Brazil and the Depression

The Coffee Economy Coffee accounted for 70% of Brazil’s economy The govt. turned to valorization to protect its crop Valorization attempted to limit the supply and keep prices up It worked in the 1920’s, but required loans from foreign banks and was expensive

The Crash Caused coffee prices to drop from 22 to 15 cents a pound This drop caused a loss in govt. revenue and loss of income Imports and exports declined Factories sat idle A bumper crop of coffee dropped the price to 10 cents a pound

The Rise of Getulio Vargas Vargas ran for the presidency and lost in 1930 Instability led him to overthrow the elected government in 1930 Led Brazil through the depression

Vargas’ Economic Policies Supported the coffee industry, but tried to limit its production Created artificial scarcity-burned excess coffee to keep it off the market Encouraged production of other crops Reduced sugar production Encouraged a favorable balance of trade by limiting imports

Import Substitution Industrialization Vargas encouraged coffee barons to invest in industry & provided tax incentives and low-cost loans National Steel Company founded- mix of private and public funding Built roads and encouraged commercial aviation Diversified the Brazilian economy

Vargas and Labor Became a dictator in 1935 Restricted labor unions but also instituted a minimum wage and maximum hours Set up social security, pensions, and paid vacations

Results of Vargas’s Policies Industrial production grew throughout the depression at 6% By 1933, Brazil was emerging from the depression- FDR’s New Deal had not yet been implemented in the U.S.