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The Transfer of Technology to Latecomer Economies in the 19th-Century: The Case of Minas Gerais, Brazil

Sergio de Oliveira Birchal

This paper examines the transfer of technology to latecomer economies by investigating the case of 19th-century Minas Gerais, Brazil. It discusses the dependence of various firms on foreign technical knowledge and the limits to the development of an indigenous technology during this period. It also examines the main sources of technology of mineiro firms during the 19th century and the nature of the technological dependence of each industry investigated. As local production of technical knowledge was virtually non-existent, most industries in 19th-century Minas Gerais relied on foreign technology.

Key words: technology transfer, textile, hydroelectric generating and transport industries

This paper investigates the reliance of most mineiro industries on foreign technologies. It also examines the main sources of technology of mineiro firms during the 19th century and the nature of the technological dependence of each industry investigated. All the industries investigated in this paper relied exclusively on foreign technology. Consequently, they also relied upon foreign sources for the supply of materials, components, parts, equipment, and machinery. The terms of the dependence of each industry upon foreign suppliers depended on the nature of the technology employed by them. Among the industries examined the dependence on foreign suppliers was much greater for the textile and electricity generating industries, due to the nature, complexity, and age of the technologies employed by them. The technologies employed by these industries usually came as complex machinery and equipment, which could not be found locally. Furthermore, these technologies were recent developments when compared with those employed by the transport industry. Thus, the dependence of these industries on their suppliers was more critical. Finally, the technology employed in road construction and in the transport of goods and passengers were mainly technical knowledge being carried by experts. Therefore reliance was greater upon experts rather than upon equipment. Moreover, the technologies for road-construction and the building of wheeled-vehicles drawn by animals were century-old and well established by the middle of the 19th century. Nevertheless, although several components and materials employed in the construction and operation of roads were not produced internally and mineiro road-building and transport companies had to resort to foreign suppliers, equipment and operational methods were soon replicated locally.

The textile industry
In the second half of the 19th century, several textile mills were established in Brazil. The number of textile mills established in the country increased from 9 in 1866 to 30 in 1875 and to approximately 48 ten years later. Yet, no indigenous textile technology emerged in Brazil during this period and textile entrepreneurs had to look for machinery and equipment abroad. The textile industry was at the heart of the Industrial Revolution in late 18th-century England. Until the beginning of the 20th century, the British textile industry was the most important in the world and British equipment was the most modern available. Thus, for obvious reasons, mineiro mill owners relied mainly on British and US suppliers of technology. The first successful textile mill established in Minas Gerais was the Cedro mill, established by three brothers (Antonio Candido, Caetano, and Bernardo Mascarenhas), founded in 1872. Bernardo was appointed to select and purchase the machinery. He first went to Rio de Janeiro and Sao Paulo, where he visited several mills. He then went to the USA, where he stayed for a year and a half learning English, while visiting several textile mills to get the know-how of the production of cloth. During this period, he inspected various makes and types of textile machinery. The mill machinery was bought from a US machinery manufacturer, Danforth of Paterson, from New Jersey, through machinery importers in Rio de Janeiro (Milford & Lidgerwood). Nearly a decade later, and with 48 mills already established in Brazil, the Cedro mill continued to rely exclusively on foreign suppliers, especially British and US, a clear evidence of the inability of Brazilians to replicate internally textile technology. The original machinery of the Cachoeira mill was also acquired in Britain and the USA. As Bernardo had already had the experience of setting up a mill, he was appointed by his family to organize the establishment of the Cachoeira factory. As shown in his correspondence, to select and purchase machinery Bernardo decided to go to the USA and Europe. Bernardo decided to buy machines of different origins, a decision that had long-run consequences, as will be discussed in greater detail below. In 1883, after the constitution of the Companhia Cedro e Cachoeira (CCC), as the result of the merger of the Cedro and the Cachoeira mills, the company decided to expand productive capacity. Hence, during this year new looms for the Cachoeira and for the Cedro mills were ordered in England as existing capacity was considered inadequate. Further evidence that the CCC continued to be supplied by British and US manufacturers throughout the 19th century can be found in the extensive correspondence of the company with its suppliers and agents. Furthermore, as this correspondence indicates, the CCC's reliance on foreign suppliers was not restricted to textile machinery. The company purchased capital equipment such as turbines, boilers and steam engines and inputs such as lubricants, yarns, dyes, chemicals, etc. Evidence shows that other textile mills in 19th-century Minas Gerais were equally reliant on foreign suppliers. The entire industry not only relied on foreign suppliers, but also that it was mainly supplied by British and US manufacturers. The mineiro textile industry relied on foreign suppliers for parts, machinery, equipment, components, and all sorts of material, such as lubricants, dyes, and yarn. This was the result not only of the absence of an indigenous capital-goods industry, but also of the total absence of a domestic network of suppliers of any kind. Although there was a sufficient supply of entrepreneurship for the emergence of new industrial sectors, the mineiro business environment was not conducive to the generation of the whole range of enterprises required by a complex and advanced economy. Furthermore, in several cases, the same mill was supplied by both British and US manufacturers, adding to the already long list of problems (caused by cultural and economic differences and by the geographic distance between users and suppliers) mineiro textile entrepreneurs had to face in relying on foreign technology.

Electricity generating industry
Reliance on foreign technology was not restricted to the textile industry. Any industrial sector, which employed more sophisticated and mechanized equipment, depended heavily on foreign technology, as was the case of the mineiro electricity generating industry. However, due to the difference in the nature of electricity and textile technologies (the former was a "breakthrough" scientific development and the latter a piecemeal development of traditional crafts), the terms of the dependence of the electricity generating industry were somewhat different from that of the textile industry. Owing to its scientific complexity, electricity technology was under the firm control of a few specialized firms in the world and was less feasible to be replicated locally with fewer opportunities for adaptations. Furthermore, as electrical equipment was even more specialized than textile machinery, there were fewer opportunities for the use of equipment of different manufacturers without major consequences. Hydroelectric electricity generating companies established in Minas Gerais at the turn of the century, which were local entrepreneurships, had to rely on foreign suppliers of electrical equipment and most of them relied on US suppliers. The Companhia Mineira de Eletricidade (CME), founded in 1888 by Bernardo Mascarenhas, ordered power station equipment from Westinghouse, which supplied equipment for the transmission of electricity. In 1889, the the first large-scale hydroelectric power station established in Brazil started operation. For the remainder of the century, the CME continued to be supplied by Westinghouse. In 1891, the company ordered new machines as the old ones had been damaged and the lighting service had been suspended. In1896, the new plant was also equipped with machinery supplied by the Westinghouse. The equipment employed by the Companhia Forca e Luz Cataguazes-Leopoldina (CFLCL) was also acquired in the USA and Europe. The turbine of the Mauricio power plant, inaugurated in 1908, was purchased fromEscher Wyss, a Swiss manufacturer, whereas the rest of its equipment was acquired from Westinghouse. Thus, the mineiro electricity generating industry relied heavily on foreign suppliers of equipment, following the same pattern as the textile industry. However, in the specific case of the electricity generating industry, the reliance upon foreign suppliers was probably aggravated by the peculiar characteristics of electrical technology. Since electricity outgrew of the physical science, there were less opportunities for adaptation and the transfer of the technology for the manufacturing of electric equipment involved the creation of a much more complex system of innovation and network of suppliers than the one required by textile machinery. Furthermore, electric technical knowledge was controlled by a few large US and European corporations. Therefore, suppliers of electrical equipment could only be found abroad. Yet, although textile technology was simpler and less lumpy (and there was a dramatic growth in the number of firms), there was little difference in the textile and electricity generating industries in terms of technology absorption leading to backward linkages - i.e. the development of heavy industries.

The transport industry
The Companhia Uniao e Industria (CUI) also employed foreign technology, although its reliance upon foreign suppliers was very limited when compared to that of the textile and electricity generating industries. The reason seems to have been due to the nature of the technologies employed in the construction of roads and in the transport of goods and people at this period. The technology employed in the construction of roads was not embodied in machinery. In other words, road building in the 19th century relied mostly on the technical knowledge carried by experts: the equipment used was of a very simple nature and universally available as reproducible. Furthermore, by the middle of the 19th century, the prevailing technology was century-old and accessible. The transport of goods and people employed a technology that was embodied in wheeled-vehicles drawn by animals. The technology to build carts, wagons, and coaches, dated to the ancient times and it was not very complex. This meant that local production of these vehicles was feasible. From 1856 to 1861 the Uniao e Industria turnpike built 144 kilometres of a macadamized road linking the cities of Juiz de Fora, in Minas Gerais, and Petropolis, in the province of Rio de Janeiro. In 1867 the total length of roads operated by the company was approximately 380 kilometres. Furthermore, until the late 19th century, the equipment used in the building of roads consisted of simple tools such as hammers, sieves, spades, wheelbarrows, rammers, and pickaxes. Thus, until the late 19th century, road building preserved its craft nature, involving very little sophisticated equipment. The basic requirement was technical knowledge carried by craftsmen and trained road engineers. The construction of the Uniao e Industria turnpike, for example, involved the work of several experts with experience of road-construction in Europe. From 1853 to 1856, the company employed European engineers to supervise the construction of the road. Apart from the engineers, the company also employed foreign architects and a surveyor. Furthermore, the company also employed a number of foreign craftsmen, such as bricklayers, blacksmiths, locksmiths, painters, carpenters, belt makers, etc. The technology for the building of wheeled vehicles drawn by animals was basically the same for nearly a century, when the CUI started the construction and operation of its turnpike in the late 1850s. Therefore, the company was able to build the vehicles used in the transport of goods and passengers locally. Evidence of this fact is the existence of several workshops established at the Juiz de Fora station. Furthermore, a Parliamentary Decree of 7 August 1852, exempted the company from customs duties for 12 years on purchases of machines, instruments and any other objects destined for the construction of roads and vehicles of the company. Nevertheless, due to the lack of a domestic network of suppliers, the CUI also had to rely on foreign suppliers and manufacturers for a wide range of materials. In 1856, for example, the company purchased several commodities in Europe (from stationery to screws for bridges, carts, and carriages). However, the CUI's reliance was much smaller when compared to that of both the electricity generating and the textile industries. Materials, components and equipment used by the CUI were relatively simple and were soon replicated locally. The simplicity and universal nature of the technology employed by the CUI meant that backward linkages were more easily created, as the workshops of the company indicate.

Since the Industrial Revolution the international transfer of technology has become crucial to latecomer economies, not only for initial growth, but also for their capacity to sustain development. Most 19th-century mineiro industries relied on foreign technology and foreign manufacturers of equipment, machinery, parts, components, and materials. During this period, apart from the most elementary tools, sophisticated equipment could only be found abroad, mainly in Europe and the USA. However, such dependence differed according to the nature of the technology employed. Industries employing machine technology and specialized equipment depended more intensely on foreign sources than those employing technology embodied in people and universal equipment and machinery. The mineiro textile industry imported from machinery to yarn and dyes and the electricity generating industry also relied heavily on foreign equipment, material and components. Although the CUI also relied on foreign technologies, it did not rely on foreign plants, because the equipment used in road-construction and in the transport of goods and passengers was simple, more universal and could be produced locally. Furthermore, the technologies used by the company relied more on the expertise of people than on equipment. Nevertheless, the company relied on foreign manufacturers to supply components and material of every sort. This reflects the absence not only of a domestic capital goods industry, but also the absence of a domestic network of suppliers of any kind.