Thayer Watkins
Silicon Valley
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The Greater Carajás Development Region of Brazil

In 1967 the U.S. Steel Company was carrying out an aerial survey of minerals in the Carajás Region of Brazil. A helicopter which was part of the survey was running short of fuel. It had extra fuel on board in containers but it needed to land to transfer the fuel into the fuel tanks. The pilot looked around for a convenient place to land and spotted a bare hill top and landed there. While the helicopter was being refueled some of the survey team looked around the landing site. They found the reason the hill top was bare was that the hill was composed of extremely high grade iron ore. The iron content was as high as 66 percent. That site was the Earth's richest iron deposit, unsurpassed in quantity and richness.

Later other mineral deposits were discovered in the region. Carajás was a treasue trove of not only iron ore but also ores for manganese, copper, tin, aluminum and even gold.

U.S. Steel wanted to develop the Carajás iron deposit but the Brazilian Government was unwilling to give a foreign company control over such an important national asset. Instead the Brazilian Government created in 1970 a joint venture company, Amazonias Mineração SA (AMZA), of which 51 percent was owned by the Companhia Vale do Rio Doce* (CVRD), the Brazilian Government state enterprise, and 49 percent was owned by U.S. Steel.

U.S. Steel subsequently withdrew from the joint venture in 1977 by selling its share to CVRD for $55 million. U.S. Steel felt the price increase for energy in the 1970's so decreased the demand for iron ore that it could no longer use the production from Carajás. AMZA, now wholly owned by CVRD, was granted the rights for the mineral eploration and development of the entire Carajás region.

Iron Mine at Carajás

A railroad was built to haul the iron ore to the port at São Luis on the Atlantic. The World Bank provided a portion of the funds for building the railroad. The Federal government in Brazilia authorized 22 companies to smelt iron ore along the route of the railroad. These were smaller scale operations and used charcoal for the smelting. The charcoal came from the native forest along the route of the railroad. Soon vast areas were denuded of trees.

The World Bank maintained that this was in violation of the agreement it had with Brazil concerning the financing of the project. The Companhia Vale do Rio Doce maintained that it was complying with the agreement on the territory under its control by replanting the forest but was not responsible for what was happening in the territory along the railroad route, which was not under its control. However the replanting of trees by the Companhia Vale do Rio Doce was not a success because the replanting was of fast-growing trees such as the eucalyptus which created a monoculture forest subject to diseases and insect infestations of the region. The diversified natural forest was not vulnerable to these diseases and insects.

In Europe there developed a political movement focusing on the environmental destruction associated with the iron smelters along the railroad route. The Federal government withdrew its incentives for investment in Amazonia and the small scale iron smelters went out of production.

*The name Companhia Vale do Rio Doce means in English, Valley of the Sweet River Co. The Sweet River (Rio Doce) is a river in the state of Minas Gerais in Brazil, to the north of Rio de Janeiro. It flows into the Atlantic Ocean.

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