Externally his position seemed secure. He was assured of Canning's active support in securing formal recognition as an independent monarch; Portugal was helpless; though his application for a defensive and offensive alliance had been refused by Henry Clay, the United States was the first to recognise Brazil's independence; even the Holy Alliance had little objection to an independent American state ruled by a legitimate monarch. In the summer of 1825 a treaty of peace was framed between Portugal and Brazil through the intermediation of England. Independence was formally recognised, but Pedro made the error of consenting that his father should take the honorary title of Emperor of Brazil, and by a secret article he pledged Brazil to assume ten millions of the Portuguese debt, though it had been incurred in war against herself.
In March, 1825, a rebellion against Pedro broke out in Uruguay, and the Argentine gauchos swarmed over the border. The Brazilians easily held the fortified city of Montevideo, but the Spanish-Americans were successful in the open field, and after six months of harassing fighting caught the imperial army in a disadvantageous position and cut it to pieces in the decisive battle of Sarandy. The Buenos Aires government at once gave notice that it must recognise that Uruguay had reunited itself to the Argentine, and Pedro responded with a declaration of war and a blockade.
The preparations for war involved him in unprecedented expenditures, which piled up the debt already accumulated in his father's time and added to by the war of independence and the suppression of the "Confederation of the Equator." He decided to call together the representatives of the people and insist that they bear a share of the responsibility. So little interest was taken that it was hard to hold the elections, and the members had to be urged to present themselves. On the 3rd of May, 1826, the first Brazilian Congress met. Intended as a mere instrument to furnish supplies for the war, and meeting with the fear of the fate of the constituent assembly before its eyes, it hesitatingly began the work of parliamentary government. Except for the revolution of 1889, the sessions have never since been interrupted.