Portal de Periódicos da CAPES

Native Capital: Financial Institutions and Economic Development in São Paulo, Brazil, 1850 – 1920

2007; Duke University Press; Volume: 87; Issue: 4 Linguagem: Inglês

10.1215/00182168-2007-066

1527-1900

Francisco Rogido,

Colonialism, slavery, and trade

This book will be welcomed by not only Brazilianists and Latin Americanists but also scholars interested in the dynamics of the money market in Brazil’s First Republic (1889 – 1930). Anne Hanley gives a captivating account of bank activities in São Paulo between 1850 and 1920 and of the ensuing crises and readjustments in the Republic. Her recent publication joins a host of provocative reinterpretations of Brazil at the end of the Empire and the beginning of the republican regime. Focusing on the main financial institutions of the state of São Paulo, she studies one of the most difficult and important periods of the Brazilian economy. It was the period when slavery was abolished, immigrants were incorporated into the labor market, and the country came to be an important actor in the international market. But it was also the period when politics, policies, and laws (in particular, regulations) played an important role in promoting the development of infrastructure and the modernization of the banking sector that allowed Brazil to adapt to the new reality of the international market.The formation of what Hanley calls native capital indeed was the product of selective incentives and concessions directed at financial institutions. In her view, from the Empire to the Republic there was some kind of distinct evolution in the Paulista system, based on a probusiness mentality that helped modernize financial institutions through the diversification of bank activities. Hanley points out that by concentrating business within traditional family ties, the imperial regulatory legislation kept credit and liquidity on personal levels, retarding “financial evolution.” One example of a traditional financial intermediary is the comissário, the middleman who provided links between exports, traditional families, and planters. Receiving coffee shipments from the country’s interior, preparing them for sale, and acting as broker in transactions with export houses, these intermediaries preserved the traditional commercial character of the Brazilian economy until the 1850s.The state of inertia began to change during the second half of the nineteenth century. After 1880, the shift from highly personalistic relationships based on family ties to banking through impersonal institutions — so critical to liberal competition, as well as to economic development — catalyzed a change in Brazil’s illiquid economy. Indeed, what Hanley affirms is that such kinds of relationships became less willing to accommodate planters for long periods, not just because of state regulations but also due to market factors. While production increased the demand for long-term credit, foreign investments were extremely risk averse. This combination of factors generated internal demand for a domestic capital market that was successful in São Paulo.In Hanley’s view, in São Paulo the transformation from informal to formal financial markets was largely completed, legally, by 1889. Based on primary-export products, as well as on an uncountable number of dynamic commercial banks, São Paulo’s financial system was far more advanced than that of the rest of Brazil. Although a few commercial banks, such as the Banco de Credito Real, Banco de Santos, or Banco União de São Paulo, survived the bank reform of 1890, almost half of all financial institutions could not resist the reformist policy of Campos Sales’s finance minister, Joaquim Murtinho. Hanley suggests that the survival strategy of those institutions was based on their alliances with other, bigger national groups. For example, following this track, Banco União de São Paulo became Votorantim, one of the most important industrial conglomerates in Brazil nowadays, through a strategy of diversifying products and services. However, those commercial banks spread around the country, specialized in short-term activities, deposits, discounting bills, and short-term loans, were unwilling to become universal banks after all.As Hanley argues, the failure of most national financial institutions was not due to regulatory policies themselves but rather, in part, to the rational nature of bankers. Investment banks were not yet profitable in that period. Therefore, in their rational, conservative mind, it would be much more comfortable to continue offering their traditional commercial banking products rather than take on more ambitious and risky business projects. Additional internal and foreign factors also contributed to failure. First, the new regime introduced some political uncertainty about investments — Hanley insists controversially that the “revolutionary” nature of the republican regime implied some probusiness behavior. Second, economic activity was so tied to international commerce, commercial banks, and trading houses, while the republican government saw some advantages in long-term credit for economic development. Finally, she suggests that the profit of the few universal banks in Brazil was far lower that those of countless commercial banks. Despite the fact that the republicans, individually, tried to promote the universal bank, Hanley should have stressed the compromise between the Brazilian state and native capital, which was more apparent than real outside of São Paulo, because it did not involve dynamic sectors of the bank system.In the book’s final chapters, dedicated to São Paulo’s probusiness orientation, Han-ley emphasizes that republican leadership pursued policies both to protect coffee planters and landed elites and to meet its foreign obligations. She suggests that the relationship between banks and nonbank companies disappeared in São Paulo by the 1909 – 13 period. While this modernization defined dramatically the economic inevitabilities on the national level, it showed that the first decades of the Brazilian Republic were the genesis of prodigal political issues that have followed the debates about Brazilian economic development — we would say many other Latin American countries as well — up through today.