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PALGRAVE STUDIES IN ECONOMIC HISTORY
The Portuguese Escudo

Monetary Zone
Its Impact in Colonial and
Post-Colonial Africa
Maria Eugénia Mata
Palgrave Studies in Economic History
Series Editor
Kent Deng
London School of Economics
London, UK
Palgrave Studies in Economic History is designed to illuminate and enrich
our understanding of economies and economic phenomena of the past.
The series covers a vast range of topics including financial history, labour
history, development economics, commercialisation, urbanisation, indus-
trialisation, modernisation, globalisation, and changes in world eco-
nomic orders.
More information about this series at

http://www.palgrave.com/gp/series/14632
Maria Eugénia Mata
The Portuguese
Escudo Monetary
Zone
Its Impact in Colonial and Post-Colonial Africa
Maria Eugénia Mata
Nova School of Business and Economics
Universidade Nova de Lisboa
Carcavelos, Portugal
ISSN 2662-6497 ISSN 2662-6500 (electronic)

Palgrave Studies in Economic History
ISBN 978-3-030-33856-5 ISBN 978-3-030-33857-2 (eBook)
https://doi.org/10.1007/978-3-030-33857-2
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
Nature Switzerland AG 2020
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electronic adaptation, computer software, or by similar or dissimilar methodology now
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The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are
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The publisher, the authors and the editors are safe to assume that the advice and information
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To my father’s memory. To my mother.
Preface
The Portuguese decolonisation of the 1970s broke the monetary ties that
existed between the Mainland and each of its former colonies, whose
names (before and after independence) are always spelled in Portuguese,
in this book:
• Portuguese India began to use Indian currency (rupee) after it was

occupied by India, partly in 1954 (Dadrá and Nagar Havely), partly
in 1961 (Goa, Damão and Diu).
• São João Batista de Ajudá began to use Dahomean currency (CFA
franc) after it was occupied by Dahomey (today Benin) on 27
July 1961.
• Guiné-Bissau (Guiné, before de independence) replaced the
Portuguese escudo by the Guinean peso after independence, pro-
claimed on 26 September 1973, was recognised by Portugal on 10
September 1974, and the whole territory came under Guinean
administration.
• Cabo Verde replaced the Portuguese escudo with the Cabo Verdean
escudo after independence on 5 July 1975.
• São Tomé e Príncipe replaced the Portuguese escudo with the
Santomean dobra after independence on 12 July 1975.
• Moçambique replaced the Portuguese escudo with the Mozambican
metical after independence on 25 July 1975.
• Angola replaced the Portuguese escudo with the Angolan kwanza
after independence on 11 November 1975.
vii
viii PREFACE
• Portuguese Timor began to use the Indonesian currency (rupiah)

after it was occupied (December 1975) and annexed (17 July 1975)
by Indonesia.
• Macau went on using the Macanese pataca after it became a special
administrative region of China on 20 December 1999, but its cur-
rency was already separated from the Portuguese escudo and pegged
to the Hong Kong dollar.
This radical monetary decolonisation may be explained by two main

reasons:
The first is that there was a conflictual character of Portuguese decolo-
nisation in general, which, in most cases, involved either occupation by a
foreign power (as in India, São João Batista de Ajudá, and Timor), or
conflict with local liberation movements (as in Cabo Verde and São Tomé
e Príncipe), leading to protracted colonial wars involving terrorism and
guerrilla actions (as in Angola, Guiné, and Moçambique). The only excep-
tion is Macau, where long standing tension with China was resolved
amicably.
The second reason is the fact that the attempt to build a Portuguese
monetary area embracing all of the territories under Portuguese sover-
eignty was already faltering when the decolonisation process peaked in the
mid-1970s.
Leaving aside the first reason, which is political in nature, this research
will examine:
• Firstly, the reasons for the failure of the attempt to build a Portuguese
monetary area between the early 1960s and mid-1970s.
• Secondly, the processes of monetary decolonisation of the various
territories of the Portuguese colonial empire.
As a consequence, beyond the present introduction, this book is divided

into four parts:
• Part I deals with the origin of the Portuguese Escudo Monetary

Zone. It is divided into three chapters that correspond to a chrono-
logical analysis of the periods of legislative efforts and implementa-
tion for launching the Escudo Monetary Zone, also introducing the
reader to the political dimension of the financial difficulties resulting
from the colonial war.
PREFACE ix
• Part II deals with the difficulties of the Escudo Monetary Zone, the
technical discussion on its financial problems, and the introduction
of the 1971 reform.
• Part III deals with the Portuguese monetary decolonization upon
the military revolution of 25 April 1974, which put and end to the
prevailing political regime. Decolonization agreements dictated
main conditions on the end of the colonial escudo, to establish
national monetary units and national banking systems.
• Part IV deals with the rise of the new monetary and financial systems
in the new independent countries. It analyses the various territories
that comprised the Portuguese colonial empire. The newly indepen-
dent countries preserved their names in Portuguese, and they are
referred to as such in this book. Guiné became Guiné-Bissau, and it
is referred to as such throughout this book. The names of the banks
are also expressed in Portuguese, and this book respects their names.
The analysis covers the last quarter of the twentieth century and the
first decade of the second millennium. The new-millenium years are
too close to the present day to allow an objective full analysis for the
purpose of historical perspectives, and many sources are not yet avail-
able in the archives, because they are considered to be useful for
current-day technical purposes. Only remarkable aspects that frame
the international monetary relationships will be mentioned. They are
the monetary agreements (namely with Cabo Verde and S. Tomé e
Príncipe, which continue in force), and the opening of stock markets.
A conclusion offers some lessons regarding the functioning and dis-

mantling of monetary areas, and on the importance of central-banks’
co-operation.
Carcavelos, Portugal Maria Eugénia Mata

Acknowledgements
In 2015, on the occasion of the 40th anniversary of the independence of

the former Portuguese colonies of Angola, Moçambique, Cabo Verde and
S. Tomé e Príncipe, and the establishment of their central banks, the
Portuguese Central Bank (Banco de Portugal) decided to promote and
fund a research project on the inter-territorial payment system that was in
place before the independence (the so-called Escudo Monetary Zone), as
well as on the process of monetary transition after the independence.1
I was invited to lead the project and I felt most honoured by this proof
of trust. In particular, I am very grateful to Governor Carlos Costa and his
continued support during my research. I would also like to thank
Maximiano Pinheiro and Maria João Azevedo, of Banco de Portugal, who
patiently read my draft and provided very useful comments. Moreover, I
am truly indebted to the Historical Archives of Banco de Portugal, particu-
larly to António Gil Matos, Maria do Carmo Rogado, Filipe Fernandes for
the high quality technical support when accessing historical sources, and
Vera Lory Dantas for images. I am also grateful to BNU-CGD Historical
Archives (Rui Lopes Costa, Nuno Carvalho, Filomena Rosa, Ana Monteiro,
Helena Gomes and Sónia Borracho), Torre do Tombo National Historical
Archives (Silvestre Lacerda, Anabela Borges Ribeiro), Arquivo Histórico
Ultramarino (AHU), Arquivo Histórico Contemporâneo do Ministério das
Finanças (João Sabino and Ana Gaspar), and Arquivo Histórico das
Alfândegas (Isabel Benholiel Silva) for facilitating the consultation of very
relevant documents.
I want to express my gratitude to my school and alma mater, Nova
School of Business and Economics (Faculdade de Economia), and its
xi
xii ACKOWLEDGEMENTS
Research Center hosting the project. I also feel indebted to the many who
discussed with me the research topics and kindly gave their advice and
stimulus to write the book, particularly Luís Catela Nunes (my co-author
in a paper on the Escudo Monetary Zone), António Agostinho, who pro-
vided me many balances of inter-territorial payments, Luís Saramago, for
sources and discussion on the monetary agreement with Guiné-Bissau,
Nuno Valério, who patiently read my draft and provided very useful com-
ments, José Rodrigues da Costa, for information and bibliography on
stock exchanges in the new countries, Luís Campos Cunha, for decisive
aspects on the monetary agreement with S. Tomé e Príncipe, António
Pinto Barbosa, José Tavares and Jorge Braga de Macedo, with whom I
discussed several African issues, Robin de Andrade, who explained me the
construction contracts of Cahora Bassa, João Ferreira do Amaral, to whom
I am indebted on exchange paralell markets in Guiné, and David Justino,
who shared information on this period. John Huffstot, who corrected my
English, and Mário Roldão, who received a one semester scholarship to
help me in processing the data, should also be thanked.
As regards the transition period following the independence of the ter-
ritories, I benefited enormously from the discussions and co-operation
with research teams working on similar issues for Cabo Verde and
Moçambique, namely with João Estevão, José Cláudio Mandlate, and
Napoleão Gaspar.
Last but not the least, I thank my family for their unconditional love
and support.
Any errors, omissions or misunderstandings are my responsibility.
Note
1. As part of the same research initiative, in October 2017 Banco de Portugal
organized, jointly with the European Association of Banking and Financial
History (EABH) the conference “Money in Africa - Monetary and financial
decolonisation in Africa in the twentieth Century”.
Contents
1 Introduction: Why to Study “The Portuguese Escudo

Monetary Zone and its Impact in Colonial and Post-
Colonial Africa” 1
Part I The Origin of the Escudo Monetary Zone 9
2 The Escudo Monetary Zone 11
3 The Difficulties in Launching the Escudo Monetary Zone 25
4 War, Confidence, and Expectations. Adjusting the Rules

of the Escudo Monetary Zone 51
Part II The Transition to a Revised Escudo Monetary Zone 69
5 The Heritage from the 1963–1968 Period. Marcelo

Caetano and the Decision of Asking for Studies 71
6 The Technical and Political Discussion of the Escudo

Zone Problems, and the Reform of 1971 85
xiii
xiv Contents
7 The Results of the 1971 Reform of Escudo Monetary

Zone Union. The Angolan and Mozambican Divergence101
Part III The End of the Revised Escudo Monetary System 121
8 Decolonisation and Independence Agreements. Retornados

and Difficulties of the Banking System123
9 The Genesis of the New Currency Units and Banking

Systems in the Portuguese-Speaking African Countries.
The Co-operation with Portugal133
10 The End of the Escudo Monetary Zone Fund in 1980.

The Continuation of Co-operation151
Part IV Co-operation from Independences to the End of the

Millenium 161
11 The New Currencies in the West-African Portuguese-

Speaking Countries and the Portuguese Co-operation163
12 The Angolan Kwanza and the Portuguese Co-operation193
13 The Mozambican Metical and the Portuguese

Co-operation213
14 Final Remarks: Conclusions235
Sources243
Index263
List of Figures
Fig. 2.1 Manuel Jacinto Nunes, Vice-Governor (1960–74), and acting

Governor of Banco de Portugal (1963–66), Chair of the
Board of Directors of the Monetary Fund of the Escudo Zone.
(Source: Banco de Portugal, Gallery of Governors) 16
Fig. 3.1 Rafael da Silva Marques Duque, Governor of Banco de
Portugal (1957–63). (Source: Banco de Portugal, Gallery
of Governors) 28
Fig. 5.1 Net cumulative positions of all overseas territories and the
Mainland, for the 1963–1971 period. (Source: Relatórios
Mensais do Agente, from Arquivo Histórico do Banco de
Portugal (AHBP). Unit: Million escudos) 77
Fig. 5.2 Annual Military Expenditure. (Source: Madeira, 2008,
pp. 266, 285) 78
Fig. 6.1 António Manuel Pinto Barbosa, Governor of Banco de
Portugal (1966–1974). (Source: Banco de Portugal, Gallery
of Governors) 95
Fig. 7.1 Overall balance (change in the reserve assets): total, with OECD
European countries, USA, Canada, and the rest of the world.
(Source: Estatística Cambial, Balança de Pagamentos, Arquivo
Histórico do Banco de Portugal. Unit: Million escudos)102
Fig. 7.2 The relative importance of the trade with regional partners
of the EMZ. (Source: Estatística Cambial, Balança de
Pagamentos, Arquivo Histórico do Banco de Portugal) 102
xv
xvi List of Figures
Fig. 7.3 Change in the reserve assets of each EMZ partner toward the
Rest of the World. (Source: Estatística Cambial, Balança de
Pagamentos, Arquivo Histórico do Banco de Portugal. Unit:
Million escudos)103
Fig. 7.4 Overall accounts (or change in reserve assets of each overseas
territory) with the Mainland, and of Mainland with the
overseas territories as a whole. (Source: Estatística de
pagamentos Interterritoriais. Arquivo Histórico do Banco de
Portugal. Unit: Million escudos)104
Fig. 7.5 The Angolan annual net debit positions in a monthly cumulative
accounting. (Source: Relatórios Mensais do Agente, Arquivo
Histórico do Banco de Portugal. Unit: million escudos)107
Fig. 7.6 The Mozambican annual net debit positions in a
monthly cumulative accounting. (Source: Relatórios Mensais
do Agente, Arquivo Histórico do Banco de Portugal. Unit:
million escudos)108
Fig. 7.7 Angolan overall account (changes in reserve assets). (Source:
Estatísticas dos Pagamentos Interterritoriais, Informações
estatísticas da Metrópole e Ultramar, Sistemas de Pagamentos
Interterritoriais. Arquivo Histórico do Banco de Portugal) 109
Fig. 7.8 Mozambican overall account (changes in reserve assets). (Source:
Estatísticas dos Pagamentos Interterritoriais, Informações
estatísticas da metrópole e Ultramar, Sistemas de Pagamentos
Interterritoriais. Arquivo Histórico do Banco de Portugal) 110
Fig. 7.9 GDP per capita in Angola, Cabo Verde, Moçambique, and
Mainland. (Source: Author’s calculations based on GDP,
Population and Inflation taken from Nunes et al. (2011) and
Madeira (2008)) 114
Fig. 10.1 Liabilities and Equity of the EMZ Fund over time, by
Stakeholder and Distributed Profits. (Sources: Balance sheets and
accounts of the Escudo Monetary Fund. Relatórios do Conselho
de Direcção do FMZE 1963–74, ARQUIVO HISTÓRICO DO
BANCO DE PORTUGAL 7450011 para o período 1963–74
and Relatórios do Conselho de Direcção do FMZE 1975–1979,
Arquivo Histórico do Banco de Portugal 7450011) 154
Fig. 11.1 The headquarters of BNU/Banco de Cabo Verde in Cabo
Verde, Praia city. (Source: BNU Historical Archives in Arquivo
Histórico da Caixa Geral de Depósitos) 165
Fig. 11.2 The headquarters of BNU in Bissau. (Source: BNU Historical
Archives, in Arquivo Histórico da Caixa Geral dos Depósitos) 171
List of Figures xvii
Fig. 11.3 The headquarters of BNU in S. Tomé. (Source: BNU

Historical Archives in Caixa Geral dos Depósitos) 179
Fig. 12.1 The headquarters of Banco de Angola in Luanda. (Source:
Arquivo Histórico do Banco de Portugal) 195
Fig. 13.1 The headquarters of BNU in Lourenço Marques (Maputo)
inaugurated in 1964. (New headquarters are now available).
(Source: BNU Historical Archives in Arquivo Histórico da
Caixa Geral dos Depósitos) 216
List of Tables
Table 2.1 The issuing of the 1.5 billion escudos of the capital of the
Monetary Fund of the Escudo Zone 15
Table 2.2 Ceilings for the automatic loans for each of the territories in
Decree-law 44703 15
Table 2.3 Ceilings for the special loans to each of the territories defined
by Decree-law 44703 17
Table 3.1 Value of currencies in the Foreign Exchange Management
Funds on 1 March 1963 26
Table 3.2 Available metropolitan escudos from the Foreign Exchange
Management Funds of other territories before 1 July 1963 26
Table 3.3 Loan needs in Guiné in 1963 27
Table 3.4 The interest rates approved on 11 November 1964, for loans
borrowed from the EMZ Fund 37
Table 4.1 The Moçambican Foreign Exchange Management Fund
positive position (1959–1963) 55
Table 4.2 The interest rates approved on 28 June 1967 for loans
borrowed from the EMZ Fund 59
Table 4.3 The interest rates approved on 28 November 1968 for loans
granted by the EMZ Fund 60
Table 6.1 Participation of the territories in the capital of the Fund
(Decree-Law nr. 479/71 of 6 November 1971) 94
Table 6.2 Settlement distribution of the new amount of capital for the
Escudo Monetary Zone Fund, proposed on 22 February 1972 95
Table 7.1 Mozambican debt to the Mainland on 30-11-1973 in
thousand escudos113
xix
xx List of Tables
Table 10.1 Balances of the escudo accounts at the Banco de Portugal,

belonging to the overseas territories’ Foreign Exchange
Management Funds (1973–1976) 152
Table 10.2 Remaining debts of the territories’ Foreign Exchange
Management Funds to the Escudo Monetary Zone Fund at
the moment of the Fund extinction. Unit: Escudos 155
Table 10.3 Ceilings of medium to long-run credit lines awarded to the
Portuguese-speaking African countries for Portuguese exports 155
Table 10.4 Amount of accumulated debt to Portugal on 31 December
of 1988, 1989, 1990, and 1991 156
Table 12.1 Credit lines to BNA by several Portuguese banks (1980) 199
Table 12.2 Financial situation of credit ceilings and credit awarded to
BNA on 7 March of 1990 (in USD million) 203
CHAPTER 1
Introduction: Why to Study “The

Portuguese Escudo Monetary Zone and its
Impact in Colonial and Post-Colonial Africa”
Waves of globalisation connected European countries with all regions of

the world. Thanks to sailing abilities and technological superiority,
Portugal and other European powers established not only trade connec-
tions but also European presence in all continents under great competi-
tion for the control of trade and territories over the centuries.
The independence of some territories in the late eighteenth and early
nineteenth century resulted into a new political map of mixed-migration
nations particularly in the American continent, which used their
Metropolises’ languages (namely English and French in North America,
and Spanish in South America). The late nineteenth-century globalisation
framed new colonial empires under the Berlin conference agreement to
share territories, in Africa. Economic integration of Metropolis territories
(the Metropolises) and their colonised territories built great empires for the
U.K., Belgium, France, the Netherlands, Germany, Italy, Spain, and
Portugal.1
Many of these empires established monetary zones where the absence
of exchange rate risks was a major aspect to implement businesses and
economic integration, not only with Metropolises but also among them.2
The Portuguese empire survived consequences of the First World War as a
reward for the Portuguese participation in the conflict as a member of the
Allies. It also survived the Second World War because of Portugal’s neutral
position in this conflict. The study of the Portuguese monetary zone is an
issue of interest, both for international comparative history on economic
© The Author(s) 2020 1

M. E. Mata, The Portuguese Escudo Monetary Zone, Palgrave Studies
in Economic History,
https://doi.org/10.1007/978-3-030-33857-2_1
2 M. E. MATA
integration patterns, and for domestic purposes related with economic

efficiency in currency areas.
From the late 1950s, the Portuguese link to the European Free Trade
Association (EFTA) for economic integration purposes led to commit-
ments with the General Agreement on Tariffs and Trade, GATT. The free-
trade philosophy was very useful to the increment of trade with other
European partners, to where it was possible to export tropical commodi-
ties produced in the Portuguese empire. The Escudo Monetary Zone
(ZME, Zona Monetária do Escudo) was founded in this historical context,
in order to also improve the economic integration of Portugal and the ter-
ritories of the empire, and to take advantage of the new international
opportunities created by the European economic integration.3 As trade
always means economic co-operation and peaceful relationships, the EMZ
was considered to be a very important instrument to keep the political ties
between the Mainland and the territories of the empire.
When this purpose began to be implemented in 1963 seven territories
were under Portuguese political rule, five in Africa: Cabo Verde
(4000 km2), Guiné (36,000), S. Tomé e Príncipe (1000), Angola
(1,247,000), Moçambique (802,000), and two in Asia, Macau (less than
1000), and Timor (15,000). In 1954 the Portuguese empire had lost
Dadrá and Nagar Aveli in India, in July 1961 the African fortress of S. João
Baptista de Ajudá, and in December 1961 the small territories of Goa,
Damão, and Diu, in India, which were conquered by the Indian Union.
The development levels of the Portuguese colonial territories were quite
different at that time: In the Metropolis (Portugal-Mainland and the
Adjacent Islands of Azores and Madeira) was about 2000 USD per capita,
in Angola and Moçambique were about one half of that value, and Cabo
Verde was about ¼. Maddison 2001 has no data for other territories,
which were presumably poorer.
According to the official political philosophy expressed by Oliveira
Salazar, the Prime-Minister (more precisely, the President of the Board of
Ministers, Presidente do Conselho de Ministros), Portugal was a multi-
continental country, using a same language (Portuguese), and working
under a same flag, as it had always been for centuries, since the early times
of the Portuguese nationality in medieval times. He considered education
and economic growth as instrumental to integrate the nation:
1 INTRODUCTION: WHY TO STUDY “THE PORTUGUESE ESCUDO… 3
As territories will develop and education will spread, local elites will become
more numerous and able to assume increased tasks without risk, and advan-
tage, for the national community.4
We have been criticized for our persistent commitment to the ideal multira-
cial society in the tropics, as if such an idea was opposite to the human
nature, the universal moral order or the interests of people, but it is the
contrary that happens. Without discussing this problem, I will say that we,
the Portuguese, don’t know how to be in the world in a different way, even
because it was in a kind of multi-racialty in which we framed our nation
eight centuries ago, after the end of several invasions, coming from the East,
North and South, that is to say, from Africa itself. From then we preserve a
natural trend – which we quote at ease, as it has been recognised by remark-
able foreign sociologists – for contacts with other people, from where any
concepts of superiority or racial discrimination have been always absent.5
With exaggeration, this political speech was produced in 1962, in the

context of the colonial wars against the Portuguese rule and administra-
tion, and disregarded the traditional colonial pact practices of protection-
ism to favour the production of commodities in the Mainland.
The Mainland’s exports to colonised territories lost weight in 1960 and
1961. From 23.83% in 1955 they steadily increased to 28.91 until 1959.
The decline to 25.57 and 23.23 in 1960 and 1961, respectively, in con-
trast with increasing exports to foreign countries (including USA, EFTA
and ECC partners), was a worrying development that was considered to
be the proof for the need of greater economic cohesion.
In the 1960s Mundell “supported the idea of a monetary union in
Europe”. On the one hand, Europe was a promising continent for the
purpose of economic integration following the ravages of the Second
World War, and the success of the reconstruction plans, thanks to the
Marshall Plan. European empires of victorious nations in the First World
War had been enlarged with the German defeat, thanks to sharing the
German empire among them, and all the empires offered extension oppor-
tunities for economic integration after the Second World War.6 The focus
of Mundell’s theories for the European continent is historically under-
standable. All American attention was devoted to European integration
under trade liberalisation. In the context of the Cold War this was a stra-
tegic vision. Optimum currency areas were conceived to benefit from geo-
graphical scale, and also included geopolitical consideration. In Mundell’s
(1961) mindset, which reflected his British education, the International
4 M. E. MATA
Monetary System needed a stable monetary anchor (which was the dol-
lar), because currencies pegged to precious metal recalls the desire of sta-
bility, which had been expressed in the earlier historical experiences of the
gold-standard (before 1914, and even after the First World War).7
Mundell’s theories did not refer to the growing desire for indepen-
dence that colonies expressed in all European colonial empires in the
world after the end of the Second World War, in the historical context of
the Cold War clash between the USA and the USSR, the two global pow-
ers. They consider, however, that all European countries were suffering
from the extensive destruction that resulted from the ravaging military
conflict of 1939–45.8 However, a European common currency unit also
had a role to perform. In the cold war context, any US difficulties might
have a counterbalance to the dollar if two major currencies existed in the
Western civilisation.9
Indeed, since 1965 Mundell had envisaged a European monetary area
that “would parallel the dollar and the sterling areas”.10 These areas were
defined after the monetary agreements of 1946 and 1947 that followed
the Bretton-Woods system foundation. Soon “British governments
learned that the management of sterling as an international currency was
constrained by American and European attitudes”, because of the British
decline in the context of decolonisation: the sterling area included all
members of the Commonwealth except Canada, all British colonies and
Iraq, Kuwait, other Persian Gulf sheikdoms, Libya, Jordan, Burma,
Iceland, and Ireland.11
According to Schenk (2010:132), the UK feared the co-operation with
the six founders of the European Economic Community (Belgium, the
Netherlands, Luxembourg, France, Germany, and Italy): closer British
“co-operation with the Six on reforming the international monetary sys-
tem was rejected, and instead it was agreed that collaboration with the
United States should continue”. The economic philosophy for free circu-
lation of Portuguese commodities throughout the empire was linked to
the Portuguese decision to frame a currency zone with the overseas terri-
tories under Portuguese political sovereignty, while joining EFTA, “which
is of the highest importance for Portugal”, because of “the smallness of
Portugal’s market in terms of actual and potential demand”.12
It is the purpose of this study to focus on the Escudo Monetary Zone
(EMZ), the framework of its multilateral compensation system, organisa-
tional difficulties, and problems at work. The sustainability of a monetary
zone is a high-interest issue, from a global perspective. A coloniser rule
over overseas territories provides enlightenment for studying the instru-

ments of imperial constructions. The sterling, the franc, and the escudo
areas, broadly coincided with colonial empires.13
The case of the Escudo Monetary Zone illustrates the consequences of
a war for an entire financial and monetary system. High indebtedness of
some territories in the context of the Escudo Monetary Zone illustrate
saving-investment imbalances associated with decreased confidence in the
presence of military events, terrorism, and guerrilla actions.14 Although it
was a war made only of insurrections, local guerrilla actions, and terrorism,
its purpose was challenging the political sovereignty of the overseas terri-
tories aiming at breaking the colonial ties. It is a case of interest because,
as Grauwe (2014) says, “There have been few attempts ever to introduce
a monetary union without the force of arms”.15 Lessons may be learned
from this historical perspective. The Portuguese Escudo Monetary Zone
(EMZ) was undoubtedly a macro-political experiment, drawn to promote
economic growth and integration of the Portuguese empire. In such an
historical context, trust and confidence in the future political control over
the territories were major issues. Monetary authorities clearly recognised
these features at the time: “Any policy that separates people, discourages
entrepreneurship and expels capital, compromising confidence, is
undoubtedly wrong”.16
Positive investors’ expectations on the credibility and sustainability of
the political framework, against negative investors’ expectations on possi-
ble results of explicit conflicts, must be considered. The international
background also does matter. In the case of the Escudo Monetary Zone,
negative investors’ expectations certainly considered the rising success of
local political movements in obtaining funding for guerrilla activities and
terrorism from great global powers that supported decolonisation and
new political frameworks for Africa.
The way to independence and the break from previous ties among the
territories of the empire will be studied as a transition to the birth of new
currency units. Decolonisation models have meant political independence
patterns, and may be associated with keeping or breaking with the strong
monetary relationships with the old coloniser Metropolises. The study of
the Portuguese-speaking countries in Africa is very significant to add
information and historical evidence in order to understand global patterns
of monetary behaviour amongst decolonised countries.
6 M. E. MATA
Notes
1. Bonin 2014; Maddison 2001; Newit 1995, p. V; Alexandre 1979.
Bettencourt and Curto 2007.
2. Bonin and Valério 2016.
3. The founding instrument was decree-law nr. 44,016 of 8 November 1961.
Free trade would be accomplished until 1 January 1972 (article nr. 1).
4. Salazar 1962, pp. 4, 6, Arquivo Histórico Ultramarino, (AHU).
5. Ibid, p. 6.
6. On the wartime escalation of white-settler nationalism in Africa, Rathbone,
and Killingray (eds) 1986.
7. Swoboda 1999, p. 4.
8. On the ways that the War contributed to decolonization in Africa,
Rathbone and Killingray 1986.
9. For the consequences on the British imperial financial relations,
Krozewski 2001.
10. Swoboda 1999, p. 3. Mundell 1973.
11. Schenk 2010, pp. 21–22, 83.
12. Pintado 1964, p. 32.
13. On the franc area see Banque de France 2012. On the sterling area see
Schenk 1994; Schenk 2010.
14. Nautz 2015.
15. Grauwe 2014, p.ix.
16. BNU Boletim Trimestral, 2° e 3° Trimestres de 1966, p. 26.
Bibliography
Akita, Shigeru, Krozewski, Gerold, Escobar,ita Watanabe Shouchi, (eds), The
transformation of the International order of Asia, Decolonisation, the Cold War
and the Colombo Plan, London, Routledge, 2014.
Alexandre, Valentim, Origens do colonialismo Português moderno: 1822–1891,
Lisbon, Sá da Costa, 1979.
Banque de France, Direction Générale du Trésor avec recherche historique par
Vincent Duchaussoy, Zone franc, 40 ans de coopération monétaire, Paris, 2012.
Bettencourt, F., Curto, Diogo R. (eds), Portuguese Oceanic Expansion 1400–1800,
Cambridge, Cambridge University Press, 2007.
BNU Boletim Trimestral, 2° e 3° Trimestres de 1966.
Bonin, Hubert, Banque et identité commerciale. La Société générale, 1864–2014,
Paris, Presses Universitaires du Septentrion, 2014.
Bonin, Hubert and Valério, Nuno (editors), Colonial and imperial Banking
History, Abingdon, Routledge, 2016.
Grauwe, Paul, Economics of Monetary Union, Oxford, Oxford University

Press, 2014.
Krozewski, Gerold, Money and the end of empire: International economic policy and
the colonies, 1947–1958, Basingstoke, Palgrave Macmillan, 2001.
Maddison, Angus (2001). The World Economy. A Millennial Perspective.
Paris, OECD.
R. Mundell, “Uncommon Arguments for Common Currencies,” In: H. Johnson
and A. Swoboda, Eds., The Economics of Common Currencies, Allen and
Unwin, London, 1973, pp. 114-132.
Nautz, Jürgen, the Damin Workshop ‘Conflict potentials in monetary unions’,
Warburg, 2015.
Newit, Malyn, A History of Moçambique, London, Hurst & C°, 1995.
Pintado, V. Xavier, Structure and Growth of the Portuguese Economy,
Lisbon, ICS, 1964.
Rathbone, Richard, and Killingray, David (eds), Africa and the Second World War,
Basingstoke, Palgrave Macmillan, 1986.
Rathbone, Richard, and Killingray, David (eds), Africa and the Second World War,
London, Palgrave Macmillan, 1986.
Salazar, António de Oliveira “Problemas Portugueses em África, Entrevista conce-
dida pelo Senhor Presidente do Conselho à revista norte-americana LIFE”.
Boletim Geral do Ultramar, Lisboa, 38 (443), 1962, R7, Arquivo Histórico
Ultramarino, (AHU).
Schenk, Catherine, Britain and the Sterling Area, London, Routledge, 1994.
Schenk, Catherine, The Decline of the Sterling: Managing the Retreat of an
International Currency 1945–1992, Cambridge, Cambridge University
Press, 2010.
Swoboda, Alexandre, “Robert Mundell and the theoretical foundation
for the European Monetary Union”, International Monetary Fund,
December 13, 1999.
PART I
The Origin of the Escudo Monetary

Zone
CHAPTER 2
The Escudo Monetary Zone
The Escudo Monetary Zone (EMZ, Zona Monetária do Escudo) was

launched in 1961.1 In the next year, three decree-laws of 17 November
1962 framed the background for the new monetary regime.2 A first decree
regulated the monetary conditions for payment settlements, imports,
exports, and private capital flows; the second decree regulated these
aspects among national territories using bank accounts of economic agents
living in different territories; the third created Foreign Exchange
Management Funds, Fundos Cambiais, in the territories where they did
not yet exist, and regulated them in the overseas territories. A workgroup
headed by Alberto Ribeiro Queiroz gave a technical approval to the sys-
tem, and prepared the legal framework.3 Macau and Timor were geo-
graphically inserted in the piaster zone, but the accounting currency unit
was the escudo, and banks should always use it as the standard value in spite
of the presence of Hong Kong dollars.4 The entire Portuguese intelligen-
tsia in the political regime defended the economic integration with the
overseas territories, and a single currency unit was seen as a very important
feature of political unification.5
The established rules of the compensation system among inter-
territorial payments used the 1:1 parity, to begin on March 1963.6 All
payments of all transactions of commodities and capital flows, which were
authorised amongst the different national territories, were under the regu-
lation of this multilateral clearing system.

https://doi.org/10.1007/978-3-030-33857-2_2
12 M. E. MATA
Considerable political propaganda accompanied the decision to launch

the EMZ. The Portuguese Adjunct Minister of the Board of Ministers,
Correia de Oliveira held a conference, and the daily press announced that
24 million Portuguese (the sum of people living in the entire Escudo
Monetary Zone) would benefit from greater economic development.7
The abolition of tariffs on all commodities of national origin, until the end
of 1972, was pointed out as a major step for the economic integration
with the empire, although the intention was to implement it under a slow
path (of 20% of reduction in the first year).8 An analogy with the European
Union of Payments was also considered as very hopeful for the same pur-
pose.9 The inter-territorial system of payments was carefully explained in
the press, including the 1:1 parity in the context of differentiated local
escudo currencies.10
The philosophy for free circulation of commodities and the need for an
inter-regional settlement system in the Portuguese space were carefully
explained.11 The Banco de Portugal was the agent and reserve bank of the
system. A Monetary Fund for the escudo zone was created in the Banco de
Portugal to enable the concession of loans to overseas provinces, if neces-
sary, in order to make possible the inter-territorial and international pay-
ments of all the territories under Portuguese administration. The Banco
de Portugal benefited from a fiscal exemption for operations related with
the Escudo Zone Monetary Fund, but not for operations as central bank
and reserve bank of mainland Portugal and Adjacent Islands.12
The main features of the payments settlement system were the following:
1. Each territory but Macau were to have a local Foreign Exchange

Management Fund (Fundos Cambiais). Macau had no Foreign
Exchange Management Fund, and the corresponding duties were
entrusted to the local branch of the overseas issuing bank, Banco
Nacional Ultramarino (BNU).
2. “Reserve accounts” existed at the Bank of Portugal for each of the
overseas territories, held by the respective issuing bank of the terri-
tory, “broken down into sub-accounts depending on whether the
entries were to be made in escudos, stipulated foreign currencies, or
gold”.13 These were to fund possible negative month positions of
the respective territory.
3. Reciprocal bilateral accounts were at work in the name of the three
issuing banks: Banco de Portugal, the issuer for the mainland
Portugal and the Atlantic islands of Madeira and Azores, Banco de
2 THE ESCUDO MONETARY ZONE 13
Angola, the issuer for Angola, and BNU, the issuer for all other ter-
ritories, as agents of the Foreign Exchange Management Funds that
existed for each of the territories; these were the settlement accounts
(contas de compensação).
4. The balance of these bilateral accounts produced surpluses or defi-
cits that were calculated monthly.
5. An automatic multilateral settlement of surpluses and deficits was
then taking place monthly, a multilateral clearing proceeding, at the
1:1 parity rate among the Mainland escudo and the different colo-
nial escudos.
6. In this way, net positions for each of the territories could be estab-
lished monthly in Mainland escudos “by means of suitable entries in
the corresponding reserve accounts”.14
7. The Escudo Monetary Fund (EMF) was designed to facilitate the
operation of the system by means of automatic loans, or special
loans, to enable each Foreign Exchange Management Fund of an
overseas territory to balance its inter-territorial and international
payments. Automatic loans were allowed up to an amount of 1/3 of
the concerned territory Escudo Monetary Fund’s capital, and were
automatically granted whenever a territory had a net debt balance
greater than the escudo reserve of this territory (unless the local issu-
ing bank, as agent of the Foreign Exchange Management Fund of
this territory, were to give notice on the possibility of selling gold or
foreign exchange to the Banco de Portugal to be used for this pur-
pose). Special loans could be made available when the ceiling of
automatic loans was reached, but the Board of Directors’ authorisa-
tion depended on detailed justification by the Foreign Exchange
Management Fund of the territory.
Economic integration under a common currency was a well accepted

paradigm. Theoretical foundations for monetary unions were established.
Mundell’s theories were applied to the foundation of the European
Monetary Union and later won him the Nobel Prize in 1999 for his work
on currency areas.15 In this paradigm, free trade, free labour, and free capi-
tal movements were considered to be the conditions for automatic adjust-
ments toward international co-operation and productive specialisation,
which promoted economic integration, efficiency, growth, and develop-
ment. These were also the stated principles for the Portuguese escudo zone
currency area.
14 M. E. MATA
Fears about possible problems of indebtedness of some territories

toward the Mainland and the EMZ were already expressed, and the exam-
ple of the UK toward IMF was cited.16 The amount of monetary circula-
tion, discount rate, and the escudo definition in gold were considered to be
important instruments of control.17 The participation in two free trade
zones, EMZ and EFTA, was considered to be very strategic and favour-
able to Portuguese consumers, and the stimulus to banks to establish
national networks was also expected to be remarkable.18
Luso-tropicalism theories supported the EMZ project. The term col-
ony had been dropped in the 1951 revision of the Portuguese Constitution,
“emphasizing the claim that the African territories and Portugal formed a
single indivisible country”.19 In 1954 the Ministry of the Overseas had
implemented citizenship rights to the local populations under a special
citizenship statute for natives (estatuto do indigenato),20 for the purpose of
free circulation of people and access to education. The new political-
administrative statutes that were published in 1963 for the five African
territories (Cabo Verde, Guiné, São Tomé e Príncipe, Angola, and
Moçambique) accommodated the new financial framework of the EMZ.21
The Operation of the Compensation System

in the Escudo Monetary Zone
The Monetary Fund of the Escudo Zone had capital amounting to 1.5 bil-
lion escudos, 1/3 of which was allocated to the concession of automatic
loans to the overseas territories in case of difficulties in meeting net debt
positions. The remaining 2/3 could fund loans for the same purpose or
any transaction between two territories. Exceptionally, and with the
authorisation of the Banco de Portugal, the remaining 2/3 of the Fund
capital could also be used in obtaining international means of payments
for international transactions.
The issuing of the 1.5 billion escudos of the capital of the Monetary
Fund of the Escudo Zone (Table 2.1) was authorised through the emission
of 1500 debentures of 1 million escudos each, with the Portuguese central
state as guarantor.22 Casa da Moeda, was the printer, under the rule of the
Administrator-Engineer Tavares Fernandes. The contributions should be:
Table 2.1 The issuing of the 1.5 billion escudos of the capital of the Monetary
Fund of the Escudo Zone
Fazenda 500 million escudos

Nacional
Treasure
Banco de 500 million escudos
Portugal
BNU 250 million escudos (In compensation BNU was authorised to increase
equity to 500 million escudos. 22° Relatório Trimestral confidencial do
Comissário do Governo junto do BNU. PT/CGD/
BNU/01OA/5CG/3/3/02022. BNU historical archives. Arquivo
Histórico da Caixa Geral dos Depósitos.)
Banco de 250 million escudos
Angola
Total 1500 million escudos
Table 2.2 Ceilings for

Cabo Verde 20 million escudos
the automatic loans for
Guiné 45 million escudos
each of the territories in S. Tomé e Príncipe 20 million escudos
Decree-law 44703 Angola 250 million escudos
Moçambique 150 million escudos
Macau 7.5 million escudos
Timor 7.5 million escudos
500 million escudos (1/3 of
the fund capital)
Ceilings for the automatic loans for each of the territories were estab-
lished (Table 2.2)23
According to the rules, automatic loans had no specific deadlines by
which to be repaid, but any payment surplus obtained by the borrowing
territory would be used for the loan repayment. Moreover, whenever a
debtor territory had reserves, foreign currency, or even Mainland escudos,
all incentives were given to the territory to use these funds for the repay-
ment of outstanding loans.
There was a Board of Directors of the Monetary Fund of the escudo
Zone.24 Manuel Jacinto Nunes, chaired this Board (Fig. 2.1).
Other members were the Governor of the Banco Nacional Ultramarino,
the Governor of the Banco de Angola, the General-Director of the
Secretariado Técnico da Presidência do Conselho, the General-Inspector of
Credit and Insurance, the Chief of the Repartição de Finanças, the
16 M. E. MATA
Fig. 2.1 Manuel Jacinto Nunes, Vice-Governor (1960–74), and acting Governor
of Banco de Portugal (1963–66), Chair of the Board of Directors of the Monetary
Fund of the Escudo Zone. (Source: Banco de Portugal, Gallery of Governors)
General-Director and another member of the Economics Commission of

the Ministry of Overseas Affairs. Jacinto Nunes presided over all but one
of the 122 meetings of the Board of Directors.25
The grant of special loans was a decision of the Board of Directors of
the Escudo Monetary Zone, subject to the confirmation of the Minister of
Finance. With the approval of this Board, any of the Foreign Exchange
Management Funds (Fundos Cambiais) could cede its total or partial
capacity for obtaining loans to any other Foreign Exchange Management
Fund in need, for a given period of time, according to those needs.
Ceilings for the special loans to each of the territories were also estab-
lished (Table 2.3)26:
Table 2.3 Ceilings for

Cabo Verde 40 million escudos
the special loans to each
Guiné 95 million escudos
of the territories defined S. Tomé e Príncipe 40 million escudos
by Decree-law 44703 Angola 500 million escudos
Moçambique 300 million escudos
Macau 12.5 million escudos
Timor 12.5 million escudos
1 billion escudos (2/3 of the
fund capital)
Overseas territories’ Foreign Exchange Management Funds could also

grant temporary loans to the Banco de Portugal, (which was the monetary
authority for the entire escudo zone), but these could not amount to more
than ¾ of the total amount of automatic loans that the territory could be
afforded by the escudo monetary zone.
The Banco de Portugal was the central institution for gathering and
handling gold and other international means of payment for the whole
system. From 1961 on there was an international central banking coopera-
tion to stabilize the price of gold expressed in dollars, because the gold-
dollar parity was the main basis on which the entire international monetary
system was built. This attempt was labelled Gold Pool. It consisted of
operations for purchasing and selling gold in London in a coordinated
way, increasing gold demand and supply, in order to keep stable the dollar
price of gold. So, the international common sense supposed that central
banks were the institutions that gathered and handled the entire amount
of gold reserves in each national economy.27
In Portugal, and in spite of the existence of issuing banks for the over-
seas territories, in all territories with the exception of Macau, gold and
other international means of payment were collected by the respective
local Foreign Exchange Management Funds, under the administration of
each of the territories’ Inspecção de Crédito e Seguros e do Comércio Bancário
(Inspection for Credit, Insurance, and Banking). The local Exchange
Management Funds would sell (and buy) international means of payment
to (and from) the local commercial banks and other institutions legally
authorised for the business of money exchange,28 according to the needs
of local operations in the economies of the territories.
18 M. E. MATA
According to a determination from the Ministries of Finances and the

Overseas territories, all the gold and international means of payment that
were obtained by the Foreign Exchange Management Funds in the terri-
tories were to be deposited at the Banco de Portugal, as agent of the entire
payment settlement system. Deposits would be made in accounts of
reserves for each of the territories in the name of the issuing bank of each
of those territories, as agents of the local Foreign Exchange Management
Funds (Fundos Cambiais). The issuing banks of the territories could main-
tain Exchange Management Funds expressed in international means of
payment for current payment operations. The overseas issuing banks were
the agents of the territories’ Exchange Management Funds, making all the
territorial payments and issuing money for these Funds to buy gold and
other international means of payments that were necessary throughout
the year.
On the first day of every month the overseas issuing banks were to
report to the Banco de Portugal on the state of the settlement accounts of
each territory. If negative, they should disclose if the territory had reserves
to meet the difference and if the local Foreign Exchange Management
Fund wished to use them to settle the debt, or if an automatic loan was
required.29 Only then could the Banco de Portugal specify a date for the
multilateral compensation and settlement, and check the balances of its
own books to have the net statement of each territory. If negative, the
Banco de Portugal could sell any international means of payments of the
overseas fund in deficit against metropolitan escudos. The Banco de
Portugal could purchase the gold reserves or the foreign currencies of the
territory that the Foreign Exchange Management Fund desired to dispose
of, or would record the necessary entries in the accounts of the monetary
zone fund to grant an automatic loan.30
The official international price of gold of the Bretton-Woods/IMF
international monetary system, to which Portugal had adhered in 1961,
was 32,351.990 escudos per Kg. Historically, gold reserves under the cus-
tody of central banks have been a decisive feature of any national economy
for the setting of the exchange operations, particularly in fixed exchange-
rate monetary regimes.31 The international Gold Pool system was already
considered to be the most ambitious historical cooperation amongst cen-
tral banks of the Western world.32 In spite of that, there never existed any
direct obligation of BNU or Banco de Angola to sell gold to the Mainland.
All selling operations to obtain metropolitan escudos resulted from propos-
als of the local Foreign Exchange Management Funds, for the purpose of
settling payments related with imports from the Mainland and transfers.
Moçambique was the territory with the closest access to gold, thanks to
Mozambican emigration to South Africa, namely for gold mining. As a
conclusion, the creation of the EMZ and the new role of the Bank of
Portugal in gathering the entire stock of gold reserves of the EMZ, as
agent of the entire system, obliged the transfer of gold stocks from BNU-
Moçambique, as agent of the local Foreign Exchange Management Fund
to Banco de Portugal-Lisbon. The accounting system of the EMZ Fund
records gold prices that were negotiated with BNU. The fact that BNU
could decline the sales proves the existence of a competitive international
market for gold.33 According to historical sources,34 after 11 previous
operations of this kind since 1959, the Moçambican gold-selling opera-
tions were frequent in the context of the creation of the Escudo Monetary
Zone. Ships belonging to the two navigation companies (CNN and CCN)
or airplanes belonging to the Portuguese airlines (TAP) transported the
gold bars in boxes, from Moçambique to Lisbon.
Letters from BNU to the Banco de Portugal asked what price the
Banco de Portugal offered for gold respecting the London “good deliv-
ery” requisite, transported to Lisbon, with insurance for risk on the seller
side. BNU had the capacity to negotiate the price with Banco de Portugal,
and thereby the possibility to defend the interests of Moçambique.35 From
late 1961 to September 1963, earmarked good delivery 26,780 tons of
gold were moved, at prices in the interval [32.410–32.428] escudos per
gram, above the official price of gold.36
All of this sought to contribute to the unification of the Portuguese
markets and the national economic integration. In this context, and thanks
to the decrees of 1961 and 1962, the Banco de Portugal assumed much
wider functions in order to be the central bank of the whole system of pay-
ment settlements amongst all territories under Portuguese political sover-
eignty and administration. For this purpose, a new charter for the Banco
de Portugal was issued,37 and a new contract was signed with the
Portuguese Treasury on 1 March 1963.38
Contracts between the overseas issuing banks and contracts between
them and the Portuguese Treasury were also signed.39 Banco de Angola
and BNU lost some of their local functions of central banking in the over-
seas territories in favour of the Portuguese central bank, Banco de Portugal,
although retaining the issuing monopoly under the directives of the mon-
etary policy set by the Banco de Portugal. BNU was founded in 1864 as a
private bank, and Banco de Angola was formally created during the 1923
20 M. E. MATA
Angolan inflationary disarray.40 However, the role of Banco de Angola

actually began in 1926, when it replaced BNU in the privilege of money
issuing in Angola.41 From then on, the local Foreign Exchange Management
Funds had legal entity status, and became agents of the respective issuing
bank. Choices between priorities and objectives such as price stability, eco-
nomic growth targets, micro efficiency, and distributional effects always
existed for central banking.42 These were now centralised in the Banco de
Portugal.
Notes
1. Decree-law nr. 44016 of 8 November 1961.
2. Decree-laws nr. 44698, 44701, 44702, with detailed instructions:
Instruções a que se refere o art° 28° do Decreto-Lei n° 44698, de 17 de
Novembro de 1962, Portugal. Arquivo Histórico do Banco de Portugal.
Departamento de Serviços Jurídicos. Espaço Económico Português.
Pasta n° 4.
3. Other members were Arménio Fonseca Lopes, Álvaro Ramos Pereira,
Joaquim Nunes Mexia, João Silva Guerra, Nuno Gomes da Silva, Augusto
Lucas, and Victorino António Bento.
4. According to Bases 73ª, 76ª of the 1953 Lei Orgânica do Ultramar, and a
monetary reform for Timor by decree-law nr. 41428 of 6 December 1957
41680. BNU/01OA/5CG/1–333, BNU Historical Archives. Arquivo
Histórico da Caixa Geral dos Depósitos. Pataca was the Portuguese trans-
lation for piaster. Valério, 2016. See also Portaria 7299 of 21 August 1963.
5. Oliveira, 1961. Parecer do Conselho de Administração do BNU,
BNU/01OA/5CG/1–333, BNU historical archives. Arquivo Histórico
da Caixa Geral dos Depósitos. An attempt was pursued to uniform coined
currency in the entire Portuguese space, in April–July 1965, but it was not
successful. Uniformização da moeda metálica em curso no espaço português,
PT/CGD/BNU/01OA/5CG/1–74, BNU historical archives. Arquivo
Histórico da Caixa Geral dos Depósitos.
6. Decree-laws from 17 November 1962. Valério 2001, pp. 262–64.
7. Jornal do Comércio, 6 September 1961.
8. Pacheco de Amorim, Comércio do Porto, 12 September 1961. Jornal do
Comércio, 13 September and 20 October 1961.
9. Comércio do Porto, 26 September 1961.
10. Pacheco de Amorim, Comércio do Porto, 3 and 10 October 1961. Portugal.
Arquivo Histórico do Banco de Portugal. Departamento de Serviços
Jurídicos. Espaço Económico Português, Pasta n° 1.
11. Oliveira, 1961.
12. Portugal. Arquivo Histórico do Banco de Portugal. Departamento de

Serviços Jurídicos. Espaço Económico Português, Pasta n° 11.
Valério, 2015: 9–37.
13. Annual report of the Banco de Portugal to the Board of Directors of the
International Monetary Fund, regarding the year of 1963, p. 120.
14. Annual report of the Banco de Portugal to the Board of Directors of the
International Monetary Fund, regarding the year of 1963, p. 121.
15. Mundell 1961.
16. Pacheco de Amorim, Comércio do Porto 18 October 1961. Diário Ilustrado
of 22 October 1961.
17. Pacheco de Amorim, Comércio do Porto, 14 November 1961.
18. Jornal do Comércio, 8 Nov 1961. Correia de Oliveira presented the EMZ
project in EFTA, at the meeting of 20 November 1961, in Geneve. Jornal
do Comércio, 21 November 1961. O Comércio, 15 November 1961.
19. Newit 1995, p. 473.
20. Coming from decree-law of 20 May 1954. See also Azevedo 2017,
p. 11–12.
21. Decree-laws 45371 to 45375 of 22 November 1963.
22. Decree-law nr. 45146 of 20 June 1963. Portugal. Arquivo Histórico do
Banco de Portugal. Departamento de Serviços Jurídicos. Espaço
Económico Português, Pasta n° 17.
23. Decree-law 44703.
24. According to art. 55 of the decree-law 44703 of 17 November 1962.
25. The exception was meeting nr. 24, on 9 February 1965, in which he was
replaced by the Vice-Governor of the Banco de Portugal, João Augusto
Dias Rosas (Actas do Conselho de Direcção do Fundo Monetário da Zona do
Escudo, pp. 36 verso-44 verso, vol 2). Portugal. Arquivo Histórico do
Banco de Portugal. Fundo Monetário da Zona do Escudo. Direção. Atas
do Conselho de Direção. 1964–1965. FMZE/Dir/001/002. This meet-
ing was devoted to the appraisal of the Agent’s monthly report of
December 1964.
26. Decree-law 44703.
27. Bordo; Naef, 2017.
28. The Decree-law nrs. 44699 and 44700 of 17 November 1962 regulated
business of money exchange in the Metropolis and in the overseas territo-
ries, respectively. (They replaced the prescriptions of the decree-law nr.
41403 of 27 November 1957 and the decree-law nr. 42461 of 12
November 1959, after the main regulations of the Decree nr. 10071 of 6
Sept 1924).
29. Fundo Monetário da Zona do Escudo, Notes on the system for compensation
and inter-territorial payments, 1963.
30. Articles 25 and 26 of Decree-law 44703.
22 M. E. MATA
31. Kock 1982, 121.

32. Bordo; Naef, 2017.
33. Telegram of 25 February 1963 from BNU to the Banco de Portugal pro-
posed to sell 990,088.797 gr. of fine gold, and asked for the price. The
price proposed, of 32,380 escudos per Kg to BNU, by letter of 28 March
1963 was rejected, and the operation was cancelled. Movimento da espécie
ouro, Banco de Portugal/Banco Nacional Ultramarino, Aquisições n°s 1 a
25, 1959.03.06–1963.04.24. Portugal. Arquivo Histórico do Banco de
Portugal. Banco de Portugal. Contabilidade com o Exterior. Movimento
da espécie ouro. Aquisições de ouro ao BNU, 1959–1963. BP/
CExt/012/23.
34. Movimento da espécie ouro, Banco de Portugal/Banco Nacional Ultramarino,
Aquisições n°s 1 a 25, 1959.03.06–1963.04.24, Portugal. Arquivo Histórico
do Banco de Portugal. Banco de Portugal. Banco de Portugal.
Contabilidade com o Exterior. Movimento da espécie ouro. Aquisições de
ouro ao BNU. 1959–1963. BP/CExt/012/23.
35. BNU letter 6461 Direcção-FD./JG of 4 November 1961. BNU letters nr.
6702Direcção-FD./JG., of 15 November 1961, 6917 Direcção-FD./JG
of 27 November 1961, 3917 Direcção-FD./JG., of 27 November 1961,
and nr. 7 Direcção-FD./JG of 2 January 1962. Movimento da espécie ouro,
Banco de Portugal/Banco Nacional Ultramarino, Aquisições n°s 1 a 25,
1959.03.06–1963.04.24, Portugal. Arquivo Histórico do Banco de
Portugal. Banco de Portugal. Contabilidade com o Exterior. Movimento
CExt/012/23.
36. Portugal. Arquivo Histórico do Banco de Portugal. Departamento de
Estrangeiro. Sistemas de compensação e pagamentos interterritoriais. Ouro.
1963–1969.
Cópia do Diário extraordinário feita em 31 de Março de 1959, Movimento
da espécie ouro, Banco de Portugal/Banco Nacional Ultramarino, Aquisições
n°s 1 a 25, 1959.03.06–1963.04.24, Portugal, Arquivo Histórico do Banco
de Portugal. Banco de Portugal. Contabilidade com o Exterior. Movimento
CExt/012/23.
37. Decree-law nr. 44814 of 28 Dec 1962.
38. Published in the official record Diário do Governo, of 8 March 1963,
II series.
39. Respecting decree-law nrs. 44891 and 44892 of 20 February 1963.
40. For the advent of banking in Africa, Uche, C. U., 1999. For other African
currency crises Maxon, R. M. 1989, and Gardener, Leigh, 2015.
41. Decree nr. 364 of 14 September 1923. Decree nrs. 12124 and 12131, of
14 and 16 August 1926, authorised money-issuing functions, to replace
BNU in this privilege, in Angola. This privilege was renewed until 17
September 1976, according to the statutes of decree nr. 43963 of 10
October 1961, and Decree 44479 of 26 July 1962. Sousa, 1967,
pp. 103–106.
42. Goodhart 2003, p. 65.
Bibliography
Azevedo, Ário L., “Depoimento 2009” in Conferência de homenagem a Ário
Lobo de Azevedo, ISA, Universidade de Évora. Lisboa, INIAV, SCAP, 2017.
Banco de Portugal, Annual report of the Banco de Portugal to the Board of
Directors of the International Monetary Fund, 1963.
Bordo, Michael and Naef, Alain, “The Gold Pool (1961-1968) and the fall of the
Bretton Woods system. Lessons for central bank cooperation”, Discussion
Papers CEPR, DP 12425, Nov 2017.
Fundo Monetário da Zona do Escudo, Notes on the system for compensation and
inter-territorial payments, 1963.
Gardener, Leigh, ‘The curious incident of the franc in the Gambia: exchange rate
instability and imperial monetary systems in the 1920s’, Financial History
Review, 22, 3, 2015: 291–314.
Goodhart, Charles, “Whither Central Banking?” in Altig, David; and Smith,
Bruce, Evolution and Procedures in Central Banking, Cambridge, Cambridge
University Press, 2003: 65–92.
Kock, M. H., A Banca Central, Lisboa, Banco de Portugal, 1982 or Banca
Central, Mexico, Fondo de Cultura Económica, 1995. First edition Central
Banking, 1939.
Maxon, Robert M. ‘The Kenya currency crisis, 1919-21 and the imperial dilemma’,
Journal of Imperial and Commonwealth History, 17, 3, 1989: 323–348.
Mundell, R. A. “A theory of optimum currency areas”, American Economic
Review, Nov 1961: 657–665.
Newit, Malyn, A History of Moçambique, London, Hurst & Co, 1995.
Oliveira, José Gonçalo da Cunha Sotomaior Correia de, A livre circulação de
Mercadorias e o Sistema de Pagamentos Inter-regionais no Espaço Português,
Lisbon: Presidência do Conselho, 1961. Portuguese National Library.
Uche, Chibuike Ugochukwu (1999), ‘Foreign banks, Africans, and credit in colo-
nial Nigeria, c. 1890-1912’, Economic History Review 52, 4, 669-691.
Valério, Nuno, The Escudo, the Portuguese currency unit 1911-2001, Lisbon,
Banco de Portugal, 2001.
24 M. E. MATA
Valério, Nuno, “Monetary Decolonisation: Breaking or preserving colonial mon-

etary áreas?” Paper presented at the Damin Workshop ‘Conflict potentials in
monetary unions’, Warburg, 2015a, 2016 for the revised version.
Valério, Nuno, 2015b, “Political Independence and Technical Independence of
Central Banks: A Crucial Distinction for European Monetary and Banking
Union”, The Journal of European Economic History, XLIV, 2: 9–37.
CHAPTER 3
The Difficulties in Launching the Escudo

Monetary Zone
The Escudo Monetary Zone system began operating on 1 March 1963.1

The implementation and management of the Escudo Monetary Zone
were tremendously difficult for many reasons, which can explain the long
delay from 8 November 1961 to the actual start of its operation on 1
March 1963:
(a) International means of payments in the local Foreign Exchange

Management Funds of the colonies were short.
It took some time to set the territories’ reserve accounts. It was neces-
sary to account the balances of their Foreign Exchange Management
Funds by currency. On the starting date, 1 March 1963, the value of cur-
rencies in the Foreign Exchange Management Funds was very low
(Table 3.1). With the exception of Moçambique, where foreign transac-
tions afforded rands, pounds, Rhodesian dollars, and marcs, existing bal-
ances were made only of metropolitan escudos, on the eve of the
implementation of the EMZ (28 February 1963).2 In metropolitan escu-
dos they amounted to:
These were the initial values. Only the Foreign Exchange Management
Funds of Moçambique (and Timor, on a much smaller scale) had surpluses
(saldos credores) in foreign currencies. The first reserve account to be set
was the Mozambican.3

https://doi.org/10.1007/978-3-030-33857-2_3
26 M. E. MATA
Table 3.1 Value of

Guiné 23,696,688$78
currencies in the Foreign
S. Tomé e Príncipe 11,729,293$72
Exchange Management Moçambique 50,885,512$37
Funds on 1 March 1963 Timor 5,247,811$84
91,559,306$71
Source: Saldos credores dos “Fundos Cambiais”

no Ultramar em escudos metropolitanos.
Arquivo Histórico do Banco de Portugal
Table 3.2 Available metropolitan escudos from the Foreign Exchange

Management Funds of other territories before 1 July 1963
Cabo Verde (on 31 May 1963) 5,716,185$25

Guiné (on 31 May 1963) 16,733,902$58
S. Tomé e Príncipe (on 31 May 1963) 5,616,445$80
Timor (on 28 February 1963) 5,247,811$84
Moçambique 50,000,000$00, (an amount based on
the balance to be estimated)
Macau had no Foreign Exchange Management Fund (Fundo Cambial),

and the corresponding functions rested on to BNU. For the creation of a
Foreign Exchange Management Fund in Macau, the reserve account was
to receive funding from other territories’ Foreign Exchange Management
Funds.4 BNU planned to move the available metropolitan escudos from the
Foreign Exchange Management Funds of other territories before 1 July
1963 (Table 3.2). Five other territories were supposed to lend the amounts
of their surpluses to Macau for this purpose, to be repaid by Macau
later on5:
TOTAL value for Macau’s Foreign Exchange Management Fund
83,314,345$47.
In practice, BNU went on assuming Foreign Exchange Management
Fund functions in Macau.6
(b) It was difficult to settle the capital of the EMZ Fund.
It was difficult to issue and settle the capital of the Escudo Zone
Monetary Fund. In August 1963 no part of the capital of the Fund was yet
3 THE DIFFICULTIES IN LAUNCHING THE ESCUDO MONETARY ZONE 27
paid up.7 The net positions of current account balances were then trans-
ferred to the territories’ reserve accounts.8
The capital of the Fund was issued according to the needs of loans for
the territories. The issuing banks should have contributed to the Fund by
using their funds in the Mainland, where they had agencies as commer-
cial banks.9
Pressing needs to award loans to Guiné and Angola demanded settling
some of the capital of the Fund: The Decree-law nr. 45146 of 20 July
1963 authorised the issue of 1500 debentures (obrigações) having a nomi-
nal value of one million escudos each, having the same guarantees of all
other Portuguese Treasury bonds. In the meeting of 21 August 1963 the
Board of Directors decided to issue 500 million escudos in a first step. Only
in September 1963 did this amount become available for providing auto-
matic loans to Guiné and Angola. Needs in Guiné were related to the end
of the circulation of the Senegal franc, which was useful for imports from
this French colony (Table 3.3).10
The second issue of 150 million escudos, in a second step, on 11
November 1963, completed 43.3% of the total capital of the Fund. The
contribution of participating institutions to the paid up capital was made
according to the share established for each of them in the total amount of
the Fund capital. The Exchequer (Fazenda Nacional) had some difficulty
in achieving its own underwriting position for the issues of capital for the
Escudo Monetary Zone. The 50 debentures of the Treasury were made
available only on 11 January 1964.11
A three-month special loan amounting to 100 million escudos was also
awarded to Angola on 20 November 1963 at a 3% interest rate, according
to the Angolan credit ceiling.12
Table 3.3 Loan needs

To Guiné:
in Guiné in 1963
On 16 August 1963 13, 513,813$98
On 15 October 1963 21,706,613$58
On 21 November 1963 15,887,029$01
51,107,456$57
To Angola:
On 15 October 1963 95,411,153$60
On 21 November 1963 154,588,846$40
250,000,000$00
28 M. E. MATA
(c) Legal, organisational, and administrative matters took time to be

implemented.
The EMZ legal details were carefully negotiated. Several text-improved

versions for the 1962 decrees were prepared and are preserved.13 The
Banco de Portugal sent technical corrections to the projects of the decrees
to the Ministries of Finance and Overseas, on 22, 29, and 30 August
1962. Comments received from these Ministries evoked the Governor’s
preference to promote understandings, which reveal difficulties in drawing
borders between the rule of these two Ministers over the system of inter-
territorial payments (Fig. 3.1):
Fig. 3.1 Rafael da Silva Marques Duque, Governor of Banco de Portugal

(1957–63). (Source: Banco de Portugal, Gallery of Governors)
3 THE DIFFICULTIES IN LAUNCHING THE ESCUDO MONETARY ZONE 29
“As for the Ministers’ competencies the Bank said what seems the better
(…) the Bank always intended that Ministries of Overseas and Finance were
not bargaining, but both co-operated for the good implementation (funcio-
namento) of the system”.14
Procedural details for launching the accounting system and to record

the operations of the Escudo Monetary Zone were needed.15 At the meet-
ing of 23 March 1962, of the Board of Directors of the central bank,
headed by the Governor Rafael Duque, and membres of the Board Álvaro
Ramos Pereira, Joaquim Nunes Mexia, and João da Silva Guerra it was
decided to create a group of experts (made up by Fonseca Lopes, Gomes
da Silva, Saldanha do Valle, Rómulo Rodrigues, and the Adjunct Minister
Correia de Oliveira, assisted by Canelhas Correia and Nogueira Santos),
with the mandate to come up with practical details to the more general
provisions of the founding decree-law 44016 of 8 November 1961.
As for the accounting rules, another working group with that specific
mandate was created on 13 September 1963. The co-heads were Victorino
Bento and Ramos Pereira. Santos de Almeida drafted the instructions for
the experts and specialised staff that would be in charge to accomplish
this task.16
The Banco de Portugal also created a new administrative office, the
Accounting Service of the Escudo Monetary Zone with strict rules.17
Monthly and annual reports were to be produced for submission to the
Board of Directors of the Escudo Zone Monetary Fund. This Accounting
Service was also in charge of keeping the accounting books and an archive
of all documents regarding any and all operations.18
The Board of Directors was to make an annual report to the Minister
of Finance and the Board of Ministers for Economic Affairs.19 These
monthly and annual reports, which are available today in the Historical
Archives of the Banco de Portugal, are the main sources for the present
research. The monthly reports gave place to quarterly reports as a result of
a decision of the section of Monetary Policy of the Board of Ministers on
20 September 1973. As the last monthly report was dated June 1973, only
one quarterly report was ever written, because of the revolution of 25
April 1974 and the end of the Portuguese political regime. Archiving let-
ters and recording meeting was a task belonging to the administration
general offices (Direcção de Serviços de Expediente Geral).
(d) Reliable statistical information was scarce.

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Britain, Germany and Colonial Violence in South-West

The Rhetoric of Widening Participation in Higher

The Portuguese Escudo

More information about this series at

ISSN 2662-6497 ISSN 2662-6500 (electronic)

• Portuguese India began to use Indian currency (rupee) after it was

• Portuguese Timor began to use the Indonesian currency (rupiah)

This radical monetary decolonisation may be explained by two main

As a consequence, beyond the present introduction, this book is divided

• Part I deals with the origin of the Portuguese Escudo Monetary

A conclusion offers some lessons regarding the functioning and dis-

Carcavelos, Portugal Maria Eugénia Mata

In 2015, on the occasion of the 40th anniversary of the independence of

1 Introduction: Why to Study “The Portuguese Escudo

Part I The Origin of the Escudo Monetary Zone 9

2 The Escudo Monetary Zone 11

3 The Difficulties in Launching the Escudo Monetary Zone 25

4 War, Confidence, and Expectations. Adjusting the Rules

Part II The Transition to a Revised Escudo Monetary Zone 69

5 The Heritage from the 1963–1968 Period. Marcelo

6 The Technical and Political Discussion of the Escudo

7 The Results of the 1971 Reform of Escudo Monetary

Part III The End of the Revised Escudo Monetary System 121

8 Decolonisation and Independence Agreements. Retornados

9 The Genesis of the New Currency Units and Banking

10 The End of the Escudo Monetary Zone Fund in 1980.

Part IV Co-operation from Independences to the End of the

11 The New Currencies in the West-African Portuguese-­

12 The Angolan Kwanza and the Portuguese Co-operation193

13 The Mozambican Metical and the Portuguese

14 Final Remarks: Conclusions235

Fig. 2.1 Manuel Jacinto Nunes, Vice-Governor (1960–74), and acting

Fig. 11.3 The headquarters of BNU in S. Tomé. (Source: BNU

Table 10.1 Balances of the escudo accounts at the Banco de Portugal,

Introduction: Why to Study “The

Waves of globalisation connected European countries with all regions of

© The Author(s) 2020 1

integration patterns, and for domestic purposes related with economic

With exaggeration, this political speech was produced in 1962, in the

over overseas territories provides enlightenment for studying the instru-

Grauwe, Paul, Economics of Monetary Union, Oxford, Oxford University

The Origin of the Escudo Monetary

The Escudo Monetary Zone

The Escudo Monetary Zone (EMZ, Zona Monetária do Escudo) was

© The Author(s) 2020 11

Considerable political propaganda accompanied the decision to launch

1. Each territory but Macau were to have a local Foreign Exchange

Economic integration under a common currency was a well accepted

Fears about possible problems of indebtedness of some territories

The Operation of the Compensation System

Carcavelos, Portugal Maria Eugénia Mata

1 Introduction: Why to Study “The Portuguese Escudo

Part I The Origin of the Escudo Monetary Zone 9

2 The Escudo Monetary Zone 11

3 The Difficulties in Launching the Escudo Monetary Zone 25

4 War, Confidence, and Expectations. Adjusting the Rules

Part II The Transition to a Revised Escudo Monetary Zone 69

5 The Heritage from the 1963–1968 Period. Marcelo

6 The Technical and Political Discussion of the Escudo

7 The Results of the 1971 Reform of Escudo Monetary

Part III The End of the Revised Escudo Monetary System 121

8 Decolonisation and Independence Agreements. Retornados

9 The Genesis of the New Currency Units and Banking

10 The End of the Escudo Monetary Zone Fund in 1980.

Part IV Co-operation from Independences to the End of the

11 The New Currencies in the West-African Portuguese-

12 The Angolan Kwanza and the Portuguese Co-operation193

13 The Mozambican Metical and the Portuguese

14 Final Remarks: Conclusions235