Great Depression in Brazil

Impact of the Great Depression on Brazil

The Great

Depression

in Brazil

Responses to the Depression

Economic Challenges

Social Repercussions

Coffee Overproduction

Governmental Changes

- Prior to the Great Depression, Brazil heavily relied on the United States; by 1930, the United States had invested $557 million in Brazil.

-Coffee exports made up 72% of Brazil's foreign exchange. This meant that the country was heavily reliant on one product.

- Brazil was not strong industriously; they lacked machine tools and there was little industrial modernization and advancement.

- The Wall Street Crash of 1929 caused the decline of coffee prices and in demand of coffee. Brazil faced overproduction with falling demand and a copious harvest around 1928 and 1929.

- Brazil being dependent on coffee exports led to a decline in the country's wealth. Brazilians could not buy industrial goods produced for internal consumption as there was not a sufficient amount of money in the country to afford it.

- Brazil did export some industrial goods. As other countries in South America were also declining Brazil's export markets reduced. Internal and external demand declined and negatively affected the industrial areas in Brazil. Unemployment levels were high in industrial cities.

- Agriculture was vital to Brazil as it made up most of the population's income; consequently, agriculture decline hurt the people.

- Brazil struggled with income distribution inequalities. After food and shelter costs, only .8% of the majority of Brazilian's income could be used for spending.

- Even wealthier Brazilians were affected by the Great Depression; their income was reduced by the decline in prices and trade. This was not ideal for the nation as they would have less money to jump start the economy.

(coffee beans) https://upload.wikimedia.org/wikipedia/commons/thumb/c/c5/Roasted_coffee_beans.jpg/1280px-Roasted_coffee_beans.jpg

- Over two-thirds of Brazilian's lived in rural areas. The Brazilian economy was fueled by the workers in large plantations that were given low wages.

- Brazil dealt with extensive poverty, malnutrition, and poor education.

Political Instability

(Getulio Vargas)https://upload.wikimedia.org/wikipedia/commons/5/50/Getulio_Vargas_%281930%29.jpg

- Vargas tried to implement more federal intervention, but he was met with resent at a state level; he could not achieve the economic and social reform he wanted to with the state level governments. Vargas decided to end local government which was met with revolution.

- Vargas introduced a new Ministry of Labour, Industry, and Communications in November 1930. The federal government was given more power to control prices, wages, and labour relations.

- In 1932, Sao Paolo rose up because of the loss of local power. The capital was surrounded by Vargas' army for three weeks. This revolt failed and led to Vargas' introduction of a new constitution in 1934 based off of the idea of a central government with certain responsibility for economic development and social welfare.

- The Depression brought change to the responsibilities of the government in Brazil.

- Vargas used his dictatorial power to close Brazil's Congress and introduce Estado Novo. Estado Novo was a parliamentary assembly and could interfere in the economy and promote nationalism.

- As stated earlier, Brazil struggled with the overproduction of coffee as demand fell.

- The government decided to buy massive amounts of coffee and destroy it so that the less amount of coffee would drive prices higher. The government presented a subsidy to help planters and their workers.

- Between 1931 and 1944, Brazil destroyed 78 million sack of coffee.

- It started off as only an emergency measure, but it grew to a fixed economic policy; however, it was not a conventional financial policy because of the expense of buying the coffee.

- The government had to borrow and print money as subsidizing coffee was expensive; consequentially, inflation rose and became a problem for Vargas' government.

- Brazil's government was split into a federal and states government similar to the United States, but Brazil's states had far more power. Brazil's Constitution on 1891 gave states the right to internal policy and the ability to raise their own army. There was a strong belief in laissez-faire meaning that the federal government limited regulation.

- Prior to the Wall Street Crash investment increased into industry in an attempt to diversify; however, the federal government seemed to lack an overall direction and accusations of corruption weakened their authority.

- In 1930, Getulio Vargas became president after a revolution against President Washington Luis.

- In 1937, Vargas started a coup against the Chamber of Deputies and declared dictatorial rule. Vargas was more of a 'front man' for the army than what was considered a typical, average dictator.

Gurleen Wahra

Import Substitution Industrialization (ISI) and Industrialization

Repressive Government Responses

- There was a rise in political protest on both the left and right in Brazil during the Great Depression. Both sides were repressed by Vargas.

- ISI is a trade and economic policy with the purpose to help a country expand its local production of industrialized products and to reduce the country's foreign dependency. ISI is meant to help a country become less vulnerable and more self sufficient by creating jobs and becoming less reliant on other countries.

- Many countries turned to ISI as the Wall Street Crash of 1929 showed the dependence of other countries on the United States' markets.

- ISI was meant to advance Brazil's industrial sector to meet the needs of the home market which would help free the Brazilian's economy from the world markets they depended on.

- The government planned and began Volta Redonda to promote industrial steel production.

- In Brazil, industrial growth was seen by the country as a key to the rebirth of the country.

- Between 1933 and 1939 there was extensive industrial growth. Agriculture was 79% of gross national product while industry was 21% in 1920. By 1940 it changed to agriculture making up 57% of gross national income and industry making up 43%.

Impact of the Great Depression on the society in Brazil

Women

- Discrimination against women was ignored as a problem and continued from before the Great Depression to afterward. Women in Brazil earned 58% less than men.

Life for the People

- In 1945, a survey revealed the wide spread malnutrition in the country.

- Only a quarter of industrial workers had a basic standard of living in 1945. In the countryside (where two-thirds of Brazilians lived) living conditions were far worse.

(picture showing pay inequality between gender) https://equitablegrowth.org/wp-content/uploads/2019/03/Gender-wage-gap-and-coins.jpg

The Cure

- World War Two can be considered the cure to the Great Depression because war increases demand for goods; consequentially, production increases and as does employment.

- ISI was not necessarily a cure, but the increase in industry was beneficial for Brazil as they were less reliant on others countries and coffee exportation.

Sources

Wells, Mike, and Nick Fellows. The Great Depression and the Americas (Mid 1920s-1939). Cambridge: Cambridge University Press, 2016.

(background of Brazilian flag in Brazil) http://images.huffingtonpost.com/2016-05-22-1463949471-6072763-BrazilFlagMap.png