A HISTORY OF BOOMS AND BUSTS

LONG BEFORE THERE WAS A country called Brazil, a tree with that name grew in abundance all along the northeastern coast of South America. When Portuguese explorers, blown off course on their way to Asia, landed there on April 22, 1500, they immediately saw value in trees they called brazilwood. Natives who came to meet them at the shoreline were daubed in bright red dye extracted from the timber. The Portuguese were entrepreneurial and quickly saw the potential for profit. They turned brazilwood into a crimson powder that back in Europe was used to manufacture luxury fabrics such as velvet for an emerging middle class.

To the Portuguese, Brazil's natural resources seemed limitless. A Jesuit priest who visited in the early 1500s wrote, "If there is a paradise here on earth, I would say it is in Brazil." As waves of Europeans arrived to this verdant corner of the new world, what they had in common was a voracious appetite for its bounty, and they each figured out different ways to exploit the resources. The substances driving exploration and development have varied over the centuries, from timber, precious metals, and gemstones to foodstuffs such as sugar, coffee, and soybeans. Today, with its newly discovered reserves of oil and gas, Brazil stands to achieve extraordinary wealth by mining its fossil fuels. The often well-founded belief that another bonanza is just around the corner has made Brazilians a people who are both optimistic and sometimes heedless: "God repairs at night the damage that man does by day," an old Brazilian proverb assures.

This notion would prove to be a constant in Brazilian history and is evident in Brazil's self-image even today. But that bounty of endless wealth waiting to be uncovered has also led to dark moments. Through the centuries, Brazil's powerful elite have enriched themselves on the backs of workers. On many occasions, the hunt for instant and boundless riches has encouraged Brazil's elite to value their country's natural resources above its own people and to pour their energy into developing the first even at the expense of the second. And it all began with that simple discovery of brazilwood flourishing in the rich red soil of the Bahia coastlands more than five hundred years ago.

The Portuguese would probably have preferred to have stumbled upon gold or silver, and it is clearly a sign of their ingenuity and open mindedness that they saw potential in a substance other than shiny metal. The Spanish, their rivals, had already begun their own explorations of lands farther north, in the Caribbean basin, and quickly filled their coffers with precious stones. But as a small, underpopulated nation on the edge of Europe noted for its maritime skills, Portugal had learned to make the most of whatever opportunities came its way.

The Portuguese tried trading with the native peoples they encountered. But their initial admiration for the apparent harmony and simplicity of the natives' way of life soon soured: Once those Tupi- and Ge-speaking tribes acquired the metal pots and other tools they wanted, they lost interest in further commerce, and so the Portuguese then turned to enslavement. Demographers estimate the native population of Brazil in 1500 at somewhere between three million and eight million people. Whatever the figure, it was larger than the population of Portugal, which was about one million at the time. But the Tupi and Ge groups were constantly at war among themselves, allowing the Portuguese to adopt a classic divide-and-conquer strategy, which compensated for their smaller numbers. Each people sold the enemies it had captured to the Portuguese, who encouraged and instigated conflicts to keep the tribes from uniting against the European intruder.

The Spanish were just as quick to subjugate the native peoples of the Americas and to exploit their labor, but Brazil offered Portugal different challenges. The Spanish conquistadors brutally destroyed three indigenous civilizations: the Aztecs in Mexico, the Incas in Peru, and the Mayas in Central America. In all of those civilizations the emperor was considered divine, and once he was eliminated, resistance crumbled. That was not the case in Brazil. Not only were the native tribes there less centralized and organized, but resistance was more diffuse. That made it harder to both overcome the armed opposition and govern the tribes once they were subdued.

Portugal was small and less wealthy than its European rivals, and the crown had to turn to private capital to harvest brazilwood and otherwise develop the new dominion. The king retained title to lands that had been claimed in Portugal's name but granted monopoly licenses to favored investors or nobles who then formed partnerships with those financiers. Brazil became "one vast commercial enterprise," in the words of the Brazilian historian Caio Prado Jr., which the Portuguese operated from fortified trading posts along the humid coast, venturing only hesitantly into a trackless interior of dry scrub and stunted cactus that came to be called the sertão.

The new country evolved rapidly into a system of hereditary capitanias. These were essentially fiefdoms or private estates in which a single grantee was responsible for colonizing, at his own expense, the entirety of the territory. To attract settlers who would cultivate the new realms, the landowners had the authority to carve up their territory into huge estates, some of which were larger than entire provinces back in the motherland.

Nearly five hundred years later, the origins of two of the country's enormous problems—glaring social imbalance and reckless exploitation of natural resources—are still visible. The owners of the fiefs were in essence sovereigns of their own domains, above the law and responsible only to a crown that was far away and had little capacity to enforce its will or even monitor what was going on. The mentality that this situation created has persisted into modern times. Especially in the northeast of Brazil, local political bosses and landowners defy the state's authority with impunity in areas that they regard as their personal kingdoms. In addition, the captaincy system created a preference for large estates that has made land distribution in Brazil extremely inequitable. Even today, a relatively small landed gentry controls the bulk of the country's most productive terrain, while millions of peasants have no plots of their own and are forced to eke out a miserable living as sharecroppers or to migrate to the Amazon in search of a plot of land they can call their own.

Since the colonists arriving from Portugal could not exploit their oversized estates by themselves, they had to find a way to obtain additional labor. Indigenous...