1910
CHAPTER 1 Mining in the First Republic
1.1 All that glitters is not gold nationalist movements. The workers of Itabira created their own 0217 dialect, guinlagem de camaco (or “monkey language”),2 to avoid being At the end of the 19th century – when prospectors had already understood by their foreign bosses. As time went by, the Itabira Iron given up their search for gold in Minas Gerais and abandoned the Ore Co., which grew up around the Vitória-Minas Railroad, acquired villages in the hills to look for work on the coast – the town of Itabira the profile of the men who ran it. Percival Farquhar – who is said to was little more than Cauê Peak. Cauê was one of those places that have kept the first dollar he earned mounted in a frame next to his nature seems to have sculpted by hand: a mountain that rose up bed, beside a photograph of his parents – was one of them. suddenly from the surrounding plains, forming a unique feature. It Farquhar was a legendary figure, someone whose life seems like is said that during full moons, the mountain used to shine as if lit something from a work of fiction. Some consider him a capitalist up by floodlights hung from the sky. However, as we know, all that genius; others, an opportunist. Born in the city of York, Pennsylvania, glitters is not gold. in the United States, he came to Brazil after working on railroad The word Itabira is of Tupi origin, meaning rock (“ita”) that construction ventures in Latin America (including the unsuccessful shines (“bira”).1 Contrary to the assumptions of the adventurers Madeira-Mamoré adventure in what is now the Brazilian state of who arrived to dig at the foot of Cauê Peak (the shining rock Acre), and he acquired the Itabira Iron Ore Co. in 1919. The paths itself) in search of gold, what made the mountain shine was its taken by the company – especially those that, using the railroad, enormous quantity of iron. It was a reddish iron that spread out its would transport ore to the sea and to fortune – were always color across the landscape, the layers of clay and the rivers in the intimately connected with Farquhar’s trajectory and personality. surrounding area. The color would enter family homes and remain The businessman was the main actor in violent political battles there, ingrained. At the turn of the 20th century, Cauê Peak was and, for better or worse, he was the target of nationalist campaigns mapped as the biggest iron deposit in the world. The news spread concerning the right to extract ore in Brazil. across the planet. The gold prospectors had left Itabira, but now The history of Companhia Vale do Rio Doce (CVRD), established foreign miners started to appear. in 1942 from Farquhar’s Itabira Iron Ore Co., began slightly earlier, The Itabira Iron Ore Company was the first company authorized and is intertwined with the history of mining in Brazil. It is a to prospect for iron in the region. It was the successor to the history of dreams, adventure, politics, wealth, wars, laws and men. Brazilian Hematite Syndicate and, over the course of its existence, A history that, as will become evident, was born in the shiny rocks it witnessed various political upheavals, rises and falls in the of Cauê Peak. international economy, changes in legislation and, above all,
1 - The name Itabira has two different interpretations. According to linguist Theodoro Sampaio, it means rock that rises. However, in the book Voyages dans le provinces de Rio de Janeiro et de Minas Gerais (Paris: Gibret et Darez, 1830, vol. 1, p. 270), by Auguste de Saint-Hilaire, the name Itabira is said to come from the indigenous words “yta” and “bera,” meaning rock that shines. According to Saint-Hilaire, “Therefore, Itabira does not mean higher, sharp rock, as has been suggested.” See Sampaio, Theodoro. O Tupi na geographia nacional. Instituto Historico e Geographico de S. Paulo. São Paulo: Typ. da Casa 2 - The words of “guinlagem de camaco” are made by swapping the first consonant or Eclectica, 1901. Available at:
Vale Our70 anos History Vale Our History 18 19
Vale Our History Vale Our History Previous page: a panoramic view of the The discovery of new processes for transforming iron town center of Itabira, into steel had immediate consequences. Steel, an alloy of Minas Gerais, in 1899. iron and carbon, and more malleable than cast iron, was essential to the production of machines for new factories and girders for construction
1.2 Mining codes and codes of honor system, the mine owner was the owner of the land on which it was located. This change, expressed in article 72, paragraph 17 of the 20 Understanding the history of mineral exploration in Brazil, more Constitutional Charter, sought to stimulate the free exploitation of 21 than anything else, means understanding the changes in legislation minerals by landowners.5 regulating the sector. Although mining activity has been a part of The minerals people were looking for were no longer gold and the country’s history from the beginning, exclusive laws in the precious stones. Throughout Brazil – and especially in the state of area are relatively recent. Changes started to have real influence Minas Gerais – there were clear signs that the so-called “age of gold” on society at the end of the 19th century, with the proclamation had reached its end. Production of the metal, which in the mid-18th of the Republic. It was the first republican Constitution, enacted century reached 300 metric tons per year, had fallen to a third of this on February 24, 1891, that profoundly altered the subsoil property level less than 100 years afterwards. The number of people living regime. Until then, Brazil had lived under laws largely created soon around the former gold mines was waning.6 However, there were still after the Portuguese royal family arrived in the country. immense resources to be found beneath the ground. The technical and At the start of the colonial period, in 1521, the Ordinances of scientific progress that marked the end of the 19th century, ushering Manuel were enacted, giving the Portuguese Court possession of in what some historians have called the Second Industrial Revolution,7 “seams of gold or any other metal,” and guaranteeing the discoverer opened up new prospects for extracting and using various minerals.8 the right to mine upon payment of one-fifth (the so-called “quinto”) The discovery of new processes for transforming iron into steel of the metals extracted, “after deducting all costs.” As of 1603, the had immediate consequences. Steel, an alloy of iron and carbon, and Ordinances of Manuel were replaced with the Ordinances of Philip, more malleable than cast iron, was essential to the production of which also granted the king ownership of mineral wealth (Book II, machines for new factories and girders for construction. Iron deposits Chapter XXVI, Section 16).3 hitherto abandoned as uneconomic started to be exploited in Europe Soon after independence (but before the Constitution of 1824), and the United States, and steel production grew at an extraordinary the imperial government enacted a law, on October 20, 1823, pace. Used to make railroad tracks, the structures of large buildings, validating “all Portuguese legislation prior to April 21, 1821, including in tunnels and bridges, and in machinery of all kinds, steel – the main the provisions of Book II, Chapter 26, Section 16, Chapter 28 and product made from iron – became a basic industrial raw material.9 Chapter 34, Section 10 of the Ordinances of Philip, which stipulated, among other things, that the king owned all underground mineral 5 - Concerning this subject, see Vivacqua, Attílio, A nova política do sub-solo e o regime legal resources. Accordingly, the imperial period retained the property das minas. system adopted in colonial times, through the Ordinances and the 6 - To consult the censuses, see the IBGE’s library at:
Vale Our History Vale Our History Interest in the country’s mineral reserves was further shaped by the creation, in 1907, of the Geological and Mineralogical Service of Brazil (SGMB), which was replaced in 1934 by the National Mineral Production Department (DNPM)
In turn, technical advances in steelmaking stimulated the Campos and Antônio Olynto dos Santos Pires, all former students mining of coal to make coke, widely used to reduce iron ores in blast of the Mining School.12 furnaces. Improvements to processes and techniques for extracting The results of the commission’s work – which put into concrete coal enabled deeper seams to be mined and higher output. Other numbers what had until then been mere speculation – changed minerals, such as copper, lead, zinc, bauxite and manganese, gained the way mineral policy was established in the country. Gonzaga de many new uses and their production expanded.10 Campos, for example, estimated that there were around 3 billion 22 In various Brazilian states, important advances were made metric tons of iron ore reserves in the state of Minas Gerais. In terms 23 in the field of geological prospecting and surveying, enabling a of coal, earlier assessments about the feasibility of harnessing significant increase in the number of mineral discoveries. It was in them were confirmed, and this encouraged the establishment of this new context – in which scientific research became ever more companies interested in exploiting carbon deposits in the south linked to economic progress – that the Ouro Preto Mining School of Brazil. was established.11 Interest in the country’s mineral reserves was further shaped Founded in 1876, the School directly influenced the formulation by the creation, by means of Decree 6,323 of January 1907, of the of Brazil’s mining policy at the start of the republican period. The Geological and Mineralogical Service of Brazil (SGMB), which was School produced the first generations of Brazilian geologists, blast replaced in 1934 by the National Mineral Production Department furnace designers and steelmaking industrialists. It was the right (DNPM). The SGMB, whose first director was Orville Derby, became the moment. Brazil needed research and information in this area, and main instrument for geological and mineral studies in the country.13 this was provided by the School’s professors and alumni. They Right from the start, the focus of the SGMB’s research was iron. also provided assistance to small iron prospectors and mining In its first year, the SGMB was tasked with conducting prospecting companies interested in introducing technological changes to and economic studies concentrating on iron ore in the municipalities boost productivity. of Conselheiro Lafaiete, Mariana, Itabira and Sabará in Minas Gerais. Initially, the Mining School’s attentions focused on coal. Under These studies resulted in two maps showing the distribution of iron the direction of geologist Luiz Felipe Gonzaga de Campos, the and manganese deposits in the Iron Quadrangle region. Above all, the potential of the Santa Catarina carbon basin was evaluated, starting study revealed the existence of immense iron reserves of exceptional in 1892. In 1906, the Minister of Transport and Public Works, Miguel quality in Itabira. This small town in Minas Gerais was now on the Calmon, established the Geological Commission of Brazil. The geological and economic map of Brazil. idea was to continue research already initiated and, in particular, conduct studies on untapped minerals. Led by Orville Derby, this commission divided the country into three districts: the south region, with its notable carbon reserves; the central region, known since the 18th century for gold exploration; and the north region, whose potential was practically unknown. The three regions were placed under the leadership, respectively, of geologists Francisco de Paula Oliveira, Gonzaga de
10 - Idem, ib., p. 677. See also Vazquez de Prada, Valentin. História econômica mundial. Porto: 12 - See Chiarizia, Martha M. de Azevedo. Itabira Iron Ore Company Limited. Master’s thesis in Livraria Civilização Editora, 1977/1978, vol. 2, pp. 211-214. History, Niterói, UFF, 1979, p. 4; and Soares e Silva, Edmundo de Macedo. O ferro na história e The map shown above, drawn in India ink, a gift from 11 - See Guimarães, José Epitácio Passos, op. cit., pp. 102-103, who presents a list of the na economia do Brasil. Rio de Janeiro: Biblioteca do Sesquicentenário, no. 9, 1972, p. 49. engineer João Victor Magalhães Gomes to the Emperor of mineral deposits existing in various regions of Brazil, produced by Itagyba Barçante, author 13 - For more information, see the Federal Senate, O governo presidencial do Brasil 1889-1930: Brazil, Pedro II, given in 1881, reveals an itinerary featuring of Economia rural brasileira. Rio de Janeiro: Imprensa Nacional, 1946. See also Carvalho, José Guia administrativo do Poder Executivo no período da República Velha, p. 50. For comparison gold and topaz mines, mineral deposits, and iron factories Murilo de. A Escola de Minas de Ouro Preto: o peso da glória. Rio de Janeiro: Finep/Cia. Editora purposes, the United States Geological Service was established In 1879, and the British located around Ouro Preto in Minas Gerais. Nacional, 1978. Geological Service (BGS) was founded in 1835.
Vale Our History Vale Our History Ouro Preto Mining School
“In a very small area of land, one can see an almost complete range of the metamorphic rocks that cover a large area of Brazil, Facing page: scientists and all of the city’s surroundings are used for fruitful, interesting mineral excursions.” working at the Mineralogy and Geology Laboratory (Claude Henri Gorceix, founder of the Ouro Preto Mining School, 1874) of the Ouro Preto Mining Anyone who strolls around the hilly streets of Ouro Preto will sooner or later come across a plaque on the door School in Minas Gerais, in 1925. Below: details of of one of the city’s fine old buildings, giving the name of a student fraternity house. Dotted all over the city, they are the front and side of the occupied by students from across the country, the most visible sign of the 135-year history of the Ouro Preto Mining institution’s building. School (known by Portuguese acronym EMOP).1 The School’s history is intertwined with the history of mining in Brazil. In addition to its beautiful main building in the center of the city, EMOP has a pioneering record in geological mapping, famous professors, and a vocation for scientific research. Every year, a new intake of students arrives, keen to obtain an excellent education and to enjoy the fraternity houses’ lively parties. EMOP has been – and continues to be – a leading school in the study of mining in Brazil. The School currently turns out 72 newly qualified geologists and mining engineers each year, many more than in the past. The Ouro Preto Mining School was opened in 1876, but in its first year, it did not attract a single applicant. Afterwards, things improved… a little: in the second year, seven people applied, and four were accepted. The School is the fruit of the personal efforts of Emperor Pedro II, who had plans to study better the mineral wealth of Brazil. He invited Augusto Dabreé, his fellow member of the Science Academy of Paris and director of the Mining School of Paris, to lead a project to build an institution to study Brazilian geology. His invitation – sent in a letter in 1872 – said: 24 “[...] not only will the country benefit from greater use of its mines, but the natural sciences in general will be very 25 much strengthened.” Dabreé was unable to leave France, but he recommended his compatriot Claude Henri Gorceix for the mission. Four years later, Gorceix founded not only the School, but also a new way of looking at the country’s mineral resources. After EMOP, Brazil’s underground resources would never be the same. Within 30 years or so, the engineers graduating from the School began to dictate the course of the country’s mining policy. The laboratories swarmed with activity, students went into the field to look for new deposits, and the mining sector replaced pure chance with strategic study. At the 1910 Geological Congress of Stockholm, which showed the world the potential of Brazil’s minerals, geological mapping was demonstrated by the first professionals to have graduated from EMOP. Thousands of people have studied at the School since then. Former president Getúlio Vargas, for example, spent a short time studying there. Even today, Vale recruits a significant share of its employees from among EMOP alumni. It’s always been that way. In fact, EMOP – part of the Federal University of Ouro Preto since 1969 – educated the first two presidents of Vale: Israel Pinheiro and Dermeval Pimenta.2
1 - See more information at:
Vale Our History Vale Our History From left to right: details of the São João de Ipanema Iron Factory (depicted by Jean-Baptiste Debret in 1827, and an unknown photographer, respectively). A furnace at the Esperança Factory. An advertisement by coal importer Francisco Leal taken from the Almanak Laemmert of 1913.
26 1.3 Setbacks in iron production Some of the iron was used to make horseshoes, hoes, sickles The federal government’s desire to encourage domestic iron 27 and axes, and some was sold in bars to neighboring municipalities. and steel production was expressed for the first time in a message however, there was no reliable information on the potential of Although many studies and surveys revealed or confirmed There were also many foundries spread across various parts of the sent by President Nilo Peçanha in 1909 to the National Congress: these deposits.21 the existence of large iron ore deposits in Brazil, it took some country. A common feature of the overwhelming majority of these “Nothing could better meet this need than iron. Nationalizing the As a result of the congress, then, large companies from England, time before there were any significant advances in exploiting establishments was the use of imported raw materials.17 The only production of this metal is also a necessary condition for the growth the United States, Germany, Belgium and France, in particular, them. Various factors explain the limited development of iron two operations to produce pig iron on an industrial scale before and consolidation of the military, no less than for the expansion of obtained official knowledge of Brazil’s reserves, calculated at ore extraction and the late establishment of steelmaking on an the 1920s were the Esperança Plant and the Companhia Siderúrgica civil industry.”19 10 billion metric tons, and this triggered a race to harness the industrial scale in the country. Mineira, established in 1888 and 1917, respectively.18 Shortly afterwards, Decree 8,019 of May 19, 1910 granted favors country’s iron ore. Taking advantage of gaps in the first republican Known reserves of iron ore – located mainly in the state of Minas In the 1910s, certain factors began to favor the development and privileges to companies or individuals, Brazilian or foreign, Constitution, these powerful companies, known as “syndicates,” Gerais and, to a less extent, in Mato Grosso – were a great distance not of steelmaking. Studies and research conducted by students and that proposed to build steelworks in Brazil. These favors included acquired all of the identified deposits, awaiting the time they judged only from the coal reserves of Rio Grande do Sul and Santa Catarina, professors at the Mining School confirmed that the country had the right to construct, equip and operate quays, bridges and docks, most convenient to exploit them. The landowners in these areas, but also from the potential iron and steel consuming markets of Rio large reserves of high-quality iron ore. In turn, an increase in and permission to connect mineral deposits and plants to railroads not knowing the value of what lay beneath the ground, sold their de Janeiro, São Paulo and the northeast of the country. The high cost the pace of railroad and port construction, the growth of urban and ports through branch lines. The government also granted land for much less than its true worth.22 of railroad transportation and the low quality of Brazilian coal for infrastructure in the major Brazilian cities, and rising agricultural exemption from taxes and reduced ore loading and unloading One of these companies was the Itabira Iron Ore Company, the coking purposes (the transformation of coal into coke, an essential production (which needed tools and machines) led to growing charges at federal ports.20 subject of a long legal and ideological dispute stretching from the fuel used in steel blast furnaces) were other major difficulties. imports of iron, steel and metal artifacts. Another notable occurrence during this period was the 11th 1910s to the 1930s. Besides these problems, there were others related to the limited size The First World War (1914-1918) also had a major influence on International Geological Congress of September 1910, held in of the domestic market, a shortage of capital, and the lack of an the Brazilian steel industry. The conflict hindered iron and steel Stockholm. This event was convened by the major European and appropriate tariff policy. Iron imported from Europe, for example, imports, generating shortages of products. This exposed the fragility North American steel companies, with the purpose of making a enjoyed a special tariff, a privilege it had held since the 1810s.14 and dependence of Brazil’s economy and demonstrated the need to detailed assessment of global iron reserves. Delegations from many For all of these reasons, until the start of the 1920s, steelmaking harness the country’s abundant mineral resources. countries attended the event, including Brazil, represented by in Brazil was practically limited to the smelting of iron in small Orville Derby. furnaces fed by charcoal, generally located close to iron ore deposits Derby went to the congress with the intention of showing Brazil’s and forests where timber was harvested to make charcoal.15 These 17 - For more information, see Suzigan, Wilson, op. cit., pp. 232-245. mining potential to the rest of the world. He presented a report facilities were mainly located in Minas Gerais, in the municipalities 18 - The Esperança Plant was established in 1888 through an initiative led by Swiss by the Geological and Mineralogical Service of Brazil, produced metallurgist Alberto Gerspacher and Brazilians Amaro da Silveira and Carlos da Costa by Gonzaga de Campos, that identified Brazilian mineral deposits, of Ouro Preto, Mariana, Santa Bárbara, Itabira, Conceição and Minas Wigg, near the town of Itabirito, Minas Gerais. The plant’s charcoal-fed blast furnace Nova.16 And nearly everything produced there was destined for began operating in 1891, and could produce between four and five metric tons of pig evaluated them for their potential, and gave their exact position “domestic use.” iron per day. Owned by the Companhia Forjas e Estaleiros between 1892 and 1897, on a map of Minas Gerais. The report also reported the existence and the Leandro Queiroz company between 1897 and 1899, the Esperança Plant was of iron ore in the states of Bahia, Goiás, São Paulo, Paraná, Santa acquired in 1899 by engineer J. J. Queiroz Júnior. In 1916, following the death of its owner, the plant was renamed the Queiroz Júnior Plant. See Suzigan, Wilson, op. cit., chapter Catarina, Rio Grande do Sul and Mato Grosso. For these states, 14 - See Paiva, Glycon de. O Serviço Geológico e Mineralógico do Brasil (1907-1933) como antecessor 4, and Chiarizia, Martha M. de Azevedo, op. cit., chapter 1. The Companhia Siderúrgica do DNPM (a speech given at a dinner hosted by the SEMOP to celebrate the DNPM’s 50th Mineira was established in 1917 in Sabará, by Amaro Lanari, Cristiano Guimarães and anniversary), unpublished academic paper, n.p. Gil Guatimosin, former students of the Ouro Preto Mining School. The company began production in 1920, turning out 10 metric tons of pig iron per day. Iron ore was extracted 19 - Bandeira, Luiz Alberto Moniz. A ideia de nação no Brasil. In: Bresser-Pereira, Luiz Carlos 15 - See Suzigan, Wilson. Indústria brasileira: origem e desenvolvimento. São Paulo: Brasiliense, from the Andrade deposit close to the plant, from where it was transported by the Central (org.). Nação, câmbio e desenvolvimento. Rio de Janeiro: Editora FGV, 2008. p. 46. 1986, p. 257. do Brasil Railroad. Charcoal was made in the region’s woods. See Soares e Silva, Edmundo 20 - See Luz, Nícia Vilela. A luta pela industrialização do Brasil. São Paulo: Difusão Europeia do 21 - See Chiarizia, Martha M. de Azevedo, op. cit., chapter 1. 16 - See IBGE, Séries estatísticas retrospectivas, vol. 2, part 1, p. 463. de Macedo, op. cit., pp. 61-62. Livro, 1961, pp. 188-189, and Barçante, Itagyba, op. cit., vol. 1, p. 105. 22 - Idem, ib.
Vale Our History Vale Our History 1.4 Itabira Iron Ore Co.’s contract In this same year, Brazilian Hematite raised its stake in the Vitória- Minas to 73.3% and made an agreement with the Port of Vitória 2802 29 The history of the Itabira Iron Ore Co. began even before Brazil’s Company to export iron ore. Finally, in 1911, it founded the Itabira mineral potential was divulged abroad. By the time the recently Iron Ore Company, which received authorization from the Brazilian established SGMB revealed the existence of enormous iron deposits government to operate in the country by means of Decree 8,787 of in Itabira during the congress in Stockholm, English engineers June 16 of that year. Murly Gotto, Dawson, and Robert Normanton, all resident in Brazil, The company was headquartered in London and was obliged to had already obtained the option to purchase extensive tracts of maintain a representative in Brazil, subject to Brazilian laws and land in the region. They knew what lay beneath the ground. Before jurisdiction. The company’s core objective, according to Decree effecting this purchase, they consulted the directors of the Vitória- 8,787, was to “acquire, explore, develop, work and exploit certain Minas Railroad Company (CEFVM)23 – established six years before mineral properties known as Conceição, Santa Ana and Cauê, by Brazilian businessmen to transport agricultural goods from the situated in the municipality of Itabira, in the state of Minas Gerais.” Doce River Valley – about the possibility of iron ore being carried One of the Itabira Iron Ore Co.’s key targets was to export 3 by the railroad. After receiving a positive response, the Englishmen million metric tons of iron ore per year. To do this, the company founded the Brazilian Hematite Syndicate. would have to improve the Vitória-Minas’ operating conditions, In 1909, the Brazilian Hematite Syndicate acquired 42,000 shares including electrifying the track. However, the company did not in the Vitória-Minas Railroad Company and made a request to the manage to raise the sums needed – 53 million réis, or around 3.5 federal government to change the original route of the railroad to million pounds – due to the lack of a customary guarantee from the permit access to the reserves of Itabira. Not only was this request federal government to pay the interest on the investment, and the accepted, but the Vitória-Minas obtained a virtual monopoly over obligation to build the steel mill, a venture that the company was operations in the region. In exchange, however, Brazilian Hematite not interested in.26 was obliged to build a steel mill with minimum production capacity The First World War closed off the European financial markets, of 1,000 metric tons per month.24 making fundraising even harder. In addition to its financial In 1910, Brazilian Hematite effectively acquired the main problems, the Itabira Iron Ore Co. also faced nationalist opposition, mineral deposits of Itabira. Extending for 76.8 million square which had targeted the company almost since the start of its meters and holding more than 1 billion metric tons of ore, they activities. In these early years, notable opponents of the company constituted one of the biggest iron reserves in the country.25” included Arthur Bernardes, a leading politician in Minas Gerais, and Clodomiro de Oliveira, Professor of Mineralogy at the Ouro Preto Mining School.27 Until then, the public had not actively supported 23 - To read about the history of the EFVM, see Ribeiro, Lucílio Rocha. Pequena contribuição à história da Estrada de Ferro Vitória a Minas. Vitória: author’s edition, 1986, and Pimenta, the movements trying to repeal the privileges given to the English Dermeval. O minério de ferro na economia nacional. Rio de Janeiro: Gráfica Editora Aurora, company. However, the Itabira Iron Ore Co.’s situation started to 1950, among others. become more complex when Arthur Bernardes was elected the 24 - All of this was determined by Decree 7,773 of December 30, 1909. See Suzigan, Wilson, president of Minas Gerais in 1918. op. cit., p. 261. 25 - See Abreu, Alzira Alves de, “Itabira Iron Ore Company,” Dicionário histórico-biográfico Men on the tracks of the brasileiro; 1930-1983. Rio de Janeiro: Fundação Getulio Vargas, Year 1, Volume 2, 2001. Vitória-Minas Railroad p. 1,629 (hereafter “DHBB”). Available at:
Vale Our History Vale Our History Between the mine and the sea
Between Belo Horizonte Central Station and Pedro Nolasco Station in Greater Vitória lie 664 kilometers of railroad track, on which run the only daily train service between two Brazilian state capitals. Along it – using the indispensable branch line from Nova Era to Itabira, taking the total trip to 905 kilometers – around 70 locomotives travel every day, many of them pulling more than 150 cars. The majority of the train cars carry iron ore from the mines of Itabira and the whole of the Iron Quadrangle region to the Port of Tubarão. In all, the railroad carries over 100 million metric tons of iron a year. The EFVM’s trains also transport non-iron goods (making up around 40% of total freight), including agricultural products, containers, timber, steel, tools and granite, as well as people – many people. Every year, around 1.5 million people travel on the railroad. They include tourists, business people, students, teachers and other ordinary folk. It’s the largest passenger train service in Brazil. The trains have restaurant cars and facilities for people with disabilities. There are both economy and executive classes – the latter with air conditioning and reclining seats. The journey from Belo Horizonte to Greater Vitória goes past 30 stations and takes 13 hours. And while passengers pass the time looking out of the window – seeing the old houses, the bridges, the tunnels, the children who come to wave, the elderly people in their canvas chairs, the winding Doce River, and the railroad’s cuttings and embankments, marking the landscape – it can seem they have gone back at least 100 years in time. The Vitória-Minas Railroad was established in 1904 and its use has long been at the center of discussions about mining in Brazil. Since the first concession contracts made with the Itabira Iron Ore Co., the use of the railroad has served as a fundamental negotiating tool. Around its construction, stories arose of adventure, dreams and achievements. The train was – and continues to be – essential to integrating the whole Doce River Valley region 30 and everything produced there. Without the railroad, there would be no transportation or exports. You could say 31 there’d be no Vale – at least the Vale we know today – without the EFVM. The people who work on the trains – from locomotive engineers to the catering staff who offer coffee, biscuits and candy to passengers – know that they are moving the company’s soul, continually renewing a dream that began with the pioneers of Brazilian mining. For this reason, on the railroad station platforms, when a train approaches, it’s not uncommon to hear someone exclaim proudly: “There goes Vale’s train!”
A debenture certificate issued by the Vitória-Minas Railroad in 1911. Following page: train cars carrying ore along the EFVM.
Vale Our History Vale Our History In 1919, the Itabira Iron Ore Co changed hands: it was bought by American businessman Percival Farquhar, the company’s former representative in Brazil. Farquhar had arrived in Brazil 15 years before, and had specialized in businesses involving foreign companies and the public sector
Arthur Bernardes was 45 years old, a qualified lawyer and Soon after gaining control of the Itabira Iron Ore Co., Farquhar a charismatic politician. He always began his speeches with a made a proposal to the Brazilian government to build a steel mill at 32 reference to his home town (Viçosa), his family and the worthy no cost to the public purse, in exchange for authorization to export 33 people of Minas Gerais. Before joining the state government, he had 4 million metric tons of iron per year. The proposal was well received twice been elected a federal deputy, both times as a member of a by the President of the Republic, Epitácio Pessoa, who had been nationalist party. As leader of the state government of Minas Gerais, elected in 1919, and by his Minister of Transport and Public Works, he was supported by Clodomiro de Oliveira, whom he appointed to José Pires do Rio. The president also looked favorably on the inflow of run the Secretariat of Agriculture, Industry, Trade and Public Works. foreign capital to the country. It was estimated that the Itabira Iron Together, they formulated the rules for mining iron in Minas Gerais. Ore Co. would invest around 60 million dollars in the project.32 With or without the Itabira Iron Ore Co.28 And so, on May 29, 1920, a contract was signed by which the In 1919, Bernardes enacted Law 750, which raised the tax on federal government authorized the Itabira Iron Ore Co. to build and iron ore exports to 3,000 réis per metric ton for companies that operate coke-fed blast furnaces, steel plants and rolling mills, a were exclusively export-focused. In compensation, the law set the dedicated iron ore port in Santa Cruz (now called Aracruz), to the tax at 300 réis per metric ton, for 20 years, for exporting companies north of Vitória, and two railroad branch lines starting from the that would build a steel mill in the state and process at least 5% of Vitória-Minas line: one toward Itabira and the other to the Port of the amount of ore exported.29 The terms of Law 750 evidently did Santa Cruz. Both the branch lines and the port would be owned not please the Itabira Iron Ore Co., especially as it had previously by the company, giving it the unrestricted right to export Brazilian managed to obtain from the federal government, through Decree iron ore. The exported ore would be transported on ships owned by 12,094 of June 7, 1916, an end to its obligation to build a steel mill.30 Itabira, which would carry coal on the return journey to feed the Also in 1919, the Itabira Iron Ore Co. changed hands: it was steel mills. bought by American businessman Percival Farquhar, the company’s Overall, the contract granted a period of 24 months to start the former representative in Brazil. Farquhar had arrived in Brazil 15 work and 48 months for the facilities to come into operation. If years before, and had specialized in businesses involving foreign at the end of the period the requirements had not been met, the companies and the public sector. In 1905, he worked on the government could declare the contract forfeited and terminate establishment of Canadian company Rio de Janeiro Tramways, it, and the company would be obliged to pay a fine. The contract Light and Power, which would later become known simply as Light. also stated that the Port of Santa Cruz would return to government Farquhar had also been involved in controversial projects, such as ownership after 90 years and, after 45 years, the Brazilian government a venture to sell timber and rubber in the Amazon.31 could acquire the Itabira Iron Ore Co.’s set of properties. Finally, another clause in the contract stated that, in order to proceed with
28 - Bernardes’ speeches may be read in Discursos selecionados do Presidente Arthur Bernardes the venture, the company would have to sign an additional contract 3, organized by Izabela Medeiros de Souza, Fundação Alexandre de Gusmão, Brasília, with the state government of Minas Gerais.33 Ministério das Relações Exteriores, 2010. His biographical details may be consulted in Koifman, Fábio (org.). Presidentes do Brasil. Editora Rio, 2001. 29 - See Diniz, Clélio Campolina. Estado e capital estrangeiro na industrialização mineira. Belo Horizonte: UFMG/PROED, 1981, p. 46. 30 - See Suzigan, Wilson, op. cit., p. 262. 31 - For more information, see the entry for “Farquhar, Percival,” DHBB, available at:
Vale Our History Vale Our History Percival Farquhar
Born with a silver spoon in his mouth, Percival Farquhar (York, Pennsylvania, 1864 – New York, 1953)1 lived an extraordinary life, as if written by an imaginative screenwriter. Born into an American family of Quakers (Protestants who aim to live reserved lives of moral and religious purity), Farquhar was a member of the industrial aristocracy at a time when access to finance was fundamental to establishing and developing companies that in just a few years would grow into empires. The young entrepreneur graduated as an engineer, left traditions behind and founded a capitalist empire that 34 spanned the world. 35 Farquhar built railroads in Guatemala, Cuba and Russia, where he negotiated contracts directly with Lenin. In Brazil, among various enterprises he founded Rio de Janeiro Tramways, Light and Power (the precursor to today’s electricity distributor Light S/A), he became involved in the unsuccessful project to construct the Madeira-Mamoré Railroad in what is now the state of Rondônia, he built the beautiful Grand Hotel La Plage (the first to have telephones in guests’ rooms, in 1921) in Guarujá, São Paulo, he leased the Sorocabana Railway Company and, not least, he bought the Itabira Iron Ore Company, which was taken over by the newly established Companhia Vale do Rio Doce in 1942. With the comings and goings of the Brazilian Mining Code, he made enemies with major public figures, such as President Arthur Bernardes, and lifelong friends and partners, such as businessman Assis Chateaubriand, who in 1924 financed the establishment of O Jornal. Farquhar also founded the Itabira Special Steel Company (Companhia Aços Especiais Itabira, or Acesita), in 1946.
1 - Carone, Edgard. A República Velha. São Paulo: Editora Bertrand Brasil, 1974. Moraes, Fernando. Chatô, o Rei do Brasil. São Paulo: Companhia das Letras, 1994.
A meeting at Cauê Peak in 1935 with the president of Itabira Iron Ore Co., Percival Farquhar (fourth from the left), standing next to the administrator, Thomas Charlton, and German geologist Dr. Grosse (in a light jacket).
Vale Our History Vale Our History Previous page: workers in front of a drilling rig at Cauê Mine in Itabira, Minas Gerais, in the 1920s.
36 1.5 The nationalist backlash a plant in the state capable of producing at least 150,000 metric 37 tons of steel products per year. The decree also extended the period of tax benefits for steel producers from 20 to 30 years.36 The monopolistic power gained by Itabira by signing the contract Within the federal government, the mood had also started to inflamed nationalist opposition. After it was signed, the contract worsen for the Itabira Iron Ore Co., following Epitácio Pessoa’s was duly submitted to the Federal Audit Court, which refused to departure from the presidency. His successor was none other than register it, alleging violation of legislative norms. Epitácio Pessoa Arthur Bernardes, who upon taking office in March 1922, sought pressured the Court and the contract ended up being registered to offer a nationalist alternative to the foreign company’s plans. reluctantly. However, Pessoa’s intervention made it necessary to To this end, he set up a commission formed of parliamentarians, return the contract to the National Congress for approval, where technicians and industrialists, which in 1923 presented its first it was examined by various commissions, without a definitive draft of a national steel industry plan. This work was led by his conclusion being reached as to its validity.34 right-hand man and former Secretary, Clodomiro de Oliveira. Farquhar’s plans affected many interests. The owners of small The commission’s work provided the basis for Decree 4,801, passed metallurgical plants in Minas Gerais feared that the Itabira Iron Ore on January 9, 1924. Confirming the nationalist orientation of Bernardes’ Co.’s planned exclusivity would suffocate their operations. Foreign government, the decree provided for the granting of loans by the companies, which had bought vast swathes of land on which to federal government exclusively to Brazilian companies established mine iron ore, were also apprehensive about the transportation with the purpose of building mills.37 This orientation became even exclusivity achieved by Farquhar. The coal companies of Rio Grande more accentuated in the constitutional reform led by Bernardes in do Sul and Santa Catarina did not welcome competition from foreign 1926, which prohibited the transfer to foreigners of mines and mineral coal, which would arrive in Brazil in Itabira’s ships. The project was deposits required for the safety and defense of the country. also opposed by all the German, English, French and American In Minas Gerais, the policy adopted by Arthur Bernardes suppliers of machines and tools, which feared competition from concerning mining and, above all, the Itabira Iron Ore Co., was the output of the steel mill to be built by Itabira.35 followed to the letter by his successor to the state presidency, Raul Minas Gerais, as it was the state with the biggest mineral Soares (1922-1924), and his successor, Fernando de Melo Viana deposits, became the center of resistance against Farquhar and (1924-1926). The impasse created for the signing of the state contract the politicians allied with him. Arthur Bernardes, under pressure with the Itabira Iron Ore Co. would only be overcome during the because, by signing the second contract, he would have to ratify administration of Antônio Carlos Ribeiro de Andrada (1926-1930). the contract already signed by the Itabira Iron Ore Co. and the On December 7, 1927, the second contract was finally signed, by federal government, enacted Law 793 on September 21, 1920. This which the Itabira Iron Ore Co. would only be able to start to export law reaffirmed the terms of Law 750 and made it a condition for iron ore when it had begun operating a steel mill.38 exporting iron ore that the Itabira Iron Ore Co. would have to build
36 - See Diniz, Clélio Campolina, op. cit., p. 46. 34 - Idem. 37 - See Gomes, Francisco Magalhães. História da siderurgia no Brasil. Belo Horizonte/São 35 - See Pereira, Osny Duarte. Ferro e independência. Rio de Janeiro: Civilização Brasileira, Paulo: Itatiaia/USP, 1983, pp. 159-161. 1967, p. 32. 38 - See Chiarizia, Martha M. de Azevedo, op. cit., p. 66.
Vale Our History Vale Our History Previous page: a crowd gathered at a Central do Brasil Railroad station in the 1920s, waiting for the arrival of the president of Minas Gerais, Antônio Carlos.
38 39
In an attempt to make it feasible to approve the company’s In September 1930, Itabira once more obtained a dispensation projects and placate the violent attacks on the monopolistic from its obligation to build the steel mill, taking advantage of the aspects of its contract, the president of the state of Minas Gerais, discontent and political power of small manufacturers of pig iron, Antônio Carlos, made approval of Itabira’s plans conditional which feared the possibility of the company building it.40 upon the removal of its monopoly on the use of the Vitória-Minas With due legal authority to develop its plans in Brazil, Itabira Railroad, granted by the contract of 1920. Accordingly, on November sought funding from European and American banks. However, 10, 1928, Itabira signed a waiver by which it relinquished its right the global economic crisis of 1929 and the subsequent downturn to exclusively transport its own ore on the railroad, and agreed to in financial markets, together with political and institutional also carry ore belonging to third parties, as well as passengers and transformations brought by the Revolution of 1930, opened up a new agricultural goods from the region through which the tracks passed. stage in the Itabira Iron Ore Co.’s struggle to implement its projects. The signing of the waiver paved the way for the enactment, two days later, of Federal Decree 5,568, which attested to the legalization of the contract by the National Congress, and State Decree 8,045 of December 8, 1928, by which the government of Minas Gerais authorized Itabira to begin its activities.39
Men operating a drilling rig at Cauê Mine in Itabira, 39 - Idem, ib., p. 67. 40 - Idem, ib., p. 68. Minas Gerais, in the 1920s.
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