Varig Airlines of Brazil: an Enterprising German Investment

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Varig Airlines of Brazil: An Enterprising German Investment

Marion K. Pinsdorf Fordham University

Assimilatedalmost unto invisibility into the feijoadaof Braziliansociety today is the important trans-Atlantictransfer of advancedtechnology and education,of innovationand financing by Germans.Development of Brazilian airlines, espedally early route expansionis so "interwovenwith foreign interests"that the perspectiveis badlyskewered without reference to their entrepreneurialpromotion of commercialaviation [7, p. 353]. From their beginningsin Brazil, Germanssought the niche,the unœflledneeds. They viewedthe needfor transportationboth as a sinewof modernizationand as a meansof linking and openingvast isolatedareas, of buildingair bridges (PonteA6rea) betweenmajor cities. Germansbuilt and/or operatedcoastal shipping, railroads, and roads. However,their mosteminent, lasting, and profitableexample is Brazil'sflag air carrierVarig, largestairline in Latin Americaand one of the mosthighly capitalizedcorporations in Brazil. At leastthree groups contributed; Germans residentin Brazil, concentratedin the three southernstates of Santa Catarina, Paranti,and Rio Grande do Sul, trans-Atlantictransfer agents, and German- basedcompanies. Germans who migrated to Brazil from the 1870s to the 1920s transportedmodernized skills and enterprisingattitudes crucial to the developmentof the Urwald and urban areas they entered. Too often overlooked,these Teuto-Braziliansinfluenced education, philosophy and culture;distinguished the areas they settledeconomically from the rest of Brazil.In distinctionto the largefazendas producing sugar and coffee,or the cattleranching of the pampas,they established subsistence farming and small businesses. As outsidersto the dominantLuso-Brazilian milieu, theyfunctioned as innovativeentrepreneurs. Outsiders or newcomers--theGermans were both in Brazil--had more to gain and lessto lose than establishedcitizens. As a result,they soughtopportunities through fresh and differentoutlooks, and tA longervetoion ofthis paper is available from the author on request (Graduate School of Business,Fordham University, 113 W. 60th St., New York 10023).

159 160 oftenfunctioned as agents of change.Essentially they updated "old means to novelends" [25, p. 351]. In small businesses,niche industries,and agricultureGermans contributeddisproportionate to their numbers.They analyzedwhat was lackingand produced it. Theirrole was crucial to the developmentof food, beverages,paper, small industries such as woodworking and tanning, foundries and textiles,furniture making and metallurgy.In agriculture,Germans initiatedpoly-culture and technical improvements such as the plow, harrow, andfour-wheeled cart; introduced products such as sugar cane and tobacco to theSouth. But the Germans'most profitable and continuing role was in transportation. Sincetheir economicascendence in Brazil duringthe nineteenth century,Germans have realized that progresscomes upon the sinewsof transportation--firstcoastal shipping, then an internalnetwork of roadsand railroadslinking previously isolated cysts of settlements,but most eminently airlines.Varig, Brazil's internationally respected airline, was founded in 1927 .primarilyby Teuto-Braziliansin Porto Alegre, Rio Grandedo Sul. The nnpetuscame from four sources: Santos Dumont, advances in aviation during World War I in Germany,Rio Grandedo Sul'smilieu, and its trans-Atlantic ties. While Germanstransformed advanced technology and market opportunityinto a highlyprofitable airline, Brazil claims"priority in the inventionof a heavier-than-airflying machine" [23]. through a Paulistaof Frenchheritage. On September13, 1906,Santos Dumont flew 700 feet in 21 seconds.In the1920s he demonstratedthe feasibility of trans-Atlanticflights usinga 6erman monoplane. As a youthon his father'scoffee fazenda near Silo Paulo,Dumont's dreamsreflected his French heritage--he realized the prophetictales of Jules Verne. And his Portugueseambience. Following Cam6es, he wantedto navigate"through seas never before navigated." Like so many early aviators, he succumbedto the romanceof flight. He envisionedplanes as "Birdsof Progress",a meansof union, a New World antidoteto Old World enmities. He envisionedplanes as the onlyway to protectlong, vulnerable New World coastlines.Planes could further commercial and political relations between nations,link capitalsof the WesternHemisphere--Pan Americanism on the wing. Airlines in SouthAmerica, Dumont reasoned,would overcome obstaclesgeographic and political. Later, Varig proved the profitabilityof linkingthe vast interior of Brazil. ButDumont's Birds of Progress soon became Birds of Prey, destruction quicklyreplaced hope. In 1906,no one had flown;by 1914hundreds of machinesexisted [23, p. 260]. Insteadof "ahighway to pacificglories", they ledto death.During World War I, planeswere improved in size,some were madeentirely of steel,and equipped with aircraft guns, Still, Dumont hoped that if an "airplaneshowed itself so useful in wartime"it couldbe evenmore importantin peacetime[23, pp. 184-189]. In a tribute to Dumont, the Brazilian Minister to London said: he "navigateda flyingship and straightenedits courseagainst and acrossthe wind. He thoughthe sawbefore him a flockwhich would join in andshow 161

that the future conquestof the air had alreadybeen predicted by this solitary swallow."[23, p. 260]. Dumont--inhis ethnicheritage, his frequenttrips to Europe, mostlyFrance, and the encouragement,offered him there--wasa forerunner, albeit a romantic one, to the German ventures. At the outbreakof war in 1914 "the airplanewas still a toy, though potentiallya deadlyone [14].By 1915,Germany had 1,200combat planes; for severalmonths that year, "thanksto AnthonyFokker's ingenuity", Germans dominatedthe air. That spurredenemies and alliesalike to innovationand increasedproduction [14]. By war'send, the fabledGerman ace, Manfred von Richthofen,aka the Red Baron,seaplanes, flying boats, land-based fighters, such as the Fokker D-7, probably the war's best fighter, captured imaginations,military, individual and commercial.Although revolutionary advances,such as the all metal Junker monoplane,were being made in Europe,the United Statesand certainlyBrazil, laggedbadly [14]. Even though"giant strides were made in aviation,"the men not the machineswere rememberedvividly, even romantically[14]. But soonwar heroeswere unemployed;their warplanes,ill-suited for civilian use, were consignedto surplusand dumpedon the market. Rather than connotingthe heroic and glamorous,"grim associationsof violenceand death clung"to airplanes[14]. Men, skills, and equipmentwere obviouslyseeking new opportunitiesin new lands. In an irony that would have greatlyentertained Sir John Maynard Keynes,the highlyimpractical and unrealistic Versailles Peace Treaty that he thoughtwould painfully demolish any hope of Europeanprosperity, actually forcedingenuity within Germany, forced it to spreadits entrepreneurialseeds most eminentlyin the United Statesand Brazil. Before the war, German prosperityenjoyed three supports:thriving overseas trade, ever larger and morediversified foreign investments, and aggressive promotion of high-quality, reasonablypriced manufacturedgoods. To Keynes the Versailles Peace conferencein its wickednessand folly "cunninglydevised" a settlement"to injureGerman overseas trade." [16, pp. 19-21]. The VersaillesTreaty severely curtailed any German activity--industrial, militarytraining, even advocacy-- which could abet resurgenceof Germany's power. Suchstringency and reparationsonly worsened the naturalaftermath of war--shortageof funds for any development,in this case, of better airplanes.When militaryaviation was blocked, commercial opportunities-- freight and passengers--surged.Covertness was key. When the Treaty "forbadeGermany to havean air forceand banned [any] aircraftconstruction, the Junkerfactory was movedto Danzig."When constructionof civil aircraft was allowed,wartime manufacturers--Heinkel, Dornier,Focke-Wulf and the Junkerswere ready. Youngdesigners such as Willy Messerschmittbuilt civilianplanes that later evolvedinto fighters. In 1926,Deutsche Lufthansa, a civilairline, was foundedas a statemonopoly. Through all the restrictionsand geographicdispersion, the Old Comrades,associations of ex-air crews,kept in touch, sometimesovertly, sometimescovertly, to study other air forces, and the "new problems increasingspeed, range and firepowerwould bring to aerialwarfare" [9]. 162

Journalssuch a Die Luftwachand DeutscheWehr carried original articles on all aspectsof flying, but also translationsdetailing important developmentsin aviationworld-wide. Of highpriority was "the possibility of quicklyconverting commercial planes for military use"[9]. Not only planes,but also pilots who flew commercialwere easily convertedto the military. Secret training of air crewswas conductedin Russia until the advent of Hitler, then with Italy. "Lufthansapilots on extendedleaves or youngmen mad aboutflying" often trained covertly for important military duties they would assumelater. This dispersionand deceptionended in March1935, when Hitler toreup theVersailles Treaty and militarytraining began openly [9]. Germaninventors were making important technological breakthroughs (all metal planes,with smoothmetal surfaces,to reducethe high drag of corrugatedmetal used previously). This introduced the modern"stressed-skin concept,"enhancing the wing's strengthand load-bearingcapacity. The Junkersand AnthonyFokker put the monoplanein serouscompetition with bi-planes[32, p. 131]. Brazil attractedmany European Germans either weary of the war or fearingan encore. Many headedfor the statesin the BrazilianSouth when Germanwas then the linguafranca. Varig'shome state Rio Grandedo Sul, actuallya tri-culturalstate--Portuguese, German, and Italian with a spicingof the neighboringSpanish countries--is distinguished by its frontier mentality and militaristic traditions.The ever vigilant guardian of the national boundaries,the statesafeguarded Brazil's expansion and was imbued with the bandeirantespirit. Although speakingof language,Moyses Vellinho's conclusioncan applyequally to the state'seconomic innovation: it "doesnot keep its windowsclosed to the renovatingbreeze of time and environment" [14, p. 181. In this state traditionalGerman interestin transportationcoalesced with cutting edge aviation technology,overseas German techniciansand financierswith Teuto-Brazilians,savvy in turningunsatisfied niche needs into profit, and inventionwith needsfor unitinga hugecountry, plagued since its establishmentwith unconnectedarchipelagoes of peoplesand a narrowcoastal settlement. Transporthad been the spineand pride of German developmentin Brazil. Blumenau,considered the Meccaof Germanism,from its foundingin 1848until 1919applied 63 percentof its total revenuesto roadsand bridges [22]. Germansfrom Russiaorganized wagon transport and operatedit as a monopolyon the Parantiplateau to the coast.In PetropolisGermans played a similarrole in carryingmerchandise and passengersbetween Rio de Janeiro and Juiz de Fore [13]. By 1926,the yearbefore Varig wasfounded, German coloniesin the Southhad the œmest natural surface roads in Brazil[22]. Even where Germanswere few or their coloniesnonexistent, they pioneeredroad construction.As they would later in nationalaviation, Germans assumed managerialroles in importantsometimes risky ventures. Daniel Pedro Mueller, in 1820 appointedgeneral supervisor of traffic on Sio Paulo roads, directeda road project of great economicpotential--hacking out a direct, albeit serpentine,line of communicationand transportationbetween Silo 163

Paulo and its port of Santos[11, p. 241]. As coffeefazendeiros in the Silo Paulo hinterlandbegan to producefor export,the port facilitiesof Santos loomedever more financiallyimportant. While Germanfinanciers, both those resident in Braziland in Europe, were interestedin backingroads, shipping and airlines,they seldom invested in railroads. That was British turf. But German engineersand technicians oftenconstructed stretches of track. They so encouragedthese links between settlementsthat GilbertoFreyre wrote: the railroadwas the iron embraceof the four southernprovinces [11, p. 241].But vastdistances, forbidding terrain, thin populations,plus transportation,fragmented and gearedto an export economy (radiatingout from ports) couldserve only localpurposes, not internalcohesion. The link, the prod,the revolutionin socialbehavior came from airlines."The economic stimulants which changed frustrating stagnation into dynamicgrowth" were largelyairlines "which provided the vital nerve systems".Germans were a key [7, p. 333]. Railroads,steamships and planes all indicateGerman entrepreneurs were practicingbottom-up innovation and creativedestruction long before JosephSchumpeter preached his eclecticeconomic ideas. He documented whatlate nineteenth century Germans were doing--sweeping out old products, old enterprises,and old organizationalforms by introducingnew ones[22]. In my journalwritten in Blumenauon October27, 1973,the authorobserved Schumpeter's"oxymoronic metaphor" of "creativedestruction." "Leaving Blumenau,we paralleledthe railroad tracks down the Itaja/River. The tracks are abandoned,overgrown with weedsand smallbushes. To think how men struggled to lay them, how much they meant to the colonistsand to commerce...andnow nothing. Men's strugglesare often for naught and forgotten,superseded by better more profitabletechnology in another generation." Steamshiplines not only transportedimmigrants to Brazil at great profit,but theyencouraged a constant trans-Atlantic flow of people,ideas, and money. In the Braziliancoastal cities Germans saw need to link Rio Grande with Silo Paulo and Rio de Janeiro,and so they built the first boats. They also establishedprofitable import-export businesses, organized trade and maritimetransport with Germany,and despite such obstacles as high export duties--15percent on Dutch and Portuguese products, 24 percenton German- -competedsuccessfully [24, pp. 236, 449]. As in the fatherland,Teuto-Brazllians were quick to sensethe opportunities,organize, and experiment. Brazil so large, lacking any aviation expertiseof its own, save the heritageof Dumont, and later astridethe developingair routesto Argentina,then the continent'swealthiest nation, was a catnipof opportunity[7, p. 352]. Ventures,international and domestic, beganblooming. Aviator JorgeHenrique M611er joined JoseBernardino Bormann to founda BrazilianAir Clubin 1911.It becamethe principle source of training pilotsand encouragingaviation. Even the 1915crash of RicardoKirk, also Germandespite his name, did not diminishthe Club'sardour. They dreamed, ashad Dumont, of the expandingand positive aspects of flight. Flightswould fosternational unity, would change previously inhibiting concepts of timeand 164

distance. Startingwith mail flights,planes could explore interior areasstill remote and unknown. Planeswould be the base;without them Brazil would not progress[7, pp. 454-460]. ThroughoutVarig's early history, as well as that of Aviancaand other SouthAmerican airlines fostered by Germans,ties across the Atlantic--planes, pilots,managers and funds--were crucial. Only afterWorld War II didBoeing and Lockheedreplace Junkers and Focke-Wulfs. The first solidmanifestation of this trend came on May 5, 1924 when the Condor Syndikatwas organizedin Berlin for the exclusivepurpose of promotingsales of German commercialaircraft overseas. Condor was sponsoredby DeutscherAero Lloyd, A.G. a leadingGerman airline and ancestorof Lufthansa,Schlubach Theimer, a Hamburgtrading company, and Peter Paul yonBauer, an Austrianemigrant to Colombia[7, p. 338]. On November19, 1926,the first commercialaircraft to fly a revenue- earningservice in Brazil arrivedin Rio Grande. The Dornier Wal "Atlfmtico," shippedfrom Hamburgat the expenseof DeutsheLufthansa, was flown by Fritz Hammer, Max Sauer and Herman Teegan. To mark not only the occasion,but to demonstrateits safetyand reliability,the former chancellor of Germany,Dr. Hans Luther, was a passenger.On New Year's Day 1927, the "Atl•ntico" made a demonstrationflight from Rio to Florianopolis, captainedby Rudolf Crameryon Clausbruck,newly arrived from Germany, where he had flown the Baltic region for both DeutscherAero Lloyd and Deutsche Lufthansa. Also aboard was Dr. Victor Kondor, then Brazil's transportationminister. Later the sameyear, Linha da Lag6a inaugurated servicebetween Rio Grande, Pelotasand Porto Alegre [7, p. 340]. The groundworkwas laid for a majorproject--Varig. Like earlier German ventures,the inspirationsprang from need. A German World War I pilot, Otto Ernst Meyer was workingfor Lundgren Brothers,a Recifetextile company with subsidiariesand associates throughout Brazil. He "was greatly inconvenienced"traveling extensivelyon the "uncoordinatedand incompleterailway system" and by shipfrom Recife to Rio, wherehe livedbriefly. He soonidentified the needfor an airline. He and his colleagues,Hans Joestingand Hans Cronau,attempted to establish air transportcompanies in 1921 and 1924, unsuccessfully.Acting on his resolve,Meyer movedto Rio Grandedo Sul to seekpractical and financial supportfrom its large German population. ThroughAlberto Bins, then presidentof Porto Alegre'sChamber of Commerce,Meyer obtainedstate financialsupport. Bins,even more than Meyer, exemplifies innovation, the importantrole of German-Brazilians in the economic life of Rio Grande and crucial ties with Germany.Born in Porto Alegre in 1869,Bins, son of an immigranttailor turned merchant,typically, received some of his schoolingin Germany. Joininga metalworks firm MPA in PortoAlegre, he becameits managerin 1904and quicklyexpanded the rangeof its products.Diversification and new venturesattracted him as it did many Germansin Brazil. He enteredrice farming,soon becoming president of PortoAlegre's Commercial Association, then organizeda rice growerssyndicate. Bins' successas businessmanand organizercannot be attributedonly to administrativeand entrepreneurial 165

prowess,but alsoto his connectionsas a governmentofficial. He servedon the municipalcouncil from 1890to 1913,as a stateassemblyman until 1928, whenhe becamePorto Alegre intendantfor ten years[18]. In 1926, Meyer "naturallywent to the German commercialaircraft industry,"then "producing the world's most advanced load-carrying airplanes." On November1926 he signedan agreementwith the CondorSyndikat in Hamburg"to allocate 21 percentof Varig'sshares to Condor"in returnfor an airplaneand necessarytechnical support. Mutual opportunitysealed the deal. While Meyer introducedCondor to Brazil, "it recognizedthe entr6e as a goldenopportunity and seizedupon it with "calculatedefficiency", thus providing"a newimpetus to the corninertialair transportindustry in Brazil." "A successfulairline dependson good fmance,good management,good aircraftand goodroutes." Varig eventuallyenjoyed them all [7, p. 339]. It waseasy, then, to convinceDr. Victor Kondor,a Germanfrom Santa Catarina,when minister of transportation,of the importanceof air. He had studiedGerman pilots, who in 1926had formedthe CondorSyndicate and flownthe firstexperimental flights in SouthAmerica. They demonstrated the feasibilityof airlines. A groupof ten underwriterswas formed, who would later becomethe incorporatorsof the new company: Bins,Jos6 Bertaso, CharlesFraeb, Arthur Bromberg,Rodolpho Ahrens, Adroaldo Mesquita da Costa, Emilio Gerturn, Waldemar Bromberg,Jorge Pfeiffer and Ernesto Rorerround.With theirbacking Meyer went to Germanyshopping at major companiesand industriesfor crewmembers and aircraft. As a result,Varig (Viacio AereaRio-Grandense]. was formed on May 7, 1927in PortoAlegre on Meyer'sadvice and inspiration.He becamethe managingdirector, Captain Van Clausbruck,technical director, and engineer Captain Fritz Hammer, deputydirector. One of Meyer's first hires, a secretary,Reuben Berta, became his successor as Varig president in 1941.The 550 shareholdersrepresented Porto Alegre, Pelotas,Silo Leopoldo,Rio Grande,Novo Hamburgo and Cachoeir6do Sul. Variginaugurated Brazil's first regularair servicebetween the citiesof Rio Grande and Porto Alegre. The airline flew Junkers, Messerschmittsand Foche-Wulfs leased from Condor [7, p. 404]. Not until 1933 did a Brazilian--SeverianoPrimo da FortsecaLins--pilot a Varig flight [7, p. 405]. In 1934,the CondorSyndicate, in cooperationwith Germanpilots and technicians,founded a secondairline VASP (Viac5o A6rea Silo Paulo), patternedafter the Reich'sLufthansa. UsingJunkers obtained through TheodoreWille and Company,a Germanimporting firm, and led by Luis Weber,Vasp directly linked Silo Paulo, with its developing industrial contacts andwith Rio. Its Rio-SiloPaulo flights inaugurated the air bridge(or shuttle) conceptbetween major cities. Eventually,Vasp developedlines into the interior of Silo Paulo State, to Goias, and even to the Mato Grossoborder city, Corumbl. Some observerssaw Vasp retracingthe steps of entrepreneurial Bandeirantes,who pioneeredthe openingof the Silo Pauloplateau. R.E.G. Davies, historian of Latin American airlines, seesthe tie as so close and important,he entitledone of his chapters,"Bandeirates of the Air". Like airlines,these SixteenthCentury entrepreneurs sought wealth in Brazil's 166 interior,thereby revolutionizing Brazil's economy. Germans pushed into the interior first in UrwaM settlements;later in airlinks,for example,to Corumb•, Cuiabaand CampoGrande, Mato Grosso[7, pp. 380-1]. In 1990,Vasp was privatized[7, pp. 457-8]. All airlines under German influence in Brazil courted serious future difficultiesby followingold patternswith entrepreneurialzeal. Early German- speakingsettlers sought opportunities by pushinginto the extremitiesof the UrwaM and seekingthe market nichesin need of productsand services, SyndicatoCondor was following this familiar pattern--establishing bases and routesegments at the furthestextremity of a trunkroute, opening virgin areas, thenfilling the gaps [7, p. 347].This is demonstratedtechnologically with mail routesand zeppelins as well geographically. Instead of carryingmail purelyby surfaceships, Germans introduced a sea-aircombination, using zeppelins. The "GrafZeppelin" transported mail from Friedrichshafento Recife, thenconnecting with Rio. From thereCondor distributed the mail to German communitiesin the south.Even though Zeppelins made regular runs between Friedrichshafenand Recife, they were soonsupplanted by faster aircraft. Unfortunatelythe Hindenburg tragedy in theUnited States demonstrated the dangers.Germany also trained pilots who would extend Germany's air reach in SouthAmerica. They experimentedwith catapultedcraft. In 1934,the German-Brazilianpartnership gathered momentum when Deutsche Lufthansa waspermitted to fly withinBrazil. The zenithof passengerand mail service betweenEurope and SouthAmerica was reachedthe followingyear when sixteenround trips, carrying1,006 passengers, were completed[7]. Nationalismand war werebeginning to cloudVarig's operational and financial success. Shadowsof warningsbecame concretewith President Vargas' 1937 decree outlawingany public use of any languageexcept Portuguese--astrike at German,the linguafranca in the southernstates and other German-Braziliansettlements. Vargas' politicsand world turmoil focusedfears on the extensiveGerman-Varig ties. Varig initially had financial ties with the Berlin-basedCondor Syndicatewhich initiated commercial aviationin Brazil. Varig'splanes and pilots were almost exclusively German; itscompany officers German-Brazilians. Foreign birth created few problems, when in 1934, Vargas decreedall pilots flyingBrazilian registered planes domesticallyor internationallymust be Braziliannationals. The pilotswere simplynationalized. However, the more restrictive1940 rule that all pilots mustbe nativeborn, createdserious shortages [12, pp. 388-389].Ironically, a verysmall number, estimated at fivepercent. of Germanswere even slightly interestedin politicsor military use. Rather, they were aviationpioneers imbuedwith the excitementof airline expansion[12, p. 375]. The tensionsof the times,particularly concerns about German control of Varigand the ColombianAvianca, with its proximityto thePanama Canal, were bestrecorded by journalistJohn Gunther in InsideLatin America. In 1940, he wrote that the German or German-dominatedairlines in Latin America,"were throbbing arteries of thefifth column." German pilots trained for yearsover the terrain,"know every inch of strategicterritory." They fly "everyinch of the exposedBrazilian bulge, penetrate deep inland," go just 167

wherestrategic considerations are the mostpressing. "Germans do everything theycan to maintaintheir services." Davis, writing later in 1983 when German hysteriawas gone, saw chargesof politicaland military designs very differently. Rather than airlines providinga logisticaland technicalbase for nefariousGermans expansion or a dangerto the PanamaCanal, Davies saw simplebusiness opportunities. Developingremote areas of the Northeastand Acre mademore profitable businesssense than competingin denserpopulated areas already well served by air. Rather then beingfeared, Condor was welcomed by localauthorities. If some planeshad bomber design,that was simply what Germanywas producing.Davies concludes,

evidencewas circumstantialand hypothetical. While the potentialfor a spectacularmilitary adventurecan be discerned from the map of German airline associatesin SouthAmerica, nothingever happened to suggestthat suchan ambitiousplot was evencontemplated [12, p. 375].

Traditionalquests to fill marketniches were invested by the temperof the times with sinisterplans of conquest. Gunther notes that Syndicato Condorhad a "bigfleet of Junkers";most its pilotsnationalized Germans. It seemeda sinister,intricate network to Gunther--morethan 10,000miles flown to the Straitsof Magellan,west to Boliviaand Peru. He citeda January1941 ForeignAffairs article by Melvin Hall andWalker Peck, "Wings for the Trojan Horse," for a completeaccount of how the German airlineswork. In contrast,the United Stateshad minimal commercialaviation ties with South America[12, pp. 19-20]. As with all German-ownedoperations in Brazil,when war wasdeclared betweenthe two nations in 1942,Brazil assumed control, firing even Brazilian- born workers. Meyer, feelinghis German backgroundcould causeVarig problems,resigned. Berta becamepresident. By then, however,Brazil had a "networkof air routeswhich out strippedin paceand imagination"ideas of economicdevelopment. Airlines were the "communicationsnerve system." EveryBrazilian state and most cities were served by airlines,connecting them swiftlywith mail,freight and passengers, to otherBrazilian and international cities[7, pp. 404]. FollowingWorld War II transportationreceived great attentionand massivesums. But nowthe impetuswas Brazilian not from overseas.Moving peopleand the goodsto sustainthem in a territoryof 8.5 million square kilometers,the "marchapara o Oeste,"and PresidentJuscelino Kubitschek's dreamof openingthe interiorwith a capitalin Goias,linked nationally by a roadsystem all dictatedthe primacyof transportation.The TargetProgram of the 1960s,recognizing neglected, insufficient transportation as a principal obstacleto economicdevelopment, assigned it higheconomic priority. Varig playedsuch a majorrole in developinga widespreadmodern air networkit promptedthe late CharlesWagley to say in 1960 that Brazil jumpedfrom the oxcartage to the air agealmost overnight. By 1968airlines 168

carriedover 3 millionpassengers, 3.5 millionkilos of mail, and37 millionkilos of air freight [26]. Althoughgreatly muted, the Germanheritage remains among some of its senior executives.President Berta was suecededin 1966 by Erik de Carvalho.In 1979,Harry Schuetz,one of Varig'soldest employees, became president. Hello Smidtgreatly expanded both domesticand international routes from 1980 to 1990. Rubel Thomas currently heads Varig. In continuousoperation for 65 years,Varig is now one of the world'slargest airlinesand the onlyone employeeowned [29, 30]. In 1990it carried598,027 passengersdomestically and internationally,logging 17,383,643 passenger- kilometers.Among the 19 LatinAmerican airlines, Varig ranksfirst in terms of kilometersand hours flown, cargo transported, passenger-kilometers, route systemsand number of employees,28,500. Comparedwith the 149 carriers worldwide,Varig rankstwenty-first in hoursflown and passenger-kilometers, twenty-seventhin passengers,twelfth in cargotransported, and thirteenthin numberof employees.Varig serves45 internationaland 75 Braziliancities with 102 aircraft. Varig carriesmore air freight than any other SouthAmerican airline and ranksthirteenth in the worldin scheduledfreight ton-kilometers. Cargo rangesfrom machinery,electronics, and pharmaceuticalto horses,cattle, and tropicalfish and fruits.Varig's maintenance, reflects the thoroughnessof its founders.The program,designed to meetand surpass industry standards, is alsoused by the BrazilianGovernment to serviceits militaryaircraft. Testing, maintenanceand overhaulof enginesfor military,commercial and passenger aircraft of any size can be completedat Varig's industrialmaintenance complexat the Rio de JaneiroInternational Airport, the largestcomplex of its kind in South America. In 1954,to mitigatefinancial risk, Varig begandiversifying with the establishmentof SATA, a groundhandling company. Rototur Air Charters wasadded in 1969.To diversifyfrom air transportationservices, Varig began Agripec,an agriculturalenterprise in the NortheastState of Maranhaoin 1973. Half the 45,000-acrecomplex will be preservedin its naturalstate, the balancededicated to farming,cattle and poultryraising. However, as in the 1940s, events,economics and politics largely externalto airline operationsare impactingVarig. Its officialshold "mixed views" about Brazilian President Fernando Coilor de Mello's liberalization of civil aviation,but are "pursuingadvantages of the new environment." During 1990,Varig weathereddifficulties created by the PersianGulf war,national economic problems, and the deathof its PresidentHelio Smidt. In response,Varig reorganizedits senior managementunder Smidt's successor,Rubel Thomas,and decentralizeddecision-making to facilitate faster responsesto an increasinglycompetitive market. Modest revenue growthwas expected in 1991. One reasonfor suchslow growth is the generalBrazilian economy and proceduralchanges. To eradicateover-regulation, President Collot granted greaterflexibility in governmentapprovals to buy aircraft,fares and change routes.Also, Varig's once unique position as Brazil's only international long- haul carrier is gone. Privatizationof Vasp, creationof Trans Brazil, and 169

openingof internationalroutes, primarily to AmericanAirlines, actions taken quickly amid general economic instability, have heightened market competition. Remarkablebusiness success, however, did not obscurethe innovative socialheritage of the Teuto-Brazilians,who built theirown schools, churches, socialclubs and other infrastructurethroughout the South. After assuming the presidencyfrom German-bornMeyer in 1941,Ruben Berta took steps toward mutual ownershipby Varig's employees. Berta establisheda foundationfirst to provideshared ownership, then to fund socialassistance programslacking in thepublic sector--free medical and dental treatment, low- interest loans, subsidizedmeals and vacation retreats. Berta's guiding preceptswere privateownership "and respecting in everyman his dignity." Upon his deathin 1966,while still president, the foundationwas renamed in his honor. Otherexamples of trans-Atlantictransfer from Germany to thebenefit of Brazil could be cited: the extensivefamily businessesof H. Stern, internationaljewelers, poet-businessman Augusto Frederico Schmidt, the Klabin and Lundgren families, who produced powerful industrial conglomerates,even the military-managerssuch as President General Ernesto Geisel,son of an immigrantLutheran pastor, who headedPetrobras before becomingpresident. Today, Teuto-Brazilianbusiness has melded into the mosaic that typifiesBrazil, but westernGerman ties have been spectacular since the 1970s in everyarea of trade,commerce and investment, according to JordanYoung. More than 900 German companies--includingsuch well known giantsas Volkswagen,Siemens, and Mercedes-Benz--operate in Brazil. Joint projects-- nuclearresearch and construction, rocket and space probes, and ship building could, accordingto Young, not only replace that special U.S.-Brazil relationship,but producean "interlockingalliance" that reaches well into the future [35].

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