Until 1529 Portugal had very little interest in Brazil mainly due to the high profits gained through its commerce with India, China, and the East Indies. This lack of interest allowed traders, pirates, and privateers of several countries to poach profitable Brazilwood in lands claimed by Portugal, with France setting up the colony of France Antarctique in 1555. In response the Portuguese Crown devised a system to effectively occupy Brazil, without paying the costs. Beginning in the early 16th century, the Portuguese monarchy used proprietorships or captaincies—land grants with extensive governing privileges—as a tool to colonize new lands. Prior to the grants in Brazil, the captaincy system had been successfully used in territories claimed by Portugal—-notably including Madeira, the Azores, and other Atlantic islands.

In contrast to the generally successful Atlantic captaincies, of all the captaincies of Brazil, only two, the captaincies of Pernambuco and São Vicente (later called São Paulo), are today considered to have been successful. For reasons varying from abandonment, defeat by aboriginal tribes, occupation of Northeast Brazil by the Dutch West India Company, and death of the donatário (lord proprietor) without an heir, all of the proprietorships (captaincies) eventually reverted to or were repurchased by the crown. In 1572, the country was divided into the Northern Government based in Salvador and the Southern Government based in Rio de Janeiro.