The Taubaté Agreement was a state intervention plan in Brazilian coffee production, which took place in February 1906, during the government of Rodrigues Ales, whose objective was to promote the increase in the prices of the product and thus, ensure the profits of coffee growers.
Coffee Crisis
In the second half of the 19th century, coffee was the most important Brazilian product so that 70% of all world production came from Brazil's coffee plantations.
The coffee expansion swelled in the lands of São Paulo, as a result of the high prices of the product in the international market.
The first signs of the crisis appeared at the end of the 19th century, when the consumer market, especially the foreign market, did not grow at the same rate.
As a result, prices fell frighteningly. In 1893, the bag was sold at 4.09 pounds, in 1896 it dropped to 2.91, reaching 1.48 in 1899.
To learn more:History of Coffee and the Coffee Cycle
Coffee Valuation Policy
coffee was the backbone of the country's economy , and the big farmers, the ruling class and several governors worked to prevent the coffee growing from having losses.
The solution began to emerge on February 26, 1906 , when they met, in the São Paulo city of Taubaté , the governors of São Paulo (Jorge Tibiriça), Rio de Janeiro (Nilo Peçanha) and Minas Gerais (Francisco Sales).
The result of the meeting was the signing of the Agreement of Taubaté , which laid the foundations for the coffee valorization policy .
The governments of the three states have committed to loans abroad , aiming to buy the surplus of coffee production and keep them in Brazilian ports, thus avoiding the price drop in the international market.
The agreement established that the amortization and interest on these loans would be covered by a new tax levied on each sack of coffee exported. To solve the problem in the long term, producing states should discourage the expansion of plantation .
The president Rodrigues Alves did not agree to give federal aid to the Agreement, citing the need to contain spending and stop inflation. Only in 1907, with the appointment of the miner Afonso Pena for the country's presidency, the Taubaté Convention received federal support.
English bankers, especially those of the House of Rothschild, initially refused to make loans, but backed out when US and German banks began to do so. The government withdrew from the market, in four years, 8.5 million bags of coffee , with funding from various governments and international capital.
The provisions of the Taubaté Agreement brought broad benefits from the first moments of its application. However, in the long run the plan failed , since the valorization of coffee could only succeed if Brazil had a monopoly on world production.
However, the rise in prices on the international market ended up stimulating coffee production in other countries, increasing competition . The policy was adopted by several governments, when in 1926, the State of São Paulo started to pay for the valuation alone.
To learn more:
- First Republic
- Rodrigues Alves