The Impacts of the Mortgage Clause and the Payment Term of the Operations on the Liquidity of the Credit Market in Bahia (1700-1710)

Abstract

The colonial economic chroniclers indicate that the credit relations between individuals were supported by the quality of the borrowers and the history of good payers that these individuals had. In this article, through the analysis of a sample of notarial deeds from the beginning of the 18th century in Salvador, we demonstrate that legal requirements were imposed on borrowers of any quality and that collateral was frequently included in the contracts, the main one of which was the specific mortgage clause. The loans drawn up by the notary, by determination of contractual clause, had their maturity one year after the signing of the deed. However, it was common for the payment term of the operation to be extended, leaving the borrower responsible only for the annual payment of interest on the contract. In this context, we will demonstrate that these two variables had a negative impact on the liquidity of the credit market in Bahia.