While diving into some history, I came across an explanation for why, if Olinda was poised to hold the spotlight, did Recife eventually become the capital? Here’s the answer,
“While unique, the beauty of Olinda’s location is not favored by trade due to it being very far from the reefs that form the only harbor in the region. Therefore, people slowly began gathering near the natural wharf, whose name the city took. The inhabitants of Olinda also started to see those in the new town with the most scathing contempt, calling them “peddlers.” After all, the convenience ended up overtaking romanticism and the aristocracy. The city of Recife became the capital and Olinda, while still maintaining the pride of their position and past grandeur, reverted to the insignificance of being a suburb of its rival. (Kidder: 1845)”
So there you have it, Olinda originally provided a safe defensive position against attacks from “savages” by land or invaders by sea but, once it established itself, the ease of doing commerce in neighboring Recife eventually won out.