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vi Contents

6. Orders 41
6.1. Execution Instructions 42
6.2. Validity Instructions 45
6.3. Clearing Instructions 47
7. Primary Security Markets 47
7.1. Public Offerings 48
7.2. Private Placements and Other Primary Market Transactions 50
7.3. Importance of Secondary Markets to Primary Markets 51
8. Secondary Security Market and Contract Market Structures 51
8.1. Trading Sessions 51
8.2. Execution Mechanisms 52
8.3. Market Information Systems 56
9. Well-Functioning Financial Systems 56
10. Market Regulation 58
11. Summary 61
Problems 63

CHAPTER 2
Security Market Indices 73
Learning Outcomes 73
1. Introduction 73
2. Index Definition and Calculations of Value and Returns 75
2.1. Calculation of Single-Period Returns 75
2.2. Calculation of Index Values over Multiple Time Periods 77
3. Index Construction and Management 78
3.1. Target Market and Security Selection 79
3.2. Index Weighting 79
3.3. Index Management: Rebalancing and Reconstitution 88
4. Uses of Market Indices 90
4.1. Gauges of Market Sentiment 90
4.2. Proxies for Measuring and Modeling Returns, Systematic Risk,
and Risk-Adjusted Performance 90
4.3. Proxies for Asset Classes in Asset Allocation Models 90
4.4. Benchmarks for Actively Managed Portfolios 91
4.5. Model Portfolios for Investment Products 91
5. Equity Indices 91
5.1. Broad Market Indices 91
5.2. Multimarket Indices 92
5.3. Sector Indices 92
5.4. Style Indices 93
6. Fixed-Income Indices 94
6.1. Construction 94
6.2. Types of Fixed-Income Indices 95
7. Indices for Alternative Investments 96
7.1. Commodity Indices 98
7.2. Real Estate Investment Trust Indices 98
7.3. Hedge Fund Indices 98
Contents vii

8. Summary 101
Problems 102

CHAPTER 3
Market Efficiency 109
Learning Outcomes 109
1. Introduction 109
2. The Concept of Market Efficiency 111
2.1. The Description of Efficient Markets 111
2.2. Market Value versus Intrinsic Value 113
2.3. Factors Contributing to and Impeding a Market’s Efficiency 114
2.4. Transaction Costs and Information-Acquisition Costs 117
3. Forms of Market Efficiency 118
3.1. Weak Form 119
3.2. Semistrong Form 119
3.3. Strong Form 122
3.4. Implications of the Efficient Market Hypothesis 122
4. Market Pricing Anomalies 124
4.1. Time-Series Anomalies 125
4.2. Cross-Sectional Anomalies 127
4.3. Other Anomalies 128
4.4. Implications for Investment Strategies 130
5. Behavioral Finance 131
5.1. Loss Aversion 131
5.2. Overconfidence 132
5.3. Other Behavioral Biases 132
5.4. Information Cascades 133
5.5. Behavioral Finance and Efficient Markets 133
6. Summary 134
Problems 134

CHAPTER 4
Portfolio Management: An Overview 139
Learning Outcomes 139
1. Introduction 139
2. A Portfolio Perspective on Investing 140
2.1. Portfolio Diversification: Avoiding Disaster 140
2.2. Portfolios: Reduce Risk 142
2.3. Portfolios: Composition Matters for the Risk–Return Tradeoff 145
2.4. Portfolios: Not Necessarily Downside Protection 145
2.5. Portfolios: The Emergence of Modern Portfolio Theory 148
3. Investment Clients 149
3.1. Individual Investors 149
3.2. Institutional Investors 150
viii Contents

4. Steps in the Portfolio Management Process 156

4.1. Step One: The Planning Step 156
4.2. Step Two: The Execution Step 156
4.3. Step Three: The Feedback Step 159
5. Pooled Investments 160
5.1. Mutual Funds 160
5.2. Types of Mutual Funds 164
5.3. Other Investment Products 167
6. Summary 172
Problems 172

CHAPTER 5
Portfolio Risk and Return: Part I 175
Learning Outcomes 175
1. Introduction 175
2. Investment Characteristics of Assets 176
2.1. Return 176
2.2. Other Major Return Measures and Their Applications 185
2.3. Variance and Covariance of Returns 189
2.4. Historical Return and Risk 192
2.5. Other Investment Characteristics 197
3. Risk Aversion and Portfolio Selection 200
3.1. The Concept of Risk Aversion 201
3.2. Utility Theory and Indifference Curves 202
3.3. Application of Utility Theory to Portfolio Selection 206
4. Portfolio Risk 209
4.1. Portfolio of Two Risky Assets 210
4.2. Portfolio of Many Risky Assets 215
4.3. The Power of Diversification 216
5. Efficient Frontier and Investor’s Optimal Portfolio 222
5.1. Investment Opportunity Set 222
5.2. Minimum-Variance Portfolios 223
5.3. A Risk-Free Asset and Many Risky Assets 225
5.4. Optimal Investor Portfolio 228
6. Summary 234
Problems 234

CHAPTER 6
Portfolio Risk and Return: Part II 243
Learning Outcomes 243
1. Introduction 243
2. Capital Market Theory 244
2.1. Portfolio of Risk-Free and Risky Assets 244
2.2. The Capital Market Line 248
Contents ix

3. Pricing of Risk and Computation of Expected Return 256

3.1. Systematic Risk and Nonsystematic Risk 257
3.2. Calculation and Interpretation of Beta 259
4. The Capital Asset Pricing Model 267
4.1. Assumptions of the CAPM 267
4.2. The Security Market Line 269
4.3. Applications of the CAPM 272
5. Beyond the Capital Asset Pricing Model 284
5.1. The CAPM 284
5.2. Limitations of the CAPM 284
5.3. Extensions to the CAPM 286
5.4. The CAPM and Beyond 287
6. Summary 287
Problems 288

CHAPTER 7
Basics of Portfolio Planning and Construction 295
Learning Outcomes 295
1. Introduction 295
2. Portfolio Planning 296
2.1. The Investment Policy Statement 296
2.2. Major Components of an IPS 297
2.3. Gathering Client Information 309
3. Portfolio Construction 312
3.1. Capital Market Expectations 312
3.2. The Strategic Asset Allocation 313
3.3. Steps toward an Actual Portfolio 321
3.4. Additional Portfolio Organizing Principles 325
4. Summary 326
Problems 327

CHAPTER 8
Overview of Equity Securities 331
Learning Outcomes 331
1. Introduction 331
2. Equity Securities in Global Financial Markets 332
3. Types and Characteristics of Equity Securities 338
3.1. Common Shares 339
3.2. Preference Shares 343
4. Private versus Public Equity Securities 345
5. Investing in Nondomestic Equity Securities 347
5.1. Direct Investing 348
5.2. Depository Receipts 349
x Contents

6. Risk and Return Characteristics of Equity Securities 353

6.1. Return Characteristics of Equity Securities 353
6.2. Risk of Equity Securities 354
7. Equity Securities and Company Value 356
7.1. Accounting Return on Equity 356
7.2. The Cost of Equity and Investors’ Required Rates of Return 361
8. Summary 362
Problems 363

CHAPTER 9
Introduction to Industry and Company Analysis 369
Learning Outcomes 369
1. Introduction 370
2. Uses of Industry Analysis 370
3. Approaches to Identifying Similar Companies 371
3.1. Products and/or Services Supplied 371
3.2. Business-Cycle Sensitivities 372
3.3. Statistical Similarities 374
4. Industry Classification Systems 374
4.1. Commercial Industry Classification Systems 374
4.2. Governmental Industry Classification Systems 378
4.3. Strengths and Weaknesses of Current Systems 380
4.4. Constructing a Peer Group 380
5. Describing and Analyzing an Industry 385
5.1. Principles of Strategic Analysis 386
5.2. External Influences on Industry Growth, Profitability, and Risk 405
6. Company Analysis 412
6.1. Elements That Should Be Covered in a Company Analysis 413
6.2. Spreadsheet Modeling 416
7. Summary 417
Problems 420

CHAPTER 10
Equity Valuation: Concepts and Basic Tools 425
Learning Outcomes 425
1. Introduction 426
2. Estimated Value and Market Price 426
3. Major Categories of Equity Valuation Models 428
4. Present Value Models: The Dividend Discount Model 430
4.1. Preferred Stock Valuation 434
4.2. The Gordon Growth Model 436
4.3. Multistage Dividend Discount Models 441
5. Multiplier Models 445
5.1. Relationships among Price Multiples, Present Value Models,
and Fundamentals 445
Contents xi

5.2. The Method of Comparables 449

5.3. Illustration of a Valuation Based on Price Multiples 452
5.4. Enterprise Value 454
6. Asset-Based Valuation 457
7. Summary 461
Problems 462

CHAPTER 11
Equity Market Valuation 469
Learning Outcomes 469
1. Introduction 469
2. Estimating a Justified P/E Ratio 470
2.1. Neoclassical Approach to Growth Accounting 470
2.2. The China Economic Experience 472
2.3. Quantifying China’s Future Economic Growth 474
2.4. Equity Market Valuation 476
3. Top-Down and Bottom-Up Forecasting 484
3.1. Portfolio Suitability of Each Forecasting Type 485
3.2. Using Both Forecasting Types 487
3.3. Top-Down and Bottom-Up Forecasting of Market Earnings
per Share 488
4. Relative Value Models 491
4.1. Earnings-Based Models 491
4.2. Asset-Based Models 502
5. Summary 506
Problems 508

CHAPTER 12
Technical Analysis 515
Learning Outcomes 515
1. Introduction 515
2. Technical Analysis: Definition and Scope 516
2.1. Principles and Assumptions 516
2.2. Technical and Fundamental Analysis 518
3. Technical Analysis Tools 520
3.1. Charts 520
3.2. Trend 530
3.3. Chart Patterns 532
3.4. Technical Indicators 544
3.5. Cycles 562
4. Elliott Wave Theory 563
5. Intermarket Analysis 566
6. Summary 568
Problems 570
xii Contents

Glossary 575

References 589

About the Authors 595

About the CFA Program 601

Index 603
 FOREWORD
As I read Investments: Principles of Portfolio and Equity Analysis, I was struck by how much the
investment profession has evolved over the past 40 years. Although the changes have been
mostly for the better, the market events of the past decade suggest that we still have more to
learn in order to avoid repeating some of our recent mistakes. We witnessed the bursting of
two bubbles—technology and housing/credit—which resulted in a lost decade for equities:
The S&P 500 generated negative returns for the 10 years ended December 2009.
I remember learning modern portfolio theory as a student when it was indeed relatively
modern. Although analytical techniques for managing portfolios have improved since the
1970s, the investment landscape has become much more complex. The number of markets,
institutions, and securities has exploded alongside improvements in security selection/analysis,
portfolio construction, and risk management. Aided by ever-increasing information and
computing power, institutional investors have become bigger, more numerous, more global,
and seemingly more sophisticated. They have attracted the best and brightest from the world’s
leading universities. These growing armies of professional investors all compete to be the next
Warren Buffett or top hedge fund manager.
New investment texts that keep up with the changing markets and analytical techniques
are needed. Investments: Principles of Portfolio and Equity Analysis is a valuable addition to the
bookshelves of all investment professionals and students of finance. It has kept pace with the
changes in the institutional aspects of investing, as well as the advances in asset pricing and
portfolio theory and the practical applications of such tools.
As chief investment officer of Georgetown University, I am responsible for investing its
endowment. I also teach investment courses in the MBA program at Georgetown. I am a
consumer of this book for both parts of my professional life. As an endowment manager, I
know that our investment process involves asset allocation, investment manager selection,
portfolio construction, and risk management. The governance for this process is set forth in
our investment policy statement. Thoroughly covering all these topics, Investments: Principles
of Portfolio and Equity Analysis discusses the theory and application of how endowments,
pensions, and other institutions invest their sizable pools of capital. Although we are not
directly involved with security selection at our endowment, it is important that we under-
stand the best practices followed by investment managers (e.g., mutual funds, hedge funds,
and other investment advisers) to help us in our selection of such managers. We must also be
able to recognize opportunities for managers to add value relative to a passive index.
Although many investors scoff at the notion of market efficiency, most managers fail to beat
passive benchmarks. This book does a wonderful job of addressing not only market efficiency
and whether and when active management can add value, but also the institutional details of
investing—the mechanics of trading and custody; the array of institutions (e.g., endowments,
pensions, and sovereign wealth funds); and the growing number of investment vehicles
available to institutions (e.g., exchange-traded funds [ETFs] for passive implementation and
hedge funds for active management).

xiii
xiv Foreword

As someone who spans both the academic and the real world of investing, I understand
the challenge and importance of writing a book that is able to cover and meld both
investment theory and implementation. I believe readers will find that Investments: Principles
of Portfolio and Equity Analysis succeeds on both fronts. The book will help professional
investors understand a broad body of investment theory. More importantly, it will help them
apply this knowledge to the actual practice of investing.

Lawrence E. Kochard, CFA

Chief Investment Officer
Georgetown University
September 2010
 ACKNOWLEDGMENTS
We would like to thank the many individuals who played important roles in producing
this book.
Robert R. Johnson, CFA, Senior Managing Director of CFA Institute, originally saw the
need for specialized curriculum materials and initiated their development. We appreciate his
support. Robert E. Lamy, CFA, Head of CFA Program Content, initiated the project and
oversaw its final development. The Education Advisory Committee, through the global
practice analysis, provides valuable input in the development and review of the CFA Program
curriculum.
We would especially like to thank James Bronson, CFA; Yves Courtois, CFA; Benoit
Descourtieux, CFA; Doug Manz, CFA; George Troughton, CFA; and Philip Young, CFA,
for their advice on the curriculum relevancy of each chapter.
Manuscript reviewers and authors of practice problems were as follows: William
Akmentins, CFA; Christopher Anderson, CFA; Evan Ashcraft, CFA; Mark Bhasin, CFA;
Michael J. Carr; David Cox, CFA; Lee Dunham, CFA; Philip Fanara Jr., CFA; Jane Farris,
CFA; Thomas Franckowiak, CFA; Martha Freitag, CFA; Jacques Gagne, CFA; Bryan
Gardiner, CFA; Gregory Gocek, CFA; Usman Hayat, CFA; Bradley Herndon, CFA; Glen
Holden, CFA; C. Thomas Howard, PhD; Stephen Huffman, CFA; Muhammad Jawaid
Iqbal, CFA; Frank Laatsch, CFA; David Landis, CFA; Dan Larocco, CFA; Sanford Leeds,
CFA; Barbara MacLeod, CFA; Frank Magiera, CFA; John Maginn, CFA; Ronald Moy,
CFA; Gregory Noronha, CFA; Edgar Norton, CFA; Michael Pompian, CFA; Murli Rajan,
CFA; Raymond Rath, CFA; Victoria Rati, CFA; Joel Ray, CFA; Knut Reinertz, CFA; Karen
O’Connor Rubsam, CFA; Sanjiv Sabherwal; Frank Smudde, CFA; Lavone Whitmer, CFA;
and Pamela Yang, CFA.
Samuel Lum, CFA, Director of Private Wealth and Capital Markets in the Hong Kong
office of CFA Institute, helpfully shared his expertise. Wanda Lauziere, Project Manager in
Curriculum Development, expertly guided the reading manuscripts from planning through
production. Tabitha Gore, Administrative Assistant in Curriculum Development, provided
valuable assistance at various stages.
Thanks are due to the Editorial Services group at CFA Institute for their extraordinary
support of the book’s copyediting needs.

xv
 INTRODUCTION
CFA Institute is pleased to provide you with this Investment Series covering major areas in
the field of investments. These texts are thoroughly grounded in the highly regarded CFA
Program Candidate Body of Knowledge that serves as the anchor for the three levels of the
CFA Program. Currently, nearly 200,000 aspiring investment professionals from over 150
countries are devoting hundreds of hours each year to master this material, as well as other
elements of the Candidate Body of Knowledge, to obtain the coveted CFA designation. We
provide these materials for the same reason we have been chartering investment professionals
for over 45 years: to lead the investment profession globally by setting the highest standards
of ethics, education, and professional excellence.

HISTORY

This book series draws on the rich history and origins of CFA Institute. In the 1940s, several
local societies for investment professionals developed around common interests in the
evolving investment industry. At that time, the idea of purchasing common stock as an
investment—as opposed to pure speculation—was still a relatively new concept for the
general public. Just 10 years before, the U.S. Securities and Exchange Commission had been
formed to help referee a playing field marked by robber barons and stock market panics.
In January 1945, a fundamental analysis–driven professor and practitioner from
Columbia University and Graham-Newman Corporation wrote an article in the precursor of
today’s CFA Institute Financial Analysts Journal, making the case that people who research
and manage portfolios should have some sort of credential to demonstrate competence and
ethical behavior. This person was none other than Benjamin Graham, the father of security
analysis and future mentor to well-known modern investor Warren Buffett.
Creating such a credential took 16 years. By 1963, 284 brave souls—all over the age of
45—took an exam and successfully launched the CFA credential. What many do not fully
understand is that this effort was driven by a desire to create professional standards for
practitioners dedicated to serving individual investors. In so doing, a fairer and more pro-
ductive capital market would result.
Most professions—including medicine, law, and accounting—have certain hallmark
characteristics that help to attract serious individuals and motivate them to devote energy to
their life’s work. First, there must be a body of knowledge. Second, entry requirements must
exist, such as those required to achieve the CFA credential. Third, there must be a com-
mitment to continuing education. Finally, a profession must serve a purpose beyond one’s
individual interests. By properly conducting one’s affairs and putting client interests first, the
investment professional encourages general participation in the incredibly productive global

xvii
xviii Introduction

capital markets. This encourages the investing public to part with their hard-earned savings
for redeployment in the fair and productive pursuit of appropriate returns.
As C. Stewart Sheppard, founding executive director of the Institute of Chartered
Financial Analysts, said:

Society demands more from a profession and its members than it does from a professional
craftsman in trade, arts, or business. In return for status, prestige, and autonomy, a profession
extends a public warranty that it has established and maintains conditions of entry, standards
of fair practice, disciplinary procedures, and continuing education for its particular con-
stituency. Much is expected from members of a profession, but over time, more is given.

For more than 40 years, hundreds upon hundreds of practitioners and academics have served
on CFA Institute curriculum committees, sifting through and winnowing out all the many
investment concepts and ideas to create a body of investment knowledge and the CFA
curriculum. One of the hallmarks of curriculum development at CFA Institute is its extensive
use of practitioners in all phases of the process. CFA Institute has followed a formal practice
analysis process since 1995. Most recently, the effort involves special practice analysis forums
held at 20 locations around the world and surveys of 70,000 practicing CFA charterholders
for verification and confirmation. In 2007, CFA Institute moved to implement an ongoing
practice analysis to update the body of knowledge continuously, making use of a collaborative
web-based site and wiki technology. In addition, CFA Institute has moved in recent years
from using traditional academic textbooks in its curriculum to commissioning prominent
practitioners and academics to create custom material based on this practice analysis. The
result is practical, globally relevant material that is provided to CFA candidates in the CFA
Program curriculum and published in this series for investment professionals and others.
What this means for the reader is that the concepts highlighted in these texts were
selected by practitioners who fully understand the skills and knowledge necessary for success.
We are pleased to put this extensive effort to work for the benefit of the readers of the
Investment Series.

BENEFITS

This series will prove useful to those contemplating entry into the extremely competitive field
of investment management, as well as those seeking a means of keeping one’s knowledge fresh
and up to date. Regardless of its use, this series was designed to be both user friendly and highly
relevant. Each chapter within the series includes extensive references for those who would like
to further probe a given concept. I believe that the general public seriously underestimates the
disciplined processes needed for the best investment firms and individuals to prosper. This
material will help you better understand the investment field. For those new to the industry,
the essential concepts that any investment professional needs to master are presented in a time-
tested fashion. These volumes lay the basic groundwork for many of the processes that suc-
cessful firms use on a day-to-day basis. Without this base level of understanding and an
appreciation for how the capital markets operate, it becomes challenging to find competitive
success. Furthermore, the concepts presented herein provide a true sense of the kind of work
that is to be found managing portfolios, doing research, or pursuing related endeavors.
The investment profession, despite its relatively lucrative compensation, is not for
everyone. It takes a special kind of individual to fundamentally understand and absorb the
Introduction xix

teachings from this body of work and then successfully apply them in practice. In fact, most
individuals who enter the field do not survive in the long run. The aspiring professional should
think long and hard about whether this is the right field. There is no better way to make such a
critical decision than by reading and evaluating the classic works of the profession.
The more experienced professional understands that the nature of the capital markets
requires a commitment to continuous learning. Markets evolve as quickly as smart minds can
find new ways to create exposure, attract capital, or manage risk. A number of the concepts in
these books did not exist a decade or two ago, when many were starting out in the business.
In fact, as we talk to major employers about their training needs, we are often told that one of
the biggest challenges they face is how to help the experienced professional keep up with the
recent graduates. This series can be part of that answer.
As markets invent and reinvent themselves, a best-in-class foundation investment series
is of great value. Investment professionals must continuously hone their skills and knowledge
if they are to compete with the young talent that constantly emerges. Further, the
best investment management firms are run by those who carefully form investment
hypotheses and test them rigorously in the marketplace, whether it be in a quant strategy,
comparative shopping for stocks within an industry, or hedge fund strategies. Their goal is to
create investment processes that can be replicated with some statistical reliability. I believe
those who embraced the so-called academic side of the learning equation have been much
more successful as real-world investment managers.

THE TEXTS

One of the most prominent texts over the years in the investment management industry has
been Maginn and Tuttle’s Managing Investment Portfolios: A Dynamic Process. The third
edition updates key concepts from the 1990 second edition. Some of the more experienced
members of our community own the prior two editions and will add the third edition to their
libraries. Not only does this seminal work take the concepts from the other readings and put
them in a portfolio context, but it also updates the concepts of alternative investments,
performance presentation standards, portfolio execution, and, very importantly, managing
individual investor portfolios. Focusing attention away from institutional portfolios and
toward the individual investor makes this edition an important and timely work.
Quantitative Investment Analysis focuses on some key tools that are needed for today’s
professional investor. In addition to classic time value of money, discounted cash flow
applications, and probability material, there are two aspects that can be of value over tra-
ditional thinking.
The first involves the chapters dealing with correlation and regression that ultimately
figure into the formation of hypotheses for purposes of testing. This gets to a critical skill that
challenges many professionals: the ability to distinguish useful information from the over-
whelming quantity of available data. For most investment researchers and managers, their
analysis is not solely the result of newly created data and tests that they perform. Rather, they
synthesize and analyze primary research done by others. Without a rigorous manner by which
to understand quality research, you cannot understand good research, nor do you have a basis
on which to evaluate less rigorous research.
Second, the last chapter of Quantitative Investment Analysis covers portfolio concepts and
takes the reader beyond the traditional capital asset pricing model (CAPM) type of tools and
into the more practical world of multifactor models and arbitrage pricing theory.
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rocky, in others bare and barren, but the principal part is covered
with beautiful woods, nourished by strong and fertile soils. In some
places it has two or three leagues of luxuriant herbage on its
summit.
The mountain Araripe, which is a portion of it, commands a view
of the river St. Francisco, at a distance of more than thirty leagues.
In this mountain the rivers Jaguariba and Piranhas have their origin,
and run to the north. It also gives birth to the rivers Parahiba and
Capibaribe, which flow eastward, and likewise to the Moxoto and the
Pajehu, which direct their course to the south.
About seven leagues distant from the fall of Paulo Affonso, in the
parish of Tarcaratu, is the mountain of Agua-Branca, with its
numerous branches, in great part covered with wild and luxuriant
woods. Here is a chapel of Our Lady of Conceiçao, and many
families of different shades of complexion, equally if not more
barbarous than the ancient possessors of the country.
In the vicinity of the river Pajehu, about fifteen leagues from that
which absorbs it, is the serra Negra, which is about a league long,
and proportionably wide, and covered with thick woods, that are
often violently agitated by strong winds. Near it is the site of Jacare,
where the Choco Indians lived for some time; but since they have
been subjugated, like their neighbours, there is little mention made
of them.
At a short distance from the source of the river Una, is the serra
Garanhuns. It is covered with woods, where they are introducing
plantations of cotton, Indian corn, mandioca, vegetables, and fruits.
From this mountain descend many clear streams of water, which
vanish on entering the sandy plains that encompass it below. Among
other useful plants may be remarked the terminalia, or styrax of
Linnæus, which produces the gum-resinous drug called benzoin.
The serra of Russas, two leagues long, and of small width, is
situated about sixteen leagues distant from the Recife, in the road
which leads towards the certam of the river St. Francisco.
The serra Sellada is four leagues to the south-west of Cape St.
Augustine, and little more than two from the sea; and, although of
trifling height, is the best land-mark for sailors in these latitudes.
Four leagues to the north-west of Caninde, an insignificant and
ill-situated village, on the left bank of the St. Francisco, is the serra
of Olho d’Agua, with a circuit of two leagues, and of considerable
height. From its summit is discovered a vast chain of inferior
mountains on all sides, and at a distance of about six leagues to the
west-north-west is seen a column of vapour rising from the cataract
of Paulo Affonso, similar to the smoke of a conflagration. Formerly
this mountain abounded with numerous tigers, in consequence of
the multitude of caverns within the jetting rocks and frowning crags
that compose it. Even at present they are the retreats of a
formidable species of bat, which proves very destructive to cattle.
The serra of Priaca is about eight leagues to the north-west of
the town of Penedo. That of Pao d’Assucar is within sight of the
former, and near the river St. Francisco. On the southern skirts of
the serra of Pao d’Assucar there is a lake, where bones of an
enormous size have been found; and on its northern side there is a
most terrific cavern.
The serra of Poco, situated fifteen leagues distant from the last,
towards the interior of the province, is covered with woods where
trees of the finest timber are produced, some of whose trunks exude
precious resins, and oily or balsamic liquors, while the hollow trunks
of others serve for the hives of various kinds of bees.
Comenaty is one of the largest mountains in the interior. It
abounds with extensive woods in many parts, where the Indians and
other inhabitants of the parish of Aguas Bellas have introduced large
plantations of cotton and mandioca.
The serra of Barriga is about four leagues distant from the town
of Anadia, and twenty from the sea, and is subject to frequent
thunderstorms. The occasional and loud noises from its cavities
terrify the people of the circumjacent country, and indicate that it
has minerals. On its extreme skirts was the fatal band of Africans,
called the Quilombo dos Palmares, commenced by three hundred
and forty negroes of Guinea, on the occasion of the Dutch
disembarking at Pernambuco. They were joined by many others
from the neighbouring provinces, and founded the above village,
which took the name of Palmares from the number of palm trees
which the negroes had planted around it. The village, which was
more than a league in extent, was encompassed by a square,
consisting of two orders or rows of enclosures of palisadoes, formed
of large high trunks of the strongest and most durable wood the
country afforded. At equal distances were three strong doors, each
having its platform above, and defended by two hundred men in
times of assault; the whole flanked by various bulwarks of the same
fabric as the walls. Its population amounted to twenty thousand,
one-half of whom were capable of taking up arms. They had
established an elective and monarchical form of government. The
chief was entitled Zumbe, and had his palace more distinguished
than the houses of his vassals, which were erected according to the
African mode. The most valorous and wise were always selected for
this important office. Besides the superior, they had subordinate
officers for the administration of justice, which was punctually
executed against adulterers, homicides, and thieves.
The slaves who voluntarily came and associated with them had
their liberty immediately granted, but those taken by force remained
captives. The first incurred the penalty of death if they fled and were
taken, a punishment which deserters from the latter class did not
experience. Independently of a slight covering the whole were in a
state of nudity, except the superiors, who wore such clothes for
dresses as the neighbouring people of Quilombo sold to them,
together with arms and ammunition, in exchange for provisions.
Those only who had been baptized assumed the name of Christians.
Within the square was a vast basin or tank of soft water, well
stored with fish, and a high rock, which served them for a watch-
tower, from whence they could discover the country all round to a
great extent, and could observe the approach of the enemy. The
suburbs were covered with plantations of necessary provisions, to
protect which there were various hamlets, called mocambos,
governed by veteran soldiers.
It is extraordinary that this colony gave much anxiety to the
crown, existed for the space of sixty years, and cost much labour to
an army of eight thousand men for many months to accomplish its
extinction in 1697.
Mineralogy.—Gold, amianthus, stone for water-filters, limestone
and grindstone, terra de cores, a sort of plaster for figures, also two
or three species of rude marble, and potters’ earth.
Zoology.—All the domestic animals of Spain are bred here. Goats
and sheep are less profitable than in the country in which they are
natives. The woods abound with all the species of wild animals
described in the preceding provinces, excepting the wild dog, in
place of which there is the ferret. The hedge-hog has here the name
of quandu. The guariba, a species of monkey generally of a red
colour, from the river St. Francisco towards the south, is black in this
province, and its skin on this account is more esteemed. The
tatubola, or armadillo, and the land-tortoise are numerous, as well
as the moco, in rocks and stony grounds. Rabbits are very rare. In
the open country are the emu-ostrich and the seriema. In the lakes
are the colhereira, jaburu, goose, grey and white heron, wild duck,
soco, macarico, water hen. In the woods and plains are the jacu,
mutun, zabele, enapupe, racuan, arara, parrot, the uru which is a
species of small partridge, going always in bands and upon the
ground. The bird here called rouxinol, or the nightingale, is very
different in its song and plumage from that of Europe. The araponga
pours its simple and tender song from the summit of the highest
trees. The white-winged dove always avoids strange birds, like other
species of its kind. Various sorts of kites and hawks make war upon
the other birds. The jacurutu, which is of a large size, has two great
horns of feathers, and kills the largest snakes with caution and much
dexterity in order to avoid being stung by them. In almost all the
rivers there are otters, and no lake is without the alligator.
Phytology.—The cedar, bow-wood, vinhatica, of various colours,
the yellow and dark are the most esteemed; the conduru, which is
red; barabu, male and female, more or less of a violet or purple
colour; pau santo, waved with violet; sucupira and brahuna, both of
a blackish colour. The sapucaya affords good masts of a small size,
and its towy rind is used by the caulkers. The red camacary, pau
d’alho, maçaranduba, angico, coraçao de negro, the pith or heart of
which is black and hard: there are many others of fine timber for
building. The Brazil wood comes thirty leagues from the interior of
the country; here is also the cassia, the carahiba, whose flower is
yellow and rather large, constituting delicious food for the deer. This
animal, generally feeding beneath the tree upon them, thus
becomes an easy prey to the hunter. Amongst the fruit trees and
shrubs of the woods are the ambuzo, the cajue, the araçaza, the
jabuticaba, the mandupussa, the fruit of which is yellow and grows
also round the trunk, like the preceding; the muricy; the cambuhy is
a large tree and its fruit about the size of a sour cherry, either red or
purple; the piky affords a fruit, from the stone of which is extracted
a kind of hard tallow that is used for making imitation candles; the
issicariba, which produces gum-mastick, ipecacuanha, and some
species of inferior quina, or Jesuit’s bark, to which they give this
name; the real one is to be found in the serra Cayriris. The
maçanzeira is common in some districts of this province, where it
has the improper name of murta.
The comarca of the Alagoas produces great abundance of the
best timber in the province; there the canoes are made in which the
St. Francisco is navigated. Cocoa-nut tree groves abound in the
vicinity of the sea. The mamona is carefully cultivated in some
districts, and its oil affords an article of exportation. The opuncia, or
palmatoria, is here very common; and the cochineal insect might be
cultivated with advantage.
 The cotton tree and sugar cane are the principal branches of
agriculture, and their productions are the most lucrative. The desire
every where of the gain which these two articles afford, unwisely
prevents the cultivation of provisions of the first necessity in
sufficient quantity for the subsistence of the population. The flour of
mandioca is generally scarce and dear, arising in part from the lands
in the vicinity of the sea (which alone are fertile) having been given
in such liberal portions; so that at the present day they are under
the dominion of so few persons that it is calculated that for every
two hundred families there are only eight or ten proprietors, or
senhores d’engenho, and who generally permit their tenants only to
plant the cane. The jangada, a peculiar tree, and one of the most
useful in the province, has a trunk commonly straight and scarcely
ever attaining a thickness that a man cannot encompass with his
arms: it is extremely porous and light. The trunks attached, as
already described, constitute the only small craft of the country;
fishermen proceed with them to sea out of sight of land, and
travellers transport themselves, with their moveables, from one port
to another. It is necessary to drag them on the beach at the end of
each voyage to dry, in order that the wood may not decay so quickly.
The trees which produce the oil of cupahyba are met with in all the
woods; also those which produce the gum-copal, the drug benzoin,
and the sweet gum storax. The latter is here called the balsam tree;
and the honey which the bees make from the sweets of its flower
has the smell of cinnamon. Amongst other exotic trees which have
been naturalized the precious sandal tree, it is affirmed, would
prosper here almost as well as in the island of Timor, and would save
to the state many arrobas of gold annually expended in bringing it
from India.
The people of the certam catch large quantities of turtle and ring
doves with the manicoba-brava, an infusion of which is put into
vessels half buried in the sand, in those places where some little
water remains after the streams are dried up, and to which those
birds are attracted for the purpose of drinking. On taking the
infusion, if they do not immediately vomit, they cannot again take
wing, but quickly begin to tremble, and expire in a few moments.
Rivers.—The most considerable are in the western part of the
province; but we shall defer speaking of them till we come to finish
the description of the river St. Francisco, into which they discharge
themselves.
The principal ones in the eastern part of the province are the
Capibaribe, the Ipojuca, the Una, the Tracunhaen, or Goyanna, and
the Serenhen.
The Capibaribe, or river of the Capibaras,[37] has its origin in the
district of Cayriris Velhos, about fifty leagues distant from the sea.
Its source is brackish; the channel very stony, with many falls, and
navigable only for about eight miles. It is discharged by two mouths,
one within the Recife, and the other near four miles to the south, at
the arraial of Affogados, where there is a wooden bridge two
hundred and sixty paces in length. Topacora and Goyta are its
principal confluents, both of which join it by the right bank, with an
interval of four or five miles. The latter runs from a lake,
denominated Lagoa Grande.
The Ipojuca rises in the Cayriris Velhos, near the Capibaribe, and
runs through countries appropriated to the culture of cotton and
sugar, which productions have been extremely advantageous to the
agriculturist. It disembogues between Cape St. Augustine and the
island of St. Aleixo, forming a port for the small vessels by which it is
frequented.
The Serenhen, which is considerable and advantageous to the
cultivator, empties itself almost in front of the isle of St. Aleixo. One
of its largest confluents is the Ceribo, which meets it on the left
bank, not far from the sea.
The Una comes from the district of Garanhuns, with a course of
nearly forty leagues, and in the vicinity of the ocean receives on the
right the Jacuipe, which is inferior, and runs into the sea through
large woods. Both serve for the conveyance of timber, that is laden
in the port at its mouth, which is about seven leagues to the south-
west of the island of St. Aleixo.
The Goyanna, which is handsome and considerable, runs into the
sea nine miles to the north of Itamaraca, between the point of
Pedras and the Cocoa-Tree Point. It takes this name at the
confluence of the Tracunhaen, which has a considerable course, with
the Capibari-mirim, much inferior, about three leagues from the sea,
to which place smacks and small craft ascend. The water of the first
is only good at the source.
The other rivers upon the coast are the Cururippe, which
discharges itself twenty-eight miles north-east of the St. Francisco;
the St. Miguel, twenty-five miles further; the Alagoas, so called from
being the mouth of two large lakes; the St. Antonio Mirim; the St.
Antonio Grande; the Cammaragibe; the Manguape; the Rio Grande;
the Formozo; the Maracahippe, which runs into the sea between the
Serenhen and the Ipojuca; the Jaboatao, which receives near the
coast the Parapamba by the right bank, their common mouth being
designated Barra da Jangada, and is two leagues to the north of
Cape St. Augustine; the Iguarassu, which discharges itself with
considerable width five or six leagues north of Olinda, and is formed
by several small rivers, that unite about seven miles from the ocean.
All these rivers admit of the entrance of boats and small vessels. The
Moxoto, after a considerable course, empties itself eight miles above
the fall of Paulo Alfonso. It is only a current during the rainy season.
The delicate mandin fish, which proceed up whilst it is full, as soon
as the river ceases to run, and the water begins to grow warm in the
wells, pines away, and soon dies. The Pajehu is only a current whilst
the thunder showers prevail.
Promontories.—Cape St. Augustine, the only one upon the coast,
is the most famous in the new world, and the most eastern land of
South America, in the latitude 8° 20’. Here is a religious hospicio of
slippered Carmelites, dedicated to Our Lady of Nazareth, which
many captains formerly honoured with a salute on passing. It has
two forts, each of which defends a small port, where vessels of an
inferior class can come to anchor.
Islands.—Itamaraca, for a considerable time called Cosmos, is
three leagues long from north to south, and one in the widest part;
it is mountainous and inhabited. Its principal place is the parish of
Our Lady of Conceiçao, situated on the southern side, about half a
league above the mouth of the Iguarassu. This was formerly a town,
the prerogative of which was transferred to Goyanna, whose senate
goes annually to assist at the festival of its patroness. The mangoes
and grapes of this island are highly praised. There are also several
very fine salt-pits. The channel which separates it from the continent
is narrow and deep. At the northern entrance, called Catuama, there
is commodious anchorage for ships in front of the mouth of the river
Massaranduba.
The island of St. Aleixo, which is about four miles in circuit, with
portions of ground appropriated to the production of various
necessaries of life, is five leagues to the south-west of Cape St.
Augustine, and a mile distant from the continent.
Ports.—No province has so great a number of ports, though the
generality of them are only capable of receiving smacks and small
craft. The principal ones are the before-mentioned Catuama; the
Recife, which will be described jointly with the town of that name;
the Tamandare, which is the best of the whole, in the form of a bay
within the river so called. It is securely defended by a large fort, and
capable of receiving a fleet, being four and five fathoms deep at the
entrance, and six within. It lies ten leagues south-west of Cape St.
Augustine.
Jaragua and Pajussara are separated by a point which gives
name to the first, where vessels anchor in the summer. The latter
one can only be used in winter. They are two leagues north-east of
the river Alagoas, and in them people disembark to go to the town
of this name, because the river, which formerly afforded passage for
smacks, at present will not admit of canoes. It is therefore necessary
to go a league by land, and re-embark on the lake.
 Cururippe is a beautiful bay, capable of receiving large ships. It is
sheltered by a reef, which breaks the fury of the sea. It has two
entrances, one to the south and the other to the north; but the
anchorage is not generally good. The bay receives the river from
which it derives the name. It is a deep and quiet stream of black
water, and navigable for canoes some leagues; the least depth is at
the mouth. Its banks are covered with mangroves, reeds, and divers
trees.
Lakes.—The considerable lakes are the Jiquiba, five leagues long
and one wide, brackish, containing fish, and is discharged twelve
miles to the north-east of Cururippe; and the Manguaba, ten leagues
long and one at the greatest width, is salt, and abounds with fish. It
is divided by a straight into two portions, one called Lagoa do Norte,
the other Lagoa do Sul, which is the largest. Its channel of discharge
is the before-mentioned river of the Alagoas, about a cannon-shot
across. Various small rivers here empty themselves. Its banks are
cultivated in parts; in others covered with mangoes. In its
neighbourhood are various sugar works, the produce of which is
transported, with cotton and other articles, in large canoes, to a
northern part of the lake, from whence they are carried in carts for
the space of three miles to the ports of Jaragua and Pajussara,
where the smacks are laden with them for the Recife, or Bahia.
The following are the towns in the three comarcas into which this
province is divided.
COMARCAS. TOWNS.
Ollinda[38]
Goyanna
Ollinda Iguarassu
Pau d’ Alho
Limoeiro.
Recife
Serenhen
Recife
St. Antonio
St. Antao.
 Porto Calvo
Alagoas
Atalaya
Anadia
Alagoas
Maceyo
Porto de Pedras
Poxim
Penedo.

Goyanna, situated in low ground between the rivers Capibari-

mirim, which washes it on the north, and Tracunhaen on the south,
a little more than a league above their confluence, is a large,
populous, and flourishing town, well supplied with meat, fish, and
fruits. It has a church of Our Lady of Rozario, a hermitage of the
same name, others of Amparo, Conceiçao, and the Senhor dos
Martyrios, a house of misericordia, a convent of slippered Carmelites,
a Magdalen, two bridges, and a Juiz de Fora; there is a royal
professor of Latin. It has a fair for cattle on Thursdays. A large
quantity of cotton is exported; the principal productions of the
farmers of its extensive district, where there are above twenty
hermitages almost all with chapels. It is sixty miles north-west of
Ollinda, and fifteen from the sea. In 1810 it had four thousand four
hundred inhabitants, including its district; but the town itself now
contains near five thousand.
Seven miles south of the mouth of the river Goyanna, and near
the beach, is the parish of St. Lourenço de Tijucopabo, which is
augmenting. Thirty-five miles west of Goyanna is the parish of St.
Antonio de Tracunhaen, near to this river: its inhabitants cultivate
cotton.
Iguarassu is considerable, and the most ancient town of the
province. It is honoured with the title of loyal, and has a church
dedicated to the companion Saints of Cosme and Damiao, a house
of misericordia, a convent of Franciscans, a Magdalen, four
hermitages, and is well supplied with fish, meat, and fruits. It is five
or six leagues north of Ollinda, and two from the sea, upon the right
bank of the river that gives it the name, and which is formed by the
small rivers Ottinga, Pittanga, and Taype, that unite themselves
above. There is a bridge over it, and canoes arrive here with the
tide, but smacks remain two miles lower down. Sugar and cotton are
the articles of exportation.
Two leagues north of Iguarassu, on the Goyanna road, is the
considerable village of Pasmado, inhabited by whites, in great part
locksmiths.
Pau d’Alho, situated upon the right bank of the Capibaribe, and
thirty-five miles from the capital, was created a town in 1812, has a
church dedicated to the Holy Spirit, a hermitage of Our Lady of
Rozario, and a market every eight days.
Limoeiro, also created a town in 1812, is upon the margin of the
Capibaribe, about thirty miles above Pau d’Alho, and has a church,
dedicated to Our Lady of Expectaçao, and a market every week.
Cotton constitutes the wealth of its inhabitants. Whilst I remained at
Pernambuco, an English gentleman proceeded to this town for the
purpose of establishing a machine for dressing cotton, in which, I
understand, he has been very successful.
Serenhen, founded in 1627 with the name of Villa Formoza,
situated on an eminence upon the margin and seven miles above
the mouth of the river from which it borrows the name, is small, and
has a church, dedicated to Our Lady of Conceiçao, two hermitages,
and a convent of Franciscans. Its environs are remarkable for
fertility, abounding with water and rich plantations of cane.
St. Antonio, so called after the patron of its church, is nine miles
north-west of Cape St. Augustin, near the margin of the Parapamba,
and has two hermitages, one of St. Braz, the other of Our Lady of
Rozario. It was erected into a town in 1812.
St. Antao, situated near the small river Tapacora, and created a
town in 1812, has a church dedicated to the same saint, and two
chapels of Rozario and Livramento, and a market every week. It
produces much cotton.
 Amongst other places and considerable parishes in this comarca,
is to be remarked the Ipojuca, upon the margin of the river from
which it derives its name, two leagues distant from the sea, with a
church of St. Miguel, and a convent of Franciscans.
Muribeca, with a church of Nossa Senhora of Rozario, a
hermitage of the same name, and another of Livramento, is situated
between the Recife and Cape St. Augustin, about three miles from
the sea. Sugar is the produce of both these places.
Porto Calvo, a middling town with some commerce, and a church
of Our Lady of Aprezentaçao, is situated upon the margin of the
river, from which it takes the name, and twenty miles from the sea.
Bom Successo was its first name; to its haven formerly smacks
arrived with the tide. It is the native place of the mulatto Calabar,
who, passing over to the Dutch in 1632, was to them a great
acquisition, and to the Pernambucans a great injury; until he was
delivered to the latter, as a reward for their services, in order that he
might receive the chastisement due to his perfidy. At the taking of
this town, a nephew of the Dutch general, Count Nassau lost his life,
and the celebrated Preto Henrique Dias part of an arm. The latter
afterwards distinguished himself in the battle of the mountains of
Gararappes.
Alagoas, so called from having its site upon a southern portion of
the lake Manguaba, created with the name of Magdalen, is
considerable, head of the comarca of its name, and the ordinary
residence of the ouvidor, who is also inspector of the woods of the
royal marine. It has a church of Nossa Senhora of Conceiçao, a
convent of Franciscans, another of slippered Carmelites, two orders
of devout women, three chapels, with the titles of Amparo, Rozario,
and Bom Fim, and a royal professorship of Latin. At all times it is
well supplied with fish; and abounds in the jaca and orange tree. In
the beginning of last century was exported from the district of this
town, two thousand five hundred rolls of tobacco, of eight arrobas
each, and of such good quality, that it was bought at fifty per cent.
dearer than the same article from Bahia. Sugar is at the present day
the riches of its inhabitants. A custom-house has been recently
established within its jurisdiction, in consequence of the considerable
increase in the commerce of this comarca.
Atalaya, six leagues distant from the preceding place, three by
water, and the rest by land, is in a fertile and wholesome country,
possessing excellent water, and having a church of Nossa Senhora
das Brotas. Its neighbourhood abounds with ipecacuanha, and
cotton is cultivated with the common provisions of the country. The
number of its inhabitants, including those of its district, amount to
nearly two thousand; part of them are Caboclos,[39] white, and with
more regular features than any other known tribe of Indians.
Anadia, a middling sized town, with a church of the Lady of Piety,
is fourteen leagues from Alagoas. Its inhabitants are Indians,
Europeans, whites of the country, and Mestiços, in number about ten
thousand, including those of the district; almost all are cultivators or
purchasers of cotton, its principal produce. By the same law, of 15th
December, 1815, which gave to the town of Penedo a Juiz de Fora,
were created the towns of Maceyo and Porto de Pedras.
Maceyo is a dismemberment of the Alagoas, having a district of
more than seven leagues of coast, computing from the river Alagoas
to the St. Antonio Grande. In this interval the following rivers run
into the sea:—The Doce, which is short, and comes from a small
lake; the Paratiji, the St. Antonio Mirim, and the Paripueira, which
receives the Cabuçu on the right, near its mouth. Maceyo is
becoming a place of some commerce, and will be the emporium of
the trade of the comarca of Alagoas. One English establishment
already exists here, and shipments are made direct from hence to
Great Britain. An European first settling in any of the towns of Brazil,
and particularly in places of this class, makes a sacrifice of all the
comforts common to well regulated society.
Porto de Pedras is a dismemberment of Porto Calvo; its district
embraces nearly nine leagues of coast, occupying the interval from
the aforesaid river St. Antonio Grande to the Manguape. The
Cumuriji and the Tatuamuhy are the principal rivers that empty
themselves upon its shores. The two last towns have each two
ordinary judges, and one of orphans; three veradores, or species of
aldermen, a procurador of the council, a treasurer, two clerks of the
market, an alcaide, with a scrivener of his office, two public
scriveners, judicial and notarial, the first of which holds that office in
the council, also in the customs, and is market clerk; the second also
belongs to the office of scrivener of the orphans.
Poxim, a small town upon the margin of the river of the same
name, which enters the sea three leagues to the north-east of
Cururippe, has a large bridge, and a church dedicated to Our Lady of
Madre de Deos. It is two miles from the ocean, is well supplied with
fish, and has in its district the new and yet small aldeia of Our Lady
of Conceiçao, so called after the patroness of the chapel which
ornaments it; and where upon festival days are assembled six
hundred families, dispersed around its neighbourhood. It is situated
near the river Cururippe, four miles from the sea; and its good port,
where at present is only laden some timber and oil of the mamona,
with the fertility of the interior territory, will contribute to render this
a considerable place at some future day. The land in the proximity of
the shore is sandy, and well adapted to the cajue-nut tree, which, in
a short time grows to a large size, and its fruit would furnish a
branch of commerce.
Penedo, a considerable, populous, and commercial town, is
situated partly in a plain along the bank of the river St. Francisco,
and occasionally suffering by its inundations, and partly upon a
height at the extremity of a range, which is the first elevated land
met with on the northern margin, on ascending this river. Besides
the church dedicated to Nossa Senhora of Rozario, there is a
hermitage with the same title; another of the Lady of Corrente;
others of St. Gonçalo d’Amarante, St. Gonçalo Garcia, and a convent
of Franciscans, whose ill appropriated grounds occupy a situation the
best suited for the improvement of the povoaçao. It has a royal Latin
master, and a good house for the ouvidor. The houses were, till
lately, miserable buildings of wood; there are now many of stone,
with two or three stories, having portals of a species of grindstone.
The river is here near a mile in width, and the highest tide is three
feet. The greatest height of the river, that can be remembered,
reached twenty feet. It is about twenty-five miles from hence to the
mouth of the river. The confessional roll, which is a tolerably correct
one, estimates the population at eleven thousand five hundred and
four, including that of the district. By a law of the 15th of December,
1805, a Juiz de Fora was granted to this town.
About twenty-five miles higher up, on the margin of the St.
Francisco, in a delightful situation, is the parish of Collegio, whose
dwellers only amount to ninety families, and are mostly Indians, of
three different nations. The Acconans who lived in the district of
Logoa Comprida, a few miles higher up the river: the Carapotos,
who inhabited the serra of Cuminaty: and the Cayriris, who dwelt in
the vicinity of the serra which takes from them its name. The main
part of this colony wander about when not occupied in fishing,
according to the custom of their ancestors, through a country six
miles along the river, and three broad, which was given to them for
the purposes of agriculture. The wives of these lazy poltroons work
daily in making earthenware, seated on the ground. They begin to
make an earthen vessel by working the clay on a banana leaf, placed
upon their knees; afterwards it is put upon a large dish, with
pulverized ashes, when it receives the form and last finish. Without
any assistance from the men, they procure and work up the clay,
proceed to fetch the wood in order to set up large fires every
Saturday night for hardening the vessels made during the week. The
church was a Jesuitical chapel, which the district already possessed.
In this comarca is the considerable arraial of St. Miguel, upon the
margin and seven leagues above the mouth of the river of the same
name. It has a church of Nossa Senhora of O, whose parishioners
amount to fifteen hundred, the main part dispersed.
The western portion of the province is much more extensive than
the preceding, but is very thinly inhabited, being a sterile and
parched up country, without other rains than those afforded by
thunder showers. In all parts, however, are met with portions of
ground more or less fertile, which would produce mandioca, Indian
corn, feijao, hortulans, cottons, fruits, and the sugar cane. Cattle are
generally bred in this vast district, and game abounds in great
variety. It was included in the jurisdiction of the ouvidor of Jacobina
until 1810, when it became a comarca, receiving the interior portion
of that of Recife. It is at present called the ouvidorship of the certam
of Pernambuco, the magistrate not having chosen the town for its
head, by which it ought to be designated. Cattle, hides, cotton, salt,
and gold, are the articles of its exportation.
Rivers.—The Rio Grande and the Correntes are the only
considerable rivers.
The river St. Francisco, whose description we left off at the
confluence of the Carinhenha, only receives from thence to its
entrance into the ocean, five streams of any importance, namely, the
Rans, the Parimirim, the Verde, on the right, the Correntes, one
hundred miles below the first, and the Rio Grande, one hundred and
forty lower on the left, continuing from thence northward, with many
small windings, being of considerable width, and having many
islands and some currents which do not impede navigation. Its
margins are flat, and in some parts so low, that at the inundations,
they are submerged for more than seven miles. Below the
confluence of Rio Grande, its course bends towards the east, and
then to the east-south-east, preserving the same width for a long
way, to the aldeia of Vargem Redonda, where the navigation
terminates from above, and the lateral lands begin to rise. Its
channel gradually becomes narrower, and the current is rapidly
impelled between blue and black rocks, to the small aldeia of
Caninde, (the boundary of the navigation from the ocean,) which is
seventy miles below the other. In this interval there are various large
falls, of which the most interesting and famous is that of Paulo
Affonso. Between these falls canoes navigate during the summer
season. Through Caninde it continues to run between stony banks,
thinly covered with soil and an impoverished vegetation, being one
hundred fathoms in height, the width of the river not exceeding a
sling’s throw for the distance of ten miles, to the mouth of the
Jacare, where its elevated and rugged banks terminate. Its bed in
this part is overspread with cleft reefs, appearing like the relics of a
majestic sluice or dock.
Three leagues below is the small island of Ferro, where the
margins begin to diminish in elevation, and the river to augment in
width, exhibiting crowns of white sand, the resort of the ash-
coloured and white heron, and where myriads of black diving birds
assemble; forming themselves like a net, they encircle the fish in
shoal places, not infested by the dreaded piranha fish. Here the sea-
mew, and other aquatic birds, make their nests in small holes, their
young being hatched by the heat of the sun.
Six leagues below the island of Ferro, is that of Oiro, also small,
high, and rocky, crowned with a hermitage of Nossa Senhora of
Prazeres. These are the only islands met with in the space of one
hundred miles from Caninde to the town of Penedo, where the small
range of hills that borders the left bank of the river terminates. Two
miles below Villa Nova, the elevation of the right margin also has its
bounds, and the river begins to divide its course, forming a great
number of islands, generally low, and abounding with woods, giving
them an agreeable aspect. They possess portions of fertile soil,
where some rice, maize, mandioca, sugar, and hortulans, are
cultivated. Some are sandy, others are composed of grey clay, with a
bed of black above, about a foot in depth and above this another, of
yellow earth, from three to four spans in thickness. The whole are
submerged at the period of the overflowings of this great river. The
cassia tree is here numerous, and extremely beautiful while
blooming with its rosy flowers. It affords a sort of husky fruit, two
spans in length, and of proportionable thickness, and abounds on
both margins of the river for about thirty-five miles above the town
of Penedo. This river, so deep in the interior of the continent,
disembogues by two mouths of very unequal size; the principal one
is on the north, being near two miles wide, with so little depth that
the smacks can enter it only at high water, and there wait for the full
tides to get out. The navigation from the falls, upwards, is
performed in barks and ajojos, which are two or more canoes
moored together with cross pieces of timber above. All produce
descending the river below the falls is disembarked at Vargem
Redonda, a district of the parish and julgado of Tacaratu, and
transmitted on oxen to the port of Caninde, or Piranhas, which is
two miles lower down. The navigation from hence to Penedo, is
solely by the ajojos, and upwards always with a sail. The wind is
favourable from eight o’clock of the day to the following morning’s
dawn, but not without variation according to the age of the moon
and the state of the weather; always increasing at evening, and
frequently becoming quite calm before midnight. These craft
descend always with a strong current, whilst there is no wind to
produce an agitation of the water. When the breeze is high the
current diminishes, and the river rises above a span. Fish is more
abundant above the falls, which difference, the oldest men say
originated in the extirpating system of fishing with what are called
tapagens, a mode of enclosing them, and which was unjustly
countenanced by the chief magistrates, who drew from this abuse
considerable revenues, which disappeared without leaving to the
public one signal of its expenditure. The most valuable fish of this
river are the sorubin, which grows to the size of a man; the mandin,
four feet in length, and proportionably thick, with large beards; the
pira, two feet long; and the piranha, which is short and thick, with
very sharp teeth, and fatal to all living creatures that come within its
reach. None of these fish have scales. The camurin, with a white
stripe on both sides; and the camurupin, are both thick and scaly.
The dogs, as if by a natural instinct, do not approach the waters
that are muddy, but drink only at those parts where there is a
current, from an innate dread of the piranhas, which lurk about with
destructive intent in the dead waters.
The Correntes, which has a course of about one hundred and
forty miles, issues from a lake, and runs first under the name of
Formozo, receiving another river of the same name, and afterwards
the Eguas, Guara, and Arrojado. It affords navigation for a
considerable space, and disembogues into the St. Francisco ten
miles below the chapel of Bom Jesus da Lappa. All the branches
mentioned issue from the skirts or proximity of the serra of Paranan.
Some run through auriferous countries, where mining has originated
only a few years, and which has been the occasion of founding in
the vicinity of the river Eguas a chapel of Our Lady of Glory, whose
parish contained six hundred and eighty-four families, with one
thousand nine hundred and ninety-eight adults, in the year 1809;
many being breeders of cattle, others agriculturists.
The Rio Grande, whose original name is not known, and for
which the present one was substituted, in consequence of the
ridiculous and prevailing custom in the Brazil of designating many
large rivers, of various districts, by the term of Rio Grande, (Large
River,) thereby creating a confusion of names, has fifty leagues of
course, and originates in the serra of Paranan, near the register of
St. Domingos, about five leagues from the source of the Guara, a
branch of the Correntes. After flowing a considerable way, the
Mosquito joins it, and five leagues lower the Femeas, which rises
fifteen miles from Serra Tabatinga; twelve miles further it is entered
by the Ondas, which originates eight miles from the preceding, and
nearer the Sobrado, an arm of the Tucantines, and runs rapidly
through a gold and diamond country. Fifteen miles below, it receives
the Branco, navigable to the situation of Tres Barras, so called in
consequence of the union with it of the Riachao and the Janeiro,
which enter in front of each other; seventy miles lower also on the
left, the Preto joins, which is one of its largest tributaries, and rises
in the skirts of the Serra Figuras, which is a continuation of that of
Mangabeiro, from whence issue the other branches mentioned,
excepting the Riachao. Its first name is the river of Doirados, and its
current of clear water is rapidly impelled through a winding bed,
edged with steep margins. It passes near the village of Formoza,
which has a hermitage of Senhor do Bom Fim, and by the parish of
St. Ritta, which is forty miles below the other, and the same distance
above the mouth of the river. The Rio Grande, which enters the St.
Francisco fifty miles below the confluence of the Preto, is navigable
to the mouth of the Ondas, and without falls to the Branco, passes
the parish of St. Anna de Campo Largo, which is thirty-five miles
above the embouchure of the Preto; it is well stored with the
sorubin, crumatan, large doirados, the piranha, piau, martrinchan,
and other sorts of fish. Its water has a very different colour from the
river which receives it, and remains unchanged for a considerable
distance after entering the St. Francisco.
The towns of this ouvidoria are,
Barra do Rio Grande
Santa Maria
Flores
Pilao Arcado
Assumpçao
Symbres.

The town of Barra do Rio Grande is at the northern angle of the

confluent which affords it the name, is in a state of mediocrity, well
supplied with meat and fish, and has some commerce. The church is
dedicated to St. Francisco das Chagas; and the number of its
inhabitants is included in one thousand and thirty-six families. The
passage of the St. Francisco, here a mile wide, is much frequented.
Pilao Arcado, created a town in 1810, is one hundred miles below
the preceding, and is well situated near a small hill upon the margin
of the St. Francisco, its only resource for water, and whose greatest
inundations always visit it with some injury. The church, dedicated to
St. Antonio, is new, and solidly built with bricks and lime. The
houses are generally earth and wood, and many of them covered
with straw. It has three hundred families, which are increasing, and,
with those of its vast district, comprise five thousand inhabitants,
who cultivate mandioca, maize, vegetables, good melons, and water-
melons, upon the margins of the river. The land around it is
generally wild and sterile, and alone appropriated to the breeding of
cattle, which are subject to the horrible mortality, produced by
frequent droughts. There are a great many small lakes, at various
distances from the river, all more or less brackish, and upon whose
margins the salt, formed by the ardent heat of the sun, appears like
hoarfrost. The water of these lakes (and even soft water) filtered
through a contiguous earth in wooden vessels, or leather finely
perforated, and exposed on boards to the weather, in eight days of
heat crystallizes, becoming salt as white as marine salt. Although in
lands which have proprietors, they are, like auriferous soils, reputed
common to all those who wish to benefit by them, and are a great
resource for the poor, almost all the salt here produced is
transmitted to the centre of Minas Geraes.
Villa Real de Santa Maria, situated upon an island three miles
long, and a great distance below the preceding, has the aspect of an
aldeia, with one hundred and sixty families, chiefly Indians, who are
hunters, fishermen, and agriculturists, and are exempt from tribute.
Their wives spin and weave cotton, and work in the manufactory of
earthenware, of which a considerable portion is exported.
The town of N. Senhora d’Assumpçao takes the name from the
patroness of its church. The inhabitants, comprising one hundred
and fifty-four families, are all Indians; they fish, hunt, and cultivate
mandioca, maize, water-melons, hortulans, and cotton. It is at the
western extremity of an island eighteen miles long, and the same
distance below the preceding town. In front of this island is the
middling arraial and julgado of Quebrobo, with a church of
Conceiçao, whose parishioners, about eighteen hundred and twenty-
seven families of all complexions, are mostly dispersed over its vast
district. Cotton and cattle are their productions.
Flores, erected into a town in the year 1810, is yet small and in
the vicinity of the river Pajehu. A filial chapel of the parish of
Quebrobo serves it for a church. The inhabitants draw their
subsistence from the breeding of cattle, and the culture of cotton.
Symbres, formerly Ororoba, is a small town of Chucuru Indians,
with some whites and mesticos, cultivators of cotton and the
provisions of the country. The wives of the first make earthenware
with considerable art, and spin and weave cotton. They utter great
lamentations when their husbands do not bring home game from the
woods. The church is dedicated to the Lady of the Mountain; and its
population consists of four hundred and eighty families.
 The considerable arraial, julgado, and parish of St. Antonio, in
the district of Garanhuns, bordering upon the preceding, is of this
comarca, having been, with the latter one, dismembered from that
of the Recife. Its people grow cotton.
In this ouvidorship is also the parish of St. Anna do Sacramento
do Angical, dismembered from that of Campo Largo, from which it is
distant thirty miles, and ten from the margin of the Rio Grande.
Having concluded the description of the province, we will now
proceed to a consideration of its capital, commonly called
Pernambuco, (which name is a corruption of Paranabuco, by which
the Cahetes designated the port, where at the present day the
smallest class of vessels anchor,) and is understood to comprehend
two distinct places, the city of Ollinda and the town of Recife, (so
called from the reef in front of it,) with an interval of a league,
communicating by a narrow sand-bank from north to south, also by
an arm of the sea that enters the small river Biberibe, which runs
along the said sand-bank from one place to the other, and likewise
by a road on the main land, at no great distance from the western
margin of the same river.
Recife, which is the official designation of the capital, the
government documents being so signed, is large, populous, and
commercial, with tolerable houses, handsome churches, a convent of
priests of the congregation of Oratorio, another of Franciscans, a
third of slippered Carmelites, an alms and entertaining house of
Terra Santa, another of Italian Barbonios, a recolhimento of women,
an episcopal palace, and an hospital of Lazarettos. The Jesuits had a
college here, which now constitutes the palace of the governors.
This town is divided into three portions, or districts, by the river
Capibaribe, namely, Recife, St. Antonio, and Boavista. Each of these
forms a separate parish, and they communicate by two bridges; that
of Boavista, which is chiefly of wood, and paved, is three hundred
and twenty paces long; that of St. Antonio, two hundred and ninety
paces across, was in great part of stone, but having given way, the
remainder is imperfectly supplied with wood, not admitting of the
passage of a carriage, and has been allowed to remain for a
considerable time in this condition, so disreputable to the town. At
each end it has a stone arch of rather an elegant construction,
above which there are small chapels, niches, and saints, where mass
is celebrated. In the street, fronting the niches with saints, many of
the inhabitants prostrate themselves, at dusk, for some time in a
posture of devotion. The bridges are flat and not many feet above
the level of the sea.
The first part, or the Recife, occupies a peninsula, and is the
emporium of the town’s commerce, the stores of the merchants
being situated in it. The tongue of land, or sand-bank before
mentioned, which extends itself from Ollinda to the south between
the sea and the river Biberibe, terminates here. It is the site of the
custom-house, which of itself is an indifferent edifice. The Rua das
Cruzes is the best street, and although short is wide and neat; the
others are mostly paved, but are narrow and inelegant. Its church,
which is handsome, and commonly designated Corpo Santo, has for
its nominal patron St. Pedro Gonsalvez.
The second portion of the town, called St. Antonio, occupies
another peninsula, which is the northern extremity of the island,
formed by two arms of the Capibaribe. It was first planted with
cocoa-nut trees by Prince Nassau, the Dutch governor, who erected
Fribourg House for his own residence, and founded the town of
Mauritius upon it. It has better streets than the Recife, although
generally sandy, and not paved, with high footways laid with bricks.
Here is a small square, surrounded with neat houses, having only a
ground floor, with a piazza to the interior front, and may be
denominated a species of bazar, consisting solely of shops, where a
variety of articles are sold. The mother church is dedicated to SS.
Sacramento. The treasury and the governor’s palace are situated
here. The latter is not the residence of the governor, but contains
various public offices, and is used for a sort of levee, held upon
occasions of the birthday of any of the royal family.
 The third part of the town, called Boavista, is the only portion
susceptible of any considerable increase, being situated on the
continent. It has advanced in magnitude with the others, but is
destitute of regularity, which may be attributed to the negligence of
the senate in not having marked out the streets in right lines at its
commencement. Its church is also dedicated to SS. Sacramento.
Here also the Dutch governor built the first house, which he called
Boavista, and, being a Portuguese name, the place has retained it.
These three portions, running in a line from east to west, form this
large and flourishing town, which, besides the governor, has an
ouvidor, a port admiral, a Juiz de Fora, each of them having various
inspections, and three royal professors of Latin, one of philosophy,
and another of eloquence and poetry. The usual junta, or council da
fazenda real, to decide upon all matters relative to the province, is
composed of the governor, the ouvidor, the Juiz de Fora, the
attorney-general, the port admiral, the chief of the treasury, and the
judge or comptroller of the custom-house, who hold their sittings at
the treasury. The suburbs are an extensive plain, with handsome
cocoa-nut tree groves, interspersed with sitios, or country-houses.
The inhabitants drink the water principally of the Biberibe, collected
into a reservoir at Ollinda, formed by a sort of barrier, denominated
a varadoiro, which impedes the further advance of the tide, and
accumulates the fresh water above. This bulwark, which also serves
as a bridge or passage over the river to Ollinda, is in part covered by
a handsome archway, below which the water passes through circular
spouts, and at the other parts by larger and square channels;
presenting altogether twenty-four mouths, from whence the water
issues in spray, forming many pleasing cascades. From hence it is
conveyed in covered canoes for the supply of the Recife. The water
of the Capibaribe is also brought in canoes from Monteiro.
The port of Recife, which is not deep enough for vessels of a
large class, is amongst the most wonderful works of nature. A recife,
or chain of reef, which extends itself from the entrance of Bahia to
Cape St. Roque, parallel with and at no great distance from the
shore, in no part appears so much like an operation of human art as
here. It is prolonged for the space of a league in a direct line with
and about two hundred yards from the beach, having the aspect of a
large flat wall, being always above the level of the sea, and at low
water six feet is discovered. This reef, which is perpendicular on the
land side, and gradually declining on the other, here suddenly
disappears opposite the most northern part of the Recife, having on
its extremity the fort of Picao, and forming a fine harbour, which
must have been the sole inducement for the foundation of the
capital in this situation. Vessels entering the port navigate as near as
possible to the internal side of the reef, where they require much
depth till they arrive at the most commodious place of anchorage.
The occasionally agitated ocean here finds its bounds, and dashes in
tumultuous and angry waves against the reef, the foaming spray not
disturbing the smooth water within, but affording a delightfully
cooling freshness, as well as an interesting spectacle, to the houses
situated upon the beach, and principally occupied in stores by the
merchants. Large ships anchor to the north of the fort of Picao, in a
bay without shelter, fronting the forts of Brun and Buraco, situated
upon the before-mentioned sand-bank. The fort of Brun, which the
Dutch commenced on the 25th of June, 1631, and gave it the name
of a maternal relative of their General Theodore, had for some time
among the Pernambucanans the appellation of Perreril.
This place, while yet of little consequence, was taken by the
Dutch in 1630, who retained it for twenty-four years, and did more
for it in public works during that time, as was candidly admitted to
me by a Portuguese gentleman holding a public situation here, than
has ever been done since. Among the monuments which attest the
spirit of improvement that marked the Dutch possession of this part
of the Brazil, there is (or was a few years ago) a stone of European
marble bearing the following inscription:
Op Gebouwt
onder
D’Hooge Regeringe
van
 Præsidt en Raden,
Anno MDCLII.[40]
This stone was seen by several of the English merchants within
the last three years at the door of the church of Corpo Santo, among
the masonry work destined for the completion of this fine edifice;
but it certainly is not introduced into the walls of the building, nor
could I discover any trace of it.
The before-mentioned forts, and that of Cinco Pontas, at the
southern extremity of St. Antonio, are the principal ones that defend
the place; the two first are in good order.
A league to the south of Recife, near the southern arm of the
Capibaribe, is the arraial of Affogadas, which is increasing, and is
ornamented with three hermitages, of Nossa Senhora of Paz, of
Rozario, and of St. Miguel. There is here a wooden bridge
communicating with St. Antonio.
The city of Ollinda, which, as has been observed, constitutes a
part of Pernambuco, was burnt by the Dutch in 1631, and is
beautifully situated upon a cluster of eminences, which are the
commencement of a small cordillera, that extends itself towards the
interior of the continent. It was in former times rich, flourishing, and
powerful, and was erected into an episcopal city in the year 1676,
but continued to fall into decay, and is at present poor and thinly
inhabited, owing to the vicinity of the town of Recife, which has
deprived it of all its commerce. It is, however, a fine retreat for the
studious, convalescent, or misanthropical, who seek retirement from
the tumult and bustle of the world. It has a house of misericordia,
with its hospital, a recolhimento, or Magdalen house, a convent of
Franciscans, one of unslippered Carmelites, another of slippered
Carmelites, and a fourth of Benedictines; a palace in which the
governors in former times were obliged to reside six months in the
year; an episcopal palace, finely situated, but much deteriorated,
being unoccupied in consequence of the death of the bishop; a
seminary in the ex-Jesuitical college, with schools, and professors of
Greek, Latin, French, geography, rhetoric, universal history,
philosophy, drawing, ecclesiastical history, dogmatical and moral
theology, a great number of hermitages, and a garden of trees and
exotic plants, chiefly Asiatic, from whence the farmers can transplant
them into their own grounds. It has also the bread-fruit tree and
Otaheitan cane, and occupies an advantageous situation, but is not
kept in good order. This city is divided into two parishes, one of
them being of the cathedral, which is a magnificent edifice, with
three naves, dedicated to St. Salvador, and contains eight hundred
and eighty houses; the other has for parochial the church of St.
Pedro Martin, and comprises three hundred and fifteen houses.
The senate is rich; almost all the houses pay to it a testoon
(three hundred reas) of tax for each span of front. Almost all have
large gardens, but generally of little or no utility. The ground is
appropriated to the cultivation of fruitful trees, of which mangoes
are the principal.
The last donatory of this province affirmed that Ollinda, when it
was burned, had two thousand five hundred houses, which were
estimated to contain twenty-five thousand inhabitants.
The decay of Ollinda was considered by many of its inhabitants
as a punishment for the pride of its rich and leading persons, whose
libertinism had arrived at such a pitch, that an orator preaching on a
festival day in one of the parish churches, and energetically
declaiming against the vices prevailing in the country, some of the
principal people commanded him to be silent, and dragged him with
violence from the pulpit, without the auxiliary priests being able to
prevent the outrage.
The convents, which are handsome and well-built, occupy the
finest situations in Ollinda, generally upon the acclivity or summits of
the eminences, from whence the views are interesting. Some of
these religious establishments have now but few friars, and one of
them was occupied by a military detachment. The walls surrounding
the grounds of several, I observed, were broken down in many
parts, and in a state of dilapidation; and the enclosures, which would
have formed fine pleasure grounds, were barren, unplanted, and
quite neglected.

A MATUTO RETURNING FROM PERNAMBUCO.

On proceeding from hence by the sand-bank to the Recife, I was
suddenly startled at the appearance of a human skull and bones,
near a pillar or beacon situated between the two forts. Considerably
impressed by so unexpected a sight, and moving slowly forward with
such feelings as it was calculated to excite, not having any other
idea but that they were the remains of some murdered person, I
found myself in the midst of human bones, over-spreading the
summit of the sand-bank. I now began to surmise that it was the
cemetery of the blacks, which was confirmed on my arrival at the
Recife. The dead bodies of the negroes are wrapped up in a piece of
coarse cotton cloth, and being thinly covered with sand is the reason
of their remains soon becoming thus indecently exposed. I
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