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Inglorious RevolutionPolitical Institutions, Sovereign Debt, and Financial Underdevelopment in Imperial Brazil$
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William R Summerhill

Print publication date: 2015

Print ISBN-13: 9780300139273

Published to Yale Scholarship Online: January 2016

DOI: 10.12987/yale/9780300139273.001.0001

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Fall from Grace

Fall from Grace

(p.215) Chapter Eight Fall from Grace
Inglorious Revolution

William R. Summerhill

Yale University Press

In 1889 the Republic fundamentally altered the principal characteristics of the political institutions—as well as the commitment to repay debt—established under the constitutional monarchy. This chapter summarizes the key discontinuities, which were evident in the political institutional changes wrought by the overthrow of the constitutional monarchy and also in the evolution of Brazil's capital markets. Following the replacement of the monarchy by a military government (which then segued to the oligarchic Republic), sovereign creditworthiness in the 1890s, along with fiscal and monetary policy, more generally began to founder. Bankers in London and Paris cut off existing lines of credit. The new regime quickly ran into great difficulty in securing new long-term loans in London. By 1898, faced with ongoing deficits, a milréis in free fall, and rapidly rising costs of external debt service, Brazil defaulted on its foreign debt, turning to its London creditors to reschedule its obligations. Over the same period, private finance in Brazil lurched along, supporting both the expansion of industry and the growth of the two main stock exchanges in Rio de Janeiro and São Paulo.

Keywords:   constitutional monarchy, Brazil, political institutions, capital markets, sovereign creditworthiness, Republic, London, foreign debt

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