Entrepreneurship in Nineteenth-Century Brazil:The Formation of a Business Environment

Published by EH.Net (November 1999)

Sergio de Oliveira Birchal, Entrepreneurship in Nineteenth-Century Brazil:

The Formation of a Business Environment. New York: St. Martin’s Press,

1999. xiii + 233 pp. Tables, notes, bibliography, and index. $65.00

(cloth), ISBN 0-312-21716-1.

Reviewed for EH.NET by Ralph Lee Woodward, Jr., Department of History,

Texas Christian University.

This well-researched monograph, based on the author’s Ph.D.

thesis at the University of London, examines the emergence of entrepreneurship

in the Brazilian province of Minas Gerais during the nineteenth century,

suggesting that it is an example of economic development and business formation

in “latecomer” economies. The author’s stated purpose is to show how the

emergence of an entrepreneur class in the interior province of Minas Gerais

differed somewhat from such development in Sao Paulo or Rio de Janeiro. The

study centers on non-agricultural enterprises, specifically the iron, the

transport, the textile, and the electricity-generating industries, and deals

principally with the latter half of the nineteenth century.

The author is a lecturer in Economics and Business at the UNA School of

Business in Belo Horizonte. Based on a broad array of business and government

records and reports in the province, he first provides an overview of Brazilian

and Mineiro economic history in the nineteenth century. A second chapter

focuses on the formation of the Mineiro entrepreneur, with a brief review of

the literature followed by careful analysis of the social and economic

background of the Mineiro businessman.

While acknowledging that the businessmen in Minas Gerais possessed most of the

characteristics of their counterparts

in Rio or Sao Paulo, he also finds that they had significantly different

social and ethnic backgrounds and that immigrants were less important in Minas

Gerais. Local residents constituted the main source of entrepreneurs in

nineteenth-century Minas Gerais.

The third chapter explores the organizational structures of the Minas Gerais

business firms, comparing them to Max Weber’s “traditional” or

“bureaucratic” types. He comes easily to the conclusion that most Mineiro firms

were traditional, small family

affairs. “Their limited scale never required the development of a more complex

organization of the firm and

mineiro entrepreneurs continued to manage their firms with old-century

techniques” (p. 69). In analyzing the four industries mentioned above,

Oliveira Birchal provides considerable statistical data on the size,

structure, and activities of several firms. He adds, however, that toward the

end of the century there was a trend toward more bureaucratic organization,

even though the mineiro economy “continued to be dominated by traditional

firms which became more numerous and specialized towards the end of the

century” (p. 127). He notes that this was the same phenomena that preceded the

rise of large and modern enterprises and of managerial capitalism

in the United States, Britain, and Germany. “Therefore, it is reasonable to

conclude that from the organizational point of view the business environment in

nineteenth-century Minas Gerais was characteristic of the first stage of

capitalist development-traditional and personal capitalism” (p. 127).

The final chapter discusses the role of technology in these firms and their

heavy dependence on and absorption of foreign technical knowledge and the

limits to the development of an indigenous technology during the nineteenth

century. The process of bringing advanced foreign technology to Minas Gerais

was notably slow, and much of the author’s discussion here focuses on the last

two decades of the century. From his examination of technology the author

concludes that Minas Gerais was “an inhospitable environment for the

entrepreneur. . . . The narrowness of the capacity of the nineteenth-century

mineiro economy to absorb and refine imported technology was due to a

lack of skills and entrepreneurship, which was confirmed by the failure to

develop a capital goods industry” (p. 183).

This study “strongly supports the view that economic development of backward

countries does not necessarily follow the same path taken by advanced

economies” (p. 184). Among the differences it notes from development of “more

advanced countries” is the absence of “self-made”

businessmen coming from the bottom of the social ladder by the strength of

their own efforts. Such Horatio Alger figures were notably absent in Minas

Gerais as

business leaders usually came from the upper class and businesses were usually

family ventures. Moreover, strategies and internal organization of these firms

often resulted from considerations unrelated to the market, the social or

political contexts being more important factors.

And, the lack of indigenous technology and a capital-goods industry

“imposed solutions to problems that entrepreneurs in more technologically

advanced countries rarely had to worry about” (pp. 184-85).

It is clear from this study that social and cultural factors are major

determinants of economic development. To the extent that Minas Gerais’

historical development is unique, the reasons may be found in its social,

ethnic, and cultural patterns as Oliveira Birchal has demonstrate d. These or

other social and cultural characteristics certainly help to explain why some

regions have succeeded in implementing a modern capitalist economy more rapidly

than others. This case study of one such region thus makes an important

contribution to the literature on the development of “latecomer” economies.

Ralph Lee Woodward is Neville G. Penrose Professor of Latin American Studies in

the Department of History, Texas Christian University, Fort Worth, Texas. The

third edition of his Central America: A Nation Divided

(Oxford University Press) appeared in 1999. He is currently writing a history

of merchant guilds (consulados de comercio) in the Spanish World,

1200-1900.