Business and credit: complexity and flexibility in credit arrangements (fifteenth century)

Abstract

After the fourteenth century, as is generally known, Portuguese commerce gained decisive importance for the kingdom's economy. However, an analysis of various commercial mechanisms of the end of the Middle Ages, particularly those linked to credit, shows that their implementation was governed by various factors, some of them nothing to do with commerce itself. Portuguese traders knew about different mechanisms and commercial practices that were common in Europe. Nevertheless, the monarchy's actions, including its weight in the national economy, denied individuals the possibility of becoming involved in the most profitable practices in Europe, methods that opened the way to the establishment of powerful banks. This limitation led to a certain financial fragility, but at the same time it brought comparative advantages. It enabled the capital to be more agile, taking it away, for example, from some ruinous circles such as credit for manor houses. Portuguese markets were conditioned by the church or by the monarchy, and put under pressure by foreign competition. The size of their business made it impossible for them to mobilise enough capital to organize banks that could analyse the market better. Therefore, they developed the methods and practices that adapted best to their circumstances. These are the aspects that the article covers.