Graciosa is the northernmost island of the central group of the Azores. It is the second smallest (61 km2) at just 12.5 km long and 8.5 km wide. An island of gently sloping terrain, it is also the lowest (the highest point is at Pico Timão at 398 m asl) and the least rugged in the archipelago. However, cliffs at Serra Branca on the south coast rise up to 300 m. Other areas of the coast feature low-lying platforms that extend into the sea, such as Baia da Caldeirinha–Porto Afonso, in the west, Ponta da Pesqueira, in the north, and Lagoa and Carapacho, in the south. The southwestern sector is dominated by the caldera-like crater of Caldeira, located in the highest area of the island. There are also two important islets: Ilhéu de Baixo, off the southwestern tip, and Ilhéu da Praia, in the north. Recent volcanism is noticeable in the west-east and northeast-southwest alignments of cinder cones, the caldera mentioned above, and the malpaíses or badlands visible in several areas of the island.
Graciosa is considered to have the driest climate in the archipelago, but its low altitude and terrain make it incomparable to the rest of the Azores. Average annual rainfall varies between 878 and 1105 mm, according to the two meteorological stations located in low-lying areas (30 and 50 m above sea level, respectively). As is the norm in the Azores, prevailing cloud cover means that hours of sunshine are very few, the maximum being in August and the minimum in December. The average annual temperature is 17 ºC, with minimum variations thanks to the influence of the sea.
Graciosa is currently home to 4 400 inhabitants (2001), mostly concentrated in the capital, Santa Cruz de Graciosa—the island’s only municipality. Other towns of some significance are Guadalupe, Luz and São Mateus de Praia. The population declined considerably between 1900 and 1920 and from the 1950s onwards, mainly because of emigration to the USA and Brazil, and migration to other islands in the central group of the Azores, especially Terceira. This trend has balanced out in more recent times.
The economy of this tiny island is largely based on agriculture and fishing, which has also been the norm for the archipelago throughout its history. However, low soil fertility and the saline deposits from sea spray led to cereals and vines being cultivated in better conditions inland. Today most of the territory is given over to grazing, since milk and other dairy products are a mainstay of the economy in the islands. Reduced fishing quotas, in accordance with European Union guidelines, have led to a gradual decline in the sector. Despite the rise in tourism of the last few decades, after construction of the airport and commercial port in the 1980s, the island economy suffers from a certain amount of stagnation.
Graciosa was discovered by Portuguese navigators in the early 15th century and cattle were introduced in the 1440s to pave the way for settlement, which occurred soon after. Many of the early colonists came from the regions of Beiras and Minho in Portugal. In 1831, liberal troops fighting in the Portuguese Civil War (1828-1834) seized the island. At various points in history, several prominent figures have ended up on Graciosa, including Chateaubriand, the poet Almeida Garrett and the Prince of Monaco, in 1814. There have also been various tragic episodes, such as pirate attacks and natural disasters like the 1730 earthquake that completely wiped out several towns on the island.