land and buildings at the factory site and to commission him to turn over to the company a fully equipped mill at the end of eighteen months —all for the sum of 450 contos ($246,500).22 Since only half the capital stock had to be paid in at this time, Caymari in fact received the first returns on capital stock payments. It soon became evident that original specifications for the projected mill were inadequate. Three months later, December 1873, according to the directors' minutes, extra buildings (a "chalet" for the superintendent, a second story for another edifice), another turbine, and machinery for a repair shop supplemented the original plan. Bit by bit in ensuing months the installation expanded. In June 1874 the directors added a dye-works and boiler, a sizing machine, and a cloth folding machine; in August 1874 a sprinkler system joined the list of extra purchases. At the beginning of September the spinning machinery had to be adapted to produce coarser yarn. 23 These modifications required greater financial efforts. In February 1874 the company requested shareholders to pay up for subscribed stock, and by the middle of May 1874 it was decided to seek a loan to meet the increased financial outlay. In June the company requested and received a loan of 80 contos ($42,400) from the bank which also financed the Brazil Industrial mill, the German-Brazilian Bank, to run for six months at 8 per cent per annum, 1 per cent commission for opening the credit, in exchange for a mortgage on land, buildings, and equipment. Caymari had by now paid out of his own funds for materials and machinery in excess of the contract stipulations. After the call had gone out for all stock to be paid up, the company reimbursed Caymari; on June 7, 1874 the directors resolved to pay him another two and onehalf contos for extra machine parts. In August, Caymari was asked

Organization, Finance, Machinery

31

to supply piped water, a sprinkling system, and extra machinery, and to supervise shingling of factory roofs and adaptation of spinning machinery to produce low yarn counts.24 Although setting up the mill was no mean achievement, Caymari's disbursements were not pure altruism, for the directors paid him on his advances the same interest rate demanded by the GermanBrazilian Bank. On the basis of available evidence, he profited, not only as head of the Petropolitana, but also as intermediary, earning interest on advances, as purveyor of factory supplies, workers' housing, and the myriad items required by any industrial establishment. By the end of the first year of incorporation, the company owed him approximately 77 contos ($40,810) for all the supplementary construction, accessory machinery, and other details for whose supply and execution he had been commissioned.25 In January 1875, with the mill ready to commence production and no cash on hand, the directors decided to reduce the company's debt to Caymari, paying him in cotton bills of lading. At the same meeting the directors appointed Joaquim Arsenio Cintra da Silva purchasing and selling agent for five years. Cintra da Silva, it appeared, had loaned Caymari funds to complete construction at the mill.26 Continued shortage of funds to pay Caymari forced the company to modify its sales policy from a retail to a wholesale basis in order to obtain cash quickly. Caymari's indebtedness to a hardware supplier, Silva Monteiro & Cia., was also assumed by the company. No attempt to by-pass the president and intermediary Caymari was evident; in August 1876, he received authorization to place an order with a local commercial house for further machinery.27 Presumably because of Caymari's multifarious entrepreneurial roles and the complicated bookkeeping practices that were evolved, no proper accounts were presented by the directors from November 17, 1876 to August 3, 1883 and, consequently, no stockholders' meetings were called. José Maria Mora, mill superintendent, and a member of the original triumvirate of directors which also included Caymari and secretary Themistocles Petrococchino, resigned on June 17, 1879 in a letter sent from Petropolis advising of his withdrawal for "imperious reasons." 2 8 No further meeting of the board of directors was held between June 25, 1879 and August 3, 1883; on the latter date an entry in the minutes of the board laconically stated that Caymari had left for Europe "temporarily." On May 15, 1885, the company was reorganized with three new directors, all members of the board of the Brazil Industrial

32

The Brazilian Cotton Manufacture

cotton mill: Joaquim de Mattos Vieira (a Portuguese cloth merchant of Rio), as president, Joäo Luis Coelho as secretary, and Joaquim Dias Custodio de Oliveira as treasurer.29 First item on the agenda was how to settle the debts of the old company. Duvivier & Cia. and Clemente Castello Branco & Cia., creditors, took 1,000 contos ($380,000) in preferred mortgage bearer bonds and agreed to pay the company's outstanding debts. An account current for cash transactions was opened with the firm of Cámara & Gomes.30 A more permanent financial settlement was achieved in 1889. After the failure of shareholders to take up 5,000 new shares at 75 per cent of par, a bond issue for 4,000 contos was floated, largely in Portugal, carrying interest at 6 per cent and amortization of 1 per cent, both payable in gold.31 For the following nine years these obligations to pay gold haunted the directors of the Petropolitana as sterling exchange almost immediately began to descend precipitously from a par of 27d to below 18d, and turned interest payments into an excessive drainage of company funds. When exchange fell below 18d in 1892, a compromise was arranged with the bondholders. They agreed to accept interest in Brazilian currency taking the exchange rate of 18d per milreis as the basis of computation. Interest payments were met promptly; henceforth, the sore spot remained the 1 per cent amortization payable in gold and at the daily exchange rate. As the directors painfully acknowledged, each debenture amortized as of that date (1898) equaled 800$000 in Brazilian currency when the "net amount received on each debenture in 1889 amounted to 158$601 in Brazilian currency." After many telegrams were exchanged by the directors and the Banco Commercial of Porto ( Portugal ), mill directors and bondholders agreed to redemption of the bonds at 266$660 (Brazilian currency) as long as exchange remained below 18d; above this figure, at the daily rate. As a concession to the Portuguese coupon clippers, no dividends were to be paid until interest and amortization on the bonds were resumed.32 The America Fabril textile company was started in 1878, under the name of the Pau Grande mill, as a partnership of two merchants and an industrially minded entrepreneur.33 In 1885, the three partners sold out to a newly formed joint-stock company in which they took shares. The new company had capital stock of 400 contos ($152,000), divided into 2,000 shares. At the first meeting (August 1885) of the

33

Organization, Finance, Machinery

directors, it was agreed to seek a loan of 160 contos ($60,800) to cover the floating debt of the absorbed partnership as well as machinery ordered from Europe. According to the minutes of the board, one of the directors, Luiz Joaquim dos Santos Lobo, was to feel out the Banco Rural e Commercial, and the second director, Manuel Vicente Lisboa, a Portuguese cloth merchant, the Banco do Commercio. On September 26, 1885 they agreed to accept the terms of the Banco Rural e Hypothecario; the company received a net loan of 148.8 contos ($56,544), the nominal value being set at 160 contos ($60,800). 3 4 Slightly more than three years later the directors resolved to canvass for a new loan to cover the cost of machinery for the manufacture of stockings, "each director to push this matter in the manner most favorable to the company's interests and with this understanding they agreed to talk to the credit establishments of Rio de Janeiro." The TABLE

3.

SHAREHOLDERS

AND THEIR

AMERICA FABRIL, JULY

Shareholder Alfredo Coelho da Rocha Luis Joaquim dos Santos Lobo J. Rodrigues Peixoto Antonio Mendes Campos Guilherme C. Vianna Leitäo, Irmäo & Cia. Manuel Vicente Lisboa Ge. Whyttaker He. Whyttaker P. Coelha da Rocha Pereira da Silva & Cia. Total

HOLDINGS,

COMPANHIA

1890.

Number of shares 875 400 275 200 50 50 50 25 25 25 25 2,000

Source·. America Fabril, Directoría, September 30, 1890. Mendes Campos and Coelho da Rocha married nieces of Manuel Vicente Lisboa, Portuguese cotton goods importer, reorganizer and one of the directors of the Pau Grande mill (later America Fabril).

loan was to be 300 contos ($162,000) at 7 per cent. 35 On March 18, after considering various proposals, the two-man board of directors accepted that of the Banco Uniäo de Credito which was arranged through a broker. Emission was set at 90 per cent of par, 7 per cent per annum; in all, 1,500 preferred bonds were issued, amortization at

34

The Brazilian Cotton Manufacture

the rate of 1 per cent per annum. 36 The following year 1,000 shares were distributed as a 50 per cent stock dividend to the eleven proprietors (See Table 3). At the end of November 1893, the America Fabril received two loans from the government's Banco da República do Brasil, a total of 1510 contos ($362,400) to defray the added equipment and construction of a mill which the America Fabril had acquired in 1891.37 In 1894 capital stock was raised to 2,400 contos ($480,000). Thus, over a period of ten years, capital stock had grown from 400 to 2,400 contos (including stock dividends) and loans totaling 1,810 contos placed in Rio banks. By 1899 the company was sound financially to the point of setting up a "special reserve fund" to care for unexpected contingencies; and to start the fund, 30 per cent of the undistributed profits was set aside, roughly 135.2 contos ($20,280). 38 3 Once capital had been obtained, efficient use of time, labor, and technical know-how determined the success or failure of early Brazilian cotton mills. In a period of little technical aid for non-industrialized areas, the onus of turning project into plant fell upon the original promoters. Since they were furnished only general specifications by foreign equipment producers and employed local materials and workers, waste of capital and labor time was inevitable. Nor did the advent of contractors with experience in mill construction at the end of the century always eliminate delays and miscalculations. Mill entrepreneurs first decided on the type of cotton cloth salable in their local markets. With this coarse cloth in hand they approached the local machinery importing houses in the few urban centers of the period or went directly to overseas machine shops. Meanwhile, what they had at hand was used to prepare for what was to be imported. Work was begun on the required buildings; when the first crates of machinery arrived, they were installed in prepared structures. 39 There were occasions when materials, local labor, and machinery installation were not synchronized. Interrupted flow of construction materials played hob with the Brazil Industrial mill where "lack of indispensable materials . . . forced temporary paralyses; we could not reduce labor costs lest we disperse the workers" — something to be avoided at all cost; often work was maintained in the open under heavy torrential rains. And, where inadequate capitalization

Organization, Finance, Machinery

35

left no funds for completion of mill buildings, delivered machinery probably remained under tarpaulins in open fields under sun, wind, and rain until necessary capital could be raised.40 Lack of competent unskilled labor complicated construction of nineteenth-century cotton mills. Hence the fear of the Brazil Industrial directors in dispersing temporarily the construction gang. An economy based upon the slave-operated plantations limited the formation of a pool of free, specialized labor available for employment on industrial projects. Consequently, textile impresarios of the early cotton manufacture used both slave and free labor. "In our building project," an account of the Santo Aleixo mill related in 1848, "we employ 300 persons almost all free, and for the most part sharecroppers of Petropolis." From the German colony of Petropolis, originally founded as an agricultural settlement, came fifty-three cabinet-makers and fiftyseven carpenters for the Santo Aleixo labor force. 41 In later decades of the nineteenth century, large urban centers provided enough free labor to avoid the employment of slaves; by that time, too, mill proprietors encountered contractors with experience in mill construction, such as Carlos Hargreaves of Rio, to whom they entrusted such work.42 When the mill site was chosen and construction initiated, entrepreneurs procured machinery and arranged for installation under competent direction.43 Brazil produced little heavy equipment in the nineteenth century; unlike the early textile manufacturers of Lowell who designed and produced their own equipment, early Brazilian manufacturers looked to the machine-makers of Great Britain, France, and the United States for both equipment and technically trained personnel for installation and maintenance.44 Perhaps this justifies the characterization of the industry in 1885 as the product of "foreign invention, foreign workmen and foreign engineers." 4 5 Few details have been found in Brazilian sources as to the way contacts were made, suppliers selected, and installation completed for the earliest mills. In some cases direct participation of foreigners as partners or engineering consultants facilitated contact with European or United States machine shops.46 Other entrepreneurs probably followed the example of Cayman who "bought several books on machinery." 4 7 As time went on, some mills were put into operation by Englishmen or Frenchmen already engaged in going Brazilian mills. Joseph Revault, a French civil engineer, came out to Brazil to erect the machinery ordered for the Queimado mill of Bahia and he

36

The Brazilian Cotton Manufacture

later equipped the nearby Modelo mill with French spindles and looms.48 An Englishman, John Edington, directed the Amparo mill's "technical work" in 1866, and five years later was reported to have set up the nearby Progresso mill installations, including seven mule spinning frames. William S. Ellison, a former engineer of the Dom Pedro Segundo railway, drew up plans for the largest mill in Brazil at that time, the Brazil Industrial (24,000 spindles and 400 looms). As the company proudly announced early in the seventies: "Since our country lacks professionally trained men who have specialized in this work, no one more competent or authorized than Mr. Ellison could have been consulted on the plans, for he dedicated himself to this type of work in the United States." 49 In the last decades of the nineteenth century, when foreign machine shops began to solicit business, advertisements of cotton mill machinery appeared in Rio newspapers. In the forefront was Henry Rogers Sons & Co., importers, "Specialists in Spinning and Weaving. Cards and Spinning Frames of Howard & Bullough, Ltd. Looms by Henry Livesey." 50 To such agents of European and American machine shops the smaller mills promoted by Brazilian entrepreneurs went for plans, machinery, and technical advice. As Brazil began to develop a small nucleus of technically trained personnel, mills confided to their own representatives, usually stockholders, superintendents, managers, or engineers, the task of dealing directly with foreign machine works to skip local intermediaries in an attempt to reduce the initial costs of machinery imports. Brazilian engineers with a background of study in European technical schools made their appearance in the cotton textile industry in the eighties and nineties. Eduardo dos Guimaräes Bonjean sponsored the plans for expansion of the Petropolitana and went to England, Belgium, and France to procure cotton machinery.51 The Progresso Industrial do Brazil, set up in 1889 for spinning, weaving, bleaching, and printing cloth in the Rio suburb of Bangú, was the product of the "studies and plans made in England by the Brazilian engineer, Henrique de Morgan Suell [Snell?] who took over its construction." 5 2 The appearance of Brazilian engineers in the last two decades of the nineteenth century made possible a more independent policy in dealing with machine works.33 What one observer said of Brazilian public works was undoubtedly applicable to the cotton manufacture: ". . . the English bring their machinery from their own country wherever possible, but, as fast as public works get into Brazilian hands, there is a disposition

Organization, Finance, Machinery

37

to purchase their machinery and mechanical appliances where they can be had best and cheapest. . ." 5 4 Thus, the Uniäo Itabiçana mill preferred to choose machinery from various sources, English or American, according to its appraisal of quality and purposes. "Our preparatory machines are English, made by Platts and the others are American," declared the company in 1883. "Both are very fine and well made; the English machines are more solid, the American more convenient because they are simpler, use fewer personnel, are cheaper and operate equally well." Equally succinct was the appraisal of another Minas Gérais mill of the same period on the respective advantages of English and American machinery, especially where long treks from ports to inland locations were involved. Most equipment came from the "United States, little from England, we prefer the American for the quality of the iron, lighter weight, better crating and cheaper cost." 55 The method of procurement followed by the Petropolitana mill was typical. Bonjean, one of the new owners, went to Europe in 1885 as company representative to acquire the material for erecting buildings and a bridge, piping and machines "of the best quality" for the projected four-hundred-loom mill.56 Almost a year later he returned with the contracts with European producers for delivery of spinning, weaving, bleaching and dyeing machinery, iron tubing, turbines and accessories for the hydraulic motors, transmission systems for the whole mill, as well as all the iron work for the new buildings and other construction materials — roof-tiles, cement, and glass. English machinery amounted to £68,000, while in France and Belgium he contracted for 800,000 francs of material. Wherever possible he paid one-third in cash, the remainder to be paid on arrival of shipments at Rio.57 Once basic agreement between overseas machine shops and local mills was reached, receipt of materials and terms of payment often beclouded otherwise amicable relations. Until late in the century, machine shops tied up deliveries with conditions that seemed to Brazilian entrepreneurs unreasonable and arbitrary. A northern cotton mill owner in 1892 asserted that "practically no proprietor of a machine shop will accept orders with a deposit of one-third of the contracted price because in twenty-four hours a new invention or a simple improvement may devaluate enormously equipment considered the very finest as of that date." 68 And the papers of even well established mills such as the America Fabril and Petropolitana suggest also

38

The Brazilian Cotton Manufacture

sharp business practice on the part of the shops with which they dealt. 5 9 The first purchase of machinery and supplies established contacts with foreign concerns which were frequently maintained. When the Beribery mill needed new spinning frames and looms to compete with other Brazilian mills in the early eighties, one of the founders turned to the first suppliers of his mill, American machine companies, from which he bought the "best displayed at the Philadelphia Exposition." 6 0 In 1885 the Petropolitana's mill superintendent, ordering spare parts and dyes, wrote: "Let the order for spinning parts be given to John Wetherington & Sons, of Manchester, and for looms to the Andersten Foundry Company. They are the old suppliers of machinery to our Mill and therefore know what is necessary." 6 1 Installation of machinery remained in most cases a task reserved for imported foreign skilled labor under the technical supervision of the English or American machinery concern's erector. "For mounting of machinery we have hired since April of last year five master mechanics contracted in England solely for that purpose," was recorded by the directors of the Brazil Industrial in 1875. So large was the relative number of British technical personnel in Brazilian cotton mills that an observer of the mills in Rio and its environs noted in 1898 that "the plant in use has been obtained almost exclusively from the United Kingdom and the works are, as a general rule, under the direction of Lancashire masters." 6 2 Thousands of miles distant from machinery producers in England, on the continent or in the United States, and mindful of shipping delays, garbled requests for parts, and inevitable misunderstandings, Brazilian cotton textile entrepreneurs set up extensive repair shops. No discussion of the foundation of textile mills in an area removed from the industrial heartlands of the nineteenth century can overlook the attitude of local industrial entrepreneurs toward local fabrication of replacements of broken or worn-out parts of costly textile machinery. "We are tied to routine, we are backward in everything," was the anguished cry of cotton industrialist Domingos Martins Guerra of the Uniäo Itabirana mill in the eighties. "Our machines are improperly mounted and poorly handled, and we are so dependent that either we tie up funds in standby machinery or w e have to see our machines often halted to await a small item which can not yet be produced in our country." It was this businessman, isolated in the interior of Minas moreover, who voiced eloquently the Brazilian indus-

Organization, Finance, Machinery

39

trial anomaly of a cotton manufacture without textile machine shops in a nation rich in iron ore. His mill had a smithy and carpenter's shop "which only operate when required." Guerra continued: "The State, despite the sacrifices, must aid, at its own cost, iron foundries and their trained personnel, to reproduce if not everything we import at least the essential; for why should we purchase so much iron abroad when we have in quantity and quality more than they?" "The iron industry . . . can furnish the varied machines needed by our present industries and by those we must create." 03 Mills pointed pridefully to the accessory installations they mounted. The Todos os Santos mill of Bahia announced in 1861 that near the "weaving sheds there is an iron and bronze foundry equipped with a bellows, a smithy, carpenter's and joiner's shop." "In these shops can be handled all the establishment's jobs and any others ordered. At the moment we are building a sawmill." 6 4 In Petropolis the Säo Pedro de Alcántara mill fabricated a wide variety of loom parts in its fully equipped shop. Bahia's Amparo mill also pointed to its machinery repair shop, smithy, and a "large sawmill." On the other hand, an American visitor to Brazil's cotton mills emphasized that the reason why mills cast and finished their supply parts was to obtain a saving in time, not in money, for "though the Portuguese makes a fairly good machinist, he is not nearly as efficient as the English." 65 4 In the initial period of the Brazilian cotton textile industry the integrated cotton mill, combining all operations from spinning to finishing, was the dominant unit of production. There were in a few cities of the 1850's and 1860's, however, a number of factories equipped only with looms using imported yarns.66 Tariff duties on dyestuffs were high and dyeing techniques were not readily mastered. Another factor favoring the appearance of weaving mills was the small capital investment in comparison with that required by the integrated mills. Entrepreneurs soon recognized the "advantages and high profits that special weaving manufacturies provided . . ," 6 7 Furthermore, imported warp or filling paid in the early eighties a duty of 100 reis ($0.04) per kilo — estimated at 16 per cent —while duties levied upon imported cotton cloth averaged 60 per cent. This difference provided the weaving mill proprietors an "adequate margin to cover the expenses of manufacture and still remunerate them with very stimulating profits." 68

40

The Brazilian Cotton Manufacture

By the 1880's there were protests against the tariff schedule which favored weaving mills over integrated mills. To this criticism, weaving mill proprietors retorted that the division of labor was the "most powerful weapon of competition"; they reminded their critics that there were European mills specializing in certain yarn counts or kinds of colored yarns. From their analysis of the evolution of the cotton manufacture in Europe they concluded that Brazilian yarn-spinning and dyeing establishments would appear as the number of weaving mills increased. 69 They also enjoyed some parliamentary support, for it was claimed that weaving mills flourished on the importation of British and Italian yarns since the "private interests of the protectionist leaders were bound up in the weaving instead of the spinning factories." 70 When the parliament discussed tariff revision in 1885 there were a number of weaving mills, such as the one founded by F. Glette in Rio (1878), which imported a large percentage of its annual yarn requirements of 200,000 kilos.71 One of the largest weaving mills appeared at Bahia where the Emporio Industrial do Norte set up in 1893 two weaving sheds holding a total of 2,000 looms, importing yarn from Great Britain; Dell'Acqua & Cia. of Milan, with five mills throughout Latin America, brought yarn from their spinning mills in the Piedmont to their 400-loom Säo Roque mill in Säo Paulo, founded in 1879.72 Despite the weaving entrepreneurs' hope, there was by 1892 no specialized spinning mill in Brazil. Domestic integrated mills not only used most of their yarn in their own looms, they rapidly dominated the cotton textile industry. Here were the roots of later difficulties between integrated mills, particularly in Säo Paulo, and the small weaving mills. Some of the latter, it is true, developed into large integrated mills, but most continued to seek protection in a low tariff on yarns. Not until the 1930's, however, did small weaving mills obtain from the domestic spinning mills a more adequate yarn supply. 5 What was the impression created in the inquiring mind of the period by the early Brazilian cotton mills which developed, as nearly as possible, as self-contained industrial units, situated near a source of raw cotton, integrating spinning, weaving, and finishing processes under one roof, and supplying a local market? To the eyes of a provincial engineer in 1850 the Santo Aleixo mill (Rio) showed a building of "simple although elegant construction;

Organization, Finance, Machinery

41

its water-driven modern machinery well mounted, operates regularly . . . its fifty looms (only twenty-two are now in use) produces between 1,200 and 1,400 varas (1320-1540 meters) of cloth daily and it employs 116 workers of both sexes." 73 Its iron water wheel in 1855 drove two grist mills, a circular saw, a cotton gin, two openers, sixteen cards, two lathes, 2,012 spindles, and looms, warping, and folding machines.74 Eleven years later a description of the same mill prepared for the second national exposition spoke of the "main edifice . . . raised on stone foundations, three storys of wood and iron stanchions, a high tower in front where two bells call workers daily to labor or to celebrate religious holidays for the workers' settlement in this remote spot or to show in its carillon the workers' joy on the arrival of a friend of the worthy proprietors, Commendador J. Antonio de Araujo Filgueiras & Cia." In addition to the main building there were others placed symmetrically on each side of the factory building to form a large area dominated by the tower in the middle. Nearby was the mill proprietor's residence or "chalet," a clump of trees to one side, a "lovely garden" on the other —the whole ringed by spurs of the Orgäo Mountains. The contrast of the bucolic and the industrial made a lasting impression. "Whoever enters the Santo Aleixo's main building is greatly surprised at the spectacle offered by the steady movement of fifty-two looms on the first floor" and by the spindles in full activity, arranged in the main room of the second story in ten files (132 spindles to a frame) and forming a total of twenty frames or 2,640 spindles. On the third floor were the cards and the drawing and roving frames. There were also repair shops (smith, carpenter's, and joiner's shop, metal-working tools, a saw mill), rooms for ginning equipment, and others for starching and dyeing yarns.75 Less imagery and more attention to mechanical detail came from a description of Bahia's Todos os Santos mill in 1861. Six openers of American construction handled 2,000 pounds of baled cotton daily; there were also sixty American cards. Near these were twenty-two drawing, slubbing, and roving frames. In the spinning room were placed ten English and twelve American frames, the English frames containing 200 spindles, the American, 180 spindles, per frame. In the weave shed there were 135 looms.76 It was perhaps symbolic of the attempts to nurture industrial seedlings in a predominantly agrarian milieu that the Brazil Industrial cotton mill, one of the largest in nineteenth-century Brazil, grew on the site of a large plantation; in fact, the mill's entrepreneurs took

42

The Brazilian Cotton

Manufacture

over the former two-story main residence ("recently converted to a boarding house for 100 minors in our employ"), a warehouse, and the slave quarters beside the kiln ("now occupied by the kiln, smithy and resident workers"). The ground floor of the long, three-story factory building held the three turbines with their transmission belts to the upper stories, and the openers and pickers. The main room of the first floor also held the 400 looms; above them, on the second floor, were the cards and preparatory spinning machines and on the third, the spinning frames with 24,000 spindles. 77 The Beribery mill, described in the same period, had the design of a "Swiss chalet." To the right of the turbine was located a lapidary shop, while to the left there were the picker, six cards, two drawing frames, 1,020 spindles, forty looms, a lathe for iron- and wood-working. Nearby, on the same floor, a twenty-horsepower steam engine warmed the mill on cold damp days and ran the dyeing shop. 78 A little of the nature of the problems confronted in establishing cotton mills before 1885 can be realized from the words describing how the Santo Aleixo mill near Rio de Janeiro eventually set up its 2,500 spindles, 100 looms, and cotton ginning equipment by 1853: "This factory, located in the Province of Rio de Janeiro, suffered at the outset mishaps, circumstances, and events which slowed down its progress and forced the owners to lose part of their capital. Imperfect machinery brought the first mishap, the result of bad faith of the machine shop. The second mishap was the poor planning and construction of the transmission belts — they were damaged and had to be repaired. The last mishap (still affecting its prosperity) is the absence of an energetic administration. Despite all these impediments, the mill seems to be moving along well once the new machinery was installed." 7 9 That the path of succeeding industrial pioneers did not grow appreciably smoother is proven amply by the complaints of other mill proprietors. Commenting in 1874 on the adversities which slowed down plant construction and machinery installation, the directors of the Brazil Industrial cited the lack of workmen, slow rail deliveries, inclement weather, and concluded: "Those who bear [our difficulties] in mind will have to recognize that, in addition to the capital spent, the Company's great manufacturing establishment would not have been carried to almost complete realization without an ample supply of energy and perseverance." 8 0 Were it not for the laboriously gathered funds, the hopes, sweat, and worry involved, the mishaps of

Organization, Finance, Machinery

43

the Uniäo Itabirana mill of the province of Minas Gérais would furnish the material for a comedy of errors. Two years were lost in trying to get the 1,040 spindles and 85 looms operating in the seventies. An English mechanic left in a hurry, his two successors were not equal to the job, and when the fourth mechanic — an American — got the machinery operating and the first profits began to appear, a fire burned down a warehouse holding 384,000 pounds of raw cotton and ruined two wheels of the turbine. New ones were ordered from the United States, while the mechanic pressed one of the broken wheels into temporary service. The company's capitalization was 100 contos ($44,000). "Our loss," stated the company directors in 1883, "was more than 30 contos ($13,000), if we count the time lost while production was halted." 81 Perseverance and faith in the face of adversity, an ability to absorb the blows of both nature and man, a vision of national progress based upon a prosperous industrialized economy — these were the major elements required of the industrial entrepreneur of the early Brazilian cotton manufacture.

Cotton

While the plans, machinery, managers, and skilled labor for the Brazilian cotton manufacture came from England, the European continent, and the United States, there was an element overwhelmingly Brazilian in the initial setting-up of large-scale industrial enterprise — cotton. Although it was poorly grown, harvested, and processed, Brazilian cotton, by virtue of its long staple, enabled the nineteenth-century mills to produce durable cloths in competition with imported cottons. Without the cotton growers, large and small, of the northern backlands and, to a lesser degree, of Säo Paulo's interior, the textile industry would have remained far longer the daydream of visionaries. 1 The founding of the first cotton factories in the 1840's was closely tied to the cultivation of cotton in the Brazilian north and northeast. There the cotton plant was indigenous and was used by Indians for weaving before the arrival of the Portuguese; later it became an article of handicraft and trade. However, it was not until the end of the eighteenth century, when British cotton mills got under way, that local growers, cognizant of the "great and steadily increasing demand for the raw material," found that the dry, warm climate of the north and northeast provided a larger area more suitable for cotton than for sugar, that the native long staple, arboreal cotton carried a premium in Liverpool, and that the capital demands of the new staple were lower than those of sugar.1 Between 1780 and 1820 Brazil ranked as an important source of

Cotton

45

supply for British cotton mills. Although exports continued to increase slightly between 1820 and I860, 2 expansion was not proportionate to the growth of world demand. Great Britain, the major importer, turned instead to raw cotton from the United States, Egypt, and India.3 The tremendous demand for raw cotton during the European cotton famine of the sixties stimulated cotton growing for export extraordinarily in the northeastern provinces of Pernambuco, Maranhäo, Alagoas, Parahyba, Ceará, and Bahia, and in the province of Sâo Paulo (See Table 4). The establishment of cotton cultivation in the province of Säo Paulo was in large measure the result of the efforts of the Manchester Cotton Supply Association which sent seed to the provincial authorities. Since British textile men desired a fiber as similar as possible to that of the United States, they introduced the Louisiana or New Orleans seed which produced cotton short of staple but high in resistance.4 Brazilian cotton exports exceeded 100 million pounds three times in the decade ending in 1875, averaging for TABLE 4. BRAZILIAN COTTON EXPORTS, 1 8 6 0 - 6 1 ΤΟ 1 8 7 5 - 7 6 .

Year 1860-61 1861-62 1862-63 1863-64 1864-65 1865-66 1866-67 1867-68

Pounds

Year

21,467,552 27,839,360 34,724,420 36,089,792 55,222,976 92,449,368 82,243,392 102,592,339

1868-69 1869-70 1870-71 1871-72 1872-73 1873-74 1874-75 1875-76

Pounds 90,475,509 82,113,598 93,194,298 181,608,949 96,424,457 116,717,697 92,779,625 63,664,917

Source: Branner, Cotton in the Empire of Brazil, p. 48. There are discrepancies between Branner's statistics and those published in IBGE, Anuario estetistico. Ano V-1939/1940, p. 1376. Branner's are reproduced here since he checked the sources carefully.

the same period about 92 million pounds. Thereafter, United States exports returned to European markets, followed by the agricultural crisis of 1873. Falling prices on the Liverpool cotton exchange, inadequate and costly overland transport, export taxes, and the production of cotton of interior quality gradually priced Brazilian cotton, raised largely by small producers, out of overseas markets.6 By the eighties, cotton acreage in the northeastern provinces was reduced, it was already negligible in Sâo Paulo, and in some areas exports had

46

The Brazilian Cotton Manufacture

entirely disappeared. Nevertheless export of cotton continued on a reduced scale.6 Available evidence indicates that the ample supply of cotton and its low price in the seventies presented a favorable situation for early manufacturers. Not all difficulties, however, in cotton supply were ironed out. Procurement of cotton supplies by mills, particularly those in the Rio area, in the quarter century following the close of the civil war in the United States was difficult. Supplies were intermittent and inadequate as cotton on a declining market showed the characteristics of a marginal crop. Markets were not glutted, and procurement in the northeastern area left the mills at the mercy of northern brokers who exported the best of the crop. Rio mills placed orders, first for Säo Paulo cotton, and, when that source dried up, shifted to northern supplies. To further complicate cotton procurement, the policy of protection to agricultural as well as industrial interests in the 1890's led to a tariff on imported raw cotton which in 1908 was termed the "highest in the world." 7 The records of the Petropolitana cotton mill of Petropolis founded in 1873 at the end of the boom show how southern cotton mill entrepreneurs obtained their raw cotton in the last quarter of the nineteenth century. The long haul from northern ports in the hold of coastal steamers or sailing vessels, the use of lighters in Rio, and then delivery to the mill door meant irregular deliveries as a rule. Yet deliveries from relatively nearby cotton fields in Säo Paulo to the Petropolitana mill near Rio in 1874-1875 left much to be desired, too. Luis M. Maylasky & Cia., a cotton brokerage house purchasing in Säo Paulo's Sorocaba cotton area, agreed on October 21, 1874 to supply the Petropolitana in monthly shipments. Six months later, Maylasky's deliveries were insufficient and the mill's Rio purchasing office was ordered to make supplementary purchases among other Rio brokers. In July 1875 the Petropolitana's directors angrily wrote to Maylasky's correspondents in Santos and to the main office in Sorocaba that shipments were far below the mill's requirements.8 After the mill's reorganization in the eighties, new arrangements were made to obtain northern cotton. Nevertheless such entries as "The mill closed down yesterday and today for lack of cotton" or "The mill is still shut for lack of cotton" were frequent in factory records.9 In despair the Petropolitana superintendent wrote in July 1897 that he could not depend upon purchasing cotton from recently arrived shipments from the north for the "delivery is often completely sold before

Cotton

47

arrival." Every effort should be made, he urged, to secure cotton in view of the cotton shortage, absence of ships and freight cars.10 When the railway delivered fifty-three bales at 11:30 one morning, the superintendent ordered the opener and carding machines started. Then, as the cotton supply ran out, first the opener and beater rooms closed down, then the drawing and spinning frames, and finally the looms. Working under such conditions, it is entirely credible that manufacturers were pleased to accept any cotton shipments no matter what the quality.

2 If millmen failed to differentiate "clean over dirty cotton, long over short fibers, regular over irregular staple," 11 it was because they were aware of the perennially poor methods of cultivation, ginning, and baling in Brazil's cotton growing areas. "The poor man's crop" ( lavoura de pobre ) — this reference to the role of the small grower in Brazilian cotton cultivation suggests one of the causes for the stagnation both in quantity and quality of Brazilian cotton. Sugar in the north and coffee in the south remained the staple export crops of the plantations, while cotton in both areas was left to the small growers to cultivate in "little patches on the edge of the great sugar-cane plantations" by primitive techniques, since neither capital nor technical knowledge was available.12 Possibly the key to the rapid spread of cotton during the cotton famine was the rudimentary techniques small producers employed. "All the planter has to do is to burn off the woods and plant his seed at the proper season . . . Nothing in this country is less expensive or more productive than cotton culture." 13 There was no clearing of stumps, no plowing, no laying out of furrows, and only occasional weeding.14 Picking followed a similarly empirical pattern, sometimes extending over many months in the long, dry season before the winter rains. "Fields are never large and cotton being cultivated, for the most part, on a small scale, picking is done more at the leisure and convenience of the planter." For the slower-picking small grower the widely cultivated arboreal cotton offered an advantage insofar as the ripe cotton boll did not lose its fibers as did herbaceous cotton. There were two to three pickings, each inferior to the preceding in quality. Dew and dust falling on ripe, open bolls were said to produce a "soiled" cotton.15 These farming techniques persisted in Brazil's cotton growing areas until the 1930's despite some

48

The Brazilian Cotton Manufacture

governmental steps for the improvement of techniques after 1915. To judge by observations of the primitive methods of local cotton culture, Brazilian cotton's only advantages were that tree cotton (long staple) was indigenous to the northern arc of Brazil and required less labor than annual cotton.16 Prior to the cotton boom of the sixties, cotton was usually processed by the hand-operated portable "cherka" roller gins which ginned fifteen pounds of raw cotton daily without injury to the fibers.17 But the high prices of the cotton famine years induced planters and cotton dealers to abandon the hand roller gin for American and British saw gins which cleaned more cotton in a given interval than the Britishbuilt Macarthy roller gin. In 1868, the Manchester Cotton Supply Association complained to Brazilian authorities of "cut or ruined" fibers and emphasized the growing preference among British manufacturers for Egyptian cotton ginned by Macarthy machines.18 But the more productive saw gins rapidly displaced the cherka and in the 1880's the hand gin was rare and "becoming more so." 1 9 In the eighties it was reported that the local ginners had crude wooden presses. Under the pressure of a hand-turned screw these turned out loose seventy-five-kilo bales which were sacked, then wrapped with lianas and shipped by pack train to the nearest market.20 When J. H. Bexwell, presumably a British cotton exporter, set up a steam cotton press at a cost of approximately £12,000, it was worth recording in a diplomatic report. At Pernambuco, the Bombay system was adopted, whereby companies graded and cleaned cotton before baling; a Crighton opener did the cleaning performed by coolies in India. The finished bale ready for export was judged "neater and easier to handle than the American." 2 1 Pernambuco installations were not typical, however. The upcountry bale, "slovenly" and wastefully packaged, nevertheless was preferred by Rio mills because the tightly compressed bale injured long staple fibers by matting them together. For the longer shipments to Säo Paulo or to Liverpool, the tightly compressed bale was preferred because it lowered freight charges.22 Advent of ginning equipment which required capital outlay for purchase, installation, and maintenance made the proprietor of ginning equipment a prominent figure. As the intermediary between farmer and exporter of the port towns, the local cotton merchant was the logical person to install the cotton gins. In the appreciable difference between the price of raw cotton and the ginned product, he found a

Cotton

49

strong incentive to make the capital outlay on saw gin installation.23 Some local cotton merchants sold ginned cotton to exporters in Pemambuco or Fortaleza through brokers who acted as their agents on a commission basis. Others sold directly to exporters' up-country representatives who supplied them with goods. Still others sold directly to exporters.24 The mill proprietors of Rio, for example, purchased their cotton supplies from Rio brokers, with the exception of a few mills maintaining direct contact with the Pemambuco market.25 By the close of the eighties, the textile mills of south-central Brazil were becoming the mainstay of the northern cotton growers, although the rewards to the latter remained low. While southern mills increased consumption of domestic cotton more than 300 per cent between 1872-1903 (17,319,000 to 60,000,000 pounds), raw cotton production rose only 61 per cent (74,686,700 to 122,119, 538 pounds).26 Inability to produce competitively for the overseas market in this period, it may be concluded, exerted more influence on cotton growing than the expansion of a domestic market.

Labor

In the limited literature available on the Brazilian textile industry of the nineteenth century, Brazilian and other observers have mentioned a handful of entrepreneurs and stressed the problem of capital. They have given little attention to the procurement and training of the labor force. To be sure, labor relations in the early mills demanded little innovation, for businessmen believed in general that the Brazilian mill hand was docile, untutored, and in need of guidance. To deal with such a labor force, local entrepreneurs adopted labor-management policies not far removed from those of benevolent plantation patriarchs. Procurement and training of a labor force in textile mill operations for a half century, 1840-1890, occurred in the matrix of a slave society. Even after abolition the condition of ex-slaves and imported European laborers failed to change appreciably. Urbanization of the port cities had few repercussions in the countryside, aside from attracting a small segment of the rural population. Nineteenth-century mill owners continued to handle day laborers as patriarchal coffee or sugar planters handled slave field hands or the few non-slaves who earned a daily wage.1 Alternative employment was limited. Opportunity to become a small freeholder in settled or pioneer areas was remote. Again, lagging industrialization of other sectors of the economy, lack of primary and technical schools, and the fact that innovation within the industry came slowly once the processes of producing coarse cloth were mastered, tended to freeze laborers to their positions. Nor did imported skilled labor — the master spinners and weavers — enjoy wider opportunity, for they acted merely as a catalyst

Labor

51

in getting mills started; afterward, in the majority of cases, foreign laborers were absorbed in the mass of Brazilian textile workers or returned to Europe. The early cotton manufacture, a tiny industrial sector of the Brazilian economy, contributed little to alter property holders' attitude toward labor. Slavery first and then the poverty which sent families to the cotton mills set the patriarchal tone of management's attitude toward its workers. Some of the earliest Brazilian mills employed slaves with a sprinkling of free operatives. 2 The tariff commission of 1853, affirming that slavery had not slowed down industrialization, admitted that the mills "in our country in the majority use slave labor." 3 Although mills generally abandoned the use of slaves after 1850 as urban wage labor appeared and European immigration began, the shadow of slavery was visible in such phrases as 'labor is expensive and inefficient where not executed by the slave under the corresponding disciplinary regime." 4 Neither the slave nor the Brazilian-born wage laborer had any wide background in mechanical trades. Mill owners desired technical competence and they were willing to hire abroad women as well as men to run their machinery and to train Brazilian operatives of both sexes. The Imperial Government facilitated the entry of such immigrant labor at least by providing free railroad transportation. 5 Some observers even equated successful mill operation with the use of imported textile labor. 6 Such skilled labor, complementing the employment of young men and women of the countryside at lower wages, and the setting up of trade schools would, it was believed, produce Brazilian operatives, mechanics, and "manufactories entirely national." 7 To England first, and then to the European continent where the industrial revolution created a pool of artisans, mechanics, and experienced cotton spinners and weavers, the Brazilian textile entrepreneurs looked for the hard core of competent labor to start their enterprises and to train their workers. From 1840 onward, Brazilian mills used foreign labor contracted for a definite number of years to leaven the mass of unskilled Brazilian labor. 8 In 1851, Santo Aleixo had a cosmopolitan assortment of labor, including seventeen Brazilians (fifteen men, two women), five Italians (three men and two women), two Englishmen, two Americans, and eighty-three Germans (forty-three men, forty women). 9 Alagoas' Fernäo Velho mill of 1,625 spindles and forty looms used eight "foreigners" alongside its thirty-five local operatives in 1866.10 At the

52

The Brazilian Cotton

Manufacture

third meeting of the Petropolitana's board of directors in 1874 it was resolved to contract three or four "good master workers to handle the machinery of the establishment." In 1887, stockholder-manager Bonjean wrote from Europe that he was contracting for one hundred weavers, sending out first the master weavers. 11 Mill owners desired foreign help not only for technical ability, but also to deal competently with unskilled local labor. Having advertised in local newspapers for a master carder, the Petropolitana directors proposed that "Mr. R. Morrison, the Companhia Brazil Industrial's master carder, contract a master carder in England, one who is both competent at his trade and capable of handling the personnel under his charge. Since Mr. Morrison has been with the mill at Macacos since 1872, a practiced master carder and aware of how to handle our workers, he can judge if any candidate is worth while." 1 2 Until the nineties, mill owners were eager and able to hire British labor. After 1870 the procurement of British labor was facilitated by depression and competition in the European textile industry, forcing many British mills to close and some skilled laborers to emigrate. "For the manufacture of common domestics or coarse cotton cloth," wrote the organizers of the Brazil Industrial mill in 1870, "but little skilled labor is necessary and in the present overcrowded state of the manufacturing cities of England this labor can be engaged at a reasonable price." 1 3 However, the role of British skilled labor in Brazilian textile mills was reduced or entirely eliminated in some places in the nineties. In the first place, unfavorable exchange rates at that time made wage payments in British pounds costly for many mills despite the willingness of the republican government to pay the passage of mechanics and other industrial laborers. 14 From textile factory areas of both north and south Brazil came reports in 1891 that local wages "would not be such as would tempt any Englishman to leave his country," or references to the "poverty of wages even when they can be procured for skilled weavers." 1 5 Skilled weavers from Bradford, England, were brought out to Santa Catarina in 1891 only to find no jobs; the British consul in Porto Alegre found employment in the Rheingantz woolen and cotton mills for a man and two women "almost starving." But after six months of work the man was earning Rs 2$200 per day or the equivalent of two shillings, the women receiving about 2£ 2s a month for piecework. Concluded the consul: "The man has now gone home on a steamer as a fireman for no wages via Rio de Janeiro

Labor

53

and the United States in hope of being taken on when he arrives at home at his old factory at his old wages." Skilled labor in general earned only a little more than two shillings daily while rent, clothes, fuel, and food were "much" dearer than in England. 16 These generally unsatisfactory conditions of employment did not encourage British skilled labor to continue to emigrate to Brazil or to settle there. Other factors diminished the need for the British. Brazilian operatives had acquired enough technical mastery to operate spindles and looms which their British counterparts had put into operation. Furthermore, other skilled immigrants, in the majority Italians, with some Spaniards and Germans, in the nineties began to fill such highly specialized jobs as running a Säo Paulo print works of 800 rollers, where 130 to 150 hands, "chiefly immigrants expert at the work," operated machinery which Brazilian help was not prepared to handle. At the end of the nineties mills of the Rio de Janeiro and Säo Paulo areas employed a labor force generally of Brazilians or non-English immigrants.17 Most of these arrivals poured through the ports of Santos and Rio de Janeiro and moved on to the Sao Paulo coffee plantations, although some were handpicked by mill owners at Rio's Ilha das Flores immigrant processing station and sent to local factories. 18 The newer immigrants, coming from areas of lower living standards and speaking tongues closely related to Portuguese, proved more malleable than their British predecessors. This characteristic permitted more facile integration into the factory labor force composed of the indigent members of the patriarchal Brazilian plantation society. 2 From local orphanages, foundling homes, and poorhouses, and from the unemployed urban classes of the cities of the littoral, textile entrepreneurs drew unskilled labor to man cotton mills. By tapping these sources of labor, mill owners set in motion an industrial segment of the national economy and fulfilled the role of philanthropic benefactors; both themes were closely intertwined and clearly expressed in the minds of industrial entrepreneurs and observers alike. "Orphan and foundling" boys were put to work in Bahia's Todos os Santos mill in the fifties, replacing the adolescents who were designated for schooling as mechanics. 19 Of the same mill's labor force of 150 "free" Brazilians under twenty-five years of age of both sexes, 70 were women

54

The Brazilian Cotton Manufacture

"drawn from the poorest classes, a few from the direst misery." 2 0 According to the effusive rapporteur of the Exposition of 1866, hundreds of families thanked the cotton mills of Valença in Bahia for their "daily bread." 2 1 Brazilian entrepreneurs had the widely accepted view of the poor as a class given to idleness unless obliged to work. With great satisfaction the editors of a Säo Paulo provincial newspaper welcomed the operations of the Säo Luis mill of 1869 which employed "children, and women. . . on the machinery, the former turning to profitable account time lost in idleness, the latter employing their time more usefully." 2 2 Sons and daughters of poor families in the vicinity of the textile mills were expected to find in factory employment a proper occupation and all the needs of life they required. 2 3 Gainful employment for the "hundreds of orphans and destitute children" in Brazilian orphan asylums, in the institutions of the Sisters of Charity, and in benevolent societies would substitute "private charity" and lighten the tax burdens of society. "Surely there can be no undertaking more philanthropic and humane," wrote a group of entrepreneurs in 1870, "than to find permanent and suitable employment for this large and ever-increasing portion of the community." Factories provided food, clothing, shelter, and instruction to train artisans, mechanics, and operatives and to prepare "good, intelligent, skillful" citizens. In the quid pro quo system espoused by employer and employee alike, Brazilian child laborers gave a "few years of their labor, at an age when character is forming and regular habits of industry can b e acquired." 2 4 Four years later the same board of directors expressed satisfaction at the sight of small boys attracted to their mill as wipers of machinery; the directors judged this an auspicious sign of future facility in finding help of both sexes at low wages. 2 6 In the interior of Minas Gérais, the manager of the Uniäo Itabirana mill in 1883 proposed that the government subsidize cotton mills so that mills could welcome "poor and untutored orphans" to learn the carpenter's and blacksmith's trades or other factory occupations. Manager Domingos Martins Guerra admitted that families near his mill were eager to see their sons and daughters hired. A half century after the first textile mills had made their appearance, the America Fabril factory took under its charge fifteen foundlings from Rio de Janeiro's charity hospital. 26 In an attempt to integrate industry and the milieu of his time, one mill owner offered to the government, land and building materials near his mill on which to construct an asylum for disabled veterans of

Labor

55

the Paraguayan war, promising to employ those who desired and were capable of factory work.27 During the first fifty years of the industry, cotton manufacturers sometimes referred to labor scarcity. While the pool of free labor grew larger in this period, the regime of constant toil associated with the slave-operated plantations undoubtedly produced among free laborers a repugnance for unbroken, supervised toil in any form. In this context it would appear that labor scarcity stemmed from labor mobility, as factory hands entered and left cotton mills according to the attractiveness of wages and living conditions. Brazilian labor was described as willing to work for "comparatively" low wages and as "frugal, industrious and easily controlled . . . readily obtained." Yet four years later, in 1874, the same source bemoaned the "notorious scarcity of workers" and high wages as various entrepreneurs scrambled for the available laborers.28 Again in the seventies, reference was made to the absence of "competent" labor in a Rio weaving mill.29 The labor problem was more clearly defined in the eighties when a parliamentary commission of inquiry blamed the lack of legislation regulating workers and forcing them to fulfill contracts as factors retarding industrial development. 30 From the Uniäo Itabirana mill of Minas Gérais came a torrent of criticism of local workers, abusive and simultaneously illustrative of laborers' mobility and seeming disinterestedness. It was a "disgrace that very few [workers] take any interest in their duties. . . they will submit to no systematic control, they will not stick to their jobs, they do not care about contracts. . ." The mill directors concluded that they could not "count upon them, nor do they provide any profit." 31 The Pau Grande textile mill in Rio's suburbs, possibly because of its notoriously swampy and malariaridden location, felt a shortage of labor after abolition and sent an agent to contract labor in a perennially depressed area of the north, Parahyba do Norte. 32 Further evidence that labor "scarcity" meant labor's unwillingness to work under conditions considered unfavorable came in 1892 when one of the main causes for labor shortages in the oldest mills was ascribed to inadequate company or private local housing, and construction difficulties.33 In 1894, Pernambuco textile mills scouted for "competent persons (principally women and children)" in neighboring Alagoas and nearby areas where wages were lower; and it was predicted that the local shortage would clear up when more opportunities appeared for the "poorer" classes in Pernambuco to get daily

56

The Brazilian Cotton Manufacture

employment.34 It can only be concluded that wages in Pernambuco mills were not sufficiently attractive to induce available local labor to enter factory service. Apparently similar conditions made labor unwilling to tend the 1,100 looms of Pará's cotton mills in 1895. A diplomatic observer there felt that wages earned in local mills gave women an "amount of money they never dreamed of." But the cost of living had "nearly doubled" as the prices of basic articles rose "extraordinarily." "Strange to say," Consul Kanthack remarked of the rising cost of living, "this fact does not seem to have the effect it might be expected to have as . . . it does not increase the demand for work." Finally, to get women weavers, one mill, located fifteen minutes' walking distance from the center of town, "bribed" the women with free rides part of the way home on the local tramway line when work halted at five P.M. Where wages were better than those offered by farmers or small proprietors, mills generally encountered no labor shortages.35 3 The combination of poverty, the shadow of the patriarchal plantation, and the overriding factory requirement of sufficient and regulated labor to tend the machines, posed a complicated problem for the early textile manufacturers. Among free laborers in a slave society or one newly emerged from slavery, the coercion of the plantation was difficult to impose. In the coastal cities — of narrow streets, poor housing, worse sanitation, and annual flare-ups of yellow fever — health, safety, and public morality were undermined. In 1853 the remembrance of the role of urban workers in Europe's revolutionary wildfire of 1848 hovered in the minds of literate Brazilians. Factories and shops were best established far from the cities, some Brazilians reasoned, far from the "agglomeration of starved beings, buried in the worst misery, driven to the most violent despair . . . and receptive to the voice of malevolent, ambitious men who upset public order." Local conditions were bad enough to breed so restive a proletariat. Neither modern science nor sad experience had improved hygienic conditions, although many residents of Brazilian cities had complained. The poor occupied quarters "ordinarily hot, moist and dirty, the focus of innumerable diseases." In the midst of this dismal sketch of Brazilian urban conditions, one pinpoint of light shone, the example of the manufacturing city of Lowell, Massachusetts, which

Labor

57

"sprang from the virgin forest with a cotton mill" and where the comportment of its workers was "proverbial." 36 For the good of the factory hand and the efficient operation of the textile mill, to insure supervision and inhibit idleness, some industrialists created a system of social services assisting and regulating the laborer from the cradle even to the cemetery, where in one mill a "special place is marked off for those whose services are no longer available." 37 One basic concept cemented together the system of services which mills furnished: the factory's labor force as a group of families living together under a "truly paternal administration" provided by managers and stockholders.38 Implanted in the earliest mills, industrial paternalism was probably more pronounced in the 1850's than forty years later. If mills were erected where few facilities existed, then mill directors had to provide for workers "far from home." 39 The Todos os Santos mill of Bahia and Rio's Andarahy Pequeño supplied unskilled labor with room, board, and work clothes, quartering female help in separate buildings as of 1853. Further north, Alagoas' Fernäo Velho mill in 1866 announced construction of a wing to provide a small infirmary for ill employees, a refectory to serve workers and apprentices without families, and dormitories for those without their own quarters. As another mill reported in that same year, it had "vast" edifices to accommodate machinery and personnel living together as "a family." 40 When English master spinners and weavers were contracted in 1874 by the recently formed Petropolitana mill, the mill furnished the housing; for its Brazilian workers the directors built ovens and supplied stoves, beds, mattresses, pillows, sheets, tables, benches, crockery, and cooking utensils. True, some mills hoped to get some return on their investment in housing through sale of land to those who joined the factory community.41 Thirty years after the first reports of factory paternalism appeared, Beribery mill directors remarked of their 110 female workers ( of a total force of 130 hands ) aged ten to thirty years, that they were quartered in a "spacious building which has baths," the mill furnishing food and work clothes. In Rio Grande do Sul the Rheingantz textile mills also lodged their workers nearby.42 In the last years of the century there was apparently a break with the dormitory tradition as cotton industrialists began to house workers on the "English plan," or as it became known locally, in "workers' villas" (vilas operarios). Factory families rented housing units from the textile companies offering employment. Between 1893 and 1895,

58

The Brazilian Cotton Manufacture

for example, Bahia's Emporio Industrial do Norte mill rented to each factory family a "separate house . . . sitting room and kitchen on the ground floor, and two bedrooms on the first floor." A one-hundredgallon tank flushed six toilets automatically every twenty minutes from six A.M. to ten P.M., and street fountains provided water "ad libitum." Single men and women were soon to occupy a large building boasting a steam kitchen, library, bakery, slaughterhouse and "two ranges of baths, one for men and the other for women." 4 3 Conceivably, expansion of cotton mills in the nineties and consequent overcrowding and over-use of old dormitories as new personnel entered, obliged cotton manufacturers to build on adjacent property. When the local board of health condemned the "Poles' Shanty," the Petropolitana mill agreed to build eight new family dwellings.44 Where the company-owned vilas operarios supplemented or supplanted the dormitories, the feeding of workers became the responsibility of the individual family. Often erected in areas far from country stores, cotton mills maintained shops to provide the labor force with an inexpensive yet rounded assortment of foodstuffs and other necessities until the arrival of other stores eliminated the possibility of monopoly by one merchant and the threat of exorbitant prices.45 Cotton mills experimented with general stores (armazens) on company property, and sometimes their operation turned out to be financially successful, if unscrupulous. This period also witnessed the appearance of factory-sponsored consumer cooperatives in a few areas.46 The America Fabril mill in 1889 bought out a small partnership operating a general store on its property "to see if such a purchase could bring in returns to the company." After almost four years of company operation, the managing director, Alfredo Coelho da Rocha, decided to rent the store since the financial returns failed to compensate for the labor and preoccupations involved. Moreover, it was judged not appropriate to tie up personnel in labor "completely divorced" from cotton manufacture. Turning over the store to private parties led to abuses by the new proprietors; within two years the factory hands were protesting so vehemently against the irregularities practiced by the lessee of the general store that the store was rented to another merchant.47 At almost the identical period, similar practices and abuses turned up in the Petropolitana mill. The profitability of general stores located near a mill of 1,334 men, women, boys, and girls attracted small entrepreneurs. Guilherme da Costa

Labor

59

Vianna was granted permission to open at his own expense and on company property a general store of "wood, iron, and zinc, with a capacity sufficient to supply the factory's help with the necessaries of life." Within a year, the company took over the store, presumably because outsiders purchased there, too. Six years later, in 1897, the general store manager was given a percentage of the store's profits because of the manner in which he had increased sales. Less than three months elapsed, when workers went on strike, presenting as a grievance the high prices at the company store which "sells to us more dearly than other stores." 48 The interest of factory entrepreneurs in housing, feeding, and partly clothing their workers spilled over into other aspects of their workers' lives. Having taken on many hands from Catholic charitable institutions, it is conceivable that industrial entrepreneurs incorporated in their attitudes a sense of responsibility for their charges. In 1853, after seven years of operation, the directors of Todos os Santos admitted that auxiliary services for their factory workers cost 50 per cent more than in England; nevertheless they considered the "better treatment" a worthwhile outlay, necessary to "inculcate morality and impart rounded instruction." Incorrigibly bad boys went into "national service," the girls were summarily dismissed. "The workers' families live together under the most farseeing and moralizing supervision, receiving from the worthy mill owner and his upstanding family the most salutary examples of honor and labor," was the way an observer in the eighties described the conditions existing in the Santo Aleixo mill.49 In the Brazilian accounts of the way local cotton manufacturers handled their workers the close supervision of the Lowell factory of the early decades of the nineteenth century seems to reappear. A Bahia cotton textile establishment of the fifties, the Todos os Santos, was both a school for the poor and a unit of production. The mill filled the "unoccupied hours" of all workers with schooling, music, and dancing, the girls also learning to sew and embroider. According to the account given by one of the directors, marriages among workers were celebrated on November 1st of each year, the founding date of the mill. There were a doctor, dancing master, and seamstress on the mill's staff. Yet discipline was harsh; the girls who learned to take care of themselves moved up to the "first class, [for] the girls who control their own actions and are responsible solely to the board of directors whose advice they accept." Pridefully the directors announced in

60

The Brazilian Cotton Manufacture

1853 that since the mill began, never was there discovered a single case of "immorality." 50 Lack of schools subsidized by government or community thrust upon factory owners the job of furnishing primary education to illiterate employees. This task they undertook because it was to their advantage to have literate workers who could read instructions. Directors of the Santo Aleixo mill subsidized night schools where German and Portuguese were taught, probably because of the German colonists who had left Petropolis for factory work in the lowlands of Rio.51 Furthermore, textile entrepreneurs did not neglect the religious life of their communities. In 1853 Todos os Santos had a chaplain and a chapel where mass was celebrated on Sundays and holidays. At the Beribery mill a "good chorus of working girls led by a music teacher accompanied religious ceremonies." Other references to companysubsidized chaplains and chapels appeared frequently in mill descriptions.52 4 No discussion of labor in the early Brazilian cotton manufacture would be complete without reference to how contemporaries judged labor's ability to adapt to industrial occupations. Only highly tentative generalizations are possible in view of the still inadequate documentation. With a few marked exceptions, the first fifty years of the textile industry brought praise for Brazilian labor's adaptability to industrial employment. Where adverse comments were made, perhaps the basic fault resided in the absence of a broad industrial movement, particularly one involving a machine tools industry, foundries, and metalworking shops; and the absence of trade schools and manuals translated into Portuguese inhibited the training of technically competent laborers in appreciable numbers. If national and local governments failed to establish a functioning primary school system after abolition, how much less likely to expect those very governments to provide trade schools. By 1866, Brazilians in favor of industry pointed to the successful operation of the two cotton mills at Valença, citing the testimony of the proprietors that workers from the "free, poor class are not contrary to the life of manufactures." That cotton mill workers stuck to their machines to earn overtime pay as early as 1849 was put forth as contradicting the current notion that "we can not establish manufac-

Labor

61

tures because . . . the people have no natural aptitude for factory work." Women were considered more active than men; and, in general, the only complaint made was that workers lacked a sense of order in operating their machines, and enthusiasm for their work. Otherwise, Brazilian workers were as good as the best European mill hands and "more easily controlled." 53 The cotton industry, however, suffered the handicap of few trade schools. Not even the textile center of Bahia provided professional schooling in industrial trades forty years after the first mills were established there; only the naval arsenal and a Bahia coastal shipping company trained mechanics and other skilled workmen.54 The case of an empirically trained mill hand at a Minas cotton mill, the Uniäo Itabirana, is probably typical: the machinist in charge of the mill picked up his knowledge in the mill, showing ability and a "liking for cottons." Unfortunately, he could not distribute the work load properly and where the mill could produce daily 1,500 meters of coarse and 900 meters of fine cloth, in 1883 he managed to turn out 1,200 meters and 800 meters respectively. "Nevertheless," commented one of the directors, "we are earning 19 per cent profits." In the same year another Minas mill asked the government to subsidize the translation and sale of cotton mill manuals at low prices so that "our mill hands may learn their specialties and be freed of the despotism of foreign spinning and weaving masters." There were other mills, such as the Petropolitana in 1891, which could not support inefficient production techniques and still show a profit on their semi-annual balance sheets. That mill complained in 1891 that estimated income from mill operations for that year was not fulfilled because of a heavy floating debt and the "lack of skilled hands to give just the reasonable minimum that the looms could produce." 55 It was the absence of skilled workers in a Minas Gérais mill that brought a blistering attack on Brazilian cotton mill labor in 1883, and countered the generally favorable opinion expressed by textile entrepreneurs. One of the factors for perennial inability of local mills to meet foreign competition, the directors of the Uniäo Itabirana mill averred, was the nature of the mill hands who were ignorant and intransigent, sensitive and restive under discipline, indifferent to improvement, and "as long as they were left to their slothful lives working three or four days per week, they did not want to earn more than a wretched salary, because they only wish to eat, chew toothpicks, swig sugar brandy or debauch themselves." These diversions required

62

The Brazilian Cotton Manufacture

money, and when the factory owners refused to make advances on salaries, the workers left.56 Yet confidence in Brazilian labor's "aptitude and intelligence" became generalized, and local cotton mill entrepreneurs fired thinly veiled criticism at the skilled English laborers in their factories. Referring to Brazilian labor's competence, a group of industrialists told the Congress in 1891 that labor's "all-around adaptation" was a sign of "recognized superiority" over the English workers' "mechanical exclusivism" since the latter shifted to diverse tasks with difficulty. One industrialist announced that "prosperity in our shops and factories came only when Brazilians replaced the European master workers."57 Confirmation of these attitudes came from a different source. An American observer reported that an English superintendent of a Brazilian mill felt that some of the "half-castes" made good assistant bosses or contramestres and that they learned quickly. Pressed to explain why few Brazilians rose above the position of assistant bosses, the Englishman replied candidly that Brazilians had no training in machine calculations "as there is scarcely anything published in the Portuguese language on practical mill work." He added frankly: ". . . the English room bosses do not tell them any more than is necessary, for fear of finding themselves displaced by the cheaper native." 58 Although mills claimed to operate on a ten-hour-day schedule, six days per week, there were exceptions.59 The Alliança cotton mill of Rio reported in 1882 that it had finally resolved to fix the operating day at ten hours for adults and minors, and underscored that other mills should fix the hours of the work day as a measure "urgently sought in the name of justice and humanity." In Pernambuco during the nineties when labor was "plentiful and cheap" and the introduction of electric lights made feasible "excessively" long working hours, women and children labored in cotton mills from fourteen to seventeen hours daily "content to earn extra wages for night work." 60 When the first mills were erected in the forties and fifties, the payment of wages to factory labor was judged a novelty, an attitude understandable in a nineteenth-century economy where slave labor was practically the only labor available.61 Todos os Santos in 1853 paid only its masters and their assistants a daily wage, the unskilled labor receiving food and work clothes and, only at the end of the year, a bonus based upon service and behavior.62 Only in 1866 did there appear any reference to wage payments to all employees in a

Lahor

63

cotton mill.63 With few exceptions early textile industrialists in their reports failed to discriminate wages by sex or occupation, merely recording minimum and maximum daily rates.64 As the industry grew in the nineties and whole families entered the mills, some data appeared on salaries by sex and age; at the close of the century some mills, particularly those of growing urban areas, tended to set wages according to operation (drawing, spinning, weaving) and by piecework.65 When a British observer visited Brazilian cotton mills in the late nineties he noted the transition from flat daily wages to piecework; in one Rio mill all hands had been put on piecework, except the weavers, "but the management had just ordered out indicators so as to put the weavers also on piecework." 66 It was probably the desire of the proprietors of the Todos os Santos mill to switch from weekly wages to piece rates in the eighties that inspired the importation of seven English girl and five English men weavers. Brazilian girls tended two looms and earned 4s to 18s weekly, while the English girls handled three looms for 17s to 30s and the Englishmen, 30s to 50s per week. "By way of emulation," the English girl who produced most weekly had her earnings doubled.67 The tentative conclusions that can be drawn from scattered information on wage rates in Brazilian cotton mills in the last quarter of the nineteenth century are that there was a small rise in money wages and a disparity in wage levels between northern and southern mills and between urban and rural areas.68 Mills frequently announced that labor was cheap, and the presence of large numbers of women and minors seems to bear this out.69 It must be remembered, too, that money wages failed to include items such as the cost of factoryowned housing (probably cheaper than non-factory accommodations), nurseries for the infants of working mothers, medical care, and other welfare contributions of cotton entrepreneurs. In 1882 the Petropolitana mill paid its workers daily from one milreis to nine milreis ($.43 to $3.87); ten Bahian mills in 1883 were paying less, from 350 reis to five milreis ($.15 to $2.20). 70 Disbursing methods of mills varied, some paying their hands monthly, others weekly. Mills often delayed wage payments until the second Saturday of the following month, or until they could scrape together enough cash.71 The Petropolitana's director-treasurer, for example, carried cash from Rio to Petropolis on every pay day when the company could afford to pay wages in the troubled nineties. On October 30, 1897, he carried eighty-five contos ($13,600) from Rio

64

The Brazilian Cotton Manufacture

banks to the mill to pay two and a half months' wages long overdue. 72 Where specie shortages developed in areas far from the capital at Rio, debentures and small notes were disbursed. Thus, in 1895 and 1896, businessmen of Para used debentures of small value which were discounted locally at as high as 20 per cent. Pará cotton mill proprietors paid wages in the "discredited" currency which shopkeepers soon refused to accept. Pressed for a loan, the federal government refused and conditions improved only when the textile mills began paying in general notes. 73 The 1890's, a period of inflation and general economic instability, altered the paternalistic relationship between mill hand and proprietors, especially in and near expanding urban centers. Signs of incipient labor unrest were visible in a number of strikes in the Rio area, which had become the leading textile center, and in the appearance of a proletarian press of anarcho-syndicalist orientation. 74 The f e w British skilled workmen who felt dissatisfied could flee without warning the mill proprietors, who discovered that their contract could not be enforced. Once imprisoned, the British were easily freed by demanding a writ of habeas corpus. 75 Less privileged factory labor, Brazilian and European immigrant hands unprotected by contract, resorted to strikes to settle grievances. The immigrants, moreover, came from nations where industrial labor conflict had been common for the previous fifty years. In the two strikes which occurred in the Petropolitana mill in 1891 and in 1897, the locus of activity was the weaving section where the determined action of a f e w immigrant weavers caused suspension of work throughout the mill. In June and July 1891, the weavers, with the aid of a representative of the local Workers' Center ( Centro dos Operarios), won from the mill directors the restoration of a cut in the rate paid per yard of cloth. They also demanded the elimination of substitute workers (who replaced absent weavers at the daily roll call), but the directors refused to yield and forty "disorderly" workmen were fired including the English boss of the sizing room. 76 The second large strike, that of 1897, was called to protest against the British plant supervisor, the poor medical service, high prices at the company store, the continued use of substitute weavers, and failure to pay back wages. This time the company yielded on the question of employing substitute weavers by agreeing not to deduct the wages of the substitute from those of the absentee; the directors regretted the failure to pay wages promptly and promised to make up

Labor

65

back payments as soon as possible. If workers were not satisfied, the directors suggested the dissatisfied leave in five days. When the Petropolitana's director-president remonstrated with a workers' committee for resorting to a strike to express their complaints, the latter retorted that they had no other recourse, since no worker could leave his post to speak to the management during working hours. Company officials made note of the names of the most "influential" strike leaders whom they planned to fire once the agitation died down. To satisfy the workers, many of whom did not understand Portuguese, the company's decision was printed in Italian. 77 In the nineteenth century each cotton textile mill solved its labor problems on an individual basis, as illustrated by the events which occurred in the Petropolitana mill. Labor-management problems in the twentieth century, especially after the currents set loose by the First World War reached Brazil, began to involve more than the individual mills, affecting all the mills of a given industrial area. The formation of textile workers' unions in Rio and Säo Paulo on the one hand, and the founding of the textile manufacturers' associations on the other, put labor-management relations in those areas on an entirely different plane after 1918, and undermined industrial paternalism.

Products and Distribution

As Brazilians organized mills and began to produce a narrow range of staple products, almost wholly coarse goods, they ran into the problem of displacing from local markets the products of foreign mills. Mildly protective tariffs helped the early mills. Furthermore, by 1871, mill owners advertised that locally produced coarse cottons were more durable and they assured wary consumers that the use of long staple cotton gave the domestic goods fullness and strength despite repeated washings, while the generously sized and seemingly full imported European cloth deteriorated. Consumer resistance waned gradually and, until the 1880's, Brazilian mill owners seem in general to have been content with this preliminary success, turning out gray cloth, bagging, and Negro cloth.1 In the eighties a few mills experimented with the medium grade cottons, hitherto neglected. This innovation, only partially successful, was less the result of technical competence than of keen competition among local mills aggravated by the influx of foreign cottons. A pattern of entrepreneurial activity emerged which was to reappear a half century later. Brazilian factory owners had applied all resources to machinery and personnel for the production of coarse cloth without seeking to vary output. As a parliamentary commission commented in 1882, "The production of one manufacturer differed in no way from that of another; there was no novelty, variation, or improvement to recommend the cloth of any mill or to set it off from the runof-the-mill cloth produced for years." 2 Simultaneously, cotton mill proprietors found cloth importing houses displaying foreign merchandise ordered "especially" to compete with domestic production.

Products and Distribution

67

They were startled by the cleverly planned campaign for selling imported goods adapted closely to the tastes of the Brazilian consumer who as a rule "paid scant attention to the intrinsic value of the cloth he purchased, permitting himself to be carried away by impressions of good appearance." 3 In response to the challenge of domestic and foreign competition and the threat of lower prices, Brazilian entrepreneurs asked the government to raise the tariff. A parliamentary commission took a dim view of manufacturers' demands for protection and, summing up the situation of the cotton mill entrepreneurs of the eighties, declared that foreign competition could stimulate local establishments. The commission pointed to the century-long struggle of British mills to overcome "deceptions and crises" by displaying "pertinacity and will"; if the Brazilian manufacturers were to achieve a comparably prosperous condition, they too would need "diligence, unceasing improvement in the methods of production joined to the severest economy of expenses." 4 In their defense, some manufacturers explained that most local mills had failed to vary production from coarse goods because they lacked the confidence and support of the government. "However, they understand they must break with routine, which works against their interests and their amour propre." 5 Under these circumstances a few mills began to improve and diversify production by 1885. From widely separated areas such as Rio de Janeiro and Maranhâo there came indications of a transition in Brazilian cotton mill production. For the period 1879-1885 a fall in exchange, increasing import duties, and the "supplies brought out by native manufacturers," caused a drop in Rio's imports of Britishmade bishops' lawns, grenadines, brilliants, white calicoes, and domestics. In colored and white domestics — "a coarse sort of goods used by the poorer classes of natives" — a marked decline was registered. 6 Maranhäo's imports of gray domestic cloth in 1885 were drastically reduced, while white calico, madapolam, and sheeting hitherto largely imported from England were threatened by a new local mill to be readied the following year. Simultaneously, the proprietors of Pemambuco's sole mill, which produced coarse cloth for bagging, planned a new mill for domestics, twills, and madapolams. To account for the drop of £90,000 in imports of British cottons, an observer in Fernambuco singled out, among other causes, the "steady progress which is being made in establishment of native factories" throughout Brazil to manufacture "rough" and even "superior" quality cotton goods.7

68

The Brazilian Cotton Manufacture

Some local manufacturers looked at changing market conditions and laid their plans accordingly. In 1886 the managing director of the Petropolitana mill urged upon his colleagues the wisdom of expanding calico shirting production since there was as yet no fear of strong local competition and the market was "tremendously vast." An analysis of the mill's proposed distribution of one thousand looms in 1890, when the manager was under pressure to increase sales, showed that he planned to assign 834 looms to good quality shirtings, ginghams, and cassinets, 374 looms to shirting alone. Possibly a factor in consumer preference for the newer shirtings coming from both Rio and northern mills in the nineties was the general use of northern Brazil's long staple cotton.8 According to a survey of Rio mills made in 1894, eight of eleven mills were producing small quantities of fine and medium gray goods. A few also offered colored goods and white shirtings; only one could handle prints as Table 5 shows. Now favored by tariff protecTABLE 5.

T Y P E S O F GOODS PRODUCED IN E L E V E N C O T T O N M I L L S O F THE R i o AREA,

Mill

Number

1894.

Gray goods

Colored

goods

White Prints

of looms Fine Medium Coarse Fine Coarse shirtings Alliança Prog. Ind. Petropolitana Br. Ind. Carioca Conf. Ind. Corcovado Alcántara Ind. Min. Pau Grande D. Ysabel

1,265 1,000 850

800 600 500 500 300 300 300 200

β β O e e

β β

« e β e

α

β

«

α

»

β

•

» « β •

β

β « β

O « β

β

* = type produced. Source: Adapted from Consul Ancell, Report, C 7581, xcvi (1895). Prog. Ind. (Progresso Industrial); Br. Ind. (Brazil Industrial); Conf. Ind. (Confiança Industrial); Ind. Min. (Industrial Mineira).

tion, Rio mills were spreading their distribution wider than the regional market. Their gray goods, drills, denims, and regattas drove from the Porto Alegre market in southern Brazil all similar British goods in 1897 and seriously threatened imported oxfords, ginghams, and shirtings. The following year there were reports of successful

Products and Distribution

69

production in Rio mills of shirtings, grays, simple prints, ginghams, oxfords, trouserings, zephyrs, and blue drills. Even the Bahian mills had supplemented their bagging and coarse cloth with calicoes, striped checks, and blue drills, completely eliminating grays and domestics once imported, and making serious inroads upon Manchester dry goods in general — madapolams, oxford shirtings, and coarse colored goods.9 Only in dyeing and printing did the local mills lag. National and foreign observers agreed that the main impediment was the heavy duty levied on dyes.10 While one or two mills in Rio and Säo Paulo could boast of good printing departments, printing had not been tried in the north of Brazil as late as 1894.11 With considerable understanding of the developments which had occurred since the eighties, an American visitor commented in 1905 that the local factories had "gained a foothold in the production of cheaper goods which must be regarded as permanent."12 2 During the first fifty years of growth, Brazilian mills had to overcome two obstacles to the sale of their products: the reluctance of local cloth importers to handle their cotton cloth and, later, the need to expand distribution from a regional to a national basis. Although these problems were probably general in most mills, particularly in the 1880's and 1890's, it was in the rapidly expanding textile industry of Rio —the commercial center of the Empire and, after 1889, of the Republic — that they were most evident. To sell cotton cloth the early mills operated through the established cloth importing firms whence cotton goods passed into the hands of jobbers and then to town factors who shipped them on order to up-country planters to clothe slaves. And it was to the urban cloth merchants that up-country storekeepers and peddlers came annually to stock up goods for resale in the interior. After abolition of slavery in 1888 the country store {venda) took over from planters the furnishing of supplies to emancipated Negroes and immigrant European plantation labor. The market which Brazilian mills tried to reach, then as now, was composed of rural and, to a lesser extent, urban members of the Brazilian population, those who sought cloth for men's "blue or light-colored cotton trousers . . . a thin merino shirt and occasionally a white or calico shirt,"13 and dress material and handkerchiefs for

70

The Brazilian Cotton Manufacture

women. The wealthy groups in Brazilian society continued to purchase imported cottons, linens, silks, and woolens for their apparel. In the seventies cotton textile entrepreneurs complained frequently that the amount of foreign articles handled by local importers made it difficult to sell their cloth. There was, as the mill proprietors also recognized, the problem of routine trade practices, "the barriers which any strange and new article customarily encounters because it interrupts routine and disturbs pre-existing commercial relations." 14 Cloth merchants probably took into account the attitudes of the consuming public of the time, suspicious of "all new changes and systems," when Brazilian textile entrepreneurs first approached them with samples of white and blue drills. As an American observer noted, markets were in the hands of "shrewd and competent European merchants who thoroughly understand the trade" and effort was needed to break their prevailing commercial arrangements. 15 Commenting on the attitude of cloth importers, one Rio factory owner declared that importers and intermediaries aimed to wage a "war of extermination" to liquidate his mill when he first offered them cotton stockings in the early eighties and only government intervention in the form of increased import duties saved his mill from bankruptcy. 16 A practice which militated against domestic manufacturers was the auction of large quantities of imported goods with the time of payment extended to a year or more. This practice was inherited from a preceding era of relatively great distances and slow and uncertain transport. 17 But why should auctions be continued in the 1880's? asked O Industrial, house organ of the Industrial Association. By auction the cloth importers supplied the Brazilian market beyond what it could normally absorb, it was complained, blocking purchases from Brazilian cotton mills and "banishing" domestic production. Furthermore, urban retailers and wholesalers supplying the storekeepers of the interior areas were pressured to handle foreign imports since importers were often either commission agents or branch houses of foreign mills.18 O Industrial concluded that establishment of close commercial relations between local merchants and the domestic cotton industry would eliminate large markets for foreign cotton cloth.19 "The Brazilian manufacturer seeks only to serve the public, creating faith in his mill's products, while the foreigner [importer] satisfies only his own desires, neglecting the consumer who is in general the factory hand, the rural laborer . . . the man of small means." 20 Domestic mills encountered decreasing resistance from cloth mer-

Products and Distribution

71

chants in placing their goods in the last two decades of the nineteenth century. The elimination of English by Portuguese and some Brazilian importing houses was perhaps the first phase in the decline of the wholesalers' resistance to the domestic product. Facilitating this was the arrival of the telegraph cable and the traveling salesmen of British manufacturing firms. These innovations, first apparent in the seventies, permitted Portuguese and Brazilian shopkeepers to circumvent the British dry-goods importers by placing orders directly with British mills.21 Portuguese, prominent as clerks in Brazilian banks and mercantile establishments, furthered the displacement of their entrenched British competitors.22 Moreover, the Portuguese houses were not without strong financial support, for they were in "communication with Lisboa, Oporto, and all the provincial towns and villages in Portugal, [where] they have banks and agencies on a scale exceeded only by the money order offices in Great Britain and her colonies." 23 With this new group of wholesalers the Brazilian mills could transact business in Portuguese, overcoming the language barrier which the British wholesalers never tackled.24 An American visitor, writing in 1905, noted that over the preceding years the British importing houses had yielded their formerly dominant position to the Portuguese. The import trade, he wrote, was "to an increasing degree in the hands of Portuguese and German houses" and the largest share of imports was handled by Portuguese.25 3 The second phase of decreased sales resistance apparently coincided with investment by resident Portuguese in the textile industry from the 1880's onward.26 Many entrepreneurs had been long on ideas and short on working capital,27 and after 1880 some Portuguese cotton goods importers thought it profitable to subsidize local industry by providing credit in return for exclusive or quasi-exclusive marketing arrangements. "Commerce in the textile line at the end of the Empire and in the first part of the Republic," declared a textile manufacturer and publicist, "was well organized by the Portuguese. With nationally produced cotton at hand, the prices of cheap fabrics containing ample cotton fiber were attractively low. The large commercial houses saw the advantage of producing in Brazil, assuring their chain of distribution a guaranteed, organized production." 28 •TTiey brought to both the established mills and the new enterprises financial resources earned in trade, and an equally important asset — knowledge of the Brazilian

72

The Brazilian Cotton Manufacture

cloth market. Rio was not only a large cotton producer in its own right, it was the center for national distribution of cotton goods. The era of resistance to domestic cottons was clearly ending. 29 Once the Portuguese bought into the cotton mills it was in their interest to expand the network of distributive outlets. The rapid growth of the cotton textile industry in and around the city of Rio from the nineties onward, and the financial support of the wholesalers, made Rio a logical distributive hub for a large part of Brazil. Until the eighties, mills found most of their consumers in the nearby surrounding countryside, whether the mills were located in Fernambuco, Bahia, Rio, Minas, or Sâo Paulo. Regional not national markets were the rule for most of the early textile centers. There were some exceptions: hand-loomed coarse cottons were shipped in the sixties from Minas Gérais to the city of Rio, to Säo Paulo, and to the slave market of Cantagallo in the province of Rio.30 Two of Minas' pioneer mills, at Curvello and Pitangui, were forwarding power-loomed goods in the eighties to Rio where the products were "well known and well liked." In 1882, however, only 189,000 meters of a total Minas production of approximately 9,000,000 meters were sold in Rio, the rest being absorbed "in the vicinity of the factories." Bahia's mills of the fifties apparently took care of local demand although in the next two decades the mills there were supplying not only Bahia's hinterland but that of the nearby areas of Sergipe and Alagoas. One Pernambuco mill in 1895 sent 100,000 meters of its annual production of 1,800,000 to neighboring states.31 From the seventies onward there appeared frequent reference to Rio de Janeiro as the source of domestic cottons sold elsewhere in Brazil. The Brazil Industrial mill boasted in the seventies that its 28-inch coarse cloth was sold throughout the Empire. Maceió, in the eighties, was called one of the "best" markets for mills established in Rio. It should not be overlooked, on the other hand, that Rio was known as the most important consumer of cloth in Brazil. The size of Rio's population in 1883, estimated at 450,000 — 500,000, had grown in the previous quarter century and insured a steady outlet for local production. But by the nineties, the competition of local mills and some foreign imports forced the proprietors of Rio's factories to overhaul their selling techniques and to seek outlets throughout Brazil as a definite policy. As the director of the Petropolitana mill expressed the situation in 1890, well-planned mill operations depended upon a "considerable increase in orders, new markets in the north and south of the

Products and Distribution

73

Republic and in the Plate." To increase the number of consumers demanded planning, for it was impossible to expand consumption overnight "according to the whim of the producer." 32 The varied problems of distribution encountered and solved by Brazilian cotton mill entrepreneurs at the close of the nineteenth century are illuminated by the experiences of the Petropolitana mill near Rio. Its distributive network, first confined to Rio, was later expanded to a nationwide basis; through the changes made by the proprietors runs the theme of recognition of the importance of having company directors with marketing experience capable of reaching new consumers for the mill's products. When the Petropolitana commenced operations, no separation was made between selling cloth and handling the mill's general purchasing department. To the "Agent of the Company," Joäo Arsenio Cintra da Silva, the mill proprietors assigned the function of handling all the company's business dealings since the treasurer had to concentrate on running the mill. The agent was to hold his position for five years, starting from the date of his first sale; until the mill, then operating only trial runs, produced salable goods, he received a salary of Rs. 300$000 ($165) per month. His commission was 2 per cent of the value of all purchases, and 3 per cent of all sales, with an annual guaranteed income of Rs. 15.000$000 ($8,250). 33 Until 1885 there appeared no necessity for pushing sales, and in urging plant expansion in that year, one stockholder reminded the board of directors of the "lively demand" for the Petropolitana's products and mentioned other products "worth manufacturing in view of consumers' approval." Despite favorable consumer response to the mill's products, the directors had to tread warily with cloth merchants. The factory's superintendent was advised to sell only to accredited houses to avoid complaints from long established merchants, and any orders placed directly at the mill were to be shown the directors before action was taken. Furthermore, in the formulation of a price list and conditions of sale, the company's salesman was asked to sound out customers for suggestions, as well as how they would expand the company's business. Terms of payment were fixed at ninety days from the end of the month in which the sales were made; sales after the 20th of the month would be considered as made in the following month, stretching payment over four months. So well did the mill directors observe their agreement with local cloth merchants, that they refused to sell to a dry-goods house in far-off Cuyabá (Matto Grosso) in 1886, alleg-

The Brazilian Cotton Manufacture

74

ing that "we have a formal agreement with our clients that our mill not sell to the stores of the interior." 34 Lower prices for cotton cloth worked a metamorphosis in the Petropolitana's selling arrangements. In the mill's most important line of production, plain and checked ginghams, the price reduction noted in Table 6 was steady between 1885 and 1890.35 Noting the difficulty in pushing ginghams, the mill directors extended terms of payment, allowing buyers to pay up to six months after date of sale. They toyed with the idea of putting out a very low-priced gingham because of "competition from other mills and customers' preference for cheaper qualities." 3 6 Since this comment appeared three months after the abolition of slavery in Brazil, it would seem that the mill was attempting to meet the purchasing power of the "great mass of laborers formerly without wages," who were spending a large part of their low earnings on clothing.37 With its warehouse overstocked with third-grade ginghams "whose assortment was not appealing to purchasers," the directors resolved in 1889 to sell at auction and to invite prospective customers "as is normal procedure." Further reduction in sales brought a shake-up in the sales organization three months later. Apparently the sales manager had received a six months' leave TABLE 6.

P R I C E S OF T H E PETROPOLITANA'S COARSE G I N G H A M S ,

1885-1889

(reis per meter).

Type

1885

1887

1888

1889

1890

First quality Second quality Third quality

420 380 340

405 365 325

400 360 310

390 350 295

380 330 290

Source: Petropolitana, Directoría, October 19, 1885, April 15, 1887, December 27, 1888, October 21, 1889, and May 27, 1890.

of absence for reasons of health and now, fearful of leaving the position vacant, the mill proprietors decided to make an interim appointment, choosing a "cloth factor, well known in our commercial circles." 3 8 Several years of sales difficulties, unsuccessful palliatives, and stopgap measures seemed to impress upon the directors of the Petropolitana the need to devise more effective sales techniques. Early in January 1890, the directors met again to decide the disposal of the cloth piling up in the warehouse. Sales were lagging — customers still had cloth purchased at the auction of the previous June and July, and

Products and Distribution

75

the market in January was "almost completely" paralyzed by the difficulties of the money market and "the absence of customers from the interior." The owners were so badly worried that they considered circumventing their normal outlets, the cloth merchants, by making "private sales" below list prices with extended periods for payment. But fearful of a break with routine methods, the directors fell back upon the auction, "trusting that a large quantity of cloth distributed to all customers would serve as excellent advertisement." The auction was handled by an import house, and the time of payment extended to nine months. 39 A full review of the deteriorating market situation occurred five months later, at a joint meeting of directors and stockholders. Conditions more than justified a break with routine solutions. One director expressed himself: "The Petropolitana's present conditions are not merely difficult, they are risky, and demand a solution differing radically from the customary practices of similar establishments." It was highly desirable to increase company sales, for "new markets promised increased consumption and consequently increased production"; and new consumers were to be found, he continued, in the north and south of Brazil, and in the Plate. 40 Now came the break with the policy in force since 1886, when the mill refused to sell directly to stores of the interior. A salesman was hired to visit customers and display samples of the Petropolitana's production with the intriguing names of "Brazilian Cassimer," "Fluminense Gingham," "Liberty," and "Bocayuva Cassinet" and "Jornal do Commercio Calico." 41 First fruits of the expansion program were bitter. In the middle of 1891 the company had to accept a 70 per cent loss on merchandise sold to a cloth merchant in the north. Equally bitter was the exposition of conditions prepared in 1892 at the close of the boom of 1890-1891 when low exchange rates, increased wages, higher raw material costs, and the invasion of Brazilian markets by cheap English cottons worsened the Petropolitana's financial position. By the end of that year factory corridors were blocked with unsold merchandise and customers in the north were demanding price cuts since "our factory's products are high in price and can not compete with foreign cottons of the same quality." 42 Two years later, with first- and third-quality ginghams still hard to sell in competition with those of other mills, the company decided to maintain prices in the Rio market, to cut them in the north, and to hire a salesman for distribution there. Despite the

76

The Brazilian Cotton Manufacture

setbacks, it is evident that between 1890 and 1894 the Petropolitana's directors managed to find agents in northern and southern coastal centers.43 It would appear that the company preferred, at least in the nineties, to avoid selling on consignment. The agents, or intermediaries whom the company used to widen sales, never obtained ownership of the goods. The position of the Petropolitana's proprietors was made clear when the Porto Alegre agent suggested in 1894 that the Petropolitana warehouse the goods in Porto Alegre, to be in turn sold by the agents there in exchange for commission and del credere. The Petropolitana directors turned down this proposal on the ground that selling on consignment would tie up cotton goods, while expenses would "absorb any advantages." 44 This attitude, however, did not mean that the Petropolitana was not eager to widen its markets; on the contrary, it merely insisted upon commission agents as intermediaries. A year after the rejection of the Porto Alegre agent's scheme, a merchant from another city of Rio Grande do Sul, Pelotas, proposed to the Petropolitana that he become an agent. To this the company agreed stipulating that no enroachments could be made upon the territory of the Porto Alegre agent and giving the terms.45 Emphasis on trading with "first-class" houses may have been motivated by the two previous agents' choice of accounts. Much of the interior trade in Rio Grande do Sul was handled by Syrian and Armenian pack peddlers traveling from town to town. Their stock in trade was purchased on credit from Syrian and Armenian merchants in Porto Alegre, who, in turn, placed their orders through the commission agents of the Rio textile mills. When trading conditions worsened around 1895, the Armenian and Syrian merchants defaulted on payment for merchandise received.46 Expansion of the Rio mills into far-flung national markets was no simple matter. The Rio mills found themselves competing with each other, with imported cottons, and even with the mills in the areas invaded. Confronted with bad selling conditions in Rio and in the peripheral areas, they preferred to lower prices in the cities of the north and south where competition from new domestic mills was felt. Some states, such as Pernambuco and Amazonas, placed a 20 per cent tax on all cottons brought in from other areas of Brazil and inspired a strong protest from Rio mills.47 Steadily worsening conditions in 1897 brought upon the Petropolitana's proprietors the realization that one of the directors had to know the cloth trade intimately.48

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77

Company president Moreira dos Santos "observed apprehensively how the Rio market was becoming tighter, that bankruptcies take place every day especially in our business, and he considers both urgent and necessary that the board of directors have as a director a man au courant of present commercial conditions and who understands thoroughly the article in which our factory does business." At the next meeting of the board, a Portuguese cloth merchant of years of experience in Rio, and also a stockholder, was appointed directortreasurer.49 This was precisely the practice adopted twelve years earlier by the America Fabril textile company once that company was reorganized in 1885; during the intervening years the America Fabril had enjoyed a much smoother expansion than the Petropolitana.50 The policy of bringing in market-wise cloth merchants, openly advocated in 1897, was continued in appointments to the fiscal committee of the Petropolitana; in 1902, on picking Francisco Rodrigues da Silva Ferraz, it was pointed out that he was chosen because "being a cloth merchant he could aid the directors in their market orientation." 61 The development of a national market was only another sign that the Brazilian cotton manufacture was no longer an infant industry. Brazilian entrepreneurs, aided by a handful of North American, British, and European immigrants, had organized and financed the early partnerships and corporations, erected factories and stocked them with machinery, trained a labor force, and produced and marketed coarse cotton goods suitable for lower-class Brazilian consumers. In the eighties mill proprietors joined by other industrialists formed associations to advertise their views and champion their interests; the entry of experienced Portuguese cloth wholesalers into the cotton textile industry at the same time furnished sorely needed stability via finance and salesmanship. In emerging from infant-industry status in the nineties, cotton manufacturers concluded that private enterprise could not resolve unaided the complex problems of finance, disposition of increased output, and competition from both domestic and foreign mills. The republican government's recognition of the industry's importance in the national economy created a climate in which entrepreneurs emphasized the role of the state in meeting the problems of tariff and finance.

Part II

1890-1930

Industry and Government

In the early years of the first decade of the Republic, 1890-1892, the link between industrial development and governmental intervention was hammered out. The way for intervention had been prepared in the decades of tariff controversy beginning in the 1840's and particularly in the critical years 1870-1890. It was in 1892, however, that Brazilian industrialists as a group appealed for and obtained direct financial help from the government. Until then, the issue had not been met directly; rather, the government had observed the principle of non-intervention while granting subsidies, lottery proceeds, import exemptions, revenue tariffs that at times amounted to protection, and other favors on an ad hoc basis. In the controversy generated by the "Aid to Industry" campaign of 1892, both government and industry were well aware of the issue at stake: the principle of laissez faire versus state support for private enterprise. With the victory of the industrialists, the principle of government patronage of agricultural enterprise in periods of crisis was extended to industrial enterprise. 1 The Brazilian cotton textile industry in the first half century of its existence was benefited by what can be appropriately termed "creeping protection." The protection that developed gradually and hesitatingly was due to several factors. First, the government's fiscal requirements were augmented from the end of the sixties onward. Second, the agricultural crisis of the last quarter of the nineteenth century undermined the faith of Brazilian politicians in the ability of export crops to sustain the national economy. Third, pressure was

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The Brazilian Cotton Manufacture

exerted by industrialists who began to coordinate their forces in the eighties. Fourth, the wave of protectionist measures in Europe and the United States, from the end of the seventies, undermined the Cobden treaty system. The protection that was advanced indirectly by government measures until the nineties was not granted according to a considered plan for encouraging industry; on the contrary, those cotton manufacturers and other industrialists received protection who managed to survive under the government's vacillating policy, and who could then request protection on the basis of survival and the utilization of Brazilian raw materials. 1 Textile and other industrialists in the eighties dwelt insistently upon two main themes as they argued for state support. They tended to identify industry with national progress; it was but one step further to the position that helping industry was an act of patriotism. Furthermore, since the industrially advanced nations had espoused free trade, and free trade permitted foreign producers to hamstring domestic manufacture, the Brazilian industrialists hinted that applying freetrade doctrines was basically unpatriotic. "The value of an industrial apparatus in the economy of society has not yet been perceived in Brazil," ran an industrialists' memorial to the finance minister in 1881. "The local production of coarse cottons . . . is being warred upon by foreign competitors and if legislative measures do not come to the industry's aid, all the effort and capital employed to date will be wasted." 2 In few places did the industrialists of the eighties delineate so well their thoughts on the role of government as in the first issue of O Industrial, the Association's newspaper. Political independence was an illusion, it was argued, as long as Brazil remained a raw materials producing nation, a "commercial and colonial factory exploited by European traders." Brazil's raw materials, once exported, returned doubled in value by the process of manufacture. Failure to promote industry was tantamount to agreement on the soundness of free trade policies and their application on a world-wide scale. But, O Industrial queried, "Can this . . . doctrine apply equally well in England as in Brazil, France, or China?" After looking at industrial development elsewhere in the world, the industrialists were confirmed in their view that "civilized" governments had favored the expansion of industry. Consequently, the influence of the state was indispensable in stimulating industry in "young lands." 3 In Germany and in the United States, countries whose pattern of economic development seemed worthy of emulation, the Brazilian industrialists saw the tariff

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83

as the main weapon of economic progress. And they concluded that the moment specific interests entered any discussion in those lands, economic theory and principle yielded immediately to the "spirit of protection." Even in England, the land which trumpeted to the world her free trade theories, observed a Brazilian cotton mill proprietor, the government had to protect industry from foreign competitors.4 "Are we to be so stupid," another asked rhetorically, "as to hope to follow a different path?" 5 Not blind imitation but an incisive and penetrating analysis of the effect of manipulating tariffs guided the thinking of mill proprietors in their "crusade" 6 to impress upon the small segment of politically powerful public opinion and the government the interaction of protection and industrial progress. They saw in the Customs House an instrument for molding the industrial life of Brazil. Production, consumption, imports, and exports — "all the secretions and nutrition of the social organism" — could be modified by tariff legislation, particularly in young nations like Brazil where the economic laws of "old societies" were inapplicable.7 They considered the tariff of 1879 a decided advance over that of previous decades; but its flaws left it still the "main hindrance" to the development of domestic manufacture, especially where cotton goods were involved. Only the importers were consulted in fixing official values, protested the cotton textile manufacturers; equally erroneous was the provision that the weight of cotton goods be the decisive factor in computing value.8 Foreign mills, closely observant of Brazilian tariff legislation, shipped fabrics similar to the domestic product but much lighter in weight so that they could qualify for a tariff classification on which lower duties were charged. Even more incensed were cotton manufacturers on learning that Brazilian consumers who purchased the foreign inferior imitation marketed as a product of Brazilian mills often blamed local mills for turning out a poor product.9 As spokesmen for the Brazil Industrial textile mill stated their case for protection in 1881, if their gray cloth was better in quality and cheaper in price than the British article, why could they not expect the government to stimulate the domestic manufacturer? They entertained no "wild pretension" of supplying all Brazilian requirements in gray cloth and they welcomed the competition of the British mills; but no one could deny them the "right" to try to develop an industry with "natural elements from Brazil's soil" — such as cotton.10 The industrial exposition of 1881, planned and executed by the

84

The Brazilian Cotton Manufacture

entrepreneurs of the Industrial Association (by "men of labor," not "verbal gymnasts") 11 as a weapon of propaganda, emphasized the concept of protection as an equalizer of competition in the home market, not as a measure prohibiting the foreign article. Not yet could cotton manufacturers recommend outright exclusion of foreign cotton goods.12 As the industrialists explained their goal in 1883, the very existence of their enterprises depended upon the tariff as "regulator of foreign competition." 13 Entrepreneurs had embarked upon "patriotic undertakings," confident of the government's support; they affirmed that public opinion, after viewing the advances of Brazilian industrialists, perceived that protective tariffs could assure Brazil a prosperous industrial future. This policy was all the more urgent in view of the imminent and inevitable abolition of slavery. "We must prepare a successor to agriculture to soften the blow which threatens, for only industry will save us." The hopes of the nation therefore rested with domestic manufacture, the "haven of salvation." 14 Even the prospect of unemployed and footloose labor wandering about after emancipation was turned to good advantage by industrialists. Frederico Glette, founder and proprietor of a Rio cotton mill, predicted that, when emancipation came, industry would absorb the army of idle and thereby strengthen the nation materially and morally, for "only well trained, educated working classes constitute the power of modern nations." 15 Small wonder that tariff legislation from 1879 onward showed a steady protectionist trend.16 The basis of the tariff of 1860 — 30 per cent ad valorem ( official value ) — had been increased by new additional taxes (surtaxes) added during the Paraguayan war. In 1880 it was estimated that, far from paying 30 per cent, the "bulk of . . . British cotton manufactures may be said to pay 60 per cent of their original cost." 17 During the eighties the tariff continued to rise, especially in the last years of the Empire. Commenting on the decline in the price of imported cotton goods while official prices established years before for customs collections remained high, a British consul observed in 1885 that tariff rates were set officially at approximately 45 per cent ad valorem, but in fact varied anywhere from 35 per cent to 100 per cent.18 In the last important tariff revision ( 1886 ) prepared under the Imperial regime, cotton mill proprietors were favored by rate increases on imported cottons. By consolidating the surtaxes of the previous tariff, and adopting the rate of 24d per milreis for official prices, the revision established a rate of 48 per cent ad valorem, paving

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85

the way for "fresh additions to the 'additional.'" Later that year other favors were extended to cotton textile and other entrepreneurs when the government exempted from duties all machinery imported for initial installation in any industry. The British consul in Rio concluded that behind the tariff revisions were the twin motives of increasing revenue while protecting domestic cotton manufacture.19 To judge by statements made in 1886, the recommendations of the European commissioners had been successful, for the government became keenly aware of the need to modify tariffs periodically to accompany the frequent alterations in the quality and price of imported cottons.20 In the last year of its existence (1889) the Imperial Government again raised duties on cotton goods. The protectionist tendencies evident in the last years of the Empire were continued under the Republic.21 They took the form of surtaxes, revisions in the percentage of duty payable in gold, and rate (razâo) increases. Depreciation of the milreis throughout the nineties led the government to initiate partial payment of customs duties in gold in 1890 (quota ouro); in 1893 the government altered the official rate of exchange in payment of duties from 24d to 12d per milreis. Furthermore, from 1896 to 1900 the tariff commissions gave particular attention to the cotton industry.22 The markedly protective tariff of 1900 raised the percentage of duty payable in gold to 25 per cent and increased the rates, which now varied in some cases from 50 to 80 per cent ad valorem. This protection was reinforced from another quarter; since rates on cottons and on a majority of other dutiable articles were based upon official prices generally higher than market prices, rates of 50 to 80 per cent were in fact considerably higher, and partial payment of duties in gold raised them further.23 It was a tariff that, in the government's quest for revenue, assured cotton manufacturers and other industrialists of a "prolonged period of excellent returns." 24 In fact, the tariff of 1900 which remained in effect with minor revisions for the next three decades protected a cotton textile industry in existence for more than fifty years, one which had already outgrown its swaddling clothes.

2 Meanwhile, it was in the crisis that followed the boom ( encilhamento ) of 1890-1891 that textile industrialists and other entrepreneurs found a second occasion to campaign for government intervention in behalf of industry. The "Aid to Industry" campaign of 1892 is an incident

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The Brazilian Cotton Manufacture

largely overlooked in the history of Brazilian economic growth, yet its importance was not lost upon those who took sides.25 The origins of the boom went back to the last days of the Empire. After the abolition of slavery in 1888, disaffection was rife among Brazilian planters, the most vocal and powerful group backing the Imperial regime. To secure the allegiance of planters "whom the Emancipation Act had caused to join the opposition to the Imperial Government," the last prime minister of the Empire contracted with seventeen banks to loan planters a total of 172,000 contos ($92,880,000). 2 6 The government furnished one-half the sum while the banks, according to contract, were to distribute the government's share before making their own contribution.27 What portion of the government's funds originally intended for planters ended in their accounts is unknown although the inefficacy of the measure was widely recognized in the first months of the provisional government.28 It is certain, however, that a large part of these funds was diverted to commercial and industrial enterprises, many of them of a highly speculative character. Further encouragement was given speculative ventures two months after the proclamation of the Republic 29 when restrictions on the chartering of corporations were eased (January 1890). Then, on January 18, 1890, the official gazette announced the creation of new banks of issue and the establishment of a "'credit mobilier upon a scientific basis." Banks were empowered to engage in financial, industrial, and commercial undertakings; new industrial ventures were exempted from tithes, taxes, and customs duties.30 Banks of issue now sprouted everywhere and each day new notes were put in circulation. The use of credit led rapidly to abuse as the basis of commercial operations changed from "capital supplemented by credit to credit supplemented by small capital." 3 1 The boom spread in concentric waves northward and southward. In Rio Grande do Sul, on Brazil's southern border, the number of banking establishments jumped from two to ten in 1890-1891. According to bank balance sheets, business in Rio Grande do Sul had increased, but these figures were accepted with reservations. As a British consul warned, "possibly the new native banks have been more engaged in promoting new companies and other speculative business than in legitimate banking works." 3 2 With the government officially opening the dikes to speculation, industrialists and speculators alike seized their opportunity; Brazilian private initiative and corporate enterprise mushroomed. Between

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87

July 1889 and August 1890 the capital of new banks and companies registered by Rio's Junta Commercial totaled 1,148,000,000 milreis ($548,080,000), of which 800,000,000 milreis were recorded in the period following proclamation of the Republic.33 Once started the boom could not be halted. Ruy Barbosa, finance minister in the provisional government (1890), was credited with the statement that he would "gladly have put a stop to it at once, but for the fear that such a proceeding might have created a powerful opposition to the infant Republic." 34 Uncertain of the faith of planters turned republicans, the new regime sought support among the beneficiaries of speculation; it tried to "make friends" by distributing to upper-class families concessions and guarantees of interest — "incentives to reckless speculation too strong to be resisted in a country where gambling may be said to be a national failing." At the end of 1890 the nominal capital of newly founded joint stock companies totaled more than the sum of the federal debt, foreign and domestic; and in the first weeks of February 1891, there were founded 113 new companies with a nominal capital of 790,000,000 milreis. The government's "friends" were also highly influential, for, when legislation was proposed to control more rigidly the formation of limited liability companies by taxing sales or transfers of stocks and dividends over 12 per cent, stockbrokers objected by closing their offices. Rio's commercial association joined the leading banks and other companies to force the government to back down.35 As the speculative boom rolled onward, throwing up in its boiling wake parvenu financier-aristocrats, many decorated by the Portuguese crown three or four times in one year,38 there were observers who saw behind the façade of easy credit and the "fictitious and effervescent" spirit of enterprise. They saw subscribers initiate impossible enterprises on the simple understanding that "the market would be rigged so as to enable them to get out at a premium." The subscribers quickly unloaded their shares upon eager outsiders "enticed by profits so earned and trusting in luck to get out in like manner" before the bubble burst.37 The sight of more than a year of gambling in premiums, of company organization for promotion and incorporation fees, of stock watering, led Rio's English-language newspaper to denounce the boom as "false and deceptive from beginning to end." 38 Viewed in perspective, however, the boom contained positive elements. Despite the excesses, it symbolized the attempt to break with the slow, routine agricultural past epitomized by the conservative and

88

The Brazilian Cotton Manufacture

now rejected Empire, and to substitute "real American energy." Democratic industry was the way to modernize and revitalize Brazil. It alone, some Brazilians felt, might bring felicity to the laboring man while augmenting the capital of enterprising investors.39 Contemporaries associated the early nineties with a great expansion in the cotton textile industry. Falling exchange rates had the effect of tariff increases while mill expansion was facilitated by paper money and easy credit. Many mills which later developed into Brazil's largest were founded in this period; mills already in existence expanded capital stock, although part of the new capitalization took the form of stock dividends. The nominal capitalization of textile mills listed on the Rio stock exchange swelled from 13,500 contos ($7,290,000) in 1889 to 54,100 contos eighteen months later; to 72,550 contos in August 1891 and to 84,210 contos ($25,263,000) on January 1, 1892 (Table 7). Furthermore, cotton mill proprietors (and the entrepreneurs of other industries ) placed orders abroad for new machinery in 1889, 1890, and early in 1891. TABLE 7 . CAPITAL EXPANSION OF COTTON MILLS LISTED ON THE RIO STOCK EXCHANGE, 1 8 8 9 - 1 8 9 2 ( c o n t o s ) .

Date May 1 8 8 9 November 1890 August 1891 January 1892 Increase 1889-1892

Share capital

Paid in capital

Outstanding

Bonds

Capital received

13,500 54,100 72,550 84,210

13,140 36,630 48,100 49,475

360 17,470 24,450 34,735

6,010 18,227 23,163 23,771

19,150 54,857 71,263 73,246

70,710

36,335

34,375

17,761

54,096

Source: Adapted from "Cámara dos Deputados," Jornal do Commercio, July

19, 1892.

After March 1891, few new companies were formed and demands grew insistent that subscribers complete payment for their stocks. In October and November of 1891 the boom subsided and demands for exchange to remit abroad began to drive down exchange rates. 40 Distrustful of the bear market conditions, subscribers refused to respond and compromised the enterprises in which they had taken shares. By January 1892, Rio was full of predictions of the imminent liquidation of many companies organized in the previous two years. 41 Those textile companies that had ordered, installed, and paid for their

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Industry and Government

machinery while exchange was high survived the end of the boom and looked forward to good conditions since government fiscal needs had pushed up tariffs while low exchange rates reduced imports.42 But those textile mills which had ordered their machinery late in the boom faced the dismal prospect of falling exchange rates; they started operations under a severe handicap compared with the established mills.43 From a high of 26d per milreis in 1889, the average annual value of the Brazilian milreis fell to 22d (1890), to 15d in 1891, and then to 12d in 1892 (Table 8). Entrepreneurs with capital sunk in half completed industrial enterprises or who lacked adequate working capital, or who had to create a market for their output saw their investment jeopardized; early in 1892 the campaign for government "aid to industry" was on in full force. TABLE 8.

R A T E OF EXCHANGE IN R I O DE JANEIRO ON LONDON,

1880-1900 (pence per milreis).

Year

Minimum

1880 1881 1882 1883 1884

19 20 20 21 19

7/8 1/2 1/8 1/16

24 23 22 22 22

1885 1886 1887 1888 1889

17 17 21 22 24

5/8 1/2 1/6 1/2 1/4

19 5/8 22 13/16 22 13/16 27 9/16 27 3/4

18 19/32 18 11/16 27 7/16 25 1/4 26 7/16

1890 1891 1892 1893 1894

20 11 10 10 9

1/2 1/2 1/8 1/32

26 20 3/4 16 13 15/16 12 1/2

22 9/16 14 29/32 12 1/32 11 19/32 10 3/32

9 8 6 7/8 5 5/8 6 11/16 7

11 13/32 10 5/16 8 31/32 8 27/32 8 7/32 14 1/16

9 15/16 9 1/16 7 23/32 7 3/16 7 7/16 9 1/2

1895 1896 1897 1898 1899 1900

Maximum 1/4 1/4 1/2

Average 22 3/32 21 29/32 21 5/32 21 9/16 20 11/16

Source: Normano, Brazil, p. 200. For monthly exchange rates between 1889 and 1891, see Calogeras, La politique monétaire, p. 234.

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The Brazilian Cotton Manufacture 3

Certain aspects of the Brazilian boom of the early nineties — paper money issue, liberal credit distribution by public and private banks, the formation of many corporate enterprises, real and fictitious — were not alien to earlier episodes in Brazilian economic development. There were, however, entirely new elements important for later growth. In the crisis of 1892 there was the insistent pressure for government support exercised by an established industry, the textile manufacture in particular, already favored by both direct and indirect government intervention. Second, the young republic required the political support of a group not closely allied to or influenced by the conservative agricultural groups with deep roots in the Empire. Finally, the previous decade of attacks against the principles of laissez faire brought recognition in government circles that the state might play an important role in fostering industry. 44 Between January 1892, when the directors of the Petropolitana mill noted that they could send no funds abroad because the "Rio Banks refuse to handle any transactions," and June of the same year, when they complained to stockholders that the low exchange rate forced them to "heavier expenditures to pay for imports," the industrialists' campaign for aid to industry reached its apogee. 45 It was early in April that the influential Rio Jornal do Commercio, subsidized to report parliamentary debates,4® published a notice that industrialists had approached the government for loans lest their enterprises ("which have most promising futures") go into bankruptcy and thereby force them to dismiss their workers. The report implied that in turning to the government the industrialists were repeating the example of Rio's "worthy" bankers who had recently requested and readily obtained loans from the national treasury. The notice concluded that a basic question of government policy was at stake, whether the government should intervene to save industrial enterprises "as a measure of public salvation." 4 7 In fact, the industrialists had approached finance minister Rodrigues Alves for funds, using the arguments faithfully reported in the Jornal. The finance minister was placed in an uncomfortable position for the industrialists' request ran counter to the avowed policy of non-intervention. Yet how could the government be "indifferent" to the fate of "respectable" companies suddenly threatened with liquidation? How could intervention be made compatible with the finance minister's

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91

role as guardian of public funds? In other words, how could he dispose of public funds to benefit a few elements within a "particular class?" He temporized, appointing on April 5 a special commission of public figures to recommend whether the government should intervene, directly or indirectly, to choose the form of intervention, and to estimate the amount which the Congress could set aside. Personally, Rodrigues Alves felt that a small amount would help many sound enterprises, and he was willing to accept the industrialists' proposal of issuing up to 100,000,000 milreis ($24,000,000) in government securities to existing enterprises.48 Prepared in a little over a month, the commission's report recommended to the finance minister that government intervention in behalf of industrial enterprises was necessary. But, fearing this precedentmaking recommendation, it hastened to itemize the reasons for favoring such entrepreneurs. Some enterprises about to begin operations and others awaiting machinery could not get the banks to accept bonds issued on the security of mill property, construction and/or equipment. The money market was tight: the boom years had left an unfavorable balance of payments mainly because of excessive imports, and specie shipments had lowered the milreis' value. To avoid greater and "more dismal consequences," prompt measures had to be taken, advised the commission. Since the banks refused to purchase the bonds, the entrepreneurs had to turn to the federal government. In principle, the commission emphasized carefully, it was against governmental action as a regulator of commercial and industrial activity, for such activity frequently harmed private initiative. But the present circumstances were abnormal, and many well planned, well managed companies could not be held responsible for "totally unpredictable" events. This cast a new light on the government's role, for under these circumstances "official intervention ceases to be detrimental State socialism and it becomes a public duty to avoid the annihilation of capital employed in the normal channels of production." Industry deserved to be favored by government, just as Brazilian agriculture had been in the past. The nation's international commercial relations were in a state of disequilibrium because of excessive imports; therefore the "most readily acclimated industries" should be fostered to reduce imports and develop national wealth. 49 Among other measures the commission advised that selection of the enterprises eligible for financial help be the banks' responsibility, and that banks issue under the government's guarantee preferred bonds secured

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The Brazilian Cotton Manufacture

on the industrial enterprises' plant and machinery. It suggested that tariff protection be augmented, and that a program of economic diversification be undertaken. It was this latter theme, the need to deëmphasize agriculture and to nurture industry, that ran through the first of a series of letters appearing in the "by request" columns of Rio's Jornal do Commercio, less than two weeks after the commission submitted its recommendations. The tight money market was not a "passing" but a "profound" crisis threatening the nation's hopes for progress through industry, and one writer hinted that thousands of unemployed workers might become the prey of those who hoped to disrupt the "consolidation" of the Republic. In so serious a national crisis, the action of the government could not be construed as intervention, for the government, "responsible for public welfare and national prosperity," was aiding all society and not a tiny "fraction." 80 Those few industrialists who, already well established and perhaps not eager to welcome new domestic competition, objected to governmental intervention, harped on the dubious wisdom of applying public funds for individual cures. As a successful textile entrepreneur of Bahia, Luiz Tarquinio, expressed himself, one of the most dangerous forms of state socialism came from such a policy, for it transformed the "power of the State into free insurance against the risks of the game or of lack of foresight, with the feature of being able to choose the recipients of the favors." And was it not an injustice to the companies which had planned their enterprises prudently by trimming their visions to available capital and not to credit, and which had prepared for troubled times by restricting operations to the range of the founders' particular knowledge? he asked. If the government wished to help, he proposed that it look to the tariffs and permit every machine and vital raw material to enter duty free. 51 Another of the discordant voices in the otherwise euphonious chorus in behalf of government assistance claimed in a very brief letter that most of the consumer goods factories were prosperous, they had distributed dividends, their stocks and debentures were above par.®2 As for the idea which took root under the Republic, that government assistance was indispensable for industrial progress, an accountant signing himself "A Brazilian Citizen" said that for far too many entrepreneurs the Republic meant "freedom to enrich oneself overnight through speculation and fraud, to grab everything legally or illegally, freedom to indulge in luxury and opulence, no matter what the source." He

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93

was violently opposed to government financial assistance to speculators "masquerading as industrialists." 5 3 However cogent a brief could b e made against governmental intervention until the last week of June, it was thereafter weakened by the reported interference of British bankers in what had been heretofore a domestic affair. The rumor of Rothschild pressure on the administration was enough to cement the republican form of government, economic independence, and industrialists in a patriotic alliance. "Mr. Rothschild addressed the finance minister as would a boss his clerk" —this is the way an unsigned letter phrased it to the reading public on June 23. Rothschild did not want local industry to receive aid from internal sources, ran the letter. His representatives in Rio, by withholding loans, wished to oblige the government to seek a foreign loan and industrialists to pay "scandalously" high interest rates to foreign banks. Obviously, continued the anonymous writer, among those who were opposing governmental support were the importers ( "they see in these industries competitors for the profits earned on imported merchandise") and the "Jews of the City" ("who want to prepare a report").5* Finally, aid must be forthcoming soon, pleaded the letter writer, to halt the dismissal of factory workers.5® After the Rothschild incident the issues were oversimplified and the dividing Une between protagonists and antagonists of government intervention became clearer than ever. On one side, claimed the protagonists, were the Brazilians, patriots and industrialists; and on the other, as far as many industrial entrepreneurs were concerned, were ranged the importers and bankers — creatures of foreign banks and the foreign industries in which such banks had investments. Now spurred to action as never before, industrialists met to resolve upon a course of action. As a "Small Industrialist" put it, the meeting meant to resolve the "life or death of industry and therefore, the life or death of Brazil itself." Were no aid forthcoming, factories would have to close down. 56 A few days later foreign merchants were pictured as opposed to any assistance to industry in order to destroy the industrial spirit beginning to take root. And then, to clinch the link between government and industry, it was affirmed that it was "patriotic" to grant industry government aid to finish the installation of its factories. 57 The first results of the industrialists' meeting of late June were not long in appearing. The industrialist elected an eleven-man committee, four of whose members were connected with cotton mills, to frame a coordinated exposition of industrial entrepreneurs' viewpoints on gov-

94

The Brazilian Cotton Manufacture

emmental aid. Gone were the earlier days of industrialization when each would-be entrepreneur went, hat in hand, to the government to request personal favors. In the quest for aid to industry in 1892, industrialists felt confident enough to foregather and to bring concerted pressure as members of the "managing class" (classe dirigente) upon the congress of the Republic. In their "Representation to Congress" they reminded the government that without industrial development the overthrow of the Empire would bring no "social and economic renovation to improve the living conditions and progress of the people" — phraseology foreign to the days of the old regime. The comparison of Brazil with the backward areas of Africa and Asia, so significant in the minds of nationalistically-minded writers of the eighties, was repeated: Brazil without industry would continue to export raw materials and to receive them transformed at "enormous" profit. Then the committee tried to show that a new spirit was abroad, the spirit of "individual initiative" which had confidence in the permanence of the republican regime. The motto of industry, as of the new government, was the Positivists' "order and progress." 58

The main trouble afflicting industry was shortage of credit, for which the committee blamed the investment policy of three leading banks which preferred to dabble in stock speculation rather than to finance sound, modest, industrial ventures. European machinery began to arrive at the very moment the exchange rate fell, in some cases doubling the earlier estimated costs. But the companies could obtain mortgage loans at no bank, and the undertakings, "products of individual and joint energy and initiative," had to find funds to get their machinery into operation. Under normal conditions, continued the committee, the request for government aid ran counter to free-trade theory. The "present" circumstances were abnormal, however. Since the difficulties were created largely by the government's manipulation of credit, it was rank "desertion" for the government to refuse aid. It referred again to the need to nurture private initiative, otherwise the "sight of an industrial corpse" might discourage private enterprise in every field.59 Two days later, a merchants' memorial against the pretensions of the pro-aid group appeared. The industrialists immediately called the merchants signing the memorial "intruders," and claimed that 83.5 per cent of the 424 names appended to the petition were those of foreign merchants.60 Since the directors of two Rio cotton mills — the Alliança and Bangú — had joined the merchants, they were stigmatized as beneficiaries of government protection and import exemptions,

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95

who had been fortunate enough to pay for their machinery when exchange was favorable. The industrialists commented that the Bangú mill had been started under the wing of the Banco Rural and paid 8 per cent interest on subscribed capital "before any machinery had been mounted(!)." "Bought by English gold" was the epithet thrown at wool and cotton manufacturer Rheingantz when he protested that a large segment of the cotton industry did not require financial assistance and that only the Rio mills were in financial straits.61 Advocates of government intervention were aided by the favorable resolution of the Engineering Club which openly championed government financial aid. The engineers claimed that government held the "responsibility for national prosperity" and had to support the wealth of the nation in times of crisis as it had done for agricultural interests, the railroads, coastal shipping, and road construction. That so clear a statement came from the engineers' club is not to be wondered at, for its council members and the industrialists' committee were fine examples of interlocking directorates.62 The industrialists' visit to the finance minister in April, the report of the commission to Rodrigues Alves, the propagandists activities of the industrial entrepreneurs in the press, the support of the engineers — all were effective in uniting private initiative and the state in a common endeavor. Alcindo Guanabara on the floor of the Chamber of Deputies and, later, Amaro Cavalcanti in the Senate, put before the legislature the ideas of most of the industrialists of Rio. Guanabara felt there was more than stock speculation to the case and more than the question of keeping expenditures down instead of meeting the requests for aid. A young nation with all the "elements of progress at hand" could not make a policy of tightening the national belt. Looking at Brazil in 1892, Guanabara decided that, with the republican revolution of 1889, Brazil had received new "energy and vitality," "new wants" as evidenced by the growth of urban population and the "industrial movement . . . this renaissance of national life." 63 In view of the campaign waged in favor of assistance to industry, the results were not unexpected. First by presidential decree and later by laws of congress passed in September and December 1892, the Banco da República dos Estados Unidos do Brazil was empowered to aid industrial enterprise by issuing cédulas to bearer, paying interest quarterly and receivable at par at all government offices. Of the total issue of 100,000,000 milreis ($24,000,000) some 80,000,000 entered circulation by December 1895. Accepted by the public only at a discount,

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The Brazilian Cotton Manufacture

many cédulas piled up at the Banco da República or at the treasury. Nevertheless, few denied that many mills were saved by the measure. 64 Under the industry-wide approach of the propagandists for government financial support, the blessings of the treasury fell upon the needy and the prosperous alike. In this connection it must be remembered that no statistical basis of need was established by the government. What constituted a crisis, in fact, were the unconfirmed reports of the industrialist-petitioners. The directors of the financially sound and well operated America Fabril cotton mill of Rio were quick to apply in October 1893 for a loan of 1,400,000 milreis. Equally swift in the month of October was one of the Petropolitana's directors, who presented to the finance minister an outline of the firm's financial straits, "placing his trust in Your Excellency's estimable protection for our important industry." Through the intervention of the minister and "influential people" the Banco da República provided a ninety-day loan on the security of warehoused cottons. Signing the letter sent by the Petropolitana, was Joaquim Dias Custodio de Oliveira who had been a member of the industrialists' committee elected to present industry's viewpoint on governmental assistance.66 4 The political, social, and economic turmoil that characterized the downfall of the Imperial regime and the onset of the First Republic in the three years 1889-1892 has obscured the significance of Brazil's short-lived boom and, in particular, the contributions of the state to industrial growth. Most Brazilians aware of the boom associate with it solely its stock-jobbing aspects and the fraudulent activities of speculators. Such an appraisal of the boom and its sequel, the campaign for state assistance to credit-short industrialists, is superficial. Despite heavy speculation, textile mills survived, new ones were founded, and the cotton manufacture embarked upon a promising future. By liberalizing the chartering of joint-stock finance, by widening the banks' range of economic activity, and by increased note issue, the republican government accelerated the process of capital formation. In effect, the paper money inflation supplied the textile industry with liquid capital which otherwise would probably have taken a longer period of time to accumulate. It was the ability of industrialists to perceive the value of concerted effort in pressuring the republican government that brought financial assistance in 1892; the same spirit of association enabled the

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cotton industry in the nineties to obtain the protection judged necessary to assure its future development. Furthermore, the government's decision to make a direct loan to the industry in its crisis and the adoption of a protective tariff policy established important precedents which future industrialists would not overlook.

The Golden Years

By 1892 the Brazilian cotton manufacture, now well established, ended its initial period of growth and entered upon more than three decades of development which the great depression and the Vargas revolution of 1930 closed. Although mill proprietors failed at the time to recognize the favorable climate for industrial enterprise which existed, especially after the tariff of 1900, in the troubled decade of the thirties they remembered it as their "golden age." 1 In terms of both the industry's growth and the earnings on investments, the age was indeed golden. Expansion of the industry in the first years of the twentieth century was, however, no isolated phenomenon. The possibilities for growth were the product of a changing Brazilian political, social, and economic scene. By 1900 uncertainty over the permanence of the republican regime had disappeared; its successful struggle against the monarchist revolutionaries in the naval forces, 1893-1894, and the bitter, fratricidal campaign to wipe out the rebellion in the backlands in 1898, demonstrated the regime's ability to survive. In the ensuing years Brazil enjoyed a period of political stability profoundly disturbed again only in the 1920's when scenes of violent internal conflict occurred.2 Perhaps the most noteworthy economic feature of the years between 1890 and 1929 was the second great coffee boom. Interest in industrial activity had been a marked feature of the 1880's and 1890's, the closing years of the first coffee cycle, and coincided with the uncertainty over the future of Brazilian coffee agriculture. But in the late eighties and, on a greater scale, in the nineties Säo Paulo coffee lands were opened to cultivation, and coffee, as in the nineteenth century from 1830 on-

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99

ward, continued to dominate the Brazilian economy. The coffee Convention of Taubaté ( 1906 ) whereby Brazilian producers — suppliers of the largest percentage of the world's coffee — sought to control the supply and price of coffee via self-regulation and foreign loans ( valorization), afforded reasonable insurance against price fluctuations of the world market.3 Both state and federal governments, in effect, guaranteed private enterprise in agriculture. Although the Säo Paulo coffee boom probably held back industrial growth, it did present positive aspects. The boom hastened the formation of investment capital; it attracted to Säo Paulo alone and subsidized more than one million of the 1,894,004 immigrants who entered Brazil in the first twenty-five years of the twentieth century; 4 it stimulated the construction of roads and railroads; it brought the urbanization of Sao Paulo; and it created new markets. Above all, it presented conditions particularly propitious for the development of initiative and experimentation in new fields of economic activity. In brief, manifold new opportunities for wealth were dangled before Brazilians, nativeborn and immigrants. To supply the ever-widening areas of Säo Paulo coffee cultivation with cheap labor, Europeans thronged to Brazil. Most ended their hegira on the vast coffee estates, whence many departed in disappointment to the other promised land of South America — Argentina, or to the homeland whether in Italy or Spain, or to the urban center of Säo Paulo. While the population of Brazil's two largest centers, Rio and Säo Paulo, grew rapidly, the sources of the expansion were markedly different: to Rio went the ex-slaves of exhausted Parahyba Valley plantations and their former masters, while the city of Säo Paulo swelled with the influx of European laborers and their families.5 Complementing the effects of agricultural prosperity and heavy immigration during the golden years were tariffs and a new source of power, electricity. The tariff effective in 1900 and its minor revisions which raised the gold percentage of duties, more than adequately insured the protection of coarse cloth production, still the mainstay of the textile industry.6 It was in the years after 1900, too, that the impact of a fourth factor on the cotton manufacture's growth was felt. In the large centers of Rio and Säo Paulo the establishment of hydroelectric plants by foreign corporations, particularly after 1905, permitted existing cotton mills to abandon dependence upon direct water and costly coal-burning steam installations for cheaper and more reliable hydroelectric power.7 Abandonment of coal for electricity occasioned no

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The Brazilian Cotton Manufacture

industrial dislocation; the coastal escarpment of south-central Brazil provided convenient sites for plants servicing Rio and Säo Paulo industrial establishments. Economic prosperity and urbanization created new groups and new issues. Throughout the prosperous years more than once the journalistic mentors of the consuming public commented upon the role the consumer played in industrialization. Under high protective tariffs the consumer furnished a "captive" market which frequently yielded handsome rewards to enterprising industrialists of the textile and other industries. Fears were voiced that a state-sponsored industry might produce an aristocracy of industrial wealth whose political influence and financial power would resist lowering of tariff rates. 8 On the whole, however, it was felt that industry provided a balance to the agricultural basis of the national economy. Factories contributed to the federal coffers in taxes and furnished wages to a steadily increasing working class; and textile mills supported agriculture by purchasing raw cotton grown within national borders. These contributions were probably balanced against the dividends distributed to the small group of stockholders and company directors. It was along the pattern established by the early cotton manufacture that the industry developed in the decades following 1890. Cotton mill ownership remained in the hands of a few families; Portuguese cloth wholesalers played prominent roles in ownership, management, and distribution; and paternalism was strong in labor-management relations. 2 Brazilian cotton cloth production, estimated roughly in 1885 at 20,595,375 meters, rose to 256,982,203 meters in 1908, and in 1911 to 378,619,000 meters. By 1917 production reached 548,120,000 meters and remained above 500,000,000 until 1929.9 The transition in output to include medium as well as coarse grades became more evident. Although in 1910 national output consisted chiefly of coarse and medium grades in narrow widths, 24 to 28 inches, a few mills — notably those in the Rio de Janeiro area — turned out finer grades, comparable in weave and finish and in a few cases in width to imported goods.10 It was in these few mills that there were found Jacquard looms. The America Fabril aimed at imitating every foreign cloth that became popular in the hope of forcing the imported article from the market. The Mariangela mill in Säo Paulo produced a wide variety of goods, ranging from

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bedspreads.11

manioc sacking to Jacquard Another large mill in 1910, the Confiança Industrial (Rio), concentrated solely on coarse and medium, gray and colored goods.12 At the close of the war, domestic mills supplied from 75 to 85 per cent of all cotton textiles consumed in Brazil.13 By 1920, Brazilian markets, unlike those of other South American nations, were practically closed to staple imports and "nothing but the very finest goods" could compete with locally made cloth.14 Somewhat nostalgically, one Englishman commented on the change he had observed in British exports to Brazil of gray goods, whites, prints, and fancies. "Twenty-five years ago Brazil was an excellent market for Manchester. I personally remember the time when a Manchester shipping house, in which I was employed, had weekly shipments of cotton goods of £10,000 for one Rio importer. . . First the grays dropped out, and now all these goods are being manufactured in the country and only the very finest qualities remain to be imported." 15 Statistics on the increase in mills and equipment of the cotton manufacture during the years 1905-1921 indicate the extent of the transformation that had occurred. In 1921, Brazil had 242 cotton mills compared to the 110 of 1905; the number of spindles had risen from 734,928 at the beginning of the period to 1,521,300 at its close, the looms from 26,420 to 57,208. In 1921, cotton mills employed 108,960, almost three times the number of 1905 ( Table 9 ). TABLE 9 .

GROWTH OF BRAZILIAN COTTON MILLS, Mills

Spindles

1905-1921.

Looms

Workers

Number

Per cent

Number

Per cent

Number

Per cent

Number

Per cent

1905 Brazil Federal District State of Rio State of Säo Paulo State of Minas

110 10 11 18 30

100

734,928 209,200 115,560 110,996 45,382

100

26,420 7,360 3,776 3,907 2,295

100

39,159 8,216 6,024 6,269 3,098

100

69

63

481,138

65

17,338

66

23,607

60

1915 Brazil Federal District State of Rio State of Sao Paulo State of Minas

240 23 23 51 53

100

1,512,626 338,326 176,610 378,138 131,486

100

51,134 11,562 5,405 12,743 4,321

100

82,257 16,045 8,280 18,338 9,028

100

150

63

1,024,560

68

34,031

67

51,691

63

1921 Brazil Federal District State of Rio State of Sao Paulo State of Minas

242 14 23 55 60

100

1,521,300 411,000 180,000 415,900 130,000

100

59,208 13,000 6,000 14,700 5,800

100

108,960 19,000 12,500 25,000 18,000

100

152

63

1,136,900

75

39,500

67

74,500

68

Year

Area

Source: Gany, Textile Markets of Brazil, pp. 22-23; Centro Industrial de Fiaçâo e Tecelagem do Algodâo do Rio de Janeiro, Relatorio, 1921-1922, p. 39 (hereafter cited as CIFTA-Rio).

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The Brazilian Cotton Manufacture

In the first two decades of the twentieth century there was a concentration of the industry more than matching the concentration of population. As shown in Table 10, according to the census of 1900 and TABLE 10. DISTRIBUTION OF BRAZIL'S POPULATION IN 1 9 0 0 AND 1 9 2 0 .

Area Brazil

1900

1920

Increase

17,318,556

30,635,605

13,317,049

466,308

Federal district

691,565

1,157,873

State of Rio

926,035

1,559,371

633,336

2,282,279 3,594,471

4,592,188 5,888,174

2,309,909 2,293,703

7,494,350

13,197,606

5,703,256

State of Säo Paulo State of Minas Total

Source·. T. Lynn Smith, Brazil: People and Institutions (Baton Rouge, La., 1946), p. 136.

that of 1920, slightly more than 43 per cent of the population was located in the combined area of the Federal District (Rio de Janeiro) and the states of Rio, Säo Paulo, and Minas. Table 11 shows that the TABLE 11.

COMPARISON OF DISTRIBUTION OF POPULATION AND OF THE COTTON TEXTILE INDUSTRY IN FOUR DISTRICTS OF BRAZIL, 1900-1921.

District

Population

Year

Per cent of total Brazilian industry

Year

Per cent

Federal District

1900 1920

4.0 3.8

1905 1921

10. 6.

28 27

28 22

21 17

State of Rio

1900 1920

5.3 5.1

1905 1921

10. 10.

16 12

14 10

15 12

State of Säo Paulo

1900 1920

13.8 15.0

1905 1921

16. 23.

15 27

15 25

16 23

State of Minas

1900 1920

21. 19.

1905 1921

27. 25.

6 8

9 10

8 16

Combined

1900 1920

43 43

1905 1921

63. 63.

65 75

66 67

60 68

Mills

Spindles Looms Worl

Based on data in Tables 9 and 10.

percentage of the industry in the same area in 1905 remained roughly constant as late as 1921, although the rate of growth of Säo Paulo's cotton textile industry outstripped that of neighboring states. Clearly the mills of the south had completely eclipsed the earlier textile center at Bahia.

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The Golden Years

Further confirmation of the importance of south-central Brazil as a textile area is visible in the quantity and distribution of textile machinery imports. Between 1913 and 1921 Brazilian cotton mill entrepreneurs imported over 36,000,000 kilos of spinning and weaving machines and accessories, looms, and printers rolls; in 1913, on the eve of the war, more than 13,000,000 kilos were imported. Important for the relationship between markets and machinery is the fact that 78 per cent of all textile machinery imports in this period entered the ports of TABLE 12.

Total

(kilos).

Via Rio

Via Santos

13,344,766

5,797,622

4,326,849

2,194,261 2,449,638 2,002,354 2,931,570 2,752,897 4,262,251 6,294,584

693,088 850,907 506,265 726,233 985,044 1,792,567 2,545,527

862,930 1,327,756 785,703 1,468,304 1,291,716 1,598,696 2,824,313

36,232,321

13,897,253

14,486,267

Total

Year 1913 1914 1915 1916 1917 1918 1919 1920 1921

BRAZILIAN TEXTILE MACHINERY IMPORTS, 1 9 1 3 - 1 9 2 1

E

" Unavailable. Source: Ministério da Fazenda, Directoría de Estatística Commercial, Commercio exterior do Brasil (Rio de Janeiro, 1921), I (1913-1918), 216-218, and (19191923), 184-186. Textile machinery was not specified among Brazilian imports until 1913. Until 1913 it was included among either "Agricultural and Industrial Machinery and Accessories" or "Non-Specified Machinery and Implements." For breakdown of imported textile machinery, see Appendix V.

Rio and Santos, both serving the hinterland of Minas Gérais, Rio de Janeiro, and Sâo Paulo (Table 12). Approximately half of Brazil's cotton textile equipment as of 1945 was installed and in operation by 1915 — a fact frequently ignored by otherwise competent observers of the industry, who believe the cotton manufacture was "born" during the First World War. 16 Significant in the growth of the industry in the early years of the twentieth century was the increasing concentration of the Brazilian cotton manufacture not only in the Rio area and in Sao Paulo, but within a few miles of the two areas. In 1910, for example, approximately one million spindles and thirty-five thousand looms were in operation in 137 mills throughout Brazil. Concentrated in six Rio and two Säo Paulo mills were more than one-third of the spindles, slightly less than

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The Brazilian Cotton Manufacture

one-third of the looms, and roughly one-fifth of the cotton mill labor force. Not without reason could Clark comment in 1910 that the Rio area contained the "largest and most progressive" mills.17 Eleven mills (eight in the south and three in the north) dominated the industry in 1910, and this concentration was again evident in 1915 and 1921 (Table 13). From these were to come the leading figures of the industry as well as the initiative in diversification of product. TABLE 13.

GEOGRAPHICAL DISTRIBUTION AND STATISTICS OF

BRAZIL'S LARGEST COTTON M I L L S , "

1910.

Area

Company

Number of spindles

Federal Dist.

Alliança Confiança Industrial Progresso Industrial America Fabril Carioca

56,390 42,800 37,340 32,000 32,000

1,336 1,500 1,295 1,350 1,067

1,637 1,350 1,600 1,500 1,163

200,530

6,548

7,250

31,804

958

1,050

232,334

7,506

8,300

36,000 36,000

1,700 1,300

2,200 1,500

72,000

3,000

3,700

31,000 31,000 30,000

1,288 829 650

1,600 990 706

396,334

13,273

15,296

1,000,000

35,000

55,000

Total Rio

Brazil Industrial Total, Rio and Federal District

Säo Paulo

Mariangela Votorantim Total

Bahia Pernambuco Maranhâo

Emporio Industrial Pernambuco Fabril Maranhense Total of 11 mills

Brazil

137 mills

Number of Number of looms operatives

* Mills of 25,000 spindles or more. Source: Adapted from Clark, Cotton Goods in Latin America, pp. 38, 41.

A more tangible inducement to enterprising industrialists than the growing market was the dividends and bonuses paid to the narrow circle of stockholders in the years prior to the outbreak of the First World War.18 In 1910, W. A. Graham Clark analyzed dividend distribution among Brazilian cotton mills, dividing them into large and small concerns. The large concerns were more conservative in distributing earnings, for they rarely declared over 12 per cent cash dividends annually, so that the dividends did not show actual profits.19 Thus, in Rio's Progresso Industrial do Brazil mill, in 1910, there was a nominal

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105

capital of 9,000,000 milreis of which 3,000,000 milreis were paid in by the stockholders in cash; 6,000,000 shares had been distributed as stock dividends. 20 In that year each share of the company (par value: 200 milreis) was quoted on the Rio exchange at 280 milreis. Clark concluded: " . . . if an original stockholder had sold out on January 1, 1910 he would have received back his original investment and a profit over and above this of 320 per cent for the twenty years for the use of his money, or 16 per cent a year. The average dividends paid by this mill have been at least 10 per cent cash a year, and it also has a large surplus, so that from the time it started in 1889 to January 1, 1910, the actual net profits of this mill must have been at least 25 per cent a year." A 12 per cent dividend where two-thirds of the shares had been distributed as a bonus meant 36 per cent a year on the original investment. Smaller mills were reported to have declared dividends as high as 76 per cent in one year in exceptional though proven cases. As a whole the industry in 1910 was said to average dividends of approximately 8 per cent. 21 To be sure, Clark visited Brazilian mills when local industrialists were under attack for gouging the public behind an "excessively" high tariff which varied from 45 per cent upwards between 1900 and 1914. Such protection permitted maufacturers to base their selling prices on the cost of importation as "artificially increased by the incidence of heavy customs dues," not on the cost of production. 22 Despite frequent attacks on the tariff and on the cotton mill stockholders who often voted directors and managers hundreds of contos as presents for services rendered, the tariff was not revised downward and the industry continued to grow.23 3 The generally prosperous development of the textile industry in the first quarter of the twentieth century was interrupted by a business recession beginning in 1913, which the outbreak of the First World War aggravated. Aided by governmental intervention which they urgently requested, textile and other industrialists weathered the crisis by 1915 and embarked upon a boom period which terminated in the late twenties when signs of the great world depression appeared. For the seven years preceding the war, a foreign analyst of the Brazilian cotton textile industry noted a slight price decline in many types of cotton goods. W. C. Downs, American commercial attaché at Rio, pointed out that, while English, French, and American bleached

106

The Brazilian Cotton Manufacture

shirtings cost in Brazil in 1914 from 18.5 cents to 23 cents per yard, a comparable Brazilian article cost from 8.87 cents to 11.20 cents. This development, which he claimed prevented mill owners from "reaping the full protection granted," was ascribed to domestic competition.24 Then, in 1913, competition among Brazilian mills sharpened as financial disequilibrium developed. The large inflow of foreign capital, 1908-1913, sought by federal and state governments as well as by private enterprise, slackened abruptly after the outbreak of the Balkan war. This was coupled with an unfavorable balance of merchandise trade as Brazilians purchased heavily abroad, and as coffee and rubber prices slumped in 1913. In 1912, Brazil had a net inflow of gold amounting to $17,500,000; in 1913, a net outflow of over $23,000,000.2S Contraction of credit in Brazil limited severely the operation of mills, wholesalers, and country storekeepers. As finished goods began to pile up on warehouse shelves and wholesalers were left with the unpaid accounts of up-country storekeepers, many mills reduced working hours or shut down completely. Outbreak of the First World War, on August 3, 1914, seemed the last straw. 26 In the ensuing four days, Rio industrialists debated, then resolved to go to the Congress for help. On August 6, a commission of industrialists waited upon the finance commissions of the Senate and the Chamber to recommend measures for easing the credit shortage. The demand for help hewed carefully to the concept of associating the government with the security of industrial enterprise following the pattern of government support for agriculture and commerce. Jorge Street, a leading cotton manufacturer, declared as he looked ahead to the return of foreign goods to postwar Brazil that only by governmental favors to domestic manufacturers could Brazil hope to "ward off the commercial tyranny of the conqueror of the morrow," whether England or Germany, and to promote Brazil's economic independence. 27 Street's arguments were obviously designed to meet the approval of Wenceslao Braz, the president of the Republic, who had a large interest in one of Minas Gérais' numerous cotton mills, the Companhia Industrial Sul Mineira. 28 Under the pressure of industrialists and merchants alike the government resorted to issues of paper money. On August 24, 1914 the government authorized an issue of 250 million milreis, followed twelve months later by authorization for 350 million more. These two issues represented slightly under 50 per cent of total inconvertible paper in circulation in 1918.29 Paper money and easy credit financed the wartime operations of cotton manufacturers who, assured of "great profits,"

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107

now attempted to fill the vacuum created by the cutting off of imports. 30 What high tariffs had done for the Brazilian cotton manufacture between 1900 and 1913, the disruption of international trade during the First World War continued. Not easy credit but a monopoly market was the chief consequence of the war for Brazilian textile mills. It was a golden opportunity for cotton entrepreneurs who had by this time technical know-how, a market for the coarse goods most mills produced, and a long-established system of distribution. Cotton textile entrepreneurs had before them the chance to provide domestic cottonnades to the consumers distributed in a belt along Brazil's coast line from Belém in the north to Rio Grande in the south. Farm and factory laborers of the countryside, house servants, artisans, and other lowpaid urban laborers — all required cotton cloth for men's trousers and coats, women's skirts and loose blouses or jackets, and underwear: drills, cottonnades, cassinets, zephyrs, and bleached white shirtings. "A veritable cottons goods famine appeared everywhere in Brazil and not even the worst cloth was rejected. Mill proprietors set the prices." 3 1 From an index of 100 in 1912, imports of cotton goods excluding yarns dropped to 32 (1914), and throughout the war years and until 1920 the index averaged 37. Although the hardest hit class of cotton goods was the group of non-specified textiles — the largest by weight — imports of dyed, bleached, printed, and gray goods were also severely reduced. 32 Into the market created by decreasing imports the domestic manufacture began to pour its cotton goods. Prewar expansion of equipment and excess productive capacity in the years of recession 1913-1915, doubtless facilitated the operations of Brazilian mills. With internal markets "at the disposition" of textile men, "every man of initiative was stimulated to dedicate his activity to this branch of Brazil's industrial life." 3 3 Discounting patriotic exaggeration, this statement undoubtedly illustrates the fever of industrial activity that ensued. Apparently reflecting general business uncertainty in the first years of the war, national cotton goods production first fell from a high of 399,712,000 meters (1912) to 314,345,000 meters two years later. But in 1915-1917 cotton cloth production climbed steadily to reach in 1920 an index of 147 of the peak prewar production year of 1912.84 Cotton industrialists estimated that in 1919 of a total national cotton goods consumption of 780,000 contos ($202,800,000), nationally produced cottons represented 700,000 contos; Redfield claimed that national mills produced 75 per cent of total national consumption of cotton goods. 35

108

The Brazilian Cotton Manufacture

Surveying the national economy at the close of the war, Brazilians boasted that, among all Latin American nations, their country had felt the loss of European goods the least. For the first time Brazilian cotton mills shipped goods to Argentina and Uruguay. Following the armistice of 1918, unsettled world-wide economic conditions and competition among domestic mills brought on a minor postwar recession which textile men thought would be short-lived. 36 It is against this background of temporary recession that one must view a United States trade commissioner's estimate of the future course of the Brazilian cotton manufacture. L. S. Garry felt that purchasing power in the form of wages had not kept pace with wartime price increases; for Brazilian mills to continue at full capacity, he judged that the prices of both raw materials and of finished cotton goods would have to drop. New construction, he predicted, would hurt the older mills. Perhaps Garry repeated the remarks of Brazilian cotton manufacturers when he observed that "the best opinion is that the consumption of textiles can not be increased by lowering prices for some time to come, owing to world conditions which do not permit of this." Therefore, the Brazilian cotton manufacture had only two alternatives: export, or concentrate on the manufacture of fine quality goods hitherto imported. However, Brazilian goods were too high in price to compete with European and American cottons in foreign markets, and that left the domestic manufacture with only one alternative: production of finer goods. Certain difficulties — inadequate machinery, inexperienced labor — blocked the path of those entrepreneurs who wished to essay finer cottons. On the other hand, the rewards were high, for "mills that make this class of goods, such as the America Fabril, have been the most successful throughout their history." 37 Despite Garry's prognosis, the industry in the first five years of the 1920s proceeded to expand largely in the area of greatest potential oversupply at prevailing prices, that of coarse cottons. Meanwhile, fate intervened in the form of the sudden frost of 1918 in the Säo Paulo coffee lands, spurring planters to grow cotton between coffee rows to cover expenses until new coffee harvests could be gathered. 38 Säo Paulo cotton, the general prosperity of the early twenties, and the resumed importation of machinery stimulated anew the expansion of the industry. 4 Cotton mill empresarios expanded operations in the twenties although they lacked the elements necessary for evaluating future market con-

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109

ditions and the general economic situation both internal and external. They were guided by the profitable wartime years. While established mills drew upon their accumulated reserves to put their old plant in order and to augment their productive facilities, new "capitalists and men of action, full of enthusiasm for the profits which textile entrepreneurs had garnered in the exceptional wartime years, founded new mills." 39 So attractive did the manufacture appear that "hundreds" of capitalists were later joined by affluent planters, especially during the coffee valorization period of the early twenties. Coffee, barometer of Brazilian economic conditions, slumped in price to roughly 74 milreis per 60 kilos in 1920, then began to rise steadily to a peak of 215 milreis per 60 kilos in 1925.40 These were boom years for the national economy and particularly for the proprietors of the extensive coffee plantations of the Säo Paulo interior, as both the value and volume of coffee exports climbed; the value of coffee exports alone rose from 31 per cent of total exports (1918) to 75.8 per cent (1924), (Table 14). A considerable portion of the proceeds of coffee shipments filtered down to the large rural population of Säo Paulo in wages, and a similar pattern was repeated in the cocoa and cotton areas of the rural northeast and north of Brazil. More rural consumers, the backbone of the cotton TABLE 14.

EXPORTS OF BRAZILIAN C O F F E E , 1 9 1 7 - 1 9 2 5 , W I T H P R I C E

P E R 6 0 KILOS AND PERCENTAGE OF T O T A L EXPORTS B Y V A L U E .

Price (milreis) Year 1917 1918 1919 1920 1921 1922 1923 1924 1925

41$510 47$460 94$610 74$749 82$391 118$694 146$183 205$853 215$109

Bags of 6 0 kilos (000's)

Percentage of total exports

10,606 7,433 12,963 11,525 12,638 12,673 14,466 14,226 13,482

38.7 31.0 56.5 49.2 59.6 64.4 64.4 75.8 72.1

Source·. Ministério da Fazenda, Directoría de Estatìstica Commercial, Commercio exterior do Brazil, I1913-1918; Ibid., 1919-1923; Ministério da Fazenda, Departamento Nacional de Estatística, Commercio exterior do Brasil, 1924-1928; Ministerio da Fazenda, SEEF.

goods market, appeared at country stores to purchase cotton goods, and in some cases the increased purchasing power changed the tastes

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The Brazilian Cotton Manufacture

of the country folk. "Gone is the time when a rural bumpkin used to buy at a country store a piece of rose-colored calico from which his wife made her dresses and those of their girls — and her husband's shirts and trousers as well!" was the way a Rio newspaper pictured the change in the twenties.41 It was in the towns of the rural interior that many small, new mills developed after the close of the war. Some had started modestly during the war with a few looms, buying low count yarns from the larger spinning and weaving mills. On the basis of successful weaving operations, many small entrepreneurs expanded by adding small spinning sections to eliminate dependence upon outside sources of yarn. Many such mills sold in a "privileged area," enjoying regional "protection" where high shipping costs tended to eliminate the competition of finished cottons forwarded from the large urban centers of Rio de Janeiro and Säo Paulo. In this highly restricted market, small mills operated profitably.42 The prospect of new consumers in the large urban centers which were drawing in rural families also stimulated plant expansion there; and in the years 1921-1923 the large mills of the urban centers were encouraged to expand exports to the Plate area by the absence of competition from American and Euopean mills which were prepared to return to those markets only in 1924 after postwar readjustments had been made, and by a fall in the value of the milreis. The lively demand for cotton goods, a reflection of the general prosperity fostered by the coffee valorization policy, partly accounts for the growth in the number of cotton mills from 242 in 1921 to 354 in 1927. Two other considerations may have motivated the expansion, too. Adoption of the eight-hour day in many mills following a prolonged strike — and lockout — of Rio textile workers in 1919 led some mill owners to increase labor productivity and thereby maintain production levels by discarding obsolescent for more efficient equipment. Secondly, mill owners hastened to order English machinery lest they be forced to await deliveries more than three years, so heavily booked were British machine shops.43 During 1921 to 1927, a heavy inflow of spinning, weaving, printing, and accessory machinery occurred until 1925, the year of peak coffee prices; after 1925, textile machinery imports declined.44 Nearly three times as much textile machinery by weight entered Brazil in the years 1922-1927 as in the preceding seven years.45 Payment was facilitated after 1923 by English and other machine shops which accepted settlement in installments, and it became possible to put up a cotton mill with "small, even very small capital outlay." 46

The Golden Years

111

Symbolic of the interest in cotton manufacturing during the twenties was the way the progress of the industry and its role in the forefront of Brazilian industrialization were highlighted at the international exposition held at Rio in 1922 to commemorate a century of political independence. There the largest Brazilian cotton textile firm, the Companhia America Fabril, put on display an 824-spindle spinning frame, built in its own machine shops under the direction of the company's British-born managing director, Mark Sutton. Lourival Souto, the America Fabril's president, used the christening ceremony to stress that the America Fabril "at the moment of commemorating our political emancipation, wished to bring forward this important contribution to our industrial emancipation." To the "melody of 824 spindles singing of Brazil's progress" the wife of the president of Brazil poured champagne over the "Independencia," as the spinning frame was called. Buoyed by a similar feeling of optimism, the minister of agriculture, industry, and commerce, Miguel Calmon, praised the directors of the America Fabril three months later for their spirit of initiative and progress in pioneering in the production of fine textiles employing high count yarns. The industry, he urged, should look beyond national frontiers to "conquer" markets abroad; an industry could not be considered "well established" as long as it failed to have "supporting tentacles" in foreign markets.47 Operating in so favorable a climate, it is not strange that the leading industry mushroomed at the close of the war, particularly in the period 1921-1927.48 From 242 mills at the beginning of the period, the number climbed to 354; spindles increased 59 per cent to total 2,584,050, and the number of looms 33 per cent, to 78,383. Somewhat less spectacular was the increase in number of workers (17 per cent). Overshadowing these increases was the fact that the value of production rose 120 per cent — far outstripping the 8 per cent rise in output — probably a result of higher prices for coarse and medium goods. It was a time for the "rapid formation of fortunes" in the industry and there were some Brazilians who observed the process with distrust and uneasiness. To those raised in a Brazil "essentially agricultural" ( when there was no industry of note ), there was something odd in the sight of "men of fortune who had traveled in their lifetime the long cycle of industrial evolution that in other nations had been achieved by the labor of successive generations." 49 While the prewar mills of Rio, Säo Paulo, Bahia, Juiz de Fora, and Recife expanded their installations, it was in the rural areas that swarms of small, new mills appeared. In

112

The Brazilian Cotton Manufacture

comparison with their big urban brethren, these could call upon the cheap labor of girls on the nearby plantations, upon domestic laborers and the poor boys of the small towns. Municipal taxes were low and in the cotton-growing countryside of Sâo Paulo there was a nearby source of raw material. So easily could entrepreneurs embark successfully upon textile ventures that every industrial newcomer considered himself a competent technician and industrialist. Years later the situation in retrospect was painted in these terms: "The truth of the matter is this: very few were technicians and even fewer were industrialists. With the exception of a half-dozen competent professionals, almost all of them were spinning and weaving 'amateurs,' if not plain businessmen prospecting for heavy returns on their investments . . . They were just good businessmen or good planters, but lacking any special training in an industry which in many lands only the labor of several generations can successfully manage. They entered the weaving trade with the same ease, motives, and background that they would install a hydroelectric plant, a transportation company or open a dry-goods store and tavern." 50 In spite of the great expansion that had taken place in the textile industry, the industry's pattern of location had not changed appreciably since prewar days. Most of the textile machinery imported between 1921 and 1927 entered the harbors of Rio de Janeiro and Santos; a smaller, though significant amount, was unloaded on the docks of the northern ports of Recife and Maceió, centers of raw cotton shipments to southern Brazil's mills. Since the greatest increases in number of mills developed in the states of Säo Paulo and Minas Gérais ( 70 of a total increase of 112), there is little doubt about the ultimate destination of the bulk of imported machinery. Still further proof of the relatively unchanged distribution of cotton mills in Brazil during the prewar and postwar periods can be found in the concentration of looms, spindles, and output. Of a total of 354 cotton mills dispersed along the Brazilian littoral in 1927, twenty-nine held 62 per cent of the spindles, 53 per cent of the looms, and produced 50 per cent of the cloth ( Table 15). A new and giant cotton mill corporation combining the Paulista and Rio Tinto mills appeared in the north and was to play an influential role in the thirties along with the six largest mills of the north; but these were far surpassed by the twenty-two largest mills of the Rio and Sâo Paulo areas. 61 The distribution of the Brazilian cotton manufacture is the key to understanding the powerful currents set in motion once the crisis of

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The Golden Years

TABLE 1 5 . GEOGRAPHICAL DISTRIBUTION AND SHARE IN OUTPUT OF BRAZIL'S LARGEST COTTON MILLS," 1 9 2 7 .

Area North South Combined Brazil, Total

Mills

Spindles

Looms

Production (meters)

7 22

190,110 1,400,843

7,902 33,714

77,143,828 269,279,027

29

1,590,953

41,616

346,423,755

354

2,584,050

78,383

695,963,826

* Mills of 2 5 , 0 0 0 spindles or more. Source: CIFTA-Rio, Estatisticas de industria, commercio relativos ao anno de 1927 (Rio de Janeiro, 1 9 2 8 ) .

e lavoura do

algodao

the late twenties and thirties developed, pitting northern against southern mills, small dispersed interior mills against large urban factories, and mills of coarse goods production against those of fine goods production. Needless to add, the southern mills, first in Rio ( 1919 ), and later in Säo Paulo, were to speak for the whole industry through their manufacturers' associations. As the Rio textile manufacturers' association justified its separation from the industry-wide industrial center ( Centro Industrial do Brasil ), in 1919, "The cotton industry has special interests which can be defended only by an association ready to support and present exclusively all the rights of the most important industrial sector of Brazil." 52

The Onset of the Depression

Twenty-five years of prosperity for the Brazilian textile industry began to end in 1926 when the first indications of the great depression of 1929 appeared in Brazil — declining commodity prices caused by overproduction. Despite the industrial advances made in certain sectors of the Brazilian economy, the sale of raw materials abroad still regulated the purchasing power of Brazilian consumers and all aspects of the nation's economy. After 1929 economic disequilibrium in the industrial centers of the world spread swiftly to Brazil, affecting both urban and rural dwellers, agricultural and industrial enterprises, alike. But as long as domestic markets for cotton goods did not shrink markedly, Brazilian manufacturers expanded plant capacity and output. As the signs of depression multiplied between 1926 and 1930, Brazilian manufacturers struggled to conserve the gains made during the preceding quarter century of industrial activity. Some manufacturers sought to produce fine goods, hitherto largely imported, and which could be purchased by those members of Brazilian society whose incomes were not drastically affected by declining commodity prices. When the economic crisis showed no signs of abating, other manufacturers tried to maintain sales by eliminating middlemen supplying raw cotton and those handling the finished cloth; even the idea of resuming exports to nearby River Plate nations was entertained. When those entrepreneurs who turned to the production of better goods encountered the competition of British cotton goods of comparable quality dumped in Brazilian markets, the creation of higher and more effective tariff barriers became a primary consideration — as some claimed, the principal hope of survival. Subsequently fruitless essays in the field of

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115

cartels followed. That the condition of the industry gradually worsened in these years was due to factors out of the control of cotton mill proprietors; they sought stability in what seemed the most expedient and rapid solutions. Government intervention and the gradual world-wide economic upturn of the thirties were, in the last analysis, the most effective solutions for depression. 1 During the boom years of the Brazilian cotton textile industry in the first half of the 1920's, the expansion of prewar and postwar mills concealed two elements of potential weakness. The first of these factors, the large percentage of coarse fabrics in total output,1 was recognized shortly after the first signs of economic crisis developed around 1925; the second, the production of coffee and other Brazilian raw material exports, had been the salient feature of the national economy for so long that few wished to consider the effects of a prolonged depression of the price of coffee. Obviously, both elements were closely connected: the prices of Brazil's raw materials regulated the purchasing power of rural laborers and their families who, in turn, were the consumers of the coarse cottons produced by a majority of the domestic mills. It was, therefore, inescapable that the price decline of Brazil's largest export commodity, coffee, should shake the domestic cotton manufacture and lead its entrepreneurs to seek preservation in extraordinary measures. In 1925 the price of a sixty-kilo bag of Brazilian coffee reached a maximum price of slightly over 215 milreis. The following year it fell abruptly to 170 milreis and, although it fluctuated erratically in the next four years, the price dropped almost 50 per cent by 1930 (Table 16). Concomitantly the prices of Brazilian cotton and cacao also fell. In 1924 the small outlet for Brazilian textiles in Argentina, Uruguay, TABLE 16.

EXPORTS OF BRAZILIAN C O F F E E , WITH PRICE PER 6 0

Year

Bags of 60 kilos (OOO's)

Price per bag (milreis)

1925 1926 1927

13,482 13,751 15,115

215$109 170$719 170$401

1925-1930,

KILOS.

Year

Bags of 60 kilos (OOO's)

Price per bag (milreis)

1928 1929 1930

13,881 14,281 15,288

204$619 191$871 119$540

Source: Ministerio da Fazenda, Departamento Nacional de Estatística, Commercio exterior do Brasil 1924-1938, p. 492; Ibid., 1926-1930, p. 489; SEEF.

116

The Brazilian Cotton Manufacture

and Peru had disappeared as cheaper American and British textiles invaded these markets.2 There was an even more ominous development, a marked rise in Brazil's imports of cotton goods, mainly British, commencing in 1924. Thus, at the very moment the heaviest importation of textile machinery and accessories took place, in 1925, the domestic manufacturers could have seen the dangers of contracting markets at home and abroad. 3 To explain manufacturers' failure to see the handwriting on the wall, one Brazilian observer expressed the belief that they were deceived by the extraordinary exports of cotton goods between 1921 and 1923 and, heedless of the consequences of sudden expansion, concluded that the industry's prosperity was assured. Furthermore, the "individual manufacturer did not have general information, statistics, or an embracing view of the industrial world." 4 Instead, textile entrepreneurs were drawn deeper into a "whirlpool of credit speculation," as constantly rising prices provided inventory profits to those who held on to their cotton goods.5 Only after three years of contracting markets was serious attention focused upon the part played by the domestic mills in aggravating the crisis. Late in 1925, it is true, one newspaper had noted that small mills located in rural areas had saturated local markets with coarse cottons, while the large urban mills could not use their lower costs of production to advantage because of high freight rates. But this was largely forgotten in the attention that industrialists gave to the government's financial policies.® The possibility of losing their northern markets was brought to the attention of Säo Paulo and Rio cotton mill proprietors in 1927 when it was estimated that northern mills, located in the heart of the cotton belt, paid 20 per cent less for raw cotton and had lower labor costs.7 Competition among Brazilian mills at this time was due largely to the fact that, behind more than a quarter century of tariff walls, a majority of Brazilian mills, both urban and rural, had prospered through manufacture and sale of coarse cotton goods, the forte of production. This was particularly true of the mills of the northern states and of Minas Gérais, less so in the Rio de Janeiro and Säo Paulo area mills.8 By 1928 more than one observer was ready to affirm that "intense competition" existed in local markets. This could be handled by increased efficiency; what was more vexing, however, was the possibility that a lowering of the purchasing power of "increasingly impoverished" rural consumers would put mills out of business altogether. 9 "The fact is, the cotton industry supplies principally the in-

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terior markets," ran an article in the respected and influential Jornal do Commercio, "and when agriculture is in a state of crisis, when rural laborers' wages fail to leave a surplus for clothing, the industry naturally suffers a lack of funds." 10 Faced with a saturated market for coarse goods, some mills under the direction of "more enterprising elements" began to switch to finer goods, imitating the Rio mills which had pioneered in this field earlier. As ex-finance minister Joäo Pandiá Calogeras baited Säo Paulo cotton mill owners, "only now after scores of years of strong tariffs do mills begin to think of producing fine fabrics, having contented themselves with coarse goods for which they held a monopoly of the domestic market." Others averred that social transformations had wrought a new mentality and "better consumer taste," a "universal tendency" according to Säo Paulo merchants.11 In the widespread shift to medium and fine goods, the price factor was no minor consideration. Because Brazilian consumers apparently lacked a "knowledge of values," there was a large mark-up between cost and retail price for medium and better wearing apparel, and undoubtedly the same was true for cloth itself.12 Most of the cotton mill entrepreneurs had their eyes still glued on the types of goods which had yielded "Uberai" returns before 1925. Such conservatism on the part of proprietors with little knowledge of and less interest in the manufacture of cloth is not to be wondered at. Production details were still left largely to foremen whose sole recommendation was a routine apprenticeship of ten or fifteen years as workmen.1® There were few exceptions to those empirically minded textile entrepreneurs who felt that cotton mills were run on the principle of feeding in raw cotton at one end and getting out cloth at the other and that the knottiest problem of a textile enterprise was "to order machinery."14 In 1928, the year in which the problem of changing consumer preferences was first aired, the Säo Paulo textile manufacturers' association sponsored a textile school to improve their workers' technical competence. Proclaimed the first of its type in Latin America, the school offered lectures in Portuguese, Italian, German, and French.15 Having resolved to move into the production of medium-grade cottons, a few mills found that the change from spinning No. 20s to No. 30s yarn was relatively simple. One Säo Paulo mill discovered in the changeover that its English-built machinery had been constructed to use long-staple cotton, that most suitable for better yarns. Finan-

118

The Brazilian Cotton Manufacture

daily the change was feasible particularly in the long established mills, because amortized spinning frames produced the higher count yarns more cheaply than new frames burdened with high interest and amortization payments. 16 As for the mills that tried to change to better goods and found their production costs running well above those for the imported articles, it was bruited that their proprietors would demand tariff protection for their new items of production. 17 Not every enterprising manufacturer succeeded with innovation at this time. Thus, the directors of the Petropolitana wrote in 1929: "Our studies of new articles have done us no good and each and every attempt within our means has brought only disillusionment." More rewarding, at least temporarily, was the experience of Rio's Alliança cotton mill. Finding that sales of fine cottons were picking up in the early months of 1928, the directors hastened to order greater production "in accordance with buyers' requests, in the hope this step will bear good results." 18 As competition intensified after 1926, some industrialists attacked the intermediaries — cotton brokers as well as cotton goods wholesalers — as the cause of excessively high prices for finished goods. Bitter controversy split the Rio and Säo Paulo mill owners on one side, the northern cotton traders on the other, in the years 1927-1931.19 The representative of the southern mill operators asserted that lack of trustworthy statistics of national cotton production and export vexed both producers and intermediaries, not to mention lack of standardization of fiber lengths, cleanliness of ginned cotton, quality, and price. This was the opening shot in the southern mills' attack on northern cotton intermediaries whom they accused of manipulating raw cotton prices. The local merchant in the cotton growing areas was, they said, more often than not also a gin-owner who purchased from indigent and disorganized small growers before the harvest. Only after growers delivered raw cotton to cotton brokers did prices tend to rise disproportionately. Between the cotton growers and the cotton mills there were more than six or seven brokers. Cotton brokers defended the spread between the low prices they paid to growers and the prices they demanded from cotton mills by stressing the warehousing fees, insurance and interest charges, and the factor of risk which entered their calculations; they argued that the absence of annual statistics on area planted, domestic consumption, and exports forced them to tie up capital in permanent stocks.20 It was soon evident that the local cotton price structure had become

Onset of the Depression

119

independent of Liverpool quotations. Rio and Säo Paulo mill owners affirmed that they had to pay 60 to 71 per cent more for their cotton imported from the north of Brazil than foreign mills paid, and they pointed to the difference in price between Rio and Liverpool commodity exchanges. Undoubtedly the domestic mills' increased consumption of raw cotton and the duty on imported raw cotton enabled northern brokers to fix prices; certainly the Brazilian cotton traders never denied that local cotton prices were higher than international prices. 21 The differences between some cotton mill entrepreneurs and their distributors — wholesalers (grossistas), jobbers (atacadistas), and retailers (retalhistas) — were also aired in the 1920's. They were highlighted in private exchange of letters between a public official, Lindolpho Collor, and a representative of cotton mill proprietors, O. Pupo Nogueira. Collor argued that industrialists, in exchange for government favors, should consider the public in setting prices "without the obsession for accumulating overnight the huge fortunes the public accuses them of amassing, fortunes which as a rule originate in the sacrifices and sufferings of the less favored classes, the great majority of Brazil's consumers." Others claimed that the inefficient system of distribution raised the retail price from 100 per cent to 120 per cent above the manufacturer's price. 22 To these accusations Nogueira replied that Brazilian wholesalers took the lion's share of profits, where merchants elsewhere in the world contented themselves with reasonable profit rates. It was wrong, he argued, that the Brazilian manufacturers should be the butt of public animosity.23

2 Manufacturers' attempts to change output and the attack upon cotton brokers and cloth wholesalers obscured the activity of some industrialists who sought financial stability through innovations. One can only speculate as to why the manufacturers' associations of Rio and Säo Paulo overlooked that a few mills attempted to modify the established system of distribution. Gradual and unspectacular, these modifications were nevertheless revolutionary for they signified a break in the close dependent relations of cotton mills with the large wholesale cloth merchants, in the majority Portuguese. Among the first Brazilian mills to market its production through wholly owned outlets was the Lundgren brothers' Companhia de Tecidos Paulista of the city of Recife. By 1920 the company maintained

120

The Brazilian Cotton Manufacture

about two hundred retail stores throughout northeastern Brazil, selling the production of their own and of other mills as well.24 The Lundgrens' innovation remained, on the whole, unique until 1925 when signs of economic disequilibrium stimulated many Brazilian mills to adopt sales systems by-passing wholesalers to establish direct contact with retailers. From company accounts it appears that such innovations were not the product of diffusion from one mill to another, but were applied independently by certain mills. What occurred in the Bernardo Mascarenhas mill of Minas Gérais illustrates such innovation. Here the change in distributors was the culmination of a series of events which started with the purchase of fifty-two Banner stocking looms and a British Nasmith combing machine. Up to this time the company had produced stockings woven of low count yarns and had sold them in a crude package containing one dozen pairs. The new machinery turned out an improved product which the company's sales director in Rio ( trained at the University of Manchester) decided to sell in cardboard boxes, a half-dozen per box, In two years, 1922-1923, total stocking sales rose 57 per cent and wholesalers soon refused to accept any shipments in the old dozen-pair packages. A Rio cardboard box company shipped the boxes via slow and frequently overdue railroad freight to the mill at Juiz de Fora in Minas Gérais; and since the mill produced from 7,000 to 8,000 pairs of stockings monthly, poor deliveries of boxes often created a bottleneck. The sales director in Rio, therefore, decided to warehouse hosiery in Rio to be boxed for distribution. Hosiery was packed in half-dozen packages, sorted, tied, and labeled carefully — a type of handling which Brazilian customers encountered only in stockings of silk or mercerized cotton — and then sold to large Rio wholesalers for further distribution. Furthermore, attractive designs on the stocking boxes 2 5 spread the name of the mill and the brand throughout Brazil. From 1923 to 1925 the mill's Rio office received an ever-growing volume of mail as businessmen asked to handle distribution of "TEXTIL" hosiery, the product's brand name. If carefully prepared and handled hosiery of standard quality obtained such favorable reaction, why not handle cotton cloth in the same fashion, reasoned sales director Mascarenhas. He chose two wellknown types of cloth produced by the mill, ordered boxes and labels and canvassed all Rio wholesalers. As Mascarenhas himself recorded, "The cloth merchants of Rio all accepted the articles as prepared, including the firms that usually told mills what to do and tenaciously

Onset of the Depression

121

guarded their own brands and labels." The next step, which quickly followed, was to prepare a book of samples from which merchants large and small could choose their orders; henceforth, buyers would no longer be able to impose their specifications on the cotton mill.26 Steadily diminishing sales in 1925 and 1926 brought the sales director's next step, the final act in the series of developments commencing four years earlier in the packaging of hosiery. To keep sales moving, the company had to grant discounts to its old customers among the large cloth merchant houses, and Mascarenhas resolved to save the discount by selling the mill's products directly to retailers in northern and southern Brazil, in the cities of Belém, Recife, Säo Paulo, and Pelotas. "The only way out of our difficulties was to eliminate the intermediaries and thereby increase our profits" — the last round in the plan to "liberate our enterprise from exclusive dependence upon the wholesalers of Rio." 27 With the company's new distributive system went the distribution of one standard fabric of general consumption designed as the core of the mill's production. Traveling salesmen in 1928 reconnoitered, then prepared lists of customers who would buy directly from the mill; and the company entered into agreement with one of its largest customers among the Rio wholesalers to assure itself of orders while changing to the new system.28 Satisfaction and independence were reflected in the letter written two months later when the company finally cut itself adrift from the established Rio cloth merchants. "This date," Mascarenhas wrote, "must remain a memorable one in the history of our mill, for today we informed Serqueira Leite & Cia. and other wholesalers that henceforth this company will sell its products wherever it chooses, at the prices and in the quantities it deems proper in order to safeguard its vast interests." 29 Again, it was the series of crisis-ridden years from 1925 onward that caused a mill of the interior of Säo Paulo, the Santa Basilissa textile company of Bragança, to reconsider its distributive system. In July 1926, sales were practically "paralyzed" and stocks grew larger daily; in December, one of the mill's distributors filed a petition in bankruptcy and the directors decided to consider their large account with Lollem Bussola & Sons a complete loss. Early in February 1928 the company's president and manager decided to adopt a retailing system similar to that of the Companhia Paulista of Recife, although no reference was made to the latter. "By virtue of the grave situation of the nation's textile industry, which has been unable to sell its products during the past three years," ran an entry in the minutes of the board

122

The Brazilian Cotton Manufacture

of directors' meeting, "we resolve to open branch stores wherever appropriate, to be called the House of Santa Basilissa, which will sell our goods and those of other mills directly to the consumer." By May they had opened five retail stores and by October the number reached fifteen — all in the State of Säo Paulo.30 These developments among the mills of the interior were, of course, not unnoticed and at least one large cloth merchant of Rio claimed in 1928 that the Rio wholesale cloth market was in a state of anarchy.31 That the large mills of Rio and Säo Paulo did not follow in the path of the smaller mills of the interior may have been caused by the close integration of the largest cloth merchant houses with some of the largest mills. In some cases, cloth merchants were also directors of cotton mills; in others, they closely supervised management by occupying positions on the key auditing committees (conselho fiscal) which, in turn, supervised the managing directors; and in still others, mills and merchants dovetailed their actions because years of selling through one wholesale house sufficed to establish effective liaison. Thus, when asked to state its views on exports to the Plate, one mill of the State of Rio wrote in 1928 that it could not participate because "all our production is reserved for an important wholesale firm of Rio." 3 2 It follows, too, that the powerful textile industrial associations of Rio and Säo Paulo, representing the large mills clustered around these southern industrial nuclei, were reluctant to upset traditional arrangements with important cloth wholesale houses. What Nogueira confessed privately to Collor in their exchange of views on the role of intermediaries in 1924 could not be broadcast openly at the height of the tariff campaign four years later when a united front was essential to success. The Rio textile manufacturers' association did attempt an innovation which would drive no wedge between mills or mills and distributors, for early in 1928 it sent out a circular asking member mills about the possibility of coordinated exports of Brazilian cotton goods to the countries of the Rio de la Plata. Replies were almost uniformly pessimistic. The small mills felt that their products were too coarse, too run-of-the-mill, and they suggested that the mills of "large production and fine qualities of cloth" had the best chances of breaking into the Argentine, Paraguayan, and Uruguayan markets. In turn, the large mills answered either that they were not yet properly equipped or that their quality products could not compete in price with those of European and American mills.33 The modesty and reluctance of the

Onset of the Depression

123

replies were variously interpreted. In Rio one textile entrepreneur believed Brazilian mills were too isolated from the rest of the world with respect to taste and styles, failing to vary and improve production. From Buenos Aires a Brazilian diplomat criticized his country's entrepreneurs indirectly by warning that success in Plate markets was possible for them only if they put aside all obsession with the "rate of quick profits." 3 4 And one newspaper of Rio insisted that the long years of tariff protection had coddled the Brazilian manufacturers and discouraged any initiative to seek markets abroad.35 3 It was more than coincidental that in 1928 there developed a campaign against the "dumping" of British cotton goods, a campaign aimed at the exclusion of imported medium and fine cottons. Sâo Paulo textile industrialists played an important role in the campaign, and for obvious reasons: where total national imports of cotton goods more than doubled, 1922-1926, Sâo Paulo's imports through the port of Santos practically quadrupled.36 In 1926, comments had appeared in the press mentioning vaguely the need to impede the importation of foreign cloth and, in particular, foreign yarns, for a few local industrialists felt they could produce high-count yarns.37 The following year there appeared another vague reference to competition from foreign mills whose "particular objective" was the "taking over of the Brazilian cotton goods market." 3 8 These, however, were only the opening gambits for the grand assault on dumping in late 1928 and 1929. In the first broadside against British dumping prepared for public consumption, the Sao Paulo cotton manufacturers set out to prove that heavy and unprecedented cloth imports were cutting into the sales of local mills. They computed the national per capita consumption of both imported and domestic cottons in 1927 at 18 meters, equal to 30 milreis or 10 per cent of an estimated per capita purchasing power of 300 milreis annually; most of the remaining 90 per cent of purchasing power was presumed to be spent on food.39 Comparing imports of 103,510,000 meters to total domestic production of 695,063,826 meters, the industrialists concluded that the "slow yet heavy" imports caused the cotton cloth crisis. Why had so "devastating an influence" on the domestic cotton manufacture developed? To answer this, the Sao Paulo textile proprietors noted that the British had lost their extensive markets in the Orient where nations had "emancipated themselves from commercial dependence" through industrialization. British

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The Brazilian Cotton Manufacture

exporters now saw in Brazil a vast market to "reconquer" and they were willing to sell initially at a loss to "smash our impressive cotton industry." For proof of sinister machinations the industrialists stressed that cotton cloth imports in 1926 were slightly less than those for 1925, while prices were "markedly lower." They suggested that this was part of the price war or that importers had illegally reduced C I F prices to reduce duties. After presenting a case against British imports, the report concluded that the imports must be neutralized by "well chosen" measures.40 Sâo Paulo's commercial association, after forming a commission to study a projected revision of the tariff clauses covering cotton and its manufactures, decided to "lay before those interested" its conclusions. The commission bought a two-page spread in Rio's O Jornal for January 1, 1929 in which it suggested that the cotton clauses of the tariff urgently needed changes in view of the "well known difficulties besetting the domestic textile industry." To ward off the outcry of those critical of the industry's protectionist tendencies, the commission recommended that only emergency revisions in the tariff be made since complete tariff overhaul would require long and careful study. Furthermore, tariff modifications were not to aim at increasing duties, only to "readjust" specific duties to the "nominal levels" indicated in the "prohibitive" tariff of 1896 — a tactic designed to take the wind out of the opposition's sails.41 Readjustment and not increased rates was therefore the crucial point demanding proof. From 1905 to 1912, the commission argued, effective duties on imported cotton cloth had provided more protection than the percentages prescribed by law; after 1926 the upward trend in TABLE 17. NOMINAL AND EFFECTIVE BRAZILIAN TARIFF RATES ON ALL GOODS, 1 9 0 5 - 1 9 1 3 AND 1 9 2 7 - 1 9 2 9 , AND ON COTTON GOODS, 1 9 2 7 - 1 9 2 9 .

All goods Nominal 1897

(per cent) 20 30 50 60 80 Source:

Effective

1905-1913

(per cent) 25.10 37.36 62.77 75.00 100.43

O Jornal, January 1, 1929.

Cotton goods Effective

Effective

1927-1929

1927-1929

14.3 21.4 35.7 42.8 57.1

12.3 18.05 30.8 36.1 48.4

(per cent)

(per cent)

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prices since the end of the war was not paralleled by a rise in duties.42 By 1928 the duties had fallen behind as Table 17 shows, and to establish the original percentages the commission urged a general tariff rate increase of 66 per cent "in round figures." 43 This inadequate tariff rate structure permitted British mills to "inundate" Brazilian markets with the very goods — medium to fine cottons — which some local mills had begun to produce to escape domestic competition in coarse cottons. Reorganization of existing productive facilities required heavy capital outlays which mills would not undertake as long as British dumping made profitable production of cottons impossible; the costs of establishing a mill in Brazil at this time, excluding interest on stocks of parts, anilines, and other supplies easily obtainable in England, amounted to 100 per cent above those for a similar English mill, an industrialist insisted.44 Despite "steady effort," Brazilian cotton manufacturers had not effectively reduced costs.45 Finally, the commission warned that readjustment of the tariff would not be a panacea for the industry's problems, but would only permit the reorganization "necessary for any return to normalcy." 46 Pamphlets and newspaper articles were not the only form of pressure cotton textile entrepreneurs and their industrial allies exerted. Ever since the early days of the Republic, industry had steadily cemented its ties to government; and industry's importance was heightened by close collaboration of the Centro Industrial do Brazil during the war years in response to the government's request that industry help alleviate economic disequilibrium caused by the falling off of vital imports. The hardening political structure of Brazil, where the allpowerful presidency and consequently the whole administration oscillated between the oligarchic political machines of Säo Paulo and Minas Gérais, facilitated the rise of Sao Paulo industrialists, aided by equally efficiently organized industrialists of Rio. Campaigns and maintenance of political organization between campaigns required money, and the industrialists' various Centros, a development of the twenties, mobilized political funds for the Säo Paulo Republican party far larger than those of the older Sociedade Rural, the organization of the coffee planters. The pork barrel was efficiently handled, for the party in power through its congressional whips or leaders in the Senate and the Chamber invariably pushed through or held up legislation in accordance with the privately expressed desires of organized pressure groups. And there was nothing to prevent industrialists from holding political office. Under the first Republic, Säo Paulo coffee planters came into

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their political inheritance; but by the time of the failure of the last coffee valorization schemes in the late twenties, the rising industrial groups and their spokesmen in Sâo Paulo and in Rio, Matarazzo and Street, Seabra and Oliveira Passos, Nogueira and Galliez,47 were elbowing them out of political prominence. Cotton entrepreneurs' political influence was perhaps most sharply outlined in the handling of tariff reform, 1928-1929. A campaign for increased tariff protection against British dumping apparently offered the directors of Brazil's cotton textile manufacturers' associations in 1929, beleaguered by three years of troubles, a platform to which all businessmen connected with the industry could give unanimous support. 48 Behind the tariff of 1900 the industry had progressed steadily for more than twenty-five years; if imports were not the sole cause of the crisis facing the industry, they certainly were not to be overlooked. Säo Paulo's A crise textil and the two-page advertisement in O Jornal were only part of a well-organized plan centering logically on the congress. Late in August 1928, the chairman of the Senate banking committee and administration spokesman, Säo Paulo's Senator Arnolfo Azevedo, called together committee members to discuss possible revision of the tariff's cotton clauses. The hastily called banking committee meeting and the "vague" statements of chairman Azevedo to reporters brought warning comment from the influential Jornal do Commercio, which pretended to see no signs of the intentions of the committee whether for upward or downward revision of cotton clauses. The newspaper feared behind-the-scenes maneuvering, for it cautioned that the "questions must be discussed by all interested parties without forgetting the nation's permanent interests." A compromise had to be reached, it hoped, but via "public" discussion.49 Eight days later it was rumored that revision showed "protectionist tendencies"; the newspaper was vexed by the realization that the tariff clauses of the "essential" industries — those concerning cotton, for example — would be entrusted specifically to Azevedo, the administration's "senatorial representative." Careful analysis of all viewpoints, the Jornal do Commercio suggested, and not unilateral, uncompromising governmental pressure, was in order. "Let's have no secret agreements followed by surprise voting dominated by the government's majority, designed to eliminate calm analysis of the facts." 50 Semi-official status probably restrained the newspaper from publishing what political circles were well aware of: that the cotton manufacturers of Rio and Säo Paulo were prepared to purchase the newspaper space where it would do the most good,

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and that they maintained close contact with Senator Lacerda Franco 6 1 of Säo Paulo, a member of the banking committee and a banker and shareholder in cotton mills.52 No restraints curbed the censure which certain newspapers heaped upon the cotton textile industrialists' tariff campaign. The readers of such newspapers as A Vanguarda were generally middle- and lowerclass consumers whose pocketbooks were affected by tariff changes since domestic goods were priced a fraction under the imported article, just enough to drive it out of the market. Some observers stated frankly that industrialists had planned for some time to raise duties to raise prices.53 Comment from non-extremist sections of the Brazilian press was also critical. Rio's respectable Correio da Manhä echoed the argument of H. F. Wileman, editor of an English-language financial review published in Brazil. When cotton mill owners had prepared memorials in favor of increased tariff protection in 1927, Wileman reminded them that their sales totaled 87 per cent of all cottons sold in Brazil. Expansion of the industry, 1924-1926, in share capital, debentures, and reserves was high, and in 1927 reserves equaled 58 per cent of share capital. The proposed tariff revisions, he warned, would allow manufacturers to raise prices beyond the means of the middle and lower classes. Since most mills were not trying to produce the high grade goods which the tariff revision proposed to exclude, only a "tiny segment of Brazilian manufacturers" would be favored while the consumer would be victimized." 54 In support of Wileman's argument, the Correio da Manhä emphasized the prosperous financial condition of Brazil's largest textile company, the America Fabril. On the basis of that firm's balance sheets, published in 1926 and 1927, the newspaper found a total of almost 3000 contos ($390,000) disbursed after dividend distribution, redemption of bonds, and additions to reserve and depreciation funds. It warned its readers of the influence wielded by the "magnates" of the cotton manufacture on the chief executive and the congress. In fact, the following month it caricatured a member of the Chamber of Deputies' banking committee, Manuel Villaboim, as the "magnates' advocate" because he defended the industrialists' point of view. When Villaboim and Azevedo, the majority leaders in the Chamber and Senate, went to Säo Paulo in December 1928, it was rumored that their departure portended a political pact of the Sao Paulo Republican party and cotton mill entrepreneurs Jorge Street, Francisco Matarazzo, and Rodolpho Crespi. 55

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The Brazilian Cotton Manufacture

As the tariff debate continued into the month of December it became evident that one sector of anti-protectionist sentiment wished to divorce cotton manufacturers from the rest of the nation. This sector singled out a handful of cotton mill proprietors as a small group of ruthless businessmen whose interests conflicted with those of other cotton industrialists in Brazil. 56 Where sections of the press sought to make capital of a heated discussion to divide society into apparently incompatible groups of producers and consumers, it was perhaps unavoidable that the tariff debate enter a name-calling stage. Nationalism was on the rise in Brazil during the 1920's and the "foreigner" came in for more than his share of criticism. The task of isolating foreign- from Brazilianborn industrial figures was relatively simple in an economy whose industrialized sectors were limited to a few consumer industries of national prominence managed by equally prominent families. Four months after the Senate banking commission began its hearings on tariff reform, the leading figures among textile entrepreneurs long resident in Brazil were called Portuguese, Italian, Syrian, or English, not Brazilians. It was not mentioned, however, that Antonio Ribeiro Seabra, Gervasio Seabra, Pereira Inacio, Sotto Maior, and Antonio Santos (Portugueseborn), that Francisco Matarazzo, Pinotti Gamba, Scarpa, Crespi, and Belli (Italian), that Basilio Jafet (Syrian), Lundgren (German), and Mark Sutton (British) had all entered Brazil as immigrants. Nor did the same newspaper stress that these immigrants had become integrated into the Brazilian social structure.57 The tariff campaign, begun in August 1928, was successfully completed five months later, at the end of January 1929, by the modification of the tariff's cotton clauses.58 And, while some entrepreneurs privately expressed their feeling that the revision should have come a "little" sooner, they accepted it as a sign of the administration's "patriotism." 59 The marked reduction of imported cottons from a total of 8,310,615 kilos in 1928 to 1,338,304 kilos in 1930 testifies to the effectiveness of the revision. Indeed, cotton textile manufacturers were no longer troubled seriously by the tariff issue. 4 Tariff revision failed to eliminate the anxieties of cotton mill proprietors. For, despite the tariff revision, the difficulties of the industry, and of the Brazilian economy as a whole, worsened in 1929 and 1930. Not profits, but the maintenance of personnel and machinery, became cotton textile entrepreneurs' cardinal considerations. Bowing to the

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pressure of dwindling sales, the proprietors of each mill adopted similar measures without any prior agreement: the work-week was cut gradually from six to three days, and the number of looms in operation was curtailed; and apparently textile entrepreneurs compensated for the absence of dividends by comparing their losses to those of their competitors.60 Funds earmarked for machinery replacement were diverted to cover current operating expenses in some mills; textile machinery imports fell off 83 per cent between 1926 and 1930. Slightly more than one year after congress passed the tariff reform, the situation of the largest industry in Brazil was bleak. Total output of cotton cloth had dropped 20 per cent from an all-time peak of 594,313,000 meters (1927) to a low of 476,088,000 meters (1930) - the production of 1916.61 A dismal report came from Sâo Paulo in February 1930 on the situation of fifty-seven cotton mills: twenty-three had suspended operations, seventeen were operating from 10 per cent to 50 per cent of normal capacity, while seventeen mills or 30 per cent functioned at 50 to 120 per cent. Careful analysis made the confidential report even more pessimistic for among the mills operating at or below 60 per cent of capacity were seven of the largest Säo Paulo mills.62 In the same month a Säo Paulo newspaper published an article which broached publicly the idea of a textile industry cartel. European-born José Haydú, founder and director of Brazil's first weaving specialists' school, urged textile entrepreneurs to adopt a God-helps-those-whohelp-themselves attitude rather than to follow the fatalistic path of leaving their destiny to the Almighty. He suggested a fusion of mills, standardization of product, and exports financed by a state bank. Seven or eight varieties of essentially the same product, he proposed, could be eliminated in favor of one; by coordinating all buying one large group could purchase cotton, dyes, and other materials cheaper than individual member mills. "Current prices for merchandise could be cheapened from 10 to 20 per cent by assigning and standardizing production among seven or eight mills, by each mill producing a single quality and type, and by better trained workers producing more quickly and efficiently." 83 Although this was perhaps one of the first times the suggestion appeared in print, there is reason to believe that there had been earlier discussion of a production cartel as a solution for the trying times of the industry, emanating from the Brazilian national association of manufacturers (Centro Industrial do Brasil) at the close of 1929. One industrialist, in close contact with Säo Paulo textile men, called the suggestion "utopian," explicable only because

130

The Brazilian Cotton Manufacture

of the Centra's unawareness of the "mentality of our industrialists." In Germany or the United States, where the industrialists' mentality was "higher," the idea of cartels or trusts could be broached. But in France, "perhaps" in Italy and "certainly" in Brazil even elementary "rationalization" could not be undertaken, he judged, because of businessmen's "unenlightened, ineradicable and inept self-interest." 64 An exchange of letters from January to June 1930, reveals how some Brazilians closely connected with the cotton manufacture interpreted the failure of cotton textile entrepreneurs to form a cartel. Calling attention to the confused situation of Sâo Paulo mills, one spokesman for textile mill owners claimed that a mill proprietor, operating at full capacity, would never limit his output. There was a "psychological" factor to explain the "primary school" mentality of local manufacturers. "Our mills belong to people of different races who do not unite in the face of common peril. The Syrian looks at the situation in one way, the Italian has his sui generis point of view, and so forth." Three cotton manufacturers met privately on February 12, 1930 in an attempt to form a cartel at least in one sector of the industry. No agreement was reached, for each had his "own prices, his clientele, his cost of production and his special mentality." If no accord could be reached among three manufacturers of the same kind of cloth, the spokesman queried, "what can be said for the hundreds of manufacturers with absolutely no common ties?" Only one solution for the industry's plight remained, a solution reminiscent of the fatalism that Haydú attacked: leave the industrialists to the "natural force of things . . . natural selection." 65 The roots of such entrepreneurial pessimism could be found in manufacturers' "apathy" after years of crisis, and in the realization that the nation's disturbed political and financial situation could not be solved solely by textile manufacturers, thought this spokesman.66 It was, continued another, easy to show great initial enthusiasm for cartels or trusts in times of crisis. But manufacturers held back once the schemes took a "practical turn" and the sincerity of the participants became the sine qua non of success.67 The presidential campaign pushed discussion of the industry's ills off the front pages in the winter of 1930. Preoccupied with the Säo Paulo candidate, Julio Prestes, whom industrialists overtly supported, 68 manufacturers apparently decided to let the tariff, and not the reorganization of the industry via cartels or examination of the internal organization of their mills, solve the problem of selling to rural consumers. Meanwhile, manufacturers' unpopularity with consumers, al-

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ready heightened by the tariff campaign, was augmented by their opposition to congressional proposals covering paid annual vacations to industrial workers and restrictions on child labor in factories. 69 Further attempts to bring textile entrepreneurs into a cartel failed in April and again in June 1930.70 The reports of failure prompted one newspaper, which expressed the opinions of the urban middle and lower classes, to castigate textile manufacturers for their reliance upon the tariff to eliminate their problems. O Paiz had taken a leading part in the abolitionist campaign of the 1880's and with reason it compared the industry's crisis of 1930 with that of planters before 1888, the year of slave emancipation. "Cotton mill proprietors enjoy a lack of popularity not far removed from the hostile wave that swelled against planters whom the public identified with the institution of slavery," ran an article published in August 1930. "By a curious repetition of history, modern exponents of industrial capitalism seem to show the same mentality unresponsive to reality that characterized our planters half a century ago." 71 Two months later, the Vargas revolution wrote finis to the first Republic and ushered in an era in which cotton mill entrepreneurs tried new solutions for an old problem.

Part III

1930-1950

-10 The Crisis of the Thirties

The Vargas revolution of 1930, which ended the "old republic" of 1889, ushered in a period of rapid change in Brazil. There was a confusing blend of the old and the new, of conservative, middle-of-theroad, and radical elements. During its fifteen-year life span (19301945) the Vargas regime, buffeted by both domestic and foreign currents, shifted from a brief house-cleaning stage of liberal democracy to dictatorship patterned partly on the Unes of the corporative states of Europe. Only allied victories and domestic pressures revived liberalism at the end of the war and terminated the dictatorship of the "New State." The political conditions under which industry rose to prominence under the Vargas administration bore little resemblance to those of the first republic in the 1890's. Plantation agriculture's all too evident collapse made superfluous further insistence upon the importance of industry in assuring national progress. The failure of the last of the coffee valorization schemes to support prices in the great depression following 1929 removed the century-old political influence of coffee planter groups.1 Only the eleventh-hour financial support of the federal government in the early thirties prevented abrupt foreclosure and possible dismemberment of large, heavily mortgaged plantations under the auctioneer's hammer. Actually, the waning of coffee planter prestige left no void, for the growing industrialist groups of the Rio area and the State of Säo Paulo, where cotton textile proprietors exerted considerable influence, readily supplanted the members of the agricultural oligarchy in political influence. It was an unnoticed, unheralded revolution, one in preparation since the First World War.

136

The Brazilian Cotton Manufacture

Yet few would have imagined the speed and ease with which the process of integrating industry and government was accelerated in the thirties. As one observer summed up in 1937, "the textile industry in our land is a force equally powerful in the field of production and in the sphere of politics."2 Years of practice before 1930 in consulting with the chief executive and congressional committees prepared industrialists' associations for active collaboration in the formulation of governmental policy under Vargas; and the mutual acceptance of the concept of the corporative state, with its emphasis upon state intervention and planning ("directed" or "managed" economy) so close to the thinking of many Brazilian industrialists, made the collaboration more effective. There was a wave of interest in Brazil during the thirties in the theory and practice of the corporative state as adopted by some industrialized nations of western Europe; O. P. Nogueira, a prominent official of the Sâo Paulo cotton manufacturers' association, translated Mihail Manoilescu's essays on industry, government, and the one-party state.3 The cotton manufacturers' association of Rio and Sâo Paulo welcomed the Vargas administration's adoption of the principles of "managed economy," for the directors of these associations held that governmental decisions based upon the solicited testimony and advice of competent "class organs" ( as industrialists' associations or syndicatos were officially termed) were the goal they had long campaigned for. Indeed, it is in the light of government by collaboration with industry — a policy consistently pursued by cotton textile manufacturers before 1930 — that we can properly understand legislation by Vargas' presidential decrees which aimed to solve the problem of alleged "overproduction" in the early thirties. Powerful as was the influence of manufacturers' associations in the policy-making of the Vargas administration, it was not the only pressure exerted upon policy-makers. The republican political regime, by failing to provide an effective means of expression for the growingly vociferous middle and working classes, had dissipated the earlier visions of the new society held by a few leaders of the republican revolution of 1889. The revolution of 1930 buoyed the hopes of segments of the Brazilian people which had deeply resented the limbo to which they were consigned by the political groups of the first republic. From these segments had come the supporters of the significant if abortive revolts of 1922 and 1924; many rose to key positions in the new administration that took office in 1930. These bureaucrats were the spokesmen of the middle and lower classes, critical of unilateral decisions of

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the administration in favor of industrialists. For behind the Vargas revolution and giving added significance to it was an increasingly articulate middle class of commercial employees and of government officials which sought recognition of its needs and aspirations. They were often buttressed by the industrial laborers, a large section of them employees of the cotton textile industry, who grew increasingly restive under the paternalistic regime carried over from the previous epoch of master-slave relations and economic liberalism. These groups, joined by some congressional spokesmen, found an outlet for expression in sections of the Brazilian press; they chafed increasingly under the political and social order which the transition from monarchy to republic had brought into being. Far behind were the years in which the cotton manufacture, with full public approval, had fought hard to gather stockholders, raise factory walls, order and install expensive machinery, organize a labor force and outlets of distribution. If industry demanded government assistance in various forms after its period of infancy and adolescence, dissident groups after 1930 contended that perhaps the whole problem of industrialization and its cost to the national consumer should be more critically examined. Perhaps the earlier promises of industry's blessings should be inspected. Might one flaw in the economy be the opportunity of local industrial entrepreneurs to operate behind tariff walls where no stimuli for lowered costs and improved quality could affect the traditional organization of production or managerial attitudes? And if entrepreneurs claimed that their enterprises faced everimminent failure ("overproduction") and thereby qualified for unending government assistance after years of profitable operations, why, the public began to ask, had the difficulties not been foreseen and proper precautionary measures taken? To be sure, during most of the thirties the pressure of consumers' interests and criticism of the cotton industry proved relatively ineffectual. The difficulties of the Brazilian people in the early forties as the exigencies of total war demanded that all society sacrifice to insure successful prosecution of the Allied war effort gave only brief prominence to the consumers' point of view. From the cotton textile entrepreneurs' point of view, the cotton manufacture achieved a maximum of production and a minimum of stability during the years 1930-1945. At the beginning of the period the industry claimed its major problem was "overproduction." Slow general economic recovery and the stimulus of wartime export markets in the western hemisphere, Europe, and even in Asia more than tripled

138

The Brazilian Cotton Manufacture

the industry's physical output. By 1946, however, the industry again had no assurance that domestic consumption would match its productive capacity, and the nightmare of "overproduction" returned to disturb Brazilian mill proprietors. Engrossed in supervising plant, machinery, and labor force amid the worst world-wide economic crisis of modern times, cotton mill proprietors of the thirties understandably failed to view their problems in perspective. This lack of perspective in the search for stability explains the cotton manufacturers' shift from expedient to expedient, from tariffs to restrictions on machinery imports, to limits on hours of work, and to the establishment of minimum wage scales and, finally, to governmental support of exports. In retrospect, the Second World War temporarily rescued an industry "crisis-ridden" since the fall of coffee and other commodity prices after 1925. When the boom conditions began to recede at the close of the Second World War, Brazilian manufacturers were face to face with the inescapable problem: how to produce profitably for a large domestic market of low income consumers. The story of the industrialists of the Brazilian cotton manufacture in the second quarter of the twentieth century is essentially the account not of particular industrial figures but of industrial and allied entrepreneurs undertaking in a period of great change collective action in search of immediate security. 1 Failure to secure the support of cotton manufacturers for cartel arrangements limiting production in 1930 did not leave the industrial association without an alternative course of action. As the Säo Paulo report on mill operations had shown, regulatory action was urgently needed to control the abnormal condition of the industry, where a few mills operated at full capacity while a majority were kept open merely to keep intact the trained labor force. Tariff revision in 1929 had effectively reduced foreign cloth imports; despite the industry's sales difficulties, sizeable quantities of textile machinery still flowed through the customs houses of Rio de Janeiro, Santos, Recife, and Fortaleza. Imports of machinery had fallen off markedly from the peak years of 1925 and 1926, but there were enough "planters and capitalists" dismayed by the sagging prices for agricultural produce to invest in "city businesses"; 4 they were undoubtedly responsible for the imports of textile equipment in 1929 and 1930. In the latter year imports of

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spinning and weaving machinery dropped to 17 per cent of the 1926 level, looms to 6 per cent. Surveying the situation of their industry, cotton textile entrepreneurs judged that falling agricultural commodity prices eliminated any hope of augmenting the purchasing power of rural consumers while competition of foreign mills made impossible a program of exports. Some industrialists insisted that competition was annihilating the weaker mills and dangerously sapping the strength of the larger mills. 5 The new administration's "logic and patriotism," declared the mill proprietors, suggested but one decision: measures preventing increased productive capacity of industries already "afflicted by the ills of overproduction." 6 Textile entrepreneurs, in brief, desired a breathing spell which would be untroubled by the "risk of new competitors." Most Rio and Sâo Paulo industrialists welcomed with "undisguised satisfaction" the alternative to cartel arrangements, restrictions on textile machinery imports. 7 At the end of 1928 the Säo Paulo cotton manufacturers' association favored suspension of all textile machinery imports for the duration of the crisis. Twenty months elapsed, however, before the idea of restrictions on machinery appeared in a bill presented on the floor of congress. According to the bill proposed by Deputy Eduardo de Lima Castro in August 1930, the way to reduce excess production in cotton mills was to stop all imports of new looms and simultaneously to force all mills to limit the workday to eight hours. By the middle of September the Säo Paulo association had drawn up measures to be submitted to president-elect Julio Prestes ( later ousted by Vargas in the October coup), with restrictions on machinery imports heading the list.8 But Lima Castro's proposal received a mixed reaction from cotton mill proprietors, the most critical comment being directed against the eighthour day. 9 And, while some mills restrained their criticism to consideration of the bill's provisions, one mill belabored those whom it singled out as the real proponents of the measure: the Rio cotton manufacturers' association, tarred as a "few interested parties" of the "Industrial Dictatorship." 1 0 Critical comment in the Rio press reminded manufacturers that it was illogical for them to seek salvation by hamstringing technological progress while the rest of the world strove for efficiency in production. One newspaper warned that technological stagnation might also affect the psychology of industrialists, preventing "modernization of the mentality of our captains of industry." 11 Further discussion of Lima Castro's bill was suspended by the Vargas revolution of October 1930, which threw out the elected government

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The Brazilian Cotton Manufacture

of Julio Prestes, former governor of Säo Paulo, and "paralyzed" industrial operations.12 But fears that the new broom of the revolutionary regime might sweep away the political influence exercised by Rio and Sao Paulo manufacturers' associations were unwarranted. 13 Less than two months after Getulio Vargas swept up from Rio Grande do Sul to the capital at Rio de Janeiro, his Minister of Labor, Lindolpho Collor, requested the collaboration of industrialists for the "task of regenerating national endeavor." 14 Simultaneously, two prominent cotton manufacturers accepted key positions in the Vargas administration: Manuel Guilherme da Silveira became president of the nation's largest banking institution, the Bank of Brazil, while a Sao Paulo colleague, Jorge Street, headed the labor ministry's industrial division. At the direction of the new administration, the Bank of Brazil made loans to cotton mill proprietors. 15 There is evidence to support the belief that some influential manufacturers pressured the new Vargas administration to pass the decree of March 7, 1931 restricting machinery imports for all industries considered in a state of "overproduction," although it later became the fashion for spokesmen of the cotton manufacture to ascribe the measure to the "spontaneous" or "inopportune" initiative of the provisional government. 18 What happened on March 7, 1931 was tersely summarized in a magazine article six years later: "The government yielded. It had to yield. In its first days, when partisan feeling still ran high, the government could not . . . resist the industrialists on the verge of collective bankruptcy." 17 Passing over Lima Castro's highly controversial proposals to halt loom imports and regulate working hours, Vargas signed decree No. 19,739 of March 7, 1931, curtailing for three years machinery imports for industries whose production "in the judgment of the government might be considered excessive." On May 13, 1931 the cotton textile industry was declared in a state of "overproduction." New machinery and spare parts could still enter the country to replace obsolete or worn-out installations.18 No reference was made to the eight-hour working day, while both imported looms and spinning frames were prohibited. As to the inclusion of spinning frames, a spokesman for the industry made this suggestive remark: "Some will say that no one will install spinning frames when looms are being limited. But can one rely upon the common sense of the whole class of cotton mill proprietors?" 19 That the manufacturers' associations would lose no opportunity to

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establish close contact with the new regime was underscored by their interpretation of a decree of March 19, 1931. In accordance with the principles of "directed" or "managed" economy, this decree authorized the formation of separate syndicates of employers and employees. In urging cotton mill proprietors to join its association and thereby to present to both government and public a united front in treating industrial problems, the Sâo Paulo manufacturers' syndicate minced no words: "Either cotton mills enter this organization . . . or they will find no one to defend their interests before public officials" and "will exist amid all sorts of difficulties." 2 0 The interests of industrialists and, to a lesser extent, employees were safeguarded when the Constituent Assembly, meeting from November 1933 to the middle of 1934, hammered out a new constitution providing for "functional representation" in the Chamber of Deputies. Syndicates of employers and employees were to elect indirectly one-sixth of the deputies. Actually, as one American observer emphasized, employers obtained a "representation out of proportion to their number in the population." 2 1 So smoothly did industry and government collaborate in seeking solutions for industrial problems that in November 1933, four months before expiration of the three-year restriction of machinery imports, the government extended the measure until March 31, 1937, judging the arguments of the national association of manufacturers (Federaçâo Industrial do Brasil) and of the Rio cotton manufacturers' association "acceptable and logical." 22 Perhaps no one was more responsible for the harmonious relations established between the textile manufacturers' associations and the revolutionary regime in the years 1930-1935 than the Rio association's secretary-general, Vicente de Paulo Galliez. Congratulating him on his election as deputy "for his class" (deputado classista) under the system of functional representation, the association's board of directors paid this tribute in 1935. "[He has been] tied to the interests of the textile industry as Secretary-General of our Centro and director of several textile enterprises . . . we can say that no discussion of industrial matters in recent years has been concluded without the always efficient collaboration of Dr. Vicente de Paulo Galliez . . . The domestic cotton manufacture now will have in the Chamber of Deputies a capable representative whose participation, along with that of Dr. Paul Alvaro de Assumpçâo, president of the Säo Paulo cotton manufacturers' association, will always be praiseworthy." 23

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The Brazilian Cotton Manufacture 2

In 1936 the attempt of the Rio and Säo Paulo cotton associations to obtain a second extension of the 1931 decree ran into a storm of protest and touched off a controversy only settled by the outbreak of the Second World War. What had occurred in the intervening years to create opposition to the plans of the cotton manufacturers? Was the criticism directed by groups removed from the associations of industrial entrepreneurs, or had there developed within the industrialists' organizations regional blocks of northern versus southern mills, small mills of the rural interior versus the large units of the urban centers? Was there any propriety to the simile employed in 1937 by the president of one of Brazil's most modern cotton mills, when he likened limiting the importation of cotton machinery as a solution for overproduction to "cutting off the head to cure a headache?" 2 4 In other words, what led to the breakup of the plans for stabilizing the Brazilian cotton manufacture initiated by the presidential decrees of 1931 and 1933? At the depth of the depression, harried industrial entrepreneurs and trusting political bureaucrats of a recently installed regime could not be expected to regard contemplatively the problems of the most important industry in Brazil. Urgent measures were required, or, to use the phrase of a textile manufacturer at the time, "Abnormal cases require abnormal decisions." 2 5 Undisposable stocks of cotton cloth piling up in cotton mill warehouses were bitter proof that tariff revision did not automatically sell goods to Brazilian consumers. Cartels were out of the question. So, industry and government advocated measures restraining competition and maintaining the technological status quo within the cotton textile and other consumer industries, without adducing statistical proof of "overproduction." Substitution of over-all controls on textile machinery imports for cartel agreements within the industry soon revealed, however, the defects of tackling industrial problems by rule-of-thumb procedures. For no effective controls were clamped on day-to-day mill operations — the length of the workday, for example — and on what few could justifiably have predicted in 1930, a booming domestic loom manufacture. Without the restraints of any cartel agreements, local manufacturers turned first to the "easiest method to reduce manufacturing costs": they stretched the workday beyond the normal ten hours and added a second, even a third shift. Some small mills producing coarse goods

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were reported to have worked sixteen to twenty-four hours daily between 1931 and 1937, although, by the middle of 1936, workers were refusing to extend their workday into the evening (seräo) on the grounds of fatigue.26 During the worst years of the depression, workers hired by the month or day would stay by their machines a few extra hours, even returning in the evening, rather than accept a 20 per cent cut in wages. Since the average of raw cotton prices, 1931-1936, was slightly below the 1928 level and, assuming depreciation and labor costs remained relatively fixed, the operation of equipment to near capacity resulted in lower unit cost of production.27 On the other hand, the curtailment of machinery imports caused friction among entrepreneurs since it froze the relative positions of the large urban mills with respect to the small establishments of the interior. Between 1931 and 1937 the mills of the interior could not take advantage of the offers made by European machine shops eager to sell abroad on credit in the form of installments spread over many years at low rates of interest. Those mills which had augmented their spinning and weaving sections in the twenties, and undoubtedly a majority of such mills were the large urban mills with capital for expansion, produced the fine goods which the antiquated mills of the interior could not match. And now the small mills of the interior, limited to coarse cloth production, entered a vicious circle. Since they could not import new spinning machinery capable of turning out yarns of higher counts, they could not move into the production of fabrics with a higher profit return. So they increased their output, lowered prices slightly, and found immediately "a vast and hardly exigent market, a market which proved to be more stable when prices were reasonable and not exorbitant." 2 8 This, then, was the origin of the paradoxical situation of the Brazilian cotton manufacture of the thirties: an industry presumed to be in a state of overproduction while many of its factories operated feverishly beyond the normal workday.29 Surprisingly enough, some quarters believed that, as late as 1937, cotton textile entrepreneurs were quite unaware how they had managed to survive.30 An even more paradoxical situation might have developed had cotton mill men successfully checked the growth of domestic loom manufacture on the grounds that such activity, if unchecked, would contribute to the excess production of the cotton industry and, by extension, affect adversely the national interest. For one consequence of the restriction on machinery imports was the rise of a domestic loom manufacture. Not that cotton manufacturers overlooked such a possi-

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The Brazilian Cotton Manufacture

bility, for two months after the decree of March 7, 1931 appeared, the Rio cotton manufacturers' association seconded its Säo Paulo counterpart in urging that the decree be extended to curtail domestic production of looms.31 They lashed the entrepreneurs of the three Säo Paulo machine shops making looms for the market created by prohibition of imported looms, as "individuals destitute of patriotism, greedy for profits legal or illegal" and their looms were described as "crude imitations of French and English models" without "the merit of originality." 32 Between 1930 and 1936, the largest Brazilian manufacturer of looms increased average monthly production from 30 to 130; by 1937, two shipments of Brazilian-built weaving sheds had been sent to Argentina. 33 Wisely, the Rio manufacturers' association gradually revised its earlier position, agreeing in 1936 that prohibition of domestic loom manufacture would hurt not only what the 1934 constitution expressly guaranteed, "freedom of industrial liberty," but also the development of one of "our manufacturing activities in its most interesting aspects." The association admitted grudgingly that Brazilian machine shops were manufacturing looms almost as good as the best imported ones.34 Since practically no foreign looms entered the country, the operators of small mills, eager to expand cloth production to meet rising consumer demand, began to buy obsolete looms from textile manufacturers who saw a chance to unload their old equipment at the price of new machines. Loom manufacturers prospered, some mills renovated their weave sheds, while others spent "extremely" large sums on secondhand machinery. 36 Perhaps nowhere were restrictions on importing textile machinery more effectively applied than in the case of the Companhia Brasileña de Linhas para Coser (Machine Cottons Limited), a Brazilian subsidiary in Sâo Paulo of the British sewing thread combine, J. and P. Coats, Ltd. Government approval of the British firm's request for permission to import additional sewing thread machinery early in May 1934 incensed the cotton manufacturers' associations of Rio and Sâo Paulo. To account for the successful opposition put up by the twin associations, due consideration should be allotted the factor of antiforeign nationalism flowering in the Vargas administration which Brazilian manufacturers wielded against the British branch firm.36 The fact that the hard-driving business practices of the British firm before 1930 struck some Brazilians as highhanded made the company's position in 1934 — a foreign enclave in an industry largely Brazilian-owned — particularly open to criticism. "Absolute master" of the Brazilian

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sewing thread market before 1916, the British firm sold thread in Brazil giving advantageous discounts to dealers who would handle only their brand.37 Four domestic mills were reported operating during the twenties, although only one concern — Delmiro Gouveia's Companhia AgroFabril Mercantil of Alagoas, producing sewing thread and embroidery cotton — was judged to have any chance of survival against the foreignowned competitor. The latter was accused of starting a price war in the markets of Gouveia's mill. In 1926 the government quintupled the duties on imported thread, presumably to aid the Alagoas mill; these were reduced to their former level in 1927 after ( so it was rumored ) the British firm brought pressure to bear upon the Säo Paulo commercial association. Although the duties on yarn were raised in 1928, they failed to save the Alagoas mill which was eventually sold to the British-owned adversary. A team of wreckers arrived at the mill site fifteen miles below the Paulo Affonso falls and proceeded to hurl the threadmaking installations "ostentatiously" into the Säo Francisco River. According to one report, the mill hands in front of the factory "wept at the sight of this savagery." "Let the poor beware," concluded one newspaper at the time, "sewing thread prices are going to rise." 38 These were the facts which Rio and Säo Paulo cotton mill associations arrayed against the petition for new spinning frames to increase thread production in 1934. By that year a number of Brazilian factories began to furnish yarn to local thread mills. Stimulated by the barrier placed upon imported cotton textile machinery in 1931, one Rio cotton mill purchased the spinning section of a Säo Paulo mill which had halted operations, to produce thread. The competition of the machinery petitioned for by the British firm could force the Brazilian enterprise to shut down, its directors insisted, causing a loss of capital and creating unemployment. Why did the British outfit insist on avoiding any yarn purchases from local Brazilian mills, preferring to import from the parent firm in Great Britain the extra yarn its Brazilian plant required? asked spokesmen of the cotton manufacturers.39 Pressure from the Säo Paulo and Rio cotton manufacturers' associations convinced the Minister of Labor early in July 1934 that he should suspend the British firm's import license covering the new spinning frames, and directors of the Rio association congratulated themselves on "one more important victory for the association in the defense of the essential interests entrusted to it." 4 0 The celebration was somewhat premature. The British firm tried to get the Säo Paulo association to change its position; fully confident of its ability

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The Brazilian Cotton Manufacture

to get the import license, the firm had begun plant construction and bought and embarked its new machinery. Such self-confidence and the threat to by-pass the Säo Paulo association and approach important political figures in Säo Paulo brought one manufacturers' spokesman to criticize "that pertinacity and unscrupulousness which is one of the factors of the firm's success the world over." "As long as there is breath in my body," he wrote indignantly to a friend, "I will protest the privilege which the firm desires. I'll revive the incident of the sewing thread mill of Alagoas and I'll denounce the British subsidiary which continues to live in that 'splendid' isolation maintained by Great Britain in one phase of its political life." 4 1 The firm, Machine Cottons, tried again to get its machinery into Brazil in December 1934. The Rio association, when asked by the Ministry of Labor for an opinion, expressed the belief that the British firm, as part of an international trust, wished to expand its sewing thread operations to import yarns manufactured in British mills, thereby "prejudicing" Brazil's cotton growers and manufacturers. This opinion of Rio and Sao Paulo cotton mill proprietors eventually prevailed, although they later admitted privately that restrictions on machinery imports were designed to hamper overproduction of cloth, not of yarns or sewing thread.42 To enforce a measure of stabilization upon the whole domestic cotton manufacture for more than a brief period brought less encouraging results. Small mills of the interior, particularly in Minas and in the northern and northeastern states, began to chafe increasingly under controls on textile machinery imports extended in 1934. There may have been a grain of prudence in the stabilization scheme sponsored by many cotton manufacturers in the critical years 1931-1933; but improved economic conditions both national and international in the following two years made the attempt to continue machinery controls unrealistic. The population of Brazil grew 35 per cent between 1920 and 1940, and the expanding domestic market for cotton goods 4 3 made restrictions irksome to mills. They were free to augment their weave sheds with the purchase of Sao Paulo's new looms or the castoff ones of local mills, and to operate their installations around the clock. Extra looms and longer hours brought a chain reaction, for pressure developed for more yarn, while changing consumer preference spurred mills to consider producing yarns over 20s counts; these factors obliged textile entrepreneurs to consider the purchase of spinning frames, new or secondhand. In a period of economic recovery, espousal of stabiliza-

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tìon by the Rio and Säo Paulo manufacturers' associations left them open to charges of defending only the interests of entrepreneurs influential in their organizations. The aspirations and disappointments of small mill entrepreneurs between 1933 and 1936 can be traced via the letters written in their behalf by a Rio textile machinery importing house, established late in the nineteenth century. As Henry Rogers Sons & Co. of Brazil reminded the Rio cotton manufacturers' association in 1934, "we furnish the technological orientation of a great number of small cotton industrialists (we have installed machinery in perhaps a majority of Brazil's mills)" — adequate background, they judged, for analyzing the technical problems of their clients. Even before machinery controls went into effect in 1931, many small mills of the interior faced a chronic imbalance between yarn production and yarn requirements. Capital outlay for looms was lower than that for spinning frames and accessory equipment, and by running spinning sections overtime, loom needs were met.44 Although the decrees of 1931 and 1933 permitted the mills to import machinery which did not increase production, the Ministry of Labor tended to classify efforts to correct imbalance as an increase of output. In May 1934, the government removed import controls over preparatory and intermediate spinning machinery (cards and fly-frames, for example), and textile machinery imports rose in 1934 to 2,455,935 kilos, 50 per cent over the 1933 level, spinning and weaving machinery jumping from 971,626 kilos to 2,455,935; but cotton manufacturers whom Rogers claimed to represent were still dissatisfied.45 These were a "majority" of those in the north of Brazil and in the State of Minas. Many owned mills which had begun operations in the 1890's; by the 1930s their installations and organization were outmoded. These entrepreneurs resented the fact that only the relatively few large mills, modern or remodeled, of Rio and Säo Paulo had efficient, technically sound installations. "The majority of the small mills," ran another note of Henry Rogers Sons to the Rio cotton manufacturers' association, "are in a stage of modernization and reorganization, depending on their respective financial situation; in a few cases they can modify their types of production which experience indicates as most adequate for catering to certain markets." A northern mill had to guarantee the industrial division of the ministry that it would make inoperable an ancient fly-frame in continuous operation for forty-six years before the customs house would release the new one; in the meantime, the mill would have had to shut down for two months until

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The Brazilian Cotton Manufacture

installation was completed. This state of affairs, the machinery importing firm noted, prevented the cotton manufacturers from improving production according to the demands of the market and technical innovation.40 Slightly over two years later, Henry Rogers Sons still complained of the situation of mills which either could not locate Brazilian mills willing to sell yarns or were unable to import spinning frames to produce their own. The large yarn producers, whose "power in the Rio and Säo Paulo manufacturers' association is undeniable," were benefited by import restrictions converting yarn production into a "privilege guaranteed by law." 47 It became evident after six years ( 1931-1937 ) of the curtailment of machinery imports, on the principle that the nation suffered overproduction of cotton textiles, that the cotton textile industry had in fact expanded production. From 633,893,000 meters in 1931, annual cloth output climbed about 50 per cent to 963,766,000 meters seven years later. 48 For the period 1933-1936, machinery imports showed a comparable upward trend, the northern and northeastern areas receiving significant amounts; by 1936 imports of spinning equipment exceeded slightly the 1928 level, although looms lagged. On balance, curtailment of textile machinery imports, 1931-1936, probably slowed the expansion of the Brazilian cotton manufacture and thereby helped alleviate "overproduction"; in the period 1937-1940 after restrictions were lifted, textile manufacturers imported almost twice as much machinery as in the years 1933-1936.49 Whether other factors — low consumer purchasing power or the inability or unwillingness of manufacturers to make capital outlays on new equipment in the worst years of the depression, for example — would have produced a similar effect without import restrictions is debatable. Also, the restriction on imports of new equipment permitted some manufacturers to sell their castoff spinning frames, as well as looms, to mills of the interior. At any rate, under the umbrella sustained by the established mills of the large south central urban centers, which had taken the lead in securing protection from foreign cloth mills and then obtained machinery restrictions, the small mills of the interior and one or two large northern mills had expanded output. 50 Temporarily and publicly the unity of cotton manufacturers was now broken by a drawn-out debate over perennial overproduction — true or alleged — and over the search for new expedients to shore up the industry as the period for controls on textile machinery imports drew to a close in the last half of 1936 and the first months of 1937.

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3 The cotton manufacturers' associations of Rio and Säo Paulo began planning for a second renewal of machinery controls at least ten months before the date of expiration, March 31, 1937. In June 1936 the Säo Paulo association canvassed its members on the "economic policy" to be adopted by the government after March 1937, and so lifted the curtain on the industrial drama which was staged from 1936 to 1939 and was brought to a halt only by the Second World War. Although its inquiry was limited to reports from Säo Paulo cotton mill operators, the association tried to strengthen its conclusions by avowing that the local situation in most respects reflected conditions throughout the Brazilian cotton manufacture. The situation, to judge by the comments of some mill proprietors, was not bright. For, after more than five years of restrictions on new machinery imposed in the name of overproduction, many industrialists felt that all the signs indicated continued overproduction. Cotton cloth prices in the Säo Paulo market were falling because the producers of other states, in the opinion of the Säo Paulo association, were "unloading" goods there, a "symptom that overproduction was commencing to appear throughout the nation." 51 Coarse cottons which were almost always in a "state of overproduction," according to one of the largest mills in Brazil, were encountering fewer buyers, while fine cloth, never in oversupply, sold with some difficulty. The proprietors of another large mill complained they had orders for 60 per cent of loom capacity covering the next two months' operations, and they were running the remaining 40 per cent of their weave sheds for stock to avoid disorganizing production and dismissing mill hands. Northern buyers were canceling orders, especially those at Pernambuco, where sugar production was reported to have fallen off. The cloth market, they judged, faced overproduction, spinning capacity was more than adequate, and, since machine shops offered looms which increased cloth production, some continued curbs on machinery imports were needed to avoid a repetition of the crisis of 1928-1930. 82 Such curbs were warranted, too, in the light of what the Säo Paulo association's report called an "interesting detail": "The industrial powers [Western Europe and the United States] hold in reserve an incalculable stock of used machinery, advertised in Brazil via catalogues that are inundating us." Depreciation of Brazilian currency made extremely costly the purchase of new

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The Brazilian Cotton Manufacture

machinery. On the other hand, the "ancient" equipment of the industrialized nations was offered on attractive terms to "poor" nations beginning industrialization. Unless restrictions were maintained, local mills would snap up machinery, and output would increase despite the fact that there was no corresponding rise in the "extremely low" purchasing power of the Brazilian consumer.53 Neither the Ministry of Labor nor those manufacturers opposed to the policies of the Rio and Säo Paulo textile proprietors' associations were to be caught napping in framing their plans for the day restrictions terminated. In August the ministry circulated an outline of suggested legislation, which the Rio association quickly mimeographed for distribution and comment. That cotton mill entrepreneurs would not unanimously approve continuation of restrictions was made abundantly clear almost immediately. Some mills looked upon overproduction as a weak argument for machinery restrictions when so many mills operated two or three shifts; others claimed that the large output of coarse goods was the cause of overproduction since it was difficult to replace obsolete machinery, 95 per cent of which had been imported over the years to produce up to number 30s yarn.54 This was no way for the industry to prepare to export cotton goods, it was argued. Not only did governmental supervision of machinery imports smack of favoritism in behalf of certain unnamed mills; it threatened to replace "private initiative" by the "rigid control of the State." 5 5 Two months after circulating its projected legislation, the government resolved to relax import restrictions for the remaining months of the prohibition, permitting the Ministry of Labor to study each application. There was, however, a marked difference of views on relaxing controls. The ministry wished to sanction increases in spindles up to a total of 15 per cent of all spindles in Brazil, in quotas varying with the number of spindles in each mill, and to approve only spinning frames turning out number 60s counts or higher; the associations wanted a flat, across-the-board percentage for all mills with no provisos for the yarn count.56 In view of the recognized influence of the Rio association on government industrial policies, the ministry's insistence in December 1936 upon its graduated scale of percentages brought a storm of expected protest upon the association from some dissatisfied cotton entrepreneurs. Particularly upset were the mills of the interior. A Santa Catarina mill proprietor felt that the government's modification of restrictions confirmed the policy of concentrating upon the already large in-

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dustrial centers of Rio de Janeiro and Säo Paulo, because the areas with the largest textile installations profited most by increases based upon existing equipment.57 Others felt that restricting spinning frames to those capable of producing 60s yarns and above failed to aid the small mills of the interior which wished to improve yarns from 14s or 20s to 40s in order to produce better cloth. Their only recourse would be the purchase of castoff machinery of those mills already handling 40s yarns. "In our industry," a Minas entrepreneur, asking the Rio association for "equality and fraternity," declared, "all measures favor the large centers without the slightest preoccupation with the fate of those who labor in the interior." 5 8 This case of governmental intervention did not change the Rio cotton manufacturers' association's approval of the principle involved. The cotton industry had to take shelter under the government's protective wing, despite the fact that industrialists were opposed "in principle" to governmental interference in economic matters.59 If the prose was foggy, the conception was clear. "We are passing through a period in which [the concept of] the directed economy is being adopted . . . as the most practical and efficient means of attending to economic interests which can not and ought not be subject to the vicissitudes of potentially serious situations clearly affecting the real and supreme interests of the Nation." 6 0 And, to qualify for the benefits of the directed economy — continued restrictions on textile machinery imports after expiration of controls in March 1937 — Rio and Säo Paulo cotton manufacturers hammered on the theme that their industry suffered from overproduction. Early in 1937 the government took the problem from the Ministry of Labor and entrusted it to the Conselho Federal do Commercio Exterior (Federal Foreign Trade Council). The scene shifted but the same arguments appeared. Before the government's bureaus the textile manufacturers' associations premised as an indisputable and incontrovertible fact that there was overproduction in several industries, including their own. "In various branches of Brazilian manufacturing activities production is evidently larger than the possibilities of consumption." 6 1 On this point the textile associations of Rio and Sao Paulo would not yield, although some differences of opinion among the associations on the nature of the cure appeared in the many memorials presented. On January 15, 1937, the Rio association requested that mills be permitted to import 15 per cent of their installed spindles, specifying that new spinning frames be able to produce only 60s yarns or higher; but several weeks later, after the leaders

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The Brazilian Cotton Manufacture

of the Rio, Säo Paulo, and Juiz de Fora ( Minas Gérais ) associations put their heads together to present a "single, uniform point of view," the 15 per cent dropped to 5 per cent, and no spindle specifications were made. Furthermore, it was proposed to halt the installation of looms produced at home or abroad, and to limit operations to a sixtyhour week. 62 Significantly, the northern cotton manufacturers' association, the Pernambuco syndicato, refused to attend the meeting although invited. 63 In March, some Rio newspapers tried to undermine the main thesis, overproduction, upon which the Rio and Säo Paulo cotton manufacturers' associations had built their case. They published articles which stressed that the few large mills of Rio and Säo Paulo, equipped prior to 1931, "applauded" laws inhibiting the growth of competition. They cited a high government official to the effect that machinery restrictions in an industry unable to fill the demands of the public constituted guaranteeing to "half-a-dozen citizens the right and privilege of supplying the market, in other words, a monopoly." "In the name of 'directed economy' trusts are favored and magnates fattened." So profitable had mill operations become, it was alleged, that profit-and-loss statements of many cotton mills in 1936 showed profits totaling 50 per cent to 60 per cent of paid-in capital, and cotton mill shares were said to circulate at 50 per cent to 100 per cent premium. Certain industrialists were accused of having friends and advocates in congress and in the administration to prevent other entrepreneurs from competing with them. 64 Such criticism, originating in respectable quarters of the press and directed at cotton manufacturers' oft-repeated if statistically unsubstantiated assertions of overproduction, counseled a policy of concession. Moreover, time was running out. Early in March, one of the cotton manufacturers' congressional representatives placed before the Chamber of Deputies a plan to extend import restrictions for only twelve months, with the proviso that in the meantime the Ministry of Labor investigate carefully those industries which claimed to suffer from overproduction with the view of extending such controls if the facts warranted. Until proven otherwise, the cotton textile industry was to be considered as overproducing and thereby as qualifying for continued restrictions.65 This was precisely what the Conselho Federal do Commercio Exterior considered a bridle on the nation's industrial expansion, particularly when there was no impartial proof to substantiate allegations of overproduction. 66 It is not surprising, then, that

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on March 31, 1937, all restrictions on textile machinery imports terminated without the Congress extending them. Perhaps the most incisive appraisal of the campaign of the cotton manufacture, and of other light industries which had sought extension of the 1931 and 1933 decrees, appeared in the March issue of a Rio monthly whose editor served on the Conselho Federal do Commercio Exterior. The industrialists involved had used "incomplete and inadequate" statistics, the article charged, had made "superficial" evaluations, and were guilty of the most "dubious" partiality in examining their problems.87 The Conselho's inquiry had emphasized that careful analysis of each industry would alone show whether the industries were in a critical situation. Moreover, the article continued, the cotton manufacture, as well as the paper, shoe, and hat industries, evidently did not desire to compete in the domestic market. For the attitude and behavior of many industrial entrepreneurs ("experts in 'directed economy'") who had prospered under six years of restrictions, there was reserved the sweeping observation that they would not carry on operations unless they were propped up on the "crutches of government favors." They were unaware that advertising, for example, would increase sales. "They have neither progressed, nor evolved, nor learned." 68 Following the lifting of restrictions on machinery imports, the sixyear-old backlog of machinery orders brought the volume of textile machinery imports close to the highs of 1924 and 1926; in 1937 they totaled 8,646,908 kilos and the following year, 11,137,000 kilos. England and Germany shipped most of the equipment, with Switzerland and a relatively new supplier, the United States, a poor third and fourth.69 A high percentage of imported textile equipment probably included spindles.70 Domestic cloth production reached a new high of 963,766,000 meters, and several mills found difficulty in disposing of their cottons throughout 1937. Foodstuffs became "noticeably" dearer, the prices of basic Brazilian products, coffee and cotton in particular, fell and with them the income of rural families, and as a result consumers had to cut back or eliminate outlay on such items as cotton clothing. Further, the prospect of political disturbances foreshadowed in the announcement of a presidential election that year caused retail merchants of town and rural areas to handle inventories cautiously.71 Defeat in the campaign for extension of the restrictive legislation failed to wean the Rio and Säo Paulo cotton manufacturers' associations from faith in the thaumaturgical powers of the claims of overproduc-

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The Brazilian Cotton Manufacture

tion. In the year and a half following the events of March 1937 the associations attempted to prove overproduction but modified the methods by which they proposed to counteract it. The heavy inflow of British and German spindles led the two principal cotton manufacturers' associations to abandon the quest for spindle restriction; in 1938 and 1939 they focused upon cotton mills' weave sheds. The operations of the weave sheds, after all, regulated the schedule of all the other sections of the integrated Brazilian mills. According to the new plan, the government would halt importation of looms and place a ceiling of forty-eight hours on the work-week in the weave sheds. There remained, however, the underpinning of the cotton manufacturers' case for loom and hour controls: the controversial allegations of cotton textile overproduction. Throughout 1937 the Congress refused to consider any re-imposition of controls; after the dictatorial coup of November 1937 and the installation of a full-scale corporative state, the "New State," Vargas temporized by handing the problem to a research and advisory group of the Ministry of Finance, the Conselho Técnico de Economía e Finanças. 72 The Conselho, the corporative state's counterpart of the once-powerful congressional finance committees, promptly asked the industrial section of the labor ministry to carry out, between February 18 and April 15, 1938, the long-delayed detailed study of the industry and to decide whether or not overproduction existed. At first the 'Rio manufacturers' association requested that the time allotted for the inquiry be reduced because of the need for immediate measures. Failing here, the association decided to make an independent survey to substantiate its assertions of overproduction in the industry.73 The battle of the questionnaires showed the different approaches of the government and the industry: where the former reserved any mention of overproduction for its last question, the latter ran as its first question, "Does overproduction of cotton cloth exist?" and as its final one, "What measures do you believe are required to restore the industry to normalcy?" More than one industrialist felt that the phrasing of the manufacturers' questionnaire was a "snare," and consequently of doubtful utility.74 While both the Rio association and the industrial department of the labor ministry analyzed returns and prepared their reports, another government bureau, partly staffed with industrialists, was asked for an opinion of loom and hour controls. Its reply stressed the paradox of an industry claiming overproduction while many cotton mills ran their machines anywhere from sixteen to twenty-four hours daily. And, the

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report pointed out, if cotton mill entrepreneurs encountered some sales resistance, there existed a solution other than that of seeking salvation in the "eternal tutelage of the State," namely, turning out new products with existing equipment for domestic and even nearby foreign markets. If such measures were not examined, nor a careful industrial investigation undertaken, then public opinion could rightly assume that cotton mill proprietors desired to create a monopolistic situation.75 Although the signs now pointed to a denial of the Rio cotton manufacturers' assertions of overproduction, cotton mill proprietors of the north and northeast feared the political influence of the southern mill associations and the possibility of a ceiling on working hours. It was even reported that one industrialist connected with some of the largest northern mills traveled from mill office to mill office in northern areas affirming that the southern associations aimed at a "nefarious" plan for a nation-wide forty-hour week in the cotton manufacture because they wanted to "ruin" the northern mills.76 Inevitably, the conclusions of the inquiry undertaken by the industrial department of the Ministry of Labor leaked out. Though never published, they were presented in a report to President Vargas in October 1938 and called attention to what was euphemistically termed the "scientific precariousness of the cotton manufacturers' allegation of overproduction." There was no overproduction, continued the report, because a reservoir of consumer purchasing power existed in domestic markets and in nearby nations of the River Plate. Rather than use the term overproduction, the report claimed, a better description would be "over-supply of some cloth markets, mainly in the city of Rio de Janeiro." 77 Recommendations included favorable exchange rates to facilitate exports, a national minimum wage law to raise purchasing power and, finally, division of Brazil into two working zones. Only the southern zone, covering the State of Rio, the Federal District ( city of Rio), states of Sâo Paulo and Minas Gérais, would be limited to a strict forty-eight-hour week; the northern states ("where the loudest complaints against presumed overproduction are heard") would be unaffected by such legislation.78 Rumors of the unexpected division of the cotton textile industry into two regional blocs electrified southern cotton mill associations.79 Few would have dreamt that the proposal to limit working hours in weave sheds scattered throughout Brazil might boomerang on the south where most of the largest cotton mills were located. A hurried, unpublicized canvass of 47 member mills of the Säo Paulo textile asso-

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dation showed 30 mills owning 17,048 looms in favor of nation-wide hour controls; and, against the measure, 17 mills with 5,745 looms. Most of the opponents of restrictions were small mills. Yet there was no statistical basis for overproduction, southern entrepreneurs admitted, only the fact that stocks on hand were moving with "despairing" slowness; what was needed to back up claims of overproduction was not a collection of "yeas" from manufacturers and distributors on overproduction, but statistics — "and these have not been prepared." Northern mill operators saw ruin in hour controls; now it was the turn of southern entrepreneurs to prophesy "disaster" administered by the "unbeatable" competition of their northern colleagues employing underpaid labor. 80 In the five months commencing on October 1, 1938, more was at stake than a battle of industrial giants for reapportionment of the domestic market in cotton goods. The violence of charges and countercharges merely underscored the more vital issue — the soundness of the policies backed by the Rio manufacturers' association. With good reason the government considered the controversy among mill operators a "grave matter." 8 1 The Rio cotton manufacturers' association had always welcomed the opinion of member mill proprietors in the formulation of policy, likening its role to that of "interpreter" of the majority's will.82 The association's basic principle of years of policymaking, moreover, was the use of the federal government to aid in solving many of the cotton manufacture's problems. Notable failure to achieve voluntary agreements among entrepreneurs in 1930, followed by the recourse to government-applied import restrictions on machinery which lasted six years, had served to draw the industrialists' association and government closer. Furthermore, the five-month debate which found its way into newspaper columns cast doubts on the nature of competition among mill operators and upon the efficiency of their sales organization. Now, for the first time, a few cotton mill entrepreneurs publicly challenged the heretofore unquestioned right of the southern associations to speak for the whole Brazilian cotton manufacture. Early in December the Rio and Sao Paulo associations presented a joint statement to the Conselho Técnico, repeating earlier recommendations for an executive decree to alleviate the industry's "state of evident overproduction." It was a carefully worded declaration of views; and, despite the undercurrent of rumor involving the northern mills, it studiously avoided name-calling. The associations asked for nation-wide

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measures to bring "immediate results"; a ceiling on weave-shed working hours, non-importation of foreign looms, and controls on installation of domestically-produced looms. These measures they coupled with two of "long-range consequence": development of cloth exports and of domestic buying power. Accent was laid upon the recommendations of "immediate" effect. To gain support for hour controls, the report marshaled the results of its independent inquiry of the preceding April: 165 mills (66,012 looms) were reported favoring nationwide controls, 48 mills ( 16,123 looms ) against the measure. It stressed that a majority of northern mill operators supported the associations' recommendations. On the other hand, the joint statement made no reference to the fears of small mill entrepreneurs, expressed in telegrams and letters, that limits on hours of operation in weave sheds "hurt the small operators while helping the large ones." 83 Without direct reference to the Ministry of Labor's unpublished survey, its two essential elements were challenged. Dividing Brazil into differing labor areas, the two associations insisted, shattered the nation's "economic unity" and created "zones of privilege" which were unnecessary because no differences between northern and southern mills existed. In handling the survey's remarks about alleged overproduction, the associations peremptorily declared they would not discuss the "value or scientific precariousness" of overproduction in their industry. Whether it was overproduction or underconsumption, the gap between production and consumption had to be narrowed. To reinforce the belief in overproduction, the associations appended the remarks of cloth wholesalers (atacadistas) who reported stocks were "abnormally" high, that sales had fallen off 20 to 40 per cent, that prices were lower, and that the way to "normalcy" could be found in hour and loom controls.84 However, in the desire to present a united front to the government, the associations did not do justice to comments of all the cloth merchants interviewed. While all of them agreed that the cotton textile industry was in trouble, a few of the largest merchants did not accept overproduction as a blanket diagnosis. Some stressed the factors of poor transport, lack of bank credit in rural areas, and even high taxes. One commercial house felt that it was wise to recall that "two-thirds of the population could not purchase goods at current high prices because of the low level of income." 85 Support for this view came from Säo Paulo mill hands' representatives who commented: "With all due respect to industrialists and the government, we ask that the eight-hour day be

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The Brazilian Cotton Manufacture

enforced and wages raised, so that workers can purchase what they produce at their machines." 86 As long as rumor and rancor remained unpublicized and confined to conversational exchanges, the Rio and Säo Paulo associations' moderation had a chance of success. Perhaps a thin façade of unity among cotton mill entrepreneurs might have been preserved before the administration and the public. Any such hopes were shattered at the end of December 1938, when the directors of the industrial division of the labor ministry turned over to the Rio manufacturers' association a strongly worded denunciation not only of the concept of overproduction but also of the plan to regulate the operating hours of weave sheds. The denunciation was signed on October 1 by the director of the largest cotton manufacturing company of Brazil's northern area, the Companhia de Tecidos Paulista, controlled and managed by the Lundgren Brothers. There was no doubt where the Lundgrens stood on overproduction — in their title they bracketed the word with quotation marks. An appeal to Brazilian nationalism prefaced their memorial: domestic cotton manufacture needed every sort of stimulus to protect itself against the action of western Europe, namely, "the sudden demise of Brazilian mills bought up by foreign capital and put out of commission" — an allusion to Gouveia's mill. A similar movement of economic emancipation was occurring within Brazil, the Lundgrens explained, as cotton mills sprang up in the cotton-growing districts in the north. Formerly this area shipped raw cotton to the southern industrial centers until the development of an alternate supply of cotton in Säo Paulo made more cotton mills imperative in the northern areas. It was this internal economic emancipation which frightened a few of the more far-sighted southern mill entrepreneurs, "fearful" of the sudden appearance of new competitors who could convert northern consumers into producers of their own cotton goods. The Lundgrens assured the Conselho that only three southern mills were behind the campaign to diminish the competition of northern entrepreneurs by using overproduction as an excuse to limit working hours. Upon these accused mills — the Confiança Industrial of Rio de Janeiro and the Matarazzo and Crespi firms of Säo Paulo — they trained their criticism. As far as the Lundgrens could see, these three firms wanted to raise prices, and they chose controls on hours of work to oblige northern entrepreneurs to follow suit. The issue, although not explicitly stated, was this: northern cotton mill entrepreneurs were pitting cheap labor

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against the better equipment of their southern confreres in the contest to expand markets. There was nothing extraordinary about competition among cotton manufacturers, continued the Lundgrens — it was part of the "law of adaptation" to which all producers are subject. Certainly the State was under no obligation to adopt any measures "impeding the free play of competition among national enterprises." 87 Eleven days after receiving the Lundgren charges, the Rio association furnished a detailed reply to the Conselho. Only brief mention was made of the cheap labor supply available for northern entrepreneurs, for that was left to an inspired article in the Rio press, which called the wages of Rio mill hands "wretched," Säo Paulo's "infamous," and those of Pernambuco "hopeless." 88 To demonstrate that a majority of Brazilian cotton mill owners backed the Rio association's policy, an attempt was made to isolate the Lundgren brothers from fellow entrepreneurs — a retaliation for the attacks on the three southern firms. Capitalizing on the latent and traditional animosity of cotton mill owners toward cloth intermediaries, the Rio association declared that the Lundgrens were mainly interested in their commercial activities. Unlike most manufacturers, the Lundgrens held a "privileged position" in the industry, since they sold 80 per cent of their mills' output over the counters of wholly owned retail stores, the Casas Pernambucanas. It was "widely" recognized that their mill operations were "unprofitable," declared the rebuttal of the Rio association; the Lundgrens stood to gain "solely" on their retail stores' operations. They supplemented the stock of their outlets with large-scale purchases of better grade goods from the Rio wholesalers, and before they purchased finer goods, they first "demoralized" the Rio price level by selling below cost through their Rio outlets whatever merchandise proved unsalable elsewhere. Then and then only they placed their largO orders. The efficient combination of cotton mills and retail outlets permitted them to sell all their goods. Thus, they had no large inventories, nor reason to believe in overproduction. "Who is really defending the interests of our industry," the Rio manufacturers' rebuttal asked rhetorically, "our association or the Lundgrens?" 89 In effect, the Rio association left unanswered the implied question: why had other cotton textile entrepreneurs failed on the whole to follow the example of the Lundgrens? Perhaps this can be explained by a lack of merchandising experience and the need of financial support generally received from intermediaries in times of crisis. As one large cotton mill proprietor opined, simplification of the distributive

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The Brazilian Cotton Manufacture

system for cotton textiles was a "delicate, difficult" task which "economic forces will gradually bring us to change." 90 Even though the Lundgrens saw no crisis in the industry, continued the Rio association, nevertheless, total cotton cloth output was dropping; 91 and unless a nation-wide rational plan for cutting back production were adopted, many cotton mill entrepreneurs would go bankrupt. This was their sole reference to competition and its effects. Mill owners should not be left in a "precarious" situation, and this attitude was shored up by the years of growing contact between the Rio manufacturers' association and the federal government. It was not unexpected, therefore, that the cardinal tenet of the association was now publicly reaffirmed: "The Government has the obligation to guarantee a reasonable return on capital invested in the cotton industry, and the precarious and temporary sale of goods below cost is only an illusion." In other terms, the association preferred government intervention, not competition. 92 This tenet was supported by the rapporteur of the Conselho Tecnico in his recommendations for a nation-wide sixty-hour work week in all cotton mills of more than fifty looms, to last for twelve months. Looms and other textile equipment were exempted from any import restrictions. There was underconsumption of cotton goods, the rapporteur concluded, not overproduction; and this critical situation could not be solved by a governmental hands-off policy which would bring price cutting and voluntary production cutbacks and, ultimately, the disorganization and destruction of the cotton manufacture. To back up his recommendations for governmental action, rapporteur Lima Campos referred to the NRA fair competition codes adopted in the United States. "I therefore consider it absolutely necessary," he stated, "that the State intervene temporarily to aid the whole industry, thereby granting most of the mills, which do not have retail stores, ample time to prepare for competition." 93 These suggestions, in the opinion of one writer who followed closely the drawn-out campaign for government-imposed regulations, revealed a group of otherwise capable entrepreneurs who wanted to convert competition into a "flower battle in Paradise" and who envisioned free enterprise as a "perpetual ward," unable to fend for itself and therefore entrusted to the care of the State. Six years of machinery controls, 1931-1937, had fostered a "quasi-industrial privilege" exercised by a few mills in certain areas. The consumer had not been asked to present his case, and the inquiries in search of a statistical basis for decisionmaking were improperly planned and executed. Cotton mills, the writer

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suggested, should beware of the pitfalls of dependence upon the government, for the path might one day lead to expropriation. Time and energy had gone into futile discussion of overproduction, without any attention given to more essential matters: rational organization of production, market analyses, improved advertising and distribution, and the purchase of equipment to "increase the returns on production and lower the cost of the product." 9 4

4 The Rio and Sâo Paulo associations obtained at best a pyrrhic victory in the contest with the Lundgrens. Only one of the two measures promising "immediate results" — hour controls — was recommended by Lima Campos to Vargas.95 Now, without abandoning insistence that overproduction was a fact and should be remedied by hour controls and loom installation restrictions, the southern associations of cotton textile entrepreneurs shifted emphasis to their recommendations of "longrange consequence." These included cotton cloth exports under the aegis of government financial measures. Coupled to this, but not accorded similar importance, came reiterated suggestions for "careful" studies of wages and the possible establishment of a national minimum wage scale. These recommendations had appeared in the southern associations' joint memorial of December 1938, and in Lima Campos' report of January 1939. In the middle of February, the Rio association, in another memorial to the government, devoted approximately a page each to advocacy of limits on hours of operation, and of exports, and onetenth of a page respectively to controls on new looms and to studies of wages.9® The new ranking of measures probably was an effort to achieve greater unanimity of opinion among Rrazilian mill owners, but may also have been influenced by the attitude of some government officials who now preferred an export drive to hour controls.97 While some manufacturers still bristled at the notion of a sixty-hour limit on weaving sections, almost all could take pride in exporting the products of Brazilian industry to nearby Latin American nations. It was more than coincidence that from approximately the middle of February onward interviews with a number of prominent cotton textile entrepreneurs began to appear in an influential sector of the Rio press. With few exceptions, the twin themes of the interviews were exports and minimum wages, not machinery and hour controls. Some manufacturers called exports the "main measure" to solve the "crisis," others talked of the "conquest of new markets," and all appealed to the

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The Brazilian Cotton Manufacture

federal government to facilitate sales abroad.98 One manufacturer, on his return from an extensive survey of potential markets in the Antilles, and Central and South America, mixed his enthusiasm with a detailed analysis of how the administration could expand the industry's sales overseas. Many manufacturers recognized that the standard of living in Brazilian rural areas was low — one manufacturer compared it with that of the "unfortunate Untouchables of India" — and that a national minimum wage should be studied." It was repeatedly emphasized that, in Brazil's rural areas, many inhabitants earned barely enough to feed and clothe themselves, so that they could not possibly purchase more than one change of clothing. One manufacturer, allotting 50 per cent of wages for the purchase of foodstuffs and 10 per cent for clothing, concluded that the presumed 20 per cent rise in the cost of foodstuffs between 1937 and 1939, wiped out the clothing allotment of rural dwellers. "People have given up buying even the minimum clothing they need, and must work half nude." 100 The manufacturer's estimate of expenditures for food and clothing approximated the percentages in official cost-of-living indices prepared in 1938 and 1939 (Table 18). TABLE 1 8 .

AVERAGE PERCENTAGE OF TOTAL INCOME OF SELECTED GROUPS * IN CAPITAL CITIES AND COUNTIES OF THE INTERIOR OF BRAZIL EXPENDED FOR VARIOUS CATEGORIES, 1 9 3 9 .

Capitals Expenditure Food Clothing Housing Medicine Medical aid

Per cent 55.3 8.9 21.1 4.1 2.6

Interior

No. of informants

Per cent

No. of Informants

251,240 213,628 219,796 145,044 34,594

65.9 10.1 13.5 4.6 2.8

333,279 301,078 222,323 199,586 67,030

* Based on data covering laborers, clerks, and low-salaried employees with annual income not exceeding 4 2 0 $ 0 0 0 . The percentages are approximate at best. Source: IBGE. Conselho Nacional de Estatística, Anuario estatistico do Brasil. Ano V. 1939/1940 (Rio de Janeiro, 1 9 4 1 ) , pp. 5 3 5 - 5 3 7 . See T. Lynn Smith, Brazil: People and Institutions. ( 1 9 5 4 ) , pp. 29CM293, and Street, "A industria textil," p. 98.

Nevertheless, there were cotton mill proprietors who carried on an undercover campaign against the adoption of a minimum wage for the textile industry. They argued that the profitable operations of both mills and cloth wholesalers which newspapers were reporting daily were merely the result of bookkeeping legerdemain and that company

Crisis of the Thirties

1Θ3

statements for 1938 operations were doctored by drawing upon the earnings of previous years "honestly and wisely hidden as reserves." 101 It was perhaps ironic that of all the panaceas for overproduction which the cotton manufacturers' associations sponsored from mid-1936 to mid-1940, the Vargas regime turned only one into decree legislation. On May 15,1940, a minimum wage scale, varying by region and limited to industrial workers, became law. The outbreak of the Second World War in September 1939, made further discussion of overproduction or underconsumption academic, for what could not be sold at prevailing prices at home was now shipped to foreign markets. The entry for November 1939, in the minutes of the board of directors of one mill, illustrates the repercussions of the world conflict: "Business has picked up very well these past two months, because of the expansion of exports to the Republics of the River Plate." 102 To be sure, the troubles of the industry did not end suddenly in the final months of 1939, for not until two years later were the full effects of the wartime boom felt, as European and Japanese textiles disappeared from the world market. Then the Brazilian cotton textile industry embarked upon a period of prosperity overshadowing the "golden age" of the first decades of the twentieth century. "Fortunately, unexpected events growing out of the war have allowed the industry to find an equilibrium between its production and the requirements of its markets," a man closely connected with the cotton manufacture wrote in 1941.103 By a twist of fate, however, the two southern manufacturers' associations were forced to remove the keystone of the stabilization measures they had sponsored between 1931 and 1937. Twice in the month of October 1940, the Rio and Säo Paulo associations of entrepreneurs publicly admitted that the equipment of Brazilian cotton mills had to be modernized and otherwise improved because so large a percentage of it was both obsolete and of low productivity. And in the now traditional pattern they called upon the State to finance reëquipment because modernization of their mills involved the "wealth of the nation." 104 According to the plan advanced by the cotton manufacturers, the Bank of Brazil and other para-government institutions such as the social security institutes, to which industrial workers paid a percentage of their wages, would loan the necessary funds. In 1940, it should be recalled, the textile workers totaled 24 per cent of all industrial workers. 105 It must have been galling indeed for many manufacturers to pick up their morning newspapers in 1940 and 1941 to read that they were

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The Brazilian Cotton Manufacture

"profit mad" and lacked the "foresight and patriotism" of entrepreneurs because in many cotton mills the looms on hand could not keep up with the flood of incoming orders and because the domestic market was undersupplied as cotton goods disappeared or soared beyond the range of the pocketbooks of the lower classes. "Therefore," argued one newspaper, "it was an error to adopt measures that discouraged the initiative of those who wanted to invest in new cotton mills," merely because the government wished to aid the cotton manufacture which was considered in a "critical phase of overproduction." 106 Hindsight and the greatest war in the history of mankind had provided an unkind but certainly justifiable epitaph for the restrictive policies advocated by influential cotton manufacturers in the previous decade.

- 11 The War and its Aftermath

Cotton mill proprietors entered upon their most prosperous period of operations, the years 1940-1945, with the plant, equipment, and managerial techniques of the critical years of the thirties largely unmodified.1 The brake upon innovation and possible cartelization which government intervention furnished in the early thirties, was providentially applied at the end of the decade by war-created overseas demands for cotton goods. Without minimizing the contribution of the Brazilian cotton manufacture to the Allied war effort, it was perhaps unfortunate that an industry, which as late as 1930 considered itself woefully unprepared to compete in nearby Latin American markets, was catapulted overnight to a position of prominence. Brazilian textile manufacturers were called upon to market goods in Latin America, Europe, and the Near East and, in 1944, even to supply both UNRRA and the Conseil Français d'Approvisionnement with a total of 150,000,000 yards of cloth.2 That the industry could even partially fulfill these demands confirmed the faith of entrepreneurs in the effectiveness of their methods of distribution and production. Exports and not internal efficiency became an integral part of normal operations as industrialists came to view exports as a "manifest destiny," paralleling and perhaps supplanting the traditional pattern of exports of raw materials. The new frame of mind was best summed up by one entrepreneur who affirmed that the cotton manufacture enjoyed during the extraordinarily prosperous war years only what had been denied it before, "a normal life," and by a government official closely connected with the industry who wrote that "Brazil will indeed be a world power on the day we Brazilians drink imported coffee." 3

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The Brazilian Cotton Manufacture

Measured in physical output and value, cotton mill proprietors had good cause for their feeling of "euphoria" 4 from 1940 to 1945. Production climbed from 840,168,000 meters in 1940 to an all-time high of 1,414,336,000 meters three years later; in 1945 Brazilian mills were still turning out more than one billion meters. Even more spectacular than the expansion of total output in meters was that of exports. In 1941 alone, for instance, manufacturers and exporters shipped abroad 92,379,320 meters — far more than the total cloth exports of the preceding ten years. And by 1943, more than three times the exports of 1941 were passing through Brazilian ports, destined largely for Argentina and the Union of South Africa. Indeed, those nations absorbed more than 50 per cent of Brazilian cloth exports from 1941 to 1945, with Argentina taking the major portion. 5 Since Brazil ranked second among the nations of the western hemisphere in the size of its textile industry, and since the United States was involved in its own war effort, Brazilian manufacturers in the same period found ready purchasers in other underdeveloped nations of the Americas as well, selling to Uruguay, Venezuela, Paraguay, and Chile, and to the colossus of the north,® the United States, a total of 327,877,970 meters. 7 To meet constantly growing demands overseas, manufacturers continued the practices widely adopted during the thirties: they crowded into their labor force inexperienced rural workers, and ran their mills, wherever possible, twenty-four hours daily.8 As late as 1945, an inquiry covering a majority of cotton textile installations revealed that card sections were operating daily an average of 14.55 hours, spinning rooms approximately 15.30 hours, and weave sheds, 12.20 hours. 9 One can but surmise what were the average hours of machinery operation two years earlier when Brazilian cotton cloth production and exports were at their height. That the great drive to produce and sell abroad induced many textile entrepreneurs and cloth intermediaries to sacrifice both factory standards and business ethics was made clear in 1943 through the columns of a Rio newspaper ordinarily restrained in its criticism of those connected with the cotton manufacture and distribution. Under the headline, "Big Time Operators with Their Sleeves Rolled Up," the editor pointed to the loss in the prestige overseas of the Brazilian cotton textile industry caused by "exaggerated industrial and commercial profits and the quality of goods sold abroad." Exempting the largest mills from his attacks, he explained that less scrupulous cotton manufacturers sold inferior goods "to fill their pockets in every way." Export prices were inviting, but "stupid, unbridled greed" could not be satisfied by profit

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War and its Aftermath

margins ranging from 50 per cent to 80 per cent. "The overriding consideration is to make your pile' as quickly as possible . . . In our country during these wartime years, an industrial entrepreneur is judged incompetent if he hasn't earned at least 60 per cent on his invested capital." 10 Practically overnight the spread of the Second World War completely transformed the situation of the Brazilian cotton textile industry. Only two years after a leading spokesman for the manufacturers proclaimed (on the day before Pearl Harbor) that the industry was crisis-ridden because of overproduction, the profit and loss statements covering the operations of nineteen textile mills in 1943 showed an average ratio of dividends and bonuses to paid-in capital of a little over 25 per cent. 11 (Table 19.) Euphoria, indeed! TABLE 19. RATIO OF DIVIDENDS AND BONUS TO CAPITAL IN NINETEEN BRAZILIAN COTTON MILLS, 1 9 4 3 .

Mill Säo Pedro de Alcántara Sâo Joâo Evangelista Cotonificio Gavea Industrial Campista Confiança Industrial Corcovado Esperança Maria Candida Brasil Industrial America Fabril Nacional de Estamparía Industrial Mineira Cedro e Cachoeira Deodoro Industrial Industrial Itaunense Petropolitana Progresso Industrial Nova America Cometa

Capital (contos) 6,600 9,000 5,000 6,000 9,000 15,000 10,000 4,500 15,000 48,000 50,000 20,000 18,000 12,000 9,000 11,900 40,500 40,000 5,400

Dividends and bonus Ratio (contos) (per cent) 3,060 4,050 1,800 2,100 3,150 4,125 2,550 1,125 3,525 10,560 10,000 4,000 3,600 2,400 1,800 2,352 7,290 7,200 648

60 45 36 35 35 27.5 25.5 25 23.5 22 20 20 20 20 20 19.7 18 18 12

Source: Jornal do Commercio, November 18, 1951.

The extraordinary development of exports and of cotton textile manufacturers' earnings, combined with rising prices, caused the federal government to consider the situation of Brazilian consumers.12 Early in January 1943, the Coordinator of Economic Mobilization or-

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The Brazilian Cotton Manufacture

dered the prices of all cotton goods sold in Brazil to be frozen temporarily at the levels of December 1, 1942, and placed in the lap of the Federal Price Commission the job of formulating price ceilings for all products, particularly those used by the "less favored classes." The Commission realized quickly the "impossibility" of stabilizing the prices of textiles; 13 and, when it was brought to the attention of the Coordinator that ceiling prices would upset the cotton manufacture's operations, he promptly asked the Rio cotton manufacturers' association to work out a solution. Since the early thirties, industrialists had feared the possibility of government price-fixing. Domestic cotton goods shortages and rising prices in the early forties increased that possibility and probably influenced the manufacturers' decision to accept the Convenio Textil, an agreement between the federal government and the cotton manufacturers. Under the agreement drafted by the textile associations in 1943, 10 per cent of total cotton textile production of every mill was put under price controls, namely fourteen items of "utility cloth" (tecidos populares or people's cloth) whose prices were fixed both for manufacturers and retailers. Retail price varied from Cr. 1,90 to Cr. 3,30 ( 9.5 cents to 16.5 cents ) per meter. The agreement between the industry and the government covered annual production and distribution of approximately one hundred million meters; direction was entrusted to a supervisory committee composed largely but not exclusively of textile mill proprietors who proceeded to set up quarters in the offices of the Rio cotton manufacturers' association.14 In return for this concession, no ceilings were applied to the rest of cotton textile production whether sold at home or abroad. Evidently the idea of industrialists was to use the one hundred million meters of utility cloth to provide "presentable" clothing materials accessible to the pocketbooks of industrial workers and the "rural proletariat, the poorest and most unprotected." Otherwise, the distribution of textiles according to the free play of the market left areas of low purchasing power without a supply of basic cotton goods.15 According to a letter by one member of the supervisory committee, the restiveness of Brazilian consumers in the face of rising prices was a factor, too, in the creation of utility cloths. "The tecido popular," wrote textile industrialist Firmo Dutra in 1943, "marks a new era . . . which will inevitably assure Brazil . . . peace and tranquility in a restive and unhappy world, confronted by the 'social question' particularly in those countries which have not bothered to distribute better the profits of business." 16

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169

The problem of exports was also behind the formation in 1944 of another textile industry commission, directed and principally staffed by mill proprietors. At the request of the textile committee of the United States War Production Board's Combined Production and Resources Board, Brazil sent a commission to Washington in May 1944 to help apportion export quotas for cotton goods among United States, British, Canadian, Mexican, and Indian manufacturers. Brazil was assigned a quota of ninety million yards for distribution by UNRRA; in Washington, too, the groundwork was laid for a contract, later signed in Rio, whereby Brazil agreed to furnish the French Colonial Supply Mission with sixty million yards. 17 Although the first deliveries were made after more than a year had elapsed, and, despite the fact that Brazilian manufacturers eventually furnished only 27 per cent of the total UNRRA order, the now internationally recognized role of domestic industry "constituted an important event" in Brazil's economic development. 18 The new export agreements required a central agency to spur production, allocate quotas among mills, and control quality. On the return of the Brazilian mission, therefore, the Vargas administration in July 1944 "mobilized" the Brazilian cotton textile industry in the name of "national interest" and created the Textile Executive Commission or CETex as the industry's coordinating agency. The functions, personnel, and records of the Convenio Textil's supervisory group were incorporated into the CETex, whose president was Guilherme da Silveira Filho, a prominent cotton mill proprietor of Rio. In addition to the president, the CETex staff contained five other industrialists representing regional associations of cotton textile manufacturers and five government officials.19 Within nineteen months, however, some of the "general satisfaction" and "congratulations" of the Rio and other regional manufacturers' associations on the appointment of Guilherme da Silveira Filho turned into disapproval. On March 1, 1946, the Diario Oficial published a CETex order, signed by Guilherme da Silveira Filho, suspending all exports for ninety days. As far as many cotton manufacturers were concerned, the decree ended the euphoric times of the export cycle and brought back the old themes of overproduction and crisis.

2 An analysis of Brazilian cotton cloth exports, their long- and shortrun possibilities and their effect upon domestic supplies at the end of 1945 and the beginning of 1946, explains the CETex suspension.

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The Brazilian Cotton Manufacture

In the closing years of the war, there were many indications that the prewar suppliers of Brazil's wartime export markets would return at the close of hostilities. There was the example of the Union of South Africa, which imported 14 per cent of Brazil's total cloth exports in 1942; yet the following year the same nation absorbed only 11 per cent, as British mills strove to recover lost ground. 20 Furthermore, Brazilian cotton textile prices were judged exorbitant, as a representative of the Palestine Government informed the Rio cotton textile manufacturers' association in 1945. Visiting one of the largest wholesale exporters of Rio, he was reportedly impressed by the quality and assortment he found; his only complaint concerned prices, which he judged to be 60 to 120 per cent higher than those in the United States.21 That high prices on Brazilian cotton fabrics sold in the Union of South Africa cut off Brazilian cotton manufacturers from a potentially large market of Kaffirs was understood by some industrialists. Thus, in discussing the low income level of the Kaffirs, the largest group of purchasers in the Union of South Africa, one Rio cotton mill manufacturer observed in 1946 that the price of Brazilian shirtings and trouserings was Cr. 6.80, or 34 cents per yard. "A reduction in price, however, would open up enormous consumer potentialities," he concluded. "Our goods should be priced to reach mainly the poorest classes of the population." 22 Opinion in the Union in 1943, on the other hand, was not too favorable, even in regard to the quality of Brazilian cotton textiles, many finding them below the standard of prewar British and Japanese goods. The problem facing Brazilian cotton textile entrepreneurs who wished to maintain exports in the postwar years was bluntly phrased by a South African. Whether Brazil would share the Union's market, he wrote, depended on "whether she can improve quality and bring down prices so as to meet competition from other sources." 23 The future of Brazil's Latin American textile markets which absorbed, between 1940 and 1945, 71 per cent of total Brazilian exports, was equally unpromising in the last years of the war. Even earlier, when Brazilian manufacturers visited Buenos Aires in 1940 to obtain an agreement covering increased Argentine imports of Brazilian cotton goods, they sensed the opposition of Argentine industrialists who felt their investments were "seriously threatened" by the competition of Brazilian exports of coarse fabrics, those weighing more than 130 grams per square meter. 24 The impetus to the industrialization of underdeveloped areas in Latin America imparted by war-induced shortages and high prices for goods temporarily in short supply could not be

War and its Aftermath

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circumscribed to Brazil. During the war, a Sao Paulo cotton manufacturer warned that modern Argentine textile mills would eventually compete with Brazilian goods sold there.25 At the end of the war a Brazilian textile entrepreneur, returning from a trip through Latin American nations, reminded Brazilians that Argentina, Chile, and Uruguay—Brazil's first, second, and fourth largest Latin American markets, 1941-1945 — were industrializing "rapidly and unexpectedly under the stimulus of high cotton textile prices of recent years." In Argentina, Brazil's largest wartime customer, it was predicted that mills in existence and on planning boards would soon produce all the coarse and medium-grade goods hitherto supplied by Brazil. Brazilian exports of fine goods to Argentina were threatened, too, because Argentina could obtain them from Great Britain, drawing on the credits amassed there during the war.26 Moreover, competition was impossible because Brazilian production of fine goods was small and consequently costs of production were high. The Brazilian industrialist therefore recommended that his colleagues concentrate "as rapidly as possible" on those markets which showed no indication of "immediate industrialization." 27 Indeed, the brief period of Brazilian preëminence in Latin American textile markets during the war cast influential cotton textile entrepreneurs in the role of "economic imperialists." How else can be interpreted the following memorandum, circulated privately before the Inter-American Conference on Problems of War and Peace held in Mexico in 1945? "It must be emphasized," ran the memorandum, "that the supply of new textile equipment should not be the subject of study or debate . . . because this might facilitate equipping or reequipping other Latin American nations which the Brazilian textile industry is now supplying with cotton goods." 2 8 Preservation of a foothold in foreign markets, according to the information available to those Brazilian manufacturers aware of the problem, was tied closely to price, and to a lesser extent, to quality of Brazilian cottons exported at the close of the war. As far as Brazilian cotton mill proprietors reasoned, the high quality and low price of finished goods depended upon immediate installation of new highly productive and efficient machinery.29 To garner the fruits of modern or modernized equipment, the reëquipment had to occur rapidly, else overseas markets would be lost. And even here there was no ground for optimism. In May 1945, the United States Embassy in Rio informed the Brazilian government that overworked American machine shops were not prepared to deliver new textile equipment to Brazilian manu-

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The Brazilian Cotton Manufacture

facturers for some time. This was immediately interpreted to mean that the United States was willing to export only obsolete or reconditioned equipment. 30 In July word came from the Brazilian consul-general in London that Great Britain, too, was putting its mills in condition to compete in its former markets and was shipping "worn-out and ancient" textile equipment for sale to underdeveloped nations eager to industrialize. The British Board of Trade, in fact, informed the Brazilian diplomat that it would certify for export only machinery classified as "inferior" for its own mills. Nor would the Board assume any responsibility for the condition of the machinery offered, shifting the onus upon the Brazilian importer. One long-established importer of textile machinery was accused by a Brazilian manufacturer of refusing to accept orders in order to channel would-be buyers toward the acquisition of castoff equipment, some of which was often more than a quarter century old.31 Needless to say, all this information was made available to Brazilian textile industrialists.32 In brief, it should have been perceived at the close of the war that the years of large-scale Brazilian cotton textile exports were numbered. The only excuse for continued faith in exports was the heavy orders for overseas shipments placed with Brazilian firms in the last six months of 1945. There were, however, more pressing reasons that might have turned the eyes of Brazilian entrepreneurs from exports to the home market. The fact of the matter is that the estimated dearth and high prices of cotton goods available for Brazilian consumers weighed heavily in the CETex decision to halt exports for ninety days, as of March 1, 1946. The CETex had the dual responsibility of supervising both external and internal distribution; and, at the beginning of 1946, both the government and the CETex president — a cotton mill proprietor, it must be repeated — felt that exports were affecting adversely both the supply and price of cotton goods to Brazilian consumers. "The factor of price alone governed manufacturers' choice of markets," a CETex official asserted of conditions at the end of 1945, "and the possibility of keeping in Brazil a quota of cloth indispensable for the modest clothing requirements" of the mass of Brazilian consumers came to depend upon domestic prices reaching the level of export prices. 33 A number of factors entered the calculations of the CETex's president and the government officials working with him. First of all, although total production of cotton cloth fell off 24 per cent between 1943 and 1945, exports fell in 1944 only to rise in 1945 to 93 per cent of the exports of 1943, the peak year. 34 Stimulating exports was a

War and its Aftermath

173

government measure issued after the ousting of Getulio Vargas in October 1945, which ordered the prices of all domestic cottons cut 10 per cent below the levels of September 1, 1945.35 In effect, the government scrapped the 1943 agreement with the cotton textile industry which had left the latter to dispose of 90 per cent of production at what the market abroad or at home would bear. However well-intentioned the measure may have been, the measure of September 1945 was illconceived. A casual reading of Säo Paulo and Rio newspapers would have revealed that the public was aware that the overseas prices of Brazilian cotton goods had soared steadily since 1939. According to the figures published in one newspaper, the average value per metric ton of cotton goods exported had risen from 14,83 cruzeiros (1939) to 52,13 cruzeiros (1944). 3 6 And in the files of the CETex there were at hand statistics showing that average export prices were higher than average domestic ones at the mills; significantly, in the period 19441945 average domestic prices were rising more rapidly than average export prices.37 Clearly, export prices were forcing upward the level of domestic prices. Moreover, manufacturers and exporters had a further incentive to sell abroad: payment on overseas shipments was immediate while domestic buyers delayed anywhere from two to six months.38 The consternation of CETex president and cotton manufacturer, Guilherme da Silveira Filho, was understandably great in the last months of 1945 and in the first three months of 1946, as reports came to the CETex that exports were rising rapidly and deliveries to Brazilian consumers falling, particularly after the ouster of the Vargas regime.39 Statistics indicated that the amount of cotton goods produced and available for domestic consumption in 1945 was inadequate to meet the normal domestic consumption. Street has calculated that the national consumption rose from 900,000,000 meters in 1939 to 1,170,000,000 in 1950, approximately 24,500,000 per year. On this basis it seems that in 1945 Brazilian textile manufacturers had undersupplied the domestic market by amounts ranging, according to different estimates, from 164,960,000 to 291,270,000 meters. This state of affairs was accredited to decreased total production and increased exports. The calculations entering into the larger estimate are exemplified in Table 20. The CETex president, at the end of February 1946, was aware that the distribution of utility cloth from the middle of 1945 onward had broken down, and he was informed that in the first quarter of 1946 the average price of domestic cottons had risen to 6,50 cruzeiros per meter as com-

174

The Brazilian Cotton

Manufacture

pared with 3,17 cruzeiros (1944), and 5,27 cruzeiros (1945). 40 Although the Rio manufacturers' association later contended that deliveries to the domestic market were not as low as the CETex affirmed, the value of the CETex order suspending exports does not consist in the validity of Brazilian statistics. The CETex acted on the basis of available information and took a "preventive" step.41 TABLE

20.

ESTIMATED

BRAZILIAN DOMESTIC

CONSUMPTION,

AND E X P O R T S OF COTTON C L O T H , 1 9 4 3 - 1 9 4 5

Total Production Total Exports Less Sacking Available for Domestic Consumption Estimated Domestic Consumption Deficit or Surplus

DELIVERIES,

(meters).

1943

1944

1945

1,414,336,000 260,458,180 1,153,877,820 100,000,000

1,382,700,000 198,947,040 1,183,752,960 100,000,000

1,073,490,000 242,260,000 831,230,000 100,000,000

1,053,877,820

1,083,752,960

731,230,000

973,500,000

998,000,000

1,022,500,000

+ 80,377,820

+ 85,752,960

- 291,270,000

Source: Street "A industria textil," pp. 100, 119; Industria textil algodoeira, pp. 170, 232; Guilherme da Silveira Filho, Memoria, p. 35.

For the study of the Brazilian cotton entrepreneur, more significant is the fact that neither the provisional government which ran Brazil until elections in 1946 nor the manufacturer-president of the CETex trusted the majority of Brazilian textile manufacturers to resist the lure of overseas markets and to concern themselves with the Brazilian consumer. When industrialists suggested that exports continue up to an agreed-upon amount, the proposal was rejected.42 As members of the CETex, the representatives of the manufacturers' associations agreed under protest to the ninety-day suspension only because it would have been "unseemly" and "demoralizing" for the government to order the suspension without the concordance of the joint industrygovernment CETex. 43 In siding with the government members of the CETex, Guilherme da Silveira Filho declared that he was well aware of the billions of cruzeiros (he called them "super-extraordinary profits") with which uncontrolled exports promised to line the pockets of manufacturers and intermediaries. In the long run, he argued, such high export prices threatened to drive local prices upward, raising the Brazilian cost of living, and thereby cost of production in Brazilian mills. Eventually, Brazilian cottons would be priced out of foreign mar-

War and its Aftermath

175

kets. What most disturbed him, however, was the realization that his fellow entrepreneurs of the Brazilian cotton manufacture insisted on exports to maintain a policy that satisfied "their desire for immediate gain, though inimical to the interests of the Brazilian people and to the real interests of the domestic cotton textile industry." 44 3 In acquiescing to the CETex order halting exports, industrialists consoled themselves for their "sacrifice" with the expectation that the prohibition would end in ninety days. On June 7, to their surprise, and without consulting them, the CETex president extended the prohibition for another ninety days; subsequently a presidential order continued the prohibition to December 1946, on the ground that the domestic market continued to be undersupplied. 45 Representatives of the industry insisted that the enforcement of the measure had entailed the loss of foreign markets. 48 According to their argument, the industry now had the problem of disposing annually of some 200,000,000 meters, the difference between production and domestic consumption. The allegations of incipient "bankruptcy," of "crisis," and "overproduction," unless exports received government support, touched off a public reaction. 47 Thus, in the postwar years of the late forties, when textile manufacturers declared that government support of exports could alone dispose of alleged excess production, there rose a vast chorus of criticism. Many declared that the traditional policy of immediate application of expedients prescribed by industrialists failed to improve the lot of Brazilian consumers. If industry and government had become closely integrated over the years, affording industrialists the blessings of governmental favors in the form of tariffs, subsidies and — for the brief but crucial period of the middle thirties — temporary maintenance of the technological status quo, industrialists had no reason to overlook a day of reckoning. The consumer public, increasingly vociferous and critical, now called upon the cotton industry to recognize that to every privilege there was attached an accompanying responsibility. The time for a long overdue accounting had come. Analysis of the origins and nature of popular dissatisfaction and criticism of Brazilian cotton textile entrepreneurs in the postwar period indicates some of the shortcomings of the successful, century-old industry. Popular criticism was sometimes unjustified; such criticism nevertheless reflected what many Brazilians thought of entrepreneurs.

176

The Brazilian Cotton Manufacture

Textile mill operations paid handsome dividends to management and stockholders during the war years. To this prosperity Brazilian consumers felt they contributed in the form of shortages and high prices. Consequently, the complaints raised by cotton textile entrepreneurs over export restrictions, and the absence of price relief for consumers at the end of the war, caused many consumers and sections of the local press to demand an undistributed dividend: signs of social consciousness from cotton manufacturers, or as it was stated in July 1945, the "social responsibility . . . of bettering the living conditions of the people who are overburdened by the cost of living." 4 8 While the index of wholesale prices for principal foodstuffs based on the years 19281929, had fluctuated from 92 in 1930 downward to 84 in 1933 and gradually upward to 119 in 1937, the period from 1940 to 1945 presented a different picture. Although it is not strictly comparable, the retail TABLE 2 1 .

R E T A I L P R I C E INDEX OF P R I N C I P A L FOODSTUFFS IN T W E N T Y - T W O C A P I T A L C I T I E S OF B R A Z I L ,

Commodity ° Sugar ° Rice ° Bacon fat Potatoes β Coffee Meat Onions Jerked beef * Manioc flour Wheat * Beans Milk Butter β Corn Eggs Bread β Salt Bacon

1940 (cruz) 1,40 1,22 4,16 1,54 3,51 2,14 2,48 4,12 0,62 1,62 1,22 1,10 10,36 0,43 2,50 1,87 0,50 3,53

1940-1945.

1945 (cruz) 2,94 2,83 9,82 3,61 7,27 5,49 7,39 11,44 1,71 3,24 2,36 1,99 24,32 1,12 6,72 3,33 1,12 8,17

Index (all items) Index (basic foodstuffs)

1945 (index: 1940 = 210 232 236 234 207 257 298 278 276 200 293 181 235 260 269 178 224 231 234 246

* = basic foodstuffs. Source: Adapted from Anuario estatístico. Ano VI-1941/1945 (Rio de Janeiro, 1946), pp. 3 2 0 - 3 2 4 ; Anuario estatístico. Ano VII. 1946 (Rio de Janeiro, 1947), pp. 3 5 7 - 3 6 1 .

War and its Aftermath

177

price index of principal foodstuffs in twenty-two capital cities in 1945 showed an increase of 134 per cent over 1940 ( Table 21 ). Consumer resentment stemmed from manifold causes. Cotton manufacturers, for example, had earned extraordinary profits because the federal government applied no price controls except on the 10 per cent of production covered by the Convenio Textil of 1943. Yet, in the months following the CETex prohibition on exports, manufacturers and wholesale dealers kept goods off the market in the hope of selling abroad, where prices were higher, once the prohibition expired; they cut the amount of utility cloth distributed by manufacturers and retailers. By early 1947, manufacturers were no longer bound by the Convenio Textil, for the wartime mobilization had expired.49 This officially terminated the period of tecidos populares. The emergency was over in a technical sense, but certainly not as far as middle- and lowerclass consumers were concerned as they saw textile and other prices soar in Brazil's inflationary spiral.50 Immediately newspaper articles accused proprietors of the largest cotton mills — the "sharks" (tubarôes) — of withholding production and intriguing against the "people and the government." "The nation can not look on indifferently at the activity of those who earn tremendous profits and are indifferent to the people." 51 It was hard to see how industrialists could insist on claiming overproduction, as they had during the thirties, when it was patent that low-priced utility cloths were snapped up by "marginal" consumers, the "unfortunate classes" formerly unable to buy at "normal" prices. To some Brazilians it appeared that an industry favored by the government during the war had turned its back upon a neglected sector of the Brazilian public by abandoning the utility cloth and the goal of "producing more, more cheaply" and therefore disqualified itself from governmental favors. 52 Labor was a factor which can not be overlooked in the widespread criticism of cotton manufacturers in the postwar years. Indirectly, the war accorded to Brazilian factory labor a greater sense of its role in the national economy than was ever felt before. Mobilization of the cotton textile industry in 1944 embraced not only employers but factory employees as well; the latter could not leave one cotton mill for a job at higher pay in any other industrial establishment without permission from employers.53 This curb on labor's mobility in wartime, the long hours worked each week, and participation of a labor representative in a CETex sub-commission helped drive home the contribution of textile laborers in the waging of the war. Participation in the CETex

178

The Brazilian Cotton Manufacture

alongside "respected and educated" industrialists was interpreted as a "sign of better times for labor in the future, for the workingman formerly left to languish in eternal oblivion now takes his first steps in the fight . . . for progress." He was, in the judgment of the CETex labor representative, an "element which must participate in the many political, social, and economic decisions shaping Brazil's destiny." 54 A quickened sense of Brazilian labor's importance was revealed in the support which the Säo Paulo clothing workers offered the federal government when price controls were applied to cotton goods in 1946. Cotton textile entrepreneurs were portrayed as earning abnormal profits ("publicly and notoriously known"), while consumers were facing "penurious" times. The clothing workers' union was ready to join with "men of good will" to curb the "common enemy" from the conviction that "hunger and misery" made democracy impossible.55 Cotton manufacturers were placed in a particularly unfavorable light when the government's postwar price control commission sought to placate both manufacturers and distributors. At first the commission ordered, in March 1947, that each manufacturer stamp the selling price per meter on every meter leaving the factory; and then the commission set the ceiling prices ("maximum margins of profit") for the wholesaler (grossista) (15 per cent above the factory price), the jobber or atacadista (20 per cent) and for the retailer (50 per cent above the factory price). 66 For many years the public had suspected the mark-up between factory price and retail price, and the cost of multiplicity of middlemen. Now they were furnished with some details.57 Manufacturers objected that the same kind of cloth was frequently sold to different buyers at varying prices. Distributors argued that once consumers learned of the spread between factory and retail price, they would fail to deduct the distributors' expenses and price fixing would defeat the aim of the commission, "public tranquility," by generating "the hatred of the public toward merchants." On the other hand, if each meter bore a ceiling price to the consumer, prices set below this figure would arouse the consumers' approval.58 Newspapers were quick to point out that there was complete agreement between manufacturers and distributors on the need to stamp only the ceiling price to the consumer; manufacturers accepted the assigned mark-ups, insisted some newspapers, because the distributors who dominated the field were also large stockholders in cotton mills. Instead of reducing prices by selling directly to the consumer, as a few mills were doing successfully, most cotton mills remained de-

War and its Aftermath

179

pendent upon their traditional distributors, the grossistas, and sold only to them, complained one clothing manufacturer. 59 One influential newspaper analyzed the published balance sheets of a cotton mill and a cloth wholesaler and concluded that the former could reduce prices 45 per cent and the latter at least 10 per cent and still earn excellent returns on capital invested. 60 Spokesmen for the cotton manufacturers inferred from the unfavorable press comment that they were accused of being the largest "contributors" to spiraling prices. And, when they insisted that they had to raise prices to meet heavier outlay on wages and raw materials in the postwar years, former president Vargas, a senator and head of the Brazilian Labor Party, charged that the returns on 1946 sales more than compensated for rising costs of production. 61 Others, conceding that costs had indeed risen, insisted that the stock dividends and directors' bonuses paid by cotton mills had risen, too.62 The price control commission yielded to the joint pressure of cotton manufacturers and wholesalers, however, and in June ordered only the maximum retail price ( double the factory price) stamped on every meter of cloth sold.63 Actually, the postwar textile industry's insistence upon exports to save it from the woes of alleged overproduction reopened the issues of the great debate of the thirties which wartime prosperity had shelved temporarily. If prices and earnings were high, as the discussion of price control measures showed, and if per capita consumption of textiles remained low, how airtight, after all, was the industrialists' brief, based upon overproduction and the need to export? This line of reasoning led, in turn, to public examination and criticism of what textile entrepreneurs had done with the high earnings of the wartime years to prepare for the inevitable competition abroad and to meet the need for cheap cottons at home. There was considerable evidence that a high percentage of wartime earnings was distributed in cash and stock dividends and in bonuses to textile mill directors.64 One long established and nationally known Brazilian cotton mill distributed in two years, 1942 and 1943, among its eight shareholders who held all of the firm's 16,000 shares, a total dividend of Cr. 5,102,000 on share capital of Cr. 3,200,000.65 A Rio mill, one of the largest in Brazil, increased its capital stock from 9,000,000 to 18,000,000 cruzeiros in 1941 and again in 1943 to over 40,000,000 cruzeiros through stock dividends. 66 These examples only typify the financial practices of many cotton mills during and after the Second World War. 67 Undoubtedly inflation influenced the high

180

The Brazilian Cotton Manufacture

returns on cotton mill operations at this time. However, in view of subsequent claims that mills had no capital for expansion, there is reason to believe stock dividends merely concealed the rate of cash dividends. Naturally, the discussion of earnings in this fashion, coupled to manufacturers' complaints over rising costs, brought to the fore the corollary problem of costs of production. Cost accounting was, practically speaking, neglected in Brazilian mills. In traditional fashion, bookkeepers added up all the firm's expenses and, dividing by the number of meters produced, set the prices of finished goods.68 As late as 1945 it was reported that "rare are the textile mills that have systems of cost accounting," and members of one textile group shamefacedly admitted that the "only accounting system they had was a simple commercial one . . . it was impossible to furnish any details because they did not know the cost of production in their mills."69 Some newspapers reasoned that, as long as mills sold at high prices abroad or at home, cost and quality controls were unnecessary. 70 A surplus of cotton textiles on the domestic market hardly warranted the conclusion that the nation was adequately clothed or that manufacturers were producing as cheaply as possible. To the contrary, these facts and the experience with utility cloth merely verified, in the eyes of certain commentators, a gap between consumers' needs and purchasing power. "Why can't textile entrepreneurs accept a few sacrifices and concessions," it was asked, "in exchange for increased sales to the domestic market?" The industry's role was to provide 45,000,000 Brazilians with cotton goods at prices they could afford, for herein resided the "mission" and "great potential" of Brazilian cotton textile industrialists. 71 By way of summary, many Brazilians felt that cotton mill entrepreneurs not only failed to set aside adequate reserves from wartime earnings for the modernization of their mills in the postwar period, but insisted after 1945 on maintaining unprecedented profit levels out of line with costs of production. As long as manufacturers could sell production at home and the "excess" abroad, they could operate successfully without truly competitive conditions arising. This explained why domestic cotton prices could remain high while "overproduction" developed. Finally, in the absence of competition, textile entrepreneurs were not goaded to undertake heavy outlays for the overhaul of management. Twenty-five or thirty years earlier, Brazilian cotton manufacturers might have pushed toward their goals heedless of the reaction of the

War and its Aftermath

181

middle- and lower-class groups. The worst depression and, close upon its heels, the most destructive war in modern history, supplemented by the effects of Brazil's industrialization, made such a policy difficult after 1945. The report of a CETex official in 1946 investigating labor unrest in the jute mills of southern Brazil (whose conditions approximated those of cotton mills) emphasized what industrial labor and the consumer in general thought of industrialists' failure to plow back wartime earnings. Wishing to hear what textile laborers were saying, the CETex official spent several days in the sections where they resided. He noted that most knew how to read, that they clustered about the radios in the bars, and that they commented on the cost of living and the annual published statements of mill operations. Said one "apparently educated" mill hand: "It would be fine if the bosses were building up reserves, as they once did, to cover future wear and tear of machinery and dividends, putting the remainder in the banks so that some day our children and our grandchildren will work in a bigger and better mill; instead, they issue stock dividends, transform their enterprises into limited liability companies so that the government will have to help them in bad times,72 and apply most of annual earnings to construct skyscrapers at a time when we can't find rooms and never had a harder time to make ends meet." That it was not easy for industrialists to change their behavior, he had no doubts. The problem facing the individual entrepreneur was "how to change now, if fellow industrialists A or X are earning [with the same methods] even more money?" 73 4 Opposing change, however, was more than the example of individual entrepreneurs. For more than half a century, most Brazilian cotton manufacturers and other industrialists had hitched their wagons to the star of government protection.74 While some might call this a sign of little "creative capacity," "fighting spirit," or "sound intelligence," to many industrialists government assistance in time of crisis apparently assured survival.75 Not that cotton manufacturers abandoned the principle of private initiative in economic activity. Nevertheless, while affirming the preëminence of the latter in Brazilian industry's "Economic Charter of Teresopolis," drafted in May 1945, cotton manufacturers joined their colleagues of other industries in welcoming a "certain degree" of state interference as, for example, where necessary enterprises exceeded the "power, capacity, or convenience" of private

182

The Brazilian Cotton Manufacture

initiative. Industrialists carefully stipulated, however, that they were to be heard beforehand whenever the State contemplated direct action.76 These principles were implicit in the thinking of cotton manufacturers during the postwar years. The government, in fact, was at the core of the industry's proposals to solve the crisis of overproduction. Cotton manufacturers' associations insisted that the government, because of the CETex prohibition of exports in 1946, had prevented the maintenance of a foothold for Brazilian cotton goods in overseas markets; and they insisted that government-sponsored exports could alone siphon away excess annual production, estimated at 20 to 30 per cent of total cloth output, which the domestic market could not absorb. The greater the decline in exports after the CETex prohibition was lifted at the end of 1946, the greater was the clamor for government assistance to exports.77 The arguments advocating assistance to exports changed in only minor fashion between 1946 and 1950. In 1946 it was stated that wartime exports had not been "improvised" but were the reward of years of perseverance and careful study; without exports the cotton manufacture was threatened with crisis. If some industrialists and statistics on earnings disagreed with this, the principal cotton manufacturers' association made no mention of it. 78 By 1948, government assistance was spelled out in the form of favorable exchange rates and later, drawbacks; and in the following year the industry was declared to be an "eminently exporting one" because normal conditions were achieved only when excess production was exported.79 Lest such a conclusion contradict low per capita consumption of cotton goods in Brazil, manufacturers agreed that exports constituted a method to carry the industry until the level of domestic consumption were raised by measures involving all sections of the economy. Meanwhile, "the industry can not wait." 8 0 At their second convention or round table, held in 1949, cotton manufacturers emphasized another essential area in which government collaboration was requested: financial support for modernizing and reëquiping cotton mills. There had been hints to the public authorities as early as April 1946 that company reserves were inadequate to finance modernization unaided, because postwar prices of machinery had soared far beyond the conservative calculations of textile manufacturers.81 They admitted that depreciation and replacement allowances had really gone into wartime dividends and bonuses, despite the fact that high wartime earnings were defended on the ground that machinery had to be replaced.82 The need for government

War and its Aftermath

183

financial aid for mill modernization was strengthened by the argument that improved installations would prepare the Brazilian cotton textile industry to compete abroad; it must be remembered, too, that the disposal of excess production through exports was the greatest issue before the manufacturers at their convention. Where all industrialists agreed that the textile industry was "linked to the basic structure of the State," it was not unexpected that they concluded that the government's Bank of Brazil should provide long-term, low-interest-bearing loans (tentatively set at 6 per cent for ten years) for the purchase of new machinery.83 Even an economist well acquainted with the cotton manufacture and generally uncritical of its assertions explained, a few months after the convention, that textile entrepreneurs had themselves to blame for the lack of capital to finance modernization. Stock or bond issues could conceivably raise the funds to cover plant modernization. Unhappily, the shares of cotton mills were generally "controlled by the members of one family or at least by a closed group hostile to the entry of new shareholders." Nor could cotton mills offer interest payments on a potential bond issue that could match the 11 per cent interest paid by government securities nor the 8 per cent banks paid on sight deposits. Potential bond subscribers, finally, were deterred from investing in cotton mills because the "hermetic nature" of the companies left outsiders in the dark about their financial standing.84 Thus, in convention assembled, Brazilian cotton manufacturers in the middle of the twentieth century furnished the public and the government with both an auto-diagnosis and an auto-prognosis. At the price levels established by cotton textile entrepreneurs, annual domestic consumption fell short of total production. Exports to nearby countries represented the only policy to avoid the bankruptcy of the industry and thereby to preserve the nation's economic equilibrium. Ultimate responsibility rested with the government: first, to raise national income and create a reservoir of consumer purchasing power; second, to facilitate cotton cloth exports; and, third, to finance modernization and reëquipment of existing plants to permit manufacturers to compete abroad. Those outside the industry were inclined to ask whether the program of cotton textile mill proprietors shifted the onus of improvement from the shoulders of those best suited to bear it, and if the time and energy spent in discussion might not better be applied to "rational organization of production, thorough investigation of [home] markets,

184

The Brazilian Cotton Manufacture

creation of an improved system of distribution and advertising, and in the adoption of improvements that increase production and lower costs." 85 Those critical of Brazilian cotton textile entrepreneurs found, in 1951, support in a United Nations report on factors influencing labor productivity in the cotton textile industry of five Latin American nations. The report singled out as the two fundamental causes of backwardness "stagnation of technical progress" in equipment and "lack of progress in management." 86 In the case of the largest cotton industry studied, that of Brazil, where 95 per cent of the looms and 91 per cent of the spindles were classified as old, the investigators recommended that it was "more important to reorganize old industry on a new administrative basis than to modernize equipment and expand the installations." It was observed that, even in Säo Paulo, the area of most modern textile installations, modern machinery was not being used to "best advantage." 87 Higher productivity depended first, then, on modernization of management. At mid-century this was the greatest challenge confronting Brazilian cotton textile entrepreneurs.

-12 -

Summary and Conclusions

In its formative stage ( 1840-1892 ) Brazilian entrepreneurs established the cotton manufacture, employing local capital and labor along with indispensable foreign machinery and technical assistance, plus important though unpredictable government support. By 1892, basic patterns of the industry had emerged which influenced developments during the next half century or more. Mills and productive capacity were concentrated in the area of Rio de Janeiro, the Federal District, Säo Paulo, and Minas Gérais — the chief region of urbanization and population concentration. As representatives of prominent cloth wholesale houses, mercantile entrepreneurs — many of Portuguese birth — now occupied key positions in mill management; consequently, there was close liaison between mills and large distributors. Paternalism ruled labor-management relations. Industrialist-entrepreneurs recognized and insisted that tariff protection was essential for the preservation and expansion of the industry. In periods of economic disequilibrium affecting domestic sales, manufacturers urged the government to intervene in their behalf. Cotton manufacturers, enjoying a privileged position in the national economy by 1892, expanded installations and production and widened the domestic market. Despite economic fluctuations in the second stage of the industry's development (18921930), the industry benefited from high profit ratios which attracted many entrepreneurs in the postwar years. Undoubtedly the renewed cultivation of cotton in Säo Paulo, this time on a large scale, contributed to the expansion of the industry there after 1918. The break-up of the pattern of world production and trade characteristic of the previous half century affected profoundly the Brazilian cotton manufacture after the First World War. Toward the end of the

186

The Brazilian Cotton Manufacture

1920's manufacturers saw crises on all sides and turned increasingly to government intervention as the first and last resort. Government intervention was proclaimed indispensable for the industry's survival in the third stage (1930-1950). Termination of world conflict in 1945 and the rapid loss of wartime overseas markets brought from manufacturers renewed warnings of crises and increased criticism from consumers. What was now open to question was the utility of traditional solutions for ever-recurring "crises." Approximately a century after the establishment of the first cotton mills, it was clear that in some respects the cotton manufacture in Brazil was a developed segment of an underdeveloped economy. In view of the stages in the century-old evolution of the Brazilian cotton industry, the generally accepted timing of world economic trends, and, in particular, of industrialization in Brazil needs reëxamination. Specifically, certain phenomena associated with the industrialization of Europe, Great Britain, and the United States appeared in Brazil after a shorter time lag than is commonly recognized. At the middle of the nineteenth century, when Europe's industrialization created a demand for primary products which Brazil and other Latin American nations were able to supply, Brazilians were already evaluating economic liberalism concurrently with their European and North American contemporaries. When the Cobden treaty system was abandoned in the late seventies, Brazilians too campaigned for effective tariff barriers and the abandonment of laissez faire and the international division of labor. And when industry and government in the industrialized nations grew increasingly interdependent after 1890, a pattern accentuated by the First World War, inter-war economic fluctuations, and by the development of nationalism and bureaucratic centralization, a similar phenomenon occurred in Brazil. Thus, Brazil's success as a producer of primary products and the concentration of foreign observers upon that facet of the Brazilian economy have obscured the slower, concurrent, and more significant evolution of Brazilian industrialism. Unquestionably Brazil's nineteenth-century agrarian economy affected the nascent industrialism. The importance of Brazilian planters and plantations between 1870 and 1914 may account for patterns of activity in the cotton manufacture: paternalism in labor relations, the role of the state, tardy response to change — a conservatism inherited from the landholding aristocracy and merchant oligarchy, the elite group of Brazilian society in the

Summary and Conclusions

187

nineteenth and early twentieth centuries. From the elite of planters, merchants, and industrialist-entrepreneurs, a product of the integration of the Brazilian and the world economy, came those who adapted modern capitalism in Brazil and who established cotton mills in a plantation economy. As early as the 1890's the leaders of Brazilian cotton manufacture advocated practices which converted them forty years later into a business oligarchy operating closely with government. The frontier between industrialization in the national interest and legalized favoritism for a minority of cotton industrialists was vague and easily passed. Here cotton manufacturers merely followed the traditional patterns of planters and merchants who demanded and received from the state both concessions and privileges in the nineteenth and twentieth centuries. Cotton manufacturers refined the techniques of government intervention, exerting pressure in direct proportion to their industry's importance in the national economy after 1890. Despite protestations of faith in economic liberalism, private enterprise in the cotton manufacture has long been closely associated with government intervention; such dependence upon the state seems to underscore the brief heyday of economic liberalism and the continuity of mercantilist«: practice in Brazil. As late as 1930 the industry obtained its concessions and privileges from the state without seriously affecting other interest groups; after 1930, however, a rapidly diversifying economy produced interest groups equally vociferous and influential. At the middle of the twentieth century it is impossible to grant comparable concessions wholesale without disorganizing the economy and inviting outspoken public criticism. Expansion of output and of markets during the Second World War and the loss of overseas markets in the postwar era stimulated a reëxamination of the cotton manufacture's role in the national economy. After 1945 it was evident that the textile industry of technologically more advanced nations eliminated the Brazilian industry from overseas markets and could threaten the domestic market in the absence of protective tariffs. It was equally clear that government intervention in various forms, the absence of effective competition, and a rapidly growing population had long sheltered the industry from the effects of technological and managerial obsolescence. Shortrun planning, a circumscribed view of the national economy, and repeated reliance upon expediency emerged as the dominant features of cotton manufacturers' thinking. Traditional patterns of entrepre-

188

The Brazilian Cotton Manufacture

neurial activity in the Brazilian cotton manufacture, which had operated successfully since 1892, were under fire after the Second World War. Whatever the factual basis, Brazilian consumers in the postwar era looked upon cotton mill proprietors as businessmen more interested in profits than in the "stewardship of wealth." Indeed the successful evolution of the cotton industry within the context of Brazilian industrialization opened affluent cotton manufacturers to attack as long as consumers judged they were not benefiting from the increase in national income, one of the promises of industrialization. And those who had apparently profited least by industrialization were Brazil's rural consumers. Any improvement of their standard of living could expand significantly the domestic market for cotton goods and relieve mill proprietors of the problem of excess productive capacity. The problem of cotton textile entrepreneurs was indissolubly linked with the national economy; a sound cotton manufacture could not exist alongside a sick rural economy. But amelioration of the rural dwellers' standard of living, however easily undertaken with the techniques of modern economics, remained essentially a political problem. For the maintenance of the Brazilian political structure, as one Brazilian political scientist has observed, still depends upon a rural oligarchy and an impoverished rural electorate. Higher wages for rural workers, changes in patterns of sharecropping or tenancy, could threaten the stability of the political system. Or, as Victor Nunes Leal has succinctly phrased the situation of agriculture and industry in the Brazilian economy: . . the domestic market does not expand since the cost of living rises and the rural population remains incapable of consuming; without a domestic market, industry fails to prosper, it fails to keep abreast of technological advances and must continually appeal for government protection." Although many Brazilians have asserted that the benefits of industrialization, as seen in the evolution of the cotton manufacture, seem meager, industrialization must be put in a larger context. Industrialization's promise is not solely more, better, and cheaper goods, it is part of a complex modernization of society wherever it has been introduced. And modernization is not a reversible process. Brazilians would neither eliminate their industrialization nor halt the progress of the cotton textile industry. On the whole they wish to improve and extend industrialization, and their attitude toward the textile industry and its entrepreneurs shows this.

Appendixes Bibliography Notes Index

Appendix I. T H E BRAZILIAN COTTON T E X T I L E INDUSTRY,

Year

1853* 1866* 1882* 1885* 1905 1909* 1910* 1915 1921 1924 1925 1926 1927 1928 1929 1932 1946 1948

Number mills

8 9 46 48 110 161 137 240 242 244 257 329 354 347 359 355 420" 409"

Capital (contos)

10,000 5,005 e 165,440 234,478 250,000 321,110 337,700 385,685 468,473 587,597 641,493 669,912 656,353 669,794 2,478,352 4,626,269

Looms

Spindles

4,499 13,977 42,380 b 66,466 734,928 1,000,000 1,512,626 1,521,300 2,502,288 2,345,809 2,528,611 2,584,050 2,620,471 2,651,108 2,695,639 3,076,336 3,092,054

178 346 2,111 26,420 35,000 51,134 59,208 65,651 70,561 75,631 78,383 78,910 80,336 83,312 92,469 98,426

Workers

424 795 3,600 3,172 39,159 45,942 55,000 82,257 108,960 110,119 114,561 174,619 128,613 123,521 123,470 115,550 234,864 224,252

1853-1948 Production ( 1 0 0 0 meters) (contos)

1,210 3,586 22,000 20,595 242,087

2,116

135,026

261,183 470,783 442,000 552,446 579,779 775,791 535,909 974,330 981,082 539,025 974,555 594,313 581,951 929,308 684,962 477,995 911,926 630,738 1,142,151 5,959,549 1,119,738 7,019,751

* Statistics incomplete. Estimate of spindles in eight milk (1884). e Includes capital and spindles (20 mills), looms (30 mills), workers (23 mills), output ( 12 mills ). * Represents the total number of mills in existence, not those which supplied statistical information. The number of mills furnishing statistical material for each category were: (1946) 420 for the category of mills, 386 for capital, 420 for spindles, 420 for looms, 366 for workers; (1948) 409 for the category of mills, 379 for capital, 381 for spindles, 342 for looms, 379 for workers, and 342 for production in meters. Sources: Commissäo da tarifa, pp. 160, 342; Borja Castro, "Relatorio do segundo grupo," p. 49; Inquerito industrial, p. 15; O Industrial, June 18, 1881; Archivos da exposiçâo da industria nacional de 1881, pp. xcvi-xcvii; Consul Ricketts, Report, C 4657, lxv (1886), 187-188; Branner, Cotton in the Empire of Brazil, pp. 42-43; Jornal do Commercio, December 11, 1895; Consul Rhind, Report C 9497-2, xcvii (1899), 3; Clark, Cotton Goods in Latin America, p. 46; Garry, Textile Markets of Brazil, pp. 22-23; Pearse, Brazilian Cotton, p. 28; CIFTA-Rio, Relatorio, 19211922, 1924, 1926, 1927; Industria textil algodoeira, pp. 104, 107, 115, 127, 130; Industria textil do algodäo e da lâ, pp. 14, 19, 31, 59, 63; Anuario estetistico. Ano X-1949, p. 212. h

191

Appendix II. C O T T O N C L O T H PRODUCTION OF BRAZIL,

1911-1948

Year

1000 Meters

Index (1911 = 100)

Year

1000 Meters

Index (1911 = ]

1911 1912 1913 1914 1915

378,619 399,710 384,989 314,345 470,783

100 106 102 83 124

1930 1931 1932 1933 1934

476,088 633,893 630,738 638,803 715,814

126 167 167 169 189

1916 1917 1918 1919 1920

474,302 548,120 494,422 584,402 587,182

125 145 131 154 155

1935 1936 1937 1938 1939

752,691 914,529 963,766 909,972 893,904

199 242 255 240 236

1921 1922 1923 1924 1925

552,446 626,760 939,794 579,779 535,909

146 166 248 153 142

1940 1941 1942 1943 1944

840,168 989,669 1,068,612 1,414,336 1,382,700

222 261 282 373 365

1926 1927 1928 1929

539,025 594,313 581,951 477,995

142 157 154 126

1945 1946 1947 1948

1,085,429 1,142,151 1,063,426 1,119,738

287 302 281 296

Sources: Anuario estatistico do Brasil. Ano V-1939/1940, p. 1329; ibid., Ano X1949, p. 212; ibid., Ano VII-1946, p. 171; E. Street, "A industria textil no Brasil," p. 125; A industria textil do adgodäo e da lä, pp. 91, 93, 101.

192

Appendix III. COTTON C L O T H IMPORTS INTO B R A Z I L , 1 9 0 1 - 1 9 5 0

(KILOS)

Year

Bleached

Gray

Printed

Dyed

Non-specified

Total

1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951"

1,248,715 2,434,805 2,687,510 2,231,891 2,688,222 2,436,156 1,932,140 1,115,861 1,289,292 1,876,658 1,714,469 1,384,001 1,233,447 458,465 398,366 571,881 530,234 656,540 413,445 704,618 271,332 356,236 442,408 711,063 938,865 1,343,764 848,269 642,910 438,686 146,933 45,596 40,352 96,026 47,103 13,043 17,451 38,284 22,048 10,461 20,672 9,650 8,663 11,883

145,037 196,937 435,223 462,106 244,419 132,494 204,094 148,434 63,961 145,968 311,559 336,793 238,850 21,999 33,725 167,825 17,922 24,882 20,494 81,699 70,809 46,697 59,447 66,717 80,959 46,123 77,909 120,766 93,783 15,601 5,400 9,126 16,672 3,697 17,763 913 3,229 2,026 9,577 54,376 4,716 21,876 3,660 944 2,289 6,561 21,561 11,165 3,763 1,000

2,052,700 4,157,299 4,424,909 3,423,585 3,253,394 2,611,410 2,572,897 1,227,477 1,180,295 1,489,102 1,323,761 718,197 352,609 85,583 58,941 136,273 131,575 194,597 138,145 386,491 148,052 191,063 372,540 421,620 480,774 521,845 570,108 676,702 429,735 192,295 72,750 27,370 66,389 29,346 14,412 22,522 26,469 19,294 11,200 10,764 10,920 10,225 2,193 2,605 2,767 4,002 31,164 46,138 19,743

1,953,951 3,713,437 4,360,320 4,070,676 3,579,182 2,798,068 3,349,932 2,234,903 2,068,007 3,411,468 3,433,297 2,475,902 1,808,114 644,122 603,229 1,130,338 1,450,404 1,521,764 1,045,612 2,284,760 1,158,183 2,083,486 2,455,623 4,105,999 5,083,481 4,755,108 5,168,965 6,200,666 3,534,978 793,788 221,573 236,952 456,744 250,457 77,485 121,470 91,868 73,584 54,261 41,816 28,884 18,294 4,672 2,380 4,186 20,744 63,655 86,781 42,267 1,263 2,919

938,697 1,372,844 1,397,100 2,256,328 2,640,878 3,444,928 4,581,546 3,317,540 3,116,093 5,143,330 7,189,494 6,582,955 6,213,168 2,485,133 1,841,893 2,958,983 2,029,434 2,301,980 2,105,777 1,409,820 367,876 471,299 582,631 533,664 744,261 651,970 580,073 669,571 443,094 189,687 101.725 76,480 157,525 156,227 219,484 226,608 285,788 364,488 459,763 1,336,326 705,288 83,521 666,769 195,604 145,320 158,714 314,407 212,363 162,299 70,279 68,771

6,339,100 11,875,372 13,305,062 12,444,586 12,406,095 11,423,056 12,640,609 8,044,215 7,717,648 12,066,526 13,972,580 11,497,848 9,846,188 3,695,302 2,936,154 4,965,300 4,159,569 4,699,763 3,723,473 4,867,388 2,016,252 3,148,781 3,912,649 5,839,063 7,328,340 7,318,810 7,245,324 8,310,615 4,940,276 1,338,304 447,044 390,280 793,356 486,830 342,187 388,964 445,638 481,440 545,262 1,463,954 759,458 142,579 689,177 201,533 159,345 240,756 495,359 413,917 250,779 76,584 72,832

4,783 50,735 64,572 57,470 22,707 4,042 606

536

* January to September. Source: Ministerio da Fazenda, SEEF. 193

Appendix IV. COTTON CLOTH EXPORTS FROM BRAZIL, 1 9 0 2 - 1 9 5 0

Year 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950

Bleached

Gray

Printed

Dyed

(KILOS)

Non-specified

Total

2,821 2,976 12,897 3,515 9,848 6,356 334 749 128 186

2,075,714 2,655,802 2,207,259 2,446,908 628,907 470,950 242,908

3,533,192 5,669,824 2,270,038 1,870,906 163,723 865,499 132,214

5,818,691 4,928,106 2,360,831 3,285,254 1,990,559 1,113,187 249,159

6,392,679 10,003,475 6,349,048 8,433,401 2,668,120 1,349,487 718,517

2,060 5,854 19,350 113,035 110,450 135,119 556,427 779,365 785,771 57,242 23,342 14,996 7,984 26,754 19,960 11,274 275,581 62,561 86,807 425,489 221,024 318,754 686,687 247,239 1,981,734 3,958,371 9,237,932 25,168,682 26,045,818 2,249,532 989,303 915,672 641,746 186,335 211,444 18,561

26,045,818 20,069,808 24,246,510 14,102,848 16,678,215 5,637,644 4,010,567 1,361,359

Source: Ministerio da Fazenda, SEEF. Statistics of Brazilian cotton cloth exports were classified "non-specified" until 1944 when they were divided into the above categories.

194

Appendix V. T E X T I L E MACHINERY IMPORTS INTO B R A Z I L ,

Year 1913 1914* 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931* 1932* 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944* 1945 1946' 1947* 1948 1949 1950

Spinningweaving unenumerated

Calico print rolls

Looms

1913-1950

Accessories unenumerated

(KILOS)

Total 13,344,766

1,199,981 1,356,291 1,016,965 1,498,746 1,410,069 2,444,557 3,934,220 3,852,666 4,211,940 6,565,364 12,264,623 6,632,029 3,584,536 3,507,184 2,736,453 1,151,362 971,626 2,455,935 2,015,534 3,703,121 6,818,524

7,138 1,110 9 12,980 3,711 16,304 1,753 4,165 71 2,854 91 27,241 2,154 4,866

296,920 295,494 323,140 670,589 530,234 736,890 1,223,313 1,107,672 2,454,936 2,045,650 3,374,682 1,789,583 1,442,606 1,227,143 625,044 107,971

690,222 797,853 662,249 761,125 812,585 1,077,824 1,133,340 1,657,893 2,169,605 1,577,035 2,219,361 1,905,316 1,716,440 1,482,186 1,283,350 721,844

2,194,261 2,449,638 2,002,354 2,931,570 2,752,897 4,262,251 6,294,584 6,634,535 8,838,243 10,192,214 17,858,737 10,429,782 6,743,673 6,243,754 4,647,001 1,986,043

27,798 27,477 22,455 3,032 20

75,877 310,099 347,928 232,614 969,234

975,833 1,318,179 1,489,231 1,407,621 859,130

2,051,134 4,111,690 3,875,148 5,346,388 8,646,908 11,137,000 5,855,000 4,091,000 3,450,000 2,776,000 1,375,000

A •

26,021,000 18,025,197 19,233,459 15,356,000

* Data unavailable. Sources: Ministerio da Fazenda. Directoría de Estatística Commercial, Comercio exterior do Brasil. I (1913-1918) (Rio de Janeiro, 1921), pp. 216-218; ibid. (1919-1923) (Rio de Janeiro, 1928), pp. 184-186; ibid., (1926-1930); ibid.' (1933-1937); ibid., (1938-1943); ibid., (1939-1940); ibid., (1948-1949); Anuario estetistico. Ano XIII-1952, p. 295 and ibid., Ano XIV. 1953, p. 285.

195

Appendix VI. RAW COTTON PRODUCTION OF BRAZIL, 1 9 2 6 - 1 9 5 0 (METRIC TONS)

Säo Paulo

Paraiba

Pemambuco

Rio Grande do Norte

8,700

20,980

17,401

13,285

109,737

1931 1932 1933 1934 1935

8,350 21,272 36,317 102,296 98,207

23,000 9,000 21,534 39,898 44,831

15,000 9,000 15,000 27,421 28,929

14,281 5,500 17,507 29,052 30,576

112,789 76,416 151,253 284,604 297,306

1936 1937 1938 1939 1940

178,500 202,618 248,296 273,264 307,377

35,414 37,999 36,782 39,269 40,550

27,393 27,879 22,567 23,783 20,280

18,757 22,526 20,066 22,080 30,220

351,543 405,024 436,628 428,523 468,695

1941 1942 1943 1944" 1945

381,000 282,665 375,098 445,572 248,509

25,550 18,471 25,258 29,222 20,497

16,832 14,002 14,665 22,339 19,753

16,756 11,862 19,331 22,664 24,380

503,003 376,954 496,247 592,381 378,495

1946 1947 1948 1949 1950

235,182 194,303 174,111 232,658 205,426

25,374 22,890 24,180 24,555 26,026

18,191 17,795 19,198 17,149 21,398

24,127 27,470 24,676 27,229 28,790

377,767 346,715 319,584 395,969 393,000

Year 1926-30*

Brazil

' Five-year average annual production. Figures for 1944 differ in Anuario estatístico. Ano VI-1941-1945, p. 64, and in ibid., X-1949. I have used the latter's figures. Sources: Anuario estatístico. Ano 11-1936, pp. 106-110; ibid., IV-1938, pp. 185-186, 190; ibid., V-1939/1940, pp. 162-163; ibid., VI-1941-1945, pp. 63-64; ibid., X-1949, p. 108; ibid., XIII-1952, p. 97; Ministerio da Fazenda. Directoría de Estatística Económica e Financeira do Thesouro Nacional, Quadros estatísticos, No. 2 (Rio de Janeiro, 1938), p. 125; ibid., No. 3 (Rio de Janeiro, 1941), pp. 135, 137. b

196

Appendix VII. RAW COTTON PRODUCTION OF SAO PAULO, 1 9 0 0 - 1 9 3 0

Year

Production (metric tons)

1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915

1,843 2,302 1,915 1,228 2,721 2,558 3,229 4,696 3,785 4,273 5,072 6,598 5,621 11,945 2,828 3,914

Year 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

Sources: See sources for Appendix VI.

197

Production (metric tons) 7,347 11,122 13,913 49,616 20,647 21,904 13,188 13,599 25,371 26,896 16,508 8,644 9,977 4,434 3,934

Appendix Vili. RAW COTTON EXPORTS OF BRAZIL,

Year 1821 1822 1823 1824 1825 1826 1827 1828 1829 1830 1831 1832 1833 1833-4 1834-5 1835-6 1836-7 1837-8 1838-9 1839-40 1840-1 1841-2 1842-3 1843-4 1844-5 1845-6 1846-7 1847-8 1848-9 1849-50 1850-1 1851-2 1852-3 1853-4 1854-5 1855-6 1856-7 1857-8 1858-9 1859-60 1860-1 1861-2 1862-3 1863-4

Metrie tons 10,631 12,989 12,593 12,006 15,441 5,123 10,101 12,459 13,444 16,196 15,703 10,409 7,342 12,354 11,314 13,434 12,611 11,027 9,397 10,253 10,164 9,395 10,055 11,691 12,139 9,479 8,943 9,390 12,556 17,299 13,064 13,283 14,757 13,134 12,884 15,052 15,981 14,902 16,787 11,404 8,972 • 12,811 15,934 19,800

Metrie tons

Year 1864-5 1865-6 1866-7 1867-8 1868-9 1869-70 1870-1 1871-2 1872-3 1873-4 1874-5 1875-6 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907

25,352 42,581 39,478 41,666 39,317 43,024 44,396 78,517 45,494 56,228 43,560 27,777 30,867 17,754 25,487 11,356 12,719 21,916 33,565 32,685 24,305 15,054 23,280 15,847 22,094 13,575 12,738 20,143 11,914 38,937 27,261 9,510 7,209 11,500 8,070 3,738 20,720 11,765 32,138 28,236 13,263 24,082 31,668 28,036

1821-1950

Year 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950

Metrie tons 3,565 9,968 11,160 14,647 16,774 37,424 30,434 5,228 1,071 5,941 2,594 12,153 24,696 19,607 33,947 19,170 6,464 30,635 16,687 o 10,010 47,728 30,416 20,779 515 11,693 126,528 138,630 200,313 236,181 268,719 323,539 224,265 288,274 153,954 77,962 107,640 164,456 352,752 285,473 258,703 139,759 128,845

" Data unavailable. Sources: Anuario estatistico. Ano V-1939/1940, p. 1376; Ministerio da Agricultura, Industria e Commercio, Directoría Geral da Estetistica, Annuario estatistico do Brazû. Anno 1-1908-1912. Vol. II. Economìa e Finanças (Rio de Janeiro, 1917), pp. 105, 108; Ministerio da Fazenda, Directoría da Estatistica Econòmica e Financeira do Thesouro Nacional, Quadros estatísticos, No. 2 (1938), 21, and No. 3 (1941), pp. 21, 135; Anuario estatistico. VI-1941-1945, p. 65; ibid., VII1946, pp. 90, 297; ibid., X-1949, pp. 107-108, 324; ibid., XIII-1952, pp. 108, 290; ibid., V-1939-1940, 1140, 1377.

198

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Diario de Säo Paulo. Diario Nacional de Säo Paulo. Diario Popular. Estado de Säo Paulo. Folha da Manhä. Folha da Noite. Säo Paulo-Jornal. Β. BIO DE JANEIRO ( CAPITAL )

A Manhä. A Noite. A Vanguarda. Correio da Noite. Diario Carioca. Diario da Manhä. Diario de Noticias. Diario do Congresso Nacional. Diario do Poder Legislativo. Diario Oficial. Jornal do Brasil. O Globo. O Impartial. VI. ARTICLES Azevedo, Aldo Mario de, "A super-producçâo industrial," O Observador económico e financeiro, XV (April 1937), 45-47. Belo, José María, "A reaçâo civilista e a presidencia Hermes," Cultura politica, I (September 1941), 35-47. Board of Trade Journal, XXXIX (June 28, 1900). Davis, Horace Β., "Brazil's Political and Economic Problems," Foreign Policy Reports, XI (March 13, 1935). Deursen, H. van, "L'émancipation industrielle du Brésil," Revue économique internationale, (August 1934), 275-335. "Estrangeiros entrados no Brasil de 1884 a 1939," Revista de imigraçâo e colonizaçâo, I (October 1940), 617-644. Heaton, Herbert, "A Merchant Adventurer in Brazil," Journal of Economic History, VI (May 1946), 1-23. Lafond, G., "L'évolution économique et financière du Brésil pendant la guerre," Journl des économistes, (July-September 1918), 339361. Murtinho, Joaquim, "Introduçâo. Relatorio apresentado ao Sr. Presidente da República pelo Ministro da Industria, Viaçâo e Obras Públicas. Rio de Janeiro, 1897," Revista do instituto histórico e geogràfico brasileiro, 219 (April-June, 1953), 239-265.

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"Sears, Roebuck in Brazil," Fortune (February 1950), pp. 78-80, 151156. Street, Ernesto, "A industria textil no Brasil," Estudos económicos, I (September, December 1950), 5-137. "Super-producçâo industrial?" O Observador económico e financeiro, XIV (March 1937), 91-103. "Super-producçâo de tecidos," Ibid., XXXV (December 1938), 107124. Teixeira, Dorival, "La moneda brasileña," Trimestre económico, XV (April-June 1948), 44-90. Waddell, Agnes S., "The Revolution in Brazil," Foreign Policy Association, Information Service, VI ( March 4, 1931 ). Williams, John H., "Latin American Foreign Exchange and International Balances during the War," Quarterly Journal of Economics, XXXIII (May 1918), 422-465.

VII. GENERAL WORKS A crise textil. See below. Guedes da Silva, Braulio, et al. A industria textil do algodäo e de lä. See III, a, Ministério do Traballio, CETex. Albano, Ildefonso, A crise do algodäo. Rio de Janeiro, 1918. Anuario estatistico. See III, a, Instituto Brasileiro de Geografia e Estatística. Conselho Nacional de Estetistica. Archivos da exposiçâo da industria nacional de 1881. Rio de Janeiro, 1882. Azevedo, Aluizio de, A Brazilian Tenement. Harry W. Brown, transi. London, 1928. Azevedo, Joäo Lucio de, Épocas de Portugal económico. 2nd ed. Lisboa, 1927. Bandeira Junior, A expansâo económica de Sâo Paulo. Säo Paulo, 1903. Baptista, Homero, A receita geral para 1913. Rio de Janeiro, 1913. Biblioteca da Industria Nacional, O trabalho nacional. Rio de Janeiro, 1881. Borja Castro, A. V. de, "Relatorio do segundo grupo," in A. J. de Souza Rego, Relatorio da segunda exposiçâo nacional de 1866. Rio de Janeiro, 1869. Burlamaque, F. L. C., "Relatorio gérai," Exposiçâo nacional de 1861. Rio de Janeiro, 1862. Burton, Richard, The Highlands of the Brazil. 2 vols., London, 1869. Calogeras, Joäo Pandiá, La politique monétaire du Brésil. Rio de Janeiro, 1910.

206

Bibliography

Câmeu, Francolino, Políticos e estadistas contemporáneos. Subsidios. Terceira serie. Rio de Janeiro, 1928. Canabrava, Alice P., O desenvolvimento da cultura do algodâo na provincia de Säo Paulo (1861-1875). Sao Paulo, 1951. CIB. See II, b, Centro Industrial do Brazil. CIFTA-Rio. See II, b, Centro Industrial de Fiaçâo e Tecelagem, Rio de Janeiro. Coelho de Souza, W. W., O algodâo no Maranhäo. Säo Paulo, 1922. Commissäo da tarifa. See III, a, Commissâo . . . da revisäo da tarifa, Relatorio. Couty, Louis, Le Brésil en 1884. Rio de Janeiro, 1884. Delden Laerne, C. F. Van, Brazil and Java. Report on Coffee-Culture in America, Asia and Africa. London, 1885. Denis, Ferdinand, La crise du café au Brésil et la valorisation. Paris, 1908. Duncan, Julian S., Public and Private Operation of Railways in Brazil. New York, 1932. Fernandes Pinheiro, Α. Α., "Introducçâo," Archivos da exposiçâo da industria nacional de 1881. Rio de Janeiro, 1882. Ferreira Soares, Sebastiäo, Elementos de estatistica comprehendendo a theorîa da sciencia e a sua applicaçâo à estatìstica commercial do Brazil. 2 vols., Rio de Janeiro, 1865. Glette, Frederico, A industria nacional e as tarifas de alfandega. Rio de Janeiro, 1886. Gregory, T. E. G., Tariffs. A Study in Method. London, 1921. Guedes da Silva, Braulio, C. D'Agostini, Piero Roversi, and O. P. Nogueira, Relatorio . . . sobre a crise textil. Suas causas. Seus effeitos. Seus remédios. Säo Paulo, 1928. IBGE. See III, a, Instituto Brasileiro de Geografía e Estatística. Industria textil algodoeira. See III, a, Ministério do Traballio, Industria e Comércio, Commissäo Executiva Textil. Informaçôes. See III, a, Commissäo Parlamentar de Inquerito, Informaçôes apresentadas ao corpo legislativo. Inquerito industrial. See III, a, Commissäo de Inquerito Industrial. Instituto Histórico e Geográphico Brasileiro, Diccionario histórico, geográphico e eihnográphico do Brasil. 2 vols., Rio de Janeiro, 1922. Kennedy, S. J., Profits and Losses in Textiles: Textile Financing Since the War. New York, 1936. Manchester, Alan K., British Preeminence in Brazil. Its Rise and Decline. Chapel Hill, 1933. Mann, James Α., The Cotton Trade of Great Britain. London, 1860. Mitchell, Broadus, The Rise of Cotton Mills in the South. Baltimore, 1921.

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207

Monteiro, Tobias do Regó, "Industria fabril, "O Brasil. Suas riquezas naturaes. Suas industrias. 3 vols., Rio de Janeiro, 1909. Normanno, Joäo, Brazil. A Study of Economic Types. Chapel Hill, 1935. Nunes Leal, Victor, Coronelismo, enxada e voto. O municìpio e o regime representativo no Brasil. Rio de Janeiro, 1948. Pearse, Arno S., Brazilian Cotton. Manchester, 1921. Pereira da Silva, J. M., Historia da fundaçâo do imperio brasileiro. 6 vols., Rio de Janeiro, 1865. Pereira Rego Filho, José, Conferência na exposiçâo industrial de 1882 sobre o tema: Problemas suscitados pela actual exposiçâo. Rio de Janeiro, 1882. Plenn, Abel, The Southern Americas: A New Chronicle. New York, 1948. Politi, S. M., A técnica do preço de custo da produçâo. Sâo Paulo, 1946. Prado Junior, Caio, Historia econòmica do Brasil. Säo Paulo, 1945. Prefeitura do Districto Federal, Noticia sobre o desenvolvimento da industria fabril e sua situaçâo actual. Rio de Janeiro, 1908. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861. Rio de Janeiro, 1862. Revisäo das tarifas alfandegarias. Rio de Janeiro, 1928. Rowe, John W. F., Studies in the Artificial Control of Raw Materials Supplies. No. 3. Brazilian Coffee. London and Cambridge Economic Service. Special Memorandum No. 35. London, January 1932. Saldanha da Gama, José de, Estudos sobre a quarta exposiçâo nacional de 1875. Rio de Janeiro, 1876. Sampaio Vianna, Carlos Americo. See III, a. Brazil. Say, Horace, Histoire des relations commerciales entre la France et le Brésil. Paris, 1836. Simonsen, Roberto, Historia económica do Brasil, 1500-1820. 2 vols., Säo Paulo, 1937. Silveira Filho, Guilherme da, Memoria sobre a situaçâo da industria textil brasileira apresentada a comissäo especial de inquerito para a industria textil do senado. Ministerio do Traballio, Industria e Comercio. Comissäo Executiva Textil. Rio de Janeiro, 1947. Smith, T. Lynn, Brazil: People and Institutions. Baton Rouge, 1946; and, 2nd ed. Baton Rouge, 1954. Spiegel, Henry William, The Brazilian Economy; Chronic Inflation and Sporadic Industrialization. Philadelphia, 1949. Street, Jorge, Carta aberta ao exmo. sr. dr. Araujo Franco, presidente da Associaçâo Commercial do Rio de Janeiro. Säo Paulo, 1928. Succincta noticia sobre a industria de Fernambuco. Pernambuco, 1881. Svennilson, Ingvar, Growth and Stagnation in the European Economy. Geneva, 1954.

208

Bibliography

Taunay, Alfredo d'Escragnolle [Heitor Malheiros, pseud.], O encilhamento. Seenas contemporáneas da bolsa em 1890,1891 e 1892. 2 vols., Rio de Janeiro, 1892. Tavares Bastos, Aureliano Cándido, Cartas do solitario. Rio de Janeiro, 1863. Tejo, Limeira, Retrato sincero do Brasil. Porto Alegre, 1950. Tollenare, L. F. de, Notas dominicaes, 1816, 1817, 1818. Alfredo de Carvalho, transi., com um prefacio de M. de Oliveira Lima. Recife, 1906. Ure, Andrew, The Cotton Manufacture of Great Britain. 2 vols., London, 1861. Williams, John H., Argentine International Trade under Inconvertible Taper Money, 1880-1890. Cambridge, Mass., 1920. Worthington, T., Reports. See III, b. Great Britain.

Notes 1 . T H E ECONOMIC C L I M A T E OF BRAZIL,

1800-1890

1. Alvará of January 5, 1875, cited in Commissäo encarregada da revisäo da tarifa em vigor que acompanhou o projecto de tarifa apresentado pela mesma commissäo ao governo imperial, Relatorio (Rio de Janeiro, 1853), p. 102. (Hereafter cited as Commissäo da tarifa.) 2. Roberto Simonsen, História económica do Brasil. 1500-1820 (2 vols., Säo Paulo, 1937), I, 170-171. 3. Herbert Heaton, "A Merchant Adventurer in Brazil," Journal of Economic History, VI (May 1946), 1-23, provides a summary of this era in Brazil. 4. See Documento No. 3, "Manifesto de D. Pedro de Alcántara a's Naçôes e Governos Amigos e Alliados, de 6 de Agosto de 1822," in J. M. Pereira da Silva, História da fundaçâo do imperio brazileiro (6 vols., Rio de Janeiro, 1865), VI, 293-294. 5. J. J. Sturz, Statistical Notes on Brazil, p. I l l , cited in John C. Branner, Cotton in the Empire of Brazil, Department of Agriculture, Special Report No. 9 (Washington, D. C., 1885), p. 40. 6. Commissäo da tarifa, p. 337; Aureliano Cándido Tavares Bastos, Cartas do solitario (Rio de Janeiro, 1863), pp. 361-362. 7. Commissäo de Inquerito Industrial, Relatorio ao Ministro da Fazenda (Rio de Janeiro, 1882), I, 13. (Hereafter cited as Inquerito industrial.) 8. To supply the necessary credit for mercantile operations, the government founded the ill-fated first Bank of Brazil. Those who watched closely the Bank's activities decided that, instead of meeting the needs of the commercial community, it became a "branch bank" of the Treasury. Its excessive loans to the Treasury led to its failure in 1829. Commissäo encarregada pelo governo imperial de proceder a um inquerito sobre as causas principaes e accidentaes da crise do mez de septembro de 1864, Relatorio (Rio de Janeiro, 1865), pp. 13-14, 17. 9. For treatment of this subject see S. J. Stein, Vassouras, A Brazilian Coffee County, 1850-1900 (Cambridge, Mass., 1957). 10. Sebastiäo Ferreira Soares, Elementos de estatìstica comprehendendo

210

Notes to Chapter 1

a iheoTÎa da sciencia e a sua applicaçâo à estatîstica commercial do Brazil (2 vols., Rio de Janeiro, 1865), I, 48. 11. Richard Rurton, The Highlands of the Brazil (2 vols., London, 1869), I, 91. 12. Ferreira Soares, Elementos de estatîstica, I, xvi. 13. In converting müreis to dollars, I have used the table, "Exchange Value of the Milreis in U. S. Dollars," in Julian S. Duncan, Public and Private Operation of Railways in Brazil (New York, 1932), p. 183. The milreis (written 1$000) was the equivalent of 1,000 rets. One thousand milreis (written 1:000$000) was called one conto. Recently the cruzeiro replaced the milreis. 14. Companhia Rrazil Industrial, Petiçâo ao corpo legislativo (Rio de Janeiro, 1875), pp. 3-4, 6-7. 15. Joäo Cardoso de Menezes e Souza, "Circular," Annexo B, in Ministerio da Fazenda, Relatorio, 1879, p. 9. 16. Commissáo Parlamentar de Inquerito, Relatorio ao corpo legislativo (Rio de Janeiro, 1885), pp. 59-60. 17. Nicia Vilela Luz, "Aspectos do nacionalismo econòmico brasileiro" (MS), pp. 5-6; Homero Baptista, A receita geral para 1913 (Rio de Janeiro, 1913), pp. 51-52, 54-56; Tavares Bastos, Cartas do solitario, pp. 362-363. 18. Commissäo da tarifa, p. 110; Consul L. Hunt, Report, C 914, lxvi (1874), 42—43. (British consular reports will cite the command and volume numbers.) 19. Consul O'Conor, Report, C 1802, lxxxi (1877), 319. 20. Commissáo Parlamentar de Inquerito, Informaçôes apresentadas . . . ao corpo legislativo (Rio de Janeiro, 1883), pp. 206-207, 333. (Hereafter cited as Informaçôes.) 21. In the case of banks, railroad, or navigation companies, provincial legislatures also had to supply authorization before legal incorporation was possible. Aprigio Garcia, Jornal do Commercio, February 25, 1913. Tavares Bastos, spokesman for the economic liberals, saw in Article 2 of the 1860 law a "pretext" for the supplementary decree No. 2711 of December 19, 1860, which created a "vast net of hindrances against joint-stock companies. . . " Cartas do solitario, p. 19. 22. Ibid., p. 18. 23. Ministerio da Agricultura, Relatorio, 1873, p. 153. 24. Aprigio Garcia, Jornal do Commercio, February 25, 1913. Government authorization, according to the law No. 3150 of November 4, 1882, was required only by religious associations, monte-píos, savings banks, mutual insurance companies, firms handling foodstuffs, and foreign corporations. 25. Ibid., Decrees No. 164 of January 17, and No. 850 of October 13, 1890.

Economic Climate of Brazil

211

26. Ferreira Soares, I, Elementos de estetìstica, 43, 46, 270. Population estimates for Brazil and Rio de Janeiro in 1864 are unduly high. 27. Ibid., I, 101. 28. Ibid., I, 131, 133, 135. Ferreira Soares' arrobas have been converted to metric tons. 29. Ibid., I, 154. Five years later a group of would-be cotton manufacturers publicized some figures to substantiate the claim of England's "hold on the pockets of the people of this great Empire." Companhia Brazil Industrial, The Industry of Brazil. Advantages of Establishing Cotton Factories at the Fazenda of Macacos (Rio de Janeiro, 1870), pp. 3-15. The breakdown, whose accuracy is subject to further investigation, was reprinted with slight modifications in Jornal do Commercio, February 12, 1875, and in Consul Austin, Report, C 1486, lxxv (1876), 766: Export duty and shipping expenses on cotton, 11 per cent; freight to England, 7 per cent; selling charges, 3.5 per cent; freight, shipping expenses on manufactured goods, 7 per cent; duties, 45 per cent; three months' interest on capital from payment to arrival, 1.5 per cent; purchasers' or sellers' commission, 5 per cent. 30. Eight steam packet boats of English and French lines linked Brazil to Europe and the Plate in 1865. Some of the ships, which touched first at Pernambuco, Bahia, and then Rio, made two sailings monthly, cutting the voyage to one quarter of the former time. Ferreira Soares, Elementos de estatística, I, 111. 31. In the four main commercial centers — Rio de Janeiro, Pernambuco, Bahia, and Rio Grande do Sul — 9,594 establishments were foreign-owned of a total of 16,849. Ibid., I, 118. 32. Commissäo da tarifa, pp. 112-113. 33. See Commissäo nomeada por aviso de 10 de Outubro de 1859, "Causas da crise de 1853," Annexo A, Relatorio (Rio de Janeiro, 1860), p. 104. 34. Commissäo da tarifa, p. 113. 35. Writing of the causes of halting Portuguese industrial activities in the eighteenth century, Joäo Lucio de Azevedo produced an analysis which tallies strikingly with that of the Brazilian commission of 1853. He singled out the Portuguese "type," "endowed with a penchant for the adventurous life, accustomed to predatory gains, to easy enterprises . . . rather than to the slow, monotonous labor and constancy demanded by industry." Épocas de Portugal econòmico (2nd ed., Lisboa, 1927), p. 442. • 36. Commissäo da tarifa, p. 114. 37. Ibid. 38. Ibid. 39. Oddly, what it did not perceive at home it appreciated in foreign lands, for it compared Mexican progress in the cotton textile industry with that of Lowell, Massachusetts. Ibid., p. 160.

212

Notes to Chapter 1

40. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861 (Rio de Janeiro, 1862), p. 318; Α. V. de Borja Castro, "Relatorio do segundo grupo," in A. J. de Souza Regó, Relatorio da segunda exposiçâo nacional de 1866 (Rio de Janeiro, 1869), pp. 32-33. 41. F. L. C. Burlamaque, "Relatorio gérai," Exposiçâo nacional de 1861 (Rio de Janeiro, 1862), p. 12. 42. Tavares Bastos, Cartas do solitario, pp. 361-362. 43. Borja Castro, "Relatorio do segundo grupo," p. 4. 44. Ibid., pp. 5-6, 11. 45. Ibid., pp. 6-7. 46. See Α. Κ. Manchester, British Preeminence in Brazil. Its Rise and Decline (Chapel Hill, N. C., 1933), pp. 314-315. 47. Sergio Teixeira de Macedo, London, May 16, 1854, dispatch cited in Borja Castro, "Relatorio do segundo grupo," p. 7. Compare Manchester, British Preeminence in Brazil, pp. 315-316. 48. Borja Castro, "Relatorio do segundo grupo," pp. 8, 10. 49. Ibid., pp. 11-12, 15. 50. Ferreira Soares warned in 1865 that economic theories were applicable in accordance with each nation's particular condition. ". . . English and French theories can be advantageous to those nations, but are of precarious results to others which have not reached their stage of industrial development. . . " Elementos de estatística, I, 272. 51. Borja Castro, "Relatorio do segundo grupo," pp. 14, 28, 30-32. 52. Baptista, A receita g eral para 1913, pp. 55-56. 53. Joäo Normanno estimated public outlay for the war at 600,000 contos ($270,000,000). Brazil. A Study of Economic Types (Chapel Hill, N. C., 1935), p. 126. 54. Baptista, A receita geral para 1913, p. 63. 55. Ministerio da Fazenda, Relatorio, 1877, pp. 54, 56. "Innumerable questions are raised daily at our Customs, arising from divergent opinions about how to evaluate the quality or estimate the value of merchandise — motivated, let us frankly admit, by an almost complete ignorance of the process of manufacture. . ." Ibid., p. 54. 56. Andrew Cone, Report. U.S. Commercial Relations (Washington, 1878), p. 116; O'Conor, Report, C 1802, Ixxxi (1877), p. 346; Carlos Américo de Sampaio Vianna and Alexandre A. R. Sattamini, "Relatorio da commissäo nomeada para estudar na Europa différentes ramos da fabricaçâo industrial e a administraçâo aduaneira de alguns paizes," Annexo F, Ministerio da Fazenda, Relatorio, 1878, pp. 1-2. 57. Ibid., p. 67. 58. Note the comments of the parliamentary commission of inquiry on the tariff of 1881: ". . . the commission is convinced of the great advantages of a reasonable system of protection for domestic manufacture, especially in the critical circumstances of our nation today, and when in

Location and Product

213

all countries there is a general movement toward protection. . ." Informaçôes, p. 7. 59. For the persistence of free-trade doctrines in Brazil, industrialists had an explanation in 1881: "[Since] our economists have written little, those young men who study political economy in our secondary schools, the average citizen who wishes to obtain a few notions of that science, and the ill-prepared legislator whom blind political fortune or capricious fate sends to parliament must consult foreign books, mainly English and French works, which were prepared when those societies had achieved a high degree of progress. At this stage the theories of free trade were no longer an encumbrance, but an improvement." A. A. Fernandes Pinheiro, "Introducçâo," Archivos da exposiçâo da industria nacional de 1881 (Rio de Janeiro, 1882), p. xxii. 60. Ministerio da Fazenda, Relatorio, 1880, pp. 19-20. 61. Companhia Brazil Industrial, The Industry of Brazil, pp. 5, 9, 15. 62. Companhia Brazil Industrial, Petiçâo ao Corpo Legislativo (Rio de Janeiro, 1875), p. 6. 63. "Agricultura national. XXXIV," Jornal do Commercio, January 30, 1875. 64. Jornal do Commercio, February 10, 1875. 65. Fernandes Pinheiro, "Introducçâo," p. xi. The campaign and the gains which the organization garnered inspired, in the minds of the next generation of cotton manufacturers, the belief that the tariff of 1879 insured the successful establishment of the textile industry in Brazil. "Once protection was applied, once the Nation's public officials focused their attention upon the embryonic existence of our industries, mills began to appear and develop," ran a congressional speech reprinted in the industrialists' annual report on the activity of their association in 1904. Cándido Rodrigues in Centro Industrial do Brazil (hereafter cited as CIB), Boletim, I (19041905), 160, 163. 66. "Companhia Sao Lazaro," Jornal do Commercio, August 3, 1892. 67. "Tudo tem a sua época. II," O Industrial, June 18, 1881. 68. CIB, Boletim, I (1904-1905), 3-4. 69. O Industrial, June 18, 1881. 70. "Tudo tem a sua época. III," O Industrial, June 21, 1881. 2. LOCATION A N D P R O D U C T

1. Inquerito industrial, p. 45. 2. See Appendix I. 3. Usmar Carlos Magno Juliäo, proprietor of Rio's Andarahy Pequeño mill, in reply to a question on the nature of his mill's source of power. Commissäo da tarifa, p. 342. Note the comment of Hartley, another industrial pioneer, who complained that his mill's machines were "moved by

214

Notes to Chapter 2

steam and the absence of fuel and its transport weigh heavily on this establishment." Ibid., p. 339. 4. Relatorio do presidente da provincia do Rio, 1848, p. 45; Relatorio do presidente da Provincia do Rio, 1855, p. 47; "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861, p. 316; Borja Castro, "Relatorio do segundo grupo," p. 42. The massive water wheels of the Todos os Santos mill "were built by Mr. Randall, the American Engineer, with the greatest of care and the best materials. The finest woods of Brazil were employed & the best English iron only used." A. F. Lacerda, "Description & Particulars of the Cotton Mill 'Todos os Santos' situated on the river 'Una' in the District of Valença, Bahia." MS, December 28, 1858. National Archives, Washington, D. C. 5. Emilio A. Goeldi, Memoria sobre una enfermedad del cafeto en Ια provincia de Rio de Janeiro. (Mexico, 1894), pp. 92-93. 6. Broken dams frequently emptied company coffers and dampened directors' spirits. "Today the Fernâo Velho mill would enjoy the benefits of improvement were it not for the downheartedness of many stockholders when . . . the first large dam broke, with losses to the company," it was announced in 1866. Similarly, the dam of the Todos os Santos mill "crumbled" twice prior to 1866. Borja Castro, "Relatorio do segundo grupo," p. 46. 7. In 1886 the directors of the Pau Grande mill resolved to suspend a dividend because workers had been sick and because of "drought . . . and . . . a need was felt for the motor ordered to help during dry spells. . ." Hydraulically driven turbines powered the Brazil Industrial, the largest Brazilian cotton mill of the nineteenth century. Nevertheless, "the steam engines are held ready in case of a water shortage, as has occurred during long droughts." America Fabril, Directoría, January 16, 1886; Archivos da exposiçâo da industria nacional de 1881, pp. xc-xci. 8. Borja Castro, "Relatorio do segundo grupo," pp. 42-48. 9. See Consul Rhind, "Precis," Report, C 9497-2, xcvii (1899), 4. 10. Manufacturers in those areas of Minas which were not reached by railroads complained of the high cost of hauling machinery from the port of Rio. As one manufacturer observed, "You can see how the lack of cheap transport restricts domestic industry." Informaçôes, p. 298. "Large and cumbersome" machinery for Minas' Beribery mill was brought from the coast by river on rafts of canoes lashed together. En route a turbine cover fell into a river and another had to be ordered from a Rio foundry and delivered in animal-borne litters. Ibid., p. 295. 11. Companhia Brazil Industrial, The Industry of Brazil, pp. 19, 21. The directors complained, however, that they had to confront "tremendous difficulties, because of lack of unloading cranes and transport when the problem involves debarking and transporting volumes larger than ordinarily encountered." Primeiro relatorio, p. 10. 12. Petropolitano, Directoría, August 14, 1885. The Pau Grande Mill

Organization, Finance, Machinery

215

directors paid out more than $10,000 in 1889 to build a trunk line from the nearby Grao Para (later Leopoldina) railway. America Fabril, Directoría, June 1, 1889. 13. Brazilian statistics of cotton cloth output failed to discriminate the grades produced until the 1940's. 14. Relatorio do presidente da provincia do Rio, 1855, p. 47; Andrew Ure, The Cotton Manufacture of Great Britain (2 vols., London, 1861), II, 457; Burlamaque, "Relatorio geral," p. 319. A description of the products of Bahia's Todos os Santos mill (1861) is probably well representative of the range of cotton goods woven in Brazilian mills of the epoch. "Canvas whose consumption is immense, and which is applied in diverse fashions largely in navigation and agriculture. . . A larger and fuller cloth, used in Bahia and Rio de Janeiro, for slave clothing, handkerchiefs, towels . . . A narrower and more loosely woven cloth designed for bagging; some people prefer to use it for clothing since it is cheaper. Sailcloth. Canvas used by farmers for bags to carry produce to market and also employed in sails. Also, yarn in cops." Ibid., p. 318. Note the following comment on the same mill: "The bag looms can be altered to weave plain cloth." Lacerda, "Description and Particulars of the Cotton Mill 'Todos os Santos.' " 15. Rio's Brazil Industrial mill claimed, in 1875, that Brazil's few mills had obtained as promising results as those of Mexico and the southern United States in spite of producing solely coarse cottons. Companhia Brazil Industrial, Petiçâo, p. 6. 16. Borja Castro, "Relatorio do segundo grupo," p. 42; "Agricultura nacional," Jornal do Commercio, January 20, 1875; R. A. Edes, Report. U.S. Commercial Relations (Washington, 1875), p. 169; José de Saldanha da Gama, Estudos sobre a quarta exposiçâo nacional de 1875 (Rio de Janeiro, 1876), p. 131; Consul Wucherer, Report, C 2556, lxxiii (1880), 482; Succincta noticia sobre a industria de Pernambuco (Pernambuco, 1881), p. 34; Consul Stevens, Report, C 4171, lxxxi (1884), 1615-1616; Consul A. L. G. Williams, Report, C 7581-87, xcvi (1895), 15; Consul W. G. Wagstaff, Report, C 8277-92, lxxxix (1897), 9; Jornal do Commercio, "Exposiçâo industrial," November 23, 1895; Consul E. Kanthack, Report, C 6205, lxxxv (1890-1891), 4. 3.

ORGANIZATION, F I N A N C E , AND MACHINERY

1. Borja Castro, "Relatorio do segundo grupo," p. 47. 2. Ibid., p. 42. 3. Inquerito industrial, p. 11. Guilherme took his machinery to the nearby coastal port of Paraty, where he erected a factory. 4. Commissäo da tarifa, pp. 338-339. For further references to individual proprietorship, see: Consul Dundas, Report, C 1855, lxxxiii (1877), 1208; Archivos da exposiçâo da industria nacional, de 1881, xciii;

216

Notes to Chapter 3

Consul Stevens, Report, C 6205, lxxxv ( 1890-1891 ), 5; Inquerito industrial, p. 30. 5. Commissäo da tarifa, p. 338; Borja Castro, "Relatorio do segundo grupo," p. 37. In Lacerda's words, the poor financial condition was due to "improper management . . . profits . . . buried in new works, repairs and unnecessary and extravagant expenses . . ." Lacerda, "Description and Particulars of the Cotton Mill 'Todos os Santos.' " 6. Commissäo da tarifa, pp. 338-339. 7. Borja Castro, "Relatorio do segundo grupo," p. 40; Bandeira Junior, A expansäo económica de Säo Paulo (Sâo Paulo, 1903), pp. 55-56, 123; "Gazetilha. Provincia de Sao Paulo," Jornal do Commercio, February 8, 1875. 8. Inquerito industrial, pp. 22, 27. 9. Informaçôes, p. 295; Inquerito industrial, p. 28. Successful cotton cloth production did not becloud the Bishop's understanding of the nature of the local economy. The cotton mill's turbine drove eighteen lapidary wheels. Informaçôes, p. 295. 10. Borja Castro, "Relatorio do segundo grupo," p. 43; Inquerito industrial, p. 21. 11. After analyzing the mills founded in Säo Paulo between 1850 and 1875, Canabrava concludes that no joint-stock textile mill was successful. Mills that survived represented solely the investment of the entrepreneurs involved. Alice P. Canabrava, O desenvolvimento da cultura do algodäo na provincia de Säo Paulo (1861-1875) (Säo Paulo, 1951), pp. 287-288. 12. Thus, of the Uniäo Mercantil mill it was stated in 1867 that its shares went to a "small number of contributors" and to the "creditors of the company." Borja Castro, "Relatorio do segundo grupo," p. 47. The reserved character of Brazilian corporations was highlighted in a comment on a mill at Itabira, Minas Gérais. The mill, the Uniäo Itabirana, was so called because its stockholders were "almost all from this municipality. . ." Commissäo Parlamentar de Inquerito. Relatorio ao corpo legislativo, p. 298. 13. See Tobias do Rego Monteiro, "Industria fabril," O Brazil. Suas dustria textil no Brasil," Estudos económicos, I (September, December 1950), 14. Santa Basilissa, Directoría, February 9, 1943; Ernesto Street, "Industria textil no Brasil," Estudos económicos, I (September, December 1950), 104-105. Material drawn from the minutes of the directors' and stockholders' meetings of the Santa Basilissa and other cotton mills will be cited hereafter as follows: name of mill, source, e.g., whether Directoría (directors' meeting) or Assemblea (stockholders' meeting), the date. 15. Petropolitana, Directoría, January 19, 1889. 16. America Fabril, Directoría, May 17, 1892; Assemblea, August 9, 1894. 17. Broadus Mitchell, The Rise of Cotton Mills in the South (Baltimore, 1921), p. 253.

Organization, Finance, Machinery

217

18. Unfortunately, there is little information on the ratio of working to fixed capital in the early cotton mills. Little provision was apparently made for operating capital in the original plans. 19. Companhia Brazil Industrial, Petiçâo, pp. 6-7, 9-10. 20. Ibid., p. 11. 21. Informaçoes, p. 298. For comparable underestimation of the cost of putting British mills into operation, see Andrew Ure, The Cotton Manufacture of Great Britain, II, 347. 22. Petropolitana, Directoría, September 20, 1873. 23. Ibid., December 5, 1873, and June 7 and September 4, 1874. 24. Ibid., February 5, June 7, August 5, September 4, 1874. 25. Ibid., October 14 and December 28, 1874. 26. Ibid., January 4, 1875. Cintra da Silva was assigned 2 per cent commission on all purchases of raw materials and 3 per cent of all sales, with a guarantee of 15 contos (about $8,000) minimum annually. 27. Ibid., March 4, 1875 and August 19, 1876. 28. Ibid., June 17, 1879. 29. The reorganized Petropolitana shared office and warehouse space for a time with the Brazil Industrial in Rio. 30. Petropolitana, Directoría, May 15, 1885. 31. Ibid., January 19, 1889, and March 30, 1898. The capital of the company was first raised to 4,000 contos ($2,160,000) since no loan larger than a company's capitalization could be floated by a joint-stock company under Brazilian law. Each bond was valued at ¿20, Francs 500, Portuguese Reis Fortes 90$000. Probably the close relations between the Petropolitana's president, the Portuguese merchant Mattos Vieira, and the Portugueseborn banker, the Visconde de Figueiredo, explain why the bonds were sold in Portugal. 32. Ibid., June 11, September 24 and October 20, 1898. 33. The company took the name America Fabril in 1891. 34. America Fabril, Assemblea, July 23, 1885; Directoría, August 13, September 26, and October 15, 1885. 35. Ibid., January 12, 1889. 36. Ibid., March 18 and March 23, 1889. The broker earned a commission of 1.5 per cent on the nominal value of the loan. 37. Ibid., November 27 and December 26, 1893. 38. Ibid., July 20, 1899. 39. Interview, Mauricio Smith de Vasconcellos, of Henry Rogers Sons, Ltd., Rio de Janeiro, January 1952; Petropolitana, Directoría, August 19, 1886. The Bishop of Diamantina and his brothers decided at a family gathering to distribute responsibility for the erection of the Beribery mill in the following fashion: Joaquim Felicio dos Santos went to Rio "to order machinery from the American firm of Milford Ledgewood [sic] & Cia." while Joäo Felicio dos Santos began work on the buildings, water supply,

218

Notes to Chapter 3

housing for workers, etc., which were readied finally in sixteen months and, on August 16, 1875, the first crates arrived." Informaçôes, p. 295. 40. Primeiro relatorio, p. 9. The first deliveries of machinery for the Santa Basilissa mill of Säo Paulo suffered this fate in the early part of this century. Interview, Cyro Berlinck, president, Companhia Santa Basilissa, Säo Paulo, December 18, 1951. 41. Relatorio do presidente da provincia do Rio, 1848, p. 45. 42. Carlos Hargreaves undertook expansion of the America Fabril's newly acquired Cruzeiro mill in 1892, signing a contract for the "administration of necessary works and the complete mounting of the said mill for the sum of 30 contos, receiving one conto monthly and the balance on conclusion of works and machinery installation." America Fabril, Directoría, October 2, 1892. The choice of Hargreaves was probably not the result of random selection. In 1877, the firm of Hargreaves & Brother owned the Santa Rita mill of Rio which it had built, operating 700 spindles, 50 looms, and employing 100 workers. Frequent use of the small local group of technically trained personnel is further revealed by the fact that a Dr. Carlos I. Hargreaves appeared as the "engineer" of the Corcovado mill (Rio) in the same year the America Fabril paid for his services. Inquerito industrial, p. 30; Companhia de Fiaçâo e Tecelagem Corcovado, Relatorio da directoría . . . 18 de Abril de 1892 (Rio de Janeiro, 1892). 43. Mid-century Brazilians felt that their few mills left little to be desired in their planning and installation. Thinking, no doubt, of the two large mills Brazil could boast in 1853 —the Santo Aleixo (1,716 spindles) of Rio and its northern counterpart, the Todos os Santos establishment of Bahia (2,084 spindles) — the tariff commission of that year declared that "we have several large establishments patterned after the mills of nations most advanced in this industry." The commission was referring to the United States and Great Britain, whence came the mills' machinery. Commissäo da tarifa, p. 337. 44. The early cotton manufacturers of New England founded their mills at a time when Great Britain tried to prevent the export of both machinery and technicians. Such restrictions had disappeared by the 1840's, when the Brazilian cotton textile industry was founded. 45. Consul Ricketts, Report, C 4657, lxv (1886), 188. 46. This appears to have been the case of the Canna do Reino mill (Minas Gérais) whose prime mover was an Englishman. Before the advent of even passable roads, this mill set up spinning and weaving machinery in 1846 which it imported from Europe and hauled one hundred leagues from Rio de Janeiro. The mill was a small one, containing 240 spindles, one card and two English looms, in addition to others "of our system." Commissäo de tarifa, p. 338. 47. Petropolitana, Directoría, May 13, 1874. 48. Borja Castro, "Relatorio do segundo grupo," p. 45; Inquerito industrial,

Organization, Finance, Machinery

219

p. 18. Houdouard & Corbran (Rouen) were the equipment manufacturers. 49. Borja Castro, "Relatorio do segundo grupo," p. 42; Inquerito industrial, p. 30; Consul Kanthack, Report, C 6205, lxxxv (1890-1891), 5. Fortunately, Ellison happened to be in Europe when contracts for the mill's machines were being negotiated with Gregson and Monk. The British concern accepted the contract under Ellison's persuasion, despite the price uncertainties caused by striking coal miners and iron workers. Companhia Brazil Industrial, Primeiro relatorio, pp. 6-7, 23. 50. Jornal do Commercio, July 2, 1899. 51. Petropolitana, Directoría, August 14, and October 4 and 30, 1885. 52. Jornal do Commercio, November 29, 1895. Buckley, Taylor & Co. supplied the machinery. Note the following observation: "The Companhia Fiaçâo e Tecidos de Pernambuco [founded, 1875] is one of the most successful of the northern mills. . . The mill is Brazilian, from the president down to the firemen, and is one of the few successfully managed large factories that contain no foreign bosses or engineers." W. A. Graham Clark, Cotton Goods in Latin America. Part II. Brazil, Colombia, Venezuela. Department of Commerce and Labor, Bureau of Manufactures, Special Agents Series No. 36. (Washington, 1910), p. 53. 53. One factor in the slow growth of a nucleus of Brazilian engineers and plant managers may have been the economic importance of coffee cultivation and export, at least in south-central Brazil. In 1895 the Petropolitana lost its mill superintendent who resigned to join "an important coffee commission house because of the advantages offered him." He was replaced by a coffee planter of the vicinity, a Positivist, who "had a notion to erect a cotton mill and seemed to have applied himself to that branch of industry." In the directors' minutes it was noted that he might not appear at the mill daily in the first few months "because of operations now going on at his plantation." Petropolitana, Directoría, April 15 and 27, 1895. 54. Consul J. M. Ayers, Report. U.S. Commercial Relations, 18851886 (Washington, 1887), 1076. 55. Informaçôes, pp. 296, 298. 56. The agreement between Bonjean and the mill was specific: he was to sign contracts with those manufacturers who could supply what was needed on the best terms, "achieving for the company every possible advantage in length of period of payment and discount"; and materials and equipment were to be shipped by sail or steam vessels, whichever he judged convenient for the progress of construction and machinery installation, all the goods being insured in Brazil. At the request of the directors, the firm of Cámara & Gomes of Rio would open a "permanent" account of £5,000 through the London house of Pinto Leite & Sobrinhos, while extra funds would be forwarded via letters of exchange or cablegram. Petropolitana, Directoría, October 30, 1885. 57. Petropolitana, Directoría, August 19, 1886.

220

Notes to Chapter 3

58. Luis Tarquinio, "Auxilio às industrias," Jornal do Commercio, June 14, 1892. 59. To Platt Brothers the Petropolitana mill protested in 1886 about surcharges, particularly the "banking commission of 2.5 per cent. . . for the negotiation of your drafts. We must protest against such a heavy charge: the usual rate being below 1 per cent and we have just got information from the banks here, which enforces our claim." The mill utilized the concept of competition among machinery purveyors in Rio to argue its case. "Your competitors here do not charge . . . for the negotiation of their drafts, therefore we believe you will do the same." Petropolitana, Copiador Gérai de Cartas (Letterbook), no. 1, 30. In 1895, for instance, Piatt Brothers shipped to the America Fabril slightly more than £4,000 of goods which the company agreed to pay for in bills on the British Bank of South America. Early in March the machinery arrived and when the directors went to the British Bank of South America to pick up the bills of lading, the bank refused to hand them over until the date when the bills came due. America Fabril, Directoría, March 9, 1895. 60. Informaçôes, p. 295. 61. Petropolitana, Directoría, October 4, 1885. 62. Consul Rhind, Report, C 9044-110, xcviii (1899), 26. 63. Informaçôes, pp. 299-300. 64. "Relatorio do jury especial," Exposiçâo nacional de 1861, p. 183. The Todos os Santos mill proprietors (1858) used the machine shop and foundry as more than a "mere repair shop for the use of the mill only; . . . we can take in jobs for outsiders which amply cover the expenses of the Department & leave besides a handsome profit. I must add that at present we can not meet all the demands as we are a little short of help. This Shop can be made a very lucrative branch of the Establishment. It employs now 18 hands." Lacerda, "Description and Particulars of the Cotton Mill 'Todos os Santos.' " 65. Clark, Cotton Goods in Latin America, p. 48. 66. For example, Alfred Solier Gand's mill at Petropolis (1851 or 1852), and Marchisio, Loureiro, Silverio & Cia at Sorocaba, Säo Paulo 1865). Commissäo da tarifa, p. 343; Bandeira Junior, A expansäo económica de Säo Paulo, p. 70. 67. Inquerito industrial, p. 41. 68. Archivos da exposiçâo da industria nacional de 1881, p. Ixxxvi; Consul Ricketts, Report, C 3162, lxx (1882), 178; Inquerito industrial, p. 41. 69. "Fabricas de tecidos," O Industrial, May 21, 1881. For later discussion, see Jornal do Commercio, November 23, 1895. 70. The Rio News, March 15, 1883, cited in Branner, Cotton in the Empire of Brazil, p. 41, note 4.

Cotton

221

71. Inquerito industrial, pp. 28-29; Archivos da exposiçâo da industria nacional de 1881, p. xcv; Ministerio da Fazenda, Relatorio, 1887, p. 24; Frederico Glette, A industria nacional e as tarifas da alfandega (Rio de Janeiro, 1886), p. 6. 72. Consul Nicolini, Report, C 7919-132, lxxxv (1896), 6; Bandeira Junior, A expansäo econòmica de Säo Paulo, pp. 15-16. 73. Commissâo da tarifa, p. 33. 74. Relatorio do presidente da provincia do Rio, 1855, p. 47. 75. Borja Castro, "Relatorio do segundo grupo," pp. 38-39. 76. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861, pp. 316-317. In 1858, the looms were employed as follows: fifty-six American and thirty English looms for plain cloth, and fifty other American looms for weaving bags. Lacerda, "Description and Particulars of the Cotton Mill 'Todos os Santos.' " 77. Companhia Brazil Industrial, Primeiro relatorio, pp. 20, 39. 78. Informaçôes, p. 296. 79. Commissâo da tarifa, p. 339; Relatorio do presidente da provincia do Rio, 1848, p. 45. 80. Companhia Brazil Industrial, Primeiro relatorio, pp. 8-10. 81. Informaçôes, pp. 298, 300. 4.

COTTON

1. John C. Branner, Cotton in the Empire of Brazil, p. 22; James A. Mann, The Cotton Trade of Great Britain (London, I860), p. 93. On the importance of a warm, dry climate for cotton cultivation, see Alice P. Canabrava, O desenvolvimento da cultura do algodäo, pp. 89-90; Thomas Ellison, A Handbook of the Cotton Trade (London, 1858), pp. 4-5; Consul Austin, Report. C 1486, lxxv (1876), 761. 2. In 1816, the peak year of this period, Brazil supplied 21 per cent (20,131,581 pounds) of all United Kingdom raw cotton imports. Mann, The Cotton Trade, p. 112. 3. Several explanations for Brazilian cotton's relative decline after 1820 have been offered. L. F. de Tollenare, writing in 1817, judged that cotton cultivation around Pernambuco failed to expand because sugar cultivation seemed to promise steady returns while those from cotton were unpredictable. Notas dominicaes, 1817, 1817, 1818. Alfredo de Carvalho, transi, with a preface by M. de Oliveira Lima (Recife, 1906), p. 118. A more satisfactory explanation may have been the high cost of transportation from the interior to the coastal ports. Cotton from the Säo Francisco Valley shipped in the pre-railway era of the fifties to the port of Bahia paid in freight charges 7s to 9s 4d per thirty-two pounds (arroba) when the market price varied from l i s 8d to 14s; the difference was not judged a "reasonable remuneration." Ellison, Handbook, pp. 85-86. See Horace Say,

222

Notes to Chapter 4

Histoire des relations commerciales entre la France et le Brésil (Paris, 1836), p. 166; Mann, The Cotton Trade, p. 114. 4. Canabrava, O desenvolvimento da cultura do algodâo, pp. 16-17, 137. For an account of British influence on Sao Paulo's cotton boom, see ibid., pp. 3-17. 5. Consul Austin, Report, C 2134, Ixxv (1878), 1424. The advent of railroads to the fields of Säo Paulo and Pernambuco did not provide appreciable improvement: cotton shipped from the interior of Säo Paulo to Santos by rail paid 13 per cent of its value in freight charges, and in Pernambuco, between 25 and 30 per cent. Branner, Cotton in the Empire of Brazil, p. 25. See Canabrava, O desenvolvimento da cultura do algodâo, pp. 110-114. Twenty-three years later it was noted that "Transportation facilities [in the north] are backward and even from sections reached by railways, the cost is excessive." Clark, Cotton Goods in Latin America, p. 26. 6. Branner, Cotton in the Empire of Brazil, p. 26. In 1871, Bahia's exports fell off 20 per cent or 700,000 kilos from the previous year's total. Consul R. A. Edes, Report. U.S. Commercial Relations (Washington, 1872), p. 68. As a parliamentary commission reported in 1885, "If cotton cultivation continues as it has since the price drop of 1872, the national mills will soon feel a shortage of this raw material." Commissäo Parlamentar de Inquerito, Relatorio, p. 26. At the end of the century a British consul observed that the "quantity of cotton exported and thus coming into competition with other producing countries is yearly growing less." Consul A. Williams, Report, C 8648, xciv (1898), 5-6. 7. Clark, Cotton Goods in Latin America, pp. 26, 29. The tariff amounted to twenty-seven cents per pound. 8. Petropolitana, Directoría, October 15 and November 3, 1874, April 16 and July 5, 1875. 9. Ibid., February 9, 1891; Copiador de Cartas, July 28 and July 30, 1897. 10. Ibid., July 29, 1897. 11. Arno S. Pearse, Brazilian Cotton (Manchester, 1921), p. 63. 12. Canabrava, O desenvolvimento da cultura do algodâo, pp. 95-99, 102-108; Clark, Cotton Goods in Latin America, p. 26. 13. Auguste de Saint-Hilaire, Voyage dans les provinces de Rio de Janeiro et de Minas Gérais (2 vols., Paris, 1830), I, 404, in Branner, Cotton in the Empire of Brazil, pp. 33-34. 14. Ibid., pp. 33-35. 15. Ibid., pp. 36-37; Clark, Cotton Goods in Latin America, p. 28. 16. Pearse, Brazilian Cotton, p. 56. 17. Branner, Cotton in the Empire of Brazil, p. 39. 18. Letters of May 21 and June 16, 1868, in ibid., pp. 37-38. 19. Ibid., p. 39. Branner noticed that there were saw gins in every

223

Cotton

cotton-growing community, and a quarter century later another American observer commented on the fact that the gins he found were all saw gins of American and European manufacture which injured long staple fibers. Clark, Cotton Goods in Latin America, p. 35. No improvement in ginning techniques was evident by the 1920's when it was reported that Ceará had only saw gins causing "incalculable loss" to agriculturists and a British traveler found that 90 per cent of the 250 saw gins inspected had blunt blades. "I came across one still being used," wrote Pearse in 1920, "which had not been adjusted for sixteen years and it was quite a common thing to find that the saw had not been touched for five or six years." Ildefonso Albano, A crise do algodäo (Rio de Janeiro, 1918), p. 40; Pearse, Brazilian Cotton, pp. 56-57. 20. Branner, Cotton in the Empire of Brazil, p. 39. Some cotton seed went to Great Britain or to Rio de Janeiro, or was used to stoke steam engines operating gins and balers. 21. Consul Cohen, Report, C 5895, Ixxiv ( 1 8 9 0 ) , 6; Clark, Cotton Goods in Latin America, p. 36. 22. Albano, A crise do algodâo, p. 40; Clark, Cotton Goods in Latin America, p. 36. 23. Profits in ginning cotton were high. In 1887 the price of cotton in the pod in Minas Gérais was Rs 2$500 per arroba, and Rs 10$000 per arroba of ginned cotton. Consul H. G. MacDonell, Report, C 4924, lxxxii ( 1 8 8 7 ) , 8. 24. Albano, A crise do algodâo, p. 40; Clark, Cotton Goods in Latin America, p. 35; Branner, Cotton in the Empire of Brazil, p. 39; Pearse, Brazilian Cotton, p. 173; H. Clay Armstrong, Report. U.S. Commercial Relations (Washington, 1884-5), II, 749. 25. T. Worthington, Reports. . . upon the Conditions and Prospects of British Trade in Certain South American Countries. Fourth Report. Brazil. Part I. C 9160, xcvi ( 1 8 9 9 ) , 23. (Hereafter cited as Report). It was claimed in 1909 that higher handling and freight charges made Fernambuco cotton more costly in Rio de Janeiro, only 1,124 miles away, than in Liverpool, more than 4,000 miles by freighter. British spinners, it was estimated, paid one and one-quarter cents per pound less than the mill owners of Southern Brazil. This difference in costs had not changed at the close of the First World War. Not only were Rio and Säo Paulo mills paying more for northern cotton than were British mills, they were paying more perhaps than American mills for comparable quality. Clark, Cotton Goods in Latin America, p. 37; L. S. Garry, Textile Markets of Brazil. Department of Commerce. Bureau of Foreign and Domestic Commerce. Special Agents Series. No. 203 (Washington, 1920), p. 27. 26. Branner, Cotton in the Markets of Brazil, p. 26.

Empire

of Brazil,

p. 47; Garry,

Textile

224

Notes to Chapter S 5.

LABOR

1. The lot of commercial employees was no better. Compare Aluizio de Azevedo, A Brazilian Tenement (London, 1928). Immigrant Portuguese employed in Portuguese merchant houses worked, ate and slept in the employers' establishments under constant surveillance. 2. Branner, Cotton in the Empire of Brazil, p. 41; Canabrava, O desenvolvimento da cultura do algodâo, p. 278. 3. Commissäo da tarifa, p. 117. Possibly the mills owning slaves utilized them also for field work, raising foodstuffs for the free millworkers. The Todos os Santos had fifty slaves in 1861 thus applied. Exposiçâo nacional de 1861, p. 319. 4. Companhia Brazil Industrial, Primeiro relatorio, p. 10. The high price of slave labor and the demand for slaves on coffee plantations, 18501885, after the end of the trade with Africa in 1850, probably were the chief causes for the absence of slave labor in cotton textile mills in the third quarter of the century. 5. Ibid., pp. 23-24; Companhia Brazil Industrial, The Industry of Brazil, p. 21. 6. As the British consul at Santos wrote in 1876: "Major de Barros proved his earnestness in ensuring the efficient working of his factory by availing himself of the aid to be derived from the introduction of skilled operatives. . ." Consul Dundas, Report, C 1855, lxxxii (1877), 1208. 7. Companhia Brazil Industrial, The Industry of Brazil, p. 17. 8. Inquerito industrial, p. 11. 9. Commissäo da tarifa, p. 340. 10. Borja Castro, "Relatorio do segundo grupo," p. 46. 11. Petropolitana, Directoría, February 4, 1874, June 1, 1885 and June 8, 1887. More technically competent personnel often wrote directly to the companies. "I am thirty-three years old," a young textile engineer wrote from Pau, France, in 1888, "and since the age of sixteen I have busied myself steadily and especially on cloth production. I studied weaving at Lyon. I graduated with the grade of Very good' from the school directed by M. Meyssin, a silk manufacturer. You may check my references with him." Petropolitana, Copiador Gérai de Cartas, no. 1, December 10, 1888. 12. Ibid., June 19, 1895. 13. Companhia Brazil Industrial, The Industry of Brazil, p. 17. 14. Decree No. 528 of June 28, 1890, cited in Reports from His Majesty's Representatives in Brazil concerning the Condition of British Immigrants, C 6424, lxxxiii (1890-1891), 3. 15. Diario de Fernambuco, January 6, 1891, cited by Consul Cohen in Reports from His Majesty's Representatives, p. 6. 16. Consul Hearn, Report, C 6812, lxxxi (1892), 23. At the Plataforma

Labor

225

mill (Bahia) the cost of living at this time was estimated at from one shilling to two shillings threepence per day. Consul Stearns, Report, C 6205, Ixxxv ( 1890-1891 ), 5. Fluctuating exchange rates, patterns of nutrition, and money wages in Brazil are difficult to correlate for this period. From 1894 to 1897 the decline in the value of the paper milreis and unchanging wages in Pernambuco raised the cost of imported foodstuffs such as codfish, flour, jerked beef, and rice. The prices for beans, maize, and manioc remained approximately the same. Since the diet of lower-class Brazilians consisted largely of beans, maize, and manioc, the more expensive imported proteins and starches did not enter the food budget of the Brazilian millworkers. See Consul Williams, Report, C 8648, xciv (1898), 7-8. 17. Worthington, Report, p. 24; Clark, Cotton Goods in Latin America, p. 47. 18. Interview at Petropolitana mill, Petropolis, January 1952. Rio de Janeiro's Säo Cristoväo mill, which began operations in 1893 had a labor force in 1895, 45 per cent foreign in origin. "Exposiçâo industrial," Jornal do Commercio, November 29, 1895. Italian weavers probably accounted for most of the foreign labor noted in certain Säo Paulo textile mills in 1903, in the Jupiter, Fortuna, and Bom Retiro mills, those of Antonio Alvares Penteado and of Dell 'Aqua & Cia. of Säo Roque. Bandeira Junior, A expansäo económica de Säo Paulo, pp. 7-8, 55-56, 152-153. From these weavers there later appeared in the war years, 1915-1918, the proprietors of tiny basement weaving shops whose looms were tended by members of the proprietors' families. 19. Commissäo da tarifa, p. 338. The mill employed fifty-five boys, most of them from the Säo Joaquim seminary of the city of Bahia. 20. Ibid., p. 338. In Rio's Santo Aleixo mill there were from 125 to 150 free workers "for the most part women and minors." Relatorio do presidente da provincia do Rio, 1855, p. 47. 21. Borja Castro, "Relatorio do segundo grupo," p. 35. 22. A Esperança (Itú), August 14, 1869, cited in Companhia Brazil Industrial, The Industry of Brazil, p. 27. 23. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861, p. 319. 24. Companhia Brazil Industrial, The Industry of Brazil, p. 17. 25. Companhia Brazil Industrial, Primeiro relatorio, p. 27. 26. America Fabril, Directoría, November 19, 1894. 27. Borja Castro, "Relatorio do segundo grupo," pp. 42-43. 28. Companhia Brazil Industrial, The Industry of Brazil, p. 27; Companhia Brazil Industrial, Primeiro relatorio, p. 9. 29. "Companhia Säo Lazaro," Jornal do Commercio, August 3, 1892. 30. Inquerito industrial, p. 47. Compare Informaçôes, p. 207. 31. Informaçôes, p. 300. 32. America Fabril, Directoría, July 13, 1890.

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Notes to Chapter 5

33. "Auxilio às industrias," Jornal do Commercio, May 28, 1892. Low exchange rates and consequently high cost of imported materials, the small number of carpenters and stonemasons, low rents which did not cover high interest charges on loans obtained for building, and local building taxes were the difficulties enumerated. 34. Consul A. L. G. Williams, Report, C 7581-87, xcvi (1895), 10. 35. Consul E. Kanthack, Report, C 7581, xcvi (1895), 6-7; Clark, Cotton Goods in Latin America, p. 48. 36. Commissäo da tarifa, pp. 342-343. The commission based its claims for Lowell's advantages on the works of Maurice Chevalier, and Ramon La Sagra, Cinco Meses en los Estados Unidos de la America del Norte (Paris, 1836). 37. Consul Bennett, Report, C 4915, lxxxiii (1887), 6. 38. Commissäo da tarifa, p. 338. "All the workers live within the establishment's dormitory and form a single family. . ." Borja Castro, "Relatorio do segundo grupo," p. 38; José Pereira Regó Filho, Conferencia na exposiçâo industrial de 1882 sobre o tema: Problemas suscitados pela actual exposiçâo (Rio de Janeiro, 1882), p. 4. 39. Petropolitana, Directoría, November 3 and December 4, 1874. Inadequate urban transportation and low wages also made it imperative for mill hands to reside near their place of work. Company housing was therefore the most convenient. "Auxilios às industrias," Jornal do Commercio, June 9, 1891. 40. Commissäo da tarifa, 338, 341; Borja Castro, "Relatorio do segundo grupo," pp. 36, 47. 41. Petropolitana, Directoría, February 5 and May 13, 1874; Companhia Brazil Industrial, Primeiro relatorio, p. 9. 42. Informaçôes, p. 296; Consul Bennett, Report, C 4915, lxxxiii (1887), 6. 43. Consul E. Nicolini, Report, C 7919-132, Ixxxv (1896), 7. For similar construction of vilas operarios in the nineties, see (Companhia Petropolitana), Jornal do Commercio, November 29, 1895; (Confiança Industrial), ibid., December 4, 1895; (Alliança, Corcovado and Industrial Pernambucana), ibid., December 6, 1895. The America Fabril company signed a contract in 1894 with the Rio perfecture for the construction of 100 workers' villas on its own land near its Cruzeiro mill. Directoría, October 29, 1894. 44. Directoría, April 6, 1900. 45. Ibid., May 30, 1919. The Petropolitana mill closed down its store only when sufficient local competition developed to free its factory hands from "unfavorable conditions." 46. Pereira Rego Filho, Conferencia na exposiçâo industrial de 1882, p. 43. 47. America Fabril, Directoría, June 5, 1889, January 21, 1893, and January 17, 1895.

Labor

227

48. Petropolitana, Directoría, May 1, 1890, March 4, 1891, August 18 and November 2, 1897. Corroborating complaints against the Petropolitana's company store was the report in 1895 that the Brazil Industrial cotton mill supplied its factory hands from a "well sorted selection" but at prices 5 per cent dearer than those charged in nearby Rio for first quality goods. Jornal do Commercio, December 4, 1895. 49. Commissäo da tarifa, 337; Archivos da exposiçâo da industria nacional de 1881, lxxxvii-lxxxviii. 50. Commissäo da tarifa, p. 338. 51. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861, p. 319. 52. Commissäo da tarifa, p. 338; Informaçôes, p. 296; Jornal do Commercio, November 9, December 4, December 6, 1895. 53. Borja Castro, "Relatorio do segundo grupo," pp. 14, 45. Of the Todos os Santos mill in 1866 the same author wrote that although Americans had installed machinery, it was "entirely in Brazilian workers' hands, and they have kept high standards, maintaining the good name the mill enjoyed at its commencement." Ibid., p. 37. 54. Informaçôes, p. 206. 55. Ibid., pp. 296, 299; Petropolitana, Directoría, September 28, 1891. 56. Informaçôes, p. 299. 57. "Auxilios às industrias. Representaçâo dos industriáis ao congresso nacional," Jornal do Commercio. July 6, 1892. 58. Clark, Cotton Goods in Latin America, p. 47. 59. Pereira Regó Filho, Conferencia na exposiçâo industrial de 1882, p. 43; Consul Stevens, Report, C 6205, lxxxv (1890-91), 5; Jornal do Commercio, December 4, December 6, 1895. 60. Pereira Rego Filho, Conferencia na exposiçâo industrial de 1882, p. 44; Consul Wagstaff, Report, C 8277-02, lxxxix (1897), 9; Consul Williams Report, C 8648, xciv (1898), 8. 61. In comparison, wage labor seemed expensive. It is not strange, then, that in 1853 some Brazilians had to point out that wherever labor became increasingly dear, there existed the promise of improvements and industrial progress, of new machines and "discoveries which aid and perfect labor." Citing McCulloch, some Brazilians claimed the state would profit by a well-paid working force which could improve its education, habits, health, and satisfaction. On the contrary, they argued, what advantage could the state obtain from a population "reduced to the wretched, impoverished condition of the Irish?" Commissäo da tarifa, p. 119. 62. Ibid., p. 337. 63. Borja Castro, "Relatorio do segundo grupo," p. 45. 64. No study of wage rates in Brazilian cotton mills has been made to date, although material for such an investigation is available in the wage books preserved by many mills.

228

Notes to Chapter S

65. Inquerito industrial, p. 24; Informaçôes, pp. 232, 296, 299; Consul H. G. MacDonell, Report, C 4924, Ixxxii (1887), 8; Jornal do Commercio, November 29, 1895, December 4, 1895; Consul Wagstaff, Report, C 827792, lxxxix (1897), 9; Worthington, Report, p. 23. 66. Ibid., p. 23. 67. Consul Stevens, Report, C 4171, lxxxi (1884), 1616. 68. Possibly the influx of Italian and Spanish immigrants of marked syndicalist orientation to the mills of Säo Paulo and, to a lesser degree, of Rio de Janeiro, and a number of factory strikes, may account for higher wages there. It is evident that little foreign labor was employed in the mills of Bahia, Pernambuco, and areas further north. 69. American observers in 1909 and again in 1919 offered conflicting analyses. Pointing to Brazilian cotton mills' ten-hour day and the presence of two or three times as many hands as American mills employed, Clark felt that Brazilian wages per day were as high as those of southern mills in the United States, then operating eleven hours daily. Yet Garry, a few years later, wrote that Brazilian wages judged by the "money standard" were low. Clark, Cotton Goods in Latin America, p. 46; Garry, Textile Markets of Brazil, p. 32. 70. Inquerito industrial, p. 24; Informaçôes, p. 232. The difference in wage levels between northern and southern mills was also apparent in 1910, when an American observer noted that the spread of daily wages in Pernambuco mills was from 800 reis to three milreis ($.26 to $.99), while that of Rio mills was from one milreis to six milreis ($.33 to $1.98). Clark, Cotton Goods in Latin America, p. 54. 71. Worthington, Report, p. 23; Inquerito industrial, p. 40. 72. Directoría, November 2, 1897. 73. Consul Kanthack, Report, C 8277, lxxxix ( 1897), 8. 74. Note the main points of an article entitled, "The Weavers": "Among the workers who provide the well-being of the useless, parasitic classes, i.e., the bourgeois classes who absorb our labor, the class of weavers is one of the worst paid and most down-trodden by many hours of labor. "The proof of our contention lies in the iniquitous factory regulations which state that no worker may leave his quarters without two-weeks' notice, although the manager or the other bosses may fire him at will and immediately. "Ah! Infamous bourgeoisie, you do not wish us to be your enemies! "Wretches! To those who do not work and disport themselves, everything; for us who fill your belly and your strongbox, nothing!" O Operario (Rio) November 18, 1895. 75. Petropolitana, Directoría, November 19, 1888. 76. Ibid., June 10, July 1 and July 24, 1891. 77. Ibid., November 2, 1897; Copiador de Cartas, November 4, 1897.

Products and 6.

Distribution

229

PRODUCTS AND DISTRIBUTION

1. "Relatorio do jury especial do segundo grupo," Exposiçâo nacional de 1861 (Rio de Janeiro, 1862), p. 318; Borja Castro, "Relatorio do segundo grupo," p. 36; José de Saldanha da Gama, Estudos sobre a quarta exposiçâo, p. 127. For a comprehensive account of Brazilian textile imports in the early seventies, see Consul Phipps, Report, C 636, lxi ( 1 8 7 2 ) , 265-267. 2. Inquerito industrial, p. 42. 3. Some imported fabrics disguised inferior quality as well as the poor cotton utilized in order to undersell the domestic product. Ibid. 4. Ibid., p. 45. 5. Informaçôes, p. 237. 6. Ibid.; Consul Ricketts, Report, C 4657, lxv ( 1886), 186-187. 7. Consul Cohen, Report, C 4915, lxxxiii ( 1 8 8 7 ) , 2. 8. Petropolitana, Directoría, February 3, 1886 and September 26, 1890; Consul C. F. Ancell, Report, C 7581, xcvi ( 1 8 9 5 ) , 20. Confirmation of the expanding market for better goods came in 1886 when it was reported that styles had brought changes in the type of goods demanded in Brazilian shops. Ministerio da Fazenda, Relatorio, 1886, p. 26. 9. Consul Rhind, Report, C 9044-110, xcviii ( 1 8 9 9 ) , 26; Worthington, Report, p. 23; Consul Nicolini, Report, C 9044-108, xcviii ( 1 8 9 9 ) , 7; Consul A. F. Howard, Report, C 8277, lxxxix ( 1 8 9 7 ) , 7. 10. Ministerio da Fazenda, Relatorio, 1886, p. 24; Consul C. F. Ancell, Report, C 7581, xcvi ( 1 8 9 5 ) , 21-22. 11. Consul A. G. Williams, Report, C 7581-87, xcvi ( 1 8 9 5 ) , 15. On Sâo Paulo print works, see Worthington, Report, p. 24. A Sâo Paulo mill printed for others and bought cloth to print for stock, being capable of printing in as many as eight colors. The Petropolitana's master dyer, an Italian immigrant, asked his employers' permission to return to Italy for two months on "urgent family matters" in 1896. Reluctantly the permission was granted, the proprietors observing that in Italy "he might be able to observe, if briefly, the new processes for dyeing cottons." Petropolitana, Directoría, August 13,1896. 12. Lincoln Hutchinson, Report on Trade Conditions in Brazil (Washington, 1906), p. 24. 13. Consul C. C. Andrews, Report. U.S. Commercial Relations, 18821883 (Washington, 1884), II, 297. 14. Companhia Brazil Industrial, Petiçâo, p. 8. 15. Consul R. A. Edes, Report. U.S. Commercial Relations (Washington, 1879), pp. 200-201. Proprietors of the Beribery mill in Minas Gérais asserted that prospective stockholders feared "foreign competition" when the cotton mill was first projected in the seventies. Informaçôes, p. 295. 16. "Companhia Sao Lazaro," Jornal do Commercio, August 3, 1892.

230

Notes to Chapter 6

17. The system of "long credits" was remarked upon in 1879 in these terms: "This system compels the importing merchant to do a kind of banking business in connection with his regular business, and obliges him to carry large amounts in nonnegotiable paper, running from one to twelve months, with the privileges of extension at the will of the debtor." It was not unusual for a house to have from $250,000 to $500,000 tied up in this fashion. Merchants borrowed, in turn, from European money markets. Consul T. Adamson, Report. U.S. Commercial Relations (Washington, 1879), p. 196. 18. After the Beribery mill began operations, the excellent quality and reasonable price of its cloth overcame the ill-will of Rio drygoods merchants. Informaçôes, p. 295. 19. "A industria e o commercio. Leilöes à grande prazo," O Industrial, June 23, 1881. 20. "Tudo tem a sua época," O Industrial, June 18, 1881. On the speculative activities of foreign importers of cloth in this period, see Commissäo Parlamentar de Inquerito, Relatorio, p. 17; Consul C. F. Ancell, Report, C 7581, xcvi (1895), 5. 21. Consul Stevens, Report, C 4171, Ixxxi (1884), 1604, and Report, C 6205, lxxxv (1890-1891), 5. 22. For comments on the role of the Portuguese in Brazilian mercantile activities, see: Consul Austin, Report, C 1486, lxxv (1876), 779; "Abstract of a Letter from an English Engineer in the State of Sâo Paulo," in Reports from H. M. Representatives in Brazil, C 6424, lxxxiii (1890-1891), 30. The figure of the diligent Portuguese immigrant who entered commerce in Brazil is portrayed vividly in Aluisio de Azevedo, A Brazilian Tenement. 23. Consul Austin, Report, C 1486, lxxv (1876), 779. In the eighties the Petropolitana cotton mill, whose director-president, Mattos Vieira, was a Portuguese cloth merchant of long residence in Brazil, dealt with the following banks, all in Oporto, Portugal: Banco Alliança, Banco Mercantil Portugués, Banco Uniäo, Banco Portugués, Banco Commercio e Industria. The other European bank with which the company had relations was the French Banque de Paris et des Pays Bas. 24. See Consul Stevens, Report, C 4171, lxxxi ( 1884), 1605. 25. Hutchinson, Report, p. 58. 26. This can be seen, for example, in at least two important Rio textile mills, the Petropolitana and the America Fabril, where Portuguese cloth merchants such as Bernardo Pinheiro, the Leitäo brothers, Manuel Vicente Lisboa, Domingo Bebianno, Antonio Ribeiro Seabra, Sotto Maior, and Mendes Campos became large stockholders. 27. This was the plight of Maranhäo mills when, during the expansion of the nineties and before the mills there could install their machinery, the enterprises found themselves without capital to complete or maintain what had been undertaken. From the hands of the original stockholders the

Products and Distribution

231

enterprises passed "bit by bit" to the "merchant capitalists of the interior and the capital city." W. W. Coelho de Souza, O algodâo no Maranhäo (Säo Paulo, 1922), p. 40. Of the plethora of textile mills founded in Pará and Maranhäo it was said that "industrial disasters" were due to failure to apply "sufficient regard to the necessary capital which has been found absolutely essential for successful trading of the various companies . . ." Consul A. F. Howard, Report, C 8277, lxxxix (1897), 12. Also, Consul E. Kanthack, Report, C 8277-58, lxxxix (1897), 6. 28. José Soares Maciel Filho, "A economía da industria textil no Brasil" (Rio de Janeiro, 1945), p. 1. Mimeographed minutes in Archive, Centro das Industrias de Fiaçâo e Tecelagem do Algodâo do Rio de Janeiro. (Hereafter cited as C I F T A - R i o . ) 29. Symptomatic of the unity of mill proprietors and wholesalers was the comment made in 1904 that the "most enlightened section" of the Rio merchants had allied themselves with domestic mill proprietors to obtain tariff protection. L. R. Vieira Souto, in CIB, Boletim, I (1904-1905), 14. The rise of Portuguese influence in many Brazilian mills during the nineties and afterward may also be traced to the need for mill managers with merchandising experience. For example, the firm of Sotto Maior, a Portuguese cloth wholesale house founded by Augusto Sotto Maior, handled part of the Petropolitana's production and negotiated with the Petropolitana's Portuguese bondholders via its affiliate in Lisbon, Pinto & Sotto Maior. Augusto Sotto Maior's shares in the Petropolitana grew from 70 (1907) to 200 (1911). Petropolitana, Directoría, May 15, 1917; "Lista dos senhores accionistas em 30 de Janeiro de 1907," Relatorio da directoría da companhia Petropolitana, 1907, 1910, 1911. 30. Borja Castro, "Relatorio do segundo grupo," p. 34. 31. Inquerito industrial, p. 28; Consul H. G. MacDonnell, Report, C 4924, lxxxii (1887), 8; Commissäo da tarifa, p. 328; Consul R. A. Edes, Report. U.S. Commercial Relations (Washington, 1875), p. 169; Borja Castro, "Relatorio do segundo grupo", p. 42; Jornal do Commercio, December 6, 1895; Consul Wagstaff, Report, C 8277-92, lxxxix (1897), 9. 32. Saldanha da Gama, Estudos solre a quarta exposiçâo, p. 128; C. F. Van Delden Laerne, Brazil and Java. Report on Coffee-Culture in America, Asia and Africa (London, 1885), pp. 192-193; Petropolitana, Directoría, May 1, 1890. 33. The company planned to retail its products, but this policy was quickly abandoned in favor of selling to wholesalers because of delays in payment. Petropolitana, Directoría, January 4 and February 9,1875. 34. Petropolitana, Directoría, January 4, 1875, May 15, August 14, August 2, October 19, 1885; and Copiador, December 23, 1886. Depending upon the size of the order, the following discounts were granted: 1-20 bales, 6 per cent; 2 1 ^ 0 , 8 per cent; 41-70, 12 per cent; 71-99, 15 per cent; 100 and over, 16 per cent. The sole change in terms of sale adopted by the

232

Notes to Chapter 6

Petropolitana came in 1920, when, in response to the "evolution of the cloth market," it was agreed to grant all customers the same discount except for large purchases. Petropolitana, Directoría, March 26, 1920. 35. Between 1885 and 1889 the Brazilian milreis rose in value and importers of Manchester goods overstocked many commodities including cottons. In a few years, sales were "restricted and business transactions curtailed." The rise in exchange was said to cheapen imported cotton goods, "the difference in favor of the importer having been 20 per cent." In 1886 it was felt that the rise was caused principally by a loan of ¿6,000,000 to the Brazilian government. Consul G. A. Stevens, Report, C 6205, Ixxxv (1890-1891), 5; Consul R. Ricketts, Report, C 4923, lxxxiii (1887), 2-3. 36. Petropolitana, Directoría, December 29, 1887, and August 30, 1888. 37. Getulio das Neves, "Industria em geral," Instituto Histórico e Geográphico Brasileiro, Diccionario histórico, geográphfico e etnográpkfico do Brazil (2 vols. Rio de Janeiro, 1922), I, 515. 38. Petropolitana, Directoría, May 23 and August 20, 1889. 39. Ibid., January 3 and 7, 1890. 40. Ibid., May 1, 1890. 41. Ibid., June 26, 1890 and Copiador, June 13, 1889. Evidently "Liberty" and "Bocayuva" were so named to attract the ear of ex-slaves, Bocayuva having been an influential abolitionist. 42. Ibid., August 17, 1891, June 11 and August 2, October 13 and 25, and November 21, 1892. 43. Ibid., August 31 and October 13, 1894. 44. Ibid., December 21, 1894. 45. Samples and prices were forwarded, payment made by sixty-day draft and 3 per cent discount, while the agent received a commission of 2 per cent on net sales. Ibid., August 19, 1896. 46. Consul Bernal, Report, C 8648, xciv (1898), 18. 47. Petropolitana, Directoría, January 15, 1895; America Fabril, Directoría, February 28, 1895; Jornal do Commercio, Retrospecto commercial, 1897, p. 15. 48. Ministerio da Fazenda, Relatorio, 1897, p. 13. Because company president Moreira dos Santos' predecessor, an engineer without sales experience, insisted upon producing one pattern of goods in 1897, there existed in the Petropolitana an "enormous quantity of one pattern and an absolute scarcity of others, so that we can not make up the assortments as they are requested — in other words, having lots of cloth on hand, we can not make assortments and satisfy orders." Petropolitana, Directoría, December 4, 1897. 49. Petropolitana, Directoría, May 24 and 31,1897. 50. America Fabril, Assemblea Geral, August 4, 1885. 51. Petropolitana, Directoría, December 4,1897, and December 31,1902.

Industry and 7.

Government

233

INDUSTRY AND GOVERNMENT

1. To date there is no comprehensive historical analysis of Brazilian tariffs nor have there been detailed studies of their relation to the rise of specific industries. Homero Baptista's A receita g eral para 1913 is a chronological summary of finance ministers' annual reports covering the nineteenth century. 2. Associaçâo Industrial, Representaçâo dirigida ao exmo. snr. Ministro da Fazenda (Rio de Janeiro, 1881), pp. 5, 11. Two years later the association advised the government that industrial enterprise was "dampened . . . almost annihilated" because it was considered a "secondary element in the nation's progress." Informaçôes, p. 345. 3. "Manifesto da Associaçâo Industrial," O Industrial (Orgäo da Associaçâo Industrial), May 21, 1881. The president of the Associaçâo Industrial was Antonio Felicio dos Santos, director of a cotton mill of Minas Gérais and founder of the Pau Grande mill near Rio de Janeiro. 4. Frederico Glette, A industria nacional e as tarifas de alfandega (Rio de Janeiro, 1886), p. 9. 5. Biblioteca da Industria Nacional, O Trabalho nacional (Rio de Janeiro, 1881), p. xiii. For similar statements by the representatives of Rio's metallurgical industries in 1883, see Informaçôes, p. 347. 6. "O tecido chamado panno cru e os importadores," O Industrial, June 4, 1881. 7. Biblioteca da Industria Nacional, O Trabalho nacional, p. 2. 8. Fernandes Pinheiro, "Introducçâo," pp. lxxxiii-lxxxiv; "A execuçâo da tarifa da alfandega." O Industrial, June 11, 1881. "The innumerable . . . tariffs and revisions are the handiwork of the importers and the treasury. An isolated industrialist, here or there, tried in vain to make his voice heard. But the pecuniary prestige of importing houses and the indifference of the treasury toward domestic manufacture smothered the complaints of the rare industrialist asked to opine on tariff clauses." "O tecido chamado panno cru," Ibid., June 4, 1881. 9. Fernandes Pinheiro, "Introducçâo," p. lxxxv. 10. O Industrial, June 4, 1881. 11. Fernandes Pinheiro, "Introducçâo," p. vi. 12. Ibid., p. xxvi. Despite this mild statement of the aims of domestic manufacturers, the prospect of eventually exporting Brazilian cottons was not absent from Fernandes Pinheiro's thinking. He recognized that "young industry" would have a long wait before being in a position to compete in foreign markets with the production of "more advanced nations." At the moment the problem was to "fend off the blows of foreign mills" in Brazilian markets. Ibid., p. ix. 13. Informaçôes, p. 4.

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Notes to Chapter 7

14. Fernandes Pinheiro, "Introducçâo," pp. xxi, xxx. On the theme of imminent agricultural crisis facing coffee cultivators in Brazil during the eighties, and on the need to diversify the economy through industrialization, note: "In a land such as ours . . . where every natural resource can and must be used, it is a grave error to continue the deplorable system of engaging in one activity, agriculture, condemned by the serious setbacks recently received by coffee growers (emancipation of sexagenerian slaves)." Commissäo Parlamentar de Inquerito, Reîatorio, p. 16. 15. Glette, A industria nacional, pp. 11, 23. 16. Effective tariff rates on selected cloth imports in 1879 were as follows, stated as percentages of value: union cloth, 70; cassinets, 135; gray calico, 68; twilled calico, 64; printed calico, 80; printed cotton batiste, 70; pilot cloths, 75; ginghams, 46; black and white brilliants, 95; regatta stripes, 80. Consul Ricketts, Report, C 2761, Ixxxix (1881), 36-37. 17. Consul Ricketts, Report, C 3162, Ixx (1882), 178. Customs duties on textiles were said to supply no less than one-seventh of Brazil's revenue. Earlier, a finance minister put the figure higher, calling it "not the result of a system but of sheer necessity." "Circular acerca dos impostos e pareceres," Annexo Β, p. 9, in Ministerio da Fazenda, Reîatorio, 1879. 18. Consul Ricketts, Report, C 4657, lxv (1886), 187. 19. Baptista, A receita geral para 1913, pp. 66-67; Consul Ricketts, Report, C 4923, lxxxiii (1887), 3, 5. Compare Consul Stevens, Report, C 4171, lxxxi (1884), 1603, 1615-1616; Succincta noticia sobre a industria de Fernambuco, p. 34; Consul T. Adamson, Report. U.S. Commercial Relations, 1880-1881 (Washington, 1883), p. 34; Consul E. Kanthack, Report, C 4915, lxxxiii (1887), 2. 20. Ministerio da Fazenda, Reîatorio, 1886, pp. 49-50. For the report of the European commissioners, see Ch. 1. 21. With the figures of 1869 taken as 100, index numbers based on the average tariff rates on specified items in Brazil for 1887, 1890, 1896, and 1900, were as follows: Clothing, 155, 168, 364, 482; Food, 193, 191, 456, 470; Construction materials, 198, 239, 491, 467. In each case the index number represents an average of the tariff rates of all articles of one classification. Ramalho Ortigäo, "Commercio," Instituto Histórico e Geográphico Brasileiro, Diccionario histórico, geográphico e ethnográphico do Brasil, I, 554. 22. According to the analysis of the Brazilian economist Calogeras, the adoption by the government of an avowedly protective tariff policy from 1896 onward reflected Brazil's economic crisis of 1895 and the "industrialists' anguish." It was under the temporary presidency of the "leading spirit" behind the National Exposition of 1895, the vice-president (for the president of Brazil was gravely ill for four months), that the tariff of 1896 was prepared and voted. The "groans, shouts and general misery of the newlyborn industrialists" were not unheeded. Joáo Pandiá Calogeras, La politique monétaire du Brésil (Rio de Janeiro, 1910), p. 289.

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23. See Board of Trade Journal, XXXIX (June 28, 1900), 689; T. E. G. Gregory, Tariffs. A Study in Method (London, 1921), pp. 133, 359-361; U.S. Federal Trade Commission, Report on Trade and Tariffs in Brazil, Uruguay, Argentina, Chile, Bolivia and Peru (Washington, 1916), pp. 24, 62, passim; Calogeras, La politique monétaire, pp. 238-240, 244, 255-56, and passim. Rutter defined the razäo as a "percentage that represents the ad valorem equivalent of the specific rate of duty." Frank R. Rutter, Tariff Systems of South American Countries. Department of Commerce, Bureau of Foreign and Domestic Commerce. Tariff Series No. 34 (Washington, 1916), p. 116. Specific duties were based upon ad valorem equivalents with partial payment in gold vales (purchased with paper milreis at the Bank of Brazil). 24. Baptista, A receita geral para 1913, p. 72. 25. There is a brief discussion of the incident in Calogeras, La politique monétaire, pp. 253-256. 26. "All the partisans of the law of May 13th [abolishing slavery] were ready to aid rural proprietors via special measures with respect to mortgages, in an indirect fashion; as for indemnifying them for the lost value of their human cattle, no." Ibid., p. 185. 27. Consul H. Wyndham, Report, C 5895, lxxiv (1890), 21-22; Ministerio da Fazenda, Relatorio, 1903, pp. 97-98. For details of the Imperial government's policy for increasing money in circulation, see Calogeras, La politique monétaire, pp. 185-199. According to international exchange rates in the preceding three years the financial situation of Brazil was sound and the issue of inconvertible paper currency was not necessarily doomed to depreciate. In March, April, and again in October 1889, the Brazilian paper milreis was worth more than its par value. Consul G. A. Stevens, Report, C 6205, lxxxv (1890-91), 5; Consul W. Ricketts, Report, C 4923, lxxxiii (1887), 2-3; John H. Williams, Argentine International Trade under Inconvertible Taper Money, 1880-1890 (Cambridge, Mass., 1920), p. 6. 28. Planters felt that government credit distributed by private banks failed to come to them because they could offer only their heavily mortgaged lands as security. Consul E. Kanthack, Report, C 5895, Ixxxiv (1890), 3. 29. In November 1889, the Brazilian Army revolted, the royal family was exiled, and, shortly after, the nation became a republic under a constitution modeled upon that of the United States. 30. Consul H. Wyndham, Report, C 5895, lxxiv (1890), 18-19. 31. Ministerio da Fazenda, Relatorio, 1901, p. xliv. On the early banking reforms of the republican government, see also Dorival Teixeira, "La moneda brasileña," Trimestre económico, XV (April-June, 1948), 56-58. 32. Consul W. R. Hearn, Report, C 6812-2, lxxxi (1892), 15. 33. Consul H. Wyndham, Report, C 6205, lxxxv (1890-1891), 21-22. 34. Ibid., p. 22.

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Notes to Chapter 7

35. Consul G. F. F. Adams, Report, C 6550, lxxxi (1892), 31-32. A Brazilian contemporary of the boom used a caustic pen to describe the distribution of government favors at this time. "Contracts for immigrants by the dozen, the settlement of thousands upon thousands of European families on all imaginable public lands, a never-ending stream. . . All that was needed was the petition of any rich or poor, prominent or unknown baron — especially the relatives, friends, sycophants, and dependents of the moment." Alfredo d'Escragnolle Taunay [Heitor Malheiros, pseud.] O encilhamento. Seenas contemporáneos da bolsa em 1890, 1891 e 1892 (2 vols. Rio de Janeiro, 1892), I, 8-9. 36. Ibid., I, 25. 37. Consul G. F. F. Adams, Report, C 6550, lxxxi (1892), 31. 38. Rio News, February 17, 1891, cited in Reports from His Majesty's Representatives in Brazil, p. 8. 39. Taunay, O encilhamento, I, 10. 40. CIB, Relatorio, 1912, p. 88. 41. Jornal do Commercio, January 18, 1892. 42. Prefeitura do Districto Federal, Noticia sobre o desenvolvimento da industria fabril e sua situaçâo actual (Rio de Janeiro, 1908), pp. 62-63. 43. Ministro da Fazenda, Relatorio, 1892, p. 17; Consul W. R. Hearn, Report, C 6812-2, lxxxi (1892), 9; Consul Adams, Report, C 6550, lxxxi (1892), 32; Consul H. A. Astlett, Report, C 6550-39, lxxxi (1892), 4. 44. Louis Couty, a French professor of industrial biology at Rio de Janeiro's Escola Polytechnica, emphasized the decline of laissez faire in an article published in 1884. He commented in "Socialisme d'État et petite propriété" that "In all civilized countries, Gournay's maxim, Laissez faire, laissez passer, has shown its inaptitude; and, bit by bit everywhere, economists are replaced by socialists who ask the government to fulfill its role, to govern and to intervene." Le Brésil en 1884 (Rio de Janeiro, 1884), p. 179. 45. Petropolitana, Directoría, January 18 and June 11, 1892. 46. Consul O'Conor, Report, C 1802, lxxxi (1877), 357. 47. Jornal do Commercio, April 10, 1892. 48. Ministerio da Fazenda, Relatorio, 1892, pp. 54-56; Jornal do Commercio, July 9, 1892. The commissioners named included the presidents of the Banco do Brasil ( Manoel Pinto de Souza Dantas ), the Banco da República dos Estados Unidos do Brazil (Visconde de Guahy), and of the Associaçâo Commercial of Rio (H. A. Ribeiro), plus the editor-in-chief of the Jornal do Commercio (José Carlos Rodrigues) and the legal counselor of the national treasury (Agapito da Veiga Filho). The Visconde de Guahy, it should be noted here, had been one of the members of the strongly nationalist parliamentary commission of 1885, which was headed by a cotton manufacturer, Antonio Felicio dos Santos. 49. "Parecer da commissäo sobre auxilios às industrias," Ministerio da Fazenda, Relatorio, 1892, pp. 3-9.

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50. Fernandes Pinheiro, "Auxilios à industria," Jornal do Commercio, May 22, 1892. For similar views, see Francisco de Paulo Rodrigues Alves, "Exposiçâo ao vice-Presidente da República," ibid., May 28, 1892, and Civis, "Auxilios à industria," ibid., June 23, 1892. 51. "Auxilios à industria," ibid., May 23,1892. 52. Ibid., June 25, 1892. 53. Carlos Pinto d'Almeida, "As companhias e os balanços. XII," Ibid., July 11, 1892. 54. Mention of a "report" may have been a reference to the recommendations of the committee of receivers for Baring Brothers & Co., headed by Baron Rothschild after the Baring panic in Argentina (1890). The report contained recommendations for a funding loan. See John H. Williams, Argentine International Trade, pp. 125-127. 55. Jornal do Commercio, June 23, 1892. 56. Ibid., June 26, 1892. 57. Ibid., June 26, 1892. 58. The committee members with ties to the cotton manufacture were: Antonio Felicio dos Santos (also one of the founders of the Associaçâo Industrial of 1881); Paulo de Frontín (America Fabril mill), José Maria Teixeira de Azevedo (Sâo Lazaro mill), Joaquim Días Custodio de Oliveira (Brazil Industrial and Petropolitana mills). Other members included: A. C. Chaves de Faria, Gabriel Osorio de Almeida, José da Cunha Ferreira, Dominique Level, A. A. Fernandes Pinheiro and Adolpho de Barros. 59. "Auxilios à industria. Representaçâo dos industriaes ao Congresso Nacional," Jornal do Commercio, July 6, 1892. 60. "Auxilios à industria. Aos intrusos," Jornal do Commercio, July 9, 1892. The Portuguese signatories numbered 231. 61. "Auxilios à aos industriaes. A nunca assaz fallada representaçâo dos importadores," Jornal do Commercio, July 9, 1892; ibid., July 11 and 13, 1892. 62. "Auxilios à industria. Representaçâo do club de engenharia ao Congresso Nacional em prol de prompta concessäo de auxilio à industria nacional," Jornal do Commercio, July 10, 1892. The directors of the Club consisted in part of: A. A. Fernandes Pinheiro, J. R. de Moráis Jardim, Pedro Dias Gordilho Paes Leme, Gabrial Osorio de Almeida, J. M. Teixeira de Azevedo, C. C. de Niemeyer, J. A. Horta Barbosa, Joào Teixeira Soares, Paulo de Frontin, T. Duvivier, John Roscoe Alien. 63. "Congresso Nacional. Senado," Jornal do Commercio, July 26, 1892; "Cámara dos Deputados," ibid., July 19, 1892. 64. Consul E. C. H. Phipps, Report, C 7919, lxxxv (1896), 211; Calogeras, La politique monétaire, p. 255; America Fabril, Directoría, April 3, 1893; "Exposiçâo industrial," Jornal do Commercio, November 27, 1895. 65. America Fabril, Directoría, April 3, October 31, November 18 and

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27, December 26, 1893; Petropolitana, Copiador de Cartas, Joaquim Dias Custodio de Oliveira to José Joaquim da Silva Freire, October 26, 1893; and Directoría, November 25,1893. 8.

T H E GOLDEN Y E A B S

1. See F. T. de Sousa Reis, "Industria manufactureira," Instituto Histórico e Geográphico Brasileiro, Diccionario histórico, geográphico e ethnógráphico do Brasil, I, 531. 2. For a description of Brazilian economic conditions, 1904-1910, including the effect of urbanization, increased consumption, and the role of government economic policy, see José Maria Belo, "A reaçâo civilista e a presidencia Hermes," Cultura política, I (September 1941), 39—il. 3. See J. W. F. Rowe, Studies in the Artificial Control of Raw Materials Supplies. No. 3. Brazilian Coffee. London and Cambridge Economic Service. Special Memorandum No. 35 (London, January 1932), p. 6; and Ferdinand Denis, La crise du café au Brésil et la valorisation (Paris, 1908). 4. Revista de Imigraçâo e Colonisaçâo, I (October 1940), 621-634; T. Lynn Smith, BrasÛ: People and Institutions. (2nd ed., Baton Rouge, 1954), pp. 222-223. 5. Ibid., p. 241. 6. The complex nature of Brazil's tariffs (a combination of valuation and specific tariffs) led one American observer to distinguish four forms of South American tariffs in 1916: the valuation, the class rate, the specific, and the Brazilian tariff. Rutter, Tariff Systems, p. 21. 7. The rates of the Rio electric company averaged $50 per horsepower per year, compared with the $20 average in the United States. "The rates charged by the electric companies are . . . high, but the mills figure that, as a rule, electricity is cheaper than steam, besides being more convenient." By 1910, all Rio mills, with one exception, had contracted for electric power. Clark, Cotton Goods in Latin America, pp. 55-57. 8. Ministerio da Fazenda, Relatorio, 1897, cited in Jornal do Commercio, Retrospecto commercial para 1911, p. 4. There is an exposition of such fears in Joaquim Murtinho, "Introduçâo. Relatorio apresentado ao Sr. Presidente da República pelo Ministro da Industria, Viaçâo e Obras Públicas. Rio de Janeiro, 1897," Revista do Instituto Histórico e Geográfico Brasileiro, 219 (April-June 1953), 239-265. 9. The figures for 1885 and 1908 are to be found in Branner, Cotton in the Empire of Brazil, pp. 42-43 and Clark, Cotton Goods in Latin America, p. 43. The rest of the data appears in Appendix II. 10. Clark, Cotton Goods in Latin America, pp. 50-51. The Mariangela mill of Sâo Paulo had a few looms for 54-inch cloth. 11. The product diversity of the Mariangela mill evoked the comment that this illustrated "how cotton mills in this country are led to try first one

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thing and then another, so as not to miss the large profits falling at times to each line." Clark, Cotton Goods in Latin America, p. 50. As for the America Fabril, its directors observed in 1914 that the mill's successful operations were the result of the acquisition of the latest machinery permitting the production of "new goods always readily accepted by the public." The company's British technical director, Mark Sutton, advised the directors about the purchase of new machinery. America Fabril, Directoría, May 11, 1914. 12. Clark, Cotton Goods in Latin America, pp. 50-52. 13. A. H. Redfield, Brazil. A Study of Economic Conditions since 191S (Washington, 1920), p. 59; Garry, Textile Markets of Brazil, p. 22; John H. Williams, "Latin American Foreign Exchange and International Balances during the War," Quarterly Journal of Economics, XXXIII (May 1918), 450. 14. Garry, Textile Markets of Brazil, p. 43; Pearse, Brazilian Cotton, p. 28. 15. Ibid., p. 28. 16. Ministerio do Trabalho, Industria e Comercio. Commissäo Executive Textil (CETex), Industria textü algodoeira (Rio de Janeiro, 1946), p. 54. Compare "Super-produçâo industrial?", O Observador económico e financeiro (hereafter cited as O Observador), XIV (March 1937), 91. 17. Clark, Cotton Goods in Latin America, p. 41. Compare Redfield, Brazil, p. 59. 18. W. C. Downs, Wearing Apparel in Brazil. Department of Commerce, Bureau of Foreign and Domestic Commerce (Washington, 1918), p. 11. 19. The generally good dividends paid by other Rio mills pressured the Petropolitana's directors in 1911 to vote a twelve-milreis dividend "which is in relation to the dividends of other large companies in our field, in order that our company continue to merit similar confidence and that our shares not fall on the stock market." On the basis of net earnings for 1910, a dividend of only seven milreis per share was warranted. Petropolitana, Directoría, January 13, 1911. 20. Compare the case of the America Fabril. In 1911 its capitalization was increased from 3,600 contos to 6,000 contos because of the "degree of prosperity achieved" and as part compensation for suspension of dividends, 1897-1903. The 2,400 new shares were issued against 600 contos withdrawn from reserve funds and 1,800 from undistributed profits. America Fabril, Directoría, August 24, 1911. 21. Clark, Cotton Goods in Latin America, pp. 43-44, 46. 22. E. Hambloch, Report. Great Britain. Department of Overseas Trade, C 840 (1920), 5; Garry, Textile Markets of Brazil, p. 21. Discussing the cost of producing medium and fine goods with one of the largest mill owners in Brazil, Garry recorded the following comments: "Costs of production do not enter into my selling price. I always keep in touch with the foreign markets and price my goods 5 or 10 per cent below what similar

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goods can be imported for. If the net result is a gain, I receive the benefit; if a loss, I must take the results." Ibid., p. 31. 23. For a sampling of the attacks upon the cotton manufacturers and industrialists in general in the first decade of the twentieth century, see: Testimony of Sampaio Avelino & Cia. and Manoel Carvalho da Silva Leal, in Associaçâo Commercial do Rio de Janeiro, Commissäo de revisäo da tarifa aduaneira (2 vols. Rio de Janeiro, 1903), II, 122, 160-163; also the verbal exchanges among textile industrialists Leon Simon, Jorge Street and Cunha Vasco over "unwarranted" protection in Jornal do Commercio, Retrospecto Commercial de 1910, p. 115; Franklim Hermogenes Dutra in Jornal do Commercio, Retrospecto Commercial para 1908, p. 18; ibid., 1911, p. 4; Correio da Manhâ, March 29, 1910. 24. Downs, Wearing Apparel in Brazil, p. 12. The prospect of competition among Brazilian cotton manufacturers led one prominent mill owner to comment in 1912 upon the "Japanese tendency to unify the textile mills, to gather in one enterprise several mills, showing the advantages of this tendency as a way to lessen the conflict of interests — methods whereby the advanced nations protect their textile markets as in Italy and Hungary . . ." CIB, Relatorio da directoría, 1912, pp. 19-20. 25. Williams, "Latin American Foreign Exchange," pp. 460-462; Redfield, Brazil, p. 69. 26. Hambloch, Report, p. 5; CIB, Relatorio, 1915, pp. 86-87, 89, 113115. As the cotton manufacturers pictured the situation in 1914: ". . . the large commercial houses [wholesalers] because of the crisis [retraction of credit] do not receive payment on account from merchants of the interior; therefore they will not make normal purchases from national mills which, without sources of credit, will undubitably slacken operations. . ." Jorge Street, "Representaçâo de 24 de Agosto de 1914," ibid., p. 115. 27. CIB, Relatorio, 1915, p. 275. 28. Letter, Rio de Janeiro, February 18, 1929, in Archive, CIFTA-Rio. 29. Redfield, Brazü, p. 73; Williams, "Latin American Foreign Exchange," p. 463. 30. "Tarifas aduaneiras sobre manufacturas de algodäo. Estudo elaborado pela Associaçâo Commercial de Säo Paulo," O Jornal, January 1,1929. 31. Downs, Wearing Apparel in Brazil, pp. 9-10, 30, 41; José Ramos de Oliveira, cited in A. G. Mascarenhas, Relatorio geral (1918-1938) apresentado aos accionistas ¿ία Cia. Textil Bernardo Mascarenhas (Rio de Janeiro, 1939), p. 23. 32. Taking the 1912 figure for cotton goods imported into Brazil as a base, the index for such imports by weight would read as follows: 1911, 122; 1912, 100; 1913, 70; 1914, 32; 1915, 26; 1916, 43; 1917, 36; 1918, 41; 1919,32; 1920, 42. See Appendix III for basic data. 33. MS (1939) in Archives, CIFTA-Rio; "A exportaçâo de tecidos para a Argentina," A Noticia (Recife), November 10, 1931.

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34. Taking the 1912 figure for cotton cloth produced in Brazil as a base, the index for such production would read as follows: 1911, 95; 1912, 100; 1913, 96; 1914, 79; 1915, 118; 1916, 111; 1917, 137; 1918, 124; 1919, 146; 1920, 147. For basic data see Appendix II. 35. CIFTA-Rio, Relatorio, 1919-1920, p. 7; Redfield, Brazü, p. 59. On the importance of the cotton manufacture at the close of the war ("the most characteristic manifestation of the Brazilian industrial movement"), see G. Lafond, "L'évolution économique et financière du Brésil pendant la guerre," Journal des économistes, (July, September 1918), 354. So successful were the operations of the America Fabril company during war years, that in 1917 the board of directors transferred 500 contos from "machinery depreciation" to "undistributed profits" and from the latter withdrew 4,000 contos — the company's nominal capitalization was 6,000 contos — for distribution as stock dividend (3,600 contos) and "reward to the Directors and their aids" (400 contos). America Fabril, Directoría, July 12, 1917. The managing director and technical director were again rewarded for their services in 1919 with 250 and 750 contos respectively, withdrawn from "undistributed profits." Ibid., November 21, 1919. 36. CIFTA-Rio, Relatorio, 1919-1920, pp. 6-7. The prices of cotton goods began to fall in 1918 and caused considerable worry to manufacturers. Santa Basilissa, Directoría, March 25 and April 25, 1919; Mascarenhas, Relatorio geral, p. 39. 37. Garry, Textile Markets of Brazil, pp. 35-36. 38. H. Van Deursen, "L'émancipation industrielle du Brésil," Revue économique internationale (August 1934), p. 292. 39. Ildefonso Albano, "As crises da industria textil algodoeira," p. 9. MS in Archive, CIFTA-Rio; "A exportaçâo de tecidos para a Argentina," A Noticia (Recife), November 10, 1931. 40. For a discussion of the interrelationship between Europe's stationary output and income, reductions of imports of primary products, the expansion of overseas countries' capacity to produce primary products, and Latin American industrialization in the period 1913-1923, see I. Svennilson, Growth and Stagnation in the European Economy (Geneva, 1954), p. 47. 41. "A crise industrial e os interesses dos clientes," Jornal do Commercio, November 25, 1928; Romeu Ν. Carvalho Bastos, "Super-desorganizaçâo," Correio da Notte, Aprii 2,1937. 42. "Um factor de crise — o proteccionismo local," Jornal do Commercio, November 21, 1925. 43. Petropolitana, Directoría, March 26, 1920; Petropolitana, Relatorio para 1920, pp. 7-8. 44. It is possible, too, that Decree No. 4910 of January 10, 1925, exempting from payment of import duties all knitting machinery utilizing Brazilian cotton, accounted in part for the heavy imports registered that year. Manufacturers reported that it started a flurry of small, family-

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operated weaving shops in Säo Paulo. "Memorial ao presidente e membros da commissâo révisera das tarifas aduaneiras," March 18, 1933. MS, Archive, CIFTA-Rio. 45. See Appendix V. The totals: 1922-27 = 60,697,184 kilos; 191521 = 22,887,555 kilos. 46. O. P. Nogueira, "A importaçâo de maquinas para a industria," O Jornal, March 20, 1931. 47. CIFTA-Rio, Grande exposiçâo de tecidos de algodäo (Rio de Janeiro, 1923), pp. 18, 21, 38. 48. See Appendix I. 49. Lindolpho Collor at the Säo Paulo Auto Club, in "Proteccionismo integral," O Jornal, May 22, 1931. Note the description of the period of the twenties left by a Brazilian: "Mills sprouted and money flowed like water." Limeira Tejo, Retrato sincero do Brasil (Porto Alegre, 1950), p. 66. 50. "Super-producçâo industrial?", O Observador, XIV (March 1937), 92. On the same theme, see the comments of Rocha Vaz, president of the Companhia Nova America in, "Conselho federal do commercio exterior," Jornal do Commercio, January 16, 1937. 51. The combined area of the Federal District and states of Rio, Säo Paulo, and Minas accounted for 57 per cent of the value of industrial production in 1920, and 74 per cent in 1929. R. Cahn, "Industrial Expansion in Brazil," 20 MS in Files, United States Embassy, Rio de Janeiro. 52. CIFTA-Rio, Relatorio, 1919-1920, p. 5. After 1925 the association also subsidized a Rio newspaper to "defend our class and discuss all matters connected with it; for a long time we have needed this because no independent newspaper would take any initiative in the matter." Petropolitana, Directoría, January 14, 1925.

9.

O N S E T OF T H E DEPRESSION

1. Distribution of the output of Brazilian mills according to grades of cloth is available only for the years 1944-1950. 2. See Appendix IV. 3. Late in 1925 the directors of the America Fabril urged stockholders to agree to a loan in order to purchase equipment for the production of the "most perfect and well finished goods comparable to the best foreign manufacture. . ." At the same time the directors asserted that for several months business had been "paralyzed." Despite the poor business conditions in 1926, the directors floated a bond issue of £700,000 in London carrying 6.5 per cent interest and 5 per cent amortization. The British Foreign and Colonial Corporation Ltd. acted as intermediary. Perhaps this will account for the willingness of Brazilian textile manufacturers to continue expansion in spite of signs of recession. America Fabril, Assembleia, Nov. 9, 1925 and

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May 28, 1926; H. F. Wileman, "A entrada do capital estrangeiro no Brasil desde 1925," O Jornal, January 21, 1928. 4. Ildefonso Albano, "As crises da industria textil algodoeira," 12; A Noticia (Recife), November 10, 1931; "Super-producçâo industrial?", O Observador, XIV (March 1937), 92. 5. Associaçâo Commercial de Säo Paulo, "Tarifas aduaneiras," O Jornal, January 1, 1929. 6. Credit contraction, not falling agricultural prices and a reduced home market, was the first portent to startle textile entrepreneurs out of placid contemplation of ever-augmenting prosperity. The administration which took office in 1926 promised during the electoral campaign of 1925 to terminate inflation by halting the issue of paper money and by stabilizing exchange rates, a policy made all the more feasible after 1924 by coffee valorization and an inflow of foreign capital for public and private projects. Apparently the sudden switch from an inflationary to a deflationary governmental policy set up immediate and wide repercussions. The Bank of Brazil, the nation's largest credit institution, with agencies in every state, refused to make further loans and other banks followed suit. Large wholesalers and rural retailers alike cut their purchases of domestic cottons while the spokesman for the Rio cotton manufacturers' association affirmed that stocks were piling up at the mills. Wholesale importers of cotton goods, however, were reported to have increased their overseas purchases because the government was trying to stabilize the milreis at "artificially" high rates. Speech of President Washington Luis before the Associaçâo Commercial of Rio, in CIB, Relatorio, 1926, pp. 145-146; Caio Prado Junior, Historia económica do Brasil (Säo Paulo, 1945), pp. 276-277. 7. "Um fator de crise. O protecionismo local," Jornal do Commercio, November 21, 1925; "Conselho federal de commercio exterior," Jornal do Commercio, January 16, 1937; interview with Carlos Lefevre, "A situaçâo do algodäo no Brasil," Säo Paulo-Jornal, September 23, 1927; Braulio Guedes da Silva, C. D'Agostino, Piero Roversi, O. P. Nogueira, Relatorio . . . sobre a crise textil. Suas causas. Seus effeitos. Seus remedios (Sâo Paulo, 1928), p. 9. (Hereafter cited as A crise textü.) 8. Jorge Street, Carta aberta ao exmo. sr. Dr. Araujo Franco, Presidente da Associaçâo Commercial do Rio de Janeiro (Säo Paulo, 1928), p. 10; Revisäo das tarifas alfandegarias (Rio de Janeiro, 1928), p. 8. 9. "As consequencias do cambio vil," Jornal do Commercio, April 19,1928. 10. "Gazetilha. A industria de tecidos e a situaçâo economica," ibid., April 11,1928; "A crise de producçâo," ibid., April 1, 1928. 11. "A organizaçâo da producçâo," O Jornal, September 18, 1928; "Evoluçâo da tecelagem," ibid., April 9, 1929; Associaçâo Commercial de Säo Paulo, "Tarifas aduaneiras," ibid., January 1, 1929; "Gazetilha. A situaçâo das industrias," Jornal do Commercio, April 14, 1928. 12. W. C. Downs, Wearing Apparel in Brazil, p. 60.

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13. "Cartas a direcçâo. A necessidade de urna escola de fiaçâo e tecelagem," O Jornal, May 14, 1929. 14. Interview, Dr. Cyro Berlinck, President, Santa Basilissa, Sâo Paulo, January 26,1952; A. G. Mascarenhas, Relatorio gérai, p. 139. 15. "Escola de tecelagem de Sâo Paulo," Folha da Manhâ (Sâo Paulo), June 1, 1928; "Escola de tecelagem. Os primeiros exames," Diario Nacional de Sâo Paulo, May 8, 1929. One year later the school graduated its first class, ten students, of whom only three came from large cotton mills. 16. Interview, Dr. Berlinck, December 18, 1951. Compare S. J. Kennedy, Profits and Losses in Textiles: Textile Financing since the War (New York, 1936), p. 213. 17. "Governo e industriaes contra a economía nacional," A Manhä, November 30, 1928. The same story appeared the following month with a new twist: mills wished to drive up the prices of fine goods through higher tariffs in order to force consumers to buy instead from the huge stocks of coarse goods. "Ainda as tarifas sobre os tecidos," Jornal do Brasil, December 30, 1928. 18. Petropolitana, Directoría, February 25, 1928; "Relatorio da Companhia de Tecidos Alliança," Jornal do Commercio, April 2 and 3,1928. 19. In 1929, more than two-thirds of the cotton consumed by Sao Paulo mills came from northern cotton fields. "Algodäo paulista," O Jornal, February 20, 1929. 20. CIFTA-Rio, Algodâo, MS, Archive, CIFTA-Rio; interview, Vicente de Paulo Galliez, "Devemos saber defender o nosso algodâo," A Notte, July 26, 1927; interview, Carlos Lefevre, "A situaçâo do algodâo no Brasil," Säo Paulo-Jornal, August 26, 1927. 21. "Alta do preço do algodäo," O Jornal, December 15, 1931; "Algodäo," Diario de Noticias, December 16, 1931; "O algodäo sob o index dos industriáis insaciaveis," A Vanguarda, December 17, 1931; "A alta do algodäo," Diario da Noite, December 30, 1931. 22. Joäo Pandiá Calogeras, "Conferencia," O Jornal, September 15, 1928; "A politica dos grandes contra os pequeños," Diario Carioca, November 30, 1928. In this connection note the comments made two decades earlier: "If the intermediaries harm both the industrialists and the public, then the industrialists should compete with the intermediaries by setting up their own retail establishments and selling cheaper in order to force them to lower their exorbitant prices. . . there are a few industrialists who have essayed this goal without, however, selling at prices lower than the exorbitant ones of the intermediaries." Jornal do Commercio, Retrospecto commercial para 1909, p. 87. 23. Collor to Nogueira, Rio de Janeiro, August 25, 1924; Nogueira to Collor, August 29, 1924. As it was later phrased, "Cotton mill proprietors and cloth merchants don't make a 'congenial menage.' " Letter, September 16, 1930. This comment followed the decision of the industrialists to split

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from the Sâo Paulo commercial association to form their own organization, a reaction to the "oligarchical" structure of the commercial association. Letter to Joäo Alberto Lins de Barros, Säo Paulo, December 11, 1930. All in Archive, CIFTA-Rio. 24. Garry, Textile Markets of Brazil, pp. 14, 17. 25. The Rio sales director, A. G. Mascarenhas, later invented a special box, the machinery for which was ordered from Vickers, Ltd. Mascarenhas, Relatorio geral, pp. 82-84. 26. Ibid., pp. 118-119. 27. Ibid., pp. 133-134. 28. Letter, June 1, 1928 in ibid., p. 176. 29. Letter, August 2, 1928 in ibid., p. 177. 30. Santa Basilissa, Directoría, February 15, May 28, and October 23, 1928. 31. Affonso Vizeu, "A industria de tecidos e a situaçâo economica," Jornal do Commercio, April 14, 1928. 32. Letter, Cia. de Fiaçâo e Tecelagem Mageense, Andorinhas, Estado do Rio, January 12, 1928, in Archive, CIFTA-Rio. 33. Letter, CIFTA-Rio to members, January 9, 1928 and replies: Cia. Fiaçâo e Tecelagem Pelotas (Pelotas, Rio Grande do Sul), February 8, 1928; Cia. Santa Basilissa (Bragança, Säo Paulo), March 19, 1928; Cia. Fiaçâo e Tecelagem Moraes Sarmento (Juiz de Fora, Minas Gérais), January 11, 1928; Cia. Ferreira Guimarâes (Minas Gérais), January 12, 1928; Cia, Fiaçâo e Tecelagem Corcovado (Rio de Janeiro, DF.), March 9, 1928. Brazilian cotton cloth prices fixed "almost at cost" were 20 to 30 per cent higher than those of European competitors in the Plate area. CIFTA-Rio, letter to Lindolpho Collor, Rio de Janeiro, November 28, 1930, in Memoriaes . . . sobre a situaçâo da industria algodoeira nacional (Rio de Janeiro, 1931), p. 9. 34. Letters in Archive, CIFTA-Rio, one undated, the other, November 12, 1928. 35. "O mal do proteccionismo," Correio da Marihâ, June 12, 1931. 36. The industrialists prepared a brief brochure on the relation of British dumping to national production of textiles and collaborated on an extensive newspaper article. A crise textil, p. 19, and Associaçâo Commercial de Sâo Paulo, "Tarifas aduaneiras," O Jornal, January 1,1929. 37. In 1926 local manufacturers demanded tariff rates on yarns be raised 100 per cent, and 50 per cent on plain and twilled cottons (31 grams to 60 grams per square meter). Such tariff revisions were advocated only as emergency measures, not as permanent modifications. V. P. Galliez, "A formidavel crise da industria de tecidos," O Jornal, June 25 and August 28, 1926; Letter, Associaçâo Commercial of Rio, Centro Industrial do Brazil and CIFTA of Rio and Säo Paulo to the President of Brazil, Jornal do Commercio, July 7,1926, cited in CIB, Relatorio, 1926, pp. 86-92.

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38. Joäo de Lourenço, "Erros económicos do projecto das tarifas," Diario da Notte (Säo Paulo), August 29, 1926; CIFTA-Rio and CIFTA-Säo Paulo, Memorial ao Presidente da Commissäo de Finanças do Senado Federal, MS (1926), Archive, CIFTA-Rio; CIFTA-Rio and CIFTA-Säo Paulo, Memorial apresentado ao congresso nacional sobre o projecto de revisäo das tarifas alfandegarias (Rio de Janeiro, 1927), p. 5. 39. The 18-meter per capita consumption was presumably arrived at by adding 1927 production figures (695,063,826 meters) to imports (103,510,000 meters — based upon an estimate of 70 grams per meter of imported tricolines, messalines, luisines and linons in 1927), then dividing by Brazil's population in 1926 (36,870,972). Since a portion of domestic production included bagging, the quotient was reduced to 18 meters. The figures for per capita purchasing power were based upon the calculations of Roberto Simonsen, vice-president of the Centro dos Industriaes de Sâo Paulo. In 1939 it was again assumed that 10 per cent of a laborer's annual wage went for clothing. Interview, Antonio Lacerda Menezes, O Jornal, February 18, 1939. 40. A crise textil, pp. 14-26; "Dados incontestaveis," O Paiz, December 28, 1928; "Tecidos de algodäo," Estado de Säo Paulo, December 15, 1928. It was claimed, too, that the coarse wrappers around imported cotton goods were removed and sold for making clothes. 41. Associaçâo Commercial de Säo Paulo, "Tarifas aduaneiras sobre manufacturas de algodäo," O Jornal, January 1, 1929. 42. According to Leopoldo de Bulhôes, the man who played a major role in the formulation of tariff policy at the close of the nineteenth century, the tariff of 1900 lasted thirty years with minor changes. These consisted of annual increases in the portion of tariff duties payable in gold, from 5 per cent to a maximum of 60 per cent. O Jornal, September 11, 1928. 43. To back up its case, the joint commission presented statistics purportedly taken from the files of an "important" wholesale cloth importing house of Säo Paulo which revealed that the duties, plus additional charges on cretonnes and sheeting, nominally set at 80 per cent, had failed to rise in proportion to the price of British goods, CIF Santos. 44. Letter, V. P. Galliez to Araujo Franco, Rio de Janeiro, November 19, 1928; "A revisäo das tarifas alfandegarias e a industria nacional," O Jornal, October 2, 1928. 45. The condition of the raw cotton received from the northern fields by southern mills was probably a factor in raising costs. Poorly ginned and graded cotton, where long staple cotton was mixed with short staple, obliged spinning sections to stop frequently when trying to spin high counts. W. W. Coelho de Souza, "A campanha do governo em prol do algodäo," Correvo Paulistano, October 30, 1929. 46. Associaçâo Commercial de Säo Paulo, O Jornal, January 1, 1929. 47. Francisco Matarazzo, President of the Centro das Industrias do

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Estado de Sâo Paulo; Jorge Street, President of the Centro dos Industriaes de Fiaçâo e Tecelagem de Sâo Paulo; Democrito Lartigau Seabra, President of the Centro Industrial de Fiaçâo e Tecelagem de Rio de Janeiro; Francisco de Oliveira Passos, President, Centro Industrial do Brazil; O. Pupo Nogueira, and Vicente de Paulo Galliez, secretaries-general respectively of the Sâo Paulo and Rio de Janeiro textile manufacturers' associations. Symptomatic of the industrialists' appreciation of their importance in the national economy is the phrase used by Affonso Vizeu, cloth wholesaler and stockholder of the America Fabril. In 1927, he referred to the America Fabril as "part of the national patrimony, although a private enterprise. . ." America Fabril, Assembleia, December 27, 1927. 48. As organizations representing all the members of an industry, the cotton manufacturers' associations of Rio and Sao Paulo were usually careful to line up a majority among members for any important recommendations. This protected the directors of the associations, textile industrialists in their own right. Letter, Rio de Janeiro, February 11, 1930, in Archive, CIFTARio. 49. Jornal do Commercio, August 23, 1928. 50. Ibid., August 31, 1928. 51. In his extensive business career Lacerda Franco was at various times a merchant in Santos, director of the Banco Uniäo de Sâo Paulo, a founder of Sao Paulo's Companhia Telephonica and of the Jundiahy textile mill as well as president of the Paulista railroad. Francolino Câmeu, Políticos e estadistas contemporáneos. Subsidios. Terceira serie (Rio de Janeiro, 1928), pp. 229, 231-232. 52. Letter, Sâo Paulo, October 6, 1928. "This newspaper . . . is really a rotten sheet, but also a sort of Gospel in local and national politics; for, as you must realize, Sâo Paulo is now dealing the political cards. The campaign may cost us our shirts, but it will bring results. . . I am in constant touch with Senator Lacerda Franco . . ." One source claimed textile manufacturers had a tariff campaign fund of 12,000 contos. Diario Carioca, December 27, 1928. Lacerda Franco was elected president of the Sâo Paulo cotton manufacturers' association in 1930. 53. Otto Schilling, "A reforma da tarifa," O Jornal, September 9, 1928; letter, Lindolpho Collor to O. P. Nogueira, Rio de Janeiro, August 25, 1924, Archive, CIFTA-Rio. It was to such middle- and lower-class readers that the left-wing A Vanguarda stated that mill owners had kept tariff reform pigeonholed for eight years, until the president decided to report the tariff revision bill out of committee for a quick vote. The people, declared A Vanguarda, should be apprehensive of tariff revision for "Whoever is aware of the strong ties between politicians and businessmen can not expect anything favorable to the lower classes to emerge from tariff discussions." A Vanguarda accused newspapers usually favorable to the government of avoiding any comment on the nature of the proposed tariff revision,

248

Notes to Chapter 9

and of talking in "circumlocutions" about finding a compromise solution satisfactory to industry, commerce and the consumer. "Paz e amor entre tubarôes e sardinhas," August 27, 1928. 54. H. F. Wileman, "O augmento de direitos sobre tecidos de algodäo," O Jornal, November 25, 1927. Wileman edited Wilemans Review and, later, Wilemans Brazilian Review. 55. "Como pensam os argéntanos," Correlo da Manhâ, October 18, 1928; "Offensiva contra o consumidor," ibid., November 20, 1928. 56. "Manobras protectionistas," Correio da Manhâ, November 11, 1928; "O protecionismo insaciavel," ibid., December 23, 1928; "A questäo das tarifas de tecidos," A Manhä, December 25, 1928. 57. "A emboscada do protecionismo," Correio da Manhä, January 16, 1929; "As maiores fabricas do Brazil. . .," Diario Carioca, December 20, 1928. 58. Decree N. 5,650 of January 9,1929. 59. Petropolitana, Directoría, February 25, 1929. 60. ". . . our condition is good, for we know of other enterprises having greater losses in the same period. . ." (February 18, 1930); or five months later, "We should not be frightened by our deficits [if they are] compared to those of other mills in a similar situation." (July 22, 1930). Petropolitana, Directoría. 61. E. Street, "A industria textil," p. 119. 62. "Situaçâo da industria de fiaçâo e tecelagem do Estado de Säo Paulo," O. P. Nogueira to V. P. Galliez, Sâo Paulo, February 6, 1930, in Archive, CIFTA-Rio. 63. José Haydú, "Em prol das industrias texteis," Diario de Säo Paulo, January 3, 1930. The idea of a southern central cotton purchasing agency for bringing in northern cotton for southern mills was proposed in 1932. Nothing developed. Letter, José Carlos Sarmento to CIFTA-Rio, September 19, 1932, Archive, CIFTA-Rio. 64. Letter, Säo Paulo, January 28, 1930, Archive, CIFTA-Rio. An example of such self-interest was offered by the Companhia de Tecidos Paulista which refused in 1930 to furnish the Rio association any information on stocks of cotton cloth because it might "harm our financial standing." Fifty-nine mills also refused to supply information out of a total of 120. Letter, to CIFTA-Rio, Pernambuco, June 12, 1930. 65. Letters, February 10 and 13, 1930, Archive, CIFTA-Rio. 66. Letter, February 21, 1930; letter, February 11, 1930, Archive, CIFTA-Rio. 67. Letter, June 16, 1930, Archive, CIFTA-Rio. Although trusts were mentioned occasionally at this time, it is evident that Brazilian industrialists aimed to form production cartels, not trusts. Many of the factors which made cartels a peculiarly German phenomenon as of 1930 were present in Brazil, too: (1) tardy capitalistic development; (2) insignificant number

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of corporations in the national economy; (3) small number of shareholders in corporate enterprise. See "Cartel," Encyclopedia of the Social Sciences (15 vols. New York, 1930), III, 236. Therefore, the absence of trusts in the Brazilian textile industry by 1930 merits further investigation, especially in view of the small number of shareholders, with holdings in several mills. It was reported by one textile manufacturer of long experience that in the early twenties there existed the possibility that one large textile trust might be formed, consolidating the mills of the Federal District and those of the adjacent state of Rio. This operation was to occur under the aegis of the America Fabril organization, Rio de Janeiro's largest textile manufacturing company. Changes of managerial personnel in the latter in 1925 are supposed to have destroyed the plan. Interview, Rio, January 9, 1952. 68. "It's no secret that the Centro [Säo Paulo's cotton manufacturers' association] took part in the campaign — heatedly, passionately, with a factious spirit that the press of the opposition played up to the hilt." Letter, Säo Paulo, December 1, 1930, Archive, CIFTA-Rio. 69. Interview with the Conde Matarazzo, "Como vive e como pensa o povo," A Noite, October 9, 1928; CIFTA-Rio, Relatorio, 1927-1928, p. 7; Assis Chateaubriand, "A entrevista do Conde Matarazzo sobre a organizaçâo do traballio industrial," O Jornal, October 13, 1928; Evaristo de Moráis, "A tarifa de protecçâo e de encarecimento," Diario Carioca, December 8, 1928. For textile manufacturers' opposition to paid vacations for industrial labor, the child labor code and workmen's compensation, see CIFTA-Rio, Memoriaes . . . sobre a situaçâo da industria algodoeira nacional, pp. 14-23. 70. Letter, Säo Paulo, April 10, 1930; Letter, Rio de Janeiro, June 16, 1930, Archive, CIFTA-Rio. 71. Azevedo Amarai, "O problema da tecelagem," O Faiz, August 20, 1930. 10.

T H E CRISIS OF THE THIRTIES

1. See V. Ν. Leal, Coronelismo, enxada e voto. O municipio e o regime representativo no Brasil (Rio de Janeiro, 1948), p. 187. 2. "Super-producçâo industrial?" O Observador económico e ßnanceiro (hereafter cited as O Observador), XIV (March 1937), 91. 3. Mihail Manoilescu, Théorie du protectionisme et de l'échange international (Paris, 1929), translated in Brazil by O. P. Nogueira, and published in Säo Paulo, 1931 [?]. 4. "Super-producçâo industrial?", O Observador, p. 92. 5. CIFTA-Rio, Relatorio, 1937, p. 44; "Super-producçâo industrial," O Observador, p. 92. 6. CIFTA-Rio, Relatorio, 1937, p. 44. 7. "Importaçâo de machinas," Correio da Manhä, October 17, 1936;

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Notes to Chapter 10

Letter, Nogueira to Collor, Säo Paulo, May 7, 1931, Archive, GIFTA-Rio. The proprietors of some large mills blamed the "pernicious" mushrooming of small mills of the interior for the imports of machinery. "Combatendo a super-producçâo," O Jornal, March 12, 1931. 8. "A industria textil de algodâo e a renovacâo de seu maqumismo." MS Archive, CIFTA-Rio; Jornal do Commercio, December 8, 1928; Letter, Nogueira to Galliez, Säo Paulo, September 16, 1930, Archive, CIFTA-Rio. Compare A crise textil, passim. 9. Letter, Companhia Industrial Mineira, August 29, 1930; Letter, Companhia Manufactora Fluminense, September 9, 1930; Letter, Companhia Industrial Säo Joannense, September 9, 1930. All to CIFTA-Rio. 10. Letter, Companhia de Tecidos Paulista to CIFTA-Rio, Pernambuco, September 20, 1930. Similar, though more restrained, was the criticism of: G. Schlosser & Filhos, Brusque, Santa Catarina; Fabrica de Tecidos de Cruz & Companhia, Aracajú, Sergipe; Santa Luzia Industrial, Belo Horizonte, Minas Gérais. All in Archive, CIFTA-Rio. 11. "O problema da tecelagem," O Paiz, August 20, 1930. 12. Petropolitana, Directoría, November 3, 1930 and January 21, 1931. 13. Letter, Nogueira to Galliez, Säo Paulo, December 12, 1930, Archive, CIFTA-Rio. 14. Letter, Nogueira to Collor, Säo Paulo, December 15, 1930. The return of the "old guard" to prominent positions in the new administration is discussed by Agnes S. Waddell, "The Revolution in Brazil," Foreign Policy Association, Information Service, VI (March 4, 1931), 506. Rio's Correio da Manhä was upset in 1932 when it discovered that the Vargas administration, anti-protectionist in its pre-revolutionary days, was using the representatives of the Rio and Säo Paulo cotton manufacturers to formulate tariff modifications. "A revisáo das tarifas," May 21,1932. 15. J. S. Maciel Filho and Roberto Simonsen, Commissäo de Planejamento Económico (Rio de Janeiro, June 7, 1945), pp. 8-9. Mimeographed minutes; Petropolitana, Directoría, October 12, 1932. For further comment on manufacturers' dealings with the Bank, see: "O remigio da Alliança," Jornal do Commercio, October 17, 1931; "A quebradura dos bancos e as companhias de tecidos," ibid., October 11, 1931. 16. Deputado Vicente Galliez, Diario do Poder Legislativo, October 26, 1937 in CIFTA-Rio, Relatorio, 1937, p. 44. For comments in a similar vein, see "Inquerito sobre a industria textil. II," Estado de Säo Paulo, June 27, 1947; Eurico de Souza Leäo, "Relatorio sobre o panorama da industria de tecidos e o problema do vestuario," CIFTA-Rio, Relatorio, 1945-1946, p. 103; "A industria textil e a importaçâo de machinismos," Folha de Minas, January 14, 1937. Compare the comment of the secretary-general of the Rio manufacturers' association: "The decree . . . was promulgated spontaneously by the government. At the beginning no textile association asked

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for the adoption of this measure . . ." Letter, V. P. Galliez, Correio da Manhâ, October 4, 1941. 17. "Super-producçâo industrial?", O Observador, p. 92. For similar comment on the pressure of industrial organizations, see: "Premio a inefficiencia," Correio da Manhâ, April 16, 1937, and "Exportaçâo de tecidos," ibid., October 4, 1941. 18. By order of the minister of labor, the industrial division, headed by Jorge Street, was empowered to authorize such purchases. CIFTA-Rio, Relatorio, 1929-1932, pp. 12-13. 19. Letter, August 25, 1930, Archive, CIFTA-Rio. 20. Decree No. 19, 770 of March 19, 1931; CIFTA-Säo Paulo, Circular 1013, [1931]. 21. Horace B. Davis, "Brazil's Political and Economic Problems," Foreign Policy Reports, XI (March 13, 1935), 7. Observers later confirmed the influence of sectors of the cotton textile industry upon the "dictatorial" government's decision to limit machinery imports. "Inquerito sobre a industria textil. II," Estado de S ño Paulo, June 27, 1947. 22. Diario Official, November 25, 1933, 22249. In 1935 the Rio branch of the Federaçâo Industrial elected as president, the president of the Rio cotton manufacturers' association, Carlos T. da Rocha Faria. CIFTA-Rio, Relatorio, 1935, p. 11. 23. CIFTA-Rio, Relatorio, 1935, pp. 9-10. For an official declaration of the Vargas Administration's concept of the relations among government, "producing classes" (ownership-management), and labor, 1937-45, see Ministerio do Trabalho, Industria e Comercio. Comissäo de Direito Social Internacional, Methods of Collaboration between the Government, the Professional Organizations of Employers and the Professional Organizations of Employees: Brazilian Guiding Principles (n.p., 1941), pp. 3, 7. 24. Rocha Vaz, "Conselho Federal do Commercio Exterior," Jornal do Commercio, January 16, 1937. 25. Letter, CIFTA-Rio to Companhia de Fiaçâo e Tecelagem Moraes Sarmento, Rio de Janeiro, September 16, 1932, Archive, CIFTA-Rio. 26. "A importaçâo de machinas," Correio da Manhâ, March 25, 1937; J. S. Maciel Filho, "Urna trama que nao é perigosa," O Imparcial, January 5, 1939; Petropolitana, Directoría, July 17, 1936. 27. Letter, Companhia Manufactora Fluminense to CIFTA-Rio, September 9, 1930; Exposition, Companhia Manufactora Fluminense to Conselho Federal do Commercio Exterior, "Movimenta-se urna grande empresa textil de Nictheroy," Diario da Manhâ, March 14, 1937. Note the following entry in the minutes of the Santa Basilissa's board of directors: "In order to cheapen manufacturing costs [the director] ordered that steps be taken to organize a new shift to work at night." Directoría, January 13, 1932. For the price per metric ton of exported cotton, see Ministerio da Fazenda,

252

Notes to Chapter 10

Directoría da Estatística Economica e Financeira do Thesouro National, Quadros estatísticos. No. 2 (1938), p. 21. 28. "Super-producçâo industrial?", O Observador, XIV (March 1937), 93. The effect of lowered prices on the potentially large market of povertystricken rural consumers may be gleaned from the comments prepared by a cotton manufacturer of Minas Gérais in 1930: "Take the example of the State of Minas, one of the richest in the republic, where possibly more than 50 per cent of the people . . . can not purchase domestic cotton cloth. The proof of this lies in the fact that the cheapest goods always sell faster." Letter, Companhia Santa Luzia Industrial, Bello Horizonte, to CIFTA, Rio, September 5, 1930, Archive, CIFTA-Rio. 29. Interview, Agamemnon Magalhäes, Minister of Labor, "Para melhor orientar as actividades dos industriáis do Brasil," Diario Carioca, March 18, 1937. 30. "Super-producçâo industrial?", O Observador, XIV (March 1937), 93. 31. Letter, CIFTA-Rio to Lindolpho Collor, Rio de Janeiro, May 14, 1931, Archive, CIFTA-Rio. 32. Letter, Nogueira to Lindolpho Collor, Sâo Paulo, May 7, 1931, Archive, CIFTA-Rio. 33. Letter, Nogueira to Galliez, Sao Paulo, October 6, 1936, Archive, CIFTA-Rio, "A evoluçâo da industria nacional na fabricaçâo de maquinas texteis," Correte Paulistano, May 13, 1951; "A industria mecanica e metalúrgica brasileira," O Globo, February 6, 1951. In 1940, a spokesman for the cotton manufacture praised the domestic looms for giving service almost comparable to that of foreign makes. Correio da Manhâ, December 26, 1940. Joaquim and Luis Ribeiro were the pioneer loom manufacturers who began their firm in Sâo Paulo in 1920, employing six men. Thirty-one years later the company claimed to be the largest of its kind in Latin America, with 350 men on its payroll. Correio Paulistano, May 13, 1951. 34. CIFTA-Rio, Relatorio, 1936, p. 21. This statement did not deter the Rio association from proposing that the minister of labor review all orders for textile machinery placed with Brazilian machine shops. What one hand gave, the other might take away. Ibid., p. 26. 35. "Super-producçâo industrial?," O Observador, p. 93. In 1946, over 10 per cent of all looms in Brazilian mills (7,108 of 70,262 whose origin was specified) were the products of domestic machine shops. Ministerio do Trabalho, Comissäo Executiva Textil, A industria textil do algodäo e da là (Rio de Janeiro, 1949), p. 63. 36. Typical of the nationalistic feeling was the comment made in 1931 by coffee merchant Paulo Prado, author of the widely circulated philippic against the first Republic, Retrato do Brasil: ". . . only nationalism in every form will liberate us from the tyranny and greed of the imperialism

Crisis of the Thirties

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threatening us." Assis Chateaubriand, "Pelo fortalecimento do saldo-ouro da nossa balança mercantil," O Jornal, January 8, 1931. 37. Cámara Portuguesa de Commercio e Industria do Rio de Janeiro, Inquerito para a expansäo do commercio portugués no Brasil (Porto, 1916), p. 12. The terms offered were 10 per cent commission, plus semi-annual 5 per cent bonus on total purchases. The profitability of the overseas subsidiaries of British sewing thread mills seems to have been high. For example, most of J. and P. Coats' net profit for 1906 operations came from its foreign mills, owned or controlled. For further details, see J. H. Clapham, An Economic History of Modern Britain (2 vols., New York and Cambridge, 1938), II, 224-225. 38. Ministerio da Agricultura to Ministerio da Fazenda, Aviso No. 150, Diario Oficial, May 10, 1927: "Urna fabrica inutilisada," Correlo da Manhä, April 30, 1931; letter, CIFTA-Rio to Ministro do Trabalho, May 10, 1934. Pearse has a description of the Alagoas mill, accompanied by photographs. He thought the mill merited "special attention owing to the extraordinary pioneer work and enterprise . . . required in its establishment, a work entirely initiated and carried out by a Brazilian, Mr. Delmiro Gouveia. . ." Gouveia's imagination was fired by the Paulo Alfonso falls which he decided to harness in 1910 to "establish a sewing thread mill in competition with English yarns of this description . . ." Gouveia's home state, Ceará, was and is to this day, along with other states of the Brazilian northeast, the traditional area for the production of Brazilian embroidered goods; the knowledge of the ready market for domestic sewing thread in the area may have been another factor in Gouveia's decision. He is reported to have planned, in addition to his cotton mill, to use the falls to supply "water for drinking and industrial purposes to surrounding villages, for erecting cottonseed oil mills, and other industries, and finally for supplying electric current to the country near and far." Gouveia died in 1918, three years after the cotton mill began operations. Pearse talked to the company's directors who were "commercial men mainly interested in the hide business of Iona and Co. and would welcome participation of Europeans in the further development of the scheme." Pearse, Brazilian Cotton, pp. 34-37. The participation came in an unexpected fashion. 39. Letter, Companhia Fiaçâo do Rio de Janeiro to CIFTA-Rio, Rio de Janeiro, May 2, 1934; Letter, CIFTA-Säo Paulo to Ministro do Trabalho, Sâo Paulo, May 9, 1934; Letter, CIFTA-Rio to Ministro do Trabalho, Rio de Janeiro, May 10, 1934. All in Archive, CIFTA-Rio. One Rio newspaper claimed that the few mills supplying yarn to small stocking and knit-goods shops could not adequately meet all domestic yarn requirements or produce the fine counts used in sewing thread. Brazilian manufacturers angrily denied this. "Tarifas de exploraçâo," Correio da Manhä, November 20, 1932; V. P. Galliez, O. P. Nogueira, W. J. Gosling, Euvaldo Lodi, Memorial ao Presi-

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dente e Membros da Commissäo Revisora das Tarifas Aduaneiras, March 18, 1933, MS in Archive, CIFTA-Rio. 40. Letter, CIFTA-Rio to CIFTA-Säo Paulo, June 4, 1934; CIFTA-Rio, Circular, July 26, 1934. All in Archive, CIFTA-Rio. 41. Letter, September 11, 1934, Archive, CIFTA-Rio. 42. Letter, CIFTA-Rio to Ministro do Trabalho, December 1934; CIFTA-Rio, Circular, December 21,1935. All in Archive, CIFTA-Rio. 43. IBGE. "Sinopse preliminar do censo demográfico." Recenseamento geral do Brasil, 1950 (Rio de Janeiro, 1951), Table I. One manufacturer claimed that by 1936 the industry was selling its production with no difficulty and had in fact already disposed of the large inventories accumulated during the early thirties. Aldo Mario de Azevedo, "A superproducçâo industrial," O Observador, XV (April 1937), 46. 44. Letter, Companhia Industrial Säo Joannense, Säo Joäo d'El-Rey, to CIFTA-Rio, September 9, 1930; CIFTA-Rio to Ministro do Trabalho, April 19, 1934; Henry Rogers Sons & Co. to CIFTA-Rio, Rio de Janeiro, November 11,1933. All in Archive, CIFTA-Rio. 45. Diario Oficial, May 24, 1934. 46. Letter to CIFTA-Rio, Rio de Janeiro, March 31, 1934, Archive, CIFTA-Rio. 47. "Henry Rogers Sons & Co. of Brazil, Ltd.," Diario Oficial, December 22, 1936. 48. See Appendix II. 49. See Appendix V. 50. Interview, Dante Bianchi, "As razöes da crise da industria textil, na opiniäo de um technico," O Jornal, February 24,1939. 51. S/A Boyes, cited in CIFTA-Säo Paulo, Memorial, June 1936, Archive, CIFTA-Rio. 52. S/A Industrias Reimidas Matarazzo, Ibid. 53. CIFTA-Säo Paulo, Memorial, Archive, CIFTA-Rio. 54. In 1946, the average count of yarns spun in Brazil was 19.54. The average for the mills of the northern states, Pará to Bahia, was considerably lower, 15.4. Industria textil algodoeira, p. 77. 55. Letter, Companhia Nova America, Rio de Janeiro, August 25, 1936 and letter, Companhia Manufactora Fluminense, Rio de Janeiro, August 25, 1936, to CIFTA-Rio, Archive, CIFTA-Rio. 56. CIFTA-Rio, Relatorio, 1936, pp. 5-6, 21-26; Ministro do Trabalho, A. Magalhäes, "Importaçâo de machinas," Diario Oficial, December 10, 1936. Mills of up to 5,000 spindles could import 50 per cent of their spindles; 5,000-10,000, 30 per cent; 10,000-15,000, 20 per cent; 15,000 or over, 10 per cent. Säo Paulo spinning mill proprietors were especially incensed by the fact that the ministry allowed small weaving shops to import up to fifty spindles per loom to produce their own yarn. This measure would eliminate the spinning mills' markets. CIFTA-Säo Paulo to Ministro do Trabalho, Me-

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morial, January 2, 1937, Archive, CIFTA-Rio; V. P. Galliez, "Importaçâo de Machinas," Exposiçâo . . . ao . . . Conselho Federal do Commercio Exterior," CIFTA-Rio, Relatorio, 1937, p. 33. 57. Letter, Carlos Rénaux, Brusque, Sta. Catarina, to CIFTA-Rio, November 19, 1936, Archive, CIFTA-Rio. 58. Companhia Fiaçâo e Tecelagem Leopoldinense to CIFTA-Rio, Leopoldina, Minas Gérais, December 22, 1936, Archive, CIFTA-Rio. One government official attached to the Ministry of Labor claimed that the new regulations would permit the importation of about 400,000 new spindles of the total on hand in Brazil (2,700,000), producing approximately 4,800,000 kilos of number 50s yarn; this output would be relatively insignificant compared with total annual production of 114,000,000 kilos of yarn of all counts. "Ministro do Trabalho, Expediente, Dia 5 de Dezembro de 1936," CIFTA-Rio, Relatorio, 1936, p. 28. 59. V. P. Galliez, "Importaçâo de machinas," CIFTA-Rio, Relatorio, 1937, p. 29. 60. "Projeto e justificaçâo Ν. 149-1937. Cámara dos Deputados," Diario do Poder Legislativo, March 4, 1937, cited in CIFTA-Rio, Relatorio, 1937, p. 39. 61. V. P. Galliez, "Importaçâo de machinas," CIFTA-Rio, Relatorio, 1937, p. 29. 62. Ibid., p. 34; CIFTA-Rio, CIFTA-Sâo Paulo, CIFTA-Juiz de Fora, "Industrias em superproducçâo," CIFTA-Rio, Relatorio, 1937, pp. 35-36. 63. Ibid., p. 6. 64. Companhia Manufactora Fluminense, "Movimenta-se urna grande empreza textil de Nictheroy," Diario da Manhä, March 14, 1937; "Industrias em superproducçâo," Correio da Manhä, March 20, 1937; "A superproducçâo," ibid., March 23, 1937; "A importaçâo de machinismos," ibid., March 25, 1937; "Profunda obra de patriotismo," O Homem Livre, April 1, 1937; "Super-desorganizaçâo," Correio da Notte, April 2, 1937. One newspaper proposed that it was entirely consistent for the government, which was abandoning the principles of economic liberalism in favor of those of "directed economy," to control profits as well. Estado de Säo Paulo, January 20, 1937. 65. Article 7 of the bill stated that all restrictive measures were to be maintained until the ministry's investigations were completed. Diario do Poder Legislativo, March 4, 1937, cited in CIFTA-Rio, Relatorio, 1937, 37-39. Note that, in October 1936, the Rio manufacturers still insisted that restrictions be extended for three years. 66. J. A. Barboza Carneiro, Euvaldo Lodi, Domingos Fleury da Rocha, Franklin de Almeida, "Parecer sobre regulamentaçâo definitiva das industrias em super-producçâo," Cámara de Producçâo, Consumo e Transportes, Processo No. 718, July 13, 1938, MS, Archive, CIFTA-Rio. 67. One cotton manufacturer remarked on the associations' technique of

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asking manufacturers what they thought of overproduction. "Frankly, I don't think you can get at the truth this way, for not always is the commonweal placed above private interests." Aldo Mario de Azevedo, "A superproducçâo industrial," O Observador, XV (April 1937), 46. 68. "Super-producçâo industrial?," O Observador, XIV (March 1937), 104; "Premio a ineficiencia," Correvo da Manhâ, April 16, 1937; Romeu Ν. Carvalho Bastos, "Super-desorganizaçâo," Correlo da Notte, Aprii 2, 1937; "Ministro do Trabalho, Expediente," CIFTA-Rio, Relatorio, 1936, p. 28. 69. Ministerio da Fazenda, SEEF do Tesouro Nacional, Commercio exterior do Brasû (Rio de Janeiro, 1940), pp. 434-436; Conselho Federai do Commercio Exterior, Commercio exterior do Brasil, 1938-1943. In 1937, Howard & Bullough, Ltd., the British manufacturers of textile equipment, offered the Petropolitana six combing machines "of the latest model" on excellent terms, including delivery in eight weeks. "The speedy delivery is due to the troubles in the Orient, where these machines were to be shipped." Petropolitana, Directoría, September 23, 1937. 70. Since looms and spare parts were classified separately in Brazilian import statistics, it seems appropriate to consider the class of "Spinning and Weaving Machines, Unenumerated" as referring to all preparatory machinery up to looms. Much of this equipment was probably spinning frames. 71. Aldo Mario de Azevedo, "A superproducçâo industrial," O Observador, XV (April 1937), 46; Santa Basilissa, Directoría, August 4, September 6, and October 8, 1937; CIFTA-Rio, "Augmento de salario. Memorial . . .," August 31, 1937, in Relatorio, 1937, p. 51. 72. CIFTA-Rio, Relatorio, 1937, pp. 8-9; "Super-producçâo de tecidos," O Observador, XXXV (December 1938), 108. 73. Jornal do Commercio, February 6, 1938; CIFTA-Rio, "Questionario," April 20, 1938, Archive, CIFTA-Rio. 74. Correio da Manhâ, January 24, 1939. 75. Cámara de Producçâo, Consumo e Transportes, "Regulamentaçâo definitiva das industrias em superproducçâo," July 13, 1938, MS, Archive, CIFTA-Rio. 76. Letter, December 31, 1938. It was also reported that the northern industrialist boasted that he had convinced all the federal government's chief political officers (interventores), who acted as governors of the Brazilian states during the years of the New State, to remind Vargas how disastrous would be any limitations on hours of work in textile mills. CIFTA-Rio and CIFTA-Säo Paulo, "Memorial . . .," CIFTA-Rio, Relatorio, 1938, p. 29. The Lundgren brothers, stockholders and managers of the largest cotton textile company in the north, had shown earlier signs of disagreement with the southern associations: their refusal to supply information on the state of their inventory in 1930; and, more recently, the refusal of the

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Fernambuco association to attend the conference of three southern textile operators' associations held early in 1937, when it was resolved to ask the government for a sixty-hour week. 77. An indirect reference to this conclusion appeared in the press months later, without any mention of the report itself. See Jornal do Commercio, January 25, 1939. The copy of the report which the author consulted lacked the statistical tables originally appended. Further investigation failed to secure the tables. 78. "Exposiçâo de motivos," to President Vargas, Rio de Janeiro, October 1938, Archive, CIFTA-Rio. 79. The Säo Paulo association reported the "rumor" in a circular to members, dated November 16, 1938. Archive, CIFTA-Rio. 80. Letter, O. P. Nogueira to CIFTA-Rio, December 1, 1938, Archive, CIFTA-Rio. 81. Joäo Maria de Lacerda, quoted in "A limitaçâo de horas de traballio," O Jornal, February 12, 1939. 82. Letter, CIFTA-Rio to members, December 23, 1938, in Relatorio, 1938, p. 25. 83. Letters, De Camargo & Cia., Säo Paulo, November 18, 1938; Fiaçâo e Tecelagem Sao Paulo, Säo Paulo, November 18, 1938; telegrams, Carlos Renaux S/A, Sta. Catarina, November 17, 1938; Companhia Fiaçâo e Tecidos Goyanna, Pernambuco, November 18, 1938; Companhia Industrial Pirapama, Pernambuco, November 16, 1938. All in Archive, CIFTA-Rio. 84. CIFTA-Rio and CIFTA-Säo Paulo, "Memorial apresentado ao Conselho Tecnico de Economía e Finanças sobre a crise da industria textil," Rio, December 12,1938, in CIFTA-Rio, Relatorio, 1938, pp. 26-32. 85. O Observador, XXXV (December 1938), 110-111. The group of dissident atacadistas included Pereira, Femandes & Cia., Muller & Cia., Sampaio, Avelino & Cia., Custodio Fernandes & Cia. 86. O Observador, XXXV (December 1938), 111. For comparable comments, see Letter, J. Sigismondi to CIFTA-Rio, Säo Paulo, November 19, 1938, Archive, CIFTA-Rio. 87. Companhia de Tecidos Paulista, "Industria de tecidos em 'superproducçâo.' Memorial . . . ao Director Geral do Departamento Nacional de Industria e Commercio do Ministerio do Traballio, Industria e Commercio, October 1, 1938," MS, Archive, CIFTA-Rio. 88. J. S. Maciel Filho, "O panno que é pimenta," O Imparcial, January 4, 1939. The difference in wage levels stemmed from the fact that manufacturers of the Federal District and surrounding state of Rio were more closely supervised for violations of existing labor legislation. In Säo Paulo, a state, not federal, bureau handled inspection and in Pernambuco, as Maciel Filho put it, the Lundgrens ran their mills as "feudal seigneurs." Yet even in relatively industrialized Säo Paulo, it was reported that textile

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mill owners used women and children on night shifts lasting up to fourteen hours. "A crise da industria textil," O Jornal, February 10,1939. 89. CIFTA-Rio, "Memorial . . . ao Conselho Tecnico . . . rebatendo accusaçâes feitas ao Centro," CIFTA-Rio, Relatorio, 1938, pp. 47, 49; O Observador, XXXV (December 1938), 113. 90. Guilherme da Silveira Filho, Memoria sobre a situaçâo da industria textil brasileña, pp. 48-49. 91. Although, again, the memorial quoted no figures to substantiate this point, production in 1938 was 5 per cent under that of 1937. E. Street, "A industria textil," p. 119. 92. CIFTA-Rio, "Memorial," Relatorio, 1938, p. 49. 93. Aloysio de Lima Campos, "Parecer . . . sobre a questäo da limitaçâo das horas de traballio nas secçôes de tecelagem de algodâo," CIFTARio, Relatorio, 1938, pp. 56-58. 94. O Observador, XXXV (December 1938), 113-114, 117. For a similar analysis, see "A crise da industria textil," O Jornal, February 10, 1939; "O salario minimo de emergencia e a exportaçâo de tecidos de algodáo," O Jornal, February 17, 1939. One of the most repeated pleas for careful analysis of the causes of the problems of the cotton manufacture, instead of the appeal to claims of overproduction, came from the president of Brazil's most modem mill. It fell on deaf ears. "Companhia Nacional de Tecidos Nova America, Relatorio, 1939," Jornal do Commercio, February 14, 1939. 95. This recommendation was immediately considered by an influential daily as a reward for the inefficiency and organizational ineptitude of southern mills. "A cigarra e a formiga," Correio da Manhâ, January 24, 1939. 96. CIFTA-Rio, "Exposiçâo . . . ao Dr. Joäo Maria de Lacerda . . . sobre a crise da industria de tecidos de algodäo," February 17, 1939, CIFTA-Rio, Relatorio, 1939-1940, pp. 41-43. 97. Letter, O. P. Nogueira to V. P. Galliez, Sâo Paulo, February 10, 1939; letter, CIFTA-Rio to Oswaldo Aranha, Rio, September 26, 1940. All in Archive, CIFTA-Rio. It must be pointed out that as early as 1928 the Rio association contemplated a return of Brazilian cloth exports to the River Plate markets. It must also be noted that, as late as May 1939, there were Brazilian mill proprietors who admitted they could not compete overseas with English, Italian, Japanese, and Belgian companies. Letter, CIFTA-Rio to Getulio Vargas, May 22, 1939, Archive, CIFTA-Rio. 98. Joäo Maria de Lacerda, O. P. Nogueira, Euvaldo Lodi, and others, "A crise da industria textil," O Jornal, February 10, 1939; "A limitaçâo do horas de traballio," ibid., February 12, 1939. 99. Interview, Othon Bezerra de Melo, "A exportaçâo dos tecidos brasileiros para a America Central," O Jornal, February 15, 1939, and "A crise da industria textil," ibid., March 17,1939. 100. Interview, Carlos T. da Rocha Faria, "A crise que atingiu a industria de tecidos," O Jornal, February 16, 1939; interview, Severino

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Pereira, "O salario minimo," ibid., February 17, 1939; interview, Joaquim Inojosa, "Crise de sub-consumo," ibid., February 18, 1939; interview, Antonio Lacerda de menezes, "Para um consumo interno," ibid., February 19, 1929. 101. Letter, Companhia Taubaté Industrial to President Getulio Vargas, Taubaté, Säo Paulo, April 27, 1939, Archive, CIFTA-Rio. 102. Santa Basilissa, Directoría, November 16, 1939. 103. Correlo da Manhä, July 16, 1941. For the same view, interview, Othon Bezerra de Melo, "Grave erro," O Jornal, October 22, 1941. 104. CIFTA-Rio, "Exposiçâo. . . ao Sr. Ministro Joäo Alberto Lins de Barros. . . ," October 2, 1940, CIFTA-Rio, Relatorio, 1939-1940, p. 52; Commissâo de Defesa da Economía Nacional, "Relatorio . . . ao Sr. Ministro Joäo Alberto Lins de Barros . . .," October 2, 1940, ibid., pp. 58, 62. 105. IBGE, Recenseamento geral do Brasil, Sinopse do censo industrial e do censo dos serviços (Rio de Janeiro, 1948), p. 2. 106. O Día (Curytiba), October 8, 1941; Correio da Manhä, December 25, 1940 and October 4, 1941.

11.

T H E W A R AND ITS AFTERMATH

1. For an analysis of the obsolete and worn-out textile equipment with which Brazil entered the war, see Fernando Nascimento Silva, "A situaçâo da industria textil. Deficiencia de maquinaria e de mäo de obra. IV," Diario Carioca, August 30, 1947. 2. Guilherme da Silveira Filho, Memoria, p. 32. 3. Interview, V. P. Galliez, "A Inglaterra está interessada em que deixemos de exportar tecidos," A 'Noticia (Rio), April 8,1947; Letter, Nelson De Vicenzi to President, CETex, Rio de Janeiro, December 9, 1946, Archive, CETex. 4. F. Ν. Silva, "A situaçâo da industria textil. A fase de reflorescimento. I," Diario Carioca, August 28, 1947. 5. Of 1,045,930,950 meters of Brazilian cotton cloth exported in 19411945, 403,328,040 meters went to Argentina, and 203,100,520 to the Union of South Africa. Included in shipments to Argentina were goods reëxported by Argentina to the Union of South Africa. See Ministerio do Trabalho, Commissâo Executiva Textil, Industria textil algodoeira (Rio de Janeiro, 1946), pp. 243-244; and F. N. Silva, "A situaçâo da industria textil. VII," Diario Carioca, September 4, 1947. 6. For example, early in 1943, Sears, Roebuck and Company sought shipments of white and gray goods and cloth for sheets and diapers. Letter, CIFTA-Säo Paulo to CIFTA-Rio, Sao Paulo, June 1, 1943, Archive, CIFTARio. 7. Adapted from Industria textil algodoeira, p. 243.

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8. "[Textile manufacturers] improvised mill hands, transforming apprentices into weavers, and hiring farm hands for jobs requiring trained labor." Industria textil algodoeira, p. 152. 9. The inquiry included 94.2 per cent of the industry's cards, 78 per cent of the spindles, and 94.25 per cent of the looms. Ibid., pp. 188-121. It is to be emphasized that the figures represent national averages, for averages for some states were frequently much higher. F. N. Silva, "A situaçâo da industria textil. II," Diario Carioca, August 28, 1947. Carding and spinning sections were operated longer than weaving sections to attempt to correct the perennial imbalance in the Brazilian cotton manufacture between yarn output and loom demands. Output was increased by adding looms, for capital outlay on spinning and intermediate equipment was higher. 10. Assis Chateaubriand, "Tubaröes de mangas arregaçadas," O Jornal, November 23, 1943. Chateaubriand cited the statements of Max Sonnenberg, a Union of South Africa congressman, who deplored the fact that prices for Brazilian (and Argentine) cottons sold in Capetown varied, on the same day and for the same goods, from 20 to 25 per cent. Similar charges of "excessive cupidity" were leveled at Argentine mill proprietors by an important Buenos Aires importing firm. Letter to S/A Ferreira Guimaräes, Buenos Aires, June 28, 1940, Archive CIFTA-Rio. See also Limeira Tejo, Retrato sincero do Brasil, p. 89; Henry William Spiegel, The Brazilian Economy (Philadelphia, 1949), p. 234. 11. O. P. Nogueira, "Há crise de superproducçâo ñas industrias texteis," Foiba da Noite (Säo Paulo), December 6, 1941. 12. "Inquerito sobre a industria textil. Medidas de controle da producçâo. VII," Estado de Säo Paulo, July 3, 1947; Coordenaçâo da Mobilizaçâo, Portaria 36, January 8, 1943, in CIFTA-Rio, Relatorio, 1943, p. 4. 13. Such an "impossibility" was confirmed at the same time by a letter prepared by the Rio manufacturers' association. Replying to a memorandum issued by the United States Embassy in Rio on the possibility of enlisting the aid of the Brazilian textile industry in meeting "present and future" textile requirements in the rest of the world, the association stressed that prices of Brazilian cotton goods varied widely from manufacturer to manufacturer, consequently it was impossible to give "definite information" on prices for the most important types of goods. Letter, CIFTA-Rio, March 18, 1943, Archive, CIFTA-Rio. 14. CIFTA-Rio, Relatorio, 1943, pp. 4, 25. 15. Letter, CETex to Minister of Labor, December 16, 1946, Annexo 2, p. 3: "[The Convenio Textil] was the only way found to force the distribution in the cities and towns of Brazil of people's articles' [artigos populares], whose prices were pushed upward by the goods in normal commercial channels." 16. Letter, December 6, 1943, Archive, CETex.

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17. CIFTA-Rio, Relatorio, 1944, pp. 3-6. In its UNRRA contract, Brazil fixed prices at current United States ceiling prices, plus a 7 per cent bonus on exports, plus another 10 per cent granted at the request of the Brazilian mission in view of Brazilian manufacturers' "high cost of production." Ibid., p. 5. 18. Actual deliveries were: 21,400,117 yards to UNRRA, 19,912,557 yards to the French Mission. Industria textil algodoeira, pp. 193, 198; "Inquerito sobre a industria textil. VII," Estado de Sâo Paulo, July 3, 1947. 19. Decreto-Lei No. 6.688 of July 13, 1944, cited in CIFTA-Rio, Relatorio, 1944, p. 7. Guilherme da Silveira Filho had been president of the Convenio Textil supervisory group; and accompanying the change to the CETex were three other industrialists. 20. F. N. Silva, "A situaçâo da industria textil. A exportaçâo antes e durante a guerra. III," Diario Carioca, August 29, 1947; Industria textil algodoeira, pp. 236-239; Appendix IV. 21. Gilbert Landsberg, report on interview with Julius Herrman, December 3, 1945, Archive, CIFTA-Rio. 22. Letter, Adhemar de Canindé Jobim to Minister of Fazenda, Gastäo Vidigal, May 13, 1946, Archive, CETex. 23. Letter, Consul-General, Union of South Africa, F. Du Plessis, to A. H. W. King, Commercial Secretary, British Embassy, Rio de Janeiro, April 4, 1946, Archive, CETex; "O tecido brasileiro vai perdendo o mercado sul-africano," O Jornal, August 8, 1944. 24. Letter, Firmo Dutra and V. P. Galliez to CIFTA-Rio, Buenos Aires, June 29, 1940, Archive, CIFTA-Rio. 25. Interview, Oscar Augusto de Camargo, "Ao Brazil impöe-se modernizar a sua industria de tecidos para nao perder o mercado argentino," Diario de Säo Paulo, May 16, 1944. For similar warnings on the wartime expansion of cotton manufacture in Colombia and Peru, see "A exportaçâo algodoeira do Brazil," O Diario (Santos), July 12, 1944; "A exportaçâo de tecidos de algodäo," Diaria Popular (Sâo Paulo), May 17, 1944. 26. An even more direct warning came in the form of a telegram forwarded in 1944 to the CETex by the British Federation of Industries which declared that British manufacturers had no "intention" of abandoning Latin American markets in the postwar period and that they planned to ship both old and new types of merchandise. British Chamber of Commerce in Brazil, Inc., to CETex president, October 24, 1944, Archive CETex. 27. Letter, Alfredo Mallet, Cia. Commissaria e Tecnica de Tecidos Mallet to CETex, December 18, 1946, Archive, CETex. Oddly enough one of the markets singled out for Brazilian exports, Turkey, had vigorously expanded its cotton textile industry under government supervision. As the Brazilian legation in Ankara saw it, the prosperity of that Turkish industry would never have been so great if "development had been left to private

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Notes to Chapter 11

initiative." Legaçâo do Brasil, Ankara, in "Mês Economico, η. 11," (November 1945), Archive, CETex. 28. MS. 29. See CIFTA-Rio, Circular 32/45, May 17, 1945. 30. "Importaçâo de maquinas," Correlo da Manhä, May 1,1945. 31. Consul-General Ildefonso Falcäo to CETex, London, June 27, 1946, Archive, CETex. The Board of Trade was said to supervise all textile machinery before dismantling for sale overseas; only "old machinery of extremely low productivity" was approved. Letter, Falcäo to Joäo Neves da Fontoura, London, April 6, 1946, Archive, CETex. 32. Letter, J. M. Moreira de Moráis, CIFTA-Sâo Paulo, to Humberto Dantas, Federaçâo das Industrias do Estado de Säo Paulo, Sâo Paulo, June 3, 1946, Archive, CETex. According to Moreira de Morais's letter, the information supplied by Falcäo hardened the opposition of Säo Paulo manufacturers to the importation of reconditioned equipment. 33. F. N. Silva, "A situaçâo da industria textil. Preço de custo e valor commercial. V," Diario Carioca, August 31, 1947; "Ecos e Comentarios," O Globo, June 12, 1946. Former President Vargas, ousted by revolution on October 29, 1945, and elected Senator under the 1946 constitution, declared the CETex suspension was requested by a few textile men unable to meet their foreign commitments because of shortages of raw materials, and therefore in search of a convenient excuse. I have not seen any documentation bearing out this accusation. See Senator Vespasiano Martins' statements, "Commissäo Especial de Inquerito para a Industria Textil no Senado Federal," in Guilherme da Silveira Filho, Memoria, pp. 141-142. 34. See Appendix II and Appendix IV. 35. Coordenador da Mobilizaçâo Economica, Portaria η. 424, November 30,1945, CIFTA-Rio, Relatorio, 1945-1946, p. 12. 36. "Os preços medios de exportaçâo nacional," Diario de Säo Paulo, June 9, 1945; "Os tecidos de algodáo. Segundo producto exportavel," Jornal do Commercio, July 27, 1945. 37. Domestic prices per meter of Brazilian cotton textiles rose from 3,17 cruzeiros in 1944 to 5,27 in 1945; while at the same time export prices rose only from 5,21 to 5,76 cruzeiros. Ministerio do Traballio, CETex, A industria textil do algodäo e da lâ, pp. 88,131. 38. Guilherme da Silveira Filho, Memoria, p. 50; F. N. Silva, "A situaçâo da industria textil. Restriçôes a exportaçâo de texteis. VII," Diario Carioca, September 3, 1947. 39. Clovis Amarai, "Commissäo especial de inquerito," in Guilherme da Silveira Filho, Memoria, p. 145. 40. Ibid., pp. 36-37, 50; Letter, CETex to Minister of Labor, December 16, 1946, Archive, CETex. 41. Clovis Amarai, "Commissäo especial de inquerito," in Guilherme da Silveira Filho, Memoria, pp. 146-147. Even the vice president of the Säo

War and its Aftermath

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Paulo cotton manufacturers' association and a member of the CETex agreed with the government and the CETex president that the domestic market was undersupplied in 1945-1946. Interview, Silvio Brand Correia, "O Brasil exportará tecidos aos seus vizinhos sul-americanos," A Notte (Säo Paulo), January 11, 1947. 42. "Reuniáo conjunta da directoría e fabricas de fiaçâo e tecelagem de algodäo do Distrito Federai e Estado de Rio de Janeiro," CIFTA-Rio, Relatorio, 1945-1946, p. 61. 43. Guilherme da Silveira Filho, Rocha Faria, Velloso Borges, and Clovis Amarai, "Commissáo especial de inquerito," in Guilherme da Silveira Filho, Memoria, pp. 145-146. 44. Ibid., p. 41. 45. "Reuniäo conjunta da directoría. . . ," June 12, 1946, in CIFTA-Rio, Relatorio, 1945-1946, p. 62; Guilherme da Silveira Filho and Clovis Amarai, "Commissáo especial de inquerito," in Guilherme da Silveira Filho, Memoria, pp. 132-133. 46. Letter, V. P. Galliez to Correte da Manhâ, Rio de Janeiro, June 4, 1947. 47. See Senator Roberto Simonsen, Diario do Congresso Nacional, May 21, 1947. Needless to add, cotton manufacturers resented being pilloried as a "group of greedy exploiters." Letter, CIFTA-Rio to Senator Alfredo Neves, July 8, 1947 in CIFTA-Rio, Relatorio, 1947, p. 76. 48. "Os tecidos de algodäo, segundo produto exportavel," Jornal do Commercio, July 27, 1945. Omitting consideration of wage increases, available statistics indicate that in the period of 1940-1945 the cost of foodstuffs in Brazil more than doubled, although from 1928-1939 it had not risen appreciably. 49. F. N. Silva, "A situaçâo da industria textil. Restriçôes a exportaçâo de texteis. VII," Diario Carioca, September 3, 1947; Letter, CETex to Julio Barata, May 22, 1946 and Letter, CETex to Commissáo Estadual de Preços de Säo Paulo, December 10, 1946, Archives, CETex; "Negocios com Perón," Diario Carioca, July 21, 1948; CIFTA-Rio, Relatorio, 1947, p. 14. The only figures available on the deliveries of the 10 per cent quotas under the Convenio Textil cover the period 1943-1945. See Industria textil algodeira, pp. 213-215. 50. An American reporter cabled from Brazil in 1946: "Rio de Janeiro today is not the happy playground of three years ago, when an American dollar provided luxury for the tourist on the Brazilian exchange. Prices have soared so high that the poor smash store windows, middle class residents wonder how long they can support their families and tourists gape at an inflation that has leaped ahead of the United States. In three years prices have jumped an estimated 300 per cent." Emily Towe, "An Awful Lot of Inflation in Brazil," The Washington Post, October 20, 1946, reprinted in

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Abel Plenn, The Southern Americas. A New Chronicle (New York, 1948), p. 401. 51. "Bilhetes da Pauliceia. Solidariedade à Cetex," Brasil-Portugal, June 29, 1946. 52. "Inquerito sobre a industria textil. Medidas de controle da producçâo. VII," Estado de Sâo Paulo, July 3, 1947. 53. F. Ν. Silva, "A situaçâo da industria textil. A exportaçâo antes e durante a guerra. III," Diario Carioca, August 29, 1947. 54. Ilacir Pereira Lima, Representaçâo Sindical de Trabalhadores na Sub-Commissäo de Trabalho na CETex, "Relatorio do mez de janeiro de 1945," February 5, 1945, Archive, CETex. One of the first signs of such "participation" was a resolution, framed at the first congress of northern and northeastern textile workers held in 1944, that the federal government take over cotton mills whose management was "obviously incompetent." Federaçâo dos Trabalhadores na Industria de Fiaçâo e Tecelagem do Norte e do Nordeste, "Memorial do Primeiro Congresso de Trabalhadores, Recife, 1944," Archive, CETex. The threat of such governmental intervention was felt keenly by entrepreneurs of Sergipe, a northeastern state, as late as five years after the framing of the 1944 resolution. In 1949 the Sergipe cotton manufacturers' association commented at the textile industry's Second Convention on the fear that "through demagogy or lack of judgment, through lack of connaissance de cause and even through persecution, we may have to endure government intervention on the ground that we have abused economic power . . . We wish to draw the attention of industrialists . . . to the fact that in 1944 the Federation of Northern and Northeastern Textile Workers . . . sent the Government a memorial (later forwarded to the CETex) requesting the Intervention of the Government in enterprises of Proved Incompetent Management. It seems to us that the bill Against Abuse of Economic Power aims to do precisely this. Who is going to establish such incompetency? By what authority. . . ?" Sindicato de Fiaçâo e Tecelagem do Estado de Sergipe, Memoria contra o Projeto de Lei contra o Abuso do Poder Econòmico, in Segunda Convençâo da Industria Textil Brasileira (Rio de Janeiro, 1949), mimeographed minutes, Archive, CIFTA-Rio. 55. Letter, Joäo Grillo, Presidente da Federaçâo dos Trabalhadores ñas Industrias do Vestuario no Estado de Säo Paulo, to CETex, Säo Paulo, July 18, 1946, Archive, CETex. Similarly, letter, José Seabra Eiros to President Dutra, September 5, 1946, Archive, CETex. "This is our dilemma: remain unclothed and eat badly or clothe ourselves and die of hunger. This is the truth: meanwhile cotton mill proprietors are turning into multimillionaires." 56. Ministerio do Trabalho, Gabinete do Ministro, Portaria No. 3, March 22, 1947, Diario Oficial, March 25, 1947. 57. A member of the Säo Paulo price control commission insisted that a meter of cloth whose price at the mill was Cr 1,40 was retailing at Cr

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15,00 to Cr 35,00. Interview, Abel Augusto Fragata, "O congelamento de preços de tecidos . . . " A Notte (Säo Paulo), March 20, 1947. Goods priced at the factory at 3,80 cruzeiros sold at retail for 8,00; those at 4,00 for 8,80; those at 5,50 for 12,00; those at 5,90 for 12,50; those at 6,80 for 12,80; and those at 7,80 for 20,50. Deputado Eurico de Souza Leäo, "Relátorio," July 18, 1946, in Diario da Assembleia, August 13, 1946. 58. Letter, CIFTA-Rio to Commissäo Central de Preços (CCP), Rio de Janeiro, March 27, 1947; Letter, Sindicato do Commercio Atacadista de Tecidos de Sao Paulo to CCP, March 26, 1947, Archive, CIFTA-Rio. 59. F. N. Silva, "A situaçâo da industria textil. A liquidaçâo da crise. IX," Diario Carioca, September 6,1947. 60. Elias Assi, "Previsôes que se realisam," Diario de Säo Paulo, May 11, 1947; "O preço dos tecidos," Correlo da Martha, March 23, 1947; Tribuna Popular, March 20, 1947. 61. Jornal do Commercio, Aprii 27, 1947. 62. "Os preços dos tecidos," Jornal do Commercio, June 29, 1947. 63. Ministerio do Traballio, Portaria No. 32, June 10, 1947, Diario Oficial, June 12, 1947. On the support of cotton manufacturers' associations for the merchants' point of view on this question, see letter to President Dutra, June 16,1947 in CIFTA-Rio, Relatorio, 1947, pp. 62-63, 65. 64. Textile manufacturers vehemently denied this, although failing to adduce statistical proof. "The general impression," wrote one cotton mill entrepreneur in 1949, "is that our industry earned and continues to earn fantastic sums, rivers of money, in what is called 'this golden age' in the history of Brazilian industry. In fact, however, no cotton manufacturer in our country succeeded in putting into reserves enough funds to reequip his mill properly." José de Cerqueira Lima, Itaúna, Minas Gérais, in Segunda Convençâo da Industria Textil Brasileira, mimeographed minutes. 65. A. G. Mascarenhas, "Companhia Textil Bernardo Mascarenhas," Jornal do Commercio, March 31, 1944. 66. Mineiro do Suburbio, "Os preços dos tecidos," Diario de Noticias (Rio de Janeiro), July 1, 1947. 67. Note the comment of Fortune (February 1950), p. 152: "Indeed, Brazil is a manufacturer's paradise. . . A few years ago a group of Sâo Paulo textile firms was getting an average annual profit of 18 per cent on capital-plus-surplus. One-tenth of 256 firms studied made over 100 per cent, and one-third made over 50." 68. One of the first simplified accounts of the advantages and techniques of cost accounting, S. M. Politi's A tecnica do preço de casto da produçâo, appeared in Säo Paulo, 1946. Here is his description of accounting practices among Brazilian industrialists. "Formerly, some industrialists judged that all costs, legitimate or illegitimate, necessary or unnecessary, should be placed upon production. Cost was cost because money had been spent, even though spent carelessly or unproductively. . . Briefly, this was the

266

Notes to Chapter 11

opinion of certain managers or accountants. Final judgment on the propriety of expenses depended upon those responsible company officials, who were only checked by the possibility of dismissal if they erred." Ibid., p. 11. 69. Jorge Kafuri and José Soares Maciel Filho in Commissäo de Planejamento Econòmico, Ata da 6a. Reuniâo (June 7, 1945), mimeographed minutes. This was common as late as 1950 in a "majority" of Latin American cotton mills. See United Nations, Economic Commission for Latin America, Labour Productivity of the Cotton Textile Industry in Five Latin American Countries (New York, 1951), p. 10. 70. See "A exportaçâo de tecidos e seus reflexos internos," Jornal do Commèrcio, February 17, 1947; "A crise na industria textil," Correio da Manhâ, June 7, 1947. Note the following: "As long as old equipment and a low salaried labor force had no effect upon steadily rising profits, why should companies modernize equipment or raise workers' standards of living? Only if they desired things to 'look nice.' " Limeira Tejo, Retrato sincero do Brasil, pp. 257-258. 71. "A crise na industria textil," Correio da Manhâ, June 7, 1947; "Inquerito sobre a industria textil. VII," Estado de Sao Paulo, July 3, 1947; "Ecos e novidades. A exportaçâo de tecidos," A Noite, December 23, 1949; "Dois proveitos a um tempo," Jornal do Brasil, April 19, 1950. 72. By means of tax privileges granted corporations. 73. Letter, Jacob Schaan Filho to Nelson Di Vicenzi of CETex, Porto Alegre, August 19, 1946, Archive, CETex. 74. Appropriately, the president of the Rio cotton manufacturers' association praised in 1939 the republican government of the nineties for its stimulus to industry. Carlos T. da Rocha Faria, "Sessäo de instalaçâo (November 21, 1939)," Segunda Convençâo da Industria Textil Brasileira, in CIFTA-Rio, Relatorio, 1949, p. 181. 75. "A contra-ofensiva," Correio da Manhâ, June 4, 1947. 76. "Carta económica de Teresopolis," Journal do Commercio, May 19, 1945. The cotton textile industry subscribed wholeheartedly to this point of view. J. S. Maciel Filho to President Eurico G. Dutra, August 17, 1946, MS, Archive, CIFTA-Rio. 77. See Appendix IV. 78. CIFTA-Rio, Relatorio, 1946, p. 58, 70. ". . . our production is poor in quality and extremely costly; the absence of competition during the war made it possible for our industry to sell abroad; and the proof of this assertion is in the fact that we could not maintain those markets later." José de Cerqueira Lima, Itaúna, Minas Gérais, Segunda Commissäo, in Segunda Convençâo da Industria Textil Brasileira, mimeographed minutes, Archive, CIFTA-Rio. The ratio of net profits to capital in the Brazilian cotton textile industry was 26.5 in 1948 and 21.9 in 1949. In contrast the respective figures for all industry were only 18.2 and 18.3. When dividends were compared with

Summary and Conclusions

267

capital the figures were about 9 per cent for the cotton mills in both years and about 7 per cent for all industry. Street, "A industria textil," pp. 77-78. 79. CIFTA-Rio, Relatorio, 1948, p. 11; "Teses . . . a segunda Convençâo da Industria Textil Brasileira," CIFTA-Rio, Relatorio, 1949, p. 84; C. T. da Rocha Faria, ibid., pp. 152-153. 80. CIFTA-Rio, Relatorio, 1949, p. 86. 81. CIFTA-Rio, Relatorio, 1945-1946, p. 81; Street, "A industria textil," p. 106. 82. CIFTA-Rio, Relatorio, 1947, p. 48. According to the president of the Brazilian national association of manufacturers, cotton mill profits had been erroneously calculated on installations valued at 20 per cent of actual replacement costs. Euvaldo Lodi, "Discurso," CIFTA-Rio, Relatorio, 1949, p. 168. 83. CIFTA-Rio, Relatorio, 1949, pp. 71, 84, 167, 326; CIFTA-Rio, Relatorio, 1947, p. 93. 84. Street, "A industria textil," pp. 106-107. 85. "Superproducçâo de tecidos," O Observador, XXV (December, 1938), 113; F. Ν. Silva, "A situaçâo da industria textil. A ultima crise textil. X," Diario Carioca, September 7, 1947. 86. United Nations, Economic Commission for Latin America, Labour Productivity, p. 11. 87. Ibid., pp. 12, 17. 1 2 . SUMMABY AND CONCLUSIONS

1. V. N. Leal, Coronelismo, enxada e voto, p. 189.

INDEX Agriculture: 3-7 passim; coffee, 4, 234 nl4; and industry, 12, 13 Alliança mill (Rio de Janeiro), 62, 94,118 Alves Branco. See Tariff, of 1844 America Fabril mill (Rio de Janeiro): finances of, 27-28, 96, 127, 230η2β, 239η20,242η3; construction of, 32-34; child labor in, 54; social services, 58, 226n23; products of, 100, 108; at international exposition of 1922, 111; during World War I, 241n35 Amparo mill (Bahia), 26, 39 Andarahy Pequeño mill (Rio de Janeiro), 57, 213n3 Antonio de Araujo Figueiras & Cia., 41 Anarcho-syndicalism, 64 Argentina: imports Brazilian textiles, 108, 166, 170; British textile exports to, 171; cotton mills in, 171 Auction, 70, 74 Azevedo, Arnulfo (Senator), 126, 127 Banco Commercial of Porto (Portugal), 32 Banco da República do Brazil, 34, 95-96 Banco Rural e Hypothecario, 33 Banco Uniäo de Credito, 33-34 Bangú mill, 94 Bank of Brazil, 183, 209n8 Banks: in encilhamento, 86, 91 Beribery mill (Minas Gérais): founded, 26; description, 42; social services, 57, 60; construction, 214nl0, 217n39; foreign competition, 229nl5; and Rio wholesalers, 230nl8 Bernardo Mascarenhas mill (Minas Gérais), 120-121 Bonjean, Eduardo dos Guimaráes, 36, 37, 52, 219n56 Brazil Industrial mili (Rio de Janeiro): finances of, 6, 28-29; prospectus of, 17-18; construction, 34, 38, 42; description, 41-42; imports skilled labor, 52; social services, 57, 60, 227n48; on tariff of 1881, 83; power supply, 214 n7

British Board of Trade: and machinery exports, 172, 262n31 British Federation of Industries, 261n26 British Bank of South America, 220n59 Calogeras, Joáo Pandiá, 117 Canna do Reino mill (Minas Gérais), 218n46 Capital: merchant, 5-6; of early cotton mills, 27-35 passim, 217nl8; during encUhamento, 86-88, 96; foreign, in Brazil, 106; in World War I, 106; in World War II, 179. See also Investment Cartel, 129-130, 139, 142, 248n67 Casas Pemambucanas, 159. See also Companhia de Tecidos Paulista Clemente Castello Branco & Cia., 32 Caymari, Bernardo, 30-31, 35 Centro Industrial do Brazil, 113,125,129 CETex (Comissäo Executiva Textil): created, 169; and suspension of textile exports, 172-173, 175, 182; and labor, 177, 181 Coats, J. and P., Ltd. See Machine Cottons Ltd. Cobden treaty system, 82, 186. See also Free trade Coffee: colonial exports of, 3; in Sao Paulo, 98, 108; and national economy, 99, 109, 115; valorization of, 99, 110, 135; planters and politics, 125-126. See also Agriculture Collor, Lindolpho, 119, 140 Commerce: and opening of Brazilian ports, 3; expansion of, 8-9; and balance of trade, 9. See also Free trade Commercial Code of 1850, 7 Comissäo Executiva Textil. See CETex Companhia Agro-Fabril Mercantil (Alagoas), 145, 253n38. See also Delmiro Gouveia Companhia de Tecidos Paulista: retail stores of, 119-120, 159; on overproduction, 158; and Rio cotton manufacturers' association, 248n64

270

Index

Company stores, 58-59 Competition: from British textiles, 6671 passim.·, and cotton textile prices, 106; among mills, 114, 116, 118, 139, 158-159, 170, 180, 240n24, 266n78; and machinery import restrictions, 152; lack of, 156 Conceiçao mill (Bahia), 22, 25 Confiança Industrial mill (Rio de Janeiro), 101, 158 Conseil Français d'Approvisionnement, 165, 169 Conselho Federal do Commercio Exterior, 151-152, 153 Conselho Tecnico de Economía e Finanças, 154, 156, 160 Consumers: purchasing power of, 150, 157, 162, 168; government considers, 167; on cotton textile industrialists, 176-177, 178; and industrialization, 188 Convenio Textil, 168, 169, 173, 177 Convention of Taubaté (1906), 99 Coordinator of Economic Mobilization, 167-168 Corporations: legislation regulating, 7 8, 27, 86, 210n21; as family enterprise, 27, 183; in early mills, 27-28, 216nll Corporativism: under Vargas, 136, 141, 154 Cost accounting, 265n68. See also Production Cost of living: affected by cotton textile exports, 174; in Bahia, 224nl6; and cotton manufacturers, 264n55; mentioned, 176 Cotton, raw: exports of, 3, 44-46; and early Sâo Paulo mills, 22; cultivation of, 44, 47-48, 221n3, 222n6, 246n45; European shortage of, 45; procurement of, 46, 49, 68; ginning of, 48, 222nl9, 223n23; of Sâo Paulo, 108, 222n4; prices of, 118, 143, 223n25 Cotton manufacturers' association: of Sao Paulo and Rio, oppose machinery imports, 139, 141; of Rio, and domestic loom manufacture, 144; of Rio and Sao Paulo, attack Machine Cottons Ltd., 145-146; yarn producers' influence in, 148; and northern mills, 155; of Rio, and federal government, 156; protest suspension of exports, 174. See also Industrialists; Intervention; Machinery; Syndicate; Tariff

Cotton textiles: types of, 23-24, 66, 67; imports of, 66-67, 240n32; printing of, 229nll Credit: in early industry, 6; in encilhamento, 94; in 1913, 106; mentioned, 107 Depression of 1929, 114, 243n6 Distribution: railroads facilitate, 23; Portuguese in, 72, 77; terms of, 73-77 passim, 231n34; profits of, 119; innovations in, 119-123; retail, 121-122, 159, 244n22; and price regulation, 178 Dividends: analyzed, 104-105; in World War II, 176-182. See also Profits Emporio Industrial do Norte mill (Bahia), 40, 58 Encilhamento: description, 85-89 passim; evaluation, 90, 96-97 Engineers, 36, 219n53 England. See Great Britain Entrepreneur. See Industrialist European commissioners. See Tariff, commission of 1878 Exchange rates: and tariffs, 88, 89 Exports, cotton textile: to River Plate, 114, 122, 170, 258n97; and government subsidy, 138, 155, 182; recommended, 150, 157, 161-162, 232nl2; prices of, 166-167; during and after World War II, 165-172 passim, 259 n5; CETex suspension of, 169, 175; quality of, 170; to Union of South Africa, 170; and overproduction, 183; mentioned, 169, 180 Exposition: of 1861, 12; of 1866, 13-15; of 1881, 83-84; of 1922, 111 Federaçâo Industrial do Brasil, 141 Federal Price Commission, 168 Felicio dos Santos, Antonio, 26, 233n3, 236n48, 237n58 Fernâo Velho mill (Alagoas), 51, 57, 214n6 Free trade: applied in Brazil, 6-7, 186, 213n59; evaluated, 9, 11, 12, 16, 82, 186. See also Commerce Functional representation, 141. See also Corporativism Galliez, Vicente de P., 126, 141, 246n47 German-Brazilian Bank (Rio de Janeiro), 28, 30

Index Germany, 153 Gins. See Cotton Glette, Frederico, 40, 84 Gouveia, Delmiro, 145,158, 253n38 Great Britain: and Brazilian economy, 4, 13-14, 211n29; visited by tariff commission of 1878, 16; exports machinery, 35, 37, 153, 172; source of skilled labor, 44, 51; and Argentina 171. See also Imports Gregson and Monk, 219n49 Guerra, Domingos Martins, 38-39, 54 Henry Rogers Sons & Co., 36, 147-148 Housing, of workers, 57-58 Howard & Bullough, 256n69 Immigration, 4, 99 Imports, cotton textiles: from Great Britain, 66-71 passim, 116; "dumping" of, 123-125 passim Importers, cotton textile: and domestic cottons, 69, 70, 71; in Brazilian mills, 71-72; decline of British, 71 India, 14 Industrial Association: and tariff, 18; opposes auctions, 70; and exposition of 1881, 84 Industrialist, cotton textile: in early mills, 18-19, 25, 26, 33; in weaving mills, 39-40; and poor, 54; evaluation of, 92, 119, 128, 153, 175-177, 183, 188, 240n23; in World War I, 107; in politics, 125, 152; in depression of 1929, 138; small versus large, 147, 157. See also Cotton manufacturers' association; Intervention; Machinery; Tariff Industrialization of Brazil: evolution of 2, 186; factors impeding, 6-17 passim; and agriculture, 17, 186; and slavery, 51; critique of, 137; and society, 188 Inter-American Conference on Problems of War and Peace, 171 Intervention, government: opposed, 8; saves stocking mill, 70; and encilhamento, 77-97 passim, 236n35; in World War I, 105, 106; under Vargas, 136; and machinery import restrictions, 151; and "directed economy," 151, 152, 255n64; and competition, 159; Rio cotton manufacturers' association supports, 160; and cotton mills, 163, 183; and industrialists, 181-187 passim; mentioned, 81, 155, 264n54

271

Investment: in slave trade, 5-6, 10; in early industry, 7-8; in government securities, 10-11; by Portuguese in cotton mills, 71-72; in enctlhamento, 8687. See also Capital Labor: slave, 3, 35, 50, 51, 224n3; European skilled, 17, 50-51, 52-53, 62, 228n68; in mill construction, 35; child, 53-54, 131; mobility of, 55, 177; scarcity of, 55; effect of paternalism on, 50-65 passim, 100, 186; industrial adaptability of, 60-61, 62; absence of skilled, 61; criticism of, 61-62; working hours of, 62,110, 138-162 passim; strikes, 64-65; lockout, 110; paid vacations of, 131; wages of, 155, 156, 158, 163, 227n61, 227n64, 228n69, 228n70; in World War II, 166; and price controls, 178 Land tenure, 3 Loans, government: to planters, 86; industrialists request, 90 Looms: Jacquard, 100-101; domestic manufacture of, 142, 143-144; limits on, 157. See also Machinery Lowell, Mass., 56-57 Luis M. Maylasky & Cia., 46 Lundgren Brothers, 119, 128, 159, 256 n76. See also Companhia de Tecidos Paulista Machine Cottons Ltd., 144-146 Machinery, cotton textile: imports of, 11, 85, 110, 138-139, 171-172, 241n44; and local dealers, 34; installation of, 35, 38; payment for, 37-38, 110, 143, 220n59; repair facilities for, 38-39; import restrictions on, 139-153 passim; depreciation of, 143, 267n82; sale of obsolescent, 148, 149; modernization of, 163, 171, 182-183, 265n64; in World War II, 166; utilization of, 184 Machinists: Portuguese and British compared, 39 Managed economy. See Corporativism; Intervention Manchester, England, 69, 101 Manchester Cotton Supply Association, 45, 48 Management. See Industrialists Manufacturers, cotton textile. See Industrialists

272

Index

Mariangela mill (Säo Paulo), 100-101., 238nll Market, cotton textile: development of, 68-69, 76, 108-110; contraction of, 116; in 1930s, 149-161 passim Marketing. See Distribution Matarazzo, Franciser, 126, 127, 128, 246n47 Mercantilism, 2, 187 Ministry of Labor, 150, 152, 155, 158 Modelo mill (Bahia), 35-36 Modernization, 188 Monopoly: among merchants, 6; in cotton textile industry, 107, 152, 155. See also Cartel Nationalism, 128, 144, 186, 252n36 New State, 154 Nogueira, O. Pupo: and Lindolpho Collor, 119; translates Manoilescu, 136; mentioned, 126, 246n47 Overproduction: in cotton manufacture, 137, 140; and small mills, 143; effect of machinery import restrictions on, 148; industrialists allege, 142, 151, 153-154, 175; investigated, 152; criticized, 150-164 passim, 177; and World War II, 163, 169; and exports, 180, 182, 183; mentioned 136-149 passim Paternalism, industrial. See Labor Pau Grande mill (Rio de Janeiro), 26, 55, 214nl2 Petropolitana mill (Rio de Janeiro): and railroad, 23; products of, 24, 118; sale of shares, 27; construction and expansion of, 29-32, 36, 37; and Brazil Industrial mill, 31-32; cotton supply of, 46; hires foreign labor, 52; social services in, 57, 58-59, 227n48; wages of, 63-64; strikes in, 64-65; marketing arrangements of, 73-77; role of Portuguese in, 77, 230n26; requests government aid, 96; dividends of, 239nl9 Plataforma mill (Bahia), 224nl6 Portuguese: in cotton mills, 71, 77, 100; in marketing, 72, 224nl, 230n22 Power supply: water and steam, 22-23; hydroelectric, 99-100; rates of electric, 238n7 Price Control Commission, 178, 179 Prices: of cotton textiles, 168-179 pas-

sim, 260nl3; of food, 263n48; in 1946, 263n50 Production, cotton textile: methods of, 4-5, 69, 117; cost of, 137, 143, 161, 180, 239n42; and consumption, 183 Productivity, 163, 184 Products, cotton textile, 23-24, 115, 117, 143, 150 Profits, cotton mill: analyzed, 104-105; criticized, 166-167; from exports, 174; in 1948 and 1949, 266n78; mentioned, 106, 144, 168, 177, 180. See also Dividends Progresso mill (Bahia), 36 Progresso Industrial do Brazil mill (Rio de Janeiro), 36, 104-105 Protection. See Tariff Quality controls, 180 Queimado mill (Bahia), 22, 24, 25, 35 Quota ouro, 85, 99 Railroads: and location of cotton mills, 23; and raw cotton shipments, 222n5 Razäo, 235n23 Recession of 1913, 105-106 Repair shops. See Machinery Revault, Joseph, 26, 35-36 Revolution, 136 Rheingantz mill (Rio Grande do Sul), 57, 58, 95 Santa Basilissa mill (Säo Paulo), 121-122, 218n40 Santo Aleixo mill (Rio de Janeiro), 12, 24, 40-41, 42, 51, 59, 60 Sao Luis mill (Säo Paulo), 26, 54 Sao Paulo Commercial Association, 124 Schools, 60, 61, 117 Seabra, Democrito Lartigau, 126, 246n7 Second convention of cotton manufacturers, 182-183 Serqueira Leite & Cia., 121 Silva Lisboa, José da, 11-12 Silveira Filho, Guilherme da, 169, 173174, 175 Slavery, 51, 84. See also Labor Slave trade, 5, 6 Socialism, 91 Social security institutes, 163 Sociedade Rural, 125 Street, Jorge: urges government intervention, 106; and Sao Paulo Republi-

273

Index can party, 127; in Ministry of Labor, 140; mentioned, 126, 246n47 Strikes. See Labor Sugar, 3, 44 Sutton, Mark, 111 Switzerland, 153 Syndicate, 136, 141, 152 Tariff: planters influence on, 7; of 1844, 7, 10, 12; commission of 1853, 10-11; and early mills, 14,15, 66, 67, 212n55, n58; of 1810, 14-15; commission of 1878 abroad, 15-16; of 1860, 15, 84; of 1867, 1874, 1879, 15; commission of 1878, 15-16; of 1879, 16, 83, 213n65; on dyestuffs, 39; and weaving mills, 40; on raw cotton, 46; internal, 76; in U.S. and Germany, 82-83; of 1880, 84; rates in 1885, 84; of 1886, 84-85; of 1889, 85; in 1890s, 85, 234 n21, 234n22; of 1900, 85, 98, 99, 124125, 126; and domestic market, 100; of 1896, 124, 234n22; revisions of 1929,124,126-128,138; lack of studies of, 233nl; and national revenues, 234nl7; described, 238n6; on yams, 245n37; mentioned, 130, 187, 231nl9 Tarquinio, Luiz, 92 Tecido popular. See Utility cloth Tavares Bastos, A. C., 8, 12-13 Textile Executive Commission. See CETex Todos os Santos mill (Bahia): ownership of, 26; repair shops, 39, 220n64; de-

scription, 41; child labor in, 53; social services in, 57, 59, 60; paternalism, 59-60; early wages in, 62, 63; power supply, 214n4, 214n6; products, 215 n4; mentioned, 227n53 Uniâo Itabirana mill (Minas Gérais), 29, 37, 43, 54, 55, 21βη12 Uniâo Mercantil mill, 216nl2 Union of South Africa, 170 Unions, textile workers, 65. See also Labor United Nations, 184 United States: development of, 14; textile industry in, 28; machinery of, 35, 153, 171; mentioned, 1, 15, 16, 44 UNRRA, 165, 169 Uruguay, 108 Utility cloth, 168,173,177, 260nl5 Valorization. See Coffee Vargas, Getulio: leads revolution, 135, 140; ousting of, 173; and cotton manufacturers, 136, 140,179, 250nl4; and CETex suspension of exports, 262n33 Wages: in early mills, 56, 62-64; minimum, 138, 162, 163; compared, 159, 257n88; mentioned, 161. See also Labor War Production Board, 169 Weavers, 52, 63-64, 228n56 Yams, 39, 245n37