194419311997
CHAPTER 8 Years of Transformations
8.1 New economic horizons gas and minerals found fewer buyers and their prices fell. As a result 249 of this demand shock, iron ore prices fell by 11% between 1998 and On October 23, 1997, the Hong Kong Stock Exchange fell 10.4% 1999, while the prices of pellets, fines and lump ore decreased by and took other markets down with it. The storm hit the São Paulo 12%, 11% and 13%, respectively.4 Stock Exchange (Bovespa), which declined by 8.15% – the second Iron ore producers including CVRD had to take emergency biggest fall among all of the world’s stock markets that day.1 action, such as reducing costs, improving efficiency levels and However, the Brazilian economy made it through the so-called increasing productivity. Against this setting, the Russian crisis Asian crisis2 better than many imagined it would. took place in 1998. A traditional exporter of commodities such as A fundamental foundation, enabling the country to stay oil and gas, the country was the victim of a speculative attack economically strong despite the Asian crisis, had been constructed against its currency, as had happened a short time before in Asia, three years previously. The Real Plan, created in 1994, was a and it declared a 90-day moratorium until it could renegotiate its successful experiment after various attempts to tackle inflation in external debt.5 Brazil, which since the 1980s had been rising, demanding successive The international distrust generated by the Asian and Russian plans that until then had not managed to contain the constant crises hit Brazil. External investment left the country but the real increase in prices. remained stable, given the fixed exchange rate regime, at rates Between 1997 and 2001, Brazil became accustomed to a stable close to the US dollar.6 However, while dollars left the country, the currency and lower inflation rates. The new economic conditions currency remained stable at the cost of interest rates that exceeded led to unparalleled experiences – Brazilians, who saw prices rise by 40% in October 1998.7 2,477% in 1993, ended 1997 with annual inflation of 5.22%.3 The overvaluation of the real in this period was a government The economic growth spurred by the success of the Real Plan strategy to stop inflation from returning, but it was impossible to led to a recovery in capital flows, and the Brazilian economy’s sustain this exchange rate policy for long. As of 1999, the exchange convergence with global standards heightened the interest of major rate moved to a floating model.8 Accordingly, devaluation was international companies. Brazil’s favorable circumstance on foreign immediate and the real weakened from US$1.21 in January to markets would be shaken by the crises that followed as of 1997, but the country would find solutions to face them. The international markets reacted to the Asian crisis by buying 4 - Read more in “Minério de Ferro no mundo: retomada de crescimento.” Mineração e less, and commodity prices slumped across the world. Oil, natural Metalurgia magazine, no. 36, September 2000. Available at
Vale Our History US$1.90 in March. In the following eight months, the real continued The privatization of state-owned companies enabled the to decline, falling 38% in all.9 government to raise resources that, alongside the reduction in Although it did not respond immediately to the devaluation of 1999, the public debt, generated a reconfiguration of the state to focus on the Brazilian economy was capable of expanding its exports, reducing its core activities such as health, transportation and public security. its import growth and rebuilding a trade surplus. Despite that year’s The privatization of the majority of state-owned enterprises adverse conditions, Vale managed to minimize the consequences of in the industrial sector was conducted in the first two years of the Asian and Russian crises. The company’s sales of iron ore and Fernando Henrique’s government. As of 1997, a new stage in the PND pellets amounted to 96.3 million metric tons in 1999, 3.2% lower than began, and the agenda moved on to the electricity, transportation in the previous year – a smaller decline than initially predicted.10 and telecommunications sectors. The focus was on improving the CVRD ended the five-year period covered in this chapter, from quality of the services provided as of that time. In the same period, 1997 to 2001, with a record net income. Its 2001 profit of R$3.05 the privatization process was intensified at the state government billion was 43% higher than in 2000. Between 1997 and 2001, Vale’s level, supported by the federal government.14 A long series of bid net income grew at an average annual rate of 41.7%.11 These results documents would be published from that moment onward. showed that during this period the company was able to overcome In terms of overall figures, the PND achieved the targets 250 the crises on international markets and to grow after one of the proposed when it was established. Between 1990 and 2009, the 251 most important events in its history: its privatization in 1997. federal government transferred 71 companies to the private sector and raised a net total of more than US$30 billion.15
Vale’s privatization 8.2 Privatizations On the afternoon of May 6, 1997, the Rio de Janeiro Stock Exchange’s building was surrounded by people. The press counted When Fernando Henrique Cardoso was elected president of Brazil 300 protesters.16 The reason for such commotion was the first in 1995, privatizations became a recurrent theme for the federal stage in the auction to privatize Companhia Vale do Rio Doce, government and a tool for tackling the crisis generated in previous after a number of postponements caused by court injunctions. decades. Established in 1990, the National Privatization Program As of that day, Vale began to be administered by a consortium (known by Portuguese acronym PND) was one of the instruments composed of private and public sector companies. The winner used to improve the trade balance and public accounts, and thereby was Consórcio Brasil, a consortium of Brazilian and foreign prolong the stabilization achieved by the Real Plan. Between 1995 investors, which acquired 41.73% of the shares belonging to the and 1996, 19 companies were privatized, raising a total of US$5.1 Brazilian government.17 Following the auction, this consortium billion.12 The highlights in the period were the sales of Escelsa – one was transformed into a company called Valepar, which is Vale’s of the biggest energy distributors in Espírito Santo – in 1995, for controlling shareholder. The purchasers’ funding was guaranteed US$519 million, and Light – an electric power company in Rio de by support from the national development bank, BNDES. The Janeiro – in May 1996, for US$2.509 billion.13 winning bid was R$3,338,178,240.00 – representing a 19.9% The administrative act that included Vale on the National premium on the established starting price. The shares were sold Privatization Program was an initiative of the Executive Branch, for R$32 each, compared to the starting price of R$26.67.18 provided for in part VI, article 84 of the Federal Constitution, and The second stage consisted of the sale of part of the company’s also in Law 8,031/90. This legislation establishes privatization as the capital to employees. This took place alongside the sale of a appropriate means of reducing the state’s presence in the economy, controlling stake to the private sector, also in 1997. The third stage, under the terms of the Federal Constitution. which occurred at the beginning of the 2000s, completed the process of disposing of the federal government’s shares, by enabling
9 - Source: Central Bank, in Pinheiro; Giambiagi and Moreira, op. cit. 10 - Executive summary, 1999 Annual Report. Available at
Vale Our History Vale Our History Ore stockyard at the processing plant at Cauê Mine in Itabira, Minas Gerais, in 1995. Next page, left to right: a consignment of paper transported by the Vitória-Minas Railroad and the front cover of the National Privatization Program document, published by BNDES, in 1997.
252 thousands of people throughout Brazil to use part of their Government had adopted. The company had grown while undertaking an internal and restructuring in each sector. In its composition, the Center producers, steel companies or trading companies could not own 253 Severance Indemnity Fund (FGTS) resources to buy shares in Vale. restructuring to permit more investment in sectors such as research, brought together the Finance, Human Resources and Administration, stakes of over 10% individually, or 45% in a group.31 Caixa Econômica Federal’s website19 states that since this Vale community relations, the environment and, above all, technology. Legal, and Planning and Control departments.27 The Corporate Center Over the first two years, sales of CVRD shares held by Valepar fund was created, its accumulated profitability as of February 2012, “Having been a successful company under government ownership, appeared at the moment where company management was putting would only be permitted to the controlling group. At the same was 918.3%; in other words, for every R$1,000 invested, there was a the task of leading the new CVRD under private control obliges us into practice a new personnel distribution policy. time and for an indefinite period, the federal government would profit of R$9,183. Over this period, if this sum had been left in the not to lose dynamism nor profitability, despite having to bring about A human resources structural reorganization process eliminated maintain a special class of preferred share (a golden share) in Vale. FGTS, the accumulated profit would be around 30%. profound change to make it more efficient and productive,” wrote old functions demanded by its previous status as a state-owned As a result, the president of Brazil would be guaranteed the power Despite the crisis conditions, 1996 was a surprisingly positive Benjamin Steinbruch, chairman of the company’s Board of Directors, enterprise. The direct effect of this was to reduce the size of of veto on specific matters related to the company’s objectives, such year for the company, which, due to its various achievements, won in a message addressed to shareholders at the end of 1997.22 the workforce – from 15,483 in 1996 to 10,865 in 1997. Most of the as changes to its corporate name, a change to its legally permitted Brasil Mineral magazine’s “Company of the Year in the Mining Sector” In Vale’s organizational chart, established after privatization, departures took place as part of the Encouraged Dismissal Program scope of work in terms of mineral exploration, any modification to award for the third time.20 The awards ceremony took place in São the presidency was now exercised by a Board of Directors, which the (“Programa de Demissão Incentivada”), created in September 1997 the rights attributed to the shares composing CVRD’s equity, or its Paulo and was attended by Vale’s then president, Francisco Schettino, company’s controlling shareholders participated in and influenced. to soften the impact of the restructuring.28 own liquidation.32 and directors and leaders of the CVRD group’s companies. Vale was Led by Steinbruch – who had the same position at CSN – the Board Shares in the company were offered to employees at the chosen for this award for the following reasons, among others: an of Directors had eight more members.23 CEOs were also appointed time – they acquired 4.45% of the common shares and 6.31% of Revised contracts and other results increase in productivity in the Iron Quadrangle region of Minas for the different business areas.24 This reorganization was part of the preferred shares, through the Companhia Vale do Rio Doce Contracts with suppliers and service providers were revised based Gerais and at Carajás Mine in Pará; the discovery of new deposits structural changes that, in their basic guidelines, provided for the Employee Investment Club (InvestVale). After this, they exercised on the new structure, optimizing operations in the mine-railroad- of gold, also in Pará; international gold exploration partnerships; shared administration of CVRD.25 The new model would start to be their right to take part in the Board of Directors of Valepar, the port system.33 Accordingly, cost per ton of iron ore fell by around technological and vertical development in iron ore production by implemented based on a financial restructuring. The company’s group of shareholders controlling CVRD. Accordingly, as well as 15% in 1997. Tubarão Complex in Espírito Santo produced 21.4 taking stakes in steel companies (CST, Usiminas and CSN); and 1997 Annual Report shows that the new orientation shifted Vale’s participating on Vale’s Board of Directors, employees also ensured million metric tons of pellets, and there was also record iron ore the environmental management policy of the whole CVRD system, focus onto optimizing its business, leading each area to seek ways their participation in the controlling group.29 output in Carajás, Pará, amounting to 43.8 million metric tons for in accordance with standards and parameters established by ISO of participating in the global market. Business units (Pulp and Paper, A company reorganization was then carried out at Valepar, with the year. A new record for annual exports of iron ore was achieved 14001 – Environmental Management System.21 Iron Ore, and Aluminum) and a Corporate Center were created in the entry of InvestVale and BNDESpar, the arm of BNDES that – 80 million metric tons – further boosted by new supply contracts The award was the result of the investment policy adopted order to stimulate production.26 administers the bank’s equity stakes in companies. Shares that with customers in Australia and China.34 in the 1990s to tackle the crisis of that period. Vale, ever more The Corporate Center was established with the objective of Consórcio Brasil’s partners – represented by Valepar S.A. and Railroad freight transportation also hit new records. The Vitória- international, had efficient logistics and diversified its investments. supporting each area in its business feasibility, investments, disposals consisting of a set of Brazilian and foreign investors that controlled Minas Railroad (EFVM) carried 107 million metric tons in 1997, In addition, the company adopted strict efficiency and quality Vale – possessed before the auction were also incorporated. while the Carajás Railroad (EFC) transported 49.4 million metric standards in its production. Valepar’s stake in CVRD reached 52.29% of its voting capital.30 In tons in the same year. In addition, CVRD acquired a 20% stake in the Less than one year after Vale was privatized, the company’s 22 - See the 1997 Annual Report, p. 3. the privatization bid documents, it was established that in Vale’s Northeast Railroad Company (Companhia Ferroviária do Nordeste, results demonstrated the appropriateness of the new procedures it 23 - The Board of Directors was composed of the following: Benjamin Steinbruch, Jair first five years as a private company, no shareholder could or CFN). In turn, CVRD’s port terminals achieved new records. Antonio Bilachi, Francisco Gonzaga de Oliveira, Francisco Valadares Póvoa, Humberto Eude Vieira Diniz, José Fernando de Almeida, Luiz Xavier, Maria Silvia Bastos Marques, and own more than 45% of its voting capital. In addition, large iron ore For example, Praia Mole Terminal in Espírito Santo unloaded 10.3 Pérsio Arida. 19 - See
Vale Our History Vale Our History Left: overview of the ore stockyard at Tubarão Complex in Espírito Santo. Opposite page, left to right: aerial view of the Vitória- Minas Railroad and Igarapé Bahia Mine in Pará, in 1991.
million metric tons of coal, and Inácio Barbosa Maritime Terminal Community relations continued to be a priority in Vale’s of history, the company reinvented itself at the start of 1998, 255 (TMIB) in Sergipe handled 819,000 metric tons of cargo.35 structure. In the year it was privatized, the company allocated adopting new concepts, establishing partnerships and showing The new times also served to stimulate the diversification R$26.2 million to social and economic infrastructure projects itself to be ready for what was to come: accumulating strategies policy implemented by Vale. Alunorte achieved record aluminum designed for the communities where it operates, through the Vale for diversification, audaciousness and participation. The employee production: 1.186 million metric tons of calcined alumina and & Communities Integration Program.40 These resources were part share offer was fundamental to the creation of a relationship of 1.197 million metric tons of aluminum hydroxide – 100,000 metric of the Reserve for the Development of the Regions Influenced by trust and integration throughout the company. tons above nominal installed capacity. Valesul also obtained record CVRD (RDRI), which was closed down that same year. To replace The year following privatization, 1998, ended with earnings production in 1997: 105,700 metric tons of cold metal and 92,300 it – while still complying with the compensatory measure provided of R$1.02 billion, a new record for Brazil’s private sector.43 The metric tons of hot metal.36 for in the privatization bid documents – the Privatization Resources experience that CVRD had built up over the course of its life as a In the same year, Cenibra’s output was higher than its nominal Regional Development Fund (FRD) was created and endowed with state-controlled enterprise with minority private investors, would capacity, reaching 719,600 metric tons of pulp. Bahia Sul also saw R$85.6 million, to assist the areas influenced by the company. In be fundamental to achieving its goals. Vale had learned that it record production in the paper sector, producing 205,500 metric tons the future, this fund would receive resources from BNDES and its was not sufficient to have large deposits: it was also essential to and selling 204,500 metric tons in 1997.37 The same thing occurred management would be shared by the bank and Vale. In 1998, the provide ways of transporting output in a shorter time and for a with Florestas Rio Doce – a subsidiary active in reforestation, timber Vale do Rio Doce Housing and Social Development Foundation took lower cost. With a standardized iron ore price and a reasonable production and forest research – which sold 11,000 cubic meters on the management of programs aimed at communities.41 level of supply (mainly from reserves) on the market, companies of sawn wood and 4.5 million saplings. The net revenues of Vale’s Thus, at the end of 1997, following all the modifications arising that could send their products to their customers for the least companies in the Pulp, Paper and Timber area amounted to R$668 from the privatization process, Vale made a net profit of R$756 would profit the most. million, up 26% from the previous year, 1996.38 million. It sold more, its portfolio of customers expanded and The owner of the largest railroad network in Brazil, extending Fears that privatization could remove CVRD’s social and the company made a record profit – a substantial 46% up on the for around 1,800 kilometers – including the 892-kilometer Carajás environmental obligations were soon allayed. On April 17, 1997, previous year.42 The company’s profits continued to grow steadily Railroad and the 905-kilometer Vitória-Minas Railroad – CVRD, at the Bureau Veritas Quality International (BVQI) audited the functioning in the following years. end of the 1990s, was also the biggest logistics operator in the country. of the Environmental Quality Management System run by the Initially, this infrastructure was used to serve its own activities, company’s Technology Superintendent’s Office (Sutec), and gave it but over time the company sought support from partners to its first ISO 14001 certification. Over the course of the year, US$30 transport goods for third parties.44 This initiative was successful. In million was invested to improve production processes. These sums 8.3 Facing the future 1998, CVRD’s gross revenues from railroad transportation and port were part of Vale’s Environment Program, created in 1994, which operations for other companies reached R$750 million, up 15.9% involved planned investment of US$125 million over five years, Although the world – and especially Brazil – was experiencing a from 1997.45 including US$50 million in loans from the World Bank.39 moment of economic fragility, at the end of 1997 Vale would achieve All of the company’s investment in logistics was accompanied records never before seen in its 55-year history. It was a new age, by a substantial increase in revenue, arising from both external and accompanied by new ideas and practices. With over half a century internal circumstances. In 1998, the main factors that positively affected performance were the following: an increase in average 35 - Idem, p. 17.
36 - Idem. 40 - Idem, pp. 17, 69. 37 - Idem. 41 - Idem, p. 69. Given this change of focus – from housing to community work – the 43 - See the 1998 Annual Report. 38 - Idem, pp. 47-48. institution changed its name to the Vale Foundation. 44 - See the 1998 Annual Report. 39 - Idem, p. 68. 42 - Idem, pp. 3, 13. 45 - Idem.
Vale Our History Vale Our History Vale had learned that it was not sufficient to have large deposits: it was also essential to provide ways of transporting output in a shorter time and for a lower cost
256 iron ore sales prices on domestic and international markets (an achieved a series of records. In 1998, iron ore output at Carajás Asia was moving ahead because, at the time, it accounted for the 257 average rise of 2.82% for fines and 2.80% for pellets); the effect of a Mine reached 45.8 million metric tons. These results were not largest percentage of iron ore imports. Steel production in the region 7.7% average devaluation of the real against the US dollar; and obtained by chance. In the same period, across the country, reached 40% of the world’s total. In addition, China had become the a 15.9% rise in revenue from railroad and port services.46 CVRD’s unparalleled results were achieved in freight transportation by the leading steel producer, as well as the fastest growing market, after Roger Agnelli strong market performance would be fundamental to ensuring its Carajás Railroad (50.1 million metric tons), in Alunorte’s overtaking Japan.54 expansion in the period. output (1,430 metric tons of alumina), at Valesul (92,850 metric Growing foreign sales, record iron ore production, expanding When he arrived at Vale in 2001, Roger Agnelli Another noteworthy development, in November 1998, was the tons of aluminum), at Mineração Rio Norte (10,102,000 metric tons port facilities and market diversification – 1999 was a successful opening of the seventh pelletizing plant at Tubarão Complex in of bauxite), and at Cenibra (741,500 metric tons of pulp).50 year, and this was reflected in the leap in the price of the company’s (São Paulo, 1959) had already been the youngest ever Espírito Santo, built for the Korean-Brazilian Pelletizing Company After a new company president was appointed in April 1999, shares on the stock exchange. According to the annual report for executive director of Bradesco, to which position he (Kobrasco), a joint venture with Pohang Iron & Steel Company from Vale defined new strategies to improve its position on the global the year, “every R$100 invested in preferred shares in Companhia was appointed at the age of 39, in 1998.1 A qualified South Korea. The plant’s annual production capacity was 4 million market. Ambassador Jório Dauster replaced Benjamin Steinbruch Vale do Rio Doce at the end of 1998 grew to R$319.60 by the end of economist, he brought with him an aggressive style and metric tons of pellets. in the most important post at the company. It was the first change December” of the following year, thanks to an increase in its prices a plan to diversify the company’s activities. During his On July 9 of the same year, Nibrasco – a company that had since the privatization in May 1997. Dauster brought with him and the distribution of 70.2% of net income. The international time as CEO, the company’s annual profits soared from operated a pellet plant for 20 years, part of Vale’s Pelletizing and extensive experience in international relations – he had negotiated financial crisis, in the wake of the Russian moratorium, still had R$3 billion to R$30.1 billion. Metallic Goods Department, and rated by the Fundação Getulio Brazil’s external debt in 1990 and 1991.51 Less than a year after negative effects for Vale, and yet the company managed to make Vargas (FGV)47 as one of the ten most competitive companies in taking over as CVRD president, the policy of opening up to the a net profit of R$1.25 billion, up 21.6% from the previous year. This The main advances came from acquiring mines and Brazil – achieved a new record for daily pellet production: 14,220 external market, implemented by his new administration, was was yet another record in CVRD’s history.55 mining companies abroad, in particular Canadian nickel metric tons. This result was a response to the new contracts that already showing results. producer Inco, which was bought in 2006.2 Commercial Vale entered into at the end of 1997, which also catered to customers Vale ended 1999 with 80 international customers: Posco (South Acquisitions: consolidation in iron ore success was accompanied by concern for sustainable 48 in Australia and China. Korea), the world’s biggest steel producer; Nippon Steel (Japan); As of 1998, in line with guidelines established by its new administration, development. In 2009, Agnelli signed Vale up for the UN CVRD’s business expansion was also reflected at the grain Usinor (France); Corus (a merger of British Steel with Dutch CVRD placed even greater emphasis on strengthening its leadership Global Compact, a program of 10 principles spanning the terminals at Tubarão Complex. In the second half of 1998, the company Hoogovens); Italian company Ilva; ThyssenKrupp Stahl position in iron ore and logistics. It took over various companies, giving environment, human rights and anti-corruption measures.3 third berth at the Diverse Products Terminal (TPD) was ready. Pier (Germany); NKK (Japan); US Steel; Baoshan (China); Arbed Group it new stretches of railroad, mines and pelletizing operations. It also III involved total investment of US$29.8 million. It was designed to (Luxembourg); and Sumitomo Metal (Japan), among others.52 Vale’s acquired a stake in Ferrovias Bandeirantes S.A. (Ferroban) – formerly Roger Agnelli was Vale’s CEO for 10 years, between accommodate ships with capacity of up to 125,000 metric tons and expanded market had a direct impact on its sales. called Ferrovia Paulista S.A. (Fepasa) – and opened a new 108-kilometer 2001 and 2011, and during this period the company’s “to expand grain exports to around 3 million metric tons per year.”49 The company’s total revenues in 1999 – including pelletizing section of the Costa Lacerda-Capitão Eduardo branch line (on the shares rose by 834%.4 Agnelli also oversaw a change in The ships that left TPD mainly headed to Japan. plant sales in partnership with Japanese, Spanish, Italian and Vitória-Minas Railroad) in Minas Gerais. CVRD also bought stakes in the company’s brand in 2007, when Companhia Vale do While in the South System, the new facilities at Tubarão Complex South Korean customers – were broken down as follows: 43% to two maritime terminals: Vila Velha in Espírito Santo (formerly called Rio Doce became simply “Vale.” demonstrated positive results, in the north of Brazil, Carajás Asia (China, Japan and South Korea) and Oceania; 30% to Europe; Capuaba), and Sepetiba in Rio de Janeiro, thereby bolstering the South 21% to the Americas; and 6% to Africa, the Middle East and India.53 System’s mine-railroad-port complex.56 1 - See
Vale Our History Vale Our History 258 259
Soybean conveyor belt at Praia Mole Maritime Terminal at Tubarão Complex, Espírito Santo.
Vale Our History Vale Our History 60 260 Aerial view of the Diverse An important milestone for Vale’s mining operations, reshaping Ferteco Mineração S.A. for US$566 million. Ferteco is a Brazilian investment per ton of installed capacity – an important model to be 261 Products Terminal at Tubarão its expansion policy, occurred in May 2000: the company acquired a company based in Rio de Janeiro, whose main activity is iron ore followed at the time.63 Complex, Espírito Santo, in 1999. Facing page, left to right: 63.06% interest in Grupo Belgo-Mineira’s total equity and a 79.27% mining and processing, and until then it had been wholly owned by In addition, Socoimex, acquired in May 2000 and incorporated the ore stockyard at Ferteco’s stake in the voting capital of Samitri, which in turn owned 51% of TKS. It was founded as an iron and coal miner, but since 1973 it had on August 31 of the same year, added the high-grade hematite processing plant in Minas Samarco Mineração. This transaction enabled CVRD to guarantee focused exclusively on iron ore. reserves of Gongo Soco Mine to CVRD’s assets in the Iron Quadrangle Gerais, and an aerial view cost savings and technological integration, accentuating the focus At the time, Ferteco was the third biggest producer of this region of Minas Gerais. With production capacity of 7 million metric of Guaíba Island Terminal in Mangaratiba, Rio de Janeiro. of its mining activities and expanding its presence on the global mineral in Brazil, with production capacity of 15 million metric tons per year, the mine helped to improve the productivity and pellet market. Samitri, headquartered in Belo Horizonte, Minas tons per year. Its minable reserves were evaluated at 263 million quality of the South System’s products.64 Gerais, operated three iron ore mining complexes and was one of metric tons of hematite and itabirite, of similar quality to the ore By incorporating Samarco, Samitri and Ferteco, and by Brazil’s biggest producers, with annual production capacity of 17.5 produced by CVRD’s South System. Ferteco also operated two iron optimizing its logistics system, CVRD entered the 21st century million metric tons.57 mines (Fábrica and Feijão, in Minas Gerais) and a pelletizing plant with the capacity to compete on an equal footing with its main Samarco was one of the lowest-cost iron ore pellet producers in the Iron Quadrangle region, also in Minas Gerais, which produced international competitors in the iron ore market. in the world and it was highly competitive in the market. It owned 4 million metric tons per year.61 and operated two pelletizing plants in Ponta do Ubu, Espírito Santo, Ferteco held 10.5% of the total capital of MRS Logística S.A., a Sustainability: communities and the environment with total production capacity of 12 million metric tons per year. railroad company that operated 1,612 kilometers of track between CVRD has always sought ways of minimizing the impact of its Samarco also had operations at Ponta do Ubu Maritime Terminal, Rio de Janeiro, São Paulo and Minas Gerais, with annual freight activities. Indeed, this commitment goes back to the company’s where it handled 20 million metric tons of cargo per year, and it transportation capacity of 80 million metric tons. Through a wholly establishment in 1942, when plans were made to transfer resources had a 396-kilometer ore slurry pipeline linking its mine at Alegria owned subsidiary, Companhia Portuária Baía de Sepetiba S.A. (CPBS), through a development fund for the Doce River Valley region in the Complex, Minas Gerais, to the pelletizing plants.58 Ferteco ran the Sepetiba Bay Port Company Terminal in Rio de Janeiro.62 states of Minas Gerais and Espírito Santo.65 Also headquartered in Belo Horizonte, Samarco was established Composed of Guaíba Island Terminal and the Sepetiba Bay The Fund to Improve and Develop the Doce River Valley (FMDVRD) in 1977, and less than 30 years later it was already Brazil’s fifth Port Company Terminal (Port of Itaguaí), the South Ports Complex, was designed to finance projects executed by state governments with largest exporter. At the end of 2010, the company distributed R$3.3 covering an area of 615,296 square kilometers, is located in the the explicit approval of the President of the Republic. In 1990, when billion (US$1.9 billion) in dividends to its shareholders. In 2011, Vale Green Coast region in the south of Rio de Janeiro State, and its piers Wilson Brummer took over as president of CVRD, the fund was given owned 51% of its shares and shared control of it with Australian can receive up to three ships, two simultaneously. In 2009 alone, a Community Relations management unit.66 company BHP Billiton.59 Vale’s acquisition of a stake in Samarco more than 60 million metric tons of iron ore was exported from the Experience of managing funds would evolve within the company. in 2000 – together with all its export facilities and low-cost pellet complex, mainly to China. In 1998 the Vale do Rio Doce Foundation (FVRD), whose roots lay in production capacity – was a major step in conquering the market In another important acquisition in this period, Vale gained full the former Vale do Rio Doce Housing and Social Development that the company desired. And there were yet more steps to take. control of the Sossego copper project in Pará for US$42.5 million. Foundation, was created. Established in 1968 to execute Vale’s The most important of these steps was taken on April 27, 2001, Vale’s administrative renewal process and cost reductions made when Vale completed negotiations with ThyssenKrupp Stahl AG Sossego one of the world’s cheapest copper projects in terms of (TKS), one of Europe’s biggest steel groups, to acquire 100% of 63 - See the 2001 Annual Report. 64 - See the 2000 Annual Report. Available at
Vale Our History Vale Our History housing policy,67 for decades the institution was dedicated to elementary education in the municipalities where the company helping CVRD employees achieve the dream held by the majority of operates using spaces such as “Teachers’ Houses,”72 by providing Brazilians: to buy their own home. educators with continuing education.73 The pilot project was implemented at 25 selected schools in six municipalities74 in the The Vale do Rio Doce Foundation states of Pará, Maranhão, Espírito Santo and Minas Gerais. From the time it was created in 1968, the Foundation worked to With the same objectives – to educate both young people and 262 build homes for Vale employees in the regions where the company teachers – the FVRD also created the Vale Information Technology 263 operated, and until the 1990s it ran a “Foundation News” column in project in 1999.75 By 2001, this project had benefited more than 9,000 the Jornal da Vale to report on the progress of its housing projects. public sector school students and teachers, as well as residents, The institution was the first area of CVRD to appoint a female in the towns of Itabira, Governador Valadares and Cocais (Minas director: on September 5, 1990, Shirley Virgínia Coutinho became Gerais), Vitória and Serra (Espírito Santo), and São Luís (Maranhão). the Director-Superintendent of the Vale do Rio Doce Housing and In the same year, the FVRD entered into a partnership with the Social Development Foundation.68 Information Technology Democratization Committee (Comitê de In 1998, the Foundation shifted its focus from housing to Democratização da Informática, or CDI), in order to give students integrated social development. It was then renamed the Vale do Rio access to computers provided by the company. By December 2002, Doce Foundation (FVRD). The Foundation’s principle is to support Vale Information Technology and CDI planned to be active at 300 the communities the company is a part of, through actions spanning Information Technology and Citizenship Schools, benefiting more education, health, infrastructure (funding the building of houses, than 50,000 people in seven states.76 for example), protection for children and youth, culture, sport, Over the course of 2001, Vale – through the Vale do Rio Doce and the environment.69 Also in 1998, the Foundation supported the Foundation – invested R$20 million77 in community projects, mostly Inter-American Development Bank (IDB)’s “Capacitação Solidária” linked to education and social welfare. The company won various (“Solidarity Training”) project, which prepared 296 young people awards, which legitimized the FVRD’s role in the development of from low-income families in Rio de Janeiro for the job market. In the communities where Vale operates.78 the cultural field, the Foundation supported the opening of the Oscar Niemeyer-designed Carlos Drummond de Andrade Memorial Center at Pico do Amor in Itabira, Minas Gerais, and the launch of the Vale do Rio Doce Railroad Museum in Vila Velha, Espírito Santo, which depicted the history of the Vitória-Minas Railroad.70 In 1999, the Vale do Rio Doce Foundation began to develop its 72 - Meeting center where public sector teachers and members of the community can exchange their experience and socialize. Subsequently, municipal governments, teachers profile more clearly and it made education its main objective. and the community will manage the house. (See the 2000 Annual Report.) 71 Its first education project, Vale School, is now a model for 73 - “Valuing educators creates transformational agents, with creative, locally tailored education management across the country. The project promotes solutions.” (See the 1999 Annual Report.) As shown in the 2006 Annual Report, an educator in Alto Alegre do Pindaré, Maranhão created a “Book Donkey” service using donkeys to take books to residents of more remote regions. 67 - Mayrink, Geraldo (org.). Histórias da Vale. São Paulo: Museu da Pessoa, 2002, p. 275. 74 - Marabá and Parauapebas (Pará), São Luís and Açailândia (Maranhão), João Neiva (Espírito 68 - Jornal da Vale, August 1990, no. 136, p. 11. Santo), and Catas Altas (Minas Gerais). 69 - Available at
Vale Our History Vale Our History Tree nursery at the Vale Natural Reserve in Linhares, Espírito Santo.
One of the Foundation’s most notable projects is Citizenship chimneys in pelletizing plants at Tubarão Complex in Espírito signed. The aim was to guarantee the preservation of the state’s Train, which in 2001 alone provided assistance to 118,684 people.79 Santo. Following investment of more than US$30 million, the plants’ now scarce areas of original Atlantic Forest.89 Using three air-conditioned train cars, this project travels to poor waste emissions fell by 85%.84 Meanwhile, Vale’s concern for forest Together, the reserves of Linhares and Sooretama, covering communities along the railroads administered by CVRD, bringing management, reforestation and sapling production became a 22,000 and 24,000 hectares, respectively, form the largest them various social inclusion services, such as help with obtaining priority. 1998 saw the launch of a Master Plan for the Linhares Forest remaining area of native Atlantic Forest in Brazil. The agreement official documents (CPF and identification cards), dental checkups, Reserve in Espírito Santo. “This Plan guarantees all the preservation, guaranteed the annual transfer of US$149,000 by the federal 80 264 preventive health exams, and vaccinations. conservation and research principles constructed over the years at government to Sooretama Biological Reserve. Of this sum, In addition to its education, health and citizenship initiatives, this location,” explained Renato de Jesus, the Reserve’s director at the US$49,000 per year would be invested in its preservation, the the Foundation also promoted events inviting citizens to experience time.85 In December 1999, as a result of the state of preservation and construction of firebreaks and hedges, the refurbishment of the local culture and art. In Itabira, the “Drummond Forum” attracted conservation of its ecosystems, the Reserve was declared a Discovery employees’ house, and the purchase of radio equipment. The around 30,000 people to workshops, exhibitions and other activities Coast World Heritage Site by the United Nations Educational, remaining US$100,000 per year would be used by Vale to pay for with the aim of developing the town’s tourism potential and Scientific and Cultural Organization (UNESCO). It is considered one forest wardens, to train staff and to acquire motorcycles and celebrating the 100th anniversary of the birth of local poet Carlos of the best preserved Conservation Areas in South America and trucks for monitoring the area.90 Drummond de Andrade.81 one of the 14 richest centers of diversity and endemism in Brazil. “At that time, we began to adopt a different perspective on the The first three years of the Vale do Rio Doce Foundation’s The Linhares Forest Reserve – now called the Vale Natural Reserve environment,” notes architect and urban planner Vânia Velloso, an existence (1998-2001) demonstrated the success of its creation and – would become “self-sustainable,” emphasizing the controlled use environmental management specialist who worked at Vale from the clearly pointed out the direction in which it would be heading in the of natural resources and the development of new technologies to 1980s to the 2000s. The major advance was allying environmental future. Education, culture, community development and citizenship restore degraded areas.86 issues to the business area: “We went from a very important vision projects would be fundamental to giving the now privatized CVRD The preservation of its 22,000 hectares of Atlantic Forest was of preserving and conserving natural resources to a new, more a new image. thereby guaranteed – and that wasn’t all. Based on the results advanced governance and management model.”91 attained through these initiatives, the Reserve’s status changed This was one of the company’s biggest steps forward in the area from a Private Conservation Unit to a Business Unit.87 Environmental of sustainability. As of then, Vale started not only to preserve, but The environment education programs, research plans, responsible tourism and the also to invest heavily in restoring degraded areas and researching In 1998, CVRD was one of the 185 members of the World Business sale of products and services were also provided for in the Master green technology in the pursuit of less aggressive solutions. Council for Sustainable Development.82 As of the late 1990s, the Plan – the premise was to strive to conserve the Reserve’s integrity. Nowadays, the definitive ending or temporary suspension of company’s internal policies to control the impacts of its activities According to Vale, preserving was also good business.88 a mine’s activities requires legal procedures and environmental gained more force. In the presence of Vale President Jório Dauster, Environment actions.92 The aim is to return to the region a large part of the In its 1998 Annual Report, Vale announced that the environment Minister José Sarney Filho, and the governor of Espírito Santo, José vegetation that existed there before the mining work. It is a task that was a “strategic component affecting the competitiveness” of the Inácio Ferreira, the Linhares Forest Reserve Usage Master Plan demands long-term investment – not least because some mined company. The document presented the results of its 1994-1999 was unveiled on June 2, 1999. At the launch event, an agreement areas may take up to 30 years to return to their original state.93 Environment Program, which provided for investment of around between CVRD and federal environment regulator Ibama to This transition phase needs planning, investment and, above all, US$120 million, of which US$50 million was lent by the World Bank.83 preserve the adjacent Sooretama Biological Reserve was also environmental awareness. With the launch of the program, various projects to enhance In 1999, as the result of a pioneering initiative in Brazil, all of environmental controls in production activities were implemented, CVRD’s operational areas focused on the work of returning the such as the installation of electrostatic precipitators in secondary 84 - Idem. 85 - Renato de Jesus gave an interview to Vale on September 23, 2011. 89 - See the 1999 Annual Report. 79 - See the 2001 Annual Report – “Ação nas Comunidades” (“Community Action”) section. 86 - See
Vale Our History Vale Our History 266 267
Restored vegetation at Timbopeba Mine in Ouro Preto, Minas Gerais, in 1999.
Vale Our History Vale Our History 268 areas affected by mining to approximately the same conditions rehabilitation of degraded areas, environmental compensation, and 269 found before the start of activities. Three main methods formed the improvements to the quality of life in the municipality.97 backbone of this environmental program – hydroseeding; the direct Throughout the year 2000, the Master Plan for the Protected Green planting of seedlings and seeds; and soil regeneration induced Areas of Itabira was also developed. This was a pioneering initiative by organic matter – always planned in line with topography and to develop a joint program to preserve and protect woodlands in both the type of soil to be rehabilitated. The use of native species in private areas and on sites owned by the municipal government. The revegetation processes was always prioritized; the challenge was to implementation of the programs defined in the Master Plan was one restore the original ecosystems.94 of the conditions of the Corrective Operating License in Itabira.98 By December 1998, a total of R$430 million had been invested Official recognition of environmental issues, specifically in forest in restoring the area around Del Rey Mine in the municipality of protection, then expanded to the north of Brazil. One structural Mariana, Minas Gerais, as part of the Timbopeba Project.95 The main change was the official registration of the nearly 412,000 hectares transformations included environmental rehabilitation to enhance of Carajás National Forest and the announcement of an agreement the geotechnical stability of mining areas and waste rock piles, control with IBAMA to produce a master plan for the region. It was a kind of erosion by installing drainage and sediment containment systems, of draft for the organization of the National Forests of Carajás and and the preparation of substrates to restore soils and vegetation. Tapirapé-Aquiri, both in Pará. Across the country, National Forests After preparing the site, medium-term actions were implemented, are units designed to foster sustainable growth for forested regions. such as control of forest fires, fertilization of vegetation and In the case of the National Forests of Pará, which surround Vale’s maintenance of replanted areas. Everything was based on an mines, the overriding goal was to create plans to enable mineral environmental diagnosis of Del Rey Mine, conducted by Vale, and a exploitation alongside environmental preservation. This is no Plan for Restoring Degraded Areas, approved by the State Environment easy task and, to obtain good results, Vale used the pioneering Foundation (FEAM).96 experience it had gained at the Vale Natural Reserve in Linhares, The experience gained in Mariana was valuable when CVRD Espírito Santo. In both the north and south of the country, the aim implemented social and environmental initiatives in its hometown, was “ecological and economic zoning, and the study of programs Itabira. On May 18, 2000, Vale received a Corrective Operating License related to the sustained use of these reserves.”99 for Itabira Mining Complex. The license was obtained at the end of a democratic process involving the participation of all stakeholders, Air and water including many members of the local community, representatives of Continuing its project to reduce the impacts of its activities, the municipal, state and federal governments, and representatives CVRD began to focus more on air and water pollution. Control of of numerous organizations, not just from Itabira but from the atmospheric pollutants was – and continues to be – a fundamental whole of Minas Gerais State. The final approved text contained 54 question in the company’s environmental policy. In 1999, the last conditions, encompassing operational control of the mining process, stage was conducted in the installation of chimney outflow dust
94 - See the 1998 and 1999 Annual Reports. 97 - See the 2000 Annual Report. Sprinkler machines 95 - See Jornal da Vale, January/February 1999, no. 213, p. 11. 98 - Idem. at Tubarão Complex, 96 - Idem. 99 - See the 1998 Annual Report. Espírito Santo, in 1994.
Vale Our History Vale Our History Left: Flor de Carajás (“Flower of Carajás”), a sculpture by Franz Weissmann. Below: CVRD’s old logo on sacks stored in Parauapebas, Pará, in 2001. As of the mid-1990s, professionalizing environmental management at all business units was a strategic condition for CVRD
collection systems in iron ore pelletizing plants, and the same Effluent collection and treatment was also implemented on the results. The celebrations were marked by the unveiling of Flower of 270 occurred at lime hydration plants, at Tubarão Complex in Espírito Vitória-Minas Railroad (EFVM) and Carajás Railroad (EFC). The focus Carajás (“Flor de Carajás”), a sculpture by Franz Weissmann. Born 271 Santo. This measure complemented the electrostatic precipitators was on treating wastes generated by the maintenance and washing in Austria, this naturalized Brazilian sculptor, who works mainly and gas scrubbers installed previously in the region. The of locomotives and train cars in workshops located along the tracks. with iron plates, has been one of the main exponents of geometric program also involved improvements to water sprinkler systems, The target was to improve water quality in receiving bodies (the art in the country since the 1960s.108 containment of wastes during transfers between machines, and the final stage in the use of water in any industrial process), soil quality, In the following years, it was the pelletizing sector’s turn to implementation of a gas monitoring network in chimneys.100 and general hygiene and cleanliness conditions at facilities.105 obtain its certification. In July 1999, the Pelletizing and Metallic From 1995 to 1999, the environmental policy implemented at All of CVRD’s investments in sustainability were endorsed for Goods Department made Vale the first Brazilian iron mining Tubarão Complex aimed to improve conditions in Greater Vitória. their effectiveness by the ISO 14001 Environmental Certification company to receive ISO 9001 certification, following an audit Thanks to the particle collection system, a 62% reduction in total obtained by the company in the late 1990s and early 2000s. by certification entity DNV. This time, the attainment of the residue emissions was recorded.101 This was a notable advance and certification took place differently, especially in two aspects: the it contributed to cutting pollution registered in the region. Certifications inclusion of Kobrasco in the list of certified plants; and proof of On June 5, 2000 (World Environment Day), the Automatic Air As of the mid-1990s, professionalizing environmental management the capacity of pelletizing operations to develop and design new Quality Monitoring Network began operating in Greater Vitória. Using at all business units was a strategic condition for CVRD. Around products with assured quality.109 the most advanced technology at the time, the local environmental its mines, plants, railroads and ports, the company was ever more Finally, on June 22, 2001, a significant event, according to CVRD’s entities and the community began to identify the main sources concerned to install and maintain green belts, and emissions control performance report for the second quarter,110 was the inclusion of of pollution. The network was donated to the State Environment was adopted at all its operations in the North and South Systems.106 the Carajás Railroad (EFC) in the ISO 9002 certification. Over the Secretariat, and CVRD paid for half of the investment as well as the In 1998, the Technology and Support areas of Vale’s Non-Ferrous course of 2001, the total freight transported by the EFC and the operating and maintenance costs in its first year of use.102 Metals Department (DENF) obtained ISO 14001 certification for the EFVM reached 167.4 million metric tons, exceeding the previous The results, set out in the Greater Vitória Region Sources second time. Conducted by Bureau Veritas Quality International record of 164 million metric tons attained in 2000. In all, the two Inventory (2010), demonstrate that Vale accounts for a relatively (BVQI) on June 18 and 19, the audit recorded zero non-conformities. railroads transported 12.9 billion metric tons per kilometer (tku) small share of pollution in the region. Of pollutants collected, Vale’s unit in Santa Luzia, Minas Gerais, was the first in the company of general freight – up 4% from the previous record of 2000, of 15.7% came from the company, while 68.2% originated in vehicles to receive the certification, in April 1997.107 The international 12.4 billion tku.111 From that point on, managing to transport large circulating in the streets. In the specific case of carbon monoxide endorsement of the ISO 14001 series proved the balance between quantities of while maintaining high standards of quality would emissions, just 4.4% of the material collected originated at Vale, maintenance of profitability and the reductions in environmental be a key challenge. while vehicle exhaust and tires were responsible for 49.7%. Also impacts achieved by Vale over the years. concerned with water quality, the company invested in the Tubarão One of Vale’s biggest accomplishments of 1998 was the awarding Complex Effluent Collection and Treatment project. The main of ISO 14001 certification to the Carajás iron and manganese mines objectives were to reduce the amount of pollution entering water following an audit by Det Norske Veritas (DNV). The new certification bodies103 and to cut industrial water consumption.104 – added to the series of ISO certifications gained in the latter half of the 1990s – strengthened the competitiveness and image of Vale, 108 - Jornal da Vale, January/February 1999, no. 213. 100 - See the 1999 Annual Report. which became the first mining company in the world to attain such 109 - Jornal da Vale, July/August 1999, no. 216, p. 11. 101 - Idem. 110 - See
Vale Our History Vale Our History 8.4 Shipping and internationalization company, Navegação Vale do Rio Doce S.A. (Navedoce), which became the holding company for the Docenave Group. Its name The shipping system created by Vale do Rio Doce – featuring was also changed to Docepar S.A. At Docepar S.A.’s extraordinary general meeting of April 29, 1999, the payment of dividends was large ships and a port complex with support to receive them – was 273 the main element in the company’s fast commercial progress in the approved, with the delivery of shares in the new Docenave, which 1960s. It was in this period that company president Eliezer Batista continued to exist. Consequently, both companies became directly instituted the concept of economic distance, which would modify controlled by Vale,118 which at the time owned 96.84% of the latter.119 Vale’s export dynamics, especially to Asian countries. In May 1999, Docenave expanded its participation in Brazilian The plan created by Batista consisted of sending giant-capacity coastal shipping by entering the container transportation market. ships from Brazil loaded with iron ore and returning them with other To do so, it chartered four multipurpose ships, covering ports products. The volume of cargo was enormous, but the transport between Rio Grande (Rio Grande do Sul) and Manaus (Amazonas). costs were lower and so the net effect was always positive. The In November, this service was extended to Buenos Aires, Argentina, strategy played a key role in the most successful period of CVRD’s by chartering another ship. The Port Support Services area was also shipping company, Rio Doce Navegação S.A. (Docenave). restructured as a business unit, encompassing tugboats, with the At the beginning of the 1990s, transoceanic shipping was one of mission of raising the business’ share of this market. Of all the Vale’s main sources of income. Docenave participated actively in cargo transported during the year, 48% was iron ore, 23% was coal, bulk cargo transportation and had its own fleet of ships. In 1992, 13% was bauxite, and 16% was other cargo. This generated revenue it had 21 bulk carriers trading with all continents, carrying 28.9 of R$321.9 million.120 million metric tons of cargo per year.112 After 24 years of activity, the Seamar Shipping Corporation The results obtained in the subsequent years continued to continued to be responsible for most of Vale’s transoceanic improve, although the company had to reduce the size of its fleet transportation, while Docenave directly handled the coastal over time. In 1993, it had 20 ships.113 In 1994, the same number of shipping of dry bulk goods.121 In 2000, R$500.3 million of revenue ships transported 32.2 million metric tons of goods.114 In 1996, it was generated. Of the cargo transported, 53% was iron ore, 21% was had 18 ships of its own and another 25 chartered ships.115 In 1997, coal, 12% was bauxite, and 14% was other cargo. Coastal shipping it had 17 bulk carriers, three ore-oil carriers and eight tugboats.116 covering ports between Buenos Aires and Manaus generated In 1998, with 17 bulk carriers of its own and 25 chartered ones, revenue of R$58.6 million. Docenave’s fleet was then composed Docenave generated revenues of R$268.7 million.117 of 15 of its own ships, including five Capesize, eight Panamax and With the restructuring of Docenave in 1999, its operating assets directly related to shipping activity were transferred to its parent
112 - See the 1992 Annual Report. 118 - See the 1999 Annual Report (Financial Statements section). 113 - See the 1993 Annual Report. 119 - Idem. 114 - See the 1994 Annual Report. 120 - See the 1999 Annual Report (Performance > Logistics), available at
Vale Our History Vale Our History two Handysize vessels,122 with total capacity of approximately 1.5 While it harnessed the opportunities offered by new trading million deadweight tonnage (dwt),123 as well as 30 chartered ships.124 conditions in its neighborhood, Vale was also crossing distant In 2001, Vale decided to discontinue its long-distance continents to find partners. Through its subsidiary the Itabira Rio Doce (transoceanic) shipping operations. At the time, these operations Company Limited (Itaco), Vale, in conjunction with the Gulf Investment were no longer considered strategic for iron ore as the freight Corporation (GIC), acquired full control of the Gulf Industrial market offered more competitive prices. Accordingly, seven ships Investment Company E.C. (GIIC). This transaction was officially in its fleet were sold for US$55 million. Docenave’s activities now announced on October 6, 2000. focused on tugboat and coastal shipping services.125 Located in Bahrain, a small island in the Persian Gulf, GIIC was Docenave, now 100% owned by Vale,126 remained active in established in 1988 by the Kuwait Petroleum Corporation (KPC), 274 coastal shipping at leading ports between Buenos Aires and Kuwait’s state-owned oil company. GIIC owned and operated one of 275 Manaus. In 2001, the company handled 42% of Brazil’s total the largest independent iron ore pelletizing plants in the world, with container volume.127 The contraction in its activities and fleet led annual production capacity of 4 million metric tons of pellets. It also to a reduction in its revenues, but even so, in 2001 it accounted operated a port equipped to accommodate ships of up to 100,000 for 4% of Vale’s gross sales, or R$440 million.128 However, this metric tons, as well as a thermal power plant and a desalinization contraction was inversely proportional to CVRD’s expansion on the plant. The pellets that it produced were sold to steel mills around international market. From the 1990s to the 2000s, Vale’s activities the Persian Gulf, elsewhere in Asia and in North Africa.130 expanded around the world. As of the late 1990s, Vale made efforts to further internationalize The New York Stock Exchange its businesses. Its actions concentrated on partnerships in South By 2000, Vale had new businesses, new partners and operations in American countries capable of supplying minerals that Brazil various parts of the world. It was revitalized and ready to face new had limited scope to produce. In 2001, the company signed a challenges. Less than three years after it was privatized, CVRD took memorandum of understanding with Corporación Nacional del its biggest ever step in its internationalization process, definitively Cobre de Chile (Codelco), the world’s largest copper producer. This marking its presence on the global market. In July 2000, the shares coordinated action was aimed at the possibility of establishing a of Companhia Vale do Rio Doce – a Brazilian company with a 58- joint venture for joint copper exploration and mining by Vale and year history – were listed on the New York Stock Exchange (NYSE).131 the Chilean company.129 As of that moment, all investors could buy Vale’s American Depositary Receipts (ADRs) without portfolio restrictions and in a much more transparent market. Investors could trade Vale shares 122 - Bulk carriers are classified, in ascending order of cargo capacity, as Handysize, Handymax, Panamax and Capesize. A Panamax ship has the maximum acceptable dimensions to pass in reais (on the Bovespa), in US dollars (on the NYSE) and in euros through the Panama Canal. Capesize vessels cannot use the Panama and Suez canals, but (on Latibex, an electronic stock exchange for Latin American instead go around Cape Horn and the Cape of Good Hope, hence their name. shares).132 CVRD’s operating policies, environmental actions, market 123 - Deadweight tonnage is the unit that measures a ship’s capacity, including for fuel, strategies and commercial partnerships – in fact, all of its actions crew, cargo and so on. If one says that a ship has DWT of X, it means it is capable of transporting X tons. – would now be tracked day by day, minute by minute, by a group 124 - The other information in this paragraph was taken from the 2000 Annual Report, of investors across the world, attentive to the performance of the available at
Vale Our History Vale Our History Energy solutions electric power.10 Due to its own production, Vale did not face any interruptions to its operations at any of its units during the nationwide blackout of July 1, 2001 – a unique situation among major companies at the time. Energy is a fundamental input for the sustainability of Vale’s activities and is part of its business strategy. As a The generation and especially the sale of its own energy began to present results as of 2005. Of its total 11 major consumer of this resource, the company’s priority is to continually improve its energy supply mix to meet consumption of 16.9 TWh, 9% was supplied by its own hydroelectric plants. Self-generation provided an estimated 12 the demand of its global operations.1 Accordingly, Vale invests heavily in generating its own energy, always seeking savings of R$110 million in electricity charges. sustainable, clean solutions of low environmental impact. The company now has hydroelectric power plants in In December 2007, the company, in partnership with BNDES, established Vale Soluções em Energia (VSE), with Brazil, Canada and Indonesia. the objective of developing technology programs, focusing on environmentally sustainable processes and the use 13 When investing in energy, Vale acts in four main areas: the development of renewable sources; the creation of of renewable energy sources. The following year, the company published its Corporate Climate Change Guidelines, mechanisms for reducing its own consumption; the pursuit of efficient energy supplies that ensure the sustainability with the aim of cutting its greenhouse gas emissions. In 2008, just 7.8% of the company’s carbon dioxide emissions 14 and competitiveness of its operations; and value generation during the development of mining projects through came from its electricity consumption, thanks to the strong presence of hydroelectric sources in its energy mix. more reliable and cleaner energy solutions. Vale now has stakes in nine large and four small hydroelectric facilities in operation, in Brazil. The large Over the years, Vale has sought to diversify its energy generation investment projects. The sector became a part plants are the following: Igarapava, Porto Estrela, Funil, Candonga, Eliezer Batista, Amador Aguiar I, Amador 15 of the company’s activities in October 1997, when it established its subsidiary Vale do Rio Doce Energia S.A. (Vale Aguiar II, Machadinho, and Estreito. The four small hydro projects are Glória, Ituerê, Mello, and Nova Maurício. Energia), which works in the oil, natural gas, solid fuel and electricity sectors.2 These investments enable the company to currently supply 45% of its electric power needs from its own 16 One year later, in December 1998, the Igarapava Hydroelectric Plant came on line in Rio Grande, on the border hydroelectric plants. of the states of Minas Gerais and São Paulo.3 It was the first hydro plant to be administered by a consortium of Vale also invests in its own energy supplies outside Brazil. In Canada, the company supplies part of the power which Vale was a member. The following year, Vale Energia was authorized to sell its output on the Wholesale used by its Sudbury operations in Ontario, from five generating stations. In Voisey’s Bay, 100% of the energy Energy Market.4 consumed is produced using diesel generators. In Indonesia, practically all the power required to operate the local With the implementation of a new corporate governance model, the electricity generating business was electric furnace is supplied by three hydro plants on the Larona River (the Larona, Balambano and Karebbe plants). allocated to the Business Development and Company Stakes Executive Department.5 At this time, the company’s While intensifying investment in hydro power based on each region’s potential, Vale has also pursued other 276 investments in building new hydroelectric projects amounted to US$50.3 million.6 options for clean, sustainable energy. One example of this is the company’s project to generate energy using 277 The sector’s deregulation process and the rising trend in electricity prices, which started in 2000, were key factors palm oil. The decision to invest in biofuel gained force when Vale incorporated Biopalma da Amazônia S.A., in in Vale’s decision to prioritize the energy area. In November 2000, the Board of Directors approved the creation February 2011. of the Energy Department, with the purpose of promoting balance between own production and consumption of Most of the oil produced will be used to power Vale’s locomotives and large machinery in its operations in Brazil, 17 electric power.7 using “B20” (a blend of 20% biodiesel and 80% regular diesel). Together with the specific work of producing fuel The electricity rationing that occurred across Brazil in the second half of 20018 showed that Vale’s strategy oil, Vale, through Biopalma, has implemented projects to restore and regenerate 90,000 hectares of native forest of investing in hydroelectric projects was prudent.9 In that year, the company consumed a total of 12.5 TWh of in the Vale do Acará / Baixo Tocantins region of Pará. In addition, a family farming program has been planned for 2,000 families in the region. Vale’s idea is for families to produce palm oil on their properties, with the company providing technical assistance and guaranteeing to purchase their output. By diversifying its investments in energy generation projects, Vale seeks to reduce its costs and protect itself from electric power price volatility, as well as regulatory uncertainty and power shortage risks. In addition, the Aerial view of the 1 - See the 2010 Form 20-F Report, pp. 17-18. company works to align itself with global issues related to climate change, to ensure the availability of this resource Igarapava Hydroelectric and contribute to environmental conservation. Plant (on the border of 2 - See the 1998 Annual Report (Business Areas – Other Businesses – Energy), available at
Vale Our History Vale Our History