Agency Problems and the Configurations of the Colonial Economy

Why did the Pombaline monopoly companies struggle to enforce their commercial privileges in colonial Brazil despite remaining profitable? This article reconsiders the history of the General Company of Grão-Pará and Maranhão (1755–1777) and the General Company of Pernambuco and Paraíba (1760–1780) by combining principal–agent theory with the economic history of Portuguese America. Rather than attributing the companies’ difficulties primarily to the opportunistic behaviour of colonial administrators, we argue that agency problems were deeply conditioned by the pre-existing configurations of colonial markets. Drawing on extensive correspondence between the companies’ boards in Lisbon and their colonial agents, together with administrative and financial records, the article demonstrates how local credit networks, merchant intermediaries, and the organization of regional commodity markets constrained the enforcement of monopolistic policies. A comparison between Maranhão’s cotton economy and Pernambuco’s sugar economy reveals that distinct market structures generated similar obstacles to monopoly, encouraging debt evasion, private trade, and conflicts over credit while simultaneously allowing the companies to remain profitable. By shifting the analytical focus from individual misconduct to the institutional and economic environments in which company agents operated, the article offers a new interpretation of the limits of monopoly in the eighteenth-century Portuguese Empire and contributes to broader debates on chartered companies, agency theory, and the functioning of early modern colonial economies.

18th century · agency theory · chartered companies · colonial administration · colonial Brazil · colonial markets · commodity markets · cotton economy · credit networks · debt evasion · principal-agent problem · private trade · sugar economy · Global Maritime and Colonial Histories · Historical Economic and Social Studies · History of Colonial Brazil