|The law that hindered the market|
The heat and the summer rains are not, in Brazil, climate conducive to the enactment of laws or regulations. Laws are rarely approved at this time. Nevertheless, in January 1861, they enacted Decree 2733, which supplemented Act 1083 of the previous year. This law created many barriers to the formation of corporations that became known in history as the Barriers Act. The rules expressed in the document also restricted the movement of securities issued by companies. In the Empire, conservatives always expressed an aversion to public companies. They argued that the resources required for their capitalization were taken out of slave-based agriculture, their political power base. And they were in power during those years.
The regulation established a market reserve in trading company shares, which became limited to brokers of public funds that had been designated by the government. These were only ten or so individuals in Rio de Janeiro, the capital and financial center of Brazil. Purchase and sales orders could only be accepted in writing, and unsecured transactions were prohibited, as were meetings with unauthorized intermediaries, which were considered meetings for illegal purposes. Moreover, it created compulsory denouncement, because whoever knew of any infractions and failed to report them suffered fines and penalties.
The head of government was the future Viscount of Uruguaiana, Ângelo Moniz da Silva Ferraz. The market quickly coined a motto: "Ângelo Moniz knows not what he says, da Silva Ferraz knows not what he does." The irreverence of the free press understood the pernicious reach of the regulation. Soon after its publication, cartoonist Henry Fleiuss published two cartoons in the Rio de Janeiro magazine Semana Ilustrada. In one, a young man asks a young woman’s hand in marriage and the father replies: "Well, you can marry my daughter, but it has to be through a broker, because this is a transaction and according to the regulation of January 23 ...” On the other, two chicken thieves comment that according to the new decree, even to steal chickens they needed a broker.
The Barriers Act and its regulations survived for two decades until 1882, and were the primary cause of the capital market’s difficulties in growing in the second half of the 19th century.