on imported products. Later, under the Rio Branco cabinet at the beginning of the 1870s, the tariff on foreign products was newly raised to 40%, and new raw materials were exempted from import taxes. Expansion At the end of the 1860s, came a new industrial surge caused by two armed conflicts: the American Civil War and the Paraguayan War. Because of the first, U.S. production of cotton was interrupted by the blockade of the Union forces against the Confederacy. The second resulted in the emission of currency and an increase in import tariffs to cover the costs of war. This resulted in a great stimulus not only for the textile industry, but also for other sector, such as chemicals, cigars, glass, paper, leather, and optical and nautical instruments. During the 1870s, thanks to the decline of the coffee region of the Paraíba Valley and some areas of sugar production, many owners of plantations invested not only in the cotton textile industry, but also in other manufacturing sectors. Deployment of a railway network throughout the national territory also stimulated the emergence of new industrial activities, mainly in São Paulo. Industry also experienced a major impetus in this period. From the 1870s onward, the great expansion of industrialization became a constant in Brazil. In 1866, there were 9 textile factories with 795 workers. In 1881, there were 46 textile factories through the country: 12 in Bahia; 11 in Rio de Janeiro; 9 in São Paulo; 9 in Minas Gerais; and 5 in other provinces. The number of establishments diminished a little by 1885 to 42 textile factories with 3,172 workers. However, it did not harm the overall growth in the sector up to 1889. In 1880 the Industrial Association was established, with its first board elected the following year. The Association supported new industrial incentives and propagandized against the defenders of an essentially agricultural Brazil. 9.6% of the capital of the Brazilian economy was directed toward industry by 1884, and by 1885, 11.2%. This figure dropped sharply during the republican period, falling to 5% between 1895 and 1899, and improving slightly to 6% between 1900 and 1904. Still, it would take many years to return to the level that prevailed during the Empire. At the time of its downfall in 1889, monarchical Brazil had 636 factories (representing an annual rate of increase of 6.74% from 1850) with a capital of Rs 401.630:600$000