The construction of the Governor’s Mansion – which later became the Imperial Palace – built in 1743 by governor Gomes Freire de Andrade, the Count of Bobadela, attracted the elite of the time to live near the Imperial Square. Brazil was still a colony and its principal ruler was the Viceroy. With the great appreciation in real estate value, the Portuguese judge, Antônio Telles Barreto de Menezes bought land in the area to build homes and rent them to merchants and residents of the city’s highest classes. However, the construction of new houses blocked the passage to the Fish Market (currently Comércio street). Thus, the head engineer José Alpoim created an arch in the middle of one of the buildings, which became the Senate of the Chamber (equivalent to the State House of Representatives), in order to link the old Carmo square (currently Praça XV) and Cruz street (now Ouvidor street).
The locale was frequented by member’s of Rio’s high society, which was attracted by the image of the Holy Virgin placed on the inside of the arch, which was called the Arco dos Teles. But a few years later, in 1790, a fire destroyed most of Telles de Menezes’ houses, leaving only the part which today makes up the Arco do Teles. After the fire, the region’s real estate depreciated and the upper classes moved out of the region, which began to attract thieves and prostitutes. With the depreciation, the image of the Holy Virgin was removed from the area and place in the Santo Antônio dos Pobres Church.
The region only recovered in 1808 with the coming of the royal Portuguese family, which lived in the Imperial Palace.