Railroads, Coffee, and the Growth of Big Business in São Paulo, Brazil

Railroads came to Latin America in the mid-nineteenth century along with other innovations born of the Industrial Revolution. Most railway hardware came from England, and most construction was underwritten by British capital and supervised, at least initially, by British engineers. The majority of lines serviced export trades, and both single traces and more elaborate nets typically projected from port-city matrices into the producing hinterlands. These lines generally met immediate objectives of delivering goods to market but failed to realize the long-range dreams of Latin American promoters who believed the innovation would automatically bequeath to their countries what it presumably had given to Europe and North America, namely territorial integration and flourishing industrial economies. These expectations remained unfulfilled as Latin American railroads were built to expedite exports and not to establish systems of internal communication. And, far from diversifying and industrializing national economies, they tended at first to reinforce and extend agricultural export orientations.¹

Nonetheless, the innovation had many important consequences. Railroad building was an enterprise of unprecedented economic and technological proportions which perforce required new financial and business strategies and structures. This essay examines the demands of the railroad and the response of the business community in the specific case of São Paulo, Brazil. The example is not typical in that São Paulo built an unusually dense railway system by Latin American standards and later made an impressive transition from agriculture to industry; in the process, São Paulo city became the hub of the state’s railway net and today ranks as one of the world’s leading commercial entrepôts and metropolitan centers. These “successes”—São Paulo’s atypicality—are important to bear in mind but their further substantiation is not the purpose of this essay. Rather, the purpose here is to consider, first, how paulistas adopted the railway innovation and set up their first companies and, second, how they responded to consequential demands upon business management, labor, and industry.

São Paulo Enters the Railway Age

The idea of building railroads came early to São Paulo. In 1835, less than a decade after trains made their appearance in England and the United States, Brazil’s imperial government promised “exclusive operating privileges for forty years to one or more companies” that would build lines from Rio de Janeiro to Bahia, Minas Gerais, and Rio Grande do Sul. São Paulo’s provincial legislature (Assembléia Legislativa) followed in 1836 with an act authorizing a vast network of rails and waterways joining Santos with the Paraíba and Tietê rivers and with Campinas, Itú, Piracicaba, and Porto Feliz.² Both plans projected fan-shaped nets tied to ports, but whereas the first reflected national developmental and strategic designs to connect north, west, and south with the imperial capital, the second grew from regional commercial ambitions to link established paulista trade centers with Santos.

Neither law brought quick results. Not until 1854 did Brazil inaugurate its first line, a nine-mile run near Rio which won its promoter, Irineu Evangelista de Sousa (1813-1889), the title of Baron Mauá. As for the national system proposed in 1835, it has yet to be fully realized. São Paulo enjoyed more success with its regional plans, although its first line was not commissioned until 1856, incorporated until 1860, or inaugurated completely until 1867. This was the San [sic] Paulo (Brazilian) Railway Company, Limited, an English enterprise first begun as another of Mauá’s ventures. It traversed the 139 kilometers between Santos, São Paulo, and Jundiaí and became known variously as the São Paulo Railway, the Santos-Jundiaí, and the Companhia Ingleza (Enghsh Company). From this one trace others grew to form a regional system.³

Some thirty years lapsed between São Paulo’s first railway law (1836) and final inauguration of its first line (1867). The delay and the fact that a British company built the Santos-Jundiaí can be explained on many grounds. Most significant is that at mid-century the railroad was too vast an undertaking for paulistas who could well appreciate existing road problems but who lacked the vision and resources to implement a rail alternative. Difficult enough to deal with was the Serra or Maioridade road which crossed the 2,500-foot coastal escarpment separating São Paulo city from the Santos port.

One of its many critics, provincial president José Tomás Nabuco de Araújo (1851-1852) lamented that even with renovations the Maioridade would never be “fit for traffic”: it is “dangerous for the traveler, susceptible of being blocked and completely obstructed by the frequent . . . landslides from which it daily suffers; . . . this road must be substituted by another, but by what one?”⁴ Nabuco never received a clear answer to his question, and even after construction on the Santos-Jundiaí railway was well under way local leaders undertook extensive repairs of the Serra road at great public expense and with imported foreign labor.

Roads on the planalto received less traffic than the Maioridade but won their equal share of criticism. Thomas Davatz visited São Paulo in the 1850s and found road conditions terrible: “In the dry season they develop pot holes in many places due to the heavy and crisscrossing mule traffic, and in the rainy season these fill with water and mud so that the animals sink in up to the belly and while trying to walk on three feet seek out solid ground with the fourth.”⁵ Mules were the main beasts of burden in the middle of the nineteenth century and the roadsides often became their graveyards. Travelers sometimes spotted fifty of the animals dead on the Rio Claro-Santos route, and those that survived the month-long round trip needed at least three weeks’ rest before making another tour. And the system took its toll in other ways as well: cargoes spoiled, roadside landowners gouged travelers for grazing privileges, and the Cubatão toll station outside Santos took its cut. All in all, transport-related costs often consumed thirty or even fifty percent of a planter’s profits.⁶

As the nineteenth century progressed, coffee increasingly became the main item of trade. This crop replaced sugar as the province’s leading export in 1850-1851 and thereafter its supremacy was complete. Well before the railroad’s advent, planters and prospective planters began their assault on São Paulo’s rich western lands. How far this expansion might have progressed without the railroad is an open question, although Rio Claro is regarded by some as the outer limit.⁷ There is, however, no indication that coffee’s expansion guaranteed the railroad’s future. The majority of those moving onto the frontier were preoccupied with immediate individual concerns—claiming lands, establishing titles through fair means and foul, buying slaves, planting coffee, and often fighting off creditors.⁸ Such matters left planters little time or money to undertake a major overhaul of their transportation system, and hence while they as a group were the ones most victimized by existing inadequacies, they were ill equipped to fashion its remedy.

In some instances poor roads and plantation interests even heightened resistance to innovation. For one thing, the roads in themselves conspired to keep planters (fazendeiros) separated. For another, competitive and parochial concerns frustrated collective action of the sort that would be necessary in building a railway. We therefore see, for example, that in the first half of the nineteenth century sugarcane growers frequently resisted road construction through their properties, and rather than pool their resources on improvements they sometimes switched to coffee production because this crop was less subject to spoilage.⁹ A more telling example is found in the failure of president Nabuco’s plan to centralize road administration. His hope was to reduce the powers held by municipal road inspectors and increase those of the provincial public works administration, whose functions would henceforth be subdivided into administration, engineering, and fiscal sectors. Significantly, resistance arose not because road improvements were seen as undesirable but, rather, because local leaders opposed any loss to their influence and feared that a central agency and technicians —possibly foreign ones—might be insensitive to their particular needs.¹⁰

The capacity of provincial leadership to innovate was also circumscribed in other ways. Capital and labor were both scarce commodities. São Paulo, moaned one provincial deputy in 1855, “is in a real economic crisis [and] can not grow for lack of capital.”¹¹ The two banks established during that decade (1856 and 1859) brought little relief, and when planters turned to commission houses for financial assistance, they found that most were based in the nation’s capital. Rio’s control of the money market and indeed of the bulk of the coffee trade lasted until late in the nineteenth century and underscored São Paulo’s provincialism. In 1873, for example, Rio counted 2,000 commission houses dealing in coffee compared to São Paulo’s thirteen. Not until the 1890s did Santos’ coffee exports surpass those of Rio. Among other things, this meant that even as the coffee frontier swung out of the Paraíba Valley into western São Paulo, much of the trade in beans continued to flow back through Rio. This also illustrates that the Santos-São Paulo axis, while important, did not yet dominate provincial life absolutely. Rio competed with Santos for the coffee trade as to a lesser extent did intermediary ports such as São Sebastião and Ubatuba. Nor did São Paulo city enjoy the primacy it would achieve by 1900. Campinas and Santos rivaled the provincial capital in population and business activity: Campinas ranked as the agricultural capital of the province and between 1836 and 1874 grew from 6,689 to 31,397 inhabitants to outstrip even São Paulo whose population reportedly declined slightly from 31,569 to 31,385 between 1854 and 1874; Santos, as the major provincial port, rivaled the capital’s commercial prestige.¹²

Labor, like capital, was also in short supply, especially after Brazil’s participation in the international slave trade ended in the 1850s. This was primarily a planter’s problem, but it also affected transportation. As early as 1836, during the debates over São Paulo’s first railway law, labor became an issue: the provincial deputies were almost to a man tied to agriculture and slave labor; they therefore feared the competition for workers that a railroad construction project would invite and counseled that free, white foreigners be imported for any such venture. This procedure was used in the 1850s when the province undertook repairs of the Maioridade road. At that time presidents Nabuco and José Antônio Saraiva (1854-1856) contracted foreigners for the job in order to keep the slaves on the plantations.¹³

For these various reasons paulistas were themselves not ready to build a railroad in the 1850s. While they had the incentive—the need for improved transport—and while they had examples—the successful railroads in England and the United States—they lacked capital, labor, technology, and, most importantly, the entrepreneurial vision to locate and combine these scarce resources. Those in São Paulo who did address the railroad issue did so mainly before the Legislative Assembly in São Paulo city. But the initiatives there were largely derivative of others taken first in Rio. Hence, São Paulo’s first railway law of 1836 followed the imperial government’s legislation of 1835; similarly, the province’s subsequent law of 1855 followed Rio’s of 1852. To stimulate construction, successive laws also became increasingly generous in the terms offered. Leases were extended from forty to ninety years, and contractors were promised “privileged zones” of five leagues on either side of a trace into which no competitors could build. No outright land grants were promised, but an annual guaranteed interest on invested capital of five percent was. This last had proved a successful incentive in India and would be employed elsewhere in Latin America, but to make it work in Brazil individual provinces tacked on an additional two percent to make the total guarantee seven percent. São Paulo followed the lead of other provinces in this respect and wrote the two percent clause into its 1855 railroad law.¹⁴

This inducement brought investment. In 1856 the Baron Mauá won the imperial concession to build a railroad from Santos to São Paulo, Campinas, and Rio Claro. Mauá, of course, was no paulista. Born in Rio Grande do Sul, at nine he was sent to Rio de Janeiro where he eventually apprenticed with an English merchant firm and so acquired familiarity with British business and banking practices that he later put to use in his grandiose entrepreneurial schemes in Brazil. Mauá was one of the Empire’s most enthusiastic Anglophiles and often preferred speaking English to Portuguese. In any event, the Baron was unquestionably the kingpin of the São Paulo Railway venture, although he did have two partners in José Antônio Pimenta Bueno (Marquis of São Vicente) and José da Costa Carvalho (Marquis of Monte Alêgre); the first was paulista by birth, the second by adoption. Each held important posts in the province but their primary preoccupation was with imperial politics. Their names on the contract petition gave it prestige in the côrte, and through a family connection Monte Alêgre acquired a previous surveyor’s plans for the Serra road.¹⁵

Concession in hand, Mauá promptly sold it to English interests for £40,000, but over the next four years new route surveys by British engineers cost him £25,000 and he paid £20,000 for the privilege of using N. M. Rothschild and Sons’ name on the prospectus. Finally, in 1860, the São Paulo Railway was incorporated, capitalized at £2,000,000 and subscribed in 100,000 shares at £20 each. The company received generous charter terms, including a ninety-year lease, a five-league “privileged zone,” and duty-free importing rights for ten years on all railway material and for thirty-three on all fuel. Construction problems abounded, especially so on the Serra sections where frequent rains and landslides delayed work on the funicular system designed for the ascent. An inconstant labor force, cost overruns, and disagreements with the government all added to the company’s difficulties. When completed, the line had cost 214:598$920 [mil-réis] per kilometer (about $120,000 per mile in contemporary United States currency). For their money, British investors had received seven percent interest throughout the construction period; for their patience paulistas gained a railroad to service their capital city and coffee trade. Mauá, however, never recouped the £340,000 he claimed personally to have advanced the hard-pressed contractors. Overextended in this and other ventures, he went bankrupt during the Paraguayan War (1865-1870) and the Panic of 1873. The São Paulo Railway remained in English hands until 1947 when it was taken over by the national government, but in the heyday of its middle years it was as blue a chip as any British investor might have wished in his portfolio, producing an average dividend of over ten percent between 1880 and 1920.¹⁶

Building the Santos-Jundiaí proved to be more an entrepreneurial than a technological problem. Engineers could be hired to solve the riddle of the Serra and the equipment could be purchased ready-made abroad. The real trick lay in bringing these and other components together, and at this Mauá excelled. He possessed the ability to inspire and organize, and he had the experience and vision that mid-century paulistas lacked. But he achieved his results by serving as a conduit for British interests and ultimately becoming their victim. The São Paulo Railway thus emerged as a British and not a Brazilian or paulista enterprise, and in Mauá we see an entrepreneurial type who might be fruitfully compared with other Latin American railway promoters or with his modern-day counterparts who innovate by purchasing techno-logical equipment abroad and employing it at home.

Mauá’s example was not lost upon paulistas. The building of the Serra line invited the possibility of others on the planalto, and between 1868 and 1872 paulistas founded five railroad companies which collectively represented a regional response to the Ingleza’s initiative. Individually, the lines serviced subregions within São Paulo and were directed and initially financed by planter groups in those subregions.

The Companhia Paulista de Estradas de Ferro (1868) was the first to incorporate. Its initial trace covered the forty-five kilometers between Jundiaí and Campinas, and subsequent construction carried its rails north to the Minas Gerais border and west to Mato Grosso for a total length in 1968 of 2,062 kilometers.¹⁷ From the start the company became a corporate model for other São Paulo lines and its local capitalization and direction hallmarks of Paulista entrepreneurship. Even so, the founders’ initiatives were not entirely of their own making, and their entrepreneurial motives and style were quite different from Mauá’s.

Events external to the province presented the first opportunity for local action. The British declined their option to build beyond Jundiaí, a decision more or less self-evident by 1862 but not definitive until 1868.¹⁸ Their disinterest, according to Ingleza Superintendent John James Aubertin, stemmed from financial considerations. Aubertin did not elaborate, but no doubt the hefty construction costs already incurred influenced the verdict. Another factor might have been the provincial government’s assumption of all extension rights including the entire seven percent guaranteed annual interest. Without security of imperial support for at least five percent of that interest, the railroad appeared to the English an even riskier investment. Brazil’s 1864 financial crisis and its heavy commitments to the Paraguayan War (1865-1870)—not to mention dislocations brought on by the war itself —constituted further investment disincentives. Finally, the British possibly perceived that there was no real need for them to extend their line. Once built, the Ingleza would control the Serra’s traffic and certainly in the near future new lines could only funnel into the existing trunk.¹⁹

Although the English declined to exercise their option, paulistas did not immediately pick it up. Local leaders remained divided on the railroad issue. Some, such as Senator Francisco Antônio de Sousa Queirós and other “notable planters and citizens from Campinas,” favored the Jundiaí extension, paid for preliminary surveys, but envisioned foreign financing—essentially the English pattern all over again. Others, such as Sousa Queirós’ brother-in-law, José Pereira de Campos Vergueiro, planned a cart road, yet allowed that it should be built wide enough to accommodate a railroad trace in the event the innovation became feasible. Still others, those far from the proposed line, took a dim view of pledging general provincial funds toward an improvement that would benefit only one area.²⁰

What ultimately convinced paulistas to build the railroad themselves was a proposal from another quarter. The Baron Mauá made a bid for the option. To many, Mauá had become a reckless investor, one associated with courtly intrigue and corruption, and a pawn in the hands of the British. And whereas paulistas had grudgingly tolerated all this on the Ingleza, they resisted his further incursion now that the railroad approached Campinas and the immediate locale of their plantations. Mauá and his associates “are not sons of the province,” wrote the Correio Paulistano:

In testament to the catalytic power of Mauá’s proposal, only seven days after its submission on March 31, 1864, José Vergueiro discarded notions of a cart road, embraced the railroad alternative, and offered to build it in less time and for less money than Mauá.²² In this unintended way the Baron brought paulistas together on the railway issue.

Endorsement of the idea was only the beginning. Almost four years elapsed between Vergueiro’s conversion in 1864 and incorporation of the Companhia Paulista in 1868. As could have been anticipated, capitalization was the major obstacle and one which the Paraguayan War made more imposing. In addition, the notion of local financing took time to mature; paulistas had no experience in raising such large sums, let alone the 5.000:000$000 mil-réis necessary for the extension. At first, they quarrelled over alternate route surveys. Then, in June 1867, a provincial deputy proposed a venture in which the province and private individuals would be co-owners. Two months later, seven wealthy paulistas informally pledged 1.000:000$000 mil-réis toward a privately financed Jundiaí-Campinas railroad.²³ This was a significant step toward local financing, particularly in the case of one of the investors, Francisco Antônio de Sousa Queirós, who just four years earlier had favored foreign capital investment. To realize these large pledges and subscribe the many smaller ones required collective action, and at this moment São Paulo’s new president, Joaquim Saldanha Marinho (1867-1868), threw his weight in this direction; in December 1867 he traveled to Campinas and, before a large planter gathering, argued the advantages of the proposed road. The group volunteered over 1.000:000$000 mil-réis and, more importantly, named thirteen commissions of two and three men each to solicit pledges from as many municipalities. For the most part, the forty-three commissioners were assigned communities where they were known through family, business, politics, or a combination thereof, and, riding from town to town, they generated sufficient additional support.²⁴

Formation of the Companhia Paulista followed in January 1868 with Saldanha Marinho again serving as catalyst. He convened the final meetings in the capital and those gathered elected Clemente Falcão de Sousa Filho president and Inácio Wallace de Gama Cochrane, Bernardo Avelino Gavião Peixoto, Francisco Antônio de Sousa Queirós, and Martinho da Silva Prado directors. Falcão Filho was a professor at the Law Academy and the others were lawyers and businessmen in the city of São Paulo with coffee interests in the interior. In the months following incorporation, 654 paulistas spoke for the company’s first stock offering of 25,000 shares and were invited to pay the 200$000 per share in installments.²⁵

If local capitalization and direction were the distinctive features of the Companhia Paulista, to what degree were they the result of Paulista entrepreneurship? Certainly the company itself could not have been formed had the British exercised their option to build to Campinas (and perhaps even to Rio Claro) as their 1856 concession allowed. Had they done so, an enterprise such as the Paulista might eventually have materialized but not in 1868. Similarly, in the absence of the Paraguayan War, Brazil’s financial instability, and provincial control over the concession, British bankers might have underwritten the project even had they not wished to take out the contract themselves. British financing had, after all, been assumed by Sousa Queirós and his fellow planters in 1863. Hence, the Paulista’s formation and local capitalization resulted in part from factors discouraging foreign participation, and this conclusion lends credence to those who argue that national development initiatives in dependent (satellite) nations are possible only in the absence of foreign (metropolitan) interest.²⁶

But the Companhia Paulista’s formation amounted to more than a local action taken only in the absence of an external one; it was also a positive reaction against further external influence in provincial affairs, whether originating in the Court in Rio or abroad. The negative response to Mauá’s railroad proposal was a clear manifestation of an emergent regionalism which took time to articulate in economic terms but which constituted the essence of paulista entrepreneurship.²⁷ The Companhia Paulista’s incorporation represented the further maturation of this approach to business in that it touched individuals previously dispersed in their separate towns and on their scattered fazendas and united them in a common enterprise. By so doing, it broke down the extreme parochialism of individual planters which heretofore had blocked collective action. The Paulista further focused provincial interests by establishing its headquarters in São Paulo, and the city increasingly became the hub not only of provincial transit but also of finance and commerce. Planters who invested in the Paulista thus acquired an interest in an enterprise centered in the capital, much vaster than their individual plantations, but designed to serve plantation needs.

Immediately after the Paulista was incorporated, railroads in São Paulo began to appear according to the demands of the coffee growers and municipal initiatives. The pattern established by the Companhia Paulista was repeated in the creation of the Ituana and Sorocabana in 1870, the São Paulo-Rio de Janeiro in 1871 and the Mogiana in 1872.²⁸ These and subsequent lines such as the Araraquara (1895) and Noroeste (1901) lent their names to the subregions serviced and in this way railroads defined São Paulo geographically. Growth of these major arteries masked the further proliferation from them of spurs in pursuit of towns and municípios not yet served and in some cases individual fazendas. Influential stockholders steered construction toward their own plantations; Antônio de Silva Prado, for example, brought the Companhia Paulista to his Santa Veridiana fazenda in 1892. Independents hooked up with established lines as was the case with the Rio Pardo (1884), the Itatibense (1887), the Descalvadense (1899), the Campineiro (1890) and others.²⁹ While the railroads divided and subdivided São Paulo province into smaller and smaller subregions, they integrated these parts into a larger system focused on the capital and funneling through it on the Ingleza to Santos.

Railways and Business Structure

The consequences of railroad building in São Paulo were manifold: railroads extended the coffee frontier, opened the interior to thousands of newcomers, and centralized and homogenized paulista life by binding city and country more closely together; they created capital, laid the foundation for an internal market, and increased technological capabilities. Railroads, coffee, and population grew together to make this Brazil’s richest and most populous state. In this process, the railway companies emerged as São Paulo’s first major corporate enterprises and as such they severely challenged the existing financial, management, and production structures that had grown up in service of the plantation economy. In response, however, these older structures did not collapse but survived to define significant features of the larger and increasingly urban and industrial economy born of the railroad.

Public and private interests were intermixed in railroads from the beginning. To encourage railway construction both empire and province wrote generous contracts which, among other things, promised interest guarantees on invested capital. In the enthusiasm of the time, concessions were granted to almost any group that could raise, or even show some hope of raising, the requisite capital. The result was that private railroads were built without central planning and at public risk since provincial and imperial governments committed themselves to interest payments. This meant in practice that company profits did not depend entirely upon operational efficiency and many lines in Brazil were built carelessly, at exorbitant cost and into unproductive areas. This situation did not generally occur in São Paulo because most roads were begun with local capital and built into areas rich in coffee. Nevertheless, São Paulo had its failures, and when it did, the government absorbed the loss. This was the case, for example, with the Sorocabana and the Ituana companies. Incorporated in the propulsive 1870s, these lines were built hastily, too close together, and into a region poor in coffee. As a consequence, the government subsidized them with interest payments, forced their merger in 1892, assumed full control in 1904, and then leased the entire operation to Percival Farquhar’s Brazil Railway Company from 1907-1919.³⁰

The most successful companies were those that trafficked most heavily in coffee and these eventually became almost free from public control once they repaid all monies received in guaranteed interest. Thereafter companies might raise and lower rates arbitrarily and only if profits exceeded twelve percent in consecutive years could the government enforce rate reductions. The profit ceiling encouraged lines with capacities to earn in excess of twelve percent to spend predicted surpluses on improvements and thereby escape tariff cuts. This tactic was employed by the Ingleza and by the turn of the century Europeans in Brazil joked that “the only thing that remains to be done upon the . . . line is to gild the tops of the telephone poles.”³¹

In some ways companies actually did a better job at regulating themselves in the absence of government interference. Hence, in 1874 the Ingleza and Paulista joined hands to form the Contadoria Geral, a Brazilian version of Britain’s Central Counting House. The agency was established to manage the multiple details of mutual traffic on the two lines, and others soon participated. The paulista example was not copied elsewhere, however, and by 1911 there was still no national counterpart, although by that time Brazil’s railway network had increased seven-fold.³² Government regulation was weak and inconsistent. The Engenheiro Fiscal was purportedly its independent agent who reviewed company books and reported directly to the provincial president. In practice, however, he was sometimes paid by the companies themselves and was rarely able to effect necessary changes. Controller-engineer, João Pinto Gonçalves, for example, found that he could not breathe life into the failing Ituana by raising its rates because traffic would simply be driven off to the successful Paulista. He was also unable to forestall construction by both Paulista and Mogiana into the Mogi Guaçú Valley. After the fact, the government never effectively mediated the claims and counterclaims advanced by each concern against the other for zone violations.³³

If public and private domains were blurred in commitments to interest guarantees and regulation, they became virtually indistinguishable in their mutual homage to coffee. Not only did plantations, railways, and government depend upon coffee for their economic well-being, but individuals and families prominent in one activity were often prominent in one or both of the other two. As a result, government policies tended to foster rather than restrict the connection between plantations and railways. A clear instance of interlocking interests came with abolition in 1888. Planter politicians negotiated government subsidization for foreign immigrants who were transported without fare to the interior and deposited there to work the plantations.³⁴ A few years later, when the mil-réis plunged in relation to the English pound, São Paulo’s legislature granted railroads the right to slide rate schedules up or down in relation to the exchange rate. This “moving tariff” (tarifa móvel) remained operative until 1920 as an indirect government subsidy insuring the railroads against inflation.³⁵ Finally in the 1900s, when coffee supply began to outrun world demand, paulistas conspired with the national government in adopting a valorization scheme to regulate prices abroad and thereby defend and perpetuate the coffee monoculture at home.³⁶

In the nineteenth century the provincial government had no clearly defined and independently conceived railroad policy. The government’s primary objective was to support the coffee economy and, to this end, it granted railroad concessions with generous terms and minimal restrictions. Public agencies found themselves supporting private railroad companies, both strong and weak alike, yet lacking the capacity to regulate either. The result was a system of mixed gauges, serpentine traces, frequent overconcentration, and complete dependence on coffee.

The labor requirement of the railroad was one of the most challenging of the new demands; along with technology, this was one of the crucial ingredients provincial society could not supply. Railroads required skilled and unskilled laborers, and at the outset São Paulo depended entirely upon foreigners for both categories. The top technical job on all lines was that of Inspetor Geral (General Inspector), a position which, during the 1870s and 1880s, virtually required experience abroad. This was understandable since the technical and managerial competence required was international in scope. Inspectors often went abroad to purchase equipment, usually in England, but later in France, Belgium, Germany, and the United States. Even when purchases were not made directly they had to be negotiated through foreign purchasing and shipping agents. In Brazil the Inspector General oversaw all aspects of a company’s operation, from surveying and construction to maintenance and bookkeeping. On the Companhia Ingleza, inspectors, or superintendents as they were there called, remained British, but on other lines Brazilians began to replace foreigners by the turn of the century. Hence, on the Companhia Paulista, Walter John Hammond’s successor, William Burnett, stepped aside for M. P. Torres Neves in the 1890s.³⁷ With some variation this pattern was followed for the heads of major departments on this and other lines—Traffic, Line, Locomotion, Personnel and Accounting. Brazilian engineers moved most quickly into positions as surveyors and designers where prior experience in building roads, bridges, and other public works stood them in better stead.

Among other consequences, these developments occasioned the expansion of engineering education and a shift in curricular emphasis from military to civilian training. At mid-century the Empire’s only engineering school was the Escola Militar (1838-1859), and although its successor, the Escola Central (1859-1874), launched a civil engineering program, it was not until formation of the Escola Politécnica in 1874 that this course of study was finally freed from its military counterpart. The Escola Central’s first director confirmed the fact that railroads played a role in the transition; civil engineering, he said, was “the career most sought after by the students of the polytechnic school because of the immediate employment assured them by the increase of our railways and the other physical improvements that Brazil needs so dearly.”³⁸ Along with the engineering schools came engineering organizations such as the Institute Politécnico Brasileiro which gave way in 1880 to the Clube de Engenharia. Both groups published journals full of railway articles, and the Engineering Club sponsored Brazil’s first railway congress in 1882. Publication of railway lexicons and texts further assisted the dissemination of the new technological vocabulary.³⁹

Paulistas initially drew heavily on foreign and national engineering talent while at the same time developing their own. Planters sent their sons to study abroad, especially to the United States, and, once graduated, many returned to work on the railroads. São Paulo produced its own engineering periodicals and spawned its own clubs; in 1894 it founded its own Politechnic School, which although less prominent than the Law Academy nevertheless became the choice of many second sons of established families and the hope for many seeking establishment.⁴⁰

As with Inspectors General and civil engineers, most skilled labor was at first foreign. These employees were largely occupied in assembling imported material during construction phases and later in maintenance operations in company workshops. Workers received specific contracts such as that awarded to George Smallbone who in October 1880 signed with the Companhia Paulista’s English agents, Fry, Miers and Company to work for three years as a smith in Campinas. (See  Appendix.) It is difficult to say with precision how many of the foreigners who virtually monopolized skilled jobs of machinists, fitters, and smiths in the 1870s and the 1880s remained in the country, but certainly some did and those who did not were responsible for training many Brazilian apprentices. By 1900 the Companhia Paulista was the state’s largest industrial employer and by 1911 entire locomotives were assembled in its workshops.⁴¹

The railroads offered job mobility to unskilled workers that few other areas provided.⁴² The career of João Chagas provides an example. Independent and unskilled, he began with the Companhia Paulista in 1872 as an ordinary laborer and rose successively to cleaner, fireman, and second- and then first-class machinist. Between 1891, when he achieved first-class machinist rank and retirement in 1916, his salary rose from 200$000 to 345$000 per month. Chagas received a pension equivalent to half pay, and in 1919 informed the company that he thereafter wished to be referred to by his true name of Francisco José de Chagas.⁴³ A similar pattern obtained for the Italian, Cezaro Felippe, who as an illiterate laborer began work in 1881, rose to fireman (1889) and machinist (1891) and retired in 1923 as assistant to the chief of the Campinas depository. Felippe’s wages climbed from 125$000 a month in 1891 to 280$000 in 1898, but after a short work absence in 1899 never regained their previous height until 1919.⁴⁴ There were also those who fared less well. Pedro Augusto suffered from drink, illness, dismissals, and fines in an erratic tour with the Companhia Paulista which lasted from 1899 to 1926. He began as a laborer at 4$300 a day but by 1917 had advanced only to the rank of assistant fitter at 5$900 a day.⁴⁵

Railroads were initially dependent upon foreign sources for their unskilled as well as for their skilled labor needs because São Paulo remained a slave society until 1888, and because even after that date agriculture absorbed the bulk of the free labor pool. The railroads attracted immigrants from other regions in Brazil and from abroad, and companies sometimes contracted especially for their importation. Even so, there remained a short supply of labor for which fazenda and railroad competed. In this environment railroad workers stood in contrast, if not in potential conflict, with the slave system, but it was the employer-employee relationship based on plantation slavery that most directly conditioned their lives.⁴⁶ Railroads built and directed by plantation interests were as companies run much as plantations. Thus while workers won pensions, compensation benefits, and recognition of the eight-hour day after strikes in 1906 and 1917, they never established themselves as independent bargaining agents. Management treated them as subordinate members of the corporate family. Such status might have its beneficial aspects—the Companhia Paulista, for example, provided its employees with schools, cooperative stores, medical and pension benefits, and often with houses. At the same time, however, the average base pay for linemen remained low even through times of devaluation and inflation. Their basic wages rose only from 2$000 to 3$000 a day between 1875 and 1910, a period in which the mil-réis plummeted from par (27d) to 7d, and then rose again to 15d.⁴⁷ In these ways paulistas met their skilled and unskilled labor needs while maintaining the social status quo. The dominant structure of plantation society persisted and incorporated the new elements.

The industrial demands of the railroad were met in a similar way. Wood for cars, fuel, and ties was the major product of local origin, and it could generally be supplied by fazendeiros ready to deforest their lands for coffee planting.⁴⁸ Virtually all manufactured equipment came from abroad, and the backward linkage effects born of the railroad were few. In the 1880s, for example, paulistas experimented with products from the province’s Ipanema iron mine and foundry but discovered that in comparison to goods of English origin theirs were less durable and more expensive.⁴⁹ Brazil was even less able to supply the steel for her railroads when that metal replaced iron as the principal hardware staple. Hence, just as the first steam engines were shipped from abroad in the 1860s, so in the 1920s the General Electric Company sold São Paulo its first electric locomotives and later built in Campinas a plant for their manufacture.⁵⁰ And when in 1968 São Paulo borrowed U.S. $17,500,000 to buy sixty-six French and German locomotives, its governor did so saying, “We accept the foreign capital and equipment without ideological considerations since they will help us overcome our underdevelopment.”⁵¹ In the case of the railroads, São Paulo’s technological dependencies may thus be traced to the plantation economy, to immediate natural resource deficiencies, and to the enormous head start achieved by foreign industrial countries. These conditions have meant that it has always been “easier” for paulistas to import equipment or allow foreigners to produce it locally, and these responses have in turn lessened the industrial impact of railway development and enabled the business structure of the plantation economy to persevere.

This essay has emphasized continuities in a changing society. It presented the railroad as a potentially powerful agent of change and alluded to ways in which its power had been undercut in Latin America. São Paulo was introduced as an exception, but it now appears exceptional more in degree than in kind—its railway net was unusually dense by Latin American standards, but the innovation did not trigger backward linkages and industrial growth of the type it reputedly had in Europe and North America. Socioeconomic conditions prior to the railroad’s advent conditioned its subsequent impact.⁵²

These conditions were regional, national, and international in context. In São Paulo’s first railroad endeavor it was the imperial government which stimulated construction through interest guarantees, the British who provided capital, hardware, and know-how, and Mauá whose entrepreneurship brought all the elements together. For subsequent lines the mix of ingredients was quite different; increasingly paulistas took matters into their own hands and built railroads both to defend and exploit their regional coffee economy. They resisted imperial interference in their affairs and then under the Old Republic. (1889-1930) won greater autonomy for their state and, with the other coffee states of Minas Gerais and Rio de Janeiro, effectively controlled national politics. Thereafter, national economic interests became equated with coffee interests. At the international level, paulistas soon negotiated directly, underwriting their own concessions, hiring, purchasing, and borrowing abroad. Clear alliances developed between coffee and foreign business elites, the one seeking to control the pace, direction, and ownership of regional lines and the other the market for technology and investment capital.

Within São Paulo, politics quickly became subordinated to the economics of coffee, and as this happened, public and private sectors merged. The railroad was critical to these processes for without it the coffee frontier could not have expanded to the degree that it did. But railroads gave paulistas more than a new means of transportation. Their creation brought people together in defense of their interests and, perhaps more than coffee itself, established the reputation of the fabled planter-entrepreneur. Through railroad-building paulistas developed the business structures for modern corporate enterprise and thus borrowed heavily from the most basic component of their society, the plantation. Procedures from the regulation of labor to the arbitration of disputes derived from this family-based institution of power and economic relations. The result was a unique agro-industrial enterprise.

This story of railroads has relevance for the study of corporate development in Brazil and Latin America today. The linkages between local, national, and foreign elites, the role of government as safeguard of private enterprise, and the ethos of plantation society, all of which marked São Paulo’s railway age, may well contribute to historical explanations of such currently important phenomena as the multinational corporation and the authoritarian state. In addition, this analysis of an agrarian society’s response to a major industrial innovation reveals the elaborate ways in which the old informed and adapted to the new. Approaching the railroad from this perspective, one might be led to reconsider claims for its transforming power in European countries and the United States.

APPENDIX

The following is a transcription of a document found in the Arquivo Môrto of the Companhia Paulista de Estradas de Ferro headquarters in Jundiaí, São Paulo, Brazil:

Articles of Agreement between Messrs. Fry Miers & Co. as agents for the Paulista Railway Company, on the one part, and George Smallbone on the other part.

1. George Smallbone engaged to leave England by the steamer of the 9th November from Southampton to Santos, and on his arrival at Campinas to serve the Paulista Railway Company in the capacity of smith for the term of three years.

2. George Smallbone engaged while in the service of the Company to remain sober and steady in his conduct, to conform to the rules and regulations of the workshops, and to do all he can for the benefit and interests of his employees.

3. Messrs. Fry Miers & Co. undertake on behalf of the Paulista Railway Company that the said George Smallbone shall receive during the term of this agreement wages at the rate of Rs 180$000 (one hundred and eighty milreis) currency of Brazil per month commencing from the day of his arrival in Campinas; they also agree to advance a sum of 25 (twenty-five pounds sterling) for outfit and passage to Brazil which George Smallbone engages to repay out of his first year’s monthly wages and furthermore that at the expiration of this agreement he shall be furnished with a sum of Rs 140$000 (one hundred and forty milreis) towards his passage to England.

4. This agreement to be ratified by George Smallbone and the manager of the Paulista Railway Company on his arrival at Campinas, when Messrs. Fry Miers & Co. liability in respect to this agreement shall entirely cease.

Witness

Thos. Smallbone (signature)

James George Smallbone (signature)

day of October 30th 1880

Note. It is understood that should George Smallbone remain in the Company’s service after the expiration of the three years his wages will be increased to Rs 190$000 (one hundred and ninety milreis) per month.

Walter J. Hammond (signature)

Insp. Genl.

Cia. Paulista 10 Dez 1880

Author notes