BRAZILIAN POLITICS AND ECONOMY 263
sertões(Rebellion in the Backlands) by Euclides da
Cunha (1856–1909), immortalized the heroism of
the defenders and the crimes of the victors. It also
revealed to the urban elite another and unfamiliar
side of Brazilian reality.
THE ECONOMIC REVOLUTION
An enormous historical gulf separated the bleak
sertão—in which the tragedy of Canudos was played
out—from the cities, the scene of a mushrooming
growth of banks, stock exchanges, and corpora-
tions. In Rio de Janeiro, writes Pedro Calmon, there
was “a multitude of millionaires of recent vintage—
commercial agents, bustling lawyers, promoters
of all kinds, politicians of the new generation, the
men of the day.” Even the physical appearance of
some of Brazil’s great urban centers changed. These
changes were most marked in the federal capital
of Rio de Janeiro, which was made into a beautiful
and healthful city between 1902 and 1906 when
Prefect Pereira Passos mercilessly demolished nar-
row, old streets to permit the construction of broad,
modern avenues, and the distinguished scientist Os-
waldo Cruz waged a victorious struggle to conquer
mosquito-borne disease by fi lling in swamps and in-
stalling adequate water and sewage systems.
The economic policies of the new republican
regime refl ected pressures from different quar-
ters: the planter class, urban capitalists, the mili-
tary. Many planters, left in a diffi cult position by
the abolition of slavery, demanded subsidies and
credits to enable them to convert to the new wage
system. The emerging industrial bourgeoisie, con-
vinced that Brazil must develop an industrial base
to emerge from backwardness, asked for protective
tariffs, the construction of an economic infrastruc-
ture, and policies favorable to capital formation.
Within the provisional government, these aspira-
tions had a fervent supporter in the minister of fi -
nance, Ruy Barbosa, who believed that the factory
was the crucible in which an “intelligent and in-
dependent democracy” would be forged in Brazil.
Finally, the army, whose decisive role in the estab-
lishment of the republic had given it great prestige
and infl uence, called for increased appropriations
for the armed services. These various demands far
exceeded the revenue available to the federal and
state governments.
The federal government initially tried to sat-
isfy these competing demands by resorting to the
printing press and allowing private banks to issue
notes backed by little more than faith in the future
of Brazil. In two years, the volume of paper money
in circulation doubled, and the foreign-exchange
value of the Brazilian monetary unit, the milréis,
plummeted disastrously. Because objective eco-
nomic conditions (the small internal market and
the lack of an adequate technological base, among
other factors) limited the real potential for Brazil-
ian growth, much of the new capital was used for
highly speculative purposes, including the creation
of fi ctitious companies.
The resulting economic collapse brought ruin
to many investors, unemployment and lower wages
to workers, and a military coup that replaced Presi-
dent da Fonseca with his vice president, Marshal
Floriano Peixoto. The urban middle-class sector
thereafter briefl y gained greater infl uence, and in-
fl ation continued unchecked. The rise in the cost of
many imported items to almost prohibitive levels
stimulated the growth of Brazilian manufactures:
the number of such enterprises almost doubled be-
tween 1890 and 1895.
But the suppression of a new revolt with strong
aristocratic and monarchical overtones increased
Peixoto’s reliance on the fi nancial and military
support of the state of São Paulo, whose coffee oli-
garchy resolved to use its clout to end the ascen-
dancy of the urban middle classes. The oligarchy
distrusted their policies of rapid industrialization
and blamed them for the fi nancial instability that
had plagued the fi rst years of the republic. In 1893
the old planter oligarchies, whose divisions had
temporarily enabled the middle classes to gain
the upper hand in coalition with the military, re-
united to form the Federal Republican Party, with
a liberal program of support for federalism, fi scal
responsibility, and limited government. Because
they controlled the electoral machinery, they
easily captured the presidency and again institu-
tionalized the domination of the coffee interests,
relegating urban capitalist groups to a secondary
role in political life.