Banks, Regions, and Nation in Brazil, 1889-1930

Abstract

Forging a national unit from regionally autonomous groups was a challenge for nineteenthand early-twentieth-century Brazil. Regional autonomy had resulted in a hierarchical system of local oligarchies and hindered political cohesion. Oligarchies were woven into a fluid, contentious, and often weak national system, with constantly changing powers that often depended on personal relationships.' Economically, regional autonomy had equally profound effects. Some researchers have pointed out that the absence of economic integration among regions resulted in small, localized markets and slow overall growth (Prado, 1991; Leff, 1982). Traditional Brazilian historiography has portrayed the economy as composed of very weakly connected autonomous regions and the state as economically liberal and noninterventionist prior to the mid-twentieth century (Prado, 1993; Furtado, 1993). Recent research in political economy challenges this characterization, finding evidence of an actively interventionist state (Topik, 1987; Fritsch, 1988). This article offers support to this latter view by exploring the participation of banks in the consolidation of a Brazilian economy that became national in scope during the First Republic (1889-1930). It contends that the banking system played an important role in connecting regions, different areas of production, and private and public sectors. It focuses on the institutional aspects of the formation of early national money markets in Brazil to explore their impact on the development of a national economy. The process of this consolidation significantly affected the nature of subsequent economic development. It concludes that the development of the banking system during the First Republic created the framework for the large and centralizing role in the economy that the state eventually assumed. Viewing the banking system within the conceptual framework of market formation highlights its ability to link previously unconnected markets for goods and services and to serve as an agent of growth.