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&emsp; Great Britain was reduced, by the formation of chartered companies, the first of which (1753) was given control of the Algarve sardine and tunny fisheries. The Oldembourg Company (1754) received a monopoly of trade with the Portuguese colonies in the East; extensive monopolist rights were also conceded to the Para and Maranhao Company (1755) and the Pernambuco and Parahyba Company (1759). In Lisbon a chamber of commerce (Junta do commercio) was organized in 1756 to replace an older association of merchants, the Meza dos homens de negocio, which had attacked the Pará Company; and in the same year the Alto Douro Company was formed to control the port-wine trade and to break the monopoly enjoyed by a syndicate of British wine merchants. This company met with strong opposition, culminating in a rising at Oporto (February 1757), which was savagely suppressed.

Both his commercial policy and his desire to strengthen the Crown brought Pombal into conflict with the Church and the aristocracy. In 1751 he had made all sentences passed by the Inquisition subject to revision by the Crown. The liberation of all slaves in Pará and Maranhao except negroes (1755), and the creation of the Para Company, were prejudicial to the interests of the Jesuits, whose administrative authority over the Indians of Brazil was also curtailed. Various charges were brought against the Society by Pombal, and in September 1759, after five years of heated controversy (see ), he published a decree of expulsion against all its members in the Portuguese dominions. His power at court had previously been strengthened by the so-called Tavora plot. The marquess and marchioness of Tavora and their two sons, with the duke of Aveiro, the count of Atouguia and other noblemen, were accused of complicity in an attempt upon the life of King Joseph (September 1758). Pombal appointed a special tribunal to judge the case; many of the accused, including those already mentioned, were found guilty and executed; and an attempt was made to implicate the Jesuits. Pombal’s enemies declared that he himself had organized the attack upon the king, in such a manner as to throw suspicion upon his political opponents and to gain credit for himself. This accusation was not proved, but the history of the Tavora plot remains extremely obscure. The expulsion of the Jesuits involved Portugal in a dispute with Pope Clement XIII.; in June 1760 the papal nuncio was ordered to leave Lisbon, and diplomatic relations with the Vatican were only resumed after the condemnation of the Jesuits by Clement XIV., in July 1773.

His victory over the Jesuits left Pombal free to develop his plans for reform. He devoted himself especially to education and defence. A school of commerce was founded in 1759; in 1760 the censorship of books was transferred from an ecclesiastical to a lay tribunal; in 1761 the former Jesuit college in Lisbon was converted into a college for the sons of noblemen; in 1768 a royal printing-press was established; in 1772 Pombal provided for a complete system of primary and secondary education, entailing the foundation of 837 schools. He founded a college of art in Mafra; he became visitor of Coimbra University, recast its statutes and introduced the teaching of natural science. Funds for these reforms were to a great extent provided out of the sequestrated property of the Jesuits; Pombal also effected great economies in internal administration. He abolished the distinction between Old and New Christians, and made all Portuguese subjects eligible to any office in the state. Far-reaching reforms were at the same time carried out in the army, navy and mercantile marine. In 1760 Admiral Boscawen had violated Portuguese neutrality by burning four French ships off Lagos; Pombal protested and the British government apologized, but not before the military weakness of Portugal had been demonstrated. Two years later, when the Family Compact involved Portugal in a war with Spain, Pombal called in Count William of Lippe-Bückeburg to reorganize the army, which was reinforced by a British contingent under Brigadier-General John Burgoyne, and was increased from 5000 to 50,000 men. The Spaniards were at first successful, and captured Braganza and Almeida; but they were subsequently defeated at Villa Velha and Valencia de Alcantara, and the Portuguese fully held their own up to the signature of peace at Fontainebleau, in February 1763. Towards the close of the reign, a long-standing controversy with Spain as to the frontier between Brazil and the Spanish colonies threatened a renewal of the War; but in this crisis Pombal was deprived of power by the death of King Joseph (Feb. 20, 1777) and the accession of his daughter Maria I.

The queen was married to her uncle, who became king consort as Pedro III. Pombal’s dismissal, brought about by the influence of the queen-mother Mariana Victoria, did not involve an immediate reversal of his policy. The controversy with Spain was amicably settled by the treaty of San Ildefonso (1777); and further industrial and educational reforms were inaugurated, chief among them being the foundation, in 1780, of the Royal Academy of Sciences. Queen Maria, who had previously shown signs of religious mania, became wholly insane after 1788, owing to the deaths of Pedro III. (May 1786), of the crown prince D. Joseph, and of her confessor, the inquisitor-general D. Ignacio de San Caetano. Her second son, D. John, assumed the conduct of affairs in 1792, although he did not take the title of regent until 1799. Meanwhile a two-fold reaction—on one side clericalism, on the other democratic—had set in against the reforms of Pombal. D. John told William Beckford in 1786 that “the kingdom belonged to the monks,” and his consort Carlota Joaquina, daughter of Charles IV. of Spain, exercised a powerful influence in favour of the Church. But new ideas had been introduced with the new system of education, and the inevitable revolt against absolutism had resulted in the formation of a Radical party, which sympathized with the Revolution in France and carried on an active propaganda through the numerous masonic lodges which were in fact political clubs. D. John became alarmed, and the intend ant of police in Lisbon, D. Diogo Ignacio de Pina Manique, organized an elaborate system of espionage which led to the imprisonment or exile of many harmless enthusiasts.

From similar motives, a treaty of alliance with Spain was signed at Aranjuez in March 1793; 5000 Portuguese troops were sent to assist in a Spanish invasion of France; a Portuguese squadron joined the British Mediterranean fleet. But in July 1795 Spain concluded a peace with the French republic from which, Portugal, as the ally of Great Britain, was deliberately excluded. In 1796 Spain declared war upon Great Britain, and in 1797 a secret convention for the partition of Portugal was signed by the French ambassador in Madrid, General Pérignon, and by the Spanish minister Godoy. D. John appealed for help to Great Britain, which sent him 6000 men, under Sir Charles Stuart and a subsidy of £200,000. Though Spain, through the influence of D. John’s father-in-law Charles IV., still remained neutral, a state of war between Portugal and France existed until 1799. D. John then reopened negotiations with Napoleon, and Lucien Bonaparte was sent to dictate terms in Madrid. But D. John dared not consent to close the harbours of Portugal against British ships. England was the chief market for Portuguese Wine and grain; and the long Portuguese littoral was at the mercy of the British navy. Compelled to choose between fighting on land and fighting at sea, D. John rejected the demands of Lucien Bonaparte, and on the 10th of February 1801 declared war upon Spain. His territories were at once invaded by a Franco-Spanish army, and on the 6th of June 1801 he was forced to conclude the peace of Badajoz, by which he ceded the frontier fortress of Olivenza to Spain, and undertook to pay 20,000,000 francs to Napoleon and to exclude British ships from Portuguese ports. Napoleon was dissatisfied with these terms, and although he ultimately ratified the treaty, he sent General Lannes to Lisbon as his ambassador, instructing him to humiliate the Portuguese and if possible to goad them into a renewal of the war. The same policy was continued by General Junot, who succeeded Lannes in 1804. Junot required D. John to declare war upon Great Britain, but this demand was not immediately pressed owing to the preoccupation of Napoleon with greater affairs, and in October 1805 Junot left Portugal.

By his Berlin decree of the 21st of November 1806 Napoleon