The main sources of income for the federal budget are indirect taxes (the income tax, introduced in 1924, encountered serious difficulties in its application, and in 1926 it gave just 5% of the total income), and the revenue alone of customs reaches about ⅓ of the total; It should also be noted that only the product of the import duties flows into the coffers of the federal government since from 1899, the year in which the republic was established, the export duties were transferred to the individual states. From this same date, a percentage of the duties (valued at 60% in the 1923 budget law) must be collected in gold, in order to enable the government to easily make its payments abroad.
The expenditures of the federal budget refer mainly to the Ministry of Finance, including in the sums allocated to it those for the service of the public debt, and secondly, to the Ministry of Traffic and Public Works, which is entrusted with the management of the railways, to the justice and home affairs, also in charge of education and public hygiene, and those of war and agriculture, industry and commerce.
Furthermore, the forecasts for the financial years 1929 and 1930 give respectively 2.220.708 and 2.274.639 contos for income and 2.017.317 and 2.224.830 for expenditure and it can thus be thought that a balanced budget is finally and solidly achieved and that the surplus made in 1927, for the first time after the foundation of the republic, is not destined to remain an isolated fact.
Here is also, overall, the data on the budget of the individual states in the years from 1923 to 1927:
These figures contribute especially among the 20 federal states, that of São Paulo (in 1927, 421,638 contos of entry and 324,698 of expenditure) and those of Rio Grande do Sul, Minas Geraes, Bahia, Pernambuco, Rio de Janeiro.
The monetary unit of Brazil is – theoretically – the real, but the unit of counting, the currency in progress, as already mentioned (see p.737), is the milreis, divided into 1000 reis. Important sums are expressed in contos; an account has the value of one million reis, or 1000 milreis. At the exchange rate of May 1930, an account is worth £ 66/13/4, that is 2,200 lire: therefore each milreis was worth 2,20 lire in Italy in that year. The usual designation of the Brazilian currency is Rs = reis. For Brazil public policy, please check proexchangerates.com.
Before the war, a complicated paper system was in force in Brazil, consisting of inconvertible bills issued by the government and convertible bills issued against gold by the conversion bank (Caixa de conversão), created in 1906 to restore circulation corrupted by the inflation of the revolutionary period and immediately following. ; the milreis (whose parity value would be 27 pence) had now stabilized between 16 and 18 pence. However, due to the war difficulties that led the Brazilian government to issue large quantities of tickets, the milreis went down to pence in 1923 and then slowly ascended to in 1926. At this level it was practically stabilized by the law of December 18, 1926 which, to avoid the disadvantages of a floating currency, decided to introduce a new monetary unit, the cruzeiro, containing two grams of gold at 900/1000 fine, and to convert all paper money in circulation at that date (2,569,304 contos) into gold on the basis of 200 milligrams per milreis; conversion that will be made possible by budget surpluses, by the product of the loans contracted for this purpose, by the sums already earmarked for the repayment, the guarantee and the conversion of paper money, and by other sums other than the stabilization law itself allows you to collect. A stabilization fund was also set up (Caixa de estabiliza ç ão) annexed to the Bank of Brazil (to which the government granted the exclusivity of the issue in 1923 for 50 years) with the aim of accumulating the gold reserves necessary to carry out the conversion and to control the money supply in circulation, providing for the exchange of tickets for gold and vice versa, until the date and form of the conversion is fixed by the executive power. At the end of September 1928 the volume of gold belonging to the box was already 791,059 contos, including the product of various loans taken out abroad (see also: Monete, p. 737).
The value of the gold milreis was later fixed by the government (August 6, 1928) at 4567 reis carta for the collection of taxes, duties, and for any collection or payment in gold to be received or made by the federal administration; various measures were also taken for the minting and entry into circulation of the cruzeiro and other subsidiary coins.
At the beginning of April 1929, the total number of notes in circulation, both state and bank, and issued by the stabilization fund, was 3,394,712 contos, and on the same date the gold reserves amounted to more than 30,000,000 of pounds sterling (10 at the bank of Brazil and the remainder, in currencies of various countries and in ingots, at the stabilization bank) so that at that date there was a gold cover of 36.759% of the currency in circulation.
The foreign public debt of the federal government at the end of 1928 was made up of £ 106,968,592, francs 333,577,086 and dollars 152,800,427; the internal consolidated amount on the same date amounted to 2,392,746 contos; the floating debt, on the other hand, which was 390,653 contos at the end of 1927, was almost completely liquidated during 1928. Even the individual states, besides the Union, have their own external and internal public debt; however, under a 1922 law they cannot borrow without federal government approval. The external public debt of the states was a total of £ 79,061,640 at the end of 1928, mainly borne by the states of Sao Paulo, Federal District, Rio Grande do Sul, Minas Geraes, Pará.