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In 1580, a succession crisis led to Portugal forming a personal union with Spain under

the Habsburg King Philip II. The unification of the two Iberian kingdoms, known as the

Iberian Union, lasted until 1640, although the institutions of both kingdoms remained

separate. The Netherlands (the Seventeen Provinces) obtained independence from Spain in

1581, leading Philip II to prohibit commerce with Dutch ships, including in Brazil.

Since the Dutch had invested large sums in financing sugar production in the Brazilian

Northeast, a conflict began with Dutch privateers plundering the coast: they sacked

Salvador in 1604, from which they removed large amounts of gold and silver before a

joint Spanish-Portuguese fleet recaptured the town.

From 1630 to 1654, the Dutch set up more permanently in commercial Recife and

aristocratic Olinda, and with the capture of Paraiba in 1635, the Dutch controlled a

long stretch of the coast most accessible to Europe (Dutch Brazil), without, however,

penetrating the interior. The large Dutch ships were unable to moor in the coastal

inlets where lighter Portuguese shipping came and went. Ironically, the result of the

Dutch capture of the sugar coast was a higher price of sugar in Amsterdam. During the

Nieuw Holland episode, the colonists of the Dutch West India Company in Brazil were in a

constant state of siege, in spite of the presence of the Count John Maurice of Nassau as

governor (1637–1644) in Recife. Nassau invited scientific commissions to research the

local flora and fauna, resulting in added knowledge of the territory. Moreover, he set

up a city project for Recife and Olinda, which was partially accomplished. Remnants

survive to this day.

After several years of open warfare, the Dutch formally withdrew in 1661; the Portuguese

paid off a war debt in payments of salt. Few Dutch cultural and ethnic influences

remain.

The war against the Dutch sparkled a sentiment of nativism among the pernambucanos which

would last for centuries. Early on the 18th century, Recife and Olinda engaged on an

episode known as War of Mascates; Olinda, after the expelling of the Dutch, had returned

to its condition of home for the Portuguese administrators and the sugarcane lords;

Recife, on the other hand, had become an important commercial center, with the busiest

port in Brazil. The War of Mascates (the Portuguese merchants of Recife) opposed the

archaic aristocracy, based on power emanated from Portugal, against this new burgeoisie,

which needed a more liberal environment to prosper; the mascates were led by Bernardo

Vieira de Melo, who was arrested and sent to Portugal, were he died in prison; the

hostilities ceased only in 1715, when, after Recife was declared independent from

Olinda, the mascates surrendered.