| COFFEE FACTORAGE AND THE EMERGENCE OF A BRAZILIAN CAPITAL ; MARKET, 1850-1888 q Joseph E. Sweigart . Garland Publishing, Inc. ¥ New York and London 1987Copyright © 1987 by Joseph E. Sweigart All rights reserved Library of Congress Cataloging-in-Publication Data Sweigart, Joseph Earl. Coffee factorage and the emergence of a Brazilian capital market, 1850-1888. (South American and Latin American economic history) Bibliography: p. 001 1. Coffee trade—Brazil—Rio de Janeiro—History-> 19th century. 2. Capital market—Brosil- Rio de J-neiro —History—I9th century. “I Title, Il Series HD9199,B8R567 1987 338.1'3373°098153 87-8617 ISBN 0-8240-1373-5 (alk. paper] All volumes in this series are printed on acid-free, 250 year-life paper. Printed in the United States of America Preface The following text examines one group of individuals defined by its function in the export-driven economy--a constant theme in Latin American history” The methodology employed very much reflects two principal Aistoriographical concerns of the past decade: social history ard quantitiative methods. My dissertation adviser, Richard Graham, suggested that I look at a key figure in the coffee export economy, the factor, whose importance was first developed by the Brazilian sociologist, Maria Sylvia de Carvalho Franco. My own zeal to demonstrate innovation in Brazilian historio- graphy lead me to pursue a quantitative approach whenever possible. This is most evident in my construction of new time series and the analysis of the underlying manuscript partnership and mortagage Contracts. Traditional genealogical research research supplemented ambitious attempt at prosopography, or collective biography, of these coffee middlemen. Ultimately I found them to be too numerous and the data base too unrepresentative to analyze with quantitative Precision. Sources and methods may have led me to pursue social history, yet a more profound understanding of these individuals and their predicaments forced me to address larger issues and change the general focus toward economic and financia] research. i In ascertaining the basic reason for the coffee, factor's existence, 1 faced fundamental aspects of the Brazilian reality. These middlemen were essential to the export economy not sé (puch forAnd now, as much as ever, the word "crisis" is indispensable to their commodity market intermediation, but for their banking anyone's vocabulary. contribution. They were the link between the export interface with the world markets in the port cities, and the very foundation of New York, March 1987 Brazilian society, the landed estate geared toward the generation of foreign exchange. Banks never succeeded in supplanting commercial credit, due to institutional impendiments. Legislation dating from the colonial era protected the landed debtor from his creditors through a frustrating series of judicial procedures. The instrument that banks issued in this nascent capital market--the mortgage bond-- was backed by collateral of dubious value. Unlike slaves, land never became a freely marketable asset. Therefore, any financial instrument issued by a mortgage institution was doomed to failure. Hence, the factors who lent against the only renewable source of collateral, the coffee beans themselves, remained the primary source of refinancing in the export economy. One hundred years later, as a commercidl banker concerned with the Brazilian market, I still detect traces of the imperial past. Raw and semi-industrialized commodities comprise the majority of goods exported to generate convertible currency to meet foreign commercial and debt obligations. Landed interests continue to foil attempts at reform and redistribution. Inexpensive labor, although frée and no longer servile, remains a key element to the development model. Capital markets, although developing through various ‘imported models and products, are still limited to a few institutions. The middleman is essential to any Brazilian's day-to-day survival. \Table of Contents Page List of Tables...) ee ee eee ee vii ise op Rig ix List of Illustrations . . . 7 List of Abbreviations a Note on Brazilian Currency and Spelling... .......... xvi Chapters (ineoduceion 1 he 10 II. The Planter's Agent in Rio: The Coffee Factor... .... 12 Nee 52 III, Business and the Family: The Coalescence of Conmerce and Agricul ures 0 66 We boone e ego 98 IV. Coffee Factorage and the Formation of the Agricultural Credit System. ee ee eee 109 V. Coffee Factorage at an Impasse: The Rio Economy in the ONG CS eeList of Tables Quantitative Dimensions of the Partnership Contract. . . . Table 2.1 Ten Leading Rio Coffee Export Firms, Ranked by Total Real Value of Exports, 1857-88 Coffee Marketing Costs Incurred by a Planter in 1884: Biographical Data on Initial Members of the Centro da Amounts as Percentage of Rio Export Price Lavoura e do Comércio Distribution of Nationality by Residence for Individual Partners of Rio Coffee Factorage Firms, 1870-88, in Percentages E. Statistical Tables . Fi Populati f the City of Rio, 1849-90 Glossary of Commercial and Financial Terms od rec Percentage Distribution of Intended Residence by Bibliography Nationality for Inmigrants to Rio, 1877-85. A. Manuscript Sources Conditions of Loans Secured by Mortgages on Coffee i A Poretunegi Sean nag: B. Nineteenth-Century Printed Sources ene c. oth .2 Conditions of Loans Secured by Mortgages on Coffee . Other Sources Plantations, Registered in Vassouras, Rio de Janeiro, t Percentage Distribution of Items on the Balance Sheet of a Rio Coffee Factorage Firm, 1871 Participation of Coffee Factors in All Rio Banks, 1853-88 . 165 Characteristics of Coffee Factorage Partnerships and Sample of All Partnerships Registered in Rio, 1870-88. Description of Activities, by Economic Sector, of Sample of Rio Partnerships, 1870-88 Distribution of Sex by Nationality or Business Entity by Form and by Residence for Partners of Rio Coffee Factorage Firms, 1870-88 Matrix of Coefficients of Association Among Five Variables of Partners of Rio Coffee Factorage Firms, 1870-88 Distribution of Nationality by Residence for Partners of Rio Coffee Factorage Firms, 1870-88, in Percentages . . . - viiTable B.6 Participation by Residence and Nationality of Partners of Rio Coffee Factorage Firms, 1870-88, in Percentages... . C.1 Slave Population of Vassouras, Rio de Janeiro, 1872-85. . . €.2 Characteristics of Major Highland Coffee Counties in the Province of Rio de Janeiro, 1872-84, Ranked by Average Ste fetes cesses eee eee essere eee eee eee E.1 Population of Major Highland Counties of the Rio Coffee Production Zone, 1872 £.2 Indicators of the Rio Coffee Economy, 1850-88. ...... 262 273 List of Figures Figure Page 2.1. Percentage Shares of Rio Coffee Exports by Province of Origin, 1850-88 (Three-Year Moving Averages)... -. ~~ 22 2.2 Monthly Arrivals of Coffee at Rio, 1866-88 (Thousands of GOsKilo sacts)o 2 0 25 2.3 Estimates of the Number of Rio Coffee Intermediary Firs, eset 32 2.4 Nominal and Deflated Avérage New York Spot Price for Coffee, 1850-88 (Cent$ per Pound). .-. +2 ee eee 38 2.5 Nominal and Deflated Revenue from Coffee Exports, 1850-88 (Thousands of Corttos, Three-Year Moving Averages) . . . - - 2.6 Relationship Between Distance and Coffee Freight Rate as a Percentage of Rio Export Price on the Dom Pedro Segundo Reilvosds cote EC 44 3.1 Partial Genealogies of the Families of Joaquim Teixeira de Castro, Viscount Arcozelo, and Luis de Malafaia, and Their Participation in Rio Coffee Factorage Firms, 1865-95... . 82 3.2 Partial Genealogy of the Family of Augusto Soares de Miranda Jordao, and Their Participation in Rio Coffee Factorage Firms, 1871-92... 0.008 - eee eee eee 87 3.3. Partial Genealogy of the Family of Joaquim de Almeida Ramos, Baron Almeida Ramos, and Their Participation in Rio Coffee Factorage Firms, 1868-98... - e+e ee eee 92 4.1 Seasonal Indices of Coffee Arrivals and Embarcations from Rig 1970065 4.2 The Rio Coffee Factor as Commodity Middleman. .....-- 13 4.3. The Rio Coffee Factor as Forwarding Agent... .- +++ 4 4.4 The Rio Coffee Factor as Financial Intermediary... - - ng 4.5 Rio Bank Discount Rates, 1850-88... - +2. +e eres 122 ixFigure 4.6 Components of the Brazilian Money Stock, 1850-88 (Thousands of Contos)... ee ee 4.7 Maximum Quotations of Imperial and Mortgage Bonds, Rio, eee tees 4.8 System of Agricultural Mortgage Credit Centered in Rio After 1873. 6 6 6 ee 5.1 Nominal and Deflated Rio Coffee Export Prices, 1850-88 (Mil-réis per 60-Kilo Sack)... 2 - ee ee ee ee ee 5.2 Loans Outstanding on Rural Properties Granted by Rio Mortgage Banks, 1872-88 (Thousands of Contos). .....- 5.3 Nominal and Deflated Average Slave Prices, Rio de Janeiro, 1850-87 (Mil-réis). . oe ee 6.1 Coffee Exports from Rio, Brazil, and the World, 1830-1930 (Millions of 60-Kilo Sacks, Five-Year Moving Averages). . . 6.2 Percentage Values of Coffee and Other Major Commodities Relative to Total Brazilian Exports, 1830-1930 (Five-Year Moving) Averages) og A.1 Wholesale Price Indices for Raw Materials and Manufactured Goods, 1850-88: United States, Great Britain, and France ee A.2 Relative Shares of Value of Brazilian Imports by Exporting Country, 1850-88 (Three-Year Moving Averages)... ... - A.3 Comparative Brazilian Wholesale Price Indices, 1850-88 Pe C.1 Coffee Shipped to Rio from Stations of the Dom Pedro Segundo Railroad Located in the County of Vassouras, Rio de Janeiro, 1867-88 (Thousands of 60-Kilo Sacks)... ... Page 168 189 191 193 oe 224 237 239 243 List of Illustrations Illustration 2.1 oo oe 4 4.2 Cal Physical Map of the Rio Coffee Production Zone, 1884. . . - Ge ee ee Transport Map of the Rio Coffee Production Zone, 1888. . . A Planter Draft, 1883... 2... - eee ee eee A Mortgage Bond, 1879 ,/. - Map of Seats of Majof Highland Coffee Counties in the Province of Rio deAlaneiro, 1884... . - eee eeeAer ACRJ AEB AGB ATHGB ANSAP ANSPE ANSPJ Art. BB BCA BCRB BP Annaes da Camara Annaes do Senado List of Abbreviations The Anglo-Brazilian Times, Political, Literary and Commercial - Associagao Commercial do Rio de Janeiro Brazil, Instituto Brasileiro de Geografia e Estatistica, Anuario estatistico do Brasi Moya, Salvador de, org., Anuario genealdgico brasileiro Arquivo do Instituto Histérico e Geografico Brasileiro, Rio Sociedade Auxiliadora da Industria Nacional, 0 Auxiliador da Industria Nacional Almanak administrativo, mercantil e industrial io Rio de Janeiro 7 Atmanak Laemmert "Supplemento: Provincia do Rio de Janeiro," in Almanak administrativo, mercantil_e industrial “do Rio de Janeiro / Almanak Laenmert 7 Brazil, Congreso, Camara dos Srs. Deputados, Annaes do parlamento brazileiro Brazil, Congresso, Senado, Annaes do parlamento brazileiro Arquivo Nacional, Rio, Segao de Arquivos Particulares Arquivo Nacional, Rio, Secao do Poder Executivo Arquivo Nacional, Rio, Secdo do Poder Judiciario Artigo Banco do Brasil Banco Commercial e Agricola Banco de Credito Real do Brasil Banco Predial . xii CARD C/CFE C/CPI Cia. eee cPpoVv CPRORJ CQNORJ CSGORJI csov CSTORI CUL a DAPERJ ge DGE DNC Banco Rural e Hypothecario Congresso Agricola do Rio de Janeiro Brazil, Congressos Commissdes de Fazenda e Especial Brazil, Congreso, Commissao Parlamentar de Inqueri to Companhia Centro da Lavoura e do Commercio Cartorio do Primeiro Oficio, Vassouras, Rio de Janeiro Arqui lacional, Rio, Seco do Poder Judiciario, anton) e do Primeiro Oficio, Rio Argtivo Nacional, Rio, Secao do Poder Judiciario, Cartorio do Quinto Oficio, Rio Arquivo Nacional, Rio, Seco do Poder Judiciario, Cartorio do Segundo Oficio, Rio Cartdrio do Segundo Officio, Vassouras, Rio de Janeiro Arquivo Nacional, Rio, Segao do Poder Judiciario, Cartorio da Sétimo Officio, Rio Companhia Unido dos Lavradores Dom Departamento de Arquivo Piblico do Estado do Rio de Janeiro, Niteroi, Rio de Janeiro Decreto Brazil, Ministerio da Agricultura, Commercio e Obras Publicas, Directoria Geral de Estatistica, or Brazil, Ministerio da Industria, Viacgao e Obras Publicas, Directoria Geral de Estatistica Brazil, Departamento Nacional do Café 0 Economista Brasileiro: Revista Quinzenal xiiiEditor, Editora MIVOP Ms n., nQ9, nos. yor. nyt Leis do Brasil ELF. Estrada de Ferro ES Espirito Santo fol. fotha GBFO Great Britain, Foreign Office ‘HAHR Hispanic American Historical Review He Hunt's Merchants' Magazine. and Commercial Review Imp. Imprensa ac Jornal do Commer JcRI Arquivo Nacional, Rio, Seco do Poder Executivo, Junta Comercial do Rio de Janeiro Brazil, Laws, statutes, etc., Colleccdo das leis do imperio do Brasil livro Livraria Brazil, Ministerio da Agricultura, Comercio e Obras Publicas Museu e Arquivo Historico, Banco do Brasil, Brasilia, D.F. Brazil, Ministerio da Fazenda Minas Geraes Brazil, Ministerio da Industria, Viagéo e Obras Publicas Brazil, Ministerio da Justica numero(s) The New York Daily Tribune The New York xiv Par. RAIFFA Rose reg. Res. Resolugdes do ConseTho/Fazenda RO RN sP Typ. Univ. USsBC USDS vol. Paragrapho Imperial Instituto Fluminense de Agricultura, Revista Agricola do Imperial Instituto uminense de Agricultura dornal do Commercio, Retrospecto Commercial do Jornal do CommercTo registro Resolugao Brazil Lensetho de Estado, Inperiaes resolucoes d@ Cohselho de Estado na.Seccao de Fazenda desde _o anno em que comecou a funccionar o /sest0 conseTho ate o presente... Rio de Janeiro (city) Rio de Janeiro (province) The Rio News Sao Paulo (province) Typographia Universidade, University United States, Department of Commerce, Bureau of the Census United States, Department of State volumeNote on Brazilian Currency and Spelling In the nineteenth century the official unit of currency was the mil-réis, divided into one thousand réis. Many conmercial and financial transactions in the export economy involved a larger unit, the conto, worth one thousand mil-réis. Amounts were written with the sign $ between mil-réis and réis, and a colon between contos and mil-réis. For example, the amount 17:520$100 means 17 contos, 520 mil-réis, and 100 réis. From 1850 to 1888, the conto averaged approximately $500 U.S.; for the annual currency equivalent series, see Table E.2 of Appendix E. Brazilian spelling was not standardized in the nineteenth century. In the notes and bibliography I have retained spellings of names and words as they appeared in contemporary sources, while in the text I have followed current usage. For example, in the text a factor is referred to as a comissario, while in the notes as a commissario. xvi CHAPTER I: INTRODUCTION Brazil entered the world economy in the sixteenth century through the export of a cash commodity, and for nearly five hundred years this orientation abroad has continued to shape Brazilian society, Portuguese discoverers did not encounter indigenous civilizations like those the Spaniards eventually conquered in the New World. Instead, they fowfd a vast land with a few hunters and gatherers sparsely scatteyéd along the Atlantic coast. This new territory apparently had no gold or silver, so the Portuguese turned to agricultural development to complenent their trade along the African coast and to India. Brazil's first export product was the reddish dyewood for which the country is named. Later, the Portuguese planted a new cash crop being grown by numerous colonists in the New World: sugar cane. Labor soon became a central problem for Brazil's agricultural development. After destroying the Indians of Brazil with hard labor and disease, or frightening them away into the vast interior, the Portuguese began to introduce human cargo from Africa. Exports of primary products with the use of slave labor became central features of the colonial economy. After braziTwood and sugar came tobacco, cotton, and finally in the eighteenth century, gold and diamonds. Given the structure of the European economy, England benefitted as much from this "golden age" of Brazil as did :Portugal. The need to monitor the gold trade motivated the crown to transfer the colonial capital from Bahia south to the city of Rio de Janeiro. ! The development of another cash crop in the early nineteenth century gave this new region in the center-south further economic prominence while preserving slavery. Coffee, native to Abyssinia and Arabia, first arrived in the Brazilian Amazon region from the West Indies in the early seventeen hundreds. By the end of the eighteenth century, it had been planted in the hills behind the capital city of Rio. At first Brazilians grew coffee as a novelty to imitate the leisurely customs of elites in the taverns of major European cities. After the political transition to independence in the first tumultuous decade of the nineteenth century, however, this small bean became the economic mainstay of the new country. Napoleon's invasion of the Iberian peninsula and march to Lisbon in 1807 forced the Portuguese crown to abandon the homeland. The king and his court set sail for their New World colony under the protection of the British Navy. Under British persuasion, the king erased mercantilist restrictions and opened the ports of Brazil to world commerce. With most of the trading world engulfed in the war against France, it was primarily Britain that took advantage of this new foothold in South America. On the king's return to Portugal, his son remained in the colony, and in 1822 declared his own independent Empire of Brazil. Once again, the British Navy guaranteed a generally peaceful transition, and spared Brazil the wars that the British, French, and Spanish colonies experienced. The international conflicts that paved the way for Brazilian independence also created a new market for the cash commodity of coffee. While Napoleon's Continental Blockade at first made it difficult for New World coffee to reach its European markets, the decrease in demand was more than compensated by resultant higher prices. Increased profitability induced further production in the West Indies and in Brazil. By the end of hostilities, a larger supply of coffee started to reach an expanding markef. Now, increased supplies caused a price reductjon, but the-number of consumers rose as incomes in the industrialzing world allowed workers to imbibe this pleasant stimulating beverage. Coffee remained profitable. Economic growth in Europe and North Anerica encouraged the maintenance of colonial modes of production in newly independent Brazil. For most of the period until 1889, landed interests articulated their demands to the emperor, through his retinue of councillors and a bicameral parliament; to consolidate their support, the constitutional monarchy perpetuated the institution of slavery to the benefit of the landed ‘class. The general patterns of landholding in large estates remained a corollary to the country's slave labor force. Most of the population continued to live on the Atlantic coast, facing the world whose international commerce promised a better way of life, at least for a few. To be sure, an internal cattle trade had traversed the interior from one end of the country to the other, and Smaller producers had been utilizing free labor andtoiling alongside the great slave plantation estates. Still, prestige and power had long been the monopoly of the landed elite and their merchant allies in the coastal cities. Whereas colonial Brazil relied on wood, sugar, cotton, tobacco, and gold, independent Brazil was financially sustained by the export of coffee. Brazi] met the challenge of a larger world market for coffee and soon accounted for the bulk of its supply. Planting extended to the region lying behind the coastal escarpment. By the third decade of the nineteenth century, the value of coffee exports exceeded the value of any other cash crop. Soon, close to half of the country's foreign payments would be met by coffee exports. Prosperity permitted the imperial government to quell regional revolts and firmly ‘import trade brought growth to the port of Rio, solidifying its position as the economic as well as political capital. Like its former metropolis, Brazil maintained a specially close economic relationship with England. Brazil's economic guardian forced the new nation to prohibit the further importation of slaves from Africa in 1850. Still, general patterns of production had been established well enough to endure for nearly four more decades. Plantation production of coffee prolonged the profitability of slavery. Using slave labor, the planter remained dominant in the countryside, yet oriented toward the port of Rio. From slighly over two hundred thousand inhabitants in 1849, the city of Rio more than doubled by 1890. The largest city in South America, establish central political contro] from mid-century on. A vigorous 1 t 1 Rio channelled half of the country's exports, and an even greater portion of the nation's imports through its secure, picturesque harbor. The development of the south-central region of Brazil thus became increasingly dependent on the export of a superfluous beverage whose price was subject to periodic oscillations. Numerous commercial agents prepared coffee for export and ‘ received imports of manufactured goods from the industrializing world. Betweefi the rural zone of production and the urban world of commerce stood the planter's principal agent: the coffee factor (comissario de | café).” He received coffee shipments from the interior and provided the first link in a complex marketing chain that extended across the seas to the importing countriés of Europe and the United States. In return, he forwarded goods received at the commercial emporium of Rio to satisfy the demands of his upland clients. Most importantly; in an era of early conmercial banking, the coffee factor extended credit to finance coffee production and carry planters across the difficult times generated by contractions in the world market. The coffee factor, therefore, operated at the confluence of production, marketing and finance in the plantation export economy. With nineteenth-century technology, lands remained productive for only a generation; the coffee frontier continually moved further from Rio. After it reached the most productive zone in western Sdo Paulo, the port of Santos began to rival that of Rio. With the abolition of slavery in 1888, planters in the Rio zone lost ‘immense capital investments. Although planters in Sao Paulo had alsodepended on slavery, they had the advantage of a superior land to exploits and could better afford the transition to free labor. By the next decade Santos surpassed Rio in coffee exports. From then on, Rio continued to carry on a vigorous coffee trade, but on a scale eclipsed by operations in the new zone of production. Until now, our understanding of the complex economic role of the Rio coffee factor has derived from three main sources. Contemporary foreign travellers left detailed and enlightening accounts, which nevertheless viewed coffee factorage only at one point in time.? In a 1927 newspaper bicentennial edition conmemorat- ing the introduction of coffee to Brazil, former coffee factors reflected nostalgically on the time when, Rio was Brazil's major coffee port.4 These merchants oyerly romanticized the past and cloaked, the entire relationship between the planter-and the factor in paternalis- tic harmony. Finally, regional studies of counties in the coffee zone have discussed the factor from the planter's point of view, with- out taking into account the context of the greater credit network.© This study, coveringing nearly four decades, and analyzing coffee factors from the perspective of Rio, better develops the complexity of these conmercial and financial ties. Numbering nearly two thousand individuals from 1850 to 1888, coffee factors formed over nine hundred commercial houses, and were among the-wealthiest of all Rio merchants. On a larger scale, this study is a social and financial history of a dependent export economy. In his, analysis of the present-day linkages among multinational, public, and local capital in Brazil, Peter Evans defines dependence as “a situation in which the rate and direction of /-capital_7 accumulation are externally conditioned."© His general definition is even more applicable to the nineteenth-century Rio coffee economy. The ability of the economy to pursue its main goal--the production of primary goods to exchange for manufactured items--was constantly conditioned by the behavior of the economies producing these items. The profitability of the coffee economy was dependent on tke price secured for coffee abroad, more than on any other factor. Still, by no means was Brazil hopelessly in the grasp of any imperialist power. Native Brazilians and Portuguese immigrants retained control of the means of production and the domestic end of the marketing process. As Fernando Henrique Cardoso and Enzo Faletto have emphasized in their now classic analysis of dependency and development in Latin America, national control of the productive process encouraged the’ formation of strong local entrepreneurial groups.” The strength of these local economic power contender’s relied on at least three’ prerequisites: a marketable product, Tand control, and exploit- able ‘labor. By mid-century Brazil had asseribled a11 three of these ingredients. Coffee was its chief source of export Hevenue. De facto" and occupation by large export-oriented planters had been ratified. The life of slavery’héd been extended at least a few’ decades, in exchange for’ the termination of the international slave trade. Thus, although dependent in terms of capital, the coffee economy was alsoshaped and directed in other ways by a local bourgeoisie. These national groups linked to coffee exports integrated Brazil into the burgeoning capitalist world economy. A study of Rio coffee factors permits a close analysis of the social composition of one of these groups--the export merchants--and establishes their ties to two other major groups, planters and bankers. The family and the firm worked jointly to smooth the transition from commerce to Tand- owning for both the native Brazilian and the Portuguese immigrant. As well, through coffee factorage landowners established family members ‘in the nation's leading commercial center. Both landed and commercial interests supported the development of the national financial structure. Soon, distinctions between merchant and planter faded for many. These three groups--planters, merchants, and bankers--tended to coalesce into one regional bourgeoisie, committed to the continued prosperity of the export economy. The quest for a national capital market for the export economy establishes the financial theme of this study. Planters and merchants had long relied on the short-term Rio money market dating from the colonial era. Coffee prosperity in the 1870s finally allowed the innovation of a local market for long-term capital, through the mortgage banks as financial intermediaries to benefit agriculture. These banks could not fully supplant mercantile credit, however, because savers were reluctant to invest in them. Slavery had always institution of the mortgage bank. Factors welcomed the arrival of added an ©" 2ment of uncertainty to the already risk-prone occupation } i i of lending to coffee planters, yet it did not actually slow the flow of agricultural credit until the 1880s. More important an impediment to the growth of mortgage banks was the protection the law afforded landowners from their creditors, thus discouraging investment in the country's principal economic activity. One of the tenets of the national export economy--the near sanctity of the large landedestate-- compromised the success of mortgage banking, and thus retardedmeasures aimed toward local capital formation. When another pillar of the export establishment, slavery, came into final disrepute during a business recession in the eighties, the alliance of export groups momentarily dissolved. With abolition a near certainty, the wealthiest planters, factors, and Rio bankers demanded and received a general credit reform, at the expense of smaller producers. They attempted to redefine the basic debtor/ creditor relationship in order to institutionalize a local capital market for export agriculture. Reform came too late for the Riocoffee economy, however. Factors had already begun to shift resources into new economic sectors, including industry. Coffee, the primary element of the export structure, had. established itself in a more profitable zone to the south, and’ would sustain a new regional economy. K strong export orientation and the concentration of Tand in the hands of a few remained themes of Brazilian history for at least another half century. The exploitation of labor continued under other forms. Capital accumulated slowly and Brazil still remains dependent on other economies for its formation.u Throughout this dissertation I shall use the name Rio to designate the national capital city, reserving the full name Rio de Janeiro for the adjacent province. 2 In one sense the coffee factor was a consignment agent (consignatario), since he, the consignee, accepted coffee shipments from the planter, the consignor, to sell in Rio. At the same time, the factor was also a commission merchant (conmissario), since his services as sales middleman were remunerated at a fixed percentage comission, Partially for the sake of brevity, throughout this study T have employed the term "coffee factor" rather than "coffee commission merchant" when speaking of the individual whom Brazilians during the last century referred to as a commissario de café. Historical reasons further support this choice. Prior to the twentieth century, the factor in the United States and Europe was a special type of commission merchant with broad commercial powers. Presently, however, no single -agent assumes all of these functions. His most similar contemporary counterparts would be the commission merchant and the broker, although neither performs all of the services that the factor alone used to provide for his principal. Now a factor is purely a financial intermediary who purchases accounts receivable to assume the credit risks of manufacturers, especially in the textiles trade; American Marketing Association, Committee on Definitions, Marketing Def ns: A Glossary of Marketing Terms (1960; rpt. CoreSgoe mertear Marketing. ResoeTetTon, 1963}, PP. rican Marketing Association pp. 10, 135 Encyclopaedia Britannica (Chicago: William Benton, 1972), IX, 29. Harold Woodman makes still another case for the choice of the term "factor". As in the Brazilian coffee economy, the factor in the U.S. cotton economy performed various intermediary services for numerous planters. He dealt in his own name, and not those of his principals, and was free to negotiate sale under the most advantageous conditions for both his client and himself. Given his sense of autonomy and the multiple business and financial transactions he performed, the term "factor" is more encompassing than “conmission merchant"; see King Cotton and His Retainers: Financing and Marketin: the Cotton Cro} Jr ape South THDOCTS2S (Lexington: Univ OF Kentucky The South, T800- exington: Univ. oF Kentuc Fressee8)= pes] eae 3 the most incisive study was conducted during some of the worst financial conditions of the coffee economy during the nineteenth century: C. F. van Delden Laérne, Brazil and Java: Report on Coffee- Culture to H. E. the Minister of the CoTonies (London: W. H. ATTen,. 4 9 Jornal: Edigio commemorativa do bi-centenario do cafeeiro no Brasil 1727-1929~ dir Rests. Chateaubriand (Sé0 Paulo: Gas Duprat e Casa Wayenga, 1927); reprinted and most often consulted ac. Brazil, Departamento Nacional do Café (hereafter: DNC), 0 cafe fo segundo centendrio de sua introducdo no Brasil, 2 vols. (Ri: NC, “fost scholars, However, have encountered this material as it was incorporated, often verbatim, in Affonso de E. Taunay, Historia do café no Brasil, 15 vols. (Rio: ONC, 1939-43). 5 stanley J. Stein, Vassouras: A Brazilian Coffee County, 1950-1900, Studies in Anerican Negro Life, 23 (T957s rpt. New York: Keheneum, 1970); Alves Notta Sobrinho, A civilizacao do_café 1820-1920) (S20 Paulo: Brasiliense, 1967); Maria Sylvia de Carvalho eee) (eet ures na orden escrevocrata, Publicagoes do Instituto de Estudos Brasileiros, 13 (S40 Paulo: TEB, Univ. de Sao Paulo, 1969). 5 peter Evans, Dependent Development: The Alliance of muttinational: state and Lecel Capttatsin Brazi, Foreword Florestan armandes (Princeton, N.J.7 Princeton Univ. Press, 1979), p. 27. 7 Fernando Henfique Cardoso and Enzo Faletto, Dependency and Development in Latin America, tr. Marjory Mattingly Urquidy , Five published 1960 (Berkeley: Univ. of California Press, 1979}, pp. 66469.CHAPTER II: THE PLANTER'S AGENT IN RIO: THE COFFEE FACTOR Throughout the nineteenth century, coffee factors performed key functions in the marketing of an export commodity that financially sustained the Brazilian nation. Coffee cultivation spread across four southeastern provinces and engaged large landowners in the exploitation of black slave labor. The planter sent his processed coffee across the coastal mountains to his factor or agent in the port city of Rio de Janeiro. The factor received coffee and then sold it for the planter to another domestic middleman, the sacker. He, in turn, packaged coffee in lots conforming to the exigencies of different export houses, agents for the world economy. Meanwhile, the coffee factor sent to the planter manufactured goods drawn from the global and domestic economies to meet the needs and fancies of plantation society. Al) these middlemen provided essential marketing connections for the producer at a cost that varied primarily with the world market price for the export commodity. The area known as the Rio export zone sent all of its coffee to the capital for export. At the height of production, the Rio zone of coffee cultivation covered over one hundred and fifty-five thousand square kilometers. Half of the area lay within the province of Rio de Janeiro, with the remainder divided among the provinces of Sao Paulo and Minas Gerais, and a small segment of the province of Espirito Santo (see illus. 2.1). The region was nestled between the rolling oe Physical Map of the Rio Coffee Production Zone, 1884. Mus. 2.1: Atlantic ‘Ocean RIO DE JANEIRO Guanabara Bay oN Legend + Mountains : Paraiba River 1 Provincial boundary15 Serra do Mar, a long coastal escarpment, dnd the Serra da Mantiqueira, Ff the a mountain range running further inland in Minas. Between these mountains, which reach elevations up to one thousand meters, is the Paraiba do Sul River valley, extending eight hundred and fifty kilo- meters. .p., 1884), in he Minister o Although it would appear to have been an ideal conduit for export, the river was only navigable for a relatively smalf stretch S extending from its mouth at the Atlantic Ocean to a point one hundred kilometers upstream, and for intermittent stretches up above. Thus, the mountains both defined the coffee valley and isolated it from the capital in Rio. This upland river valley was blessed with a maritime climate; it had favorable wind patterns, sufficient sunlight, and an average temperature above thirteen degrees centigrade. In addition, there was a fertile soil of decomposed granite and plentiful sources of water. In all, it was an ideal location for coffee cultivation. The upland zone produced relatively uniform Varieties of coffee along three bands of elevation, the lost favorable of which'ranged from two hundred to five hundred and fifty meters above sea level. In contrast, ‘fee-Cu lowland coffee, which accourited for approximately one fifth of the arne, Maj total Rio crop and grew on the southeastern slope of the coastal range, : F. van Delden Lal was inferior in quality, and rarely exportable. ! W.H. Atlen, 1885), inside back cover. Note: Shaded area encompasses the coffee zone in 1884. Report on Cof' Coffee cultivation shaped the structure of ‘regibfal society. By 1872, over eight hundred thousand people, over one third 2.1--Continued of them slaves, inhabited the major coffeé growing areas. In the following decade, productién for the Rio market reached its zenith, Brazil and Java: Tolonies (London: Illus. Source: C. with over four thousand plantations forwarding over four millionsixty-kilogram sacks of coffee per year for sale on the coast.” Hired free workers aided in the more dangerous or transitory phases of coffee cultivation, such as clearing land, felling timber, building roads, and laying out coffee gardens. Black slaves carried on most of the continuous labor--picking and processing. Foreign travellers described plantations that had as many as two thousand slaves, but the average establishment operated with less than fifty bondsmen.? The average plantation had more than one hundred and fifty thousand coffee trees, spread over six hundred hectares, and slaves constituted close to half of its total value.‘ Coffee beans are the seed of a fruit, and require multiple stages of processing before leaving the plantation for export. The standard plant grovn in the upland zone of nineteenth-century Brazil was of the family rubiaceae, genus coffea, species arabica, generally known as coffee arabica. It is a fragile plant and cannot withstand extremes in temperature, unlike its harsher-tasting twentieth-century substitutes, liberica and rubusta. Coffee trees bear delicate white blossoms, followed seven to nine months later by a bright red fruit, larger than a cranberry agd resenbling @ cherry (see illus. 2.2). Nature endowed the berry with four coverings that have to be removed. Beneath the thick outer skin is a sticky, yellowish, gurmy pulp surrounding two seeds embedded together in a husk or parchment, and further protected by a close-fitting skin. The pale beige seeds-~ the beans of conmerce--are rounded and oval-shaped on one side, and flat on the other with a fold in the middle. The Coffee Plant. eee Coffee Berries Blossom A B c Embryo seed vessel Fully developed berry Beans in berry D: ie F Bean in its two inner coverings Bean ready for market Coffee Branch A Brief History of Coffee Production T8895), facing title page. on_to Cup: ii American Grocer, From Plantat. and Consumption . . ., 15th ed. (New York Source: Francis B. Thurber, CoffeeBean preparation required first that the picked coffee be sifted free of leaves and dirt, then hulled, dried, hulled again, peeled, polished and manually sorted and graded. By the 1860s many plantations used imported hulling machinery. Some even dried coffee by expensive, labor-saving steam processes, instead of relying on weeks of open exposure to the sun on massive drying patios. Coffee loses much of its final flavor after roasting; given the level of technology at the time, coffee had to remain in its "green" or unroasted state until it reached consumer markets abroad. Once roughly sorted and sacked, green coffee was sent across the mountains to the capital.® Initially coffee was transported to Rio in a manner reminiscent of the colonial past. Hazardous and expensive mule caravans, laden with coffee, travelled across the escarpment to small ports for shipment along the coast to Rio. Mules carried no more than two sacks of coffee apiece, and wére led across often muddy paths to the Atlantic coast. By the 1850s joint-stock companies had laid macadamized roads and established coach and wagon lines to supplement mute transport frofi the interior. In small coastal ports, local commission agents either forwarded coffee to another merchant in Rio or purchased it outright to sell in the capital themselves. An active forwarding trade developed in ports such as Sdo Sebastiao, Ubatuba, ParatT, Angra dos Reis, and Mangaratiba along the Atlantic coast between Sio Paulo and Rio de Janeiro, and on the shores of Guanabara Bay near Rio, at ports including Iguagi,. Estrela, and Porto das Caixas (see illus. 2.3). small ships sailed from these ports for the capital, Legend : EF. om Pedro 11 : Other railroads : Provincial boundary ‘Angra dos Reis Transport Map of the Rio Coffee Production Zone, 1888. Scale: Tom. = 27 ka, 2.3: Tilus.carrying an average of less than six hundred sacks of coffee each iais| ' time.® Trade mechanisms were less than perfect, as witnessed by the s| a rox 7 S| Poses. case of the woman planter whose coffee shipment through Angra reached Ll -o ao : SE Elololcle <8 © the wrong Rio factor.” At least through the 1860s, mute caravans and 1 |i eal ba 3 =IS £ ae wagons, in conjunction with coastwise and trans-bay shipping, were the ale. 7°38 3 : = 335 3% 1, only means available to transport coffee from the valley to Rio.8 Eo RRB 3S 3 Be 2 $s ; Efforts were initiated to cut the cost of transport by the SBC) 5 : Shs g2lgSiesx establishment of a central rajdway system. In 1852 the imperial Sees: a BIEL ss CR 2 government passed legislatjén to guarantee interest on investments in ais SSR EE ce / OEP Sk 32 3 | certain railroad companiés. Brazilian entrepreneurs soon afterwards S18 epee] 2 t : segs ices] 8 2 formed the first major venture, the Dom Pedro Segundo Railroad. Heavy SESS" 3 5 E 9 BES EL. $8 off a eeeorsieci) © {© expenses incurred in Crossing and tunnelling through the coastal range SB ooe slo} 8 | 3 ect sPers| : 7 ro BS ccleFlecle] Bos + yg tO reach the Parafba Valley exhausted the company's capital reserves, £ ge 3 38 a 2 2 8 { -€ So in 1865 the government assumed outright control. With the basic Efe fo S| iS 2 8 ‘sg 3 vl Bak see ce 2 33 é ¥ ' 2 infrastructure laid, in the 1870s and 1880s many feeder Tines of zug sh = S88 #8 : 3 at “85 Ie. Gascon 4 oo smaller gauges inked into the government Tines the largest were the ee gosces| £ 322 6 Be je. ’ PoleseSsscie, § ses, (29 2 F 1 = So Paulo and Rio de Janeiro, the Leopoldina, and the Minas and Rio ooeel- ce] & ge ¥85 x8 22 1% ze ig 7 > eee S| £& o3ev gee oc Ss ' cE Railways. As a unit, the Dom Pedro Segundo Railroad network channeled = 315 we yw sees 8 2s 7 : a} 3B Se=8 O82 B8s8 yg i : : SOBER sles EB Sse ott Fggs 2 “roughly two-thirds of all coffee shipments for the remainder of the eps Os Ba ho eee 1% 9 ‘a gles S| £ gage Sus Puuw & : ; century, S58 ese a ee : son in oxieti, ~ | 228 Q| of seb sui coos f | Railway building encouraged coffee production in existing 3] | Ess 4 B. 2 exes Bax Fane & Z| £223 ge & $266 BSd Sse 3 ! regions, and brought expansion into newer areas. The province of Rio 2 yun Ble SO) ee wie ee §|| #258 &g 8 © § 3 7 : de Janeiro grew most of the coffee exported through Rio (see fig. 2.1). 7 sas 3 = S 3 & & i : : a 24 ° oS 3 1 Railway expansion, however, permitted the frontier to move further a ele S| ee 2 i a | 2285 ae . ‘5 ' J into the Zona da Mata region of Minas Gerais, which by century's end 2 | S35 52 3 3 a | 8ées ee 2 6Fig. 2.1: Percentage Shares of Rio Coffee Exports by Province of Origin, 1850-88 (Three-Year Noving Averages). 1058 Fr iee2 1806 1800 oso 1686 1862, 1866 1870 1074 Sources: "Tabela N. 10: Demonstragdo do termo medio do prego do café no mercado, e do preco porque se cobrou o imposto do dizimo nos diversos annos abaixo declarados com distinccao das provincias que 0 produzirdo, qual o numero de arrobas despachadas, e qual. 0 numero de arrobas isento do imposto," in Rio de Janeiro (hereafter: RJ), Governo, Relatorio, 1852 (Nichteroi: Amaral & Irmao, 1852); “Tabela N. 19: Mappa demonstrativo da exportacao do café nas @pocas abaixo declaradas," in "Annexo: Relatorio da Directoria da Fazenda," in RJ, Governo, Relatorio, 1874 (Rio: Apostolo, 1874); "Tabela N. 11: Mappa demonstrativo da exportacao do café nos annos abaixo declarados," in RJ, Directoria da Fazenda, Relatorio, 1892 (Rio, 1892). : Abbreviations of provinces: (RJ) Rio de Janeiro 2 , (MG) Minas Gerais \ (SP) Sao_Paulo (ES) Espirito Santo ras would surpass Rio province in production. Sao Paulo and EspTrito Santo remained marginal producers for the Rio export market. By the 1880s, even the furthest reaches of the coffee zone were within a day's ride to the capital on passenger trains; some places were only a matter of four hours away. Many freight trains were slower, due to transshipment from-feeder lines of a smaller gauge. Still, with freight costs lowef than those of traditional means, the railroads forced the oe the road companies and sent the Atlantic coastal ports ifto rapid decline. The railroad/also integrated itself into the trans-bay shipping network. For example, when the Cantagalo Railroad opened the eastern region of the lower Paraiba Valley to coffee cultivation by the 1870s, trans-bay shipments were made to the docks of Rio from nearby Niterdi, the terminus of the line. Brazil's first railroad, built to transport the nobility to the Emperor's summer mountain retreat, eventually carried coffee to the port of Maud, from which small boats shipped it across Guanabara Bay to Rio. + The gradual shift of coffee production to the north and east of Rio brought the railroad into the coastwise shipping trade, as well. | Much of the coffee from the lowland production zone of northern Rio de F Janeiro travelled by a combination of short-haul railroads, down-river F floating on the Paratba, further rail shipment, and finally coastwise Shipping from the port of Imbetiba, near the city of Macaé, to its final destination of Rio. Towards the end of the century, however, this coastwise/rail segment of the greater coffee trade was relegated25 to minor importance by the eventual linking of the Macaé and Campos eae yee Arrivals of Coffee at Rio, 1866-88 (Thousands of -Kilo Sacks). line into the Cantagalo Railroad, which provided direct service to Niteroi. ‘Thousands of sacks Coffee could not be shipped to Rio from the plantation ba without the services of many middlemen. Mules and oxen pulled carts of coffee from the plantation to the local rail station. The station master or other intermediary then sampled and weighed the corisignment to assess frieght charges and provincial taxes. In some cases the railroad company rented out the bags to carry the coffee to Rio. Once 400 ¢ 5 weighed, the bags were loaded into railraod wagons holding between seven and ten thousand kilos. Planters sent their coffee to agents in Rio throughout the year, but monthly coffee arrivals in Rio fluctuated dramatically, from one to six hundred thousand sacks of coffee (see fig. 2.2). Within each year there was a definite seasonal pattern, with shipments peaking ‘in the second semester. —.Cr”—r—TFFs—“ ws i sss Coffee that arrived in Rio by rail had to be claimed within . v Sources: "Commercio: Retrospecto annual, 1866-75," in Jornal do Comercio /Rio 7 (hereafter: JC), Jan.'1867 + Jan. 1876; JC) — Retrospecto Commercial do Jornal do Comercio, 1876-88 (Rio: JC, forty-eight hours at the train depot. Coffee sent across the bay or via coastwise shipping had to be claimed within eight days at the docks along the northern shore of the city's center. Otherwise, the planter Note: For the annual aggregate series of these data, see table E.2 of Appendix E. faced high storage charges. Factors hired clerks whose primary function was to verify consignment arrivals, pay invoices, and have them stamped by tax officials. After counting the bags, the clerk arranged to transport the shipment to the factorage house. dust a§ the job of picking and processing coffee in theinterior fell to slaves, they carried it on their heads through the Rio coffee district. Wearing little more than a towel wrapped around their loins, they stooped under the sixty-kilogram burden, which they carried at a fast trot to the accompaniment of percussion instruments played by the gang's leader. The sheer weight of the coffee took its toll in diseased hips, crippled thighs, and injured knees: few men lasted longer than ten years on such jobs. Masters allowed their slaves to contract their own services; slaves sometimes pooled their earnings (or the portion they were allowed to keep after paying a certain sum to their masters) to set a fellow carrier free. At least one slave, Tarquinio, succumbed to the temptation of stéaling a sack of coffee to speed up the process. Later in the century, Portugyese and Italians joined the ranks of the coffee carriers and Stevédores, but the profession remained primarily the specialty of the black man, both slave and free.! The establishment of the central railway terminal in the 1860s, farther away from the coffee district than the docks, necessitated a new means of urban coffee transport. Blacks: had always carried the coffee from the docks to the warehouses, but now the distance was too far for men alone. Carts-had to be utilized to transport the sacks over the recently macadamized streets of Rio. In the following decade the railway built the inmense Gahboa warehouse, northwest of downtown even farther than the terminus from the private warehouses of the coffee merchants. In 1865, coffee merchants and Jocal entrepreneurs formed the Companhia Locomotora to lay trolley tracks from the rail station to the numerous houses of the coffee districts later, these also branched off to the Gamboa warehouse. |! Bounded by Prainha, Ourives, Inhaiima, Quitanda, and So Bento streets, the coffee district featured rows of two and three-story warehouses lining streets bustling with cofmerce. At the outskirts of the district, the main streets--Beneditinos and Municipal--doubled in width, allowing the trolley to wind back and forth to warehouses on either side of the street, Such traffic thoroughly logjammed Rio's narrow streets and became a constant source of discord between merchants and the city council. Fully loaded with up to thirty-five coffee sacks, the carts wreaked havoc on ‘the fragile pavements of Rio, leaving chuck-holes to fill with stagnant water and garbage. Coffee merchants at one time proposed to save time and money by burrowing a tunnel through the Morro da Conceic&o, to connect the maritime station with their ware- houses and avoid congestion. On another occasion, they petitioned the government to allow them to rent out ‘portions of the under-utilized Gamboa warehouse, to avoid this expensive and bothersome intermediary traffic altogether. Their proposals were not implemented until thé remodeling of the city and the port at the turn of the century.!? The Rio factor recreated the seignorial home of the coffee plantation in his ‘downtown’ warehouse. !4 As in the colonial era, merchants lived and worked in the same structures, with the ground Floor assigned for office space, a warehouse, kitchen, and slave E quarters. The upper floors were reserved for the factor, his family,The dining table of one factorage house could seat and guests.!® sixty. Whenever the planter came to Rio, alone or with an entourage, his factor offered him hospitality in rooms decorated with elegant European furniture.!® often the planter's son lodged with his father's factor while he attended school in Rio. Slaves formed an integral part of the merchant's household. Some were stevedores, but others had specifically domestic functions, such as the case of David, the cook,!” and the slave wonan Esperanca.'® From the carts out in the street, stevedores carried the coffee sacks into the warehouse for sampling, grading, and temporary storage. As each sack passed through the doorway, a clerk quickly inserted a large brass scoop to withdraw a sample, Although the device was shaped to reclose the bag on retraction, with each withdrawal a considerable number of beans fell to the floor and ground outside. The old black women who made a living from the resale of these sweepings eagerly awaited these spilled beans, which eventually found their way into the coffee cups of Rio's citizens. The clerk also noted the consignment number, and assigned each sack to one of as many as a hundred planter accounts. He then subdivided each sample into two portions, one for the eventual purchaser and one fpr the factor. Next, other clerks rated the coffee on a scale of seven to nine gradations. Although each grade supposedly corresponded to a set number of imperfections in the sample, in practice standards varied with market demand. After 1885, a new scale was established witit grades determined in New York. They ran from Type 1 to Type 9, with Type 7 as the 29 reference point. Once the coffee had thus been graded and recorded, arrival of a prospective buyer.!9 Another intermediary, the sacker, more a speculator than any other coffee middleman, bought and sold on the Rio market. Coffee from the interior could not be sold directly to the exporter since it was not blended and because it arrived in small quantities. Thus, there arose a need for this second middleman. With one eye on the export | and the coffee sacks stacked in his warehouse, the factor awaited the | | | narket and the other on coffé arrivals, the speculating sacker had to | rely on more working wel than the factor. The sacker made his rounds to factorage houses between eight and ten o'clock in the morning, to bid on specific lots or combinations thereof. If the factor accepted his offer, the deal was considered closed without any formal bill of sates confidence ruled without the aid or protection of a broker. Factors granted discounts on payments made by the sacker within twenty days. Once purchased, the coffee again passed through Rio's streets, to the larger warehouses of the sacker. His assistants drew new samples, spilling more coffee eagerly pursued by street- sweeping bystanders. Blending and resacking coffee mixtures to fit international market standards, some sackers processed over one hundred thousand bags monthly. Wedged between the sacker,-and his buyer was an elite corporation of coffee brokers (corretores), regulated in number by imperial decrees. Of the seventy brokers in Rio in the 1880s, only half traded in general commodities, and of these only three in coffee.Since this number was grossly inadequate, brokers hired assistants, generally foreigners, to arrange transactions between sackers and exporters. Since foreigners were prohibited from holding a brokerage license, the registered brokers had to authenticate all final bills of sale. The exporter, acting as an agent of importing houses abroad, finally purchased Brazilian coffee from the sacker. Brokerage assistants walked from door to door of sacking warehouses, much as the sacker had done one stage atiead of them, in search of the perfect coffee blend. Unlike transactions between factor and sacker, however, all sales by sacker to exporter were mediated through brokerage, at a mutual fee generally fixed at one-fifth of 1 percent of the export price.” €xporters generally -did‘not’ have warehouses large enough to store their substantial purchasés. Thus, once the deal was closed and the bil? paid, the exporter had twenty days to transfer his purchase!~ at his own expense--from the sacker's warehouse to an awaiting ship. Timing was essential in order to avoid steep storage fees. When exporting firms were not branches of foreign houses, they passed on a multitude of service charges to their ihporting clients’ abroad: bag purchase, brokerage fees, cartage to the wharf, wharf dues, provincial and national export taxes, clerks' fees, telegrams, fire “insurance, commission fee on the bill and exchange transactions, and a general commission fee from 2 to 3 percent. Such service charges meant that the New York importer could pay 20 percent above the sacker's price for Rio coffee.?! . 31 These ideal types of coffee merchants--factor, sacker, and exporter--often merged into composites. A fine line existed between the factor and the sacker. Nany factors, once they became prosperous enough to maintain large inventories, sold coffee directly to exporters. Of the more than nine hundred different factorage firms listed in Rio's commercial directory from 1850 to 1888, 15 percent were also listed as sacking establishments at one time or another. Further- more, the stockholders of large sacking companies included numerous factorage firms. Thus, it Appears that many factors who could not directly participate in phe sacking trade invested modestly in these more speculative enterprises. Finally} some sacking firms with sufficient accumulated capital and commercial contacts eventually entered the direct export trade.” . | From the 1850s through the 1880s, in any given year there were anywhere from one to two hundred coffee factorage and sacking firms in Rio. Of these, the overwhelming majority were factorage concerns, which comprised as much as one quarter of all commission merchants in Rio. Figure 2.3 plots two estimates of the total number of coffee intermediaries. The city's principat commercial directory shows # cyclical but indreasing trend acrdss four decades. Scattered data from municipal tax receipts are consistent with the annual direétory listings in thé Seventies and eighties, but suggest that the directory probably did not specify a11 commission firms handling coffee in the earlier ‘years. Both indicatdrs, shoW short-term fluctuations, perhaps nét totally random. “thé declines in number of firms in the anEC Estimates of the Number of Rio Coffee Intermediary Firms, 1050 185¢ 1858 1862 1670«1874~«t878 «18821886 1090 Sources: Business directory: Almanak administrativo, mercantil e industrial do Rio de Janeiro, 1849-89 /Almanak Laemmert / (title varies) (Rio: Laemmert, 1849-89); Tax receipts: "Exercicio de 1855- 1856: Estatisticas das casas do commercio e outras . . . " (title 135d} ‘in Brazil, Ministerio da Fazenda, Relatorios, 1856-88 (Rio, Note: Intermediary firms include both factors and sackers. The curve for. the directory data is a three-year moving average. The business directory maintained a policy of printing names and addresses of alt commercial establishments gratis; only further description or an advertisement would be assessed a fee. Thus, it was in any business- man's interest to have his firm included. Until 1882, however, coffee factors were listed in a category with all other commission agents, distinguished only as specifically receiving coffee. Undoubtedly, many other commission agents also accepted coffee from the interior; therefore, the count before 1882 is probably an underestimation. 33 early sixties and late seventies occurred precisely when coffee prices were falling.23 The Rio coffee market demonstrated a marked differentiation of merchants along lines of nationality. Factors and sackers were overwhelmingly Brazilian and Portuguese, with only a few other Europeans involved.24 In contrast, a small number of foreign merchant houses controlled the export trade. Half of all of the trade was handled by an average of only seven firms, while twenty firms averaged fully 80 percent of the exp business. A breakdown of data on the ten largest export firms for the years 1857-88 reveals that British and North American houses forwarded most of the unroasted beans for foreign consumption (see table 2.1). The generally held impression that the British dominated the coffee export trade is erroneous; representatives from various nations ran these operations.<® The value of exports from the leading Brazilian and Portuguese firm was only one tenth of that of the tenth largest foreign firm.2® Brazil, the world's largest producer of coffee, had Jittle to do with the transport ‘abroad and marketing of coffee within other countries. Yet some notice of how that trade took place will clarify the central place of the coffee factor in the larger system. British steamship lines carried most of the coffee as it left Brazil. As primary regions of coffee cultivation shifted across the globe, so did their major trade centers. London had become the world import center during West Indian production dominance, but after 1830, the Dutch Ports of Amsterdam and Rotterdam also became trade emporiums due to34 Table 2.1: Ten Leading Rio Coffee Export Firms, Ranked by Total Real Value of Exports, 1857-88. Total Real Total Value of Exports ,, Exports, Thousands Name of Firm Millions £ 60-K. Sacks Natignality Phipps Brothers® 27,079 8,953 British Hard, Rand & Co.? 20,145 7,379 American Edward Johnston & Co.° 19,994 7,140 British MacKinnel1 & Co.4 12,607 4,455 Z John Bradshaw & Co. 11,875 4,058 2 Arbuckle Brothers® 7,930 2,791 American Kern, Hayn & Co. 6,588 2,068 2 Wille, Schmitinsky & Co.* 6,119 2,174 German F. Sauwen & Co.9 5,467 1,885 Belgian Norton, Megaw & Co." 5,036 1,903 British Sources: "Comercio: Retrospecto annual, 1857-75," Jornal do Conmercio /Rio7 (hereafter: JC), Jan. 1858 - Jan. 1876; JC, Retrospecto Commercial do Jornal do Comercio, 1876-88 (Rio: 36, 1877-85). Data ‘include only the twenty leading firms in a given year, yet this incorporates an annual average of 80 percent of the entire trade. Constant values in pounds sterling are attained by deflating nominal values by an average of the indices in "Table 63: Price Indices for Capital Goods, 1855-1965," in C. H. Feinstein, National Income, Expenditure and Output of the United Kingdom 1855-1965, Studies in the Robionat Tncone and Expenditure of the United Kingdom, 6 (Cambridge, Eng.: Univ. Press, 1972), 1136. Notes: ® Michael G. Mulhall, The English in South America (Buenos Aires: Standard, 1878), p. 349. Table 2.1--Continued > Hard, Rand & Co. was the continuation of Maxwell, Wright & Co. (1857-64) and Wright & Co. (1866-81); James C. Fletcher and D/ aniel 7 sh 7 Kidder, Brazil and the Brazilians: Portrayed in Historical e Sketches, 7th ed. 3 rpt. New York: ANS Press, ; Dz 36; Wright & Co., Rio, Apr. 18, 1870, in Arquivo Nacional, Rio, Secao do.Poder Executivo, Junta Comercial do Rio de Janeiro (hereafter: JCRJ), Contratos, reg. 9.5423 Wright & Co., 1875, JCRJ, Contratos, reg. 15.458; Hard, Rand & Co., Rio, Nov. 8, 1880, JCRJ, Contratos, reg. 22.388. © Edward Johnston & Co., Rid de Janeiro, One Hundred Years “of Coffee (London: E. Johnston & Co., Ltd., 1942). 4 MacKinnel1] & Co. was the continuation of Schwind, MacKinnell & Rudge (1862-66), and Schwind, ee & Co. (1867-76). © M. E. Goetzinger, A Histofy of the Firm of Arbuckle Brothers (n.p.: n.p., 1921). fire, Schmilinsky & Co. was the continuation of Wille, Lubbers & Co. (1887-61); Theodor. Wille & Co., Cem anos da casa Theodor Wille no a beg ies 3 F. sauwen & Co., Rio, Dec. 20, 1876, JCRJ, Contratos, reg. 17.228. h Norton, Megaw & Co. was the continuation of Norton, Megaw & Youle (1873-78); Reginald Lloyd, et al., eds., Impressdes do Brazil no Seculo vinte: Sua historia, seo povo, conmercio, industrias e recursos (London: Lloyd's Greater Britain Publishing, T913), p. 617.36 extensive holdings in Southeastern Asia. With increased Latin American production by mid-century, the center shifted back to London. The British never acquired a taste for coffee, preferring tea as their national beverage, but such consumer preferences did not prevent London from developing a thriving re-export trade. The British financed and transported the bulk of Brazil's coffee, but actually imported chiefly the higher premium Milds of the Caribbean, Central America and South Asia Coffees classified as Brazils were destined for mass consumption in the United States and Continental Europe. Hence, North American ports and the Continental cities of Hamburg and Le Havre dominated this end of the trade.27 Coffee drinking caught on quickly in the United States. While the Low Countries, Scandinavia and Germany were the largest consumers of coffee on a per capita basis, the U.S. was thé single largest consuming market.?® Except during the Civil War, per capita consumption paralleled the growth in real wages of American workers.22 Only the U.S. allowed coffee to enter duty-free; a tariff was imposed in 1861 as an emergency war measure, but repealed in 1872.20 Trade dependence between the U.S. and Rio coffee markets shifted across time. “ Discounting the period of the Civil War, Rio became generally more dependent on the U.S. as an outlet for its coffee; in contrast, American reliance on Rio for supplies fell gradually, as importers turned to other Latin American areas.?! Concentration of U.S. coffee marketing activities in a few port cities accompanied the growth and diversification of American imports. The ports of New York, Baltimore, New Orleans, and San Francisco received the bulk of the coffee and, starting during the Union blockade of the South and to a greater extent after the war, New York gained a market supremacy that it has retained to this day. Transactions were made at first on a spot market, where coffee was being stored along the wharves of Lower Manhattan. In response to the insecurity and mistrust caused by a speculative bust, the New York Coffee Exchange opened in 1882; three years later it was renamed the Coffee Exchange of the City of New York. Importers, jobbers, and brokers established a central location to standardize sales, collect data on market conditions, and further develop the futures contract, gaining appeal. By the end of the decade, over half of total Rio exports passed through the New York market.22 Brazilians viewed a centralized market and futures contracts with considerable apprehension and suspicion; business in Rio remained on the level of spot purchases from numerous warehouses. Rio brokers failed to comply with the New York exchange's request for coffee samples, and in 1887 Rio sackers agreed to refuse to deal with export agents buying on futures contracts. Throughout the decade the fear of speculation cast a shadow over many transactions.22 Cyclical price fluctuations characterized the Brazilian coffee economy throughout the past century. Although there was no long-term secular trend in prices, the New York spot price oscillated through sharply defined cycles of varying amplitude and phase (see fig. 2.4). For the most part prices rose gradually, but in 1864 and