Encilhamento

"[9] Throughout the 19th century the maturation of technological innovations, especially the development of rail transport, gas lighting and steamships, among others, all linked to the process of industrialization, created opportunities for large speculative movements, leading to an acceleration of the flow of capital in the world.

The first step that led to the Encilhamento took place during the final years of the Empire of Brazil under the command of Viscount of Ouro Preto, the last finance minister of the imperial era, when a new Banking Act was enacted in November 1888.

[21] All this, slowly led to an increase in speculation and inflation in general, embracing all economic sectors, from the currencies to real estate,[22] combining minor bubbles into a big one.

This however didn't stop the enacting of the new law, despite protests and opposition from secretaries like Demetrio Ribeiro and Campos Sales, who predicting the consequences of measures, got a central bank to São Paulo.

The majority of political fallout has however been generated by rogue IPOs - as the new banking law effectively allowed authorized issuers to act freely, without any supervision or official punishment.

[28][29] The Encilhamento's "last straw" came with the financial shock wave caused by the default of Argentine government bonds following the 1st collapse of the Bank Baring Brothers at the end of 1890, and although the burst has been initiated then, it occurred in a slow way, until 1892.

[40] The legislation concerning financial markets in Brazil, in a vain attempt to control their volatility, at a time when the concept of Antifragility[41][42] was unknown, suffered a violent setback to the era of the "Barriers Act" – the restrictions only being loosened 70 years later in 1965.