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

Entrepreneurship in Nineteenth-Century Brazil: The Formation of a Business Environment. By Sergio de Oliveira Birchal. New York: St. Martin's Press, 1999. xvii + 233 pp. $65.00. ISBN 0312217161.

Sergio de Oliveira Birchal's book is an important contribution to the literature on the question of why late developing economies failed to match the experiences of the early industrializers. He sets this book in nineteenth-century Minas Gerais, an important mining and farming state bordering the two fairly successful "late" developing regions of Rio de Janeiro and S[tilde{a}]o Paulo, to examine how "lateness" shaped the experiences of industrial firms in four sectors of this economy. He approaches this question both from a regional perspective, that of Minas versus Rio de Janeiro and S[tilde{a}]o Paulo, and from the harsher international perspective, that of Minas versus early industrializers. Birchal consciously evokes Alexander Gerschenkron's Economic Backwardness in Historical Perspective, Alfred Chandler's The Visible Hand, and Joseph Schumpter's Theory of Economic Development to argue that a combination of economic factors and entrepreneurial shortcomings limited industrialization in nineteenth-century Minas Gerais. His book is a lesson in just how daunting was the task of late industrialization.

Birchal, a lecturer in business and economics at the UNA School of Business in Belo Horizonte, Brazil, brings together theoretical literature on the roles of technology and entrepreneurship in the development process with existing research on mineiro industries and new research based on company annual reports and correspondence to set up a type of test. How did mineiro firms stack up against what we have come to recognize as modern industrial ventures--firms with differentiated product lines, developed distribution channels, and a professional managerial bureaucracy? Scholars familiar with the literature on Brazilian economic development would immediately guess "not well," for even the most advanced industrial centers in the country at the end of the nineteenth century lagged decades behind their European and North American counterparts. Indeed, Birchal's study of four industries--iron, electricity, textiles and transportation--is a sector by sector dissection of the limitations of Brazilian development.

Mineiro entrepreneurs and their immediate families, primarily members of the landholding elite, controlled significant portions of company stock and day-to-day management. The fact that family members, not professional managers, ran mineiro companies in the nineteenth century had important negative consequences for industrial development. For example, their hit-or-miss methods for making technology decisions led to equipment incompatibility on the factory floor while internal family politics carried more weight than individual ability in securing managerial appointments. Compounding entrepreneurial shortcomings were serious economic deficiencies. Transportation networks were primitive, domestic markets were underdeveloped or non-existent, and industries relied on imported machinery and technicians that did little to generate the linkage effects that promote broad economic development. As a result, mineiro firms were small, undifferentiated, closely held organizations that sat firmly at the first stage of cap italist development--the craft enterprise.

In spite of these serious shortcomings, the element that jumps out of this study was the strength of mineiro entrepreneurial drive. The company-level detail in this book shows the many ways in which entrepreneurs had to be innovators to succeed in a pre-industrial economy. For example, they had to know foreign languages to read trade publications in order to learn about available technological options. They traveled abroad to tour factories, establish contacts with suppliers, order equipment and hire technicians. They then organized the long journeys on mule back and oxcart over treacherous roads in a pre-railway era to get their imported machines and technicians from the port to the interior. Once installed, equipment was often found to require modifications. International communications were slow and foreign suppliers unresponsive, leaving entrepreneurs to adapt technology to the best of their ability. After clearing these hurdles, entrepreneurs faced the problem of stunted domestic markets. Electricity-ge nerating firms, for example, had to convince a population used to living in the dark that they needed light. Textile firms sold goods from the factory floor, but when sales were slow or merchants unresponsive they established regional warehouses and even organized mule trains to haul their own products hither and you in a market otherwise unserved by industry. Clearly, these obstacles set them apart from their counterparts in early industrializing countries.

It is in this sector-by-sector review of the range of inputs that went into creating an industrial company, from managerial ability to technology selection, that Birchal's work is most compelling. "The Mineiro Firm" and "Technology" take the reader through all aspects of firm size, management, markets and distribution networks, and technology choice, procurement and adaptation for each industry. The abundance of detail on scores of companies, their officers, their distributors and customers allows the reader to visualize the entrepreneurs scrambling to adapt a piece of equipment to his existing production line while his mule trains loaded up products at the small, primitive factories and set out through the mountain valleys. At every turn the reader is faced with the harsh reality that Brazilian economic development was very precarious.

While these two chapters are compelling, the remaining three are less polished. In them, the author very self-consciously attempts to differentiate the mineiro case from the "Brazilian experience," as expressed in the economic historiography on the nineteenth century, when in fact the literature on the best known cases, those of Rio de Janeiro and S[tilde{a}]o Paulo, does not attempt to make any broad pronouncements about Brazilian development at all. Rather, it almost always addresses the question of how these two specific regions developed when the remainder of the country failed to. Birchal is joining, not challenging, this region-by-region approach to Brazilian economic development to tease out the prevailing characteristics that shaped a particular experience. In the end, he tells an important story of robust entrepreneurial drive shared by a group of businessmen who managed to develop niche products for a niche market against substantial obstacles. It is here that he makes a significant contribution to our understanding of both the general problems of lateness and the specific limitations to Brazilian development.

Anne Hanley is assistant professor of Latin American history at Northern Illinois University. She is the author of "Business Finance and the S[tilde{a}]o Paulo Bolsa, 1886-1917," in Latin America and the World Economy since 1800 (1998), and is currently writing a book on the contribution of Brazilian financial intermediaries to S[tilde{a}]o Paulo's economic modernization at the turn of the twentieth century.
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Title Annotation:Review
Author:Hanley, Anne
Publication:Business History Review
Article Type:Book Review
Date:Mar 22, 2000
Words:1066
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