Property Rights and the Fiscal and Financial Systems in Brazil: Colonial Heritage and the Imperial Period

Abstract

In contrast with former colonies of Great Britain, Brazil could never look at Portugal, and particularly at Portuguese financial institutions, as paradigms to be closely followed, since the former, even though the metropolitan power, remained a rather underdeveloped economy facing difficulties of financial consolidation akin to those faced by its former colony, in spite of some episodes of financial creativity. The paradigm was Britain, even if the institutional inheritance was strongly Portuguese. The whole institutional context including the strong powers of the king could fail, as already mentioned, to provide protection from government action to real assets such as land and slaves in real practice, even though in theory the prevailing legal system based on Roman Law clearly allowed such assets to be legally registered under the names of their owners.Property rights were fragile and constantly undermined in the colonial period and part of that fragility filtered to the 19th century. This paper is a preliminary investigation concentrating only on the projections of such characteristics on the fiscal and financial systems developed in Brazil during the Empire (1822-1889).After this introduction, section 2 of the paper considers the colonial heritage from the perspective of fiscal and monetary regimes. A short section 3 briefly sketches the direct and indirect costs of independence from a financial point of view. The next two sections consider in sucession fiscal policies and monetary aspects of Brazilian finance during the Empire. Aspects related to revenue, expenditure, public debt and the political economy of public finance are examined in section 4. The next section covers monetary issues: changing monetary standards, the several versions of a Banco do Brasil, the alternation of restrictive and lax monetary regimes, changes of policy affecting the note issuing rights of private banks. Section 6 presents the provisional conclusions. The Colonial heritageProduction of sugar was the first economic activity in Brazil in the 16th century which led to the permanent settlement of the colony and which also gave rise to its first fiscal apparatus. The establishment of a royal government in Bahia in 1549 resulted in the

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