The island of Porto Santo was officially discovered in 1418 by the navigator João Gonçalves Zarco, and the same seafarer´s ship only arrived at the island of Madeira the following year. This fact marks the discovery of the archipelago’s two habitable islands; They were uninhabited at the time and colonisation only began in 1425.
In an administrative context, three captaincies were created in the archipelago: one on Porto Santo, the first Captain of which was Bartolomeu Perestrelo, and two on the island of Madeira, that of Funchal, which was awarded to João Gonçalves Zarco, his first captaincy, and the Captaincy of Machico, for which Tristão Vaz was responsible.
This was the beginning of Portugal´s era of Discoveries and a new page started to be written in the long history of Western civilisation.
Madeira quickly became the foremost and most important island trading post in the Atlantic Ocean. Funchal grew in importance as a staging port for Portuguese ships on route to the Gulf of Guinea as the geographical and commercial exploration of the west coast of Africa grew. Later on, as the Portuguese Discoveries expanded, Funchal gained further importance as ships stopped off on the way to Brazil and India.
The discoveries and trading activity, which was principally based on sugar production and export, but also on wine, fresh vegetables, meat and wood for supplying the ships that staged in Madeira, particularly from the end of the fifteenth and beginning of the sixteenth century onwards, caused the Atlantic archipelago´s influence to grow and catapulted Funchal from a small town to city status, right at the beginning of the sixteenth century, in 1508.
The economic cycle of sugar in Madeira´s history started at this time. Sugar production would last for more than a century as the main source of wealth for the islands´ inhabitants. It is during this period that trade between the port of Funchal and Italy´s main trading ports in the Mediterranean and with Flanders in the North Sea flourished. This growth led to a number of trading and financial families from these trading partners to set up residence in the archipelago.
The Flemish and Italian markets were the principal importers of sugar produced by Madeira, followed by the Portuguese market, which just accounted for 10% of total demand. The sugar industry developed locally in the downstream section, as the first conserve and jam industries arose.
Towards the end of the first half of the sixteenth century, the Canary Islands and São Tomé and Príncipe, new archipelagos that had been colonised by the Portuguese in the meantime, as well as parts of Brazil, began to compete in the sugar export market and Madeira´s supremacy in the international sugar market started to wane. Demand for Madeira sugar and its derivative products gradually declined all through the second half of that century.
As sugar declined Madeira wine production expanded and all through the seventeenth century it evolved into a fortified generous wine. The wine employed sophisticated production methods, as precise measures of brandy to stimulate ageing in excellent preservation conditions were defined locally. Thus, the economic cycle of wine started, bringing a new era of prosperity to Madeira´s economy.
At the time Madeira wine was already exported to the main European cities of the time and there are records of it being drunk and well appreciated by many wealthy classes, including Paris´ clergy. Its evolution at the end of the eighteenth century and beginning of the nineteenth century to a fortified generous wine subject to two to three months ageing at a constant temperature of around 45 degrees, ensured that it became an equal of port and sherry, and one of the most famous and well regarded fortified wines of the Western world at that time.
This second great economic cycle reaches its peak in the middle of the nineteenth century and it is almost abruptly terminated as the destructive Phyloxera Vastatrix plague, brought to the Old Continent by American grape varieties, spreads throughout Europe. This plague had destroyed nearly all wine production on the island within a few years. The cure is obtained, curiously, by successful grafts of European grape varieties onto the varieties carrying the virus, but which are immune to it. The production and international sale of Madeira wine started up again, but never on the same scale as before, one of the reasons being that port and sherry also regained their market share and production capacity, which were, respectively, ten and fifty times greater than that achieved by Madeira wine.
Another economic cycle in the history of Madeira was brought to a close. However, the enormous international expansion of the archipelago over the centuries allowed it to consolidate its image of a land with luxurious vegetation and a mild climate which was beneficial for health. Its fame as a cure for lung disorders crossed borders and won over European nobility of the end of the nineteenth and beginning of the twentieth centuries. Royal families, such as the Dutch and Swedish, and imperial families, such as the Austrian or Brazilian families, sent some of their most illustrious princes and princesses to Madeira to spend time recovering from such diseases. This fact leads to the creation of the first hotels on the island, to accommodate such illustrious visitors and, with them, a growing tourist industry that was also taking its first tentative steps on a worldwide scale. This led to a new economic cycle in Madeira, the tourism cycle, which has lasted to the present day.
The emergence and expansion of the sea cruise industry during the first half of the nineteenth century, which proliferated in the Atlantic, helped, via its stop-offs in Madeira, to consolidate the archipelago´s tourist industry.
This development was followed in the second half of the twentieth century by charter flights to tourist destinations and long-term stays. Madeira, despite its small size, was able to keep itself on international tourism circuits and it continues to gain the preference of a reasonable number of tourists, mainly European ones. Nevertheless, the information society and economic globalisation have rapidly led to the creation of new, easy to access exotic tourist destinations at competitive prices compared to those of Madeira in its traditional markets.
Thus, the need arose to find new ways to sustainably develop Madeira´s economy, diversifying and consolidating its basic underlying pillars. In addition to investment in the complete refurbishment of the region´s infrastructures, UMa - Madeira University and the Madeira Tecnopólo (science park), the International Business Centre of Madeira was also set up. The centre has made it possible to diversify and internationalise the regional economy, turning it into Portugal´s second wealthiest region.