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75production and export of pellets has gained a prominent place in the company’s results, making the product as important as raw iron ore.

3.2 CVRD and government policies

The 1950s marked Companhia Vale do Rio Doce’s entry into the global iron ore market. The advances made this decade were mainly the result of modernizing the company’s mine-railroad-port complex and changing its pricing policy. In 10 years, the amount charged per metric ton on an FOB basis doubled.6 And that wasn’t all: CVRD’s markets diversified, it reformulated its commercial policy, and former intermediaries were replaced by exclusive agents in consumer markets. The new demands of global steelmaking were reflected in the output and quality of Brazilian ore. In the financial area, the company’s “pre-bankruptcy” status of the previous decade was overcome – its debts (external and internal) were paid off and it gained international credibility. CVRD started to make a profit and finally began to grow.

During the short administration of Juracy Magalhães (1951-1952), the company’s main approach for the decade was established, and these strategies were maintained by Francisco de Sá Lessa (1952-1961) in the following years. The market-oriented policies adopted gave CVRD increasingly similar characteristics to those of a private company. The successful pursuit of efficiency and profitability distanced the company from the twists and turns typical of political games.

However, numerous changes to the country’s economic policy were introduced by the governments that succeeded each other following the end of the New State in 1945 until the end of the 1950s. Brazil had four presidents during this period: Eurico Gaspar Dutra

6 - See Abranches, Sérgio; Dain, Sulamis. A empresa estatal no Brasil: padrões estruturais e estratégias. Rio de Janeiro: Finep, 1978, unpublished academic paper, p. 53.

3.1 Pellet production

At the start of the 1950s, the steel industry basically used lump ore ranging from 6.35 mm to 50.8 mm in size, as the use of smaller particles affected reactor permeability, reducing productivity due to the flow of gases against the ore. As a result, a large quantity of waste particles known as “fines” accumulated at mines. This factor, combined with the development and use of other minerals, such as taconite1 and itabirite,2 led to the creation of two high-temperature agglomeration processes to make use of fines: sintering and pelletizing.3 Introduced in the 1950s, these processes have since been enhanced, in line with the evolution of the steel industry and seeking greater energy efficiency and productivity, together with sustainability.4

Due to its lower costs, sintering was widely introduced at steel mills, although its product – sinter, formed by agglomerating particles of 0.105 mm to 6.35 mm across – is weaker than pellets and needs to be closer to the reactor, as handling it generates undesirable fines. On the other hand, the pelletizing process involves agglomerating ultrafine particles smaller than 0.105 mm in size, transforming them into pellets – more resistant globules that can be moved for long distances, thereby making them suitable for customers on different continents.5 Sintering processes were developed before those of pelletizing, as the particle size of sinter feed is more suited to agglomeration.

When CVRD decided to begin producing pellets in 1956, it was inaugurating a new era. The company’s new pelletizing plants were incorporated into its mine-railroad-port structure and, since then, the

1 - Iron carbonate.

2 - Overlapping layers of iron oxide and silicon oxide.

3 - Interview with Virginio Xavier of the Pelletizing Department at CVRD’s Fábrica Mine Operation Unit (GAFOP).

4 - Idem.

5 - Idem.

CHAPTER 3

Defining Years: the Achievement of a Corporate Identity

19311950

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was now different. However, as the carnival song that served as the slogan for Vargas’ campaign in 1951 put it, “the old man’s portrait” had returned to the same place.

The euphoria of Vargas’ early days gradually gave way to disbelief. Bombarded by reports of corruption, the president isolated himself at the Palace of Catete. Even populist measures, such as a 100% rise in the minimum salary announced in 1954, caused less of a stir than before. In the field of mining policy, where he had taken a hard line against the participation of private companies, Vargas started to give way. After he committed suicide on August 24, 1954, encouragement for the presence of foreign capital in domestic mining companies gained even greater force. The situation crystallized during the government of Café Filho and was accentuated during Juscelino Kubitschek’s time in power.

3.3 More exports and new markets

At the start of the 1950s, the global iron ore market started to heat up again. As of 1947, Europe began to overcome the severe depression immediately following the war. Helped by an injection of money from the United States, the European economy, and particularly that of Germany, rebuilt its industries, and consequently its steel production. At the same time, the Korean War (1950-1953) – between the United States-supported South Korea and the Soviet Union-supported North Korea – triggered an arms race, boosting demand for iron ore, a fundamental raw material for the American weapons industry.

(until 1951), Getúlio Vargas (1951-1954), João Café Filho (1954-1955), and Juscelino Kubitschek de Oliveira (1956-1961). Each of them had a different view as to the participation of private capital in public-sector companies considered strategic, such as CSN and CVRD.

Throughout this period, the 1946 Constitution remained in force, determining a reduction in state control of economic activities. With regard to the mining regime, for example, the Charter of 1946 restored the principle of the 1934 Constitution according to which concessions for exploiting mineral reserves would be granted exclusively to Brazilians or companies constituted in the country, guaranteeing preference to the landowner. The expression “companies constituted in the country” used in Article 153, Section 3 was broad enough to permit the participation of foreign companies.

The 1946 Constitution’s orientation was in line with the liberal tendency of the Dutra government (1946-1951), which favored private companies and saw associations with foreign capital as the best way of promoting the modernization of the Brazilian economy. This was clearly reflected in CVRD’s conduct on the international market, at least until 1951, when presidential elections once more gave Getúlio Vargas the keys to the Palace of Catete.

Vargas returned to power in 1951, winning 3,849,040 votes – 48.7% of all votes cast. He had almost won an absolute majority of the votes. In his first period as president, Vargas had resorted to force to impose his policies, but now he had popular support – and populism as a government practice. Campaigns such as “The oil is ours” led the people out onto the streets. Brazil – following the end of the Second World War, with a new Constitution, hosting the 1950 World Cup, and even electing Marlene as the “Queen of Radio” –

Top of this page: a pile of iron ore from Itabira at the Port of Ijmuiden in the Netherlands. Below: ore being unloaded at the railroad stockyard in Itabira, Minas Gerais.

Previous photograph: mechanized facilities for loading ore at the Paul Quay at the Port of Vitória in Espírito Santo.

From left to right: the Atalaia Quay in Espírito Santo and President Getúlio Vargas,

campaigning for the 1950 election.


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Although Europe was experiencing a promising economic moment, the United States remained the main customer for Brazil’s iron ore exports. In 1950, more than 80% of the iron sold by the country was absorbed by the American market. The concentration of Brazilian iron sales to the United States provoked a backlash in nationalist sections of the press and the National Congress, which saw in this yet another indication of Brazil’s growing alignment with American foreign policy. This perspective was further supported, among other arguments, by CBRD’s effective financial dependence on Eximbank.

Placed at the center of discussions, the company reacted to this criticism. In its report of 1951, the directors claimed that, although that year the United States had once again been its largest customer, “the iron ore was freely sold to any country, and the company also entered into deals with Canada, Germany, France, the Netherlands and Belgium.”7

Another argument given by the nationalists was that the company’s iron reserves, estimated at that time to be 15 billion metric tons, should prioritize the supply of domestic rather than foreign demand. This position was contested by CVRD’s president, Juracy Magalhães, with the argument that there was not enough demand in Brazil for all the iron ore extracted. According to Magalhães, even if the country’s steel production growth rate were to double (and it had already expanded by 341% in previous years), by 1961 – ten years hence – Brazil would still only be consuming 6.8 million metric tons of ore.8 This quantity was well below estimated national ore production for that year.

In fact, the main problem faced by CVRD at that time was increasingly fierce competition on the global iron market. Growing

7 - See Companhia Vale do Rio Doce, Relatório de Diretoria correspondente ao ano de 1951 (Board of Directors’ Report for 1951), p. 7 (hereafter Board of Directors’ Report). According to Sérgio Abranches and Sulamis Dain, op. cit., p. 47, in order to calm nationalist sentiment, CVRD’s board was concerned to demonstrate its independence from the American market, but in fact, for some years the company’s commercial policy was marked by efforts to maintain or even expand its position in the United States.

8 - See Kury, Mário da Gama, op. cit., p. 41.

steel production, serving fundamentally to rebuild Europe after the war, had obliged the leading steel companies to look for new sources of iron outside their home countries. The United States, West Germany, France, England and also Japan9 made heavy investments in peripheral areas, contributing to an increase in the supply of iron ore and other raw materials used to make steel.

In most cases, the new iron-producing countries were located closer to the main consumer centers (the USA and Western Europe) than Brazil, resulting in lower freight costs and a lower final price of iron ore. The global club of iron producers was accepting new members. Alongside the major, already established exporters, such as Sweden and Canada – whose output rose, respectively, from 13.6 to 17 million metric tons between 1950 and 1953, and from 3.8 to 14.5 million metric tons between 1950 and 1955 – other countries in Latin America, Africa and Asia now entered the scene. Venezuela’s production increased from just 200,000 metric tons in 1950 to 2.2 million metric tons in 1953, and would reach 19.5 million metric tons by 1960. Peru, which did not even feature in the statistics until 1952, produced 1 million metric tons in 1953, rising to 7 million in 1960. Liberia came from nowhere in 1950 to 1.5 million metric tons in 1953 and 12.5 million metric tons in 1964. India, in turn, went from output of 3 million metric tons in 1950 to more than 10 million metric tons in 1960.10

Aware of the situation on the iron market, as of 1951 CVRD sought to modernize the operations of its mine-railroad-port complex and maritime transport system. Its target of exporting 1.5 million metric tons, stipulated soon after Juracy Magalhães was appointed president, was achieved in 1952 – but it was not enough. In 1953, CVRD embarked on a vigorous policy to diversify its markets.

9 - For Japan, the end of the Second World War meant the definitive loss of its colonies in Asia, and since then the country began to seek other sources of raw materials. The first of these investments was in Alaska, in pursuit of forestry resources. Terutomo Ozawa, Multinationalism, Japanese style: The political economy of outward dependency. Princeton: Princeton University Press, 1982.

10 - Idem, ib., pp. 45-46.

In 1950, more than 80% of iron sold by Brazil was absorbed by the American market. The concentration of sales to

the United States provoked a backlash in nationalist sections of the press and the National Congress

View of the town of Itabira, Minas Gerais, in the 1950s.

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Diversification of marketsThe United States, CVRD’s traditional market, gradually lost ground to Europe. By 1953, European customers together accounted for 63.6% of the company’s exports, while the United States absorbed approximately 32%. The USA’s falling share can be explained by a number of reasons. The pelletizing process had enabled the industrial-scale consumption of taconite, a low-grade variety of iron ore, and this allowed the United States to make greater use of its own ore reserves, which until then had been considered of insufficient quality (or too difficult to use). The end of the Korean War (1953) and the preference of American steel companies to use iron ore from their own mines in Liberia, Canada and Venezuela also contributed to significantly reducing the United States’ demand for Brazilian ore.

A crisis for Brazilian mining caused by the proliferation of iron ore producers across the world was approaching. Given this situation, worsened by a reduction in prices that led to a temporary suspension of sales in 1953, CVRD intensified its policy of diversifying its markets. In 1955, for the first time, Japan acquired iron ore from the company. That year, CVRD’s output was consumed in 10 countries.11 More than just a commercial strategy, the expansion of exports also began to be seen from a political perspective. Eastern Europe definitively entered the scene as an iron consumer. The

11 - Idem, ib., pp. 46, 51.

TABLE 1CVRD’S EXPORTS OF IRON ORE, BY CONSUMING COUNTRY (METRIC TONS)

COUNTRY 1951 1952 1953* 1954 1955 1956 1957 1958 1959 1960

United States 1,051,998 1,054,181 448,305 555,880 1,022,035 1,024,563 1,158,695 702,367 994,661 1,234,421

% 81.28 68.85 31.88 35.02 44.47 44.42 39.06 31.25 30.50 28.91

Canada 124,268 124,705 37,837 60,204 30,046 61,231 147,525 35,770 85,627 152,501

% 9.60 8.14 4.11 3.79 1.31 2.66 4.97 1.59 2.63 9.57

England 93,432 91,340 - 467,616 552,944 562,807 710,563 571,143 565,941 677,769

% 7.22 5.97 - 29.46 24.06 24.40 23.96 25.41 17.35 15.87

The Netherlands - 42,897 - - 41,285 51,985 43,676 54,835 132,859 99,451

% - 2.80 - - 1.79 2.25 1.47 2.44 4.07 2.33

Belgium 24,663 66,809 - - - 3,048 - - - -

% 1.90 4.36 - - - 0.13 - - - -

France - 28,255 - 49,552 14,326 12,746 43,988 24,423 59,317 107,179

% - 1.85 - 3.12 0.62 0.55 1.48 1.09 1.87 2.51

West Germany - 99,436 - 249,971 288,674 366,357 402,014 269,117 516,719 910,667

% - 6.49 - 15.75 12.56 15.89 13.55 11.97 15.84 21.33

Austria - 23,502 - - - 9,295 - - - -

% - 1.54 - - - 0.40 - - - -

Czechoslovakia - - - 80,374 195,851 81,208 156,852 187,518 373,479 359,484

% - - - 5.07 8.52 3.52 5.29 8.43 11.45 8.42

Poland - - - 113,428 97,483 34,827 98,895 313,225 295,110 290,964

% - - - 7.15 4.24 1.51 3.33 13.94 9.05 6.82

Italy - - - 10,160 46,707 49,910 52,273 16,954 28,814 51,167

% - - - 0.64 2.03 2.17 1.76 0.76 0.88 1.20

Hungary - - - - - - 17,374 21,480 13,411 -

% - - - - - - 0.59 0.96 0.41 -

Switzerland - - - - - - 1,524 2,033 - 2,540

% - - - - - - 0.05 0.09 - 0.06

Finland - - - - - - 1,016 - - -

% - - - - - - 0.03 - - -

Japan - - 10,114 - 9,154 40,403 131,866 46,532 195,495 383,474

% - - 0.72 - 0.40 2.10 4.46 2.07 6.00 8.98

TOTAL 1,294,361 1,531,125 1,406,245 1,587,185 2,298,505 2,306,160 2,966,261 2,247,550 3,261,453 4,269,613

(*) Exports to European countries in 1953 are not broken down in source documents. Together, they amount to 889,989 metric tons, equivalent to 63.29% of CVRD’s entire sales of iron ore. Source: Board of Directors’ Reports, 1951-1960.

From left to right: aerial view of Cauê Mine’s mineral deposits in Itabira, Minas Gerais, in 1952, and extraction of iron ore, also in Itabira, in the same year.

expression “Iron Curtain” – used during the Cold War to describe countries living under the communist regime – began to take on a new meaning.

CVRD’s contact with Eastern Europe – established back in 1951, with the supply of iron ore to Poland on a trial basis – did not go unnoticed and was strongly fought by conservative sections of the government and Congress. The American government also criticized the initiative, alleging that the company’s decision violated agreements signed by the United States and Brazil12 that prohibited the sale of strategic materials to enemy countries. Despite this pressure, CVRD signed a contract with Poland at the record price of US$18.50 per metric ton on an FOB basis. In the midst of ideological crossfire, the company’s management claimed that it was a commercial transaction without any political implications.13

CVRD’s status as a state-controlled company facilitated its activities in Eastern Europe, as government-to-government deals were common practice in those countries. Accordingly, in 1954, besides its regular exports to Poland, the company sent its first shipment of iron ore to Czechoslovakia,14 and in 1957, Hungary purchased Brazilian ore for the first time. In the same year, CVRD came very close to reaching its target of exporting 3 million metric tons per year (2,996,261 metric tons, to be exact).

12 - The agreements signed by both countries covered the Joint Brazil – United States Economic Development Commission, the result of negotiations begun in late 1950 during the Dutra government, with the aim of funding a program to reequip the Brazilian economy’s infrastructure sectors. The commission was officially established on July 19, 1951 and ended its work on July 31, 1953. See Calicchio, Vera, “Comissão Mista Brasil-Estados Unidos,” DHBB, available at: <http://www.fgv.br/CPDOC/BUSCA/Busca/BuscaConsultar.aspx>.

13 - See Abranches, Sérgio and Dain, Sulamis, op. cit., p. 62.



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CHART 1CVRD’S SHARE OF BRAZIL’S TOTAL IRON ORE EXPORTS (METRIC TONS)

YEAR CVRD’S EXPORTS BRAZIL’S EXPORTS CVRD/BRAZIL (%)

1951 1,294,361 1,320,007 98.1

1952 1,531,125 1,560,814 98.1

1953 1,406,245 1,526,494 92.1

1954 1,587,185 1,678,445 94.6

1955 2,298,505 2,564,600 89.6

1956 2,306,160 2,744,882 84.0

1957 2,966,261 3,536,728 83.9

1958 2,247,550 2,823,195 79.6

1959 3,261,453 3,957,570 82.4

1960 4,269,613 5,160,266 82.7

Sources: Board of Directors’ Reports, 1951-1960 (for CVRD’s exports); Anuário Estatístico do Brasil (Statistical Yearbook of Brazil), 1953, p. 280; 1955, p. 295; 1958, p. 295; 1961, p. 225 (for Brazil’s exports).

Despite allocating the overwhelming majority of its output to the international market, CVRD did not neglect its domestic market. Keen to reduce its dependence on exports and consequently become less exposed to fluctuations in the global economy, the company sought to participate in the Brazilian steel industry’s expansion. As of 1959, it owned stakes in four steel companies: Usinas Siderúrgicas de Minas Gerais (Usiminas), Companhia Siderúrgica Nacional (CSN), Companhia Siderúrgica Paulista (Cosipa), and Companhia Ferro e Aço de Vitória (Cofavi).15

CVRD was the third biggest shareholder in Usiminas, a company established in 1956, owned 60% by Brazilian capital and 40% by Japanese entities. CVRD was responsible for “supplying fine ore from Itabira at a reduced price; providing transportation between Itabira and Acesita; granting maximum discounts possible [on the Vitória-Minas Railroad] to transport coal and materials; and contributing to the transportation of construction materials and equipment for the plant.”16 Construction work on Usiminas’ steel mill, situated in Ipatinga, Minas Gerais, began in August 1958. When completed, the plant was expected to produce 500,000 metric tons of steel per year.

3.4 Modernization of the mine-railroad-port complex

It is impossible to think about expanding exports without associating this with port modernization. The heavy investment undertaken by CVRD to enhance operating conditions throughout its mine-railroad-port complex was fundamental to achieving its 1952 export target of 1.5 million metric tons.

15 - Idem, ib., p. 55.

16 - See Gomes, Francisco de Magalhães. História da siderurgia no Brasil. Belo Horizonte/São Paulo: Itatiaia/USP, 1983, p. 335.

By the late 1950s (and unlike at the beginning of the decade), Companhia Vale do Rio Doce was now solidly positioned in different markets, and no longer depended on a single customer. In 1960, the United States remained its biggest client, but its share of the company’s sales had fallen to around 29%, followed by West Germany (21%), England (16%), Japan (9%) and Czechoslovakia (8%).

The company’s Annual Report of 1950 listed the construction work already completed. At Cauê Mine, the company installed two electric percussion drills, two electric air compressors and an electric excavator to break up and directly load large blocks of hematite. Buildings and structures for crushing, screening and mechanical transportation (conveyor belts) to the railroad yard were completed, as well as a drill bit reconditioning workshop. This set of upgrades enabled output of 1,000 metric tons of ore per hour.17

On the Vitória-Minas Railroad (EFVM), operating productivity was improved by completing a tunnel, 21 metal bridges, more than 10,000 meters of realignments, and sections of culverts. However, some serious problems remained. As the track bed lay on sand, accidents were constant, especially during the rainy season. Although the ballasting of a 200-kilometer section had been started in 1950, there was still a lot to do in 1952. The company’s report for the latter year states that, due to “unusually heavy rain [...], the sections of track still being upgraded suffered considerably, favoring the occurrence of accidents.”18

Major construction work also took place in the port area. In 1950, the Atalaia Quay was completed, equipped with a conveyor belt from the silo to ships’ holds. In addition, the company built a warehouse capable of storing 90,000 metric tons of iron ore, enough to load nine ships.19

Once it had achieved its target of 1.5 million metric tons per year, CVRD’s management, enthused by the figures, decided to implement new projects and establish a new annual export target of 3 million metric tons for 1957. Integrated mine-railroad-port logistics were key to this project.

17 - See the Board of Directors’ Report, 1950, pp. 5-7.

18 - See the Board of Directors’ Report, 1950, p. 7.

19 - Idem, ib., p. 7.

While diversifying its markets and increasing its foreign sales, CVRD also significantly increased its share of Brazil’s iron ore exports over the 1950s, especially in the first five years, if compared with the previous decade. The following chart shows these figures.

Previous page: extraction of ore at Dois Córregos

Mine in the town of Itabira, Minas Gerais, in 1952.

Left: the Atalaia ore quay in Vitória, Espírito Santo.

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To mechanize extraction, processing and transportation20 of ore from the mines of Conceição and Dois Córregos (at this point in time, these processes were only mechanized at Cauê Mine), plans were made to install aerial cables to transport ore from the mines to the storage silo and train car loading area. In addition to loading stations located next to the mines, a facility designed to move ore to the loading silo would be constructed. Another extremely important initiative involved transforming the mines of Conceição and Dois Córregos – until then operated by contractors using manual, low-productivity methods – into operations run directly by CVRD, which once again sought to mechanize the work process. New mining and transport equipment was installed at Cauê Mine, enabling higher output. There were also plans to build a small hydroelectric power plant, to be completed in 1958, as a solution to problems caused by a shortage of power in the area.

To connect the mines to the sea, there was the EFVM. In the mid-1950s, it still had a series of problems capable of derailing any major export project. To rectify this situation, CVRD invested heavily in infrastructure. The strategy entailed remodeling the railroad up to the locality of Ana Matos (now called Mário Carvalho Station, in Timóteo, Minas Gerais), replacing the tracks with heavier ones ordered from CSN in 1955, and acquiring new ore cars (making a total of 650) and five diesel-electric locomotives.

Linhares: from railroad crossties to environmental preservationWork on the EFVM made it necessary for CVRD to acquire large numbers of wooden railroad crossties. However, the progressive

20 - Information about the construction work to be undertaken at the mines, on the railroad and at the port was taken from Companhia Vale do Rio Doce, President’s Office, Subsídios para o comparecimento do presidente da CVRD à CPI do caso Hanna, pp. 8-11 (hereafter Subsídios caso Hanna).

destruction of the region’s forests arising from intensive exploitation by the logging and charcoal industries was a cause for concern.

In 1954, CVRD decided to invest in planting forests to produce crossties. At the suggestion of the EFVM’s superintendent, Eliezer Batista, the company started to buy land in Linhares, Espírito Santo that by the mid-1960s would form what is now known as the Vale Natural Reserve. Years later, Eliezer revealed that his idea had always been to preserve the region’s forests.

“To obtain approval from Vale do Rio Doce’s board, we needed to say that the trees would be used to produce railroad crossties. I was at Vale do Rio Doce for a long time, and not a single crosstie was taken from that forest.”21

This initiative22 may be considered CVRD’s first business activity outside the mining sector and a milestone in environmental preservation. Years later, in the 21st century, the forest would be declared a Biosphere Reserve by Unesco.

At the port, due to the limited storage capacity at Atalaia, plans were made to build a new silo to store 110,000 metric tons of ore. The railroad cars would be unloaded in a rotary car dumper installed on the slope to the west of Atalaia Hill. After being unloaded, the ore would be taken by conveyor belt to an auxiliary silo, and then by another conveyor belt to the loading silo at Atalaia.

The target of 3 million metric tons established in 1953 was achieved in 1957, although not all the planned construction work had been completed. In the same year, the federal government, as part of President Kubitschek’s Target Program, set a new export target for the company, to be achieved by 1960-1961: 6 million metric tons per year.

21 - Conversas com Eliezer, Luis Cesar Faro, Carlos Pousa, Claudio Fernandez. Ed. Insight Engenharia de Comunicação, 2005.

22 - Regarding this subject, see Cury, Mário da Gama, op. cit., p. 50.

In the mid-1950s, the Vitória-Minas Railroad had a series of problems capable of derailing any major

export project. To rectify this situation, CVRD invested heavily in infrastructure


Previous photograph: the Vitória-Minas Railroad. Above: the EFVM’s diesel-electric locomotives arrive at the Port of Vitória in Espírito Santo.

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3.5 The Target Program and Document 18

Juscelino Kubitschek de Oliveira (“JK”),23 born in Diamantina, Minas Gerais, was elected president of Brazil with 36% of the valid votes cast, enough to win, but not a resounding victory. Elected as part of a coalition between the Brazilian Workers’ Party (PTB) and the Social Democratic Party (PSD), he was not completely accepted by the more conservative sections of society. His strategy to change this situation was to immediately establish a program of targets. This envisaged foreign investment, accelerated industrialization and a shift in investments inland. There was also a plan to move the country’s capital from Rio de Janeiro to the central plateau region, as indeed occurred, with the inauguration of Brasília in 1960. The plan was to be implemented before the end of his term in office. Hence the slogan of his time in power: “Fifty years in five.”

Brazil had only recently experienced the trauma of Vargas’ suicide, and hoped to leave this dark period behind it. Brazil was shortly to win its first World Cup, João Gilberto was creating the first chords of bossa nova on his guitar, and in Rio de Janeiro, girls were discovering the bikini, a new beach fashion that was said to be destined for great success. Juscelino understood this and made his government a set of dreams, cultural investment and major construction projects. His strategy required immediate investment, and so partnerships, especially international ones, were indispensable.

The Target Program was implemented by the Development Council, an entity created by JK especially for this purpose. The council was divided into working groups that, in some cases, gave rise to executive groups. Target 26, related to iron ore exports, was examined in detail by two of these groups, in accordance with a resolution adopted by a high-level study commission led by Finance Minister José Maria Alkmin. The commission members included the

23 - Concerning JK, see Cohen, Marleine. JK, o presidente bossa-nova. Rio de Janeiro: Editora Globo, 2001.

Aerial view of the Maracanã Stadium, built for the 1950 World Cup. On the opposite page, you can see a production line making Dauphine and Aero-Willys cars in the 1960s.

director of the National Mineral Production Department (DNPM), Mário da Silva Pinto; the president of CVRD, Francisco de Sá Lessa; the director of the National Economic Development Bank (BNDE), Roberto Campos; and the secretary of the Development Council and president of the BNDE, Lucas Lopes.

In July 1957, Lucas Lopes submitted a report to the Minister of Finance containing the results of studies conducted by the two working groups. The first study assessed the global iron market and Brazil’s exportable reserves. The second set out suggestions for expanding Brazilian ore exports. The report came to constitute Document 18 of the Development Council.24

Document 18’s appraisal of the global iron ore industry highlighted the opportunities Brazil had to increase its share of the market, which in the late 1950s was confined to 1% of total consumption. According to calculations by technicians from the United Nations, Brazil had 15% of the world’s iron reserves – 85 billion metric tons – and 37% of this total was in Minas Gerais alone. In addition, studies conducted by the DNPM and the U.S. Geological Survey demonstrated that Brazilian iron ore was compact and pure, with high metal content, warranting higher prices on the market.

On the other hand, the sale of Brazilian iron ore faced a number of adverse factors, including the considerable distance between mines and ports, making land transport more expensive. Furthermore, the country was far from the main regions of consumption (the United States, Western Europe and Japan). Finally, the United States had been investing heavily in the mining, transportation and concentration of taconite on its own soil, reducing the American steel industry’s need for imports.

Based on domestic and international factors, Document 18 considered it feasible to expand Brazil’s iron exports to 8 million metric tons per year by 1960. CVRD would be able to sell 6 million

24 - Information related to Document 18 was taken from the summary section of the document itself (pp. 1-13) and from Part II – “Resposta ao questionário apresentado” (pp. 1-8), hereafter referred to, respectively, as Document 18 (summary) and Document 18 (Part II).

metric tons, and the remaining 2 million would be produced by private mining companies in the Paraopeba Valley in Minas Gerais. In the long term, it was estimated that it would be possible to export between 25 and 30 million metric tons of iron per year by around 1975.

In order for these targets to be achieved in the short and long term, certain assumptions were deemed essential: firstly, all types of ore extracted would be exported, including fines and siliceous ore (after being processed), together with compact ore; and secondly, due to the size of the undertaking, a combination of foreign capital (loans or risk capital) and domestic capital (public and private) would be necessary. The government would be responsible for promoting and coordinating efforts to this end. The association with foreign capital could result in the establishment of a new company, and it was recommended that CVRD lead this initiative, as far as its financial resources would allow it.

Document 18 also referred to the need not only for growing exploitation of iron reserves for export, but also to expand production of steel and byproducts, and thereby raise the weighting of steel products as a share of total sales.

According to estimates contained in the report, an investment of nearly 7 billion cruzeiros (equivalent to around US$140 million) would be required to raise Brazilian iron exports in the short term. Plan number 1, concerning the expansion of CVRD’s output to 6 million metric tons, was budgeted at 1.41 billion cruzeiros, to be spent mainly on replacing the EFVM’s tracks and locomotives and purchasing special equipment. Plan number 2, relating to the Central do Brasil Railroad and the Port of Rio de Janeiro, included acquiring 25 locomotives, expanding the wharf, undertaking dredging work, and purchasing loading and unloading equipment, at a cost of 730 million cruzeiros.

Document 18 also recommended revising mining legislation to create incentives to export iron ore on a large scale. It also established conditions and limits for seeking funding and/or direct participation involving foreign capital. In short, the intention was to

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expand the means of attracting foreign capital, while safeguarding national security interests, above all in terms of transportation and access. The document made its point explicitly: “The need for external financial resources is indisputable, given the significant amount of investment required for large-scale exports.” It added: “It is necessary to have a policy that guarantees foreign capital fair remuneration and satisfactory security in terms of reasonable interest payments and reimbursement.”25

In line with a suggestion contained in Document 18, President Kubitschek created the Iron Ore Export Group (Grupo de Exportação de Minério de Ferro, or GEMF). Consisting largely of the same people serving on the Development Council’s study commission, and coordinated by BNDE representative João Batista Pinheiro, the GEMF’s core task was to implement the resolutions of Document 18.

Given its clearly liberal orientation, appealing strongly for foreign capital, Document 18 provoked intense controversy in the press and the National Congress, which went as far as to describe it as “scandalous and intolerable.”26 Another contentious case would emerge at the start of 1958 when, due to favorable prospects on the international iron market and the new possibilities for foreign capital provided by the development-oriented policy of the JK government, the Hanna Mining Company entered Brazil, acquiring a 52% interest in the St. John d’El Rey Mining Company on the London Stock Exchange.

St. John had mined gold in Minas Gerais since 1830, mainly at its famous Morro Velho Mine, but what interested Hanna was the fact that the English company also owned extensive iron ore deposits in the Iron Quadrangle region, in the Paraopeba River Valley – a region where improvements were planned in Document 18.

The project to enable 6 million metric tons per year to be exported entailed dredging the Port of Vitória. Studies showed that, by conducting dredging to increase the depth of water, the port would be able to receive ships of up to 40,000 metric tons in capacity, up from the existing limit of 10,000 metric tons.27

25 - See Document 18 (Part II), p. 8.

26 - See Pereira, Osny Duarte, Ferro e independência: um desafio à dignidade nacional. Rio de Janeiro: Civilização Brasileira, 1967, p. 130.

27 - Information about what the company needed to do to achieve the target of 6 million metric tons was taken from Subsídios caso Hanna, p. 12.

3.6 Advances in iron ore processing

Alongside construction work on the mine-railroad-port complex, CVRD was also concerned to diversity the types of iron ore it produced and to conduct research to make use of the fine and ultrafine ore that was accumulating at its mines.

Cauê Mine produced a compact hematite of excellent quality. Its chemical and physical characteristics and its hardness – which facilitated crushing it into lumps of iron between 6.35 mm and 50 mm across – were ideal for direct use in Siemens-Martin or open-hearth blast furnaces.28 The crushing operation, however, created the problem of waste ore – particles smaller than half an inch in size called fines and ultrafines. Due to their different particle size characteristics from those of lump ore, fines and ultrafines could not be directly used in blast furnaces because they made the charge (raw material inputs) impermeable, thereby blocking the flow of rising gases.

The accumulation of fines and ultrafines in Cauê was a consequence of the intensive exploitation of the mine. Over time, the harder ore – hematite – became scarcer, and a more brittle ore, itabirite, was left.29 This fact, together with the growing obsolescence of mine infrastructure, contributed to a declining quality of ore produced by CVRD, which led customers to complain in 1953.30

The emergence of new lump ore producers on the international market and the ever greater accumulation of fines and ultrafines led the company to review its production and processing methods. In 1952, the Mines Department, with the assistance of English technicians, conducted studies to make use of fines by means of sintering, meaning the agglomeration “of an infinite number of miniscule ore particles into adequately sized pieces with

28 - See the Board of Directors’ Report, 1951, p. 9.

29 - “Itabirite” rock was named by German geologist and mineralogist W. L. von Eschwege at the start of the 19th century. Based on his work in the Iron Quadrangle region, this indigenous term (“itabirito” meaning red-striped rock), which lent its name to the mountain peak framing the town of Itabirito, was incorporated into geological vocabulary. Itabirite is a flaky metamorphic rock made of grains of quartz and flakes of micaceous hematite. See Renger, Friedrich E. “O quadro geognóstico do Brasil de Wilhelm Ludwig von Eschwege: Breves comentários à sua visão da geologia no Brasil.” Revista Geonomos, UFMG, no. 13, pp. 91-95, 2005.

30 - See Rangel, Orlando, A Companhia Vale do Rio Doce e o mercado de minério de ferro. Talk given at the Augusto Barbosa Metallurgical Studies Center, at the Ouro Preto Federal Mining School, on June 11, 1966, unpublished academic paper, p. 18.

Opposite page: President Juscelino Kubitschek at the Palace of Catete in Rio de Janeiro, addressing the people

on the radio and defending his two years in power, in January 1958.


Above: in June 1959, the first ore shipment is loaded at the Paul Quay in Vitória, Espírito Santo. Opposite page: a locomotive full of goods arrives at the quay.

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quality characteristics compatible with their use in steelmaking processes.”31 This agglomeration was obtained through high-temperature thermal processing, in which powdered limestone, coke and silica was added to iron ore fines. This mixture, after being homogenized, was placed on a grid where, through the combustion of coke, it formed sinter.

Alongside these studies, in 1956 the company made two shipments of raw fines on a trial basis. The exportation of fines was one of the main reasons why CVRD, through an agreement with the state government of Espírito Santo, built a new wharf at the Port of Vitória, called the Paul Quay. Opened in June 1959, the Paul Quay and its mechanized loading equipment made it possible to start regular exports not only of fines, but also of a new type of ore, called run-of-mine (meaning raw, unprocessed mined material as it leaves the mine). In a short time, there was a growing trend for exports of fines to rise at the expense of lump ore,32 whose production was becoming increasingly expensive.

The company’s technicians also conducted research to make use of ultrafines. Unsuitable for sintering, ultrafines required another kind of processing, called pelletizing. This process, as mentioned previously, was being developed in the United States. Pelletizing consisted of using a thermal process to agglomerate ultrafine iron ore powder into balls or pellets, of an appropriate diameter (between 8 mm and 18 mm) and with suitable quality characteristics to enable them to be fed directly into blast furnaces.33

Given the good results obtained by the Americans with pelletizing taconite, CVRD decided to undertake studies using itabirite. A flaky metamorphic rock with iron content varying between 30% and 55%, itabirite was starting to become the predominant ore (its reserves were estimated at 27 billion metric tons) as the exploitation of the compact hematite reserves of Cauê advanced. In December 1956, the Fund for Studies and Research to Make Use of the Itabirite of Minas Gerais was established, sponsored by CVRD and the Development Council, an entity reporting directly to the President of the Republic. CVRD and the Development Council each contributed US$50,000 to this fund. With regard to the research activities, they involved both CVRD and the Armour Research Foundation of the Illinois Institute of Technology (Chicago, USA).34 This initiative by CVRD was supported by the federal government, which decided to pay for 50% of the cost of these studies. In March 1958, the preliminary results of

31 - See Revista CVRD, no. 16, June 1984. The sintering process, developed at the end of the 19th century, only began to be widely used after the Second World War. In 1958, the Soviet Union produced around 50 million metric tons of sinter, and the United States, 35 million metric tons.

32 - See Kury, Mário da Gama, op. cit., pp. 51, 55.

33 - See Revista CVRD, no. 16, June 1984, n.p.

34 - See the National Archives, Fundo Conselho do Desenvolvimento, CD-0/104/57 (correspondence from the secretary general of the Development Council, Lucas Lopes, to the president of CVRD, Francisco de Sá Lessa).

the “Techno-Economic Study of Brazil’s Itabirite Iron Ore Deposits,” presented to the Development Council, “were so encouraging that the company immediately planned to produce 4 million metric tons per year of itabirite concentrates, raising CVRD’s third production target from 6 million to 10 million metric tons per year.”35

The research into the use of itabirite was the starting point for the establishment, in April 1960, of the Vatu Steel Company, CVRD’s first subsidiary. (“Vatu” was the indigenous name for the Doce River.) With paid-up capital of 600 million cruzeiros, Vatu had the purpose of processing ores, as well as manufacturing and selling sponge iron.36

3.7 Financial recovery and a radical change in sales policy

Shortly after becoming president of CVRD in 1951, at the invitation of President Getúlio Vargas, Juracy Magalhães gave a scathing report on the state the company found itself in. He simply quoted the figures: “We owe 26 million dollars to Eximbank, 300 million cruzeiros to Banco do Brasil, 100 million cruzeiros to Caixa Econômica and another 30 million cruzeiros to the Company Employee Association. We are behind on our insurance payments, and our suppliers have not been paid for a long time.”37

The situation was serious. When they left the company in 1949, American directors Robert K. West and Howard Williams defined its situation as “pre-bankruptcy.”38 Despite the unfavorable numbers,


36 - See Rangel, Orlando, op. cit., pp. 16-17. The shareholder composition of Vatu was as follows: CVRD – 92.97%; CVRD employees – 6%; CSN – 0.33%; and others – 0.03%.

37 - See Magalhães, Juracy, Minhas memórias provisórias. Rio de Janeiro: Civilização Brasileira, 1981, p. 131.

38 - Reading the report, which was delivered personally by President Getúlio Vargas, Juracy Magalhães considered it by definition to be biased, since the diagnosis it contained was committed to the Americans’ interests. See Abranches, Sérgio and Dain, Sulamis, op. cit., p. 63.

Opened in June 1959, the Paul Quay made it possible to start regular exports of fines, thanks to the

installation of mechanized loading equipment

CVRD knew how to position itself on the international market, which was buoyant as a result of demand caused by the Korean War. Over the course of the 1950s, the company not only paid back its debts, but also undertook new investments.

One can say that the company’s financial recovery was triggered by the pricing policy implemented in 1952 by Juracy Magalhães.39 Informed that there was a substantial difference between the prices paid to CVRD (US$8 per metric ton on an FOB basis) and those charged by traders selling Brazilian ore in the USA (US$14), Juracy proposed raising the price charged per metric ton to US$14. This initiative went against the interests of the American groups that brokered sale and purchase operations. Counting on the support of Eximbank, CVRD’s main creditor, they put pressure on the Brazilian government to intervene in the company, forcing it to review its prices.

Despite this pressure, Juracy maintained his position. It was a decisive moment for the company. After three months in which not a single purchaser appeared, CVRD finally signed a contract based on US$14 per metric ton with American company Republic Steel. The sale of 300,000 metric tons of iron at this price earned the company US$4.2 million, making it possible to make its loan repayments and invest in projects required for its growth.

Also in 1952, CVRD made a deal with Banco do Brasil to pay off a loan taken out in the mid-1940s, by making 102 monthly installments of 4 million cruzeiros. In 1956, the company paid back Eximbank’s US$14-million loan 13 years early. Another loan, this one for US$900,000, soon after raised to US$1.5 million, granted by Eximbank to fund the purchase of diesel locomotives, was paid off six months before the deadline.40

39 - Information about CVRD’s new pricing policy was taken from Juracy Magalhães, op. cit., pp. 131-132.

40 - See Abranches, Sérgio and Dain, Sulamis, op. cit., pp. 57-79.

Juracy Magalhães Juracy Magalhães (Fortaleza, Ceará, 1905 – Salvador,

Bahia, 2001)1 was one of the leading organizers of the Revolution of 1930 in northeast Brazil. Following the victory of the revolutionary movement, he entered politics. He served as governor of the state of Bahia from 1931 to 1937, when he opposed the coup that established the New State regime, and then resumed his military career. With the return of democracy to the country in December 1945, he was elected a deputy representing Bahia at the National Constituent Assembly, for the National Democratic Union (União Democrática Nacional, or UDN) party. In February 1951, at the personal invitation of the president of Brazil, Getúlio Vargas, he took over as president of Companhia Vale do Rio Doce, where he remained until December 1952. During this period, he implemented new human resource management methods and became known for demanding strict punctuality among employees, whether in terms of working hours or the completion of studies and construction work according to schedule. His railroad plans were also key to the expansion and efficiency of the EFVM. Later, Juracy Magalhães served as Brazil’s ambassador to the United States from 1964 to 1965. Following this, he was Brazil’s Minister of Justice (1965-1966) and Minister of Foreign Affairs (1966-1967).

1 - See “Magalhães, Juraci,” DHBB, vol. 3, pp. 3, 450-3, 451 and Faro, Luiz Cesar, Pousa, Carlos and Fernandez, Claudio. Conversas com Eliezer. Rio de Janeiro: Ed. Insight Engenharia da Comunicação (targeted distribution), 2005.

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To the right: the Vitória-Minas Railroad. Next page: ore being shipped out at the Paul Quay in Vitória, Espírito Santo, in September 1959.

Previous photograph: the president of CVRD, Juracy Magalhães (wearing a dark suit).


Francisco de Sá Lessa

Francisco de Sá Lessa (Diamantina, Minas Gerais, 1887 – Rio de Janeiro, 1977)1 was 65 years old when appointed president of Vale, and he was the longest-serving president in the company’s early years, holding the position from December 1952 to March 1961. Sá Lessa was a qualified civil engineer with a postgraduate diploma in Industrial Chemistry from the Polytechnic School of Rio de Janeiro, and his background closely reflected his management profile. During his time running CVRD, Brazil had three different presidents, and the company overcame a number of crises. CVRD began to modernize its ports, it invested in iron ore processing, it won new markets (especially in Germany and Eastern Europe) and, in a bold move for the time, it opened its first offices abroad. When he stood down as president, the company had a strong name on the international market.

Between November 1955 and March 1956, while working as president of CVRD, Sá Lessa also served as interim mayor of the Federal District of Rio de Janeiro, by appointment of the President of the Republic, Nereu Ramos.

1 - See “Lessa, Sá,” DHBB, vol. 3, p. 3,102, and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s history), Exame maga-zine, April 5, 2011.

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CVRD’s financial recovery expanded its scope for negotiation. The loans from Eximbank – for US$4 million and US$12.5 million to finance the company’s expansion programs in 1953 and 1957 – were revised on new terms.41 It was agreed that the debts would be amortized based on a commitment of 15% of the value of exports.42

There were other signs of improvement in CVRD’s financial situation. In 1951, it paid the first ever dividend in its history, providing a 6% yield – although restricted to the company’s preferred shares. Two years later, the first bonus was paid to all employees. In 1954, the company paid a dividend to holders of its common shares as well. CVRD was gaining more credibility and strength on the market.

The following year, in accordance with a statutory determination obliging CVRD to allocate part of its profits to promote the economic development of the area where it operated (70% in Minas Gerais and 30% in Espírito Santo), the company began to transfer resources to the Fund for the Improvement and Development of the Doce River Zone (FMDZRD).43

Among the factors behind CVRD’s transformation, one in particular was fundamental, as it provided the commercial transparency indispensable for operations on the international market: a radical change in its sales policy.

Until then, the company’s sales were made from its Rio de Janeiro office by a large number of importers and traders, some of doubtful reputation, confusing consumers by quoting different prices. Many of the offers made were merely negotiating tricks to

41 - In fact, the loan that the company requested from Eximbank in 1957 totaled US$24 million. Only US$12.5 million was released in 1959.

42 - See Abranches, Sérgio and Dain, Sulamis, op. cit., p. 59.

43 - See Kury, Mário da Gama, op. cit., p. 43 and CVRD, Serviço de Relações Públicas, Companhia Vale do Rio Doce 1942-1967, n.p. Between 1955 and 1965, the company invested more than 1.2 billion cruzeiros in the fund.

lower the prices paid, frequently not come to fruition when the time came to sign the contracts. This harmed CVRD’s prestige, and once customers knew that various traders were selling its ore, they would withdraw, waiting for a substantial reduction in price.

Concerned with this situation, as of 1954 CVRD started to establish direct contact with the steel companies that consumed its ore. The company’s agents were exclusive, eliminating intermediation by numerous competing traders. The following agents were selected to handle the company’s sales: British & European Sales Ltd., based in London, covering Canada, Great Britain and Belgium; Société Anonyme d’Importation (SADI), based in Lausanne, Switzerland, covering continental Europe (except Belgium); and Cleveland Cliffs Iron Company, based in Cleveland, covering the United States. Sales to Japan and South America continued to be handled directly by CVRD from its Rio de Janeiro office. In the case of Japan, due to demands from purchasers, deals were brokered by the country’s trading companies.44

Another major improvement introduced by the new commercial policy was better discipline in the use of the ore quay. The former traders did not concern themselves with aligning sales with operating conditions at the port. As a result, it was common for too many ships to arrive at the same time, while at other times the quay would be completely idle. This lack of planning led to constant complaints from customers, and supply delays meant that the company often had to pay fines.45

44 - See Kury, Mário da Gama, op. cit., p. 48. It is worth noting that cutting out these intermediaries in the United States and Europe “also meant granting control of sales of its [CVRD’s] ore to just three companies, which monopolized its sales in the respective areas.” See Fernandes, Francisco do Rego (org.), op. cit., p. 29.

45 - See Kury, Mário da Gama, op. cit., pp. 48-49.

Opposite page (top): the ore quay at the Port of Vitória in Espírito Santo. Opposite page (bottom): the president of CVRD, Francisco de Sá Lessa (wearing glasses), at a meeting.

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How green is my valley

In the 1950s, when CVRD began to purchase areas of Atlantic Forest in Espírito Santo, its intention was to harness

them to make railroad crossties for the EFVM.1 Later, the company realized that it was possible to buy timber from other

sources and for a lower cost. It was a kind of “green light.” The passing of time – and the growing ecological awareness

that came with it – resulted in the original timber-production plan being transformed into one of the most successful

preservation and sustainability initiatives in the world. Vale’s crossties now come from elsewhere – and the reserve in

Linhares, now called the Vale Natural Reserve, shows that the company’s environmental policy is on the right track.

Covering approximately 22,000 hectares, the Vale Natural Reserve is one of the largest remaining expanses of

tabuleiro (coastal lowland) forest, one of the most endangered habitat formations in Brazil’s Atlantic Forest. In 2008,

UNESCO declared the site to be an “advanced” area of the Atlantic Forest Biosphere, given its importance to flora

and fauna conservation. The reserve is now an immense botanical garden, emphasizing research and the discovery

of new animal and plant species, and producing more than 3 million saplings a year.

As of 2011, scientists working at the reserve had cataloged over 3,000 plant species, 1,460 types of insects,

179 spider species, 26 fish species, 66 species of amphibians, 69 reptile species, and 105 species of mammals. The

reserve is also home to 380 bird species, corresponding to approximately 20% of the total found in Brazil.2 The

reserve in Linhares is framed by the Doce River (which gave its name to the company), whose mouth is located in

Regência, a few kilometers from the edge of the forest.

Besides functioning as a center of excellence for nature preservation and research, the Vale Natural Reserve is

also an attraction for visits and recreation. The reserve, which can be crossed on unpaved roads, has a training center,

an auditorium and even a comfortable hotel with 51 suites. There are also seven trails, which visitors can hike along,

led by a specialist guide. Visitors to the reserve can see a tall, white-barked, fruit-bearing tree. Of the genus Simira,

known in the region as “maiate,” the tree was discovered in the reserve and named Simira eliezeriana in honor of

former CVRD president Eliezer Batista.3 This is just one of the Vale Natural Reserve’s many unique features.

1 - To find out more about the subject, see Vale Natural Reserve (available at: <http://www.vale.com/pt-br/sustentabilidade/biodiversidade/reserva-natural-vale/paginas/default.aspx>) and Vale Natural Reserve: management model for protected areas (available at: <http://saladeimprensa.vale.com/hotsite/sustentabilidade/reserva_leiamais.asp>).

2 - Figures taken from www.vale.com – accessed on November 1, 2011.

3 - The Wall Street Journal – Reserva da Vale forma um catálogo vivo da fora na Mata Atlântica (June 8, 2005), available at: <http://online.wsj.com/article_email/SB111818543435653453-lMyQjAxMTExMTA4MTEwODE1Wj.html?mod=wsj_share_email>.

Below, left: the tree nursery at the Vale Natural Reserve in

Espírito Santo, in 1989. Below, right: a bird of

the Euphonia violacea species at the Vale

Natural Reserve, in 1991.

Aerial view of the Vale Natural Reserve in Linhares, Espírito Santo.

chapter 3 defining years: the achievement of a corporate identity · following the end of the new...

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