PRINCIPLES OF VALUE AND PRICE 475 



stocks began to appear, prices, which had long been declining, fell 

 to or below cost of production, Brazilian exchange reached bottom 

 and began to rise rapidly. The conditions of the nineties were 

 reversed, and planters began to turn to the banks for aid. A few 

 far-seeing ones realized that the real remedy lay in the introduction 

 of methods which should reduce the absurdly high cost of production, 

 but they were unable to turn the tide. When bank assistance failed, 

 demand was made for artificial checking of supply, and the govern- 

 ment prohibited further planting. But results were small. The law 

 was evaded to some extent; but, even if obeyed, it would have failed, 

 for the improved methods employed by the few saner planters, and 

 the coming to maturity of trees set out during the preceding decade 

 continued to augment the crops. 



The three coffee states have long been the chief economic and 

 political centers of Brazil. Especially is this true of Sao Paulo, and 

 Sao Paulo was the chief sufferer in the coffee crisis. Coffee-raising 

 is almost its sole industry. Conditions demanded either reform in 

 methods of production, with bankruptcy for the weaker planters, or 

 further government assistance. The latter was the easier solution, 

 and it was a political possibility. Soberer views might still have pre- 

 vailed but for a new danger the "bumper" crop of 1906-7. Bra- 

 zilian production had risen slowly from 9,500,000 bags in 1899-1900 

 to 1 1 ,300,000 bags in 1 905-6. Then it suddenly jumped to 20,000,000 

 at a time when there was already a surplus stock on the market of 

 some 4,000,000 bags. Small wonder that the warnings of the wiser 

 minority were unheeded, and that the coffee states, led by Sao Paulo, 

 launched their valorization plan. 



By this plan the states of Sao Paulo, Minas Geraes, and Rio de 

 Janeiro agreed to purchase and hold for better prices enough coffee to 

 keep out of the market all but a quantity sufficient to supply the 

 world demand, which was estimated at 17,000,000 bags. Feeling that 

 Brazil held a virtual monopoly of the trade, the advocates of the 

 scheme maintained that this withdrawal of excess supply would at 

 once force prices up to the minimum fixed by the government as the 

 basis for their purchases or subsequent sales. This price was to be 

 from 32 to 35 milreis per bag for Santos grade No. 7, with other grades 

 in proportion. It was determined by an estimate of "reasonable 

 profit" at existing cost of production. 



Funds for the purchase were to be raised by a 15,000,000 loan 

 on the credit of the states. Interest, amortization, and other charges 



