Companhia Vale do Rio Doce (or CVRD, as the company was better known prior to 2007) was founded in Itabira, Minas Gerais, as a public company by the Brazilian Federal Government on June 1, 1942. One year later the Vitória a Minas railroad was inaugurated. CVRD, just seven years after its foundation, was already responsible for 80% of Brazilian iron ore exports, started to have Vale as a majority stakeholder in 1970.
The decision to privatize Vale caused much controversy and some politicians opposed the privatization . Vale remained a public traded company both in the Bolsa de Valores de São Paulo (BOVESPA) and NYSE (through American Depositary Receipt - ADR).
Vale is the world leader in the iron ore and pellets market. The company which produced around 90 million tonnes in the mid 90s is now producing over 250 million tonnes of iron ore and pellets.
This means that Vale produces over 60% of all the iron in Brazil and around 15% of all the iron in the world: Vale produces potash at The Taquari-Vassouras Operational Unit, an underground mine with a treatment plant on the surface.
「Taquari-Vassouras」 is the name of the ore deposit. This unit is the single manufacturer of potassium chloride (KCl) in activity in Brazil.
Potassium Chloride is an important component for the manufacture of fertilizers, and it is obtained through the underground mine of sylvite and later on improved by the flotation process. Presently all production is for domestic market and assure 13% of the Brazilian demand for the product.
Since 1992 production comprised 24.7 million tonnes of ROM with an average grade of 31.80 percent KCl, containing a total of 7.8 million tonnes of KCl.Kaolin: a fine White aluminium silicate used as a coating agent, filler, extender and absorbent in the paper, ceramics and pharmaceutical industries. Despite being abundantly found in nature, its commercial reserves are restricted to Brazil, United Kingdom and the US.
As part of the celebrations for Vale’s 70-year anniversary, the book Vale – Our History was released in November 2012. The book eternalizes our history in 420 pages filled with interesting stories and historical data.
At first, the idea was to produce a simple catalogue of photos, but the amount of material that was found exceeded expectations. With a print run of 15,000 copies, the publication has been distributed to public libraries, schools and universities throughout Brazil.
The publication is part of a project to preserve memories of Vale. The first product was a 26-minute film that won a Golden Dolphin at the Cannes Corporate Media & TV Awards in 2012. This was the first Brazilian film to have won this award.
The Biggest Iron Ore Exporter in the World
An adventure in the Amazon
「You can send us the snakebite serum.」
The telegram on the desk of American geologist Gene Tolbert,
in Rio de Janeiro, was short and incredibly promising. Snakebite
serum, in this case, had nothing to do with snakes – it was the code
used among geologists at Companhia Meridional de Mineração,
the Brazilian arm of American giant US Steel, to announce the
discovery of a major deposit.
The telegram was sent from Belém by Breno dos Santos, also a geologist, and the cryptic message served to protect against the spying that went on between the mining companies scouring northern Brazil in search of riches.
There were no snakes, but there was manganese, and above all, a
spectacular amount of iron. Gold, silver, copper, bauxite and zinc,
as well as nickel, chromium, tin and tungsten would also be found
in due course.
Breno was 27 years old. He was a recently qualified geologist
who had accepted – more through lack of options than idealism – a
job at Companhia Meridional de Mineração, which was looking for
manganese in the Amazon.
It was an adventure in every sense. It wasn’t an easy job: the salary wasn’t great, the food was terrible, there were mosquitoes everywhere, and there were few geologists around. The indigenous peoples (Assurini and Xikrin) were not very friendly and, worst of all, Breno often had to fly over the jungle in very unreliable helicopters.
It was on one of these flights, on July 11, 1967, on board a red helicopter with room for two passengers, that the history of mining in Brazil (and the world) began to change. Since then, Carajás – named for the tribe that lived on the banks of the Araguaia River – has been synonymous with iron ore.
In the mid-1960s, the Amazon region was being mapped by large
American companies looking for electrolytic manganese, essential
for the manufacture of batteries. The recommended location was the
Sereno Mountains, known as the 「Serra Rica」 (「Rich Mountains」). In
geological jargon, there is a saying that 「You only look for elephants
where there are elephants.」 Pará – where enormous manganese
deposits had already been found near Marabá – was the 「elephant」
of the moment.
The strategy adopted by mining companies was to plot routes
starting from Belém, and crossing to Santarém and Altamira.
Initially, Breno’s team, led by Gene Tolbert, was going to be based in
Altamira, but Union Carbide, US Steel’s main competitor, discovered
its plans and got there first. The solution found was to create an alternative route via Marabá, where camps were set up around the
city, in places with precarious landing strips cleared alongside nut
and rubber plantations.
From his camp, Breno and his team members would leave
on short explorative flights. The geologist called his team 「the
Incredible Army of Brancaleone,」 in reference to the movie by Mário
Monicelli that tells the story of a hapless group of soldiers who
try to conquer a kingdom of dreams in medieval Europe. Breno’s reference made sense. The kingdom idealized by the Brancaleone of the Amazon was initially a whitish clearing, covered with stunted plants known by the local people as 「canelas de ema」 (「emu shins」) – but the location was an El Dorado of iron.
「The clearing was enormous, and there was low undergrowth
around, which normally characterizes a 『canga,』 meaning a region
rich in ore very close to the surface, impeding the growth of trees.
When I knocked in my hammer, a red substance came out, and I saw it wasn’t manganese – it was iron.
I thought: 『Wow! Everything here is iron!』」 recounts Breno. The geologist had already seen similar clearings on previous flights, and was starting to think that everything was part of an immense mineral reserve, of a kind that had never before been discovered on the planet.
「I had been working as a geologist for a short time, I was
enthusiastic about my discovery, but at the same time I was
afraid I could be making a very embarrassing mistake.」 But it was
no mistake: Breno had discovered 17 billion metric tons of high-
grade iron – and as of 1984 (after a lot of research, legal disputes,
technological adventures, heroism, political battles, and enterprise),
it would lead to a new stage in Vale’s history.
Vale becomes the global iron ore leader
In the late 1960s, Companhia Vale do Rio Doce’s commercial
prospects were excellent. In 1968, the company signed its first long-
and medium-term contracts to supply iron ore to Usinor, a French
state-owned steel company (for 10 years), and Italian steelmakers (for three years).
Also in 1968, CVRD signed its third contract with seven steel companies in Japan, involving the supply of 2.8 million metric tons of iron per year, for eight years starting in 1971 – a decisive step in strengthening its presence in the Japanese market.
This deal shocked the Australian iron producers, who thought their position in Japan was assured, given their geographical proximity.
Benefiting from the global steelmaking boom that began in 1969,
CVRD exported 21.8 million metric tons of ore in 1970 (an increase of
nearly 100% in relation to 1968), bringing in around US$160 million
of revenue to the country.
Japan bought practically one-third of this total – which included, for the first time, 750,000 metric tons of pellets. As of 1969, Japan had overtaken West Germany to become CVRD’s biggest customer.
By the end of 1970, the company’s long-term sales commitments
amounted to 324 million metric tons of run-of-mine ore and pellets,
destined for customers in various countries.
In the same year, Vale renewed its agreements, made in 1962 and 1964 with Samitri and Ferteco, respectively, involving the use of its railroad and port facilities to transport iron ore produced by these two foreign companies in the Iron Quadrangle region.
However, the seesaw of global steel production continued
with its ups and downs. The boom of 1969-1970 was followed by a slowdown for two years. Even so, in 1972 the company exported
26.1 million metric tons of iron ore and pellets.
The following year, as the steel industry heated up once more, the company’s sales in the international market skyrocketed, reaching a total of 37.5 million metric tons. Continuing with its policy of entering new markets, CVRD began supplying iron ore to China, Scotland and East Germany, and reestablished sales to Romania and Yugoslavia.
In 1973, the company’s long-term commitments to supply iron
ore amounted to 402 million metric tons, reserved for customers
in West Germany, Argentina, Austria, Spain, the USA, France, The
Netherlands, England, Italy, Japan, Poland and Turkey.
At the end of 1974, despite the first signs of a new downturn in
global steelmaking arising from the oil crisis of the previous year,
CVRD celebrated a new record for exports: 46.2 million metric
tons of iron ore and pellets – equivalent to 81% of Brazil’s mineral
exports and 5.5% of the country’s total exports.
A new factor in this period was an upturn in sales to the United
States, which rose by 88% between 1973 and 1974. This was because
the American government had suspended operations at the Reserve
Mining Company’s pelletizing complex due to its pollution record.
In 1974, CVRD signed long-term contracts with customers in the
USA, Romania, Poland and East Germany, involving around 70
million metric tons of ore.
Despite adverse conditions on the international market,
aggravated by a deepening crisis in the steel industry, CVRD ended
1975 with very positive results. Modest growth in its physical
volume of exports (up 3.5% from the previous year) was outweighed
by a 36% rise in their value, due to an increase in the ore price (from
US$9.74 to US$12.92 per metric ton).
The company was now the world’s biggest exporter of iron ore, accounting for 16% of seaborne trade in the product.
A summary of CVRD’s performance in the first half of the 1970s
makes clear how important this period was to the company’s
history. Between 1970 and 1975, the volume of ore it exported rose
by 116%, and the average price per metric ton increased by 77%,
resulting in growth in export revenue of around 285%, from US$160
million to US$615 million.
The start of the 1970s saw advances in the international division of labor, a process in which developed countries invested heavily in emerging countries such as Brazil in sectors that directly or indirectly made intensive use of natural resources.
This included the development of projects with intensive power consumption, especially in sectors with major environmental impacts, such as mining and pulp.
「Go ahead, Brazil!」
In 1976, CVRD’s export volumes stayed at practically the same level
as in 1975. However, thanks to a further rise in the average price of
ore, which reached US$15.15 per metric ton, the company received
export revenues of around US$717 million.
CVRD was now the biggest contributor to Brazil’s trade balance. To maintain this position, though, government intervention was increasingly necessary.
General Ernesto Geisel became president of Brazil in March 1974,
succeeding General Emílio Garrastazu Médici, who was known for
his overall control of spending and political intolerance. Geisel’s
government, which lasted until 1979, was marked by the start of
the 「political opening」 process in the country.
In the economic field, the president invested in infrastructure, signing a controversial nuclear agreement with Germany and allocating large sums of money to build the Itaipu hydroelectric power project. During his administration – and in particular, together with the Minister of Mines and Energy, Shigeaki Ueki – mining was treated as a matter of state.
This would be perceived in the outcome of the legal deadlock between CVRD and US Steel concerning the Carajás Iron Project in 1976, and in the approach to foreign trade in iron ore.
President Geisel’s visit to Japan in mid-1976 reanimated CVRD’s
commercial prospects. The company’s second and third long-term
sales contracts with Japanese steel mills, due to expire in 1978, were
renewed, involving the supply of 5.7 million metric tons per year of
iron ore for 15 years. In addition to these deals, a fifth contract was
signed, involving annual sales of 6.5 million metric tons of iron ore
and 6 million metric tons of pellets for 15 years.
Raymundo Mascarenhas (Prado, Bahia, 1928 – Linhares, Espírito Santo, 1987) joined the company in 1957, and 12 years later became its president – the second in-house employee to occupy this position. During his career, he led Docenave and was the general superintendent of sales. His experience in the latter function became the hallmark of his administration, when the company’s exports rose from 11.550 million metric tons in 1968, to 16.056 million metric tons in 1974. This increase in sales was also linked to the development of a new export product for CVRD: pig iron produced in Minas Gerais.
In 1974, the last year of his first term, he founded Celulose Nipo-Brasileira (Cenibra) in partnership with Japanese investors. In the same year, Vale became the world’s biggest iron ore exporter.
After leaving CVRD’s presidency, Mascarenhas – a qualified engineer who graduated from the Polytechnic School of Bahia – was appointed to run Companhia Bozano, Simonsen Comércio e Indústria, where he remained until 1983. The following year, he returned to CVRD as its commercial director. In May 1985, he was appointed Eliezer Batista’s vice-president and, in April of the following year, he served once again as the company’s president.
If the future seemed guaranteed – thanks to the long-term
contracts with Japanese steel companies – the present was not yet
assured. In 1977, for the first time since 1948 (at the height of the post-war crisis), Vale’s performance went into reverse. Its exports fell by 14% in relation to the previous year, from 47.3 to 39.8 million metric tons.
On top of lower volumes and export revenues, and despite the fact that the average iron ore price reached US$15.51 per metric ton, rising operating costs and a stronger cruzeiro contributed to a significant fall in the company’s profits.
The combination of an appreciation in Brazil’s currency and a falling average iron ore price would subsequently be experienced at various moments, with adverse effects for the company’s financial status.
Faced with the steel industry crisis in the main capitalist
economies, CVRD sought new customers in developing countries
that were seeing some growth in their steel production. In 1977,
the company signed its first long-term contracts with mills in Iraq,
Qatar, South Korea, Indonesia and the Philippines.
At the end of the year, its supply contracts involved future commitments for 609 million metric tons – more than half represented by the Asian market (316 million metric tons), and the rest accounted for by Western Europe (200 million metric tons), Eastern Europe (55.5 million metric tons) and the Americas (38.2 million metric tons). It was now selling to 63 customers in 26 countries.
In 1978, there was a slight recovery in CVRD’s sales on the
international market (to 41.9 million metric tons). New contracts
were signed with China (to supply 250,000 metric tons on a trial
basis, followed by 4 million metric tons between 1979 and 1980),
Poland, Argentina (sale of pellets for five years), Czechoslovakia,
Portugal (a five-year extension of an iron ore sales contract) and
France (an extension of CVRD’s contract with Usinor, again, for
five years).
Also during 1978, Japan, despite 30% of its steelmaking capacity
being idle, resumed its customary pace of purchases from CVRD. A
new feature was the inclusion of a 「flexibility clause」 in contracts,
giving Japanese steel companies more freedom to change their
volume of imports beyond the existing margin of 10%.
Table 1 shows the movements in CVRD’s sales of iron ore and
pellets on the global market between 1968 and 1974, broken down
by consuming country, including the quantity purchased annually
by each one and its share of total sales.
It was necessary to produce a separate table (Table 2) for the years 1975 to 1978 in order to reflect a change in the criteria used in the company’s reports, which meant that data from different countries were grouped into major markets (Asia, Western Europe, Eastern Europe and the Americas). In addition, the figures are more approximate for this latter period.
Vale’s excellent commercial performance on foreign markets between 1968 and 1978 can be attributed to the company’s efforts to adapt its maritime transport infrastructure to its ever more ambitious export targets
Besides exporting its own production, CVRD, through the Vitória-Minas Railroad its port facilities, also transported the output of Ferteco and Samitri, as described in Chapter 4. The expansion provided through contracts signed almost a decade earlier with these two companies generated good results.
The figures available for the years 1974 to 1978, encompassing the exports of both companies, amounted to 33.1 million metric tons. The markets served by Samitri were Western Europe (France, Belgium, West Germany and Luxembourg) and North America (the United States and Canada).
Ferteco’s ore was largely sold to West Germany. In 1977, CVRD also began exporting pellets produced by its affiliates, shipping around 500,000 metric tons of the products. The following year, this figure rose to 1.9 million metric tons.
CVRD’s average share of Brazil’s total sales of iron ore and
pellets between 1968 and 1978 was slightly higher than in the
1961-1967 period, rising from 73.5% to 74.9%. It was not just Vale
– by far – that recorded enormous growth in its export volumes.
The three largest foreign iron miners operating in Brazil – MBR, Samitri and Ferteco – also experienced extraordinary growth in their foreign sales, due to the growing specialization of production between developed and emerging countries. MBR accounted for approximately 12% of Brazil’s iron exports during this period, while Samitri and Ferteco each represented slightly over 5%.
CVRD’s fleet of ships and international trade
CVRD’s excellent commercial performance on foreign markets
between 1968 and 1978, especially in the early 1970s, may largely be
attributed to the company’s efforts to adapt its maritime transport
infrastructure to its ever more ambitious export targets.
In order to consider investing in the building of Docenave,
CVRD’s shipping subsidiary, its own fleet was fundamental. The
lack of efficient, coordinated logistics systems resulted in higher
operating costs, reducing the competitiveness of companies.
Investment was made in global supply chains』 logistics systems to
improve geostrategic positioning, overcoming the peripheral effect
of domestic logistics.
In these systems, leadership was awarded to the countries that had structures for planning, regulating and investing to ensure a strategic network of logistics infrastructure, based on production centers that continuously added value for consumer markets.
Aware of this competitive strategy, in 1970 Docenave received
its first new ships, with total transportation capacity of 570,000
deadweight tonnage (DWT).
This fleet, composed of ore-oil carriers, was expanded in the following years, reaching a total of 15 ships in 1976, with total transportation capacity of 1.261 million DWT.
This included Docecanyon, an ore-oil carrier of 269,500 DWT, delivered by Japanese shipyard Nippon Kokkan in 1973.
Another important measure was the renewal, in 1968, of
a contract with Petrobras by which Docenave committed to
transporting large quantities of oil from the Middle East, using
its ships returning from Japan, ensuring attractive freight costs
in both directions. Likewise, Docenave entered into an agreement
with Usiminas to transport the metallurgical coal imported by
the steel company.
The practice of freight sharing (combining the transportation of different types of cargo, in accordance with the itinerary) would be further intensified in the coming years. The company was improving its competitiveness while helping to develop Brazil’s industrial system.
The sales structure that CVRD established abroad had three
main components: Itabira Eisenerz, a subsidiary succeeded by Rio
Doce Europa (RDE), founded in January 1974 and headquartered
in Brussels, responsible for selling the company’s products in
Europe, as well as importing equipment and materials from there;
Itabira International Corporation (Itaco); and Rio Doce America
(RDA), a wholly owned subsidiary of Itaco, headquartered in New
York, tasked with selling iron ore and pellets in the USA, Canada,
Mexico, and Trinidad and Tobago.
CVRD’s negotiations with Japan continued to take place directly between the company and Japanese trading companies.
Fernando Roquete Reis
As soon as General Ernesto Geisel became President of the Republic in 1974, Fernando Roquete Reis (Belo Horizonte, Minas Gerais, 1932 – Rio de Janeiro, 1983) was appointed president of Vale. Mining in Brazil was going through strategic changes, with a focus on diversification and foreign trade, and Reis, who had a solid background in economic policy (having served as director of Brazil’s Central Bank, finance minister of Minas Gerais State Government, and organizer of the postgraduate Economics course at UFMG, among other positions), seemed the right man to run the company in its new phase. It was within Brazil’s frontiers, namely in the Carajás Mountains, that Reis would prove that Geisel’s choice had been wise. Reis led the entire legal
dispute involving Vale and United States Steel (partners in Amazônia Mineração S.A.) for control of the exploitation of the world’s biggest iron ore reserve.
As it expanded its exports, Vale also significantly increased
its sales in Brazil. Its share of the domestic iron ore market rose from 18.3% in 1976 to 34.4% in 1978.
Among the various deals made during this period, it is worth emphasizing contracts signed in 1973 for the long-term supply of a special type of pellet to Usina Siderúrgica da Bahia (Usiba) and Aços Finos Piratini (in Rio Grande do Sul), companies that were pioneering direct-reduction steel production in Brazil.
CVRD’s steady expansion of sales in the country – largely to Usiminas, its biggest customer, but also to Cosipa, CSN, Usiba and other smaller steel mills – justified the establishment, in 1973, of Navegação Rio Doce Ltda, a Docenave subsidiary dedicated exclusively to coastal shipping rather than long-distance shipping.
Table 3 presents information on the company’s sales volumes in
Brazil between 1968 and 1978, showing the quantity purchased by
each main customer and its share of total sales, sources permitting.
Expansion of the mine-railroad-port complex
Rising exports and new production targets demanded constant
improvements in CVRD’s mine-railroad-port complex, the structure
around which the company revolved.
A large share of investment was focused on expanding the transportation capacity of the EFVM, which had practically reached saturation point, especially after the incorporation in 1969 of a further 168 kilometers of track by the Desembargador Drumond branch line, extending it from Costa Lacerda to Fábrica in Minas Gerais, and establishing a link with the Central do Brasil Railroad.
The extension of this branch line significantly increased train
movement on the railroad. Besides serving CVRD, Samitri and
Ferteco, the EFVM also transported imported metallurgical coal for
Usiminas, Acesita, Belgo-Mineira and other steel companies in the
Iron Quadrangle region.
With its new branch line, the EFVM started to function as an
export corridor for the output of small steel mills and pig iron
manufacturers located in the west of Minas Gerais. Before long,
steel products were in third place – behind iron ore and coke – in
the list of items transported by the railroad, which also included
timber, charcoal and grains, as well as passengers.
Things were also changing at the other end of the railroad tracks,
at the port. In the late 1970s, the company began implementing
a centralized, integrated communications and traffic control
system, in order to optimize traffic capacity along the railroad with
maximum safety.
Locomotive movements would be controlled from a single dispatch center. The project also involved implementing an automatic train car identification system and acquiring two automatic scales to weigh moving trains.
To definitively resolve the EFVM’s overloading problem, in 1971
work began on double-tracking 548 kilometers of the main line.
This project was completed in 1977. Meanwhile, considerable
sums were also invested in expanding the Port of Tubarão.
Work at the port, executed between 1970 and 1974, included dredging the access channel and ship-turning basin; building a new pier with a water depth of 24 meters, capable of receiving bulk carriers of more than 250,000 DWT, where two ship loaders would be installed; and creating a goods yard around 500,000 m2 in area and a new fines stockyard, built on land reclaimed from the sea using dredged material, and sheltered by a breakwater.
By the end of the decade, the Port of Tubarão, now consisting of two
piers and a dry dock for maneuvers, and protected by a breakwater,
had an annual loading capacity of 75 million metric tons.
The port’s loading and unloading operations, totally mechanized, basically consisted of removing ore from train cars using four car dumpers, and then taking it by conveyor belt to its scheduled destination – the holds of ships or one of the two stockyards.
The stockyards, equipped with three stackers, were capable of
storing 5.6 million metric tons of 10 different kinds of products.
When the time came to ship out the ore, the company used bucket
wheels to remove it from the piles and place it onto conveyor belts
leading to the piers.
While the ore was being transferred onto vessels, small samples of the product were constantly taken to be examined at sampling stations located next to the terminal, providing information on the cargo’s grain size and chemical composition, to ensure that purchasers』 specifications were met.
To make any necessary corrections, alongside the quay CVRD
installed a screening plant capable of processing 12,000 metric
tons of ore per hour.
Cauê: the biggest mine in the West in the 1970s
Back at the other end of the complex – the mines – production also demanded new technologies, in particular to make use of low-grade ores.
In 1969, the company began constructing a plant to recover itabirite deposits from Cauê Mine, which had until then remained unexploited due to their lower levels of iron content. The new Cauê Plant was designed to produce 9 million metric tons per year of sinter feed and pellet feed (high-grade concentrates) through the electromagnetic concentration of ore fractions smaller than 1 mm across.
At the same time, in order to make full use of extracted ores, the company began work on installing a facility next to the mine to crush, screen and classify hematite fines, which would also be fed with granular fractions of itabirite.
Cauê Mine has been in operation ever since CVRD was
established in 1942 – and sampling work was carried out even
earlier, in the 1920s, at the instigation of Percival Farquhar.
Cauê’s mining plan, the top priority during the company’s early years, was explained in detail by CVRD’s first president, Israel Pinheiro, in a speech given at the Engineering Club in August 1943: 「The facilities designed to extract, crush and transport ore, and then load it onto the Vitória-Minas』 railroad cars, will be modern and perfect.
The initial workings will be at an altitude of 1,200 meters, 170 meters below the top of Cauê Peak. The first extraction will take place at this level, producing an estimated 80 million metric tons from the deposit between 1,200 and 1,370 meters of altitude.
At the 1,200-meter level, a platform will be made sufficiently large
to install initial equipment and a truck-turning area. This platform
will be the starting point for a road to go around the peak, enabling
excavation to take place by means of tunnels or directly at the
pit faces established [...] In the zone where galleries have been
made, calculations indicate a quantity of 173 million metric tons
of exportable ore of compact hematite with metallic iron content
ranging between 68% and 70%.」
Between 1942 and 1949, the company would remove
approximately one million metric tons of compact hematite from
the mine. During the following decades, the Itabira region would
continue to be CVRD’s main source of high-grade iron ore.
However, as waste products accumulated, high-grade ore began to be used up, and the company was left with deposits of lower-grade itabirite, it was clear that the company would have to dig deeper at Cauê.
New facilities at Cauê Mine were opened in 1973, and in the same
year, CVRD began selling its output of concentrates (3.7 million
metric tons), most of which was exported. Cauê Mine – something
of a symbol of CVRD’s development – then became the biggest mine
in the West.
The year 1973 was also marked by the implementation of the
Conceição Project, to make full use of the iron ore deposits of the
mines of Conceição and Dois Córregos.
The project involved the construction of new mechanized facilities for processing ore at both mines and a single tertiary crushing and screening unit next to Conceição Mine, together with a dry and wet classification plant for hematite fines, and a concentration plant for itabirite fines, both adjacent to the mine.
In all, around US$240 million was invested in Conceição Complex, which was opened at the start of 1979. It was capable of processing 28 million metric tons per year of itabirite and hematite, generating 24.2 million metric tons per year of products such as blue dust, pellet feed, sinter feed and lump ore.
It was known that performance could be greatly improved by
making use of ultrafines (until then considered a waste product)
through pelletizing. Consequently, the company decided to build
two industrial pellet plants next to the Port of Tubarão.
CVRD’s first pelletizing plant, which had a nominal production
capacity of 2 million metric tons of pellets per year, was opened in 1969. The same year, in light of research pointing to growth in global demand for pellets, due to their superior performance in blast furnaces and the spread of new direct-reduction steelmaking processes, Vale began building its second unit, designed to produce 3 million metric tons per year, which it opened in 1973.
Exhaustion of mineral deposits
All these initiatives to optimize the production of the Itabira
mines faced a serious limitation: if the pace of extraction were
to be maintained, the mines』 high-grade ore deposits would be
completely exhausted by the end of the century. It was vital for
CVRD to find new sources of minerals at once.
Over the course of the decade, this concern led CVRD to intensify
its purchases of ore from small producers in the Itabira region
and to seek to expand its mining rights both inside and outside
the Iron Quadrangle region of Minas Gerais – either by applying for
new concessions from the National Mineral Production Department
(DNPM), or by incorporating third parties』 reserves.
In 1970, CVRD acquired 520,000 metric tons of ore from small miners in Itabira, a volume that rose progressively until reaching 6.9 million metric tons in 1975, equivalent to 13.2% of its own production.
This policy resulted in the implementation of three projects
in Minas Gerais: the Guanhães Project, which involved iron
prospecting in the Itamarandiba region; the Porteirinha Project, to
assess and possibly exploit reserves located in the Rio Pardo region
in the north of the state; and the Piçarrão Project, to operate a mine
in the municipality of Nova Era acquired by the company in 1967.
Piçarrão Mine had estimated reserves of 20 million metric tons of
extractable ore.
The Piçarrão Project included building a plant to make sinter feed and laying a 17-kilometer railroad branch line to connect the mine to EFVM’s station in Desembargador Drumond.
The company expanded its frontiers in 1976 through three
acquisitions in Minas Gerais. Firstly, it bought a 99% stake in Caraça
Ferro e Aço S.A., a company that owned Caraça Mine in the Santa
Bárbara region of the state, with estimated reserves of 42 million metric tons.
Secondly, it purchased a 51% interest in Minas d』El Rey Dom Pedro, which held the rights to mine iron and gold reserves in Mariana. The other shareholders in this company were Gold Fields of South Africa (30%) and a private Brazilian group called Hugo Gouthier (19%). Thirdly, CVRD acquired mining rights to the São Luís, Tamanduá and Almas deposits, located near Fazendão, where the EFVM had a railroad yard.
Caraça Mine began operating in 1976, producing 1.2 million
metric tons by the end of the year. The mine’s output rose to 1.5 million metric tons in 1977, and increased further to 2 million metric tons in 1978.
Minas d』El Rey started up in 1977, and produced 800,000 metric tons in its first year. Given the lack of a railroad link between the mine and CVRD’s network, its output was transported by road to the Port of Rio de Janeiro.
However, at the end of the decade, given constantly rising freight costs (accounting for 70% of export prices in 1977), CVRD decided to suspend the company’s activities, which were considered uneconomic, maintaining its deposits as strategic reserves.
In August 1974, after 13 years of negotiations between CVRD and
Aços Especiais de Itabira (Acesita), the two companies established
a joint venture (51% owned by CVRD), Itavale Ltda., to facilitate
the exploitation of Acesita’s Periquito and Chacrinha deposits in
the Itabira region of Minas Gerais.
The shareholders』 agreement established that CVRD would immediately begin operating Periquito Mine through a lease, and would also be responsible for selling the ore produced.
This contract was valid for three years, and it could be renewed if more time were required for Itavale to complete studies of its reserves and produce a definitive plan to extract them.
Mining activities at the Periquito deposit began in 1976, and in its first year the mine produced 3.6 million metric tons of iron ore, rising to 3.8 million metric tons in 1977 and 5.9 million metric tons in 1978.
A second project aimed to develop Capanema Mine, in the
municipality of Ouro Preto, Minas Gerais, whose mining rights
belonged to the Kawasaki Steel Corporation. To proceed with the project, a new company, Mineração Serra Geral (MSG), was set up
in October 1976, through an association between CVRD (51%) and a
group of Japanese companies led by Kawasaki Steel.
In order to process the ore produced at Capanema Mine, in 1977
CVRD began another initiative, called the Timbopeba Project. As
well as processing ore from Capanema, this project also involved
mining and processing ore from the neighboring deposit of
Timbopeba, also in Ouro Preto. Acquired by the company in 1967,
the Timbopeba reserves contained an estimated 110 million metric
tons of hematite and 50 million metric tons of itabirite.
CVRD’s traditional mines of Cauê, Conceição and Dois Córregos,
together with the new mining operations developed elsewhere in
Minas Gerais, produced rapid growth in output in the 1970s. The company’s set of mining operations in the Iron Quadrangle produced 390 million metric tons of ore over the course of the decade, giving rise to various types of products.
Output of pellet feed and sinter feed grew significantly during this period, and by 1977, these items accounted for 13.8% and 36%, respectively, of CVRD’s total production.
However, there was a decline in the company’s share of Brazilian iron ore output, from 56.8% in 1970 to 48.3% in 1975 and 43.3% in 1978, as shown in Table 4.
CVRD’s investments to expand its mine-railroad-port complex
were to a large extent enabled by funding and loans from various international entities, notably Eximbank, the Export Development Corporation (EDC), Chase Manhattan Bank, Chemical Bank, Commerzbank AG, Austrian group Vereinigte Oesterreichische Eisin-und Stahlwerke Ag (VOEST), Mitsubishi Bank Ltd., Nissho-Iwai Co. Ltd., Mitsui & Co. Ltd., and the Inter-American Development Bank (IDB).
Brazilian funding agencies that lent to the company during this period included the National Economic Development Bank (BNDE),Banco do Brasil, and the Minas Gerais Development Bank.
Arriving in Carajás
It is said that during a visit to the Carajás Mountains in Pará, Zhao
Ziyang, the prime minister of China, seeing a large outcropping of
iron ore sticking out of the ground, told CVRD’s geologists: 「Your ancestors must have pleased God for him to have given you so much.
I am envious of you!」 Ziyang, who was in Brazil from October 30 to November 4, 1985, was the second most senior official in the Chinese government and the person responsible for the country’s economic liberalization.
The Carajás Mountains are a set of ridges and plateaus rising to
between 300 and 400 meters above the surrounding land, reaching
altitudes of around 660 meters above sea level. Located between the Itacaiunas and Parauapebas rivers, tributaries of the Tocantins, the mountains are almost entirely covered with equatorial forest.
In the highest region, there are a number of small lakes that, at first glance, might appear to indicate the presence of limestone, but which in this case are related to iron deposits. The region also has manganese, copper, gold, nickel and much more.
Most of the world’s metallic mineral deposits are situated in pre-
Cambrian areas, belonging to the longest period in the formation of
the Earth’s crust, which lasted from the solidification of the planet’s
surface until 570 million years ago.
The physical and chemical conditions during this period were very different from those of today, with a much thinner crust, making it easier for metals to rise up from the deepest parts of the Earth.
Pre-Cambrian zones cover around 40% of the Amazon. Their
volcanic-sedimentary sequences, granite intrusions, acid and
intermediate volcanic flows, alkaline-ultrabasic and basic-
ultrabasic complexes, and sedimentary covers present the potential
for a great variety of mineral deposits.
This type of formation is conductive to the presence of concentrations of iron, anganese, aluminum, copper, zinc, nickel, chromium, titanium, phosphates, gold, silver, platinum, palladium, rhodium, tin, tungsten, niobium, tantalum, zirconium, rare earth minerals, uranium and diamonds – a veritable El Dorado of the 20th century.
In Carajás – and this continues to be confirmed as time goes on –
this concentration and variety of mineral deposits extends to levels
never before imagined. Hence the Chinese prime minister’s remark
about Brazilians having 「pleased God.」
CVRD arrived in Pará some time after geologist Breno dos
Santos first knocked his hammer into the earth on top of the
Carajás Mountains, revealing the region’s potential to the world.
Although it had made its discovery three years previously, US Steel
subsidiary Companhia Meridional de Mineração had not yet started
to exploit the area’s minerals, for various reasons.
The ensuing dispute for control of the iron ore reserves of Carajás between the Brazilian state-owned enterprise and the American company that discovered them constitutes an important chapter in CVRD’s history in the 1970s.
As seen earlier, the research conducted by Companhia Meridional
in the Carajás Mountains, which resulted in the discovery of the
region’s iron-bearing potential, had the original objective of finding
new manganese reserves.
Before Meridional came to the region, Union Carbide had discovered manganese deposits in 1966 in the Sereno Mountains, also in Pará.
At first, Meridional demonstrated no interest in its iron discovery, given that its objective was manganese. Breno dos Santos recounts that he had to take his boss, Gene Tolbert, to see the location of the discovery in person in order for him to take it seriously. And then things changed.
Tolbert immediately put in a request to US Steel’s American
headquarters to send down technicians with specialist knowledge
of iron to assess the region’s capacity.
From a hotel in Rio de Janeiro’s South Zone transformed into the company’s main office in Brazil, various applications were submitted to the DNPM for research permits to appraise the mineral deposits found in Pará. The Carajás Mountains began to be definitively mapped.
Although US Steel had the legal right of preference to conduct
research of the deposits it had discovered, its intention to exploit the
mineral wealth of Carajás was not viewed favorably by the Brazilian
government.
Based on restrictions established in the Mining Code on the number of prospecting licenses that a single company could hold, the DNPM stalled the process of granting permits for the region until mid-1969.
That was when the government managed to persuade the American company to include CVRD as majority partner in a unified mineral research project covering an area of 160 million hectares.
The agreement was signed in April 1970, establishing the Amazônia Mineração S.A. (AMZA) joint venture, owned by CVRD (51%) and Companhia Meridional de Mineração (49%). AMZA was tasked with implementing the Carajás Iron Project.
Later in 1970, AMZA began the geological surveying of its
reserves, completed in 1972, which would reveal the existence of
around 17.9 billion metric tons of ore with an average iron content
of 66.1%.
Given these results, the joint venture immediately initiated technical and financial feasibility studies for exploiting the deposits, to be conducted by Valuec Serviços Técnicos Ltda.,
as well as negotiations with the DNPM to obtain the right to mine
in the region.
The conclusions of these studies were presented in May 1974
and, the same year, the DNPM authorized mining operations.
Budgeted at US$930 million, the Carajás Iron Project planned
to extract 12 million metric tons of iron ore per year as of 1979, reaching output of 50 million metric tons per year by 1985.
The main destinations for the ore would be the North American, European and Japanese markets.
To transport the ore from the mine to the coast, an 892-kilometer railroad – the Carajás Railroad – would be built, linking Marabá in Pará to Ponta da Madeira in São Marcos Bay in the municipality of Itaqui, Maranhão, near São Luís. Here, a port capable of receiving ore carriers of up to 280,000 DWT would be constructed.
The environment, nationalism and controversy
Carajás Iron was no ordinary project. All stages of its development
involved money, politics, the environment, human lives, nationalism
– and a great deal of controversy. One of the most contentious
points was AMZA’s decision to build a railroad rather than using
waterways.
The initial option was to make use of the Tocantins and Itacaiunas rivers. Some sectors of society argued that implementing a waterborne solution – involving the construction of a port in Espadarte, at the mouth of the Pará River, near Belém – would not
only benefit communities along the rivers, but would also avoid
spending on imported locomotives, tracks and metal bridges.
The solution could be implemented by the Brazilian shipbuilding
industry, which was fully able to deliver the undertaking.
Some people even suspected that US Steel’s preference for a railroad was the result of confidential agreements with CVRD guaranteeing the American group the right to supply the equipment required to build
and operate the railroad.
In fact, CVRD’s preference for the railroad solution was based
not only on technical and financial considerations, but above all
on strategic factors. The Port of Espadarte would only be able to receive small ships.
At that moment, selecting Espadarte could make it unfeasible to sell ore to Japan, which the company then considered its priority market, thereby making the project completely dependent on the North American market.
The discussions concerning which transportation system should
link the mine to the port (waterway or railroad) also involved,
among other actors, the governments of Pará and Maranhão, each
one seeking to guarantee for its state the benefits arising from
the project.
The issue continued to be debated until 1976, when the federal government, through Decree 77,608, granted AMZA a concession to build and operate the Carajás-Itaqui Railroad.
While these controversial discussions were taking place, in the
first half of 1975 the first conflicts between CVRD and US Steel
began to surface. Although the Brazilian company had a majority
interest in AMZA and appointed four of its directors, including the
president, the shareholders』 agreement signed in 1970 gave the
minority partner a veto over all strategic decisions taken by Vale.
Joel Mendes Rennó
When he was appointed CVRD’s president in 1978, Joel Mendes Rennó (Belo Horizonte, Minas Gerais, 1938) was already intimately familiar with the country’s mining policy. Since 1975, he had been an advisor on strategic affairs to the Minister of Mines and Energy, Shigeaki Ueki, and was responsible for relations between the ministry and state-owned companies. Rennó’s main goal as president was to implement the Greater Carajás Project, which in fact occurred in 1979.
A qualified engineer who graduated from the Federal University of Itajubá, Rennó spent a relatively short time – a little over one year – as the president of CVRD. During his administration, he prioritized the construction of the Carajás Railroad, which would transport iron ore from Pará to the Port of São Luís. He was responsible for
designing and implementing the new mine-railroad-port complex, fundamental to the development of the region and to the company’s success. Rennó left his post in 1979, when General João Figueiredo took over as President of the Republic. He later served as president of Petrobras, remaining in this position for almost seven years, between 1992 and 1999.
By that time, it was thought that Carajás』 output, given its excellent quality, would enable the company to meet new demands and also serve markets already supplied by the mines of the Doce River System, retaining the reserves of Minas Gerais to be allocated preferentially to
support the Brazilian steel industry
US Steel also appointed the most important directors, including
the director of engineering, which in practice gave it management
control of the project. Using these powers, US Steel blocked CVRD’s
proposals to expand AMZA’s paid-up capital and delayed the start
of construction work in Carajás, alleging that conditions on the
global iron ore market were unfavorably affected by the crisis in
the steel industry in the main industrialized countries.
There then began a long and fierce dispute between the partners for effective management and technical control of the joint venture. CVRD’s strategy, backed by the Brazilian government, was to exert pressure to revise key contractual clauses and bring in other foreign partners by acquiring a part of US Steel’s stake in the venture.
An important step in the negotiations, conducted personally by CVRD’s president, Fernando Roquette Reis, was the approval in 1976 of a 「purchase clause.」
This clause established that in the case of an irremediable disagreement about an issue of vital interest to the majority partner, the latter would have the right to acquire the dissenting group’s shares for a price agreed to at the time and with a relatively flexible payment timeframe.
At the same time, CVRD managed to force the dissolution of Valuec, dominated by the American group, and to obtain more control over AMZA’s engineering department, which would take on the activities of the dissolved subsidiary.
The disagreements between the two companies, aggravated
by US Steel’s refusal to abide by its ore purchase commitment,
culminated in the official exit of the American company from
the venture in June 1977, after receiving compensation of US$50
million. CVRD then became AMZA’s sole shareholder.
CVRD’s role in ending the dispute was highlighted by Francisco
do Rego Fernandes: 「CVRD negotiated in a tough, inflexible manner.
[...] Possessing basic technological knowledge of iron ore, already
accounting for around 20% of the seaborne iron ore market, and aware of concrete proposals for external funding, for example from the World Bank [...], CVRD considered itself to be in a comfortable position to negotiate with US Steel, which did not assure it a considerable market share, was not injecting resources into the project, and [...] was in a downward managerial and economic phase, with a deteriorating financial situation.」
The first measure taken by the 「new」 AMZA, now entirely
controlled by Companhia Vale do Rio Doce, was to undertake new
studies to reappraise the most appropriate production scale for the
project and verify the possibilities of rationalizing its costs, which
had already grown from the US$930 million originally budgeted in
1973 to around US$3.5 billion.
These studies resulted in a new initial production target of 20 million metric tons per year, as of 1984, rising to 35 million in 1987. The project’s costs were reassessed at US$2.4 billion.
At the same time, CVRD intensified its negotiations to find new foreign investors, as well as external and internal funding for the necessary construction work.
The company’s efforts to find new partners were unsuccessful.
There then followed a period of saturation in the international
iron ore market, impacted by the crisis in the steel industry.
Even the Brazilian government began to doubt the possibility of
guaranteeing, without risks, the start-up of production in Carajás.
The Minister of Mines and Energy, Shigeaki Ueki, argued that the development of the Carajás Iron Project should be delayed until economic conditions were favorable.
Despite these obstacles, CVRD insisted on the project’s economic
feasibility and the need to implement it immediately, based on
two arguments.
Firstly, the company explained, it was impossible to meet the steel industry’s growing demand for high-grade fines (sinter feed) exclusively from production in the Iron Quadrangle, whose richest reserves were running out.
The use of lower-grade reserves, in turn, would require new and growing investment in processing. Therefore, high-grade iron from Carajás would be welcome on the international market.
Secondly, CVRD made an optimistic diagnosis of the market’s
prospects, forecasting an upturn in sales as of 1985. By that time,
it was thought that Carajás』 output, given its excellent quality,
would enable the company to meet new demands and also serve markets already supplied by the mines of the Doce River System, retaining the reserves of Minas Gerais to be allocated preferentially
to support the Brazilian steel industry.
Carajás Mineral Province
In order to implement the Carajás Iron Project, Eliezer Batista,
then president of Vale, needed the support of the World Bank
(among other institutions), at the time led by Robert McNamara,
former Secretary of State in John F.
Kennedy’s government. Eliezer described McNamara as one of the most intelligent and fascinating people he had ever met.
「No one could convince him with the sales pitch of a carpet salesman,」 he said. 「As a banker, he wanted a return on investment.」 Eliezer personally checked every detail of the project, and four years of work was necessary before he presented it.
Yet in just three meetings with the American, he got the green light. However, this was not enough to get the project off the ground.
Information reported by both the Brazilian and foreign press,
obtained by researchers and non-governmental organizations
engaged in defending the rights of indigenous peoples, showed the
need for the Brazilian government to work together with indigenous
communities.
This contributed to the World Bank – one of the main financers of the Greater Carajás Project – imposing certain conditions on the granting of further resources to continue the venture.
Accordingly, the World Bank indirectly took on the role of supervising it, representing the interests of the other creditors, and the Bank’s support would guarantee the success of the initiative’s implementation.
From this point on, funding for the Brazilian government would depend on government actions to ensure the sustainability of indigenous peoples.
Occupying the region – with housing, people, commerce and
basic infrastructure – was fundamental to the project’s success.
The eastern portion of the Amazon was considered a region that
was hard to integrate, almost impenetrable.
By this time, major reserves of bauxite, manganese, cassiterite, copper, nickel and gold had already been discovered in the region, and it would be possible to harness them together by using the Carajás Iron Project’s infrastructure.
In February 1978, convinced of the importance of the venture,
the Economic Development Council authorized the construction
of the Carajás Railroad, which began in July, with the building of the first 82-kilometer stretch. The project was only implemented ore intensively, however, as of 1979, during the government of João Figueiredo.
From that point onward, Carajás would become CVRD’s top-
priority project.
Docegeo: geological research and technology
Three initiatives between the 1950s and 1970s34 marked the
manner in which the Brazilian government – including CVRD –
demonstrated its interest in geological research in the country.
The first initiative, which occurred under Juscelino’s goverment,
in 1957, was the creation of the first Geology course in Brazil at the
Geology School of Porto Alegre. Until then, the work of geologists was performed by mining engineers.
The teaching of Geology at universities resulted from the activities of the Campaign to Train Geologists (Campanha de Formação de Geólogos, or Cage).
That same year, geology schools would also be established in São Paulo, Ouro Preto and Recife. The specific work of geologists, as seen in the adventure of the discovery of Carajás, was key to the rapid growth of the mining sector during this period.
Another important initiative was the foundation, in 1969, of the
Mineral Resources Research Company (Companhia de Pesquisa de
Recursos Minerais, or CPRM). Established under the administration
of the Minister of Mines and Energy, Antônio Dias Leite (who had also been president of Vale), the CPRM had the main mission of intensifying the harnessing of water and mineral resources in the country.
The CPRM would operate as a service provision company, performing mining-related work for third parties, carrying out its own research and, as a finance company, supplying risk capital to mining companies that requested it.
Finally, there was the establishment of Docegeo, which would
unify CVRD’s geological research (by introducing planning and, above
all, technology) and employ some of the country’s best geologists.
Interested in expanding and diversifying its investments in the
mining sector, in July 1971 CVRD established Rio Doce Geologia e Mineração S.A. (Docegeo). A wholly owned subsidiary, Docegeo was
tasked with exploring and harnessing mineral deposits, both in
Brazil and abroad.
The subsidiary’s articles of incorporation also predicted 「searching for, researching and mining solid mineral and fossil fuel substances, and the distribution and sale of its products, whether raw, processed or industrialized.」
The pioneering age of geological research – with men driven by instinct, rustic maps, hammers and courage – was coming to an end. The company had realized that its productivity would multiply through prior research and the use of technical apparatus capable of anticipating discoveries of mineral deposits and their economic value.
Docegeo – as will be seen below – soon set the benchmark for more feasible exploration of the country’s underground resources. It would also complement the diversification plan developed by CVRD at the end of the decade.
According to its articles of incorporation, the new company would
not be restricted to CVRD projects, and could also 「participate in other companies directly or indirectly related to its corporate objectives, as partner or shareholder,」 as well as 「provide third parties with any services related to the aforementioned corporate objective.」
In practice, the company was the pioneer in mineral prospecting
in the country. Its dedication to geological investigation and
the development of underground sampling and exploration
technologies had a significant effect: three years after establishing
this subsidiary, CVRD would become the world’s leading iron
exporter, accounting for 16% of the seaborne trade in the product.
Headquartered in Rio de Janeiro, Docegeo began operating in
1972 with a workforce of 73 geologists. To determine its subsidiary’s
operational details, CVRD hired the services of consulting firm
Terraservice, owned by American geologist Gene Tolbert, one of
the people responsible for discovering Carajás.
The consultancy’s first measure was to hire foreign geologists, geochemists and geophysicists in order to train the Brazilian team.
Docegeo’s initial objectives were defined in its First Three Year
Plan for Geological Prospecting (1972-1975), which established the
priority of working with 14 minerals, namely bauxite, beryllium,
cassiterite, lead, copper, chromite, fluorite, phosphate, manganese,
nickel, gold, titanium, tungsten and zinc. Vale wanted more than
just global leadership in iron ore production.
Significant investment was made in the new company. In the
early 1970s, Docegeo had a total of 2,000 employees. By the late 1970s, the subsidiary had 1,200 employees in Belém alone, while a project was being conducted in the Pelada Mountains of Pará. Besides
geologists and scientists, the company employed professionals with
expertise in aerial and waterway transportation, as well as land
vehicles (jeeps, pickup trucks, and large trucks).
The geological equipment produced in Brazil – probes and drills,
for example – was now obsolete. Domestic industry had not kept up
with the innovations in machinery developed in countries such as
Canada and Australia.
Consequently, Docegeo conducted a program to bring together Brazilian companies and the BNDE, which in turn, based on this demand, created a funding program for the technological updating of Brazilian geological machinery.
The prospecting strategy adopted was very wide-ranging, covering
research into already known deposits, based on negotiations with
concession-holders, surveying of new deposits near known ones,
and the search for new reserves in virgin areas. The priority, however,
was on projects targeting associations of different minerals.
To facilitate its activities on a national scale, between 1971
and 1972, Docegeo formed four regional prospecting districts,
determined in line with planned projects: the Amazon, covering
the North region and Maranhão, headquartered in Belém; the
Center-West, encompassing the states of Goiás, Mato Grosso and Piauí, headquartered in Goiânia; the Center-East, covering Minas Gerais, Espírito Santo and Rio de Janeiro, headquartered in Belo Horizonte; and the East, headquartered in Salvador, to operate in the Northeast region.
Besides these districts, offices were also opened in Araxá (Minas Gerais) and Cachoeiro do Itapemirim (Espírito Santo). In 1976, a new Southeast district was formed, headquartered in São Paulo, extending the company’s activities towards the south of the country. The latter district was closed down two years later, however.
Also in 1973, in accordance with the recommendation of the
first National Development Plan, the government approved a
Basic Scientific and Technological Development Plan.
Within the scope of the Ministry of Mines and Energy, this plan prioritized three projects related to mining: the implementation of CVRD’s Technological Research Center, to support Docegeo’s geological prospecting program; stimulation for CVRD’s CPM research program; and the establishment of the CPRM Research Center on Fundão Island in Rio de Janeiro, in 1973 and 1974.
All of these projects sought to contribute to removing one of the biggest obstacles to raising the country’s mineral production: a lack of expertise in ore processing technology.
In June 1976, due to CVRD’s need to centralize its mineral
research activities, until then conducted independently by CPM and
Docegeo, it established its Mineral Research Superintendent’s Office
(Superintendência de Pesquisas Minerais, or Supem), linked to the
company’s administrative structure. Supem was made responsible
for geological and mineral research in all sectors except iron ore.
Between 1971 and 1978, CVRD transferred around US$82 million
to Docegeo, most of which was invested in the Amazon district.
Major achievements in this district during this period included
the following: the discovery in 1972 and 1973 of significant bauxite
deposits in Paragominas, Almeirim and the Jutaí Mountains in Pará,
leading CVRD to implement an aluminum production complex
in the north of the country; the discovery in 1974 and 1975 of
cassiterite deposits in Antônio Vicente, near São Fidélis do Xingu
in Pará; geological prospecting work conducted in the Araguaia-
Xingu zone in Pará, where occurrences of copper, lead and zinc
were found; an experimental mining project involving gold deposits
found in 1976 in the Andorinhas Mountains to the south of the
Carajás Mountains; and the sale of gold extracted by prospectors in
the Pelada Mountains region, sold to Caixa Econômica Federal and
the Brazilian Central Bank.
As of 1977, the Amazon district took on the work of assessing manganese and copper deposits recently discovered in the Carajás region, previously performed by AMZA.
Docegeo’s activities in the Center-East district centered on
evaluating the Tapira and Salitre phosphate and titanium reserves
in Minas Gerais, and identifying the limestone deposits of Cachoeiro
do Itapemirim in Espírito Santo.
The Southeast district, during its two years of existence,
contributed through the discovery of some promising occurrences
of lead and zinc, which were transferred to the Votorantim and
Banespa groups, and an evaluation of copper and molybdenum
deposits detected in Caçapava do Sul in the state of Rio Grande do Sul.
Overall, the work conducted by Docegeo during the 1970s allowed
CVRD to add more than 35 new mineral deposits to its portfolio, containing 11 types of minerals and located in 15 different parts of Brazil.
Finally, it is worth noting the valuable work performed by CVRD’s Technological Research Department (Departamento de Pesquisas Tecnológicas, or Deteg), based at the 「km 14」 point on the BR-262 highway 25 kilometers from Belo Horizonte.
Deteg’s work enabled the economic exploitation of mineral deposits discovered and studied by Docegeo. Deteg’s main achievements in the 1970s included technological capacity-building projects to make full use of the company’s iron reserves in the Iron Quadrangle, and the development of processes to concentrate phosphate rock and anatase ore from the Tapira and Salitre deposits and for the mechanical, metallurgical and chemical processing of bauxite, nickel, manganese, copper and gold deposits discovered in the Carajás region.
Between 1969 and 1973, CVRD established around 30 small
subsidiaries. At the end of the decade, the CVRD group, including
AMZA, Docegeo and this set of subsidiaries, had managed to
significantly expand its mineral rights, holding 1,151 research
permits for metallic and non-metallic minerals in 13 Brazilian
states, covering a total of 3,914 hectares.
As will be seen in the following chapters, until 2003, Docegeo
would be the company’s main research unit. From that point
onwards, new technology projects and institutes would be
constructed, continuing and extending the work begun by geologists
in the late 1960s.
Going beyond iron
At the end of the 1960s, Vale was interested in expanding and,
above all, diversifying its activities beyond iron ore production.
At that time, the company’s leaders believed that Vale’s path
to growth could not be based exclusively on the sale of iron ore.
The implementation of this policy, however, was delayed until the
end of the next decade, given that the company’s resources were committed to the expansion of its mine-railroad-port complex, especially the construction of the Port of Tubarão. Docegeo was an important driver in this area.
CVRD’s first diversification project was the establishment in 1967
of Florestas Rio Doce S.A., a subsidiary focusing on reforestation
activities in Minas Gerais.
In 1969, the company set up another subsidiary with the same purpose, this time in Espírito Santo: Rio Doce Madeiras S.A. (Docemade).
Over the next 10 years, driven by the vigorous expansion of its iron ore sales, CVRD multiplied its areas of activity, especially in the mining and metallurgical sectors, becoming involved simultaneously in various projects to produce bauxite, alumina, aluminum, manganese, titanium, phosphates/fertilizers, and timber/pulp.
Alongside these ventures, which diversified CVRD horizontally,
new vertical investment projects were also developed to process
and industrialize the company’s iron ore output, involving the
manufacture of pellets, magnetic ferrites and steel products.41 From
the start, this vertical diversification policy was also an evident
priority for the new sectors that CVRD entered.
To support the company in executing its diversification program,
Rio Doce Engenharia e Planejamento (RDEP) was established in
1971 to provide technical assistance in the field of engineering.
This subsidiary was tasked with conducting feasibility studies and
managing new industrial projects. (This company was closed down
in 1979.)
In December 1976, CVRD set up another subsidiary, Rio Doce International Finance Ltd. (RDIF), headquartered in Georgetown, Guyana, to provide financial and marketing consultancy services.
RFID was directly controlled and 90% owned by CVRD. The remaining shares in RFID were owned by group subsidiaries Rio Doce Europa (5%) and Seamar Shipping Corporation (5%).
CVRD controlled some of its new projects exclusively through
its subsidiaries. Most of the time, however, it opted to establish
joint ventures with private Brazilian companies and foreign groups
with which it already had commercial relationships. CVRD always
ensured it was the majority partner in such ventures, but they were
given the autonomy to take strategic and operational decisions in a
fast, dynamic manner.
A number of factors justified this new corporate policy. On the
one hand, it had become necessary to 「dilute the risks of enormous
investments focused on a single export product.」 On the other
hand, the massive expansion in the company’s iron ore exports in
the first half of the 1970s had generated more resources than could
be reinvested in an economically feasible way in its core activities.
CVRD’s strategy seems to have been determined much more by
market considerations than by the need for capital or technology,
although these factors were also important.
The entry of external capital enabled the simultaneous development of various projects, which generally involved heavy investment and long maturity periods.
For foreign investors, in turn, the establishment of joint ventures with the Brazilian state-owned enterprise was of interest, above all, as a means of guaranteeing the regular supply of raw materials and basic inputs for their plants and reducing their costs of production.
This explains CVRD’s partnerships with business groups from
Japan, its main iron ore customer, to jointly develop projects
directly related to the Japanese economy’s needs (aluminum,
pellets and pulp).
Finally, CVRD’s diversification policy aimed to serve government
interests. In the Brazilian government’s opinion, the experience
acquired by the company in mining, transportation and foreign
trade, as well as its elevated status outside the country, needed to
be applied to attract foreign investment and expand exports.
Accordingly, besides operating as a profit-making enterprise,
CVRD also played a strategic role in implementing national
development plans and executing Brazil’s mining policy.
Beginning in 1974, CVRD’s diversification projects acquired a
growing weight in its investment program. In the company’s budget
for the 1976-1980 five-year period, such projects were allocated
32.7% of all its planned investment for 1976.
As of 1978, more money was invested in diversification initiatives than in the expansion of iron ore production. The most favored sector was aluminum, which received 30% of the diversification program’s investments in 1976 and 1978, slightly more than the Carajás Iron Project.
This trend would be reversed at the end of the decade due to
a number of internal and external factors. On the one hand, the
decline in CVRD’s profits from iron ore sales, caused by a downturn
in the global steel industry, reduced its investment capacity.
On the other hand, a worsening of the international economic crisis limited the possibility of raising new funds abroad, aggravating the company’s financial situation and compromising the development
of its diversification projects.
Given this situation, as of 1979, CVRD would be pressured by the government led by General João Figueiredo to review its investment program, concentrating resources on mineral extraction ventures (especially the Carajás Iron Project) and transferring control of some of its projects to the private sector.