Based on what we know about Latin American dependency during the roaring 20’s, how

did this apply to Brazil and coffee?

During the roaring 20’s, before the Great Depression Latin American countries’
economies continued to follow an export-led development model. Even the largest
economies were still heavily trade-dependent in the late 1920s, and had relatively small
industrial sectors. This left them highly vulnerable to adverse conditions in the world
markets for commodities. As a result, Latin America was extremely vulnerable to the
conditions occurring in other countries, such as the United States’ economic instability.

An example of this is the Brazilian economy and how before October 1929, Brazil
was dependent on coffee, part of the reason why it was over 70% of the country’s
revenue. To keep coffee prices high, goods were purchased from Sao Paulo Institute in
Brazil and withheld from the rest of the world. To pay for this, Brazil took out loans from
foreign banks and received revenue from a transportation tax. Valorization was dangerous
because other countries increased their production of coffee, which limited Brazil’s
dominance in the area. In May 1929, the price of coffee declined drastically and Brazil had
an overproduction of coffee. Consequently, coffee was no longer useful in the economy
since Brazil couldn’t make money from it to pay back all the loans they had. In simpler
terms, the coffee economy suffered from a severe decline in world demand caused by
oversupply.

Altogether, Brazil’s trade suffered and there was large foreign debt, all of which led
to an external crisis. National debt increased tremendously due to a trade deficit (since
the economy was earning less money, GDP was going down), and since the budget stayed
the same the government needed to borrow more money, hence leading to more debt.
Later, due to the Great Depression the situation got worse as national income declined,
government revenue was limited, and there was an increase in unemployment. This
specific example provides proof as to how Latin American dependency caused Latin
America’s Great Depression and more specifically, how the Great Depression did not
create all of these problems but instead intensified them. Moreover, the magnitude of the
crisis mirrors how Brazil couldn’t rely solely on the export of primary goods and economic
diversification was needed.

All of this left approximately 1 million Brazilians affected by the economic crisis.
For example many rural workers migrated to the cities in search for work, were
unemployed and hungry. On the other hand, those that were employed didn’t get paid
for months. These two examples showcase how Brazil’s dependence on coffee and the
trading sector, and ultimately its collapse, affected many negatively.