Credit and Agriculture: Rural Mortgages in Ribeirão Preto (1895-1905)

ABSTRACT

To analyze the role played by credit instruments guaranteed by mortgages in the coffee economy boom, the article proposes to estimate their determinants and effects in Ribeirão Preto, the main coffee producing region in the early 20th century. Based on the mortgages made between 1895 and 1905 and the census data from 1904-05, (i) the profile of farmers who contracted mortgages was compared to that of farmers who did not, showing that the former have greater assets, production and productivity; and (ii) the relationship between the farmers' real state and the contracting of mortgages was explored. The analysis shows that mortgage contracting positively related to the farmers' real state, according to the theoretical expectations. The analysis also proposes a strategy to measure the two components predicted by the theory: the effect of the mortgage on increasing the farmer's patrimony (called the patrimonial effect) and the effect of the farmer's equity on the ability to contract the mortgage (called the collateral effect). The result shows that both effects were relevant in Ribeirão Preto in the studied period. Together, the distribution of credit concentrated among the largest farmers and the existence of the real-state effect can be seen as a mechanism for the concentration of wealth among farmers.

Keywords:
Mortgage; Coffee; Land distribution; Productivity; Foreigners