may be mentioned Joaquim Manoel de Macedo, José Martiniano de Alencar, Bernardo Guimarães, A. de Escrangnolle Taunay and J. M. Machado de Assis. José M. de Alencar is usually described as the greatest of Brazilian novelists. The most popular of his romances are Iracema and O Guarany. In historical literature Brazil has produced one writer of high standing—Francisco Adolpho Varnhagen (Visconde de Porto Seguro), whose Historia Geral do Brazil is a standard authority on that subject. The two English authorities, Robert Southey’s History of Brazil, covering the colonial period, and John Armitage’s History of Brazil, covering the period between the arrival of the Braganza family (1808) and the abdication of Dom Pedro I. (1831), have been translated into Portuguese. Another Brazilian historian of recognized merit is João Manoel Pereira da Silva, whose historical writings cover the first years of the empire, from its foundation to 1840. Among the later writers João Capistrano de Abren has produced some short historical studies of great merit. In the field of philosophic speculation, Auguste Comte has had many disciples in Brazil.
Finance.—The national revenue is derived largely from the duties on imports, the duties on exports having been surrendered to the states when the republic was organized. Other sources of revenue are stamp taxes on business transactions, domestic consumption taxes (usually payable in stamps) on manufactured tobaccos, beverages, boots and shoes, textiles, matches, salt, preserved foods, hats, pharmaceutical preparations, perfumeries, candles, vinegar, walking sticks and playing cards, and taxes on lotteries, passenger tickets, salaries and dividends of joint-stock companies. Formerly import duties were payable in currency, but in 1899 it was decided to collect 10% of them in gold to provide the government with specie for its foreign remittances. The revenues and expenditures have since then been calculated in gold and currency together, to the complete mystification of the average citizen, and the gold percentage of the duties on imports has been increased to 35 and 50% (in 1907), the higher rate to apply to specified articles and rule when exchange on London is above 14 pence per milreis, and the lower when it is below. The service of the national debt absorbs a very large part of the expenditure, about 45% of the estimates for 1907 being assigned to the department of finance. The department of industry, communications and public works takes the next highest proportion, but about half its expenditures are met by special taxes, as in the case of port works and railway inspection, and by the revenues of the state railways, telegraph lines and post office. The depreciation and unstable character of the paper currency render it difficult to give a clear statement of receipts and expenditures for a term of years, the sterling equivalents often showing a decrease, through a fall in the value of the milreis, where there has been an actual increase in currency returns. This was most noticeable between 1889 and 1898, when exchange, which represents the value of the milreis, fell from a maximum of 2734 pence (27d. being the par value of the milreis) to a minimum of 558 pence. Since 1898 there has been an upward movement of exchange, the average rate for 1905 having been very nearly 16 pence. In this period the increase in the sterling equivalents would be proportionately greater than that of the currency values. The gold and currency receipts and expenditures for the six years 1900 to 1905, inclusive, according to official returns, were as follows:—
| Year. | Average Rate of Exchange. | Revenue. | Expenditure. | ||
| Pence. | Gold Milreis. | Currency Milreis. | Gold Milreis. | Currency Milreis. | |
| 1900 | 9.50 | 49,955,522 | 263,687,253 | 41,892,150 | 372,753,986 |
| 1901 | 11.38 | 44,041,302 | 239,284,702 | 40,493,241 | 261,629,212 |
| 1902 | 11.97 | 42,904,844 | 266,584,912 | 34,574,643 | 236,458,862 |
| 1903 | 12 | 45,121,844 | 327,370,063 | 48,324,642 | 291,198,960 |
| 1904 | 12.28 | 50,566,572 | 342,782,191 | 48,476,413 | 352,292,147 |
| 1905 | 15.89 | 64,207,004 | 243,355,396 | 51,606,272 | 265,699,281 |
Reducing gold to a currency basis at 15d. per milreis (the official valuation adopted in 1906), the budget for 1907 provided for a revenue of 353,590,593 milreis and an expenditure of 409,482,284 milreis, showing a deficit of 55,891,691 milreis. These deficits were common enough under the monarchy, but they have become still more prominent under the republic. According to the “Retrospecto Commercial” for 1906 of the Jornal do Commercio (Rio de Janeiro, March 5, 1907), the aggregate deficits for the eleven years 1891 to 1904 were 692,000,000 milreis, or, say, £43,250,000.
The natural result of such a regime is increasing indebtedness. In 1888, a year before the republic was proclaimed, the internal and external national debts amounted to £74,000,000 sterling, with the currency at par. Ten years later, when the currency had fallen to 558 pence per milreis, the government found itself unable to meet the interest obligations on its debt and railway guarantees, and an arrangement was made with its creditors in London for the issue of a 5% funding loan to an amount not to exceed £10,000,000, and the suspension of all amortization for thirteen years. On the other hand the government agreed to withdraw currency, which had reached a total of 788,364,614 12-milreis, pari passu with the issue of the loan, the milreis being computed at 18 pence. The purpose of this condition was in order to improve the value of the paper milreis in order to increase the specie value of the revenues. The scheme came into operation in June 1898, and not only was a complete suspension of payments avoided but the financial situation was greatly improved. The government even withdrew more of its currency issues than required by the agreement, and the value of the milreis steadily improved. At the same time the government carried out the forced conversion of the national loans into lower interest-bearing issues, which greatly reduced the annual interest charges. These measures would have put the financial affairs of the nation on a solid footing in a very few years had the government been able to keep its expenditure within its income. The naval revolt of 1893–1894, however, had aroused the spirit of militarism in the ruling classes, and the effort to perfect the organization and equipment of the army, strengthen the fortifications of Rio de Janeiro, and increase the navy, have kept expenditures in excess of the revenues. The purchase of guaranteed railways owned by foreign companies likewise added largely to the bonded indebtedness, though the onus was in existence in another form. The result of these measures was a large addition to the public debt, which on 31st December 1906 was approximately as follows (apolices being the name given to bonds inscribed to the holder):—
| External debt: | £s. d. |
| Loans of 1883, 1888 and 1889. | 26,478,500 |
| Oestede Minas R. R. loan | 3,388,100 |
| Loan of 1898 | 7,331,600 |
| Funding loan of 1898 | 8,613,717 9 9 |
| Railway rescission loan of 1901 | 15,467,015 16 1 |
| Port works loan of 1903 | 8,500,000 |
| ———————— | |
| £69,778,933 5 10 | |
| Internal debt, funded: | Milreis |
| 5 % apolices, Law of 1827 | 483,546,600 |
| 412% ”” 1879 | 20,548,000 |
| 6 % ”” 1897 | 37,082,000 |
| 5 % ”” 1903 | 17,300,000 |
| ————— | |
| Total, funded | 558,476,600 |
| (at 15d. £34,904,787) | |
| Internal debt, not funded: | Milreis |
| Paper money | 664,792,960 |
| Savings bank and other deposits: | |
| In paper | 246,812,407 |
| In gold, 19,053,861 r (say) | 34,296,950 |
| Floating indebtedness (a⁄c s current, bills, &c.) | ? |
| ————— | |
| Total, not funded, approx. | 945,902,317 |
| (at 15d. £59,118,895 stg.) | |
| Approximate total indebtedness | £163,802,675 |
In addition to these, the government was still responsible for interest guarantees on fourteen railways, or sections of existing lines, with an aggregate capital of about £4,900,000 held in Europe and 12,055,440 milreis held in Brazil, on which the national treasury paid in interest £191,324 and 1,398,493 milreis.
The paper currency of Brazil consists of both treasury issues and bank-notes, the latter issued under government supervision. Its fluctuations in value have been not only a serious inconvenience in commercial transactions, but also the cause of heavy loss to the people. Under the provisions of the funding loan of 1898 a scheme for the withdrawal of the paper money was carried into effect, and by the end of December 1906 the amount in circulation had been reduced from 788,364,614 12-milreis (the outstanding circulation 31st August 1898) to 664,792,960 12-milreis. Two funds were created for the redemption and guarantee of paper issues, the latter receiving 5% of the import duties payable in gold. Up to 1906 the Caixa da Amortisação (redemption bureau), which has charge of the service of the internal funded debt, superintended the redemption of the currency, but in that year (December 6, 1906) a Caixa de Conversão (conversion bureau) was created for this special service. It is modelled after the Argentine Conversion office, and is authorized to issue notes to bearer against deposits of gold at the rate of 15 pence per milreis although exchange was above 17d. when the scheme was proposed. The notes are to be redeemable in gold at
