Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-23T06:22:38.349Z Has data issue: false hasContentIssue false
  • English
  • Français

Mortgages for machinery: credit and industrial investment in pre-World War I Brazil

Published online by Cambridge University Press:  08 July 2014

Gustavo S. Cortes ,
Renato L. Marcondes  and
Maria Dolores M. Diaz
Gustavo S. Cortes*
Affiliation:
University of Illinois
Renato L. Marcondes
Affiliation:
University of São Paulo
Maria Dolores M. Diaz
Affiliation:
University of São Paulo
*
Corresponding author: G. S. Cortes, PhD candidate in Economics, University of Illinois at Urbana-Champaign, 214 David Kinley Hall, 1407 W. Gregory Drive, Urbana, IL, USA, [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

How could a primitive credit market finance the early industrialisation of an underdeveloped economy? To answer this question, we use a hand-collected data set of mortgage loans raised by industrial firms in the city of São Paulo during the period 1866-1914. These mortgages were debt obligations collateralised by land, improvements, machinery and equipment. We argue that the mortgage credit market was a key source of funding for early industrial investments in Brazil. We find that industries were mainly funded by non-banking and domestic agents. The empirical evidence suggests that mortgages were an important proxy for industrial investment.

Keywords

mortgage creditindustrialisationfinancial marketsinvestment

JEL classification

N26: Latin America • Caribbean N86: Latin America • Caribbean N66: Latin America • Caribbean
Type
Articles
Information
Financial History Review , Volume 21 , Issue 2 , August 2014 , pp. 191 - 212
Copyright
Copyright © European Association for Banking and Financial History e.V. 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alston, L. J., Harris, E. and Mueller, B. (2012). The development of property rights on frontiers: endowments, norms, and politics. Journal of Economic History, 72(3), pp. 741–70.Google Scholar
Baer, W. (1965). Industrialization and Economic Development in Brazil. Homewood, IL: Irwin.Google Scholar
Baer, W. (2008). The Brazilian Economy: Growth and Development. Boulder, CO: Lynne Rienner.Google Scholar
Catão, L. A. V. (1992). A new wholesale price index for Brazil during the period 1870–1913. Revista Brasileira de Economia, 46(4), pp. 519–33.Google Scholar
Dean, W. K. (1969). The Industrialization of São Paulo, 1880–1945. Austin: University of Texas Press.Google Scholar
Dean, W. K. (1971). Latifundia and land policy in nineteenth-century Brazil. Hispanic American Historical Review, 51(4), pp. 606–25.Google Scholar
Enders, W. (2004). Applied Econometric Time Series, 2nd edn. Wiley Series in Probability and Statistics. New York: Wiley.Google Scholar
Fishlow, A. (1972). Origins and consequences of import substitution in Brazil. In Di Marco, L. E. (ed.), International Economics and Development: Essays in Honour of Raúl Prebisch. New York: Academic Press.Google Scholar
Flandreau, M. and Zumer, F. (2004). The Making of Global Finance (1880–1913). Paris: OECD, Development Centre Studies.Google Scholar
Haber, S. H. (1991). Industrial concentration and the capital markets: a comparative study of Brazil, Mexico and the United States, 1830-1930. Journal of Economic History, 51(3), pp. 559–80.Google Scholar
Haber, S. H. (1997). Financial markets and industrial development: a comparative study of governmental regulation, financial innovation, and industrial structure in Brazil and Mexico, 1840-1930. In Haber, S. H. (ed.), How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800–1914. Stanford: Stanford University Press, pp. 146–78.Google Scholar
Haber, S. H. (1998). The efficiency consequences of institutional change: financial market regulation and industrial productivity growth in Brazil, 1866-1934. In Coatsworth, J. H. and Taylor, A. M. (eds.), Latin America and the World Economy since 1800. Cambridge, MA: Harvard University David Rockefeller Center for Latin American Studies; Harvard University Press, pp. 275–322.Google Scholar
Hanley, A. G. (2005). Native Capital: Financial Institutions and Economic Development in São Paulo, Brazil, 1850–1920. Stanford: Stanford University Press, 2005.Google Scholar
Hanley, A. G. (2010). Financing Brazil's industrialization. In Horn, J., Rosenband, L. N. and Smith, M. R. (eds.), Reconceptualizing the Industrial Revolution. Cambridge, MA: MIT Press.Google Scholar
IBGE (1990). Estatísticas históricas do Brasil: séries econômicas, demográficas e sociais de 1550 a 1988. Rio de Janeiro: Instituto Brasileiro de Geografia e Estatística (IBGE).Google Scholar
Johansen, S. (1995). Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.CrossRefGoogle Scholar
Kim, D. and Perron, P. (2009). Unit roots tests allowing for a break in the trend function at an unknown time under both the null and alternative hypotheses. Journal of Econometrics, 148, pp. 1–13.Google Scholar
Levy, M. B. (1977). História da Bolsa de Valores do Rio de Janeiro. Rio de Janeiro: IBMEC.Google Scholar
Levy, M. B. (1991). The banking system and foreign capital in Brazil. In Cameron, R. and Bovykin, V. I.(eds.), International Banking: 1870–1914. Oxford: Oxford University Press.Google Scholar
Lewis, C. M. (1999). Industry and industrialisation: what has been accomplished, what needs to be done. Revista de Economia (Curitiba), 23, pp. 7–25.Google Scholar
Luz, N. V. (1978). A luta pela industrialização do Brasil. São Paulo: Alfa Omega.Google Scholar
Mackinnon, J. G., Haug, A. A. and Michelis, L. (1999). Numerical distribution functions of likelihood ratio tests for cointegration, Journal of Applied Econometrics, 14, pp. 563–77.3.0.CO;2-R>CrossRefGoogle Scholar
Marcondes, R. L. and Hanley, A. G. (2010). Bancos na transição republicana em São Paulo: o financiamento hipotecário (1888–1901). Estudos Econômicos, 40(1), pp. 103–31.Google Scholar
Marichal, C. (1997). Obstacles to the development of capital markets in nineteenth-century Mexico. In Haber, S. (ed.), How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800–1914. Stanford: Stanford University Press, 1997, pp. 118–45.Google Scholar
Marques, T. C. N. (2005). Bancos e desenvolvimento industrial: uma revisão das teses de Gershenkron à luz da história da Cervejaria Brahma, 1888–1917. Revista História e Economia, 1(1), pp. 87–119.Google Scholar
Musacchio, A. (2009). Experiments in Financial Democracy: Corporate Governance and Financial Development in Brazil, 1882–1950. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Ng, S. and Perron, P. (2001). Lag length selection and the construction of unit root tests with god size and power. Econometrica, 69(6), pp. 1519–54.Google Scholar
Peláez, C. M. and Suzigan, W. (1981). História monetária do Brasil: análise da política, comportamento e instituições monetárias. Brasília: UnB.Google Scholar
Perron, P. (1989). The great crash, the oil price shock and the unit hypothesis. Econometrica, 57, pp. 1361–1401.Google Scholar
Perron, P. and Yabu, T. (2009). Testing for shifts in trend with an integrated or stationary noise component. Journal of Business and Economic Statistics, 27, pp. 369–96.Google Scholar
Pesaran, M. H. and Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. In Strom, S. (ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium. Cambridge: Cambridge University Press, chapter 11.Google Scholar
Pesaran, M. H., Shin, Y. and Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(2), pp. 289–326.CrossRefGoogle Scholar
Rajan, R. and Zingales, L. (2003). The great reversals: the politics of financial development in 20th century. Journal of Financial Economics, 69, pp. 5–50.CrossRefGoogle Scholar
Rolnik, R. (1995). The city and the law: legislation, urban policy and territories in the city of São Paulo (1886–1936). PhD dissertation, History Department, New York University.Google Scholar
Saes, F. A. M. (1986). Crédito e bancos no desenvolvimento da economia paulista (1850–1930). São Paulo: IPE-USP.Google Scholar
Sephton, P. S. (1995). Response surface estimates of the KPSS stationarity test. Economics Letters, 47, pp. 255–61.Google Scholar
Stein, S. J. (1957). The Brazilian Cotton Manufacture: Textile Enterprise in an Underdeveloped Area, 1850–1950. Cambridge, MA: Harvard University Press.Google Scholar
Suzigan, W. (2000). Indústria brasileira: origens e desenvolvimento. São Paulo: Hucitec.Google Scholar
Toda, H. Y and Yamamoto, T. (1995). Statistical inferences in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66, pp. 225–50.CrossRefGoogle Scholar
Triner, G. D. (2000). Banking and Economic Development: Brazil, 1889–1930. New York: Palgrave.Google Scholar
Triner, G. D. and Wandschneider, K. (2005). International capital and the Brazilian Encilhamento, 1889-1892: an early example of contagion among emerging markets. Financial History Review, 12(2), pp. 199–225.CrossRefGoogle Scholar
Versiani, F. R. (1980). Industrial investment in an ‘export’ economy: the Brazilian experience before 1914. Journal of Development Economics, 7(3), pp. 307–29.Google Scholar