19311950
CHAPTER 3 Defining Years: the Achievement of a Corporate Identity
3.1 Pellet production production and export of pellets has gained a prominent place in the 75 company’s results, making the product as important as raw iron ore. At the start of the 1950s, the steel industry basically used lump ore ranging from 6.35 mm to 50.8 mm in size, as the use of smaller particles affected reactor permeability, reducing productivity due to the flow of gases against the ore. As a result, a large quantity 3.2 CVRD and government policies of waste particles known as “fines” accumulated at mines. This factor, combined with the development and use of other minerals, The 1950s marked Companhia Vale do Rio Doce’s entry into such as taconite1 and itabirite,2 led to the creation of two high- the global iron ore market. The advances made this decade were temperature agglomeration processes to make use of fines: sintering mainly the result of modernizing the company’s mine-railroad-port and pelletizing.3 Introduced in the 1950s, these processes have since complex and changing its pricing policy. In 10 years, the amount been enhanced, in line with the evolution of the steel industry and charged per metric ton on an FOB basis doubled.6 And that wasn’t seeking greater energy efficiency and productivity, together with all: CVRD’s markets diversified, it reformulated its commercial sustainability.4 policy, and former intermediaries were replaced by exclusive agents Due to its lower costs, sintering was widely introduced at steel in consumer markets. The new demands of global steelmaking were mills, although its product – sinter, formed by agglomerating reflected in the output and quality of Brazilian ore. In the financial particles of 0.105 mm to 6.35 mm across – is weaker than pellets area, the company’s “pre-bankruptcy” status of the previous decade and needs to be closer to the reactor, as handling it generates was overcome – its debts (external and internal) were paid off and it undesirable fines. On the other hand, the pelletizing process gained international credibility. CVRD started to make a profit and involves agglomerating ultrafine particles smaller than 0.105 mm finally began to grow. in size, transforming them into pellets – more resistant globules During the short administration of Juracy Magalhães (1951- that can be moved for long distances, thereby making them suitable 1952), the company’s main approach for the decade was for customers on different continents.5 Sintering processes were established, and these strategies were maintained by Francisco de developed before those of pelletizing, as the particle size of sinter Sá Lessa (1952-1961) in the following years. The market-oriented feed is more suited to agglomeration. policies adopted gave CVRD increasingly similar characteristics to When CVRD decided to begin producing pellets in 1956, it was those of a private company. The successful pursuit of efficiency inaugurating a new era. The company’s new pelletizing plants were and profitability distanced the company from the twists and turns incorporated into its mine-railroad-port structure and, since then, the typical of political games. However, numerous changes to the country’s economic policy were introduced by the governments that succeeded each other 1 - Iron carbonate. following the end of the New State in 1945 until the end of the 1950s. 2 - Overlapping layers of iron oxide and silicon oxide. Brazil had four presidents during this period: Eurico Gaspar Dutra 3 - Interview with Virginio Xavier of the Pelletizing Department at CVRD’s Fábrica Mine Operation Unit (GAFOP).
4 - Idem. 6 - See Abranches, Sérgio; Dain, Sulamis. A empresa estatal no Brasil: padrões estruturais e 5 - Idem. estratégias. Rio de Janeiro: Finep, 1978, unpublished academic paper, p. 53.
Vale Our History Vale Our History Previous photograph: mechanized facilities for loading ore at the Paul Quay at the Port of Vitória in Espírito Santo.
From left to right: the Atalaia Quay in 76 Espírito Santo and President Getúlio Vargas, 77 campaigning for the 1950 election.
(until 1951), Getúlio Vargas (1951-1954), João Café Filho (1954-1955), was now different. However, as the carnival song that served as the and Juscelino Kubitschek de Oliveira (1956-1961). Each of them had slogan for Vargas’ campaign in 1951 put it, “the old man’s portrait” a different view as to the participation of private capital in public- had returned to the same place. sector companies considered strategic, such as CSN and CVRD. The euphoria of Vargas’ early days gradually gave way to Throughout this period, the 1946 Constitution remained in force, disbelief. Bombarded by reports of corruption, the president determining a reduction in state control of economic activities. isolated himself at the Palace of Catete. Even populist measures, With regard to the mining regime, for example, the Charter of such as a 100% rise in the minimum salary announced in 1954, 1946 restored the principle of the 1934 Constitution according caused less of a stir than before. In the field of mining policy, to which concessions for exploiting mineral reserves would be where he had taken a hard line against the participation of private granted exclusively to Brazilians or companies constituted in the companies, Vargas started to give way. After he committed suicide country, guaranteeing preference to the landowner. The expression on August 24, 1954, encouragement for the presence of foreign “companies constituted in the country” used in Article 153, Section 3 capital in domestic mining companies gained even greater force. was broad enough to permit the participation of foreign companies. The situation crystallized during the government of Café Filho and The 1946 Constitution’s orientation was in line with the liberal was accentuated during Juscelino Kubitschek’s time in power. tendency of the Dutra government (1946-1951), which favored private companies and saw associations with foreign capital as the best way of promoting the modernization of the Brazilian economy. This was clearly reflected in CVRD’s conduct on the international 3.3 More exports and new markets market, at least until 1951, when presidential elections once more gave Getúlio Vargas the keys to the Palace of Catete. At the start of the 1950s, the global iron ore market started to heat Vargas returned to power in 1951, winning 3,849,040 votes – up again. As of 1947, Europe began to overcome the severe depression 48.7% of all votes cast. He had almost won an absolute majority immediately following the war. Helped by an injection of money from Top of this page: a pile of the votes. In his first period as president, Vargas had resorted to the United States, the European economy, and particularly that of of iron ore from Itabira force to impose his policies, but now he had popular support – and Germany, rebuilt its industries, and consequently its steel production. at the Port of Ijmuiden populism as a government practice. Campaigns such as “The oil is At the same time, the Korean War (1950-1953) – between the United in the Netherlands. ours” led the people out onto the streets. Brazil – following the end States-supported South Korea and the Soviet Union-supported North Below: ore being unloaded at the railroad stockyard of the Second World War, with a new Constitution, hosting the 1950 Korea – triggered an arms race, boosting demand for iron ore, a in Itabira, Minas Gerais. World Cup, and even electing Marlene as the “Queen of Radio” – fundamental raw material for the American weapons industry.
Vale Our History Vale Our History In 1950, more than 80% of iron sold by Brazil was absorbed by the American market. The concentration of sales to the United States provoked a backlash in nationalist sections of the press and the National Congress
Although Europe was experiencing a promising economic steel production, serving fundamentally to rebuild Europe after the moment, the United States remained the main customer for Brazil’s war, had obliged the leading steel companies to look for new sources iron ore exports. In 1950, more than 80% of the iron sold by the of iron outside their home countries. The United States, West 79 country was absorbed by the American market. The concentration Germany, France, England and also Japan9 made heavy investments of Brazilian iron sales to the United States provoked a backlash in in peripheral areas, contributing to an increase in the supply of iron nationalist sections of the press and the National Congress, which ore and other raw materials used to make steel. saw in this yet another indication of Brazil’s growing alignment with In most cases, the new iron-producing countries were located American foreign policy. This perspective was further supported, closer to the main consumer centers (the USA and Western Europe) among other arguments, by CBRD’s effective financial dependence than Brazil, resulting in lower freight costs and a lower final price on Eximbank. of iron ore. The global club of iron producers was accepting new Placed at the center of discussions, the company reacted to this members. Alongside the major, already established exporters, such criticism. In its report of 1951, the directors claimed that, although as Sweden and Canada – whose output rose, respectively, from 13.6 that year the United States had once again been its largest customer, to 17 million metric tons between 1950 and 1953, and from 3.8 to “the iron ore was freely sold to any country, and the company also 14.5 million metric tons between 1950 and 1955 – other countries in entered into deals with Canada, Germany, France, the Netherlands Latin America, Africa and Asia now entered the scene. Venezuela’s and Belgium.”7 production increased from just 200,000 metric tons in 1950 to 2.2 Another argument given by the nationalists was that the million metric tons in 1953, and would reach 19.5 million metric company’s iron reserves, estimated at that time to be 15 billion tons by 1960. Peru, which did not even feature in the statistics until metric tons, should prioritize the supply of domestic rather than 1952, produced 1 million metric tons in 1953, rising to 7 million in foreign demand. This position was contested by CVRD’s president, 1960. Liberia came from nowhere in 1950 to 1.5 million metric tons Juracy Magalhães, with the argument that there was not enough in 1953 and 12.5 million metric tons in 1964. India, in turn, went demand in Brazil for all the iron ore extracted. According to from output of 3 million metric tons in 1950 to more than 10 million Magalhães, even if the country’s steel production growth rate were metric tons in 1960.10 to double (and it had already expanded by 341% in previous years), Aware of the situation on the iron market, as of 1951 CVRD sought by 1961 – ten years hence – Brazil would still only be consuming 6.8 to modernize the operations of its mine-railroad-port complex million metric tons of ore.8 This quantity was well below estimated and maritime transport system. Its target of exporting 1.5 million national ore production for that year. metric tons, stipulated soon after Juracy Magalhães was appointed In fact, the main problem faced by CVRD at that time was president, was achieved in 1952 – but it was not enough. In 1953, increasingly fierce competition on the global iron market. Growing CVRD embarked on a vigorous policy to diversify its markets.
7 - See Companhia Vale do Rio Doce, Relatório de Diretoria correspondente ao ano de 1951 (Board of Directors’ Report for 1951), p. 7 (hereafter Board of Directors’ Report). According to 9 - For Japan, the end of the Second World War meant the definitive loss of its colonies in Sérgio Abranches and Sulamis Dain, op. cit., p. 47, in order to calm nationalist sentiment, Asia, and since then the country began to seek other sources of raw materials. The first CVRD’s board was concerned to demonstrate its independence from the American market, of these investments was in Alaska, in pursuit of forestry resources. Terutomo Ozawa, but in fact, for some years the company’s commercial policy was marked by efforts to Multinationalism, Japanese style: The political economy of outward dependency. Princeton: View of the town of Itabira, maintain or even expand its position in the United States. Princeton University Press, 1982. Minas Gerais, in the 1950s. 8 - See Kury, Mário da Gama, op. cit., p. 41. 10 - Idem, ib., pp. 45-46.
Vale Our History Vale Our History TABLE 1 CVRD’S EXPORTS OF IRON ORE, BY CONSUMING COUNTRY (METRIC TONS)
COUNTRY 1951 1952 1953* 1954 1955 1956 1957 1958 1959 1960
United States 1,051,998 1,054,181 448,305 555,880 1,022,035 1,024,563 1,158,695 702,367 994,661 1,234,421
% 81.28 68.85 31.88 35.02 44.47 44.42 39.06 31.25 30.50 28.91
Canada 124,268 124,705 37,837 60,204 30,046 61,231 147,525 35,770 85,627 152,501
% 9.60 8.14 4.11 3.79 1.31 2.66 4.97 1.59 2.63 9.57
England 93,432 91,340 - 467,616 552,944 562,807 710,563 571,143 565,941 677,769
% 7.22 5.97 - 29.46 24.06 24.40 23.96 25.41 17.35 15.87
The Netherlands - 42,897 - - 41,285 51,985 43,676 54,835 132,859 99,451
% - 2.80 - - 1.79 2.25 1.47 2.44 4.07 2.33
Belgium 24,663 66,809 - - - 3,048 - - - -
% 1.90 4.36 - - - 0.13 - - - - 80 From left to right: aerial view of expression “Iron Curtain” – used during the Cold War to describe 81 Cauê Mine’s mineral deposits in countries living under the communist regime – began to take on a France - 28,255 - 49,552 14,326 12,746 43,988 24,423 59,317 107,179 Itabira, Minas Gerais, in 1952, and extraction of iron ore, also new meaning. % - 1.85 - 3.12 0.62 0.55 1.48 1.09 1.87 2.51 in Itabira, in the same year. CVRD’s contact with Eastern Europe – established back in 1951, with the supply of iron ore to Poland on a trial basis – did not go West Germany - 99,436 - 249,971 288,674 366,357 402,014 269,117 516,719 910,667 unnoticed and was strongly fought by conservative sections of % - 6.49 - 15.75 12.56 15.89 13.55 11.97 15.84 21.33 the government and Congress. The American government also criticized the initiative, alleging that the company’s decision Austria - 23,502 - - - 9,295 - - - - 12 violated agreements signed by the United States and Brazil that % - 1.54 - - - 0.40 - - - - Diversification of markets prohibited the sale of strategic materials to enemy countries. Czechoslovakia - - - 80,374 195,851 81,208 156,852 187,518 373,479 359,484 The United States, CVRD’s traditional market, gradually lost ground Despite this pressure, CVRD signed a contract with Poland at the record price of US$18.50 per metric ton on an FOB basis. In the midst to Europe. By 1953, European customers together accounted for % - - - 5.07 8.52 3.52 5.29 8.43 11.45 8.42 63.6% of the company’s exports, while the United States absorbed of ideological crossfire, the company’s management claimed that it 13 Poland - - - 113,428 97,483 34,827 98,895 313,225 295,110 290,964 approximately 32%. The USA’s falling share can be explained by was a commercial transaction without any political implications. CVRD’s status as a state-controlled company facilitated its a number of reasons. The pelletizing process had enabled the % - - - 7.15 4.24 1.51 3.33 13.94 9.05 6.82 industrial-scale consumption of taconite, a low-grade variety of activities in Eastern Europe, as government-to-government deals iron ore, and this allowed the United States to make greater use were common practice in those countries. Accordingly, in 1954, Italy - - - 10,160 46,707 49,910 52,273 16,954 28,814 51,167 of its own ore reserves, which until then had been considered of besides its regular exports to Poland, the company sent its first 14 % - - - 0.64 2.03 2.17 1.76 0.76 0.88 1.20 insufficient quality (or too difficult to use). The end of the Korean shipment of iron ore to Czechoslovakia, and in 1957, Hungary War (1953) and the preference of American steel companies to use purchased Brazilian ore for the first time. In the same year, CVRD Hungary ------17,374 21,480 13,411 - came very close to reaching its target of exporting 3 million metric iron ore from their own mines in Liberia, Canada and Venezuela also % ------0.59 0.96 0.41 - contributed to significantly reducing the United States’ demand for tons per year (2,996,261 metric tons, to be exact). Brazilian ore. Switzerland ------1,524 2,033 - 2,540 A crisis for Brazilian mining caused by the proliferation of % ------0.05 0.09 - 0.06 iron ore producers across the world was approaching. Given this situation, worsened by a reduction in prices that led to a temporary Finland ------1,016 - - - suspension of sales in 1953, CVRD intensified its policy of diversifying % ------0.03 - - - its markets. In 1955, for the first time, Japan acquired iron ore 12 - The agreements signed by both countries covered the Joint Brazil – United States from the company. That year, CVRD’s output was consumed in 10 Economic Development Commission, the result of negotiations begun in late 1950 Japan - - 10,114 - 9,154 40,403 131,866 46,532 195,495 383,474 countries.11 More than just a commercial strategy, the expansion of during the Dutra government, with the aim of funding a program to reequip the % - - 0.72 - 0.40 2.10 4.46 2.07 6.00 8.98 exports also began to be seen from a political perspective. Eastern Brazilian economy’s infrastructure sectors. The commission was officially established on July 19, 1951 and ended its work on July 31, 1953. See Calicchio, Vera, “Comissão Mista Europe definitively entered the scene as an iron consumer. The Brasil-Estados Unidos,” DHBB, available at:
Vale Our History Vale Our History Previous page: extraction of ore at Dois Córregos Mine in the town of Itabira, Minas Gerais, in 1952. Left: the Atalaia ore quay in Vitória, Espírito Santo.
82 By the late 1950s (and unlike at the beginning of the decade), While diversifying its markets and increasing its foreign sales, Despite allocating the overwhelming majority of its output to The company’s Annual Report of 1950 listed the construction 83 Companhia Vale do Rio Doce was now solidly positioned in CVRD also significantly increased its share of Brazil’s iron ore the international market, CVRD did not neglect its domestic market. work already completed. At Cauê Mine, the company installed two different markets, and no longer depended on a single customer. exports over the 1950s, especially in the first five years, if compared Keen to reduce its dependence on exports and consequently become electric percussion drills, two electric air compressors and an electric In 1960, the United States remained its biggest client, but its share with the previous decade. The following chart shows these figures. less exposed to fluctuations in the global economy, the company excavator to break up and directly load large blocks of hematite. of the company’s sales had fallen to around 29%, followed by West sought to participate in the Brazilian steel industry’s expansion. As Buildings and structures for crushing, screening and mechanical Germany (21%), England (16%), Japan (9%) and Czechoslovakia (8%). of 1959, it owned stakes in four steel companies: Usinas Siderúrgicas transportation (conveyor belts) to the railroad yard were completed, de Minas Gerais (Usiminas), Companhia Siderúrgica Nacional (CSN), as well as a drill bit reconditioning workshop. This set of upgrades Companhia Siderúrgica Paulista (Cosipa), and Companhia Ferro e enabled output of 1,000 metric tons of ore per hour.17 Aço de Vitória (Cofavi).15 On the Vitória-Minas Railroad (EFVM), operating productivity CVRD was the third biggest shareholder in Usiminas, a company was improved by completing a tunnel, 21 metal bridges, more than CHART 1 established in 1956, owned 60% by Brazilian capital and 40% by 10,000 meters of realignments, and sections of culverts. However, CVRD’S SHARE OF BRAZIL’S TOTAL IRON ORE EXPORTS (METRIC TONS) Japanese entities. CVRD was responsible for “supplying fine ore from some serious problems remained. As the track bed lay on sand, Itabira at a reduced price; providing transportation between Itabira accidents were constant, especially during the rainy season. and Acesita; granting maximum discounts possible [on the Vitória- Although the ballasting of a 200-kilometer section had been started CVRD/BRAZIL YEAR CVRD’S EXPORTS BRAZIL’S EXPORTS Minas Railroad] to transport coal and materials; and contributing in 1950, there was still a lot to do in 1952. The company’s report (%) to the transportation of construction materials and equipment for for the latter year states that, due to “unusually heavy rain [...], 16 1951 1,294,361 1,320,007 98.1 the plant.” Construction work on Usiminas’ steel mill, situated in the sections of track still being upgraded suffered considerably, Ipatinga, Minas Gerais, began in August 1958. When completed, the favoring the occurrence of accidents.”18 1952 1,531,125 1,560,814 98.1 plant was expected to produce 500,000 metric tons of steel per year. Major construction work also took place in the port area. In 1950, the Atalaia Quay was completed, equipped with a conveyor 1953 1,406,245 1,526,494 92.1 belt from the silo to ships’ holds. In addition, the company built a 1954 1,587,185 1,678,445 94.6 warehouse capable of storing 90,000 metric tons of iron ore, enough 3.4 Modernization of the to load nine ships.19 1955 2,298,505 2,564,600 89.6 mine-railroad-port complex Once it had achieved its target of 1.5 million metric tons per year, CVRD’s management, enthused by the figures, decided to 1956 2,306,160 2,744,882 84.0 It is impossible to think about expanding exports without implement new projects and establish a new annual export target 1957 2,966,261 3,536,728 83.9 associating this with port modernization. The heavy investment of 3 million metric tons for 1957. Integrated mine-railroad-port undertaken by CVRD to enhance operating conditions throughout logistics were key to this project. 1958 2,247,550 2,823,195 79.6 its mine-railroad-port complex was fundamental to achieving its 1952 export target of 1.5 million metric tons. 1959 3,261,453 3,957,570 82.4 1960 4,269,613 5,160,266 82.7 15 - Idem, ib., p. 55. 17 - See the Board of Directors’ Report, 1950, pp. 5-7. Sources: Board of Directors’ Reports, 1951-1960 (for CVRD’s exports); Anuário Estatístico do Brasil (Statistical Yearbook of Brazil), 1953, p. 280; 1955, p. 295; 1958, p. 295; 1961, p. 225 (for Brazil’s exports). 16 - See Gomes, Francisco de Magalhães. História da siderurgia no Brasil. Belo Horizonte/São 18 - See the Board of Directors’ Report, 1950, p. 7. Paulo: Itatiaia/USP, 1983, p. 335. 19 - Idem, ib., p. 7.
Vale Our History Vale Our History In the mid-1950s, the Vitória-Minas Railroad had a series of problems capable of derailing any major export project. To rectify this situation, CVRD invested heavily in infrastructure
20 84 To mechanize extraction, processing and transportation of ore destruction of the region’s forests arising from intensive exploitation 85 from the mines of Conceição and Dois Córregos (at this point in by the logging and charcoal industries was a cause for concern. time, these processes were only mechanized at Cauê Mine), plans In 1954, CVRD decided to invest in planting forests to produce were made to install aerial cables to transport ore from the mines crossties. At the suggestion of the EFVM’s superintendent, Eliezer to the storage silo and train car loading area. In addition to loading Batista, the company started to buy land in Linhares, Espírito Santo stations located next to the mines, a facility designed to move ore to that by the mid-1960s would form what is now known as the Vale the loading silo would be constructed. Another extremely important Natural Reserve. Years later, Eliezer revealed that his idea had initiative involved transforming the mines of Conceição and Dois always been to preserve the region’s forests. Córregos – until then operated by contractors using manual, low- “To obtain approval from Vale do Rio Doce’s board, we needed to productivity methods – into operations run directly by CVRD, which say that the trees would be used to produce railroad crossties. I was once again sought to mechanize the work process. New mining and at Vale do Rio Doce for a long time, and not a single crosstie was transport equipment was installed at Cauê Mine, enabling higher taken from that forest.”21 output. There were also plans to build a small hydroelectric power This initiative22 may be considered CVRD’s first business activity plant, to be completed in 1958, as a solution to problems caused by outside the mining sector and a milestone in environmental a shortage of power in the area. preservation. Years later, in the 21st century, the forest would be To connect the mines to the sea, there was the EFVM. In the declared a Biosphere Reserve by Unesco. mid-1950s, it still had a series of problems capable of derailing At the port, due to the limited storage capacity at Atalaia, plans any major export project. To rectify this situation, CVRD invested were made to build a new silo to store 110,000 metric tons of ore. The heavily in infrastructure. The strategy entailed remodeling the railroad cars would be unloaded in a rotary car dumper installed on railroad up to the locality of Ana Matos (now called Mário Carvalho the slope to the west of Atalaia Hill. After being unloaded, the ore Station, in Timóteo, Minas Gerais), replacing the tracks with heavier would be taken by conveyor belt to an auxiliary silo, and then by ones ordered from CSN in 1955, and acquiring new ore cars (making another conveyor belt to the loading silo at Atalaia. a total of 650) and five diesel-electric locomotives. The target of 3 million metric tons established in 1953 was achieved in 1957, although not all the planned construction work Linhares: from railroad crossties to environmental preservation had been completed. In the same year, the federal government, as Work on the EFVM made it necessary for CVRD to acquire large part of President Kubitschek’s Target Program, set a new export numbers of wooden railroad crossties. However, the progressive target for the company, to be achieved by 1960-1961: 6 million metric tons per year.
20 - Information about the construction work to be undertaken at the mines, on the railroad and at the port was taken from Companhia Vale do Rio Doce, President’s Office, 21 - Conversas com Eliezer, Luis Cesar Faro, Carlos Pousa, Claudio Fernandez. Ed. Insight Subsídios para o comparecimento do presidente da CVRD à CPI do caso Hanna, pp. 8-11 (hereafter Engenharia de Comunicação, 2005. Subsídios caso Hanna). 22 - Regarding this subject, see Cury, Mário da Gama, op. cit., p. 50.
Vale Our History Vale Our History Previous photograph: the Vitória-Minas Railroad. Above: the EFVM’s diesel-electric locomotives arrive at the Port of Vitória in Espírito Santo.
Vale Our History Vale Our History 88 Aerial view of the Maracanã Stadium, 3.5 The Target Program and Document 18 director of the National Mineral Production Department (DNPM), metric tons, and the remaining 2 million would be produced by 89 built for the 1950 World Cup. On the Mário da Silva Pinto; the president of CVRD, Francisco de Sá Lessa; private mining companies in the Paraopeba Valley in Minas Gerais. opposite page, you can see a production line making Dauphine and Aero-Willys Juscelino Kubitschek de Oliveira (“JK”),23 born in Diamantina, the director of the National Economic Development Bank (BNDE), In the long term, it was estimated that it would be possible to cars in the 1960s. Minas Gerais, was elected president of Brazil with 36% of the valid Roberto Campos; and the secretary of the Development Council export between 25 and 30 million metric tons of iron per year by votes cast, enough to win, but not a resounding victory. Elected as and president of the BNDE, Lucas Lopes. around 1975. part of a coalition between the Brazilian Workers’ Party (PTB) and In July 1957, Lucas Lopes submitted a report to the Minister of In order for these targets to be achieved in the short and long the Social Democratic Party (PSD), he was not completely accepted Finance containing the results of studies conducted by the two term, certain assumptions were deemed essential: firstly, all types by the more conservative sections of society. His strategy to change working groups. The first study assessed the global iron market of ore extracted would be exported, including fines and siliceous ore this situation was to immediately establish a program of targets. and Brazil’s exportable reserves. The second set out suggestions (after being processed), together with compact ore; and secondly, This envisaged foreign investment, accelerated industrialization for expanding Brazilian ore exports. The report came to constitute due to the size of the undertaking, a combination of foreign capital and a shift in investments inland. There was also a plan to move the Document 18 of the Development Council.24 (loans or risk capital) and domestic capital (public and private) country’s capital from Rio de Janeiro to the central plateau region, Document 18’s appraisal of the global iron ore industry would be necessary. The government would be responsible for as indeed occurred, with the inauguration of Brasília in 1960. The highlighted the opportunities Brazil had to increase its share of promoting and coordinating efforts to this end. The association plan was to be implemented before the end of his term in office. the market, which in the late 1950s was confined to 1% of total with foreign capital could result in the establishment of a new Hence the slogan of his time in power: “Fifty years in five.” consumption. According to calculations by technicians from the company, and it was recommended that CVRD lead this initiative, Brazil had only recently experienced the trauma of Vargas’ United Nations, Brazil had 15% of the world’s iron reserves – 85 as far as its financial resources would allow it. suicide, and hoped to leave this dark period behind it. Brazil was billion metric tons – and 37% of this total was in Minas Gerais alone. Document 18 also referred to the need not only for growing shortly to win its first World Cup, João Gilberto was creating the In addition, studies conducted by the DNPM and the U.S. Geological exploitation of iron reserves for export, but also to expand first chords of bossa nova on his guitar, and in Rio de Janeiro, girls Survey demonstrated that Brazilian iron ore was compact and pure, production of steel and byproducts, and thereby raise the weighting were discovering the bikini, a new beach fashion that was said with high metal content, warranting higher prices on the market. of steel products as a share of total sales. to be destined for great success. Juscelino understood this and On the other hand, the sale of Brazilian iron ore faced a number of According to estimates contained in the report, an investment made his government a set of dreams, cultural investment and adverse factors, including the considerable distance between mines of nearly 7 billion cruzeiros (equivalent to around US$140 million) major construction projects. His strategy required immediate and ports, making land transport more expensive. Furthermore, would be required to raise Brazilian iron exports in the short term. investment, and so partnerships, especially international ones, the country was far from the main regions of consumption (the Plan number 1, concerning the expansion of CVRD’s output to 6 were indispensable. United States, Western Europe and Japan). Finally, the United million metric tons, was budgeted at 1.41 billion cruzeiros, to be The Target Program was implemented by the Development States had been investing heavily in the mining, transportation and spent mainly on replacing the EFVM’s tracks and locomotives Council, an entity created by JK especially for this purpose. The concentration of taconite on its own soil, reducing the American and purchasing special equipment. Plan number 2, relating to the council was divided into working groups that, in some cases, gave steel industry’s need for imports. Central do Brasil Railroad and the Port of Rio de Janeiro, included rise to executive groups. Target 26, related to iron ore exports, was Based on domestic and international factors, Document 18 acquiring 25 locomotives, expanding the wharf, undertaking examined in detail by two of these groups, in accordance with a considered it feasible to expand Brazil’s iron exports to 8 million dredging work, and purchasing loading and unloading equipment, resolution adopted by a high-level study commission led by Finance metric tons per year by 1960. CVRD would be able to sell 6 million at a cost of 730 million cruzeiros. Minister José Maria Alkmin. The commission members included the Document 18 also recommended revising mining legislation to create incentives to export iron ore on a large scale. It also 24 - Information related to Document 18 was taken from the summary section of the established conditions and limits for seeking funding and/or direct 23 - Concerning JK, see Cohen, Marleine. JK, o presidente bossa-nova. Rio de Janeiro: Editora document itself (pp. 1-13) and from Part II – “Resposta ao questionário apresentado” (pp. participation involving foreign capital. In short, the intention was to Globo, 2001. 1-8), hereafter referred to, respectively, as Document 18 (summary) and Document 18 (Part II).
Vale Our History Vale Our History Opposite page: President Juscelino Kubitschek at the Palace of Catete in Rio de Janeiro, addressing the people on the radio and defending his two years in power, in January 1958.
expand the means of attracting foreign capital, while safeguarding 3.6 Advances in iron ore processing national security interests, above all in terms of transportation and access. The document made its point explicitly: “The need for Alongside construction work on the mine-railroad-port external financial resources is indisputable, given the significant complex, CVRD was also concerned to diversity the types of iron amount of investment required for large-scale exports.” It added: ore it produced and to conduct research to make use of the fine and “It is necessary to have a policy that guarantees foreign capital ultrafine ore that was accumulating at its mines. 90 fair remuneration and satisfactory security in terms of reasonable Cauê Mine produced a compact hematite of excellent quality. 91 interest payments and reimbursement.”25 Its chemical and physical characteristics and its hardness – which In line with a suggestion contained in Document 18, President facilitated crushing it into lumps of iron between 6.35 mm and 50 Kubitschek created the Iron Ore Export Group (Grupo de Exportação mm across – were ideal for direct use in Siemens-Martin or open- de Minério de Ferro, or GEMF). Consisting largely of the same hearth blast furnaces.28 The crushing operation, however, created people serving on the Development Council’s study commission, the problem of waste ore – particles smaller than half an inch and coordinated by BNDE representative João Batista Pinheiro, the in size called fines and ultrafines. Due to their different particle GEMF’s core task was to implement the resolutions of Document 18. size characteristics from those of lump ore, fines and ultrafines Given its clearly liberal orientation, appealing strongly for could not be directly used in blast furnaces because they made the foreign capital, Document 18 provoked intense controversy in the charge (raw material inputs) impermeable, thereby blocking the press and the National Congress, which went as far as to describe it flow of rising gases. as “scandalous and intolerable.”26 Another contentious case would The accumulation of fines and ultrafines in Cauê was a emerge at the start of 1958 when, due to favorable prospects on consequence of the intensive exploitation of the mine. Over time, the international iron market and the new possibilities for foreign the harder ore – hematite – became scarcer, and a more brittle ore, capital provided by the development-oriented policy of the JK itabirite, was left.29 This fact, together with the growing obsolescence government, the Hanna Mining Company entered Brazil, acquiring of mine infrastructure, contributed to a declining quality of ore a 52% interest in the St. John d’El Rey Mining Company on the produced by CVRD, which led customers to complain in 1953.30 London Stock Exchange. The emergence of new lump ore producers on the international St. John had mined gold in Minas Gerais since 1830, mainly at its market and the ever greater accumulation of fines and ultrafines famous Morro Velho Mine, but what interested Hanna was the fact led the company to review its production and processing methods. that the English company also owned extensive iron ore deposits in In 1952, the Mines Department, with the assistance of English the Iron Quadrangle region, in the Paraopeba River Valley – a region technicians, conducted studies to make use of fines by means where improvements were planned in Document 18. of sintering, meaning the agglomeration “of an infinite number The project to enable 6 million metric tons per year to be of miniscule ore particles into adequately sized pieces with exported entailed dredging the Port of Vitória. Studies showed that, by conducting dredging to increase the depth of water, the port would be able to receive ships of up to 40,000 metric tons in 28 - See the Board of Directors’ Report, 1951, p. 9. capacity, up from the existing limit of 10,000 metric tons.27 29 - “Itabirite” rock was named by German geologist and mineralogist W. L. von Eschwege at the start of the 19th century. Based on his work in the Iron Quadrangle region, this indigenous term (“itabirito” meaning red-striped rock), which lent its name to the mountain peak framing the town of Itabirito, was incorporated into geological vocabulary. Itabirite is a flaky metamorphic rock made of grains of quartz and flakes of micaceous hematite. See Renger, Friedrich E. “O quadro geognóstico do Brasil de Wilhelm Ludwig von 25 - See Document 18 (Part II), p. 8. Eschwege: Breves comentários à sua visão da geologia no Brasil.” Revista Geonomos, UFMG, 26 - See Pereira, Osny Duarte, Ferro e independência: um desafio à dignidade nacional. Rio de no. 13, pp. 91-95, 2005. Janeiro: Civilização Brasileira, 1967, p. 130. 30 - See Rangel, Orlando, A Companhia Vale do Rio Doce e o mercado de minério de ferro. Talk 27 - Information about what the company needed to do to achieve the target of 6 million given at the Augusto Barbosa Metallurgical Studies Center, at the Ouro Preto Federal metric tons was taken from Subsídios caso Hanna, p. 12. Mining School, on June 11, 1966, unpublished academic paper, p. 18.
Vale Our History Vale Our History Above: in June 1959, the first ore shipment is loaded at the Paul Quay in Vitória, Espírito Santo. Opposite page: a locomotive full of goods arrives at the quay.
Vale Our History Vale Our History Opened in June 1959, the Paul Quay made it possible to start regular exports of fines, thanks to the quality characteristics compatible with their use in steelmaking processes.”31 This agglomeration was obtained through high- installation of mechanized loading equipment temperature thermal processing, in which powdered limestone, coke and silica was added to iron ore fines. This mixture, after being homogenized, was placed on a grid where, through the combustion of coke, it formed sinter. Alongside these studies, in 1956 the company made two shipments of raw fines on a trial basis. The exportation of fines was one of the main reasons why CVRD, through an agreement with the state government of Espírito Santo, built a new wharf at the Port of Vitória, called the Paul Quay. Opened in June 1959, the Paul Quay and its mechanized loading equipment made it possible to start regular exports not only of fines, but also of a new type of ore, called the “Techno-Economic Study of Brazil’s Itabirite Iron Ore Deposits,” CVRD knew how to position itself on the international market, run-of-mine (meaning raw, unprocessed mined material as it leaves presented to the Development Council, “were so encouraging that which was buoyant as a result of demand caused by the Korean the company immediately planned to produce 4 million metric tons War. Over the course of the 1950s, the company not only paid back 94 the mine). In a short time, there was a growing trend for exports 95 of fines to rise at the expense of lump ore,32 whose production was per year of itabirite concentrates, raising CVRD’s third production its debts, but also undertook new investments. Juracy Magalhães 35 becoming increasingly expensive. target from 6 million to 10 million metric tons per year.” One can say that the company’s financial recovery was triggered 39 The company’s technicians also conducted research to make use The research into the use of itabirite was the starting point for by the pricing policy implemented in 1952 by Juracy Magalhães. Juracy Magalhães (Fortaleza, Ceará, 1905 – Salvador, of ultrafines. Unsuitable for sintering, ultrafines required another the establishment, in April 1960, of the Vatu Steel Company, CVRD’s Informed that there was a substantial difference between the 1 Bahia, 2001) was one of the leading organizers of the kind of processing, called pelletizing. This process, as mentioned first subsidiary. (“Vatu” was the indigenous name for the Doce prices paid to CVRD (US$8 per metric ton on an FOB basis) and Revolution of 1930 in northeast Brazil. Following the previously, was being developed in the United States. Pelletizing River.) With paid-up capital of 600 million cruzeiros, Vatu had the those charged by traders selling Brazilian ore in the USA (US$14), victory of the revolutionary movement, he entered politics. consisted of using a thermal process to agglomerate ultrafine iron purpose of processing ores, as well as manufacturing and selling Juracy proposed raising the price charged per metric ton to US$14. 36 He served as governor of the state of Bahia from 1931 to ore powder into balls or pellets, of an appropriate diameter (between sponge iron. This initiative went against the interests of the American groups that brokered sale and purchase operations. Counting on the 1937, when he opposed the coup that established the New 8 mm and 18 mm) and with suitable quality characteristics to enable them to be fed directly into blast furnaces.33 support of Eximbank, CVRD’s main creditor, they put pressure on State regime, and then resumed his military career. With Given the good results obtained by the Americans with pelletizing the Brazilian government to intervene in the company, forcing it the return of democracy to the country in December 1945, taconite, CVRD decided to undertake studies using itabirite. A flaky 3.7 Financial recovery and a radical to review its prices. he was elected a deputy representing Bahia at the National metamorphic rock with iron content varying between 30% and 55%, change in sales policy Despite this pressure, Juracy maintained his position. It was a Constituent Assembly, for the National Democratic Union itabirite was starting to become the predominant ore (its reserves decisive moment for the company. After three months in which not a single purchaser appeared, CVRD finally signed a contract (União Democrática Nacional, or UDN) party. In February were estimated at 27 billion metric tons) as the exploitation of the Shortly after becoming president of CVRD in 1951, at the based on US$14 per metric ton with American company Republic 1951, at the personal invitation of the president of Brazil, compact hematite reserves of Cauê advanced. In December 1956, the invitation of President Getúlio Vargas, Juracy Magalhães gave a Steel. The sale of 300,000 metric tons of iron at this price earned Getúlio Vargas, he took over as president of Companhia Fund for Studies and Research to Make Use of the Itabirite of Minas scathing report on the state the company found itself in. He simply the company US$4.2 million, making it possible to make its loan Gerais was established, sponsored by CVRD and the Development quoted the figures: “We owe 26 million dollars to Eximbank, 300 Vale do Rio Doce, where he remained until December repayments and invest in projects required for its growth. Council, an entity reporting directly to the President of the Republic. million cruzeiros to Banco do Brasil, 100 million cruzeiros to Caixa 1952. During this period, he implemented new human Also in 1952, CVRD made a deal with Banco do Brasil to pay CVRD and the Development Council each contributed US$50,000 Econômica and another 30 million cruzeiros to the Company resource management methods and became known for off a loan taken out in the mid-1940s, by making 102 monthly to this fund. With regard to the research activities, they involved Employee Association. We are behind on our insurance payments, installments of 4 million cruzeiros. In 1956, the company paid back demanding strict punctuality among employees, whether both CVRD and the Armour Research Foundation of the Illinois and our suppliers have not been paid for a long time.”37 34 Eximbank’s US$14-million loan 13 years early. Another loan, this in terms of working hours or the completion of studies and Institute of Technology (Chicago, USA). This initiative by CVRD was The situation was serious. When they left the company in 1949, one for US$900,000, soon after raised to US$1.5 million, granted by construction work according to schedule. His railroad plans supported by the federal government, which decided to pay for 50% American directors Robert K. West and Howard Williams defined its Eximbank to fund the purchase of diesel locomotives, was paid off were also key to the expansion and efficiency of the EFVM. of the cost of these studies. In March 1958, the preliminary results of situation as “pre-bankruptcy.”38 Despite the unfavorable numbers, six months before the deadline.40 Later, Juracy Magalhães served as Brazil’s ambassador to the United States from 1964 to 1965. Following this, he 31 - See Revista CVRD, no. 16, June 1984. The sintering process, developed at the end of the 35 - See Kury, Mário da Gama, op. cit., p. 53. was Brazil’s Minister of Justice (1965-1966) and Minister of 19th century, only began to be widely used after the Second World War. In 1958, the Soviet 36 - See Rangel, Orlando, op. cit., pp. 16-17. The shareholder composition of Vatu was as Union produced around 50 million metric tons of sinter, and the United States, 35 million follows: CVRD – 92.97%; CVRD employees – 6%; CSN – 0.33%; and others – 0.03%. Foreign Affairs (1966-1967). metric tons. 37 - See Magalhães, Juracy, Minhas memórias provisórias. Rio de Janeiro: Civilização Brasileira, 32 - See Kury, Mário da Gama, op. cit., pp. 51, 55. 1981, p. 131. 33 - See Revista CVRD, no. 16, June 1984, n.p. 38 - Reading the report, which was delivered personally by President Getúlio Vargas, 1 - See “Magalhães, Juraci,” DHBB, vol. 3, pp. 3, 450-3, 451 and Faro, Luiz Cesar, 34 - See the National Archives, Fundo Conselho do Desenvolvimento, CD-0/104/57 Juracy Magalhães considered it by definition to be biased, since the diagnosis it contained 39 - Information about CVRD’s new pricing policy was taken from Juracy Magalhães, op. Pousa, Carlos and Fernandez, Claudio. Conversas com Eliezer. Rio de Janeiro: Ed. (correspondence from the secretary general of the Development Council, Lucas Lopes, to was committed to the Americans’ interests. See Abranches, Sérgio and Dain, Sulamis, op. cit., pp. 131-132. Insight Engenharia da Comunicação (targeted distribution), 2005. the president of CVRD, Francisco de Sá Lessa). cit., p. 63. 40 - See Abranches, Sérgio and Dain, Sulamis, op. cit., pp. 57-79.
Vale Our History Vale Our History Previous photograph: the president of CVRD, Juracy Magalhães (wearing a dark suit).
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To the right: the Vitória- Minas Railroad. Next page: ore being shipped out at the Paul Quay in Vitória, Espírito Santo, in September 1959.
Vale Our History Vale Our History Opposite page (top): the ore quay at the Port of Vitória in Espírito Santo. Opposite page (bottom): the president of CVRD, Francisco de Sá Lessa (wearing glasses), at a meeting.
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CVRD’s financial recovery expanded its scope for negotiation. lower the prices paid, frequently not come to fruition when the The loans from Eximbank – for US$4 million and US$12.5 million time came to sign the contracts. This harmed CVRD’s prestige, and to finance the company’s expansion programs in 1953 and 1957 – once customers knew that various traders were selling its ore, they were revised on new terms.41 It was agreed that the debts would be would withdraw, waiting for a substantial reduction in price. amortized based on a commitment of 15% of the value of exports.42 Concerned with this situation, as of 1954 CVRD started to establish There were other signs of improvement in CVRD’s financial direct contact with the steel companies that consumed its ore. The situation. In 1951, it paid the first ever dividend in its history, company’s agents were exclusive, eliminating intermediation by Francisco de Sá Lessa providing a 6% yield – although restricted to the company’s numerous competing traders. The following agents were selected preferred shares. Two years later, the first bonus was paid to all to handle the company’s sales: British & European Sales Ltd., based Francisco de Sá Lessa (Diamantina, Minas Gerais, 1887 employees. In 1954, the company paid a dividend to holders of its in London, covering Canada, Great Britain and Belgium; Société – Rio de Janeiro, 1977)1 was 65 years old when appointed common shares as well. CVRD was gaining more credibility and Anonyme d’Importation (SADI), based in Lausanne, Switzerland, president of Vale, and he was the longest-serving president strength on the market. covering continental Europe (except Belgium); and Cleveland Cliffs The following year, in accordance with a statutory determination Iron Company, based in Cleveland, covering the United States. Sales in the company’s early years, holding the position from obliging CVRD to allocate part of its profits to promote the economic to Japan and South America continued to be handled directly by December 1952 to March 1961. Sá Lessa was a qualified development of the area where it operated (70% in Minas Gerais and CVRD from its Rio de Janeiro office. In the case of Japan, due to civil engineer with a postgraduate diploma in Industrial 30% in Espírito Santo), the company began to transfer resources to demands from purchasers, deals were brokered by the country’s Chemistry from the Polytechnic School of Rio de Janeiro, 44 the Fund for the Improvement and Development of the Doce River trading companies. and his background closely reflected his management Zone (FMDZRD).43 Another major improvement introduced by the new commercial profile. During his time running CVRD, Brazil had three Among the factors behind CVRD’s transformation, one in policy was better discipline in the use of the ore quay. The former different presidents, and the company overcame a number particular was fundamental, as it provided the commercial traders did not concern themselves with aligning sales with transparency indispensable for operations on the international operating conditions at the port. As a result, it was common for of crises. CVRD began to modernize its ports, it invested market: a radical change in its sales policy. too many ships to arrive at the same time, while at other times the in iron ore processing, it won new markets (especially in Until then, the company’s sales were made from its Rio de quay would be completely idle. This lack of planning led to constant Germany and Eastern Europe) and, in a bold move for the Janeiro office by a large number of importers and traders, some complaints from customers, and supply delays meant that the time, it opened its first offices abroad. When he stood 45 of doubtful reputation, confusing consumers by quoting different company often had to pay fines. down as president, the company had a strong name on prices. Many of the offers made were merely negotiating tricks to the international market. Between November 1955 and March 1956, while working 41 - In fact, the loan that the company requested from Eximbank in 1957 totaled US$24 as president of CVRD, Sá Lessa also served as interim mayor million. Only US$12.5 million was released in 1959. 44 - See Kury, Mário da Gama, op. cit., p. 48. It is worth noting that cutting out these of the Federal District of Rio de Janeiro, by appointment of 42 - See Abranches, Sérgio and Dain, Sulamis, op. cit., p. 59. intermediaries in the United States and Europe “also meant granting control of sales of its 43 - See Kury, Mário da Gama, op. cit., p. 43 and CVRD, Serviço de Relações Públicas, [CVRD’s] ore to just three companies, which monopolized its sales in the respective areas.” the President of the Republic, Nereu Ramos. Companhia Vale do Rio Doce 1942-1967, n.p. Between 1955 and 1965, the company invested See Fernandes, Francisco do Rego (org.), op. cit., p. 29. more than 1.2 billion cruzeiros in the fund. 45 - See Kury, Mário da Gama, op. cit., pp. 48-49. 1 - See “Lessa, Sá,” DHBB, vol. 3, p. 3,102, and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s history), Exame maga- zine, April 5, 2011. Vale Our History Vale Our History How green is my valley
In the 1950s, when CVRD began to purchase areas of Atlantic Forest in Espírito Santo, its intention was to harness them to make railroad crossties for the EFVM.1 Later, the company realized that it was possible to buy timber from other sources and for a lower cost. It was a kind of “green light.” The passing of time – and the growing ecological awareness that came with it – resulted in the original timber-production plan being transformed into one of the most successful preservation and sustainability initiatives in the world. Vale’s crossties now come from elsewhere – and the reserve in Linhares, now called the Vale Natural Reserve, shows that the company’s environmental policy is on the right track. Covering approximately 22,000 hectares, the Vale Natural Reserve is one of the largest remaining expanses of tabuleiro (coastal lowland) forest, one of the most endangered habitat formations in Brazil’s Atlantic Forest. In 2008, UNESCO declared the site to be an “advanced” area of the Atlantic Forest Biosphere, given its importance to flora and fauna conservation. The reserve is now an immense botanical garden, emphasizing research and the discovery of new animal and plant species, and producing more than 3 million saplings a year. As of 2011, scientists working at the reserve had cataloged over 3,000 plant species, 1,460 types of insects, 179 spider species, 26 fish species, 66 species of amphibians, 69 reptile species, and 105 species of mammals. The reserve is also home to 380 bird species, corresponding to approximately 20% of the total found in Brazil.2 The reserve in Linhares is framed by the Doce River (which gave its name to the company), whose mouth is located in Below, left: the tree 100 Regência, a few kilometers from the edge of the forest. nursery at the Vale 101 Besides functioning as a center of excellence for nature preservation and research, the Vale Natural Reserve is Natural Reserve in Espírito Santo, in 1989. also an attraction for visits and recreation. The reserve, which can be crossed on unpaved roads, has a training center, Below, right: a bird of an auditorium and even a comfortable hotel with 51 suites. There are also seven trails, which visitors can hike along, the Euphonia violacea species at the Vale led by a specialist guide. Visitors to the reserve can see a tall, white-barked, fruit-bearing tree. Of the genus Simira, Natural Reserve, in 1991. known in the region as “maiate,” the tree was discovered in the reserve and named Simira eliezeriana in honor of former CVRD president Eliezer Batista.3 This is just one of the Vale Natural Reserve’s many unique features.
1 - To find out more about the subject, see Vale Natural Reserve (available at:
Aerial view of the Vale Natural Reserve in Linhares, Espírito Santo.
Vale Our History Vale Our History