The Encilhamento was an economic policy implemented by a diplomat and writer, Rui Barbosa, in the period known as República Velha.
A prominent figure in politics, Rui Barbosa held the position of Minister of Finance during the Provisional Government (1889 to 1891) of Marshal Deodoro da Fonseca, the first president of the Republic, thus proposing a new measure to boost the country's economy, which favored a large “economic bubble”, constituting one of the most serious economic-financial crises in the entire history of Brazil.
The Enciling Policy
The Proclamation of the Republic in Brazil, which took place on November 15, 1889, signed by Marshal Deodoro da Fonseca, ended the monarchic system, beginning the republican era in the country. However, Brazil was unstructured after the political and economic crisis of the reign of D. Pedro II, with the increase in corruption, higher taxes, expenses with the Paraguayan War, among other dissatisfactions of the population.
Indeed, slavery in the country had been abolished a year earlier, signed by Princess Isabel, daughter of Dom Pedro II, on May 13, 1888, a fact that makes evident Rui Barbosa's proposal to accelerate the country's economy, given that who intended to pay workers who were now salaried workers, whether former slaves or European emigrants who were increasingly arriving in the country.
Thus, inspired by the North American banking system, in the encilhamento policy, the banks of some capitals of the country (Bahia, Rio de Janeiro, São Paulo and Rio Grande do Sul) issued credits to entrepreneurs (farmers, coffee barons, among others). ) willing to open businesses, where some soon went bankrupt.
Rui Barbosa, when Minister of Finance, aimed to transform Brazil into an industrial hub . Therefore, the objective of the encilhamento policy was to stimulate economic growth , encouraging the issuance of paper money, while promoting theindustrialization and modernization of the country , through the expansion of agriculture and trade.
However, this proposal provoked a accelerated inflation , devaluation of the national currency, increase in foreign debt, boycott of ghost companies (free credits without inspections), salary squeeze, increase in unemployment and interest, bankruptcies and financial speculation, especially on the Rio de Janeiro Stock Exchange, from 1890 , which became known as the “encilhamento crisis”.
In the meantime, investors bought shares at low prices and, when they appreciated, they sold them at a higher value, which made the country's economic situation even worse. This form of easy profit made the Brazilian economic crisis worse.
The following year, Rui Barbosa, feeling pressured by the crisis that spread in the country, mainly due to the discontent of the farmers, left the Ministry of Finance on January 20, 1891, being replaced by Barão de Lucena . Finally, it is worth noting that the crisis generated by the encilhamento policy was only appeased in the Government of Campos Sales.
To learn more:Deodoro da Fonseca, Proclamation of the Republic, Brasil República, Campos Sales and Rui Barbosa
Curiosities
- The term “encilhamento” (the act of encilling, that is, harnessing the horse to prepare it for racing) used in Rui Barbosa's campaign, referred to the place of the racecourse (at Derby or at the Jockey Club) where players They placed their bets on horse races. However, on the one hand, the choice of name may correspond to the place where the horse gamblers were buzzing, which generated great confusion (as did the saddle crisis), or even the emergence of an industrialized and modern Brazil that was launching into a new reality, that is, “sailing” the horses, to begin the glorious race.
- The term "encilhamento" can be used to indicate both the political and economic system implemented and the financial crisis generated.
- During the government of Marechal Deodoro, Rui Barbosa served as Minister of Finance for 1 year and 2 months.