According to a British diplomat serving in Angola in 1902, “nobody regarded the contract laborers as anything other than slaves.” 
	Claims of racial tolerance aside, the Portuguese set up social, political, and economic hierarchies based on race throughout their reign over Angola. These distinctions and inequalities, as well as internal displacements of African tribes, created significant tensions between members of different ethnic and racial groups which would come to shape the formation of nationalist movements and the course of the post-colonial civil wars. 
	For the first few hundred years of Portuguese rule, the European population in Angola was minimal and largely limited to the coast. Though several attempts were made to found agricultural outposts with white settlers in the interior, these were largely failures. The oppressive tropical climate and hostile African neighbors made life difficult for settlers, many of whom lacked agricultural experience or expertise. However, at the root of the early failures of white settlement lied the Portuguese system of penal colonization. As with overseas colonization in general, the Portuguese were the first to begin and the last to stop the practice of using convicts as settlers in their colonies. The difficult nature of life in Africa made it difficult to find voluntary immigrants, so convicts, called degradados, were seen as an effective subsitute, as well as a solution to the problem of overcrowding in Portuguese prisons. Used as soldiers, settlers, and sailors, the degradados, together with exiled Jews, gypsies, and other “undesirables,” formed a large majority of the white population in Angola until the beginning of the twentieth century. The mortality rate among degredados was alarmingly high, and this further discouraged free immigration to Angola, creating a cycle of continued penal settlement. Because of their small numbers and unreliability, the degredados could not fulfill all the roles of colonial administration and commerce, a class of mestiços, also called the Afro-Portuguese, rose to take many these positions. 
Originally descendant from the union of Portuguese soldiers and merchants with indigenous African women, the Afro-Portuguese eventually became their own distinct ethnic group and grew to wield significant economic, and later political, power. The influence of the mestiços began with the slave trade, in which they often served as middlemen between the Portuguese traders and indigenous African kingdoms, leading and accompanying trade caravans into the interior. Though the slave trade was initially associated with the areas in and around the Kongo kingdom and its capital of São Salvador, Afro-Portuguese traders began to penetrate the central highlands to the south to find new sources of slaves. Luanda and later Benguela were established as ports to facilitate direct the new trade with Brazil and the other colonies. The decline of the Kongo due to a series of wars with the Portuguese in the seventeenth century, together with the stronger and more direct connections with colonial traders enjoyed by the Afro-Portuguese led to the eclipse of São Salvador by Luanda as the center of the Angolan slave trade, and by extension, economic activity in the region.
