fighting in Rio Grande do Sul, the center of the Federalist Revolt (1893–1895). Early in his government, he was able to resolve the latter difficulty by signing a peace treaty with the rebels, who received amnesty. Later, Prudente de Morais devoted all of his efforts to pacify the policial factions within his country, which included extreme advocates of the centralist policies of Floriano Peixoto and supporters of the monarchy. During his rule, he abandoned the innovative measures of Floriano Peixoto one by one. A gradual approach was necessary since the Florianists still had some influence, particularly in the army, and the vice-president was connected to the ideas of the Florianists. In 1896, he faced a diplomatic issue involving the British, who saw fit to take possession of the islands of Trindade and Martim Vaz in 1895, and the revolt of the Military School. He asserted his authority by closing the school and military club. The diplomatic issue was resolved favorably in favor of Brazil. Prudente de Morais re-established relations with Portugal and signed a Treaty of Friendship with Japan in November 1895 with the aim of encouraging the arrival of Japanese immigrants. But shortly after the rebel movement in Rio Grande do Sul, would face an even greater challenge: the War of Canudos in the interior of Bahia. Forced to undergo surgery, Prudente de Morais retired from power between 10 November 1896 and 4 March 1897, turning over his responsibilities to Vice-President Vitorino. During this interim, Vitorino transferred the seat of government from Itamaraty Palace to the Catete Palace. With the victory of the rebels of Antônio Conselheiro in the War of Canudos, the political situation further deteriorated. Prudente interrupted his convalescence and then appointed Minister of War general to lead a new expedition to defeat the rebels. Internal differences within the PR and the War of Canudos wore down the government. Even with the victory of the government troops in the war, tensions did not abate. On 5 November 1897, during a military ceremony, Morais withstood an assassination attempt. He escaped unhurt, but his war minister, Carlos Machado de Bittencourt, died defending him. The president decreed a state of siege, for the former Distrito Federal (1891–1960) in order to get rid of his most troublesome opponents. The difficult economic and financial crisis inherited from the Encilhamento economic bubble took its toll on the administration, mainly because of military spending