1 THE COTTON TEXTILE INDUSTRY OF MINAS GERAIS, BRAZIL: BEGINNINGS AND EARLY DEVELOPMENT, 1868-1906 by Maria Teresa Ribeiro de Oliveira Versiani Dissertation submitted to the University of London in fulfilment of the requirements for the degree of Doctor of Philosophy University College London 1991 2 THE COTTON TEXTILE INDUSTRY OF MINAS GERAIS, BRAZIL: BEGINNINGS AND EARLY DEVELOPMENT, 1868-1906. ABSTRACT This dissertation investigates for the first time the beginnings and early development of a cotton textile industry in a non-export area within an economy specializing in the production of primary goods for the international market: the B ra zilia n state of Minas Gerais. The general explanations offered in the secondary literature for the early stages of Brazilian industrialization - based on the experience of industrialization in export areas - are shown to be inadequate in accounting for the beginnings of industry in a region where handicraft production of cloth was still a flourishing activity and where most of the population was engaged in production for the internal market and for home consumption. Among other things, the cotton te x t ile industry of Minas Gerais was protected from outside competition and did not require for its establishment and early development additional protection from tariffs on imports or from devaluation of the exchange rate. The investigation is centred on the period 1868 to 1906. A partnership formed in 1868 was the firs t successful attempt at establishing a cotton mill in Minas Gerais. From then until the mid 1890s investment flowed into the industrial production of cloth. By the mid nineties, however, the firs t signs that supply was increasing at a faster pace than demand manifested themselves in the market. Yet, as a result of decisions to invest taken in previous periods, new cotton mills entered the market. As no compensatory changes in demand took place, difficulties in relation to sales intensified. During the first years of the twentieth century, the general performance of the cotton textile industry of Minas Gerais, and especially that located in the central areas of the state around the new capital, Belo Horizonte, began to improve, revealing an increase in local demand. In 1905 and 1906, a fte r a long period of stagnation, new te x t ile companies were once more constituted. A public convention leading to the creation of an organization of t e x t ile entrepreneurs in December,1906, can be taken to demonstrate that the cotton textile industry of Minas Gerais was by then firmly established. On the eve of the First World War the cotton mills established in the period 1868- 1906 were responsible for most of the productive capacity of the cotton te x t ile industry in Minas Gerais. 4 LIST OF CONTENTS INTRODUCTION................................................................................................... 13 1.1 General approaches adopted to the study of the emergence of i ndustry i n Brazi 1 .........................................13 1.2 Exports and early industrialization in Brazil: a brief review of the literature .......................................14 1.3 The Mineiro economy of the nineteenth century as a non-export economy ...........................................................18 1.4 Handicraft production of cotton textiles in Mi nas Gerai s ..................................................................................20 1.5 Scope and working hypotheses of the di ssertation ..................................................................................22 1.6 Organization, sources and limitations of the study ............................................................................................... 26 Notes to Introd ucti on .................................................................................... 28 CHAPTER 1 : THE BEGINNINGS OF A COTTON TEXTILE INDUSTRY IN MINAS GERAIS IN THE 1870s ...........................................................................30 Introducti on ......................................................................................................30 1.1 The evolution of Brazilian industry before the 1880s: a brief review of the literature .........................31 1.2 Unsuccessful attempts at establishing cotton m ills in Minas Gerais before the seventies and the legislation on joint stock companies .....................35 1.3 The emergence of a cotton textile industry in the seventies ..........................................................................41 1.3.1 The constitution of the partnership Mascarenhas & Irm&os in 1868 and the establishment of the Cedro cotton mi 11 ..............................................................41 1.3.2 Other cotton mills founded in the first half of the seventies: the Brumado and the Machado cotton m ills ..................................................................46 1.3.3 New associations of capital in the mid seventies for investment in the Mineiro production of cotton textiles ......................................................................... .48 1.4 Typical textile investment in Minas Gerais during the seventies: small, local and family undertakings concentrated in the Central zone ofMinasGerais ............................................................................. 52 1.5 The evolution of the cotton textile industry of Minas Gerais in the second half of the seventi es .........................................................................................56 1.6 Conclusions .................................................................................... 59 Notes to Chapter 1 ........................................................................................... 61 CHAPTER 2: INDUSTRIALIZATION OF MINEIRO COTTON TEXTILE PRODUCTION IN THE 1880s ................................................................................70 Introducti on ......................................................................................................70 2.1 The relevance of the 1880s in the emergence of industry in Brazil, a brief review of the 1 i te ra tu re .......................................................................................71 5 2.2 Expansion of the cotton t e x t ile industry of Minas Gerais in the early eighties: a spurt of investment or a moderate growth? .......................................74 2.2.1 Investment in new cotton m ills .............................................74 2.2.2 Investors in the early eighties, origins of their capital and forms of association .........................79 2.2.3 Investment in the expansion of the productive capacity of the old cotton m ills of Cedro and Cachoei ra ...........................................................................• ............83 2.2.4 A summary of the main characteristics observed in the evolution of textile investment in the Mineiro industry during the early eighties ...............84 2.3 Expansion of the cotton te x t ile industry of Minas Gerais in the second half of the eighties ...........85 2.3.1 Investment i n new cotton m ills .....................................86 2.3.2 The transformation of partnerships into joint stock companies: The Companhia de Fiag&o e Tecelagem In d u s tria l Mineira and the Companhia de Fiap&o e Tecidos Santa Barbara ....................................93 2.3.3 A brief summary of the main characteristics of the expansion of textile investment in Minas Gerais in the second h a lf of the e ig h tie s ..................99 2.3.4 The increasing popularity of joint stock companies in the e ig h tie s .................................................... 100 2.3.5 The performance of existing cotton mills in the second half of the eighties: the case of the Companhia Cedro e Cachoei ra ’ s cotton m ills .............102 2.4 Conclusions ....................................................................................108 Notes to Chapter 2 ..........................................................................................111 CHAPTER 3: EXPANSION AND PERFORMANCE OF THE MINEIRO COTTON TEXTILE INDUSTRY IN THE ENCILHAMENTO YEARS, 1890-1891 ____123 Introducti on ....................................................................................................123 3.1 Encilhamento and Brazilian industry, a review of the lite r a tu r e ............................................................................124 3.2 Investment in new cotton mills in the years 1890 and 1891 .........................................................................................128 3.3 Performance of old te x t ile companies in Minas Gerais in 1890 and 1891: the case of the Companhi a Cedro e Cachoei ra ’ s cotton m ills .............132 3.4 New evidence for an old argument: Encilhamento and increasing funds fo r t e x t ile companies al ready i n ope ra ti on ................................................................137 3.5 Legislation on jo in t stock companies and industrial expansion in the nineties ...........................142 3.6 Conclusions ....................................................................................144 Notes to Chapter 3 ..........................................................................................146 CHAPTER 4: EXPANSION AND PERFORMANCE OF THE MINEIRO COTTON TEXTILE INDUSTRY IN THE POST ENCILHAMENTO PERIOD, 1892-1895 .......................................................................................................... 150 Introduction ...................................................................................................