The History of Coffee in Relation to the Economy of Brazil

Throughout history, the economy of Brazil has had it's highs and lows, as any country's economy does. The economy is often greatly affected by a country's imports and exports. Brazil is well-known for its exportation of coffee. Today Brazil controls one third of the world's coffee.1 Being one of the world's biggest coffee exporters has had significant effects on the Brazilian economy.

Beginning in the 1500's, settlers from Portugal started to use the rich, red soils of Brazil to make themselves wealthy. Although originally sugar was Brazil's main export, coffee quickly took over this place. Due to the settlers' success in the country, Brazil was soon made a colony of Portugal.2 After 1700, the country of Brazil then began its reform and expansion. However, a more invasive government imposed new taxes, which ultimately caused war in Sao Paulo. Fortunately, by 1750, some more economically successful reforms came about during the ministry of the marquis of Pombal. This economic prosperity was a result of the uncovering of gold in the 1690's, of diamonds around 1720, and the increasing growth of cotton and coffee. As the economy continued to grow, so did the need for slaves. Overall throughout the eighteenth century, about two million slaves were brought to work from Africa. 3 By the 1800's, coffee had become a controlling commodity for Brazil's economy and made up more than half of its exports. Then, in 1831, Pedro II became Brazil's new emperor. His plan was to try to modernize Brazil. By doing this, Brazil soon became the top coffee producer in the world, in addition to increasing the amount of exports of rubber, cacao, and cattle, which also helped Brazil's economy. Although Brazil seemed to depend on slaves, another great accomplishment under Pedro II was his leading of the abolition of slavery in 1888. 4 By the early 1900's, coffee made up seventy percent of Brazil's exports. However, this caused the price of coffee to greatly decrease, eventually causing the country to suffer and be taken over by dictators. This also caused a depression of Brazil's economy, which ultimately set back the industrialization of the country.5 During this 19^th century period of falling prices of goods such as coffee in Brazil, exporters were often blamed, many claiming conspiracies. In reality, the rising marketing costs could not keep up with the demand. Farmers wished to sell their product for as high a price as they could, while exporters wished to buy it at as low of a price as they could.6

The Brazilian coffee market is significantly linked to its economy. The amount of coffee consumption is directly linked to the amount of revenue. Some other examples of these links include "production-income" and "wage and price effects." Production-income effects describe the way that coffee production affects the country's gross domestic income. Wage and price effects relate to production-income effects in that wages are founded on production amounts. This is because coffee production increases the need for more laborers, which increases wages. When more coffee is being produced more employees are needed, which helps the economy by creating more jobs. Exports can also have a strong effect on the economy. When the value of coffee exports is higher, Brazil is able to import more as well. In addition, taxes on these exports can bring in more revenue as well.7 Brazil's economy was so dependent on the production of coffee that by 1929, the coffee and cacao planters were considered to be the elite of Brazil. Without them, Brazil's economy would not have prospered nearly as much as it did during this period.8

After years of ups and downs, Brazil finally began to settle at an "up". The country prospered further and what was know as "The Coffee-and-Milk Republic" or what is sometimes called the "Old Republic" began in 1902. The Coffee-and-Milk Republic was an unwritten agreement between the Brazilian cities of Sao Paulo and Minas Gerais. By this time, Sao Paulo had become Brazil's largest coffee producer, due to its rich, fertile soils and railways available, while Minas Gerais had also become the biggest producer of dairy. The "Coffee-and Milk" agreement said that while Sao Paulo would grow coffee, Minas Gerais would produce milk and other dairy products, and the presidency of Brazil would alternate between a candidate from Sao Paulo and then a candidate from Minas Gerais. This period also drew many new immigrants from countries such as Germany and Italy. However, by 1930, the arrangement was broken when the presidency was filled by two consecutive candidates from Sao Paulo. Sao Paulo had become prosperous and already begun its industrialization. However, by this time, Brazil's economy was already in danger due to falling prices during the Great Depression.9

After a period of lows and depressions, eventually Brazil's economy started to turn around again. By 1981, Brazil became the world's eighth largest free world economy when the domestic gross product reached $290 billion. By that time, Brazil had shifted its economy from depending on few products, such as coffee and sugar, to depending on new goods, such as heavy machinery and automobiles. However, Brazil also topped the list of Third World countries with the most debt. Around the same time, Brazil began to adopt a new form of government - moving from a military based rule to a more democratic form of government.10

As with any other country, Brazil economy had both prosperous and devastating effects on the country. Brazil has long been famed for its great production of coffee. As the country's largest export, coffee was directly linked to these highs and lows. Overall, these good and bad periods have led Brazil to become the country it is today.

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