Environment, Crisis and Diversification: the 1990s 19443190

Vale Our HistoryOur HistoryVale

215Later called the Collor Plan, this included a number of controversial measures, including an 18-month confiscation of the balance of private individuals’ current accounts, savings accounts and other investments exceeding 50,000 new cruzados. A new currency was created with an old name: the Cruzeiro, Brazil’s currency in the 1940s and 1970s, was back.5 All of these measures resulted in a strong reduction in commercial activity and industrial production. Full-year inflation in 1990 amounted to 1,476.56%. Collor stood down in 1992 after an impeachment process6 and, following this, in 1993, the annual inflation rate reached a peak for the 1989 to 1996 period, as shown in Table 1.

5 - On November 1, 1942, to replace the real (plural: réis), the cruzeiro (Cr$) began to circulate as Brazil’s national currency. At the launch of the currency, one cruzeiro was worth 1,000 réis. The centavo was also created at the same time. The currency circulated until February 13, 1967, when it was replaced by the cruzeiro novo. Three years after this, on May 15, 1970, the Brazilian currency was renamed the cruzeiro (Cr$). This time, it would last until February 1986, with the creation of the cruzado novo (NCz$). See more in Folha de S. Paulo, Almanaque da Folha, Dinheiro, anos 40. Available at <http://almanaque.folha.uol.com.br/dinheiro40.htm>.

6 - The Chamber of Deputies approved the impeachment on September 29. Collor was removed from the presidency on October 2 and resigned on December 29, 1992, minutes before the Senate would start to vote on his process.

7.1 Solutions in times of crisis

The 1990s were not easy for Brazilian industry. In the economic field at the start of the decade, there was a break with the military regime’s economic protectionism, commercial and financial opening up to foreign capital, and a deep recession.1 The figures are damning: “From 1980 to 1993, Brazil had four currencies, five price freezes, nine stabilization plans, 11 indices to measure inflation, 16 salary policies, 21 proposals for payment of the country’s foreign debt, and 54 changes in the prices policy.”2

Between 1985 and 1989, during the Sarney administration, four economic plans succeeded each other (the Cruzado, Cruzado II, Bresser and Verão plans). The remedy was to freeze prices and cut zeros from currency values, and this strategy directly affected the free trade desired by business people.3 The plans’ effects were devastating: according to data from IBGE, monthly inflation in December 1989 reached 53.55%. The full-year inflation rate was 1,764.87%. By the end of the 1980s, prices had risen by more than 39 million percent.4

Fernando Collor de Mello took over as Brazil’s president in the eye of the storm, in March 1990, after a closely fought two-round election against Luiz Inácio Lula da Silva. They were the first direct presidential elections in 30 years. Expectations about the measures to be taken by the young new president were considerable.

One day after taking office, on March 15, 1990, Fernando Collor unveiled a new economic package aimed at containing hyperinflation.

1 - See more in Haguenauer, Lia et al. Evolução das cadeias produtivas brasileiras na década de 90. Brasília: Ipea, 2001.

2 - For more data on inflation, see Veja magazine, Coleção Inflação. São Paulo. Available at <http://veja.abril.com.br/arquivo_veja/inflacao-economia-planos-pacotes-real.shtml>.

3 - See Azevedo, Elisabeth and Gorayeb, José. BNDES 50 anos de desenvolvimento. São Paulo: DBA Artes Gráficas, 2002.

4 - For more figures on inflation in the period, see Folha de S. Paulo, “Ano acaba com superinflação de 1.764%.” Haguenauer, Lia et al., December 29, 1989, São Paulo, op. cit, n.p.

CHAPTER 7

Environment, Crisis and Diversification: the 1990s

1944193119441990

216 217


TABLE 1

1989 1,764%

1990 1,476%

1991 480%

1992 1,158%

1993 2,780%

1994 1,093%

1995 14.7%

1996 9.3%

Source: IBGE.7

Companies protected themselves as best they could. Investments prioritized raising productivity by introducing organizational innovations and improving quality systems.8 At the same time, the economic liberalization promoted by the government moved forward. Reductions in Brazil’s tariffs had also been implemented. Between 1988 and 1993, average tariffs on industrial goods fell

7 - All the figures related to the Wide-Ranging Consumer Price Index (an official inflation measure known by its Portuguese acronym, IPCA) are in IBGE, Séries Históricas de Números e Índices – IPCA.

8 - This information was taken from Haguenauer, Lia et al., op. cit.

from over 50% to 13.2%,9 facilitating trade in goods and services with other countries. In this context, state-owned enterprises – or rather, the privatization of these companies – would play a determining role in the economic restructuring planned by the federal government.

Economist Paulo Haddad, in an article published in newspaper O Estado de S. Paulo, showed how the Brazilian economic crisis in the 1980s profoundly affected state-owned companies, especially those that were executing major investment projects. “The interruption of external capital flows to Brazil suppressed these companies’ main source of funding, delaying construction timetables, increasing costs and postponing expected revenues. Expansion prospects were hampered by a lack of funding, given that, by the start of the 1990s, public savings – and therefore the self-financing capacity of the state-owned enterprises’ controlling shareholder – had also run dry.”10

In his article, Haddad highlighted state-owned companies’ difficulties in developing efficient management as of the second half of the 1980s: “[...] state-owned enterprises always performed multiple functions in Brazil: on the one hand, they were productive units that demanded positive financial results; and on the other hand, they were organizational units to which the state attributed roles in executing public policies. Among these roles, one may highlight controlling tariffs and prices to reduce inflation rates, taking equity stakes in pioneering projects, and locating operations in deprived areas to reduce regional development disparities. In general, this resulted in lower profitability,

9 - Besides reducing tariff levels, other trade barriers were eliminated in the early 1990s, notably the requirement for companies to have import programs, and the demand for prior approval from federal government entities to import specific products. For further information, see Markwald, Ricardo. “O impacto da abertura comercial sobre a indústria brasileira: balanço de uma década.” Revista Brasileira de Comércio Exterior. Available at <http://www.funcex.org.br/publicacoes/rbce/material/rbce/68-Integra%C3%A7ao-RM.pdf>.

10 - Haddad, Paulo. “Sobre as empresas estatais.” Haddad, Paulo. “Sobre as empresas estatais.” O Estado de S. Paulo, November 3, 2010, n.p.

hindering essential reinvestment. Accordingly, the weak financial performance of state-owned companies and the government’s inability to transfer more resources due to its own financial weakness made it necessary to embark on a privatization process, in line with the global trend toward less government intervention in the economy.”11 Brazil’s National Privatization Program was launched in April 1990 and reached its peak in 1997, with the privatization of telecommunications companies and Companhia Vale do Rio Doce.12

When Itamar Franco came to power in December 1992, he had already left the National Reconstruction Party (Partido da Reconstrução Nacional, or PRN), for which he had been elected vice-president as Fernando Collor’s running mate. Itamar had built his political career in Minas Gerais in the former Brazilian Democratic Movement (Movimento Democrático Brasileiro, or MDB) – the main party opposing the military government, which allied itself with Collor during the campaign. With the resignation of Brazil’s first directly elected president since Jânio Quadros (who incidentally also resigned, in 1961), Itamar took over.13

After holding a referendum to choose the government system to implement in Brazil – parliamentary or presidential (the latter won, with 55.58% of valid votes)14 – Itamar dedicated himself to fighting inflation. He made a number of changes to his team of ministers, including moving Fernando Henrique Cardoso from Foreign Affairs to Finance. Cardoso, also known by his initials FHC, was a well-known, left-leaning sociologist and politician, belonging to the Brazilian Social Democracy Party (Partido da Social Democracia Brasileira, or PSDB). With FHC appointed as finance minister, Brazil would discover the Real Plan – a set of

11 - Idem.

12 - Idem.

13 - For more details about the Itamar Franco period, see For more details about the Itamar Franco period, see DHBB, available at <http://www.fgv.br/CPDOC/BUSCA>.

14 - Available at <www.tse.jus.br/eleicoes/plebiscitos-e-referendos/plebiscito-de-1993>.

measures that succeeded in combating inflation and created a new currency, the real, which is in place to this day.

The success of the Real Plan would be fundamental to Fernando Henrique Cardoso’s election as president of Brazil in October 1994, but this did not mean – at least not immediately – economic growth. In 1995, the country was running a trade deficit, which worsened over the course of the decade as a result of the real’s progressive appreciation, according to an analysis by the Applied Economic Research Institute (Ipea).15

In this context, with the need to expand the flow of capital on the market and contain the effects of the country’s external and internal debts, the privatization program established five years previously by Fernando Collor was further bolstered. As of 1997, discussions about privatizing various parts of the national economy – including mining operations – moved onto the agenda, although some privatizations had already taken place since the start of the decade.

Vale tackles the crisisThe 1980s saw a mounting crisis, which hit hard at the start of the following decade. In the midst of a severe recession, Companhia Vale do Rio Doce prepared for hard times, prioritizing investment in infrastructure.

In the early 1990s, Vale expanded its railroad network and modernized its port terminals. The company also sought to diversify its mineral products, given the volatility of the iron price, bringing successive records and other excellent results. Finally, the 1990s – one of whose key events was the 1992 United Nations Earth Summit in Rio – brought CVRD the important role of spreading environmental and social initiatives. June 1992 was the company’s 50th anniversary and, despite the economic downturn, it found reasons to celebrate.

15 - Bonelli, Régis. “As estratégias dos grandes grupos industriais brasileiros nos anos 90.” Bonelli, Régis. “As estratégias dos grandes grupos industriais brasileiros nos anos 90.” Discussion Text, no. 569, July 1998, Ipea.

The photo at the start of this chapter shows the ore

stockyard at Tubarão Complex, Espírito Santo, in June 1997.The success of the diversification policy implemented

by Vale was confirmed in early 1994, when the company achieved new iron and manganese production records at its mines in Carajás


218

Vale employees working on the tracks of the Vitória-Minas Railroad (EFVM)

in March 1986.

In December 1991, a milestone was reached in the accumulated volume of iron ore extracted in the municipality of Itabira (Minas Gerais) since the start of mining activities in 1942.16 From the mines of Cauê, Conceição, Dois Córregos, Esmeril, Chacrinha and Onça, all located in Itabira, a total of 1 billion metric tons of ore had been removed over a 49-year period. This was equivalent to 166,000 kilometers of loaded railroad cars – enough to go around the Earth four times.17

Another piece of good news was that Itabira’s reserves, contrary to the initial estimates made by Rio Doce Geologia e Mineração S.A. (Docegeo), Vale’s subsidiary responsible for mineral research and exploration,18 were still far from running out. New studies showed that the total amount extracted in 50 years corresponded to just half of the potential of the region’s reserves. There was still a lot left to mine.19

More good news for Vale came from abroad. The volume exported by the company remained high: while in 1952 the company exported 1.5 million metric tons of iron, by 1992 this same quantity was exported every week.20 International partnerships developed over 50 years would also be an important asset in balancing the books.

In 1995, Carajás Mine turned 10 years old. Despite US Steel’s departure from the project in 1977, which required Vale to pay compensation of US$50 million, the investment in the mine turned out to be a good one.21 With complete ownership of Amazônia Mineração S.A. (AMZA) – obtained after the break with the American company – CVRD soon earned back all the capital invested. Success in Pará and expectations about Itabira’s reserves

16 - See See Jornal da Vale, no. 148, December 1991, p. 12.

17 - Idem.

18 - For more information, see Chapter 5.For more information, see Chapter 5.

19 - Idem.

20 - See See 1992 Annual Report.

21 - For more information about the break between CVRD and US Steel, see Chapter 5. For more information about the break between CVRD and US Steel, see Chapter 5.

drove forward the company’s entire logistics system, culminating in the opening of Ponta da Madeira Maritime Terminal in São Luís, Maranhão, and successive record figures at Tubarão Complex – which was 30 years old in 1996.

Diversification was ever more important. In May 1993, the Noble Metals Superintendent’s Office (Sumen) registered a new record for monthly gold output, with 1.1 metric ton shipped from the mines of Fazenda Brasileiro and Maria Preta (Bahia), Riacho dos Machados and Itabira (Minas Gerais), and Igarapé Bahia (Pará) – the latter one of the most profitable gold mines in the world. At the end of this year, as a result of work involving geological research, mining, processing and sales, and beating the target established at the end of the 1980s to become Brazil’s second largest gold miner, Companhia Vale do Rio Doce became Latin America’s biggest gold producer, selling 12.2 metric tons of the metal per year.22

The successful decision to invest in gold would be matched by another winning strategy, this time financial: as of 1988, the company started to sell some of its future gold output on the futures market, with delivery deadlines extending to 1992. On a single day, 26,676 contracts corresponding to 15 metric tons of gold were auctioned on the Brazilian Mercantile & Futures Exchange (BM&F) for US$128 million. A share of these resources was invested in the purchase of Brazilian government bonds, which produced excellent returns for Vale.

The success of the diversification policy implemented by CVRD was confirmed in early 1994, when the company achieved new production records at its iron and manganese mines in Carajás. For example, on January 5, 1994, daily manganese lump ore output hit a record 1,866 metric tons, 193 metric tons higher than the previous record, set on August 5, 1993. Likewise, on January 2, 1994, the company achieved a new daily record for sinter feed output, producing 128,095 metric tons – 361 metric tons more than the previous record of February 14, 1993. In terms of monthly volumes,

22 - See See 1993 Annual Report, p. 26.

220 221


sinter feed also hit a record in January 1994, of 2,991,683 metric tons, up from 2,932,044 metric tons in November 1993.23

As of 1993, Vale’s ore production was certified for its quality. For successive years, CVRD was awarded ISO 9000, attesting to the quality of its production model. Interconnected investments – especially in logistics-associated diversification – created a new structure for the company. In September 1994, CVRD was a conglomerate composed of nearly 30 companies,24 including subsidiaries and affiliates, with offices in the USA, Japan and Brussels. The company’s 1993 Annual Report highlighted that the Vitória-Minas Railroad (EFVM) and Carajás Railroad (EFC), the most modern in Brazil at that time, accounted for 64% of the country’s total railroad traffic in terms of ton-kilometers, carrying 126 million metric tons of goods, including 102 million metric tons of iron ore and a large share of steel and pulp for export.25

The first five years of the 1990s would also be marked by the definitive introduction of new words into the vocabulary of Brazilians. Topics such as sustainability, social and environmental development, forest management, global warming, the ozone layer and recycling became common items of discussion. The 1992 Rio Earth Summit took place in this context, and CVRD was once more in the lead, with prominent projects in the field.

7.2 The environment: highlight of the 1990s

Thirty-two years after the founding of Brasília, Rio de Janeiro was once again Brazil’s capital. In 1992, the Earth Summit was responsible for returning to the city, albeit only for 11 days, the sensation of being the center of power in the country. During the event, President Fernando Collor de Mello transferred the capital to Rio in order to host public officials and conference guests at the seat of government.

The Earth Summit was held 20 years after the 1972 Stockholm Conference in Sweden, the first international meeting organized by the United Nations to discuss development and the environment.

23 - See See Jornal da Vale, no. 171, February 1994, p. 3.

24 - See See Jornal da Vale, no. 178, September 1994, p. 3, and the 1994 Annual Report, pp. 8-9.


The Stockholm Conference was attended by representatives of 113 countries, which during the discussions became polarized into two antagonistic groups: rich and poor.26

Developing countries feared that restrictions on their growth were on the agenda. For the first time, the environmental effects of untrammeled industrialization were discussed, and the initial reaction was of distrust. After clashes between the two groups, the outcome of the conference was the creation of the United Nations Environment Program (UNEP), which was tasked with regulating international actions for environmental protection and sustainable development.

June 5 was declared World Environment Day, and the legal community began to pay attention to environmental issues. In Brazil, the direct effect of the Swedish conference was the creation in 1973 of the Special Environment Secretariat (Sema),27 reporting to the Ministry of Internal Affairs. This was the seed of Brazil’s environmental regulator, Ibama, established in 1989.

In 1992, in Rio de Janeiro, the atmosphere among developed and developing countries was more amicable. The city received heads of state and other representatives from more than 170 countries,28 demonstrating the importance of environmental discussions at the end of the 20th century. Between June 3 and 14, government officials signed the Rio Declaration on Environment and Development, which reaffirmed the discussions in Stockholm and set out the following as Principle 4: “In order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot

26 - Lemos, Haroldo Mattos de. “A Conferência de Estocolmo em 1972, o Clube de Lemos, Haroldo Mattos de. “A Conferência de Estocolmo em 1972, o Clube de “A Conferência de Estocolmo em 1972, o Clube de Roma e outros modelos mundiais.” Available at <http://pt.scribd.com/doc/52967800/a-conferencia-estocolmo-1972-clube-roma-outros>.

27 - Sema was created by Decree 73,030 of October 30, 1973, and replaced by environmental Sema was created by Decree 73,030 of October 30, 1973, and replaced by environmental regulator Ibama by Law 7,735 of February 22, 1989. Ibama reports to the Presidential Environmental Secretariat. It was formed through the merger of four entities that separately executed the following policies: Fishing (Fishing Development Superintendent’s Office – Sudepe); Forestry (Brazilian Institute of Forest Development – IBDF); Rubber (Rubber Superintendent’s Office – Sudhevea); and Sema. See more in Grigato, Rosemay B. and Ribeiro, Luiz C. M. “Política ambiental e responsabilidade social empresarial da CVRD.” Ágora, Vitória, no. 4, 2006.

28 - See Castro, Maurício Barros de. A reciclagem do alumínio no Brasil. Rio de Janeiro: Editora Desiderata, 2006.

Tree nursery at Bahia Sul Celulose S.A.


223technology. Back in 1992, at Ecotech, Vale was highlighting the use of technology as an important ally for sustainable development and environmental preservation.33

In that year, Vale became the first Brazilian company to conduct its own environmental audit. During the 1992 Earth Summit and throughout that year, CVRD’s facilities in Carajás received many official visits. Among the illustrious visitors were Prince Charles and Princess Diana, a delegation from Keidanren (Japan’s federation of industry), and a group of UNESCO scientists.34

Tree plantingIn January 1992, Vale’s Itabira Mines Superintendent’s Office (Sumin) in Minas Gerais, through Florestas Rio Doce, celebrated the planting of 270,000 trees in the Pico do Amor, Cambucal and Barragem do Rio do Peixe regions of the municipality of Itabira, as well as along avenues and streets in the town of Itabira. This reforestation in peripheral areas encompassed hillsides, fields, urban areas (such as Pico do Amor), land along the tracks of the Vitória-Minas Railroad (EFVM), and areas around water sources.35

In all, Sumin’s Environment Division had planted 1.1 million trees in Itabira. This tree planting took place in partnership with the municipal government, using more than 200 native and exotic species, all grown at Itabiruçu Ecological Park (a 1,200-hectare reserve) and Linhares Forest Reserve (now called the Vale Natural Reserve) in Espírito Santo, both owned by CVRD.36

Vale also planted trees in Belo Horizonte when the city government conducted a second major remodeling of its Municipal Park. This Romantic-inspired architectural project entailed implementing an irrigation system, repaving walkways and building new gates and paths. In October 1991, Vale donated

33 - Idem.

34 - See more in the See more in the 1992 Annual Report.

35 - Jornal da Vale, no. 149, January 1992, p. 9.

36 - Idem.

60,000 saplings to the city, all of native Atlantic Forest species grown at Linhares Forest Reserve by Florestas Rio Doce, which also provided technical tree planting guidance. The restoration of the Municipal Park – the biggest green area in the city, covering around 180,000 square meters – was funded by CVRD, Florestas Rio Doce and Celulose Nipo-Brasileira S.A. (Cenibra).37

Reality after the Earth SummitThe recommendations approved at the Earth Summit were gradually implemented. In 1993, through Ordinance 773/93, Brazil’s Ministry of Education and Culture (MEC) established a permanent working group in order to coordinate, support, track, evaluate and orientate actions, targets and strategies for implementing environmental education in schools at all levels and in all modalities.38 The MEC also created Environmental Education Centers to spread teaching methodologies concerning conservation.

Vale was an early adopter of these concepts. In 1989, the company started to plant a green belt around Valesul, its aluminum plant in Santa Cruz, one of the hottest regions in the state of Rio de Janeiro. In order to absorb pollution and lessen the heat, around 20,000 saplings were planted every 45 days. Four years later, in 1993, 250,000 trees formed the Valesul green belt,39 consisting of 125 native Atlantic Forest species and covering more than 30 hectares of the 80-hectare site housing the company’s furnaces, reduction facilities, warehouses and aluminum production facilities. These figures show the pioneering nature

37 - This information was taken from This information was taken from Companhia Vale do Rio Doce. Parque Municipal: crônica de um século. Belo Horizonte: CVRD, 1992.

38 - See more in Ministério da Educação. Um pouco da história ambiental. Secretaria de Educação Continuada, Alfabetização, Diversidade e Inclusão. Available at <http://portal.mec.gov.br/secad/arquivos/pdf/educacaoambiental/historia.pdf>.

39 - On January 22, 2010, Vale announced the sale of its Valesul assets in Rio de Janeiro to On January 22, 2010, Vale announced the sale of its Valesul assets in Rio de Janeiro to Alumínio Nordeste S.A., a Metalis group company, for US$31.2 million. See more in “Vale vende ativos da Valesul.” Press Office, available at <www.vale.com/pt-br/investidores/press-releases/Paginas/vale-vende-ativos-da-valesul.aspx>.

222 be considered in isolation from it.”29 The Statement of Forest Principles, the United Nations Convention on Biological Diversity, the United Nations Framework Convention on Climate Change, and Agenda 21 were other outcomes of the Earth Summit.30

Vale and the environmentCVRD’s environment program was one of the main highlights presented by the Brazilian government at the Earth Summit. The “Forest Clusters” project, which proposed reusing deforested areas for sustainable forestry, was one of 50 case studies chosen by the conference organizers for the “Expo Brazil” event, which showcased successful projects related to sustainable development and environmental protection at the main conference center.31 Vale also ran two stands during the conference. The first was open to the public at Ecotech, an Earth Summit event held to discuss the interaction of science, technology and sustainable development, especially in developing countries. The other stand was installed at the Global Forum, a parallel event held in Flamengo Park, attracting non-governmental organizations from across the world.32

At both events, CVRD presented the main activities of its environment program, organized into four macro areas: environmental control (environmental projects inside operational sites); natural resources (maintenance of conservation areas and production of saplings of species native to the Atlantic Forest and Amazon Rainforest); social and environmental development (social initiatives inside areas of influence); and research and

29 - For more information about the Earth Summit, see Milaré, �dis. For more information about the Earth Summit, see Milaré, �dis. Direito do ambiente. 3rd edition. São Paulo: Revista dos Tribunais, 2004.

30 - More information about Agenda 21, an 800-page document, may be found in Lemos, More information about Agenda 21, an 800-page document, may be found in Lemos, Haroldo Mattos de. A Agenda 21 no Brasil. 2006. Instituto Brasil PNUMA. Available at <http://www.brasilpnuma.org.br/2010/03/empresas-e-sustentabilidade.html>.

31 - See See Jornal da Vale, no. 153, May 1992, p. 7.

32 - Idem.

Right: the 1992 United Nations Conference on Environment and Development (Earth Summit) in Rio de Janeiro. Following page: aerial view of the Carajás Zoo and Botanical Park in Pará and, alongside, an electrostatic precipitator in a pelletizing plant at Tubarão Complex, Espírito Santo.

224 225


member of the general coordination unit of the Environmental Normalization Support Group (known by Portuguese acronym Gana),43 responsible for formulating the standards of ISO 14000 International Environmental Quality Certification. Initiatives highlighted in the document included a social and environmental diagnosis in Curionópolis, Pará, conducted in order to produce an Environmental Impact Plan to resume gold prospecting in Serra Pelada.

The company’s concern to guarantee complete harmony between ore production and environmental conservation was demonstrated again in 1995, when it invested heavily to control the dust that was escaping from operational units toward the town of Itabira in Minas Gerais. Vale perceived that the main sources of “fugitive dust,” as the problem is known, were the mining process and circulation of automobiles and heavy trucks along the site’s internal roads managed by the company’s Mines Superintendent’s Office (Sumin) and in the tailings deposit areas. The main initiative taken was to install a nebulizer at Cauê Mine, to form a 30-meter-high curtain of mist, using 412 meters of linear piping, to contain the dispersal of residues. This was the first project of its kind in Brazil.44

Another dust-containment strategy, announced at the start of 1995, was to sprinkle the roads at Chacrinha Mine, the closest mine to the town of Itabira: at the time, 25,000 square meters of roads were dampened using an automatic sprinkler system. In addition, in order to contain dust on circulation roads, dozens of sprinkler trucks were driven every day along the region’s highways and roads to settle and dilute the fine dust on them.45

43 - For more information about Gana, see Comissão Mundial sobre Meio Ambiente e Desenvolvimento. Nosso futuro comum. Rio de Janeiro: Fundação Getulio Vargas, 1991; and Cajazeira, Jorge Emanuel Reis and Barbieri, José Carlos. “A nova versão da Norma ISO 14001: as influências presentes no primeiro ciclo revisional e as mudanças efetuadas.” REAd, São Paulo, vol. 11, no. 6, November-December 2005.

44 - Jornal da Vale, no. 182, February 1995, p. 4.

45 - Idem.

of the company’s initiatives to reforest areas around its plants. The newly planted trees made the site cooler for its employees, restored the landscape, and soaked up polluting agents such as dust and noise. The trees, planted right up to the walls of the smelter, had the function of absorbing sound and reducing heat levels during work. Alumina (a raw material used to make aluminum) dust was trapped together with fluoride fumes in the leaves of the replanted forest, preventing the circulation of dust particles at Valesul’s site and in the surrounding area.40

At the end of 1993, the company owned and maintained 22,000 hectares in Espírito Santo (Linhares Reserve), 17,000 hectares in Pará (Marabá Reserve), and 10,000 hectares in Maranhão (Buriticupu Reserve). Vale also conserved its mining concession area in Carajás, covering 411,948.87 hectares of native Amazon Forest, and conducted surveillance activities to help protect 726,000 hectares of forest maintained by Ibama, also in Pará.41

Operating a plant and protecting the environmentIn March 1994, Vale opened its fifth electrostatic precipitator (of a series of six) at the CVRD I plant in Vitória, Espírito Santo. The apparatus cost Vale around US$3.5 million and prevented the escape of 99% of solid particles, which until then had been emitted by the plant’s main chimney into the atmosphere. The particles of this dust are attracted to steel plates and mechanically dislodged by vibration, and are then used in the pelletizing process. “Operating the plant and protecting the environment are equally important,” said Vale’s internal newsletter, Jornal da Vale, in an article about the inauguration of the precipitator.42

In its 1994 Annual Report, Vale proclaimed that it had achieved a position of leadership on the domestic and international stage thanks to its environmental policies. The company was a

40 - This information was taken from This information was taken from Jornal da Vale, no. 164, July 1993, p. 24.

41 - See more in the See more in the 1993 Annual Report.

42 - Jornal da Vale, no. 172, March 1994, p. 12.

Vale was also concerned about the quality of the water and soil in locations close to its mines. In January 1995, a concrete tank was installed in Itabira to prevent residues from Conceição Mine from polluting a steam flowing through the region and the Rio do Peixe Reservoir, into which it flows. This was the first phase of the Zero Residues Project, which aimed to completely eliminate the transportation of material extracted from the mine along the Conceição Stream.46

Alongside anniversary celebrations of the city of Vitória, in Espírito Santo, in September 1995, an important green space was opened: Augusto Ruschi Municipal Park, on the site of the former Maruípe Garden, which dated back to 1938. Using around US$500,000 provided by Vale, the 68,000-square-meter site was returned to the city with new electrical, hydraulic and irrigation infrastructure, flower pots, a bromeliad collection and small lakes formed by damming a brook. The company also provided 7,000 trees from Linhares Reserve for landscaping purposes.

In September 1995, one of the most important environment-related events for Vale in the 1992-1996 period took place in Washington D.C., when the company’s vice-president, Anastácio Fernandes Filho, signed an agreement with the World Bank to borrow US$50 million to finance some of the more than 70 projects in the company’s Environment Program.47 All of Vale’s operational areas were covered in the program, which encompassed environmental management and control in production activities, the restoration of degraded areas, ecosystem maintenance, studies and research, and joint investment with the municipal governments of Itabira (Minas Gerais) and Parauapebas (Pará).


47 - Information about CVRD’s Environment Program can be found in the Information about CVRD’s Environment Program can be found in the 1995 Annual Report.

A Vale employee observes ore being sprayed at Tubarão Complex, Espírito Santo.


7.3 The conquest of certifications and new markets

Vale’s efforts to improve its productivity received a major international endorsement in May 1993, when for the first time a company from the group obtained an ISO 9000-series certificate.48 Valesul, which produced primary aluminum and alloys, was awarded ISO 9002 certification in recognition of the quality of the management of its production process. This international endorsement was opportune and reinforced the company’s reputation outside Brazil. At the time, of the 93,000 metric tons of aluminum produced every year by Valesul, half was already shipped to foreign markets.49

All of the investments made – whether in the productive, social or environmental fields – reaffirmed Vale’s importance in the country. In May 1993, the Minister of Mines and Energy, Paulino Cícero de Vasconcelos, referred to the company publically as a “major agent for the country’s development,” surpassed only by the national development bank, BNDES.50

In October 1993, it was Sumin’s turn, in Itabira, Minas Gerais, to begin operating in accordance with the standards established by the ISO 9000 series. The aim of achieving certification was to ensure that the Superintendent’s Office’s production system complied with strict international quality standards. The certification endorsed and guaranteed an international standard for the company. During this period, 70% of the 50 million metric tons of iron ore produced every year by Vale was exported to countries such as Japan, Germany, Italy, France, Spain, South Korea and China.51 By the end of 1993, all of CVRD’s six superintendent’s

48 - The certification was created by a non-governmental organization, the International Organization of Standardization (ISO), in Geneva, in 1947, and year after year it has attested to the quality of a company’s management in any area. The certification has gone through various alterations since the year 2000. For more information, see <www.iso.org>.

49 - See See Jornal da Vale, no. 163, May-June 1993, p. 5.

50 - See See Jornal da Vale, no. 163, May-June 1993, p. 9.

51 - See See Jornal da Vale, no. 167, October 1993, p. 5.

offices involved with iron ore (Sufer, Supel, Sumin, Supot, Sumic and Supoc) had received ISO 9002 certification.52

New marketsAt the end of 1993, CVRD signed a commercial agreement that would make China an important partner before the end of the decade. In November of that year, Vale exported ore from Carajás Mine to China for the first time: in all, 120,000 metric tons of ore was shipped to Baoshan Steel in Shanghai – one of the biggest steelmakers in the world and the largest in China.53 In 2011, the Chinese company remained the leader in its country and the third biggest steel producer on the planet.

It was not the first time that Vale had sold to the Chinese. Trade between Vale and Chinese steelmakers began in 1973, with the export of iron ore from mines in the Iron Quadrangle region of Minas Gerais. After the year 2000 – and with the North System accounting for a growing share – sales reached significant values.

Continuing with the policy of winning international markets, in July 1995 in Seoul, South Korea, Vale signed a general agreement to formalize a new joint venture. The partnership would be responsible for constructing the company’s seventh pelletizing plant at Tubarão Complex in Espírito Santo. Planned investment amounted to US$215 million. The new company, called the Korean-Brazilian Pelletizing Company (Kobrasco), was created with the participation of Pohang Iron & Steel Company (Posco), a major Korean steel producer. Posco undertook to buy more than 60% of annual output, which was planned to be 4 million metric tons of pellets.54 In the same year, total iron ore shipments from Tubarão Complex were 65.4 million metric tons.55

Even bigger news came from Ponta da Madeira Maritime Terminal in Maranhão, which in 1995, shortly before its tenth anniversary,


53 - See See Jornal da Vale, no. 168, November 1993, p. 7.

54 - See See Jornal da Vale, no. 187, July 1995, p. 3.


achieved record annual shipments of 45.1 million metric tons of iron ore, manganese, soy and pig iron, and an accumulated total of 300 million metric tons over the course of the decade.56 These figures were unprecedented for a terminal of its category and helped the company to attain a leading global position. Despite all its good results, Vale’s net operating revenues at the end of 1995 were only R$2.5 billion (parent company) and R$3.49 billion (consolidated results), down from the 1994 figures of R$2.97 billion (parent company) and R$3.77 billion (consolidated results). CVRD’s net income also fell, from R$668 million in 1994 to R$329 million the following year.57

To reverse this situation – especially given the country’s economic recession – 1996 would have to be a year of greater openness to external markets. Sake was drunk to celebrate one of the most important projects in the company’s diversification drive, as Celulose Nipo-Brasileira (Cenibra)’s second industrial unit was opened in Belo Oriente, 230 kilometers from Belo Horizonte. A high-level delegation attended the inauguration: Brazilian president Fernando Henrique Cardoso, accompanied by the governor of Minas Gerais, Eduardo Azeredo, Mines and Energy Minister Raimundo Brito, Industry, Trade and Tourism Minister Dorothéa Werneck, the presidents of CVRD and Japan Brazil Paper and Pulp Resources Development Co. (JBP), Francisco José Schettino and Katshuhisa Yamada respectively, and Japan’s ambassador to Brazil, Chihiro Tsukada. Various senators, deputies, shareholders, customers and employees were also present.

One of the largest private investments ever made in Brazil at that time, the expansion project cost US$792.7 million. The purpose was to double the company’s pulp production, from 350,000 to 700,000 metric tons per year. Cenibra, an association between Vale and JBP, became the world’s second largest producer of short-fiber eucalyptus pulp.58



58 - “Cenibra: duplicação fortalece parceria com o Japão.” “Cenibra: duplicação fortalece parceria com o Japão.” Jornal da Vale, no. 196, special report, April 1996.

Operation at Carajás Mine, Pará, in 1993, and aerial view of Tubarão Complex, Espírito Santo, in 1994.

227

228 229


Ingots and billets at Valesul, Rio de Janeiro, in 1994.

230 231


7.4 Five years of logistics inaugurations

The winning of international markets was accompanied by the need to improve internal logistics. Since the start of the 1990s, CVRD invested in greater integration of its North and South Systems, with railroads and maritime terminals. This facilitated the flow of ore from the mines to the sea and enabled better use of pelletizing plants, which needed to be located near an export port.59 Curiously, the first of the major new projects in the period was implemented on the Vitória-Minas Railroad (EFVM), which had already been operating for over 80 years.

The year 1992 began with a development that had in fact been in the cards since 1904, when the first stretch of the Vitória-Minas Railroad was laid down: the inclusion of Belo Horizonte in the country’s railroad network, through a branch line opened on February 14, 1992. The stretch from Capitão Eduardo to Costa Lacerda was an enormous engineering challenge: the topography required very high bridges, and one of them is the highest railroad bridge in Brazil to this day. The extension, which added 47 kilometers to the railroad’s existing tracks of more than 600 kilometers, was fundamental to the economic and social development of the entire region. Opened on May 18, 1904, and incorporated into Vale’s logistics system in the 1940s, the Vitória-Minas was an important reinforcement for the Federal Railroad Network (RFFSA), which at the time was also a state-owned railroad.60

At the inauguration, Wilson Brumer, president of CVRD, stressed the benefits of the partnership between the two railroads as “natural and indispensible to the deployment of the growth


60 - “Trilhos da EFVM e Rede unem-se em BH.” “Trilhos da EFVM e Rede unem-se em BH.” Jornal da Vale, no. 150, special report, February 1992.

program for vast regions of the country, whose potential would only be realized by modernizing transportation facilities and opening up options for traffic and producers.”61 This modernization would be apparent in the following years.

The opening of a new grain terminal at Tubarão Complex in April 1993 also meant an expansion in the company’s export logistics in its South System. Called the Diverse Products Terminal and connected to the EFVM, and the BR-262 and BR-101 highways, the new terminal reinforced the company’s presence in the transportation of general cargo and transformed the Center-East Corridor into the cheapest and most efficient export route for soy and other Brazilian agricultural products to Europe and Japan.62

The work included installing conveyor belts, scales and hoppers – the latter taken from a former pig iron unloading system to the Port of Paul in Vitória Bay. Of the US$12.5 million invested, 50% was provided by Vale, which administered the Port of Tubarão. The efforts to improve logistics in the South System resulted in a new milestone, when Tubarão reached 2 billion metric tons of ore transported along the EFVM’s tracks since its opening.63

More than 500 people, including a choir invited especially for the occasion, and 15,000 fireworks, received the locomotive carrying 120 railroad cars with the special cargo. At the event, Brazil’s postal service issued a commemorative stamp in honor of the achievement. In his speech, the president of CVRD said that if the 2 billion metric tons had been transported on a single train, 40 million train cars extending for 400,000 kilometers would have been needed.

61 - Idem.

62 - See CVRD’s See CVRD’s 1993 Annual Report, and Jornal da Vale, no. 161, February-March 1993, p. 3.

63 - “Emoção na festa dos 2 bilhões da Vitória a Minas.” Jornal da Vale, no. 177, special report, August 1994.

As it celebrated its 30th anniversary on April 1, 1996, Vale’s oldest port system was thriving. Tubarão Complex had launched the company’s key mine-railroad-port strategy

At this time, the company had a fleet of 7,400 ore cars, 5,700 general freight cars, 60 passenger cars and 209 locomotives. At the ceremony, the purchase of more than 70 car-carrier freight cars to transport Fiat automobiles (present in Betim since 1974) and eight air-conditioned passenger cars was announced. To complete the improvement, 10 new locomotives were also acquired.64 With the expansion of the railroad network belonging to Vale, this fleet would continue to receive reinforcements of new tracks.

The opportunity to expand Vale’s rail network arose with the inclusion of various stretches belonging to the Federal Railroad Network (RFFSA) in the privatization program implemented by the federal government. In 1996, Mineração Tacumã, controlled by Vale, made a winning bid of US$316.9 million for the Center-East Network, the largest part of the RFFSA. This network would become part of the Centro-Atlântica Railroad (FCA), which in 2010 had 8,023 kilometers of tracks, extending across the Brazilian states of Sergipe, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro and Goiás as well as the Federal District.

The acquisition made it possible to transport goods (including soybeans) from the country’s central region to Espírito Santo. Various straight lines arrived at the same destination. All of the company’s investment in the logistics sector would in some way be present at Tubarão Complex, which in 1996 was 30 years old.

As it celebrated its 30th anniversary on April 1, 1996, Vale’s oldest port system was thriving. Tubarão Complex had launched CVRD’s key mine-railroad-port strategy. It had been responsible for a major boost to Vale’s activities in Espírito Santo and it drove industrial and commercial diversification in the state, whose economy had until then been based on coffee.

64 - Idem.

CVRD’s president, Wilson Nélio Brumer, in the year he was appointed, 1990.

Wilson Nélio Brumer The career of Wilson Brumer (Belo Horizonte, Minas

Gerais, 1948)1 at Companhia Vale do Rio Doce began in the 1980s, as finance director. In 1990, during Fernando Collor’s government, he was appointed president of the company. Brumer took over CVRD with the mission of promoting, in an embryonic form, an administrative reform to prepare the company for its future privatization. His work was marked by the strengthening of Vale’s presence on the stock market and the resumption of investment in Itabira. When Collor stood down as Brazil’s president in 1992, Brumer also left Vale’s presidency. He subsequently served as Minas Gerais state secretary for economic development and held managerial positions in major companies linked to mining and steelmaking, such as Acesita and Usiminas. He graduated in Business Administration from Fundação Mineira de Educação e Cultura (Fumec-Minas Gerais).

1 - See “Brumer, Wilson,” DHBB, vol. 1, pp. 861-862, and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s history), Exame magazine, April 5, 2011.


Francisco José Schettino Francisco Schettino (Belo Horizonte, Minas Gerais,

1936)1 led Vale in the period leading up to its privatization. A qualified engineer, he was appointed by President Itamar Franco and remained in his position under Franco’s successor, President Fernando Henrique Cardoso. He took over the company soon after the 1992 United Nations Rio Earth Summit. This would be a determining factor in his activities as CVRD’s president.

Schettino’s work focused on two areas: more company investment in environmental preservation; and modernization of Vale’s logistics infrastructure, such as the new Ponta da Madeira Maritime Terminal in Maranhão. Under his administration, the company was already a giant, with 15,700 employees and a profit of US$329 million in 1995. He participated in the post-privatization transition as a member of Vale’s Board of Directors.

1 - See “Schettino, Francisco José” entry, DHBB, vol. 5, pp. 5,328-5,329, and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s history), Exame magazine, April 5, 2011.

233The celebration of the date was also the starting point for new port expansion projects. Work on building three new berths was announced, two exclusively for grains and bulk liquids, and the third for fertilizers. The aim was to handle a larger quantity of miscellaneous goods.

The work, whose budget was R$48 million, would increase annual cargo-handling capacity by around 5.5 million metric tons (more than the combined annual handling capacity of the ports of Vitória and Capuaba, both located in Vila Velha, also in Espírito Santo).65

The North SystemThe North System, built in the 1990s in the Brazilian states of Pará and Maranhão, was fundamental to achieving the economic results and social integration sought by CVRD. It wasn’t just about ore. From Carajás, the company paved the way for the development – in areas ranging from agriculture to education – of a large part of the region stretching from Pará to São Luís in Maranhão.

In the last quarter of 1993, a record volume of goods was carried by the Carajás Railroad (EFC). As a result, over the course of the full year, 35 million metric tons of iron ore was transported, up 10% from the previous year, as well as general freight – especially limestone, drinks, fuels, timber, vehicles, industrial and agricultural inputs, and grains. The EFC’s daily passenger train service was – and still is – the most used long-distance transportation system in the eastern Amazon region of Pará: in 1993, around 500,000 people traveled on it.66 One important factor in this period was the revenue obtained from transporting general freight, favoring the expansion of agriculture in southern Maranhão. The transportation of soy, timber, limestone, drinks, fuels and vehicles

65 - “Tubarão, 30 anos.” “Tubarão, 30 anos.” Jornal da Vale, no. 195, special report, March 1996.

66 - 1993 Annual Report, p. 31.

covered 24% of Carajás’ operating costs.67 “You only have to sell it and we’ll transport it!” affirmed the EFC’s general manager of transportation, Luís Elesbão.68 The company’s efforts would be rewarded less than one year later, with the opening of Pier 2 at Ponta da Madeira Maritime Terminal in São Luís, Maranhão.

Opened in March 1994, Pier 2 gave rise to one of the biggest port complexes in the country. Called the Second Bulk Solids Loading System, the facility ensured flexibility for the company’s operations in the North System, which in 1993 handled more than 35 million metric tons of many types of goods at a single quay.69

The ceremony to open the new pier was attended by groups of Japanese, Korean and American business people who were partners in the project. Japanese trading company Nissho Iwai funded US$25 million of the construction costs. According to the director of Nippon Steel, Yoshihide Adachi, “CVRD has become an important element to support the global steel industry.” At the ceremony, the governor of Maranhão (who some years later would be appointed the Mines and Energy Minister), Edison Lobão, said that CVRD employees – present and in uniform at the opening – would be “an army that promotes the economy, rather than the security, of the Brazilian state.”70

The opening of Pier 2 at Ponta da Madeira Maritime Terminal was a key factor in the achievement of new records in the North System. The terminal now handled 15 different types of cargo, including lump ore and various other iron ore products, pig iron and soybeans. Pier 2 raised the local transportation potential, allowing an expansion in the mines’ production capacity, besides guaranteeing faster and safer exports via the terminal.71


68 - Idem.

69 - “Píer 2 marca início de nova fase no Porto de Ponta da Madeira.” “Píer 2 marca início de nova fase no Porto de Ponta da Madeira.” Jornal da Vale, no. 172, special report, March 1994.

70 - Idem.

71 - Idem.

In the same year of 1994, the Vitória-Minas and Carajás railroads transported 2.2 million passengers and 141 million metric tons of products. Meanwhile, Vale was conducting transoceanic shipping activities using Docenave’s 50 ships, which carried 30 million metric tons per year. Investment in infrastructure also underpinned the company’s actions in the areas of pelletizing, steel, ferroalloys and aluminum. It was a logistics network that went from ore shipment platforms to unloading terminals across the world.

In December 1994, continuing the sequence of investment in infrastructure and logistics, CVRD began operating another maritime terminal, this time in the state of Sergipe: Inácio Barbosa Maritime Terminal. The terminal was capable of handling 3 million metric tons of bulk solids and 500,000 metric tons of general cargo per year. The opening ceremony was attended by the governor of Sergipe, João Alves Filho, the Mines and Energy Minister, Delcídio Gomez, and the president of Petrobras, Joel Rennó, as well as a number of CVRD directors and superintendents.72

The rhythm grew ever faster. In May 1995, the Pelletizing Superintendent’s Office (Supel) registered new records at its Nibrasco plants, opened in 1978 at the Tubarão Complex in Vitória, Espírito Santo, and at the Italian-Brazilian Pelletizing Company (Itabrasco), established in 1977 at the same location. These companies, respectively, reached the milestones of 100 million and 50 million metric tons of total accumulated pellet output. In 1994 alone, the plants together produced 18.7 million metric tons of pellets, exceeding their nominal installed capacity of 18 million.73


73 - Jornal da Vale, no. 186, June 1995, p. 9.

The president of CVRD, Francisco José Schettino. Following page,

left to right: the Carajás Railroad (EFC) at the point where it crosses

the Tocantins River, and the Vitória-Minas Railroad (EFVM).

234 235


View of a loading silo in Carajás, Pará, in 1993.

7.6 Market diversification

CVRD diversified its sales markets, thereby expanding its range of customers and creating new business opportunities. The company gradually incorporated new products and businesses, but without losing its main focus and control of its processes – and to Vale, processes are synonymous with logistics, large distances, railroads, ports and ships. Growing logistical mastery is a way of diversifying assets, skills, sources of productivity, economies of scale, scope and integration.

CVRD’s growth is associated with its capacity to develop new technologies to make better use of the company’s mineral resources. These technologies are not always available, and known techniques may not always be applied in other environments, other deposits and other mineral occurrences. Diversification made it possible to transform unusable resources into goods with economic value.

Mineral production processes also involve the possibility of finding and using other minerals besides iron ore. This diversification performs various functions, such as stimulating Vale’s technological development. Over the years, manganese, gold, copper and aluminum were added to iron. In this way, CVRD became a diversified mining company, building new opportunities and a more promising future.

Manganese and Urucum MineThe search for manganese – which led to the discovery of Carajás in the 1960s, when American company US Steel was prospecting for manganese rather than iron in northern Brazil – long played an important role in CVRD’s history. At the time, interest in manganese was justified by its use in electrical goods, especially batteries. Later it was used more widely in steelmaking: its presence inhibits the action of impurities and strengthens iron alloys, increasing their malleability and durability. Manganese is the fourth most used metal in the world, and from the start

7.5 Ten years of Carajás

In 1995, the North System celebrated its tenth anniversary, confirming Carajás as the biggest mineral province in the world.74 In addition to workers directly linked to mining, Carajás attracted teachers, traders, brokers and other professionals who saw a chance to rise socially in the region. The social and economic life of the communities spread along the Carajás Railroad’s route was ever more dominated by the railroad, and this became especially evident when the tracks reached São Luís.75

In February 1995, a company delegation and the governor of Maranhão, Roseana Sarney, met to open São Luís Railroad Station, the last built by the EFC, whose passenger train had benefited 500,000 users in 1994 alone. Immediately after the ceremony, while still at the station, Vale signed an agreement with the Maranhão Telephone Company to implement a fiber-optic telecommunications system along the EFC.

At the age of 10, Carajás was experiencing a gradual improvement in its relations with indigenous communities, successful environmental policies and a diversification in investments. In southeast Pará, the world’s largest mineral province grew stronger as a laboratory in which CVRD’s profile was shaped.

74 - 1995 Annual Report, p. 5.

75 - “Sucesso do Sistema Norte: convênios e inaugurações marcam os 10 anos de operação “Sucesso do Sistema Norte: convênios e inaugurações marcam os 10 anos de operação de Carajás.” Jornal da Vale, no. 183, special report, March 1995.

236 237


Vale do Rio Doce Navegação S.A.’s ship Doceangra, anchored at the Brazilian Navy’s arsenal

in Rio de Janeiro, in 1990.


238 239it was one of the fundamental products in Vale’s diversification strategy,76 justifying the 1994 purchase of 100% of the shares of Urucum Mineração, based in the state of Mato Grosso do Sul.

Urucum Mineração S.A. was set up in 1976, and was owned in three equal shares (33.3%) by CVRD, Companhia Matogrossense de Mineração (Metamat), belonging to the state government of Mato Grosso, and Convap S.A., part of Alcindo Vieira, a private Brazilian group. The aim was to mine manganese reserves in the Urucum and Jacadigo mountains in the municipality of Corumbá, Mato Grosso do Sul, estimated at 60 million metric tons of raw ore.77

At the time of Vale’s takeover, company president Francisco José Schettino highlighted the opportunity for further acquisitions: “Global manganese reserves are limited. They exist in Australia, South Africa, Brazil and Gabon. Our lump iron ore reserves are also of great importance. They amount to more than 100 million metric tons, which complement our reserves of sinter feed and pellet feed. Lump ore is used on a large scale in direct-reduction furnaces,” he said.78 Direct reduction takes place in furnaces that use natural gas.79

Through the acquisition of 100% of Urucum Mine in Corumbá, Vale gained manganese reserves of approximately 67 million metric tons, which, added to the reserves of Carajás, gave a total of 131 million metric tons. The acquisition also increased Vale’s total production, to 2.3 million metric tons per year.80 “Urucum” is a native Indian word meaning “red” (the ground has a reddish hue in the location), and it is also the name of a tree that produces a red dye. The mine’s best results were attained in 1995: a total of 234,900 metric tons of manganese were sold, up 20.5% from the year of the acquisition.81

76 - See See Jornal da Vale, no. 178, September 1994, p. 3.

77 - Companhia Vale do Rio Doce – 50 anos de história, p. 192.Companhia Vale do Rio Doce – 50 anos de história, p. 192.

78 - See See Jornal da Vale, no. 178, September 1994, p. 3.

79 - Basic Mining Course, Valer – Vale Education. Module IV, p. 19. Basic Mining Course, Valer – Vale Education. Module IV, p. 19.



largely due to product diversification, with the launch of Seas sinter feed, which at the time became the company’s top-selling manganese product.86

Together with manganese, another success of Vale’s in late 1995 was the harnessing of low-grade ore. In October, a new itabirite concentration plant came into operation at Timbopeba Mine in Ouro Preto, Minas Gerais. As a result, itabirite, until then considered a low-value ore, took on a new status. CVRD’s investment in the plant amounted to US$30.7 million, undertaken exclusively using internal resources. In all, 97% of the equipment used was manufactured in Brazil. The plant enabled an increase in the minable reserve of hematite of more than 16 million metric tons, mostly for export.87

Gold and copperCVRD continued with its diversification policy, in which gold and copper played an important role in the 1990s. At the start of the decade, Vale became the biggest gold producer in Brazil, producing 11.3 metric tons in 1992.88 In the same year, as a result of mining, processing, sales and geological research efforts, Companhia Vale do Rio Doce also became the largest producer of gold in Latin America.89 In 1994, the company produced 12.8 metric tons, strengthening its position.90

Two years later, in June 1996, gold became prominent on CVRD’s agenda. In Caeté, Minas Gerais, the company opened its seventh gold mine, and its total production capacity rose to 750 kilograms per year. Vale’s arrival in the municipality meant the resumption of an activity begun in the region 280 years before, with the town’s foundation by gold-mining settlers. During the initial period, Vale

86 - Jornal da Vale, no. 190, October 1995, p. 7.





invested around US$35 million to discover new reserves, and the mine was implemented in a record time of 11 months. This achievement, however, did not come about suddenly: Docegeo had begun research in the region decades before, in 1972.91 During this period, Vale also opened Almas Mine in the recently created state of Tocantins, with capacity to produce 1 metric ton of gold per year.92

In addition to the two gold mines recently installed by Vale, a new company was established in November 1996, called Salobo Metais S.A., through an agreement between CVRD, Mineração Morro Velho and BNDES. Located in Marabá, 77 kilometers from Carajás in southern Pará, Salobo Mine was discovered in 1977 by Docegeo. The company’s plan was to help make Brazil self-sufficient in copper.93

Salobo Mine, which was planned to open in the second half of 2012, had estimated copper output of 100,000 metric tons per year in its first phase and 200,000 metric tons in the second phase. It was also expected to produce 8 metric tons of gold per year as a byproduct. The mine’s forecast lifespan was 33 years. In 2010, Vale’s Form 20-F Report94 stated that Salobo Mine’s reserves are likely to be exhausted in 2046.

Aluminum operations: from Alunorte to Valesul In the 1960s in the Amazon, bauxite was the ore most sought after by Canadian aluminum company Alcan. Fundamental to aluminum production, it was discovered next to the Trombetas River in Pará in the second half of the decade. The ore was of excellent quality and there was enough of it to enable major projects: 500 million metric tons.

91 - See See Jornal da Vale, no. 191, December 1995, p. 16, and Jornal da Vale, no. 198, June 1996, special report, n.p.

92 - See See Jornal da Vale, no. 197, May 1996, special report, n.p.


94 - The The Form 20-F Report is a document filed by Vale since 2002 with the Securities and Exchange Commission (SEC), the US stock market regulator. See 2010 Form 20-F Report.

Employees working in Urucum underground mine in Mato Grosso do Sul. Following page: gold research at the Mineral Development Center (CDM) in Santa Luzia, Minas Gerais.

Although manganese was initially the main focus in Urucum, open-pit iron ore mining, conducted since the acquisition, has grown increasingly important, and by 2010 it had become essential to the operation’s success. In 2010 alone, 1.4 million metric tons of iron ore was extracted from Urucum Mine.82

Manganese and the external marketAt the end of 1995, Vale took a decisive step to consolidate the vertical integration of its manganese production by purchasing 65% of the shares of Société Européenne d’Alliages pour la Sidérurgie (Seas), the second biggest manganese ferroalloy manufacturer in France, and indeed in Europe. This was the first time Vale had controlled an operational company outside Brazil.83 Through this acquisition, the company could guarantee its permanent entry into the European alloy market, as well as the consumption of all its manganese using fines from Carajás. It was the first company in the world to operate using 100% sinter made from 100% CVRD ore.

A contract with the French company, signed in December 1995 by Vale’s Director of Metallurgy, Guilherme Almeida Gazolla, gave CVRD access to the European alloy market.84 This agreement was consistent with the company’s record exports in this same month and year, when Ponta da Madeira Maritime Terminal reached the milestone of 300 million metric tons of iron ore shipped abroad since its opening.85

The year 1995, in which manganese mining in Urucum would expand, would also be the tenth anniversary of Azul Mine, a major producer of this mineral in the North System. In October of that year, thanks to an aggressive commercial policy, the mine attained record monthly output of 130,000 metric tons. The success was

82 - Idem.

83 - Jornal da Vale, no. 192, December 1995, p. 5.

84 - Idem.

85 - Jornal da Vale, no. 192, December 1995, p. 8.

240 241


Aluminum, as found in our everyday lives – in window frames, cooking utensils, automobile parts and aircraft – is obtained from alumina (aluminum oxide) extracted from bauxite. Pure alumina, a white powder that is water insoluble, is an intermediate product in the transformation of bauxite ore into aluminum.95 Producing aluminum involves a complex, expensive process of reducing (purifying) bauxite using the oxide.96 The end result is metal aluminum, lighter, more malleable and with immense usage possibilities.

Initially, all the bauxite extracted from the region near the Trombetas River in Pará was shipped to Alcan’s main operation in Canada. Despite the reserve’s large potential, output was modest: just 1 million metric tons per year.97 Pressured by the Brazilian government, Alcan doubled production, and at the start of the 1970s, it established Mineração Rio do Norte (MRN), involving the participation of Brazilian capital. The aim was to fully implement the project by 1975, but a crisis in the global aluminum market during the period brought a halt to the work in 1972.98

Bauxite, aluminum and a greater Brazilian presence in the Amazon were national priorities in 1974. As a result, MRN’s project was reformulated and control of the company came to be shared by Companhia Vale do Rio Doce (41%) and Companhia Brasileira de Alumínio (CBA), owned by Grupo Votorantim (10%). Alcan had a 19% stake in the company, and the remaining shares were held by another six companies, all multinationals.

MRN’s restructuring was not limited to the change of ownership and the transfer of shareholder control to Brazilian companies:

95 - See Siqueira, Victorio. See Siqueira, Victorio. Alunorte: uma história de sucesso. Barcarena (PA): Alunorte, 2010, p. 15.

96 - See more at <www.alunorte.net/processo>.See more at <www.alunorte.net/processo>.

97 - See Siqueira, Victorio, See Siqueira, Victorio, op. cit., p. 9.

98 - Idem.

Jório Dauster Magalhães e Silva In an interview with Época Negócios magazine published

in July 2007, Jório Dauster (Rio de Janeiro, 1937)1 said that his main challenge was to reinvent the company. “It is necessary to constantly reinvent oneself.” That is what he did throughout his life. Born in Rio de Janeiro, a trained diplomat (although, according to him, “I was never a member of the so-called ‘lace cuffs’ group of the Foreign Ministry”), Dauster is also a well-known name in literary translation, responsible for translating into Portuguese works by famous names such as Vladimir Nabokov (Lolita), Philip Roth and J. D. Salinger (The Catcher in the Rye).

After working at the former Brazilian Coffee Institute and as negotiator for Brazil’s foreign debt (1990-1991), Jório Dauster was appointed president of Vale in 1999, at the age of 62. His main accomplishment was the company’s restructuring after its privatization and its preparation for its path to expansion in the subsequent years. Dauster left CVRD in 2001.

1 - See “Dauster, Jório” entry, DHBB, vol. 2, pp. 1,800-1,801, and “Conheça todos os presidentes da história da Vale” (Learn about all the presidents in Vale’s history), Exame magazine, April 5, 2011.

right from the start, an increase in production was planned, to 3.4 million metric tons of bauxite per year. The company had lofty ambitions. On August 13, 1979, the first batch of ore was shipped from the Port of Trombetas in Pará and one of the most successful bauxite mining operations in the world began to operate.

Part of Companhia Vale do Rio Doce’s diversification strategy was its stake in MRN, which started to gain shape as of 1970. At that time, aluminum was in hot demand, and to produce it, it was necessary to assemble a production chain that began with bauxite extraction and ended at port terminals.

In 1974, CVRD subsidiary Docegeo embarked on research in the Amazon region that resulted in the first designs for the creation of alumina producer Alunorte and aluminum producer Albras. The project to build an aluminum production chain was strongly backed by the federal government, which through Mines and Energy Minister Shigeaki Ueki gave guarantees to enable Vale, a state-owned company, to negotiate with the Japanese partners of Light Metal Smelters Associations (LMSA), an association of aluminum and alumina producers in Japan. The foundations for the establishment of Albras and Alunorte were put into place.99

The figures – both those from the period and current ones – showed the need for well-planned investment in the construction of a plant to supply alumina in sufficient amounts to make the business feasible. Alunorte took on this role. In the initial project, it was estimated that Albras would consume 80% of Alunorte’s alumina production. Today, despite having increased its consumption by around 35%, Albras still uses less than 15% of Alunorte’s output.100

99 - Idem, p. 12.

100 - Idem, p. 175.

Due to the plant’s high cost, a supply of power guaranteed by the federal government was indispensable for the project to be viable. This became possible when the Tucuruí Hydroelectric Plant was built in Pará in 1984. For strategic reasons, the aluminum production complex was installed near Belém, Pará. The location was close to the hydroelectric plant, it had reasonable port facilities and it was close to an urban center that could supply qualified manpower. Nevertheless, due to a series of problems, Alunorte only came on line in 1995, when it began to extract alumina from bauxite.101

By the time of Vale’s privatization in 1997, the aluminum market had changed. Despite its positive results in the operational field, Alunorte still had a significant debt. After unsuccessful attempts to sell some of its shares – the amounts offered by Alcoa and Alca, among others, were derisive – Vale launched a wide-ranging project to restructure Alunorte. The plan called for reducing and renegotiating its debt (US$800 million), issuing debentures, issuing new equity and bringing in a new shareholder, Norwegian company Hydro, in 2000. With its costs and debt under control, Alunorte could now expand.102

With Hydro’s involvement, Alunorte achieved an immediate rise in its production capacity of 2.325 million metric tons per year, which represented a 50% increase in the plant’s capacity. Vale (through Aluvale) held 50.27% of the company’s equity and started to consider alumina as a high-priority, strategic business. In order to further expand its output, Alunorte sought new bauxite suppliers and began to buy from Vale’s reserves in Paragominas, southeast Pará, acquired from Anglo-Australian Rio Tinto. After deciding on new fields of activity, Expansion 1 –

101 - Idem.

102 - Idem, p. 114.

A study of the status of global bauxite reserves, as well as alumina and aluminum output potential in the main

production centers, pointed to ever more favorable conditions for making aluminum in Brazil


242

In Expansion 3, Alunorte invested US$1.135 billion to raise the plant’s annual capacity to 6.3 million metric tons. To produce this amount, 60% of the bauxite used would come from Paragominas. With the completion of its three growth plans, Vale, in association with the companies in which it held stakes – definitively shaped the aluminum production axis of Brazil, an axis that was also taking form at the other end of the chain.

Before Alunorte’s implementation was completed in the 1990s, Vale had already become the majority shareholder in Valesul, with 54.51% of its equity, in 1982, the year in which the company began its primary aluminum production operations in the neighborhood of Santa Cruz in Rio de Janeiro.105 Until 1995, Valesul bought alumina of various origins, but as of 1996, when shipments of alumina produced by Alunorte began to flow, the aluminum plant came to rely on a single supplier.

Alunorte’s first shipment, dispatched from the Port of Belém in Pará to Valesul on January 29, 1996, served as a decisive impetus to strengthen aluminum production in Rio de Janeiro. Winner, a Panamanian ship with an Indian crew, transported the first 7,000 metric tons of alumina to the plant in Rio. From then on, batches would be sent there monthly. Winner’s voyage marked the start of a partnership between Alunorte and Valesul, guaranteeing the success of Vale’s aluminum project.106

105 - See Bastos, Glaucia FelipeSee Bastos, Glaucia Felipe. Programa de responsabilidade social da Valesul Alumínio: uma receita de sucesso. Course completion paper presented at the Center of Research and Documentation of Contemporary Brazilian History (CPDOC), to obtain an MA in Cultural Goods and Social Projects, Rio de Janeiro, Fundação Getulio Vargas, 2006, p. 37.


the first of a series of growth plans produced by the company’s directors – took on a definitive shape.

A study of the status of global bauxite reserves, as well as alumina and aluminum output potential in the main production centers, pointed to ever more favorable conditions for making aluminum in Brazil. In October 2001, with Murilo Ferreira appointed as CEO of Alunorte, Vale acquired MRN’s entire block of shares in Alunorte for around US$40 million. This was followed by investment in research (especially in bauxite processing) and methods for removing excess water from bauxite slurry103 in order to transport it via a pipeline for up to 200 kilometers.

Given the size of its reserves, its processing methods, its transportation system and its success in bauxite slurry dewatering, Alunorte was ready to grow even more. The Expansion 1 project would be launched on January 19, 2003, in the presence of Brazil’s president, Luiz Inácio Lula da Silva.

Expansion 2 was practically twice the size of Expansion 1. Costing US$780 million in total, it expanded the plant’s annual production capacity to 4.3 million metric tons. A major benefit was intended to be the use of bauxite from Paragominas (Pará), which would reach the plant via a 240-kilometer slurry pipeline, but due to difficulties in obtaining environmental licenses to build the pipeline,104 bauxite from Trombetas (Pará) continued to be used instead. Expansion 2 was inaugurated in the first quarter of 2006.

103 - “Projeto Bauxita de Paragominas, no Pará, demandará investimentos de R$ 940 “Projeto Bauxita de Paragominas, no Pará, demandará investimentos de R$ 940 milhões e permitirá a expansão da Alunorte, totalizando a aplicação de recursos de R$ 3 bilhões.” Available at <http://saladeimprensa.vale.com>.

104 - Idem.

View of Alunorte’s site in Barcarena, Pará, in February 2006.

244 245


Carajás Forest

Contrary to what many people think, mining can contribute to environmental preservation. This is what Vale’s presence in southeast Pará demonstrates. Since it began mining iron ore in the region in 1985, the company has been helping to conserve the Carajás National Forest and other areas of the Amazon biome in partnership with the Chico Mendes Institute for Biodiversity Conservation (ICMBio). Over the years, Vale has also developed technologies and management systems that have led to lower-impact operations.

Carajás National Forest, which is home to a number of Vale’s iron, manganese and copper mines, is a Conservation Unit created in 1998 by presidential decree, and whose objectives include “the sustainable exploration of natural resources” such as mining. Vale’s operations occupy just 3% of Carajás National Forest’s area of approximately 4,120 km2. In addition, Vale’s support has been fundamental in preventing cattle raising and logging from encroaching on the forest.

Carajás National Forest and four adjacent areas covering a total of 4,559.5 km2 together make up the Carajás Region Mosaic of Conservation Units. The Mosaic is protected through a partnership between Vale and ICMBio, which conducts monitoring, research, fire prevention, firefighting and environmental education activities.

The company protects or helps to protect an area 3.5 times larger than that occupied by its global operations, adding up to 13,700 km2 of natural habitat. In 2011, Vale invested US$1.030 billion in environmental monitoring and protection, up 40% from the previous year.

Opposite page: a pink ipê (Tabebuia impetiginosa) tree stands out on the horizon in Carajás National Forest in Parauapebas, Pará.


Left: stamps issued as part of the Prêmio

Brasileiro Imortal (“Immortal Brazilian

Awards”), organized by Vale to pay tribute to

Paulo Bertran, Tom Jobim, Rachel de Queiroz, José

Hamilton Ribeiro, Zeneida Lima, Miguel Krigsner and

Ruth Cardoso.

Our HistoryVale

Vale’s commemorative stamps

An indication of Vale’s importance to Brazil can be seen from the postage stamps that have commemorated some of the milestones in its history. Since the 1960s, the Brazilian postal service has produced several stamps of this kind.

The first such stamp was issued in 1966 to commemorate the opening of Tubarão Maritime Terminal in Espírito Santo. Another example is the stamp produced to mark Vale’s 40th anniversary, issued on June 1, 1982.

The ceremony to unveil the first stamp, held at the office of Vale’s president in Minas Gerais, was attended by Mines and Energy Minister César Cals; the director of the postal service, Joel Marciano Rauber; and Vale’s president, Eliezer Batista, accompanied by former company presidents Oscar de Oliveira, Antônio Dias Leite, Raymundo Mascarenhas, Juracy Magalhães and Fernando Reis. Created by Portuguese artist Licínio de Melo, the stamp’s design represented mountains of ore and the technical apparatus used to extract it.1 The accompanying catalog produced by the postal service explained that the artist sought to depict the company’s strength.2

Another important stamp dedicated to CVRD was produced to commemorate the launch of the Carajás Iron Project in 1985, which the postal service proclaimed as “the biggest iron ore project in the world.”3 In 1992, the postal service’s last stamp to celebrate Vale was issued, to mark the company’s 50th anniversary.

In 2008, in partnership with the postal service, and as part of the company’s Prêmio Brasileiro Imortal (“Immortal Brazilian Awards”), Vale launched a series of commemorative stamps dedicated to the environment. The idea was to pay tribute to illustrious Brazilians, naming six plant species discovered at the Vale Natural Reserve in Linhares, Espírito Santo, for them. They consisted of three species of the Anthurium genus (belonging to the Araceae family, also called “flamingo flower”), a Machaerium species (popularly known by local people as bico branco or “white beak”), a Salacia species, and an orchid species.4 The people to be “immortalized” were chosen through an internet poll that took place over two months, attracting 250,000 votes. Two types of awards were given: a national award and awards for each of Brazil’s five regions. In the national category, the winner was José Hamilton Ribeiro, a journalist from São Paulo who received 70% of the votes. The regional winners were economist and historian Paulo Bertran (Center-West region), writer Rachel de Queiroz (Northeast), Rio de Janeiro maestro Tom Jobim (Southeast), writer and poet Zeneida Lima (from the island of Marajó in the North), and businessman Miguel Krigsner (from Santa Catarina in the South).5

During the awards ceremony, Vale and the postal service also launched another stamp to celebrate the work of former Brazilian First Lady and anthropologist Ruth Cardoso, as founder and president of NGO Conselho da Comunidade Solidária (“Solidarity Community Council”).6 The stamps’ illustrations were produced by botanical artist Dulce Nascimento, a board member of the Margaret Mee Botanical Foundation7 and a leader in her field, well known in Brazil and abroad for her work.8

1 - See Jornal da Vale, June 1982, special 40th anniversary edition, p. 10.

2 - See Correios (Postal Service), Edital no. 13 (Public Notice no. 13), 1982. According to the publication, Licínio de Melo was a Portuguese artist based in Rio de Janeiro who participated in exhibitions in Portugal, had work published in the USA, and who worked as an art director in Brazil in the editorial and advertising sectors.

3 - Idem.

4 - The first three species were discovered by researcher Marcus Nadruz Coelho, who worked at the Rio de Janeiro Botanical Garden. The others were discovered, respectively, by Carlos Victor Mendonça Filho, a botanist at the Integrated Federal Faculties of Diamantina in Minas Gerais; Julio Antonio Lombardi, a botanist at São Paulo State University; and Cláudio Nicoletti, also a researcher at the Rio de Janeiro Botanical Garden. Marcus Nadruz also discovered Philodendron ruthianum, named for anthropologist Ruth Cardoso.

5 - See “Vale divulga Prêmio Brasileiro Imortal,” published on October 31, 2008. Available at <http://saladeimprensa.vale.com/pt/release/interna.asp?id=18477>.

6 - The Council, led by Ruth Cardoso and composed of 10 ministers and 21 representatives of civil society, promoted dialogue between society and government entities, and encouraged partnerships to efficiently tackle longstanding social problems.

7 - Margaret Mee (1909-1988) was an English artist and botanist who dedicated her life to cataloging Brazilian plants, especially in the Amazon, through her paintings.

8 - See “Vale divulga Prêmio Brasileiro Imortal,” published on October 31, 2008. Available at <http://saladeimprensa.vale.com/pt/release/interna.asp?id=18477>.

Below: stamps commemorating key dates in CVRD’s history, issued in 1966, 1972, 1982

and 1985.

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