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The Cross of Gold: Brazilian Treasure and the Decline of Portugal

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  • Kedrosky, Davis
  • Palma, Nuno

Abstract

As late as 1750, Portugal had an output per head considerably higher than those of France or Spain. Yet just a century later, Portugal was Western Europe’s poorest country. In this paper we show that the discovery of massive quantities of gold in Brazil over the eighteenth century played a key role for the long-run development of Portugal’s economy. We focus on the economic resource curse: the loss of competitiveness of the tradables sector manifested in the rise of the price of non-traded goods relative to traded imports. Using original price data from archives for four Portuguese regions between 1650 and 1800, we show that a real exchange rate appreciation of about 30 percent occurred during the eighteenth century, which led to a loss of the competitiveness of national industry from which the country did not recover until considerably later.

Suggested Citation

  • Kedrosky, Davis & Palma, Nuno, 2021. "The Cross of Gold: Brazilian Treasure and the Decline of Portugal," CAGE Online Working Paper Series 574, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:574
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    Cited by:

    1. Palma, Nuno & Charotti, Carlos Javier & dos Santos, Joao Pereira, 2022. "American treasure and the decline of Spain," CEPR Discussion Papers 17020, C.E.P.R. Discussion Papers.
    2. Yao Chen & Nuno Palma & Felix Ward, 2022. "Goldilocks: American precious metals and the Rise of the West," Tinbergen Institute Discussion Papers 22-063/VI, Tinbergen Institute, revised 15 Feb 2023.
    3. Leonor Freire Costa & António Henriques & Nuno Palma, 2022. "Anatomy of a Premodern State," Economics Discussion Paper Series 2208, Economics, The University of Manchester.
    4. Palma, Nuno & Reis, Jaime & Rodrigues, Lisbeth, 2023. "Historical gender discrimination does not explain comparative Western European development: evidence from Portugal, 1300-1900," Explorations in Economic History, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Dutch Disease; resource curse; early modern Portugal; the Little Divergence JEL Classification: N10; N13; N50; N53; N73;
    All these keywords.

    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative
    • N53 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Europe: Pre-1913
    • N73 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: Pre-1913

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