1944193119441997 - Vale.com · 4 - Read more in “Minério de Ferro no mundo: retomada de crescimento.” Mineração e ... html>. 13 - BNDES. “Privatização no Brasil,” July

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gas and minerals found fewer buyers and their prices fell. As a result of this demand shock, iron ore prices fell by 11% between 1998 and 1999, while the prices of pellets, fines and lump ore decreased by 12%, 11% and 13%, respectively.4

Iron ore producers including CVRD had to take emergency action, such as reducing costs, improving efficiency levels and increasing productivity. Against this setting, the Russian crisis took place in 1998. A traditional exporter of commodities such as oil and gas, the country was the victim of a speculative attack against its currency, as had happened a short time before in Asia, and it declared a 90-day moratorium until it could renegotiate its external debt.5

The international distrust generated by the Asian and Russian crises hit Brazil. External investment left the country but the real remained stable, given the fixed exchange rate regime, at rates close to the US dollar.6 However, while dollars left the country, the currency remained stable at the cost of interest rates that exceeded 40% in October 1998.7

The overvaluation of the real in this period was a government strategy to stop inflation from returning, but it was impossible to sustain this exchange rate policy for long. As of 1999, the exchange rate moved to a floating model.8 Accordingly, devaluation was immediate and the real weakened from US$1.21 in January to

4 - Read more in “Minério de Ferro no mundo: retomada de crescimento.” Mineração e Metalurgia magazine, no. 36, September 2000. Available at <www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/setorial/is_g3_36.pdf>.

5 - See “Rússia ainda discute dívida de US$ 16 bi,” Folha de S. Paulo, November 21, 1998; and BNDES, “Crise na Siderurgia Mundial: a Visão da OCDE.” Informe Setorial Mineração e Metalurgia, no. 22, December 1998.

6 - See Pinheiro, Armando Castelar; Giambiagi, Fábio and Moreira, Maurício Mesquita. “O Brasil na década de 90: uma transição bem-sucedida?” Texto para Discussão no 91, BNDES, Rio de Janeiro, November 2001.

7 - The historical series of “SELIC” interest rates measured by the Central Bank is available at <www.bcb.gov.br/?COPOMJUROS>.

8 - Idem.

8.1 New economic horizons

On October 23, 1997, the Hong Kong Stock Exchange fell 10.4% and took other markets down with it. The storm hit the São Paulo Stock Exchange (Bovespa), which declined by 8.15% – the second biggest fall among all of the world’s stock markets that day.1 However, the Brazilian economy made it through the so-called Asian crisis2 better than many imagined it would.

A fundamental foundation, enabling the country to stay economically strong despite the Asian crisis, had been constructed three years previously. The Real Plan, created in 1994, was a successful experiment after various attempts to tackle inflation in Brazil, which since the 1980s had been rising, demanding successive plans that until then had not managed to contain the constant increase in prices.

Between 1997 and 2001, Brazil became accustomed to a stable currency and lower inflation rates. The new economic conditions led to unparalleled experiences – Brazilians, who saw prices rise by 2,477% in 1993, ended 1997 with annual inflation of 5.22%.3

The economic growth spurred by the success of the Real Plan led to a recovery in capital flows, and the Brazilian economy’s convergence with global standards heightened the interest of major international companies. Brazil’s favorable circumstance on foreign markets would be shaken by the crises that followed as of 1997, but the country would find solutions to face them.

The international markets reacted to the Asian crisis by buying less, and commodity prices slumped across the world. Oil, natural

1 - “Bolsas desabam em todo o planeta,” Folha de S. Paulo, October 24, 1997.

2 - The following Asian countries were affected: Thailand, Malaysia, South Korea, Hong Kong, Indonesia and the Philippines.

3 - See the IBGE’s Wide-Ranging Consumer Price Index (Índice de Preços ao Consumidor Amplo, or ICPA). The IPCA, the federal government’s official index for measuring inflation rates, has been calculated by the IBGE since 1979. The historical series can be found at <www.portalbrasil.net/ipca.htm>.

CHAPTER 8

Years of Transformations

1944193119441997

250 251

Vale Our HistoryOur HistoryVale

US$1.90 in March. In the following eight months, the real continued to decline, falling 38% in all.9

Although it did not respond immediately to the devaluation of 1999, the Brazilian economy was capable of expanding its exports, reducing its import growth and rebuilding a trade surplus. Despite that year’s adverse conditions, Vale managed to minimize the consequences of the Asian and Russian crises. The company’s sales of iron ore and pellets amounted to 96.3 million metric tons in 1999, 3.2% lower than in the previous year – a smaller decline than initially predicted.10

CVRD ended the five-year period covered in this chapter, from 1997 to 2001, with a record net income. Its 2001 profit of R$3.05 billion was 43% higher than in 2000. Between 1997 and 2001, Vale’s net income grew at an average annual rate of 41.7%.11 These results showed that during this period the company was able to overcome the crises on international markets and to grow after one of the most important events in its history: its privatization in 1997.

8.2 Privatizations

When Fernando Henrique Cardoso was elected president of Brazil in 1995, privatizations became a recurrent theme for the federal government and a tool for tackling the crisis generated in previous decades. Established in 1990, the National Privatization Program (known by Portuguese acronym PND) was one of the instruments used to improve the trade balance and public accounts, and thereby prolong the stabilization achieved by the Real Plan. Between 1995 and 1996, 19 companies were privatized, raising a total of US$5.1 billion.12 The highlights in the period were the sales of Escelsa – one of the biggest energy distributors in Espírito Santo – in 1995, for US$519 million, and Light – an electric power company in Rio de Janeiro – in May 1996, for US$2.509 billion.13

The administrative act that included Vale on the National Privatization Program was an initiative of the Executive Branch, provided for in part VI, article 84 of the Federal Constitution, and also in Law 8,031/90. This legislation establishes privatization as the appropriate means of reducing the state’s presence in the economy, under the terms of the Federal Constitution.

9 - Source: Central Bank, in Pinheiro; Giambiagi and Moreira, op. cit.

10 - Executive summary, 1999 Annual Report. Available at <http://www.vale.com.br/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra1999/ra99_sumarioexecutivo.htm>.

11 - See Annual Reports, 1999-2001.

12 - “Empresas desestatizadas no âmbito do PND por ano.” Available at <http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/BNDES_Transparente/Privatizacao/pnd.html>.

13 - BNDES. “Privatização no Brasil,” July 2002, p. 38. Available at <http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/especial/Priv_Gov.PDF>.

The privatization of state-owned companies enabled the government to raise resources that, alongside the reduction in the public debt, generated a reconfiguration of the state to focus on its core activities such as health, transportation and public security.

The privatization of the majority of state-owned enterprises in the industrial sector was conducted in the first two years of Fernando Henrique’s government. As of 1997, a new stage in the PND began, and the agenda moved on to the electricity, transportation and telecommunications sectors. The focus was on improving the quality of the services provided as of that time. In the same period, the privatization process was intensified at the state government level, supported by the federal government.14 A long series of bid documents would be published from that moment onward.

In terms of overall figures, the PND achieved the targets proposed when it was established. Between 1990 and 2009, the federal government transferred 71 companies to the private sector and raised a net total of more than US$30 billion.15

Vale’s privatization On the afternoon of May 6, 1997, the Rio de Janeiro Stock Exchange’s building was surrounded by people. The press counted 300 protesters.16 The reason for such commotion was the first stage in the auction to privatize Companhia Vale do Rio Doce, after a number of postponements caused by court injunctions. As of that day, Vale began to be administered by a consortium composed of private and public sector companies. The winner was Consórcio Brasil, a consortium of Brazilian and foreign investors, which acquired 41.73% of the shares belonging to the Brazilian government.17 Following the auction, this consortium was transformed into a company called Valepar, which is Vale’s controlling shareholder. The purchasers’ funding was guaranteed by support from the national development bank, BNDES. The winning bid was R$3,338,178,240.00 – representing a 19.9% premium on the established starting price. The shares were sold for R$32 each, compared to the starting price of R$26.67.18

The second stage consisted of the sale of part of the company’s capital to employees. This took place alongside the sale of a controlling stake to the private sector, also in 1997. The third stage, which occurred at the beginning of the 2000s, completed the process of disposing of the federal government’s shares, by enabling

14 - Source <http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/BNDES_Transparente/Privatizacao/historico.html>.

15 - The data presented were taken from the 2009 Annual Report of the National Privatization Plan (PND), available at <http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/pnd/PND_2009.pdf>.

16 - ISTOÉ magazine’s 35th anniversary edition, September 23, 2011. Available at <http://www.istoe.com.br/reportagens/161916_COMECA+A+ERA+DAS+PRIVATIZACOES>.

17 - See the 1997 Annual Report, p. 10.

18 - Idem.

Previous photo: pellet stockyard at Tubarão

Complex, Espírito Santo, in 1994. Left: Vale’s Barão

de Mauá headquarters building in Rio de Janeiro,

adorned with a banner celebrating Vale’s 50th anniversary, in 1992.

252 253


thousands of people throughout Brazil to use part of their Government Severance Indemnity Fund (FGTS) resources to buy shares in Vale. Caixa Econômica Federal’s website19 states that since this Vale fund was created, its accumulated profitability as of February 2012, was 918.3%; in other words, for every R$1,000 invested, there was a profit of R$9,183. Over this period, if this sum had been left in the FGTS, the accumulated profit would be around 30%.

Despite the crisis conditions, 1996 was a surprisingly positive year for the company, which, due to its various achievements, won Brasil Mineral magazine’s “Company of the Year in the Mining Sector” award for the third time.20 The awards ceremony took place in São Paulo and was attended by Vale’s then president, Francisco Schettino, and directors and leaders of the CVRD group’s companies. Vale was chosen for this award for the following reasons, among others: an increase in productivity in the Iron Quadrangle region of Minas Gerais and at Carajás Mine in Pará; the discovery of new deposits of gold, also in Pará; international gold exploration partnerships; technological and vertical development in iron ore production by taking stakes in steel companies (CST, Usiminas and CSN); and the environmental management policy of the whole CVRD system, in accordance with standards and parameters established by ISO 14001 – Environmental Management System.21

The award was the result of the investment policy adopted in the 1990s to tackle the crisis of that period. Vale, ever more international, had efficient logistics and diversified its investments. In addition, the company adopted strict efficiency and quality standards in its production.

Less than one year after Vale was privatized, the company’s results demonstrated the appropriateness of the new procedures it

19 - See <http://www.caixa.gov.br/Voce/Investimentos/Fundos/Fundos_Mutuos_de_Privatizacao/Vale_do_Rio_Doce/CAIXA_FMP_FGTS_Vale_do_Rio_Doce_I/rentabilidade_mensal.asp>.


21 - Jornal da Vale, April/May 1997, no. 208, p. 9.

had adopted. The company had grown while undertaking an internal restructuring to permit more investment in sectors such as research, community relations, the environment and, above all, technology. “Having been a successful company under government ownership, the task of leading the new CVRD under private control obliges us not to lose dynamism nor profitability, despite having to bring about profound change to make it more efficient and productive,” wrote Benjamin Steinbruch, chairman of the company’s Board of Directors, in a message addressed to shareholders at the end of 1997.22

In Vale’s organizational chart, established after privatization, the presidency was now exercised by a Board of Directors, which the company’s controlling shareholders participated in and influenced. Led by Steinbruch – who had the same position at CSN – the Board of Directors had eight more members.23 CEOs were also appointed for the different business areas.24 This reorganization was part of structural changes that, in their basic guidelines, provided for the shared administration of CVRD.25 The new model would start to be implemented based on a financial restructuring. The company’s 1997 Annual Report shows that the new orientation shifted Vale’s focus onto optimizing its business, leading each area to seek ways of participating in the global market. Business units (Pulp and Paper, Iron Ore, and Aluminum) and a Corporate Center were created in order to stimulate production.26

The Corporate Center was established with the objective of supporting each area in its business feasibility, investments, disposals


23 - The Board of Directors was composed of the following: Benjamin Steinbruch, Jair Antonio Bilachi, Francisco Gonzaga de Oliveira, Francisco Valadares Póvoa, Humberto Eude Vieira Diniz, José Fernando de Almeida, Luiz Xavier, Maria Silvia Bastos Marques, and Pérsio Arida.

24 - Gabriel Stoliar (Market Relations Area and Corporate Center), Manoel Horácio Francisco da Silva (Pulp and Paper Area), Mozart Kraemer Litwinski (Ore Area) and Luiz Paulo Marinho Nunes (Aluminum Area).


26 - Idem.

and restructuring in each sector. In its composition, the Center brought together the Finance, Human Resources and Administration, Legal, and Planning and Control departments.27 The Corporate Center appeared at the moment where company management was putting into practice a new personnel distribution policy.

A human resources structural reorganization process eliminated old functions demanded by its previous status as a state-owned enterprise. The direct effect of this was to reduce the size of the workforce – from 15,483 in 1996 to 10,865 in 1997. Most of the departures took place as part of the Encouraged Dismissal Program (“Programa de Demissão Incentivada”), created in September 1997 to soften the impact of the restructuring.28

Shares in the company were offered to employees at the time – they acquired 4.45% of the common shares and 6.31% of the preferred shares, through the Companhia Vale do Rio Doce Employee Investment Club (InvestVale). After this, they exercised their right to take part in the Board of Directors of Valepar, the group of shareholders controlling CVRD. Accordingly, as well as participating on Vale’s Board of Directors, employees also ensured their participation in the controlling group.29

A company reorganization was then carried out at Valepar, with the entry of InvestVale and BNDESpar, the arm of BNDES that administers the bank’s equity stakes in companies. Shares that Consórcio Brasil’s partners – represented by Valepar S.A. and consisting of a set of Brazilian and foreign investors that controlled Vale – possessed before the auction were also incorporated. Valepar’s stake in CVRD reached 52.29% of its voting capital.30 In the privatization bid documents, it was established that in Vale’s first five years as a private company, no shareholder could own more than 45% of its voting capital. In addition, large iron ore

27 - Idem, p. 65.

28 - Idem, p. 14.

29 - Idem, p. 10.

30 - Idem.

producers, steel companies or trading companies could not own stakes of over 10% individually, or 45% in a group.31

Over the first two years, sales of CVRD shares held by Valepar would only be permitted to the controlling group. At the same time and for an indefinite period, the federal government would maintain a special class of preferred share (a golden share) in Vale. As a result, the president of Brazil would be guaranteed the power of veto on specific matters related to the company’s objectives, such as changes to its corporate name, a change to its legally permitted scope of work in terms of mineral exploration, any modification to the rights attributed to the shares composing CVRD’s equity, or its own liquidation.32

Revised contracts and other resultsContracts with suppliers and service providers were revised based on the new structure, optimizing operations in the mine-railroad-port system.33 Accordingly, cost per ton of iron ore fell by around 15% in 1997. Tubarão Complex in Espírito Santo produced 21.4 million metric tons of pellets, and there was also record iron ore output in Carajás, Pará, amounting to 43.8 million metric tons for the year. A new record for annual exports of iron ore was achieved – 80 million metric tons – further boosted by new supply contracts with customers in Australia and China.34

Railroad freight transportation also hit new records. The Vitória-Minas Railroad (EFVM) carried 107 million metric tons in 1997, while the Carajás Railroad (EFC) transported 49.4 million metric tons in the same year. In addition, CVRD acquired a 20% stake in the Northeast Railroad Company (Companhia Ferroviária do Nordeste, or CFN). In turn, CVRD’s port terminals achieved new records. For example, Praia Mole Terminal in Espírito Santo unloaded 10.3

31 - Idem.

32 - Idem.


34 - Idem, pp. 16-17.

Ore stockyard at the processing plant at Cauê Mine in Itabira, Minas Gerais, in 1995. Next page, left to right: a consignment of paper transported by the Vitória-Minas Railroad and the front cover of the National Privatization Program document, published by BNDES, in 1997.


255million metric tons of coal, and Inácio Barbosa Maritime Terminal (TMIB) in Sergipe handled 819,000 metric tons of cargo.35

The new times also served to stimulate the diversification policy implemented by Vale. Alunorte achieved record aluminum production: 1.186 million metric tons of calcined alumina and 1.197 million metric tons of aluminum hydroxide – 100,000 metric tons above nominal installed capacity. Valesul also obtained record production in 1997: 105,700 metric tons of cold metal and 92,300 metric tons of hot metal.36

In the same year, Cenibra’s output was higher than its nominal capacity, reaching 719,600 metric tons of pulp. Bahia Sul also saw record production in the paper sector, producing 205,500 metric tons and selling 204,500 metric tons in 1997.37 The same thing occurred with Florestas Rio Doce – a subsidiary active in reforestation, timber production and forest research – which sold 11,000 cubic meters of sawn wood and 4.5 million saplings. The net revenues of Vale’s companies in the Pulp, Paper and Timber area amounted to R$668 million, up 26% from the previous year, 1996.38

Fears that privatization could remove CVRD’s social and environmental obligations were soon allayed. On April 17, 1997, Bureau Veritas Quality International (BVQI) audited the functioning of the Environmental Quality Management System run by the company’s Technology Superintendent’s Office (Sutec), and gave it its first ISO 14001 certification. Over the course of the year, US$30 million was invested to improve production processes. These sums were part of Vale’s Environment Program, created in 1994, which involved planned investment of US$125 million over five years, including US$50 million in loans from the World Bank.39

35 - Idem, p. 17.

36 - Idem.

37 - Idem.

38 - Idem, pp. 47-48.

39 - Idem, p. 68.

Community relations continued to be a priority in Vale’s structure. In the year it was privatized, the company allocated R$26.2 million to social and economic infrastructure projects designed for the communities where it operates, through the Vale & Communities Integration Program.40 These resources were part of the Reserve for the Development of the Regions Influenced by CVRD (RDRI), which was closed down that same year. To replace it – while still complying with the compensatory measure provided for in the privatization bid documents – the Privatization Resources Regional Development Fund (FRD) was created and endowed with R$85.6 million, to assist the areas influenced by the company. In the future, this fund would receive resources from BNDES and its management would be shared by the bank and Vale. In 1998, the Vale do Rio Doce Housing and Social Development Foundation took on the management of programs aimed at communities.41

Thus, at the end of 1997, following all the modifications arising from the privatization process, Vale made a net profit of R$756 million. It sold more, its portfolio of customers expanded and the company made a record profit – a substantial 46% up on the previous year.42 The company’s profits continued to grow steadily in the following years.

8.3 Facing the future

Although the world – and especially Brazil – was experiencing a moment of economic fragility, at the end of 1997 Vale would achieve records never before seen in its 55-year history. It was a new age, accompanied by new ideas and practices. With over half a century

40 - Idem, pp. 17, 69.

41 - Idem, p. 69. Given this change of focus – from housing to community work – the institution changed its name to the Vale Foundation.

42 - Idem, pp. 3, 13.

of history, the company reinvented itself at the start of 1998, adopting new concepts, establishing partnerships and showing itself to be ready for what was to come: accumulating strategies for diversification, audaciousness and participation. The employee share offer was fundamental to the creation of a relationship of trust and integration throughout the company.

The year following privatization, 1998, ended with earnings of R$1.02 billion, a new record for Brazil’s private sector.43 The experience that CVRD had built up over the course of its life as a state-controlled enterprise with minority private investors, would be fundamental to achieving its goals. Vale had learned that it was not sufficient to have large deposits: it was also essential to provide ways of transporting output in a shorter time and for a lower cost. With a standardized iron ore price and a reasonable level of supply (mainly from reserves) on the market, companies that could send their products to their customers for the least would profit the most.

The owner of the largest railroad network in Brazil, extending for around 1,800 kilometers – including the 892-kilometer Carajás Railroad and the 905-kilometer Vitória-Minas Railroad – CVRD, at the end of the 1990s, was also the biggest logistics operator in the country.

Initially, this infrastructure was used to serve its own activities, but over time the company sought support from partners to transport goods for third parties.44 This initiative was successful. In 1998, CVRD’s gross revenues from railroad transportation and port operations for other companies reached R$750 million, up 15.9% from 1997.45

All of the company’s investment in logistics was accompanied by a substantial increase in revenue, arising from both external and internal circumstances. In 1998, the main factors that positively affected performance were the following: an increase in average

43 - See the 1998 Annual Report.


45 - Idem.

Left: overview of the ore stockyard at Tubarão Complex in Espírito

Santo. Opposite page, left to right: aerial view of the Vitória-

Minas Railroad and Igarapé Bahia Mine in Pará, in 1991.

256 257


Roger Agnelli When he arrived at Vale in 2001, Roger Agnelli

(São Paulo, 1959) had already been the youngest ever executive director of Bradesco, to which position he was appointed at the age of 39, in 1998.1 A qualified economist, he brought with him an aggressive style and a plan to diversify the company’s activities. During his time as CEO, the company’s annual profits soared from R$3 billion to R$30.1 billion.

The main advances came from acquiring mines and mining companies abroad, in particular Canadian nickel producer Inco, which was bought in 2006.2 Commercial success was accompanied by concern for sustainable development. In 2009, Agnelli signed Vale up for the UN Global Compact, a program of 10 principles spanning the environment, human rights and anti-corruption measures.3

Roger Agnelli was Vale’s CEO for 10 years, between 2001 and 2011, and during this period the company’s shares rose by 834%.4 Agnelli also oversaw a change in the company’s brand in 2007, when Companhia Vale do Rio Doce became simply “Vale.”

1 - See <http://people.forbes.com/profile/roger-agnelli/469>.

2 - See <http://www.vale.com.br/pt-br/o-que-fazemos/mineracao/niquel/paginas/default.aspx>.

3 - See Vale’s 2010 Sustainability Report.

4 - See <http://g1.globo.com/economia/negocios/noticia/2011/04/em-10-anos-valorizacao-das-acoes-da-vale-foi-tres-vezes-da-petrobras.htm>.

iron ore sales prices on domestic and international markets (an average rise of 2.82% for fines and 2.80% for pellets); the effect of a 7.7% average devaluation of the real against the US dollar; and a 15.9% rise in revenue from railroad and port services.46 CVRD’s strong market performance would be fundamental to ensuring its expansion in the period.

Another noteworthy development, in November 1998, was the opening of the seventh pelletizing plant at Tubarão Complex in Espírito Santo, built for the Korean-Brazilian Pelletizing Company (Kobrasco), a joint venture with Pohang Iron & Steel Company from South Korea. The plant’s annual production capacity was 4 million metric tons of pellets.

On July 9 of the same year, Nibrasco – a company that had operated a pellet plant for 20 years, part of Vale’s Pelletizing and Metallic Goods Department, and rated by the Fundação Getulio Vargas (FGV)47 as one of the ten most competitive companies in Brazil – achieved a new record for daily pellet production: 14,220 metric tons. This result was a response to the new contracts that Vale entered into at the end of 1997, which also catered to customers in Australia and China.48

CVRD’s business expansion was also reflected at the grain terminals at Tubarão Complex. In the second half of 1998, the third berth at the Diverse Products Terminal (TPD) was ready. Pier III involved total investment of US$29.8 million. It was designed to accommodate ships with capacity of up to 125,000 metric tons and “to expand grain exports to around 3 million metric tons per year.”49 The ships that left TPD mainly headed to Japan.

While in the South System, the new facilities at Tubarão Complex demonstrated positive results, in the north of Brazil, Carajás

46 - Idem.

47 - A private, nonprofit Brazilian institution, founded in 1944, dedicated to teaching and research in the social sciences.

48 - See the 1997 Annual Report, pp. 16-17.

49 - Jornal da Vale, September/October 1998, no. 211, p. 10.

achieved a series of records. In 1998, iron ore output at Carajás Mine reached 45.8 million metric tons. These results were not obtained by chance. In the same period, across the country, unparalleled results were achieved in freight transportation by the Carajás Railroad (50.1 million metric tons), in Alunorte’s output (1,430 metric tons of alumina), at Valesul (92,850 metric tons of aluminum), at Mineração Rio Norte (10,102,000 metric tons of bauxite), and at Cenibra (741,500 metric tons of pulp).50

After a new company president was appointed in April 1999, Vale defined new strategies to improve its position on the global market. Ambassador Jório Dauster replaced Benjamin Steinbruch in the most important post at the company. It was the first change since the privatization in May 1997. Dauster brought with him extensive experience in international relations – he had negotiated Brazil’s external debt in 1990 and 1991.51 Less than a year after taking over as CVRD president, the policy of opening up to the external market, implemented by his new administration, was already showing results.

Vale ended 1999 with 80 international customers: Posco (South Korea), the world’s biggest steel producer; Nippon Steel (Japan); Usinor (France); Corus (a merger of British Steel with Dutch company Hoogovens); Italian company Ilva; ThyssenKrupp Stahl (Germany); NKK (Japan); US Steel; Baoshan (China); Arbed Group (Luxembourg); and Sumitomo Metal (Japan), among others.52 Vale’s expanded market had a direct impact on its sales.

The company’s total revenues in 1999 – including pelletizing plant sales in partnership with Japanese, Spanish, Italian and South Korean customers – were broken down as follows: 43% to Asia (China, Japan and South Korea) and Oceania; 30% to Europe; 21% to the Americas; and 6% to Africa, the Middle East and India.53


51 - “Jório Dauster” entry in CPDOC-FGV – Dicionário Histórico-Biográfico Brasileiro.


53 - Idem.

Asia was moving ahead because, at the time, it accounted for the largest percentage of iron ore imports. Steel production in the region reached 40% of the world’s total. In addition, China had become the leading steel producer, as well as the fastest growing market, after overtaking Japan.54

Growing foreign sales, record iron ore production, expanding port facilities and market diversification – 1999 was a successful year, and this was reflected in the leap in the price of the company’s shares on the stock exchange. According to the annual report for the year, “every R$100 invested in preferred shares in Companhia Vale do Rio Doce at the end of 1998 grew to R$319.60 by the end of December” of the following year, thanks to an increase in its prices and the distribution of 70.2% of net income. The international financial crisis, in the wake of the Russian moratorium, still had negative effects for Vale, and yet the company managed to make a net profit of R$1.25 billion, up 21.6% from the previous year. This was yet another record in CVRD’s history.55

Acquisitions: consolidation in iron oreAs of 1998, in line with guidelines established by its new administration, CVRD placed even greater emphasis on strengthening its leadership position in iron ore and logistics. It took over various companies, giving it new stretches of railroad, mines and pelletizing operations. It also acquired a stake in Ferrovias Bandeirantes S.A. (Ferroban) – formerly called Ferrovia Paulista S.A. (Fepasa) – and opened a new 108-kilometer section of the Costa Lacerda-Capitão Eduardo branch line (on the Vitória-Minas Railroad) in Minas Gerais. CVRD also bought stakes in two maritime terminals: Vila Velha in Espírito Santo (formerly called Capuaba), and Sepetiba in Rio de Janeiro, thereby bolstering the South System’s mine-railroad-port complex.56

54 - Idem.

55 - Idem.


Vale had learned that it was not sufficient to have large deposits: it was also essential to provide ways of transporting output in a shorter time and for a lower cost

258 259


Soybean conveyor belt at Praia Mole Maritime

Terminal at Tubarão Complex, Espírito Santo.


261Ferteco Mineração S.A. for US$566 million.60 Ferteco is a Brazilian company based in Rio de Janeiro, whose main activity is iron ore mining and processing, and until then it had been wholly owned by TKS. It was founded as an iron and coal miner, but since 1973 it had focused exclusively on iron ore.

At the time, Ferteco was the third biggest producer of this mineral in Brazil, with production capacity of 15 million metric tons per year. Its minable reserves were evaluated at 263 million metric tons of hematite and itabirite, of similar quality to the ore produced by CVRD’s South System. Ferteco also operated two iron mines (Fábrica and Feijão, in Minas Gerais) and a pelletizing plant in the Iron Quadrangle region, also in Minas Gerais, which produced 4 million metric tons per year.61

Ferteco held 10.5% of the total capital of MRS Logística S.A., a railroad company that operated 1,612 kilometers of track between Rio de Janeiro, São Paulo and Minas Gerais, with annual freight transportation capacity of 80 million metric tons. Through a wholly owned subsidiary, Companhia Portuária Baía de Sepetiba S.A. (CPBS), Ferteco ran the Sepetiba Bay Port Company Terminal in Rio de Janeiro.62

Composed of Guaíba Island Terminal and the Sepetiba Bay Port Company Terminal (Port of Itaguaí), the South Ports Complex, covering an area of 615,296 square kilometers, is located in the Green Coast region in the south of Rio de Janeiro State, and its piers can receive up to three ships, two simultaneously. In 2009 alone, more than 60 million metric tons of iron ore was exported from the complex, mainly to China.

In another important acquisition in this period, Vale gained full control of the Sossego copper project in Pará for US$42.5 million. Vale’s administrative renewal process and cost reductions made Sossego one of the world’s cheapest copper projects in terms of

60 - See “CVRD Compra Ferteco” (CVRD Buys Ferteco) Vale press release of April 27, 2001.

61 - Idem.

62 - Idem.

investment per ton of installed capacity – an important model to be followed at the time.63

In addition, Socoimex, acquired in May 2000 and incorporated on August 31 of the same year, added the high-grade hematite reserves of Gongo Soco Mine to CVRD’s assets in the Iron Quadrangle region of Minas Gerais. With production capacity of 7 million metric tons per year, the mine helped to improve the productivity and quality of the South System’s products.64

By incorporating Samarco, Samitri and Ferteco, and by optimizing its logistics system, CVRD entered the 21st century with the capacity to compete on an equal footing with its main international competitors in the iron ore market.

Sustainability: communities and the environmentCVRD has always sought ways of minimizing the impact of its activities. Indeed, this commitment goes back to the company’s establishment in 1942, when plans were made to transfer resources through a development fund for the Doce River Valley region in the states of Minas Gerais and Espírito Santo.65

The Fund to Improve and Develop the Doce River Valley (FMDVRD) was designed to finance projects executed by state governments with the explicit approval of the President of the Republic. In 1990, when Wilson Brummer took over as president of CVRD, the fund was given a Community Relations management unit.66

Experience of managing funds would evolve within the company. In 1998 the Vale do Rio Doce Foundation (FVRD), whose roots lay in the former Vale do Rio Doce Housing and Social Development Foundation, was created. Established in 1968 to execute Vale’s


64 - See the 2000 Annual Report. Available at <http://www.vale.com.br/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2000/mineracao_ferrosos_ferro.htm>.

65 - Decree-Law 4,352, of June 1, 1942, article 6, paragraph 7, p. 2.

66 - Idem.

260 An important milestone for Vale’s mining operations, reshaping its expansion policy, occurred in May 2000: the company acquired a 63.06% interest in Grupo Belgo-Mineira’s total equity and a 79.27% stake in the voting capital of Samitri, which in turn owned 51% of Samarco Mineração. This transaction enabled CVRD to guarantee cost savings and technological integration, accentuating the focus of its mining activities and expanding its presence on the global pellet market. Samitri, headquartered in Belo Horizonte, Minas Gerais, operated three iron ore mining complexes and was one of Brazil’s biggest producers, with annual production capacity of 17.5 million metric tons.57

Samarco was one of the lowest-cost iron ore pellet producers in the world and it was highly competitive in the market. It owned and operated two pelletizing plants in Ponta do Ubu, Espírito Santo, with total production capacity of 12 million metric tons per year. Samarco also had operations at Ponta do Ubu Maritime Terminal, where it handled 20 million metric tons of cargo per year, and it had a 396-kilometer ore slurry pipeline linking its mine at Alegria Complex, Minas Gerais, to the pelletizing plants.58

Also headquartered in Belo Horizonte, Samarco was established in 1977, and less than 30 years later it was already Brazil’s fifth largest exporter. At the end of 2010, the company distributed R$3.3 billion (US$1.9 billion) in dividends to its shareholders. In 2011, Vale owned 51% of its shares and shared control of it with Australian company BHP Billiton.59 Vale’s acquisition of a stake in Samarco in 2000 – together with all its export facilities and low-cost pellet production capacity – was a major step in conquering the market that the company desired. And there were yet more steps to take.

The most important of these steps was taken on April 27, 2001, when Vale completed negotiations with ThyssenKrupp Stahl AG (TKS), one of Europe’s biggest steel groups, to acquire 100% of

57 - Jornal da Vale, August 2000, no. 225, p. 3.

58 - Idem.

59 - Available at <www.samarco.com.br>.

Aerial view of the Diverse Products Terminal at Tubarão Complex, Espírito Santo, in 1999. Facing page, left to right: the ore stockyard at Ferteco’s processing plant in Minas Gerais, and an aerial view of Guaíba Island Terminal in Mangaratiba, Rio de Janeiro.

262 263


263

housing policy,67 for decades the institution was dedicated to helping CVRD employees achieve the dream held by the majority of Brazilians: to buy their own home.

The Vale do Rio Doce FoundationFrom the time it was created in 1968, the Foundation worked to

build homes for Vale employees in the regions where the company operated, and until the 1990s it ran a “Foundation News” column in the Jornal da Vale to report on the progress of its housing projects. The institution was the first area of CVRD to appoint a female director: on September 5, 1990, Shirley Virgínia Coutinho became the Director-Superintendent of the Vale do Rio Doce Housing and Social Development Foundation.68

In 1998, the Foundation shifted its focus from housing to integrated social development. It was then renamed the Vale do Rio Doce Foundation (FVRD). The Foundation’s principle is to support the communities the company is a part of, through actions spanning education, health, infrastructure (funding the building of houses, for example), protection for children and youth, culture, sport, and the environment.69 Also in 1998, the Foundation supported the Inter-American Development Bank (IDB)’s “Capacitação Solidária” (“Solidarity Training”) project, which prepared 296 young people from low-income families in Rio de Janeiro for the job market. In the cultural field, the Foundation supported the opening of the Oscar Niemeyer-designed Carlos Drummond de Andrade Memorial Center at Pico do Amor in Itabira, Minas Gerais, and the launch of the Vale do Rio Doce Railroad Museum in Vila Velha, Espírito Santo, which depicted the history of the Vitória-Minas Railroad.70

In 1999, the Vale do Rio Doce Foundation began to develop its profile more clearly and it made education its main objective. Its first education project, Vale School,71 is now a model for education management across the country. The project promotes

67 - Mayrink, Geraldo (org.). Histórias da Vale. São Paulo: Museu da Pessoa, 2002, p. 275.

68 - Jornal da Vale, August 1990, no. 136, p. 11.

69 - Available at <http://www.fundacaovale.org/pt-br/gestao-publica/como-atuamos/paginas/default.aspx.>.

70 - See the 1998 Annual Report and Jornal da Vale, July/August 1998, no. 210, p. 11.

71 - It will be one of the FVRD’s biggest projects. All the equipment is supplied by the program and there are work proposals respecting the specific features of each municipality, valuing local strengths and seeking to also involve the rest of the community with exhibitions, shows, parties and newspapers. (See the 2000 Annual Report.)

elementary education in the municipalities where the company operates using spaces such as “Teachers’ Houses,”72 by providing educators with continuing education.73 The pilot project was implemented at 25 selected schools in six municipalities74 in the states of Pará, Maranhão, Espírito Santo and Minas Gerais.

With the same objectives – to educate both young people and teachers – the FVRD also created the Vale Information Technology project in 1999.75 By 2001, this project had benefited more than 9,000 public sector school students and teachers, as well as residents, in the towns of Itabira, Governador Valadares and Cocais (Minas Gerais), Vitória and Serra (Espírito Santo), and São Luís (Maranhão). In the same year, the FVRD entered into a partnership with the Information Technology Democratization Committee (Comitê de Democratização da Informática, or CDI), in order to give students access to computers provided by the company. By December 2002, Vale Information Technology and CDI planned to be active at 300 Information Technology and Citizenship Schools, benefiting more than 50,000 people in seven states.76

Over the course of 2001, Vale – through the Vale do Rio Doce Foundation – invested R$20 million77 in community projects, mostly linked to education and social welfare. The company won various awards, which legitimized the FVRD’s role in the development of the communities where Vale operates.78

72 - Meeting center where public sector teachers and members of the community can exchange their experience and socialize. Subsequently, municipal governments, teachers and the community will manage the house. (See the 2000 Annual Report.)

73 - “Valuing educators creates transformational agents, with creative, locally tailored solutions.” (See the 1999 Annual Report.) As shown in the 2006 Annual Report, an educator in Alto Alegre do Pindaré, Maranhão created a “Book Donkey” service using donkeys to take books to residents of more remote regions.

74 - Marabá and Parauapebas (Pará), São Luís and Açailândia (Maranhão), João Neiva (Espírito Santo), and Catas Altas (Minas Gerais).

75 - A partnership with two organizations: Fundação Comunitária de Ensino Superior (“Community Higher Education Foundation”) of Itabira, and Ação Comunitária (“Community Action”) of Espírito Santo.


77 - See the 2001 Annual Report – “Construindo a Cidadania” (“Constructing Citizenship”) section.

78 - Idem.

A pile of ore at Sossego Mine in Canaã dos Carajás, Pará, in April 2004.


One of the Foundation’s most notable projects is Citizenship Train, which in 2001 alone provided assistance to 118,684 people.79 Using three air-conditioned train cars, this project travels to poor communities along the railroads administered by CVRD, bringing them various social inclusion services, such as help with obtaining official documents (CPF and identification cards), dental checkups, preventive health exams, and vaccinations.80

In addition to its education, health and citizenship initiatives, the Foundation also promoted events inviting citizens to experience local culture and art. In Itabira, the “Drummond Forum” attracted around 30,000 people to workshops, exhibitions and other activities with the aim of developing the town’s tourism potential and celebrating the 100th anniversary of the birth of local poet Carlos Drummond de Andrade.81

The first three years of the Vale do Rio Doce Foundation’s existence (1998-2001) demonstrated the success of its creation and clearly pointed out the direction in which it would be heading in the future. Education, culture, community development and citizenship projects would be fundamental to giving the now privatized CVRD a new image.

The environmentIn 1998, CVRD was one of the 185 members of the World Business Council for Sustainable Development.82 As of the late 1990s, the company’s internal policies to control the impacts of its activities gained more force.

In its 1998 Annual Report, Vale announced that the environment was a “strategic component affecting the competitiveness” of the company. The document presented the results of its 1994-1999 Environment Program, which provided for investment of around US$120 million, of which US$50 million was lent by the World Bank.83

With the launch of the program, various projects to enhance environmental controls in production activities were implemented, such as the installation of electrostatic precipitators in secondary

79 - See the 2001 Annual Report – “Ação nas Comunidades” (“Community Action”) section.

80 - Idem.

81 - Idem.


83 - Idem.

chimneys in pelletizing plants at Tubarão Complex in Espírito Santo. Following investment of more than US$30 million, the plants’ waste emissions fell by 85%.84 Meanwhile, Vale’s concern for forest management, reforestation and sapling production became a priority. 1998 saw the launch of a Master Plan for the Linhares Forest Reserve in Espírito Santo. “This Plan guarantees all the preservation, conservation and research principles constructed over the years at this location,” explained Renato de Jesus, the Reserve’s director at the time.85 In December 1999, as a result of the state of preservation and conservation of its ecosystems, the Reserve was declared a Discovery Coast World Heritage Site by the United Nations Educational, Scientific and Cultural Organization (UNESCO). It is considered one of the best preserved Conservation Areas in South America and one of the 14 richest centers of diversity and endemism in Brazil. The Linhares Forest Reserve – now called the Vale Natural Reserve – would become “self-sustainable,” emphasizing the controlled use of natural resources and the development of new technologies to restore degraded areas.86

The preservation of its 22,000 hectares of Atlantic Forest was thereby guaranteed – and that wasn’t all. Based on the results attained through these initiatives, the Reserve’s status changed from a Private Conservation Unit to a Business Unit.87 Environmental education programs, research plans, responsible tourism and the sale of products and services were also provided for in the Master Plan – the premise was to strive to conserve the Reserve’s integrity. According to Vale, preserving was also good business.88

In the presence of Vale President Jório Dauster, Environment Minister José Sarney Filho, and the governor of Espírito Santo, José Inácio Ferreira, the Linhares Forest Reserve Usage Master Plan was unveiled on June 2, 1999. At the launch event, an agreement between CVRD and federal environment regulator Ibama to preserve the adjacent Sooretama Biological Reserve was also

84 - Idem.

85 - Renato de Jesus gave an interview to Vale on September 23, 2011.

86 - See <http://www.riodoce.cbh.gov.br/Materia_ReservadaVale.asp>.

87 - Read material produced by the Doce River Water Basin Committee (CBH-Doce) at <http://www.riodoce.cbh.gov.br/Materia_ReservadaVale.asp>.

88 - The expression “preserving is good business” was used by Vale at various opportunities. For example, it can be found in the 2000 Annual Report.

signed. The aim was to guarantee the preservation of the state’s now scarce areas of original Atlantic Forest.89

Together, the reserves of Linhares and Sooretama, covering 22,000 and 24,000 hectares, respectively, form the largest remaining area of native Atlantic Forest in Brazil. The agreement guaranteed the annual transfer of US$149,000 by the federal government to Sooretama Biological Reserve. Of this sum, US$49,000 per year would be invested in its preservation, the construction of firebreaks and hedges, the refurbishment of the employees’ house, and the purchase of radio equipment. The remaining US$100,000 per year would be used by Vale to pay for forest wardens, to train staff and to acquire motorcycles and trucks for monitoring the area.90

“At that time, we began to adopt a different perspective on the environment,” notes architect and urban planner Vânia Velloso, an environmental management specialist who worked at Vale from the 1980s to the 2000s. The major advance was allying environmental issues to the business area: “We went from a very important vision of preserving and conserving natural resources to a new, more advanced governance and management model.”91

This was one of the company’s biggest steps forward in the area of sustainability. As of then, Vale started not only to preserve, but also to invest heavily in restoring degraded areas and researching green technology in the pursuit of less aggressive solutions.

Nowadays, the definitive ending or temporary suspension of a mine’s activities requires legal procedures and environmental actions.92 The aim is to return to the region a large part of the vegetation that existed there before the mining work. It is a task that demands long-term investment – not least because some mined areas may take up to 30 years to return to their original state.93 This transition phase needs planning, investment and, above all, environmental awareness.

In 1999, as the result of a pioneering initiative in Brazil, all of CVRD’s operational areas focused on the work of returning the


90 - Jornal da Vale, May/June 1999, no. 215, p. 3.

91 - Interview given to Vale in November 2011.

92 - COPAM Regulatory Deliberation. Minas Gerais State Environmental Policy Council, no. 127, of November 27, 2008.

93 - Available at <http://www.geologo.com.br/fechamentomina.htm>.

Tree nursery at the Vale Natural Reserve in Linhares, Espírito Santo.

264

266 267


Restored vegetation at Timbopeba Mine in Ouro Preto, Minas Gerais, in 1999.

268 269


areas affected by mining to approximately the same conditions found before the start of activities. Three main methods formed the backbone of this environmental program – hydroseeding; the direct planting of seedlings and seeds; and soil regeneration induced by organic matter – always planned in line with topography and the type of soil to be rehabilitated. The use of native species in revegetation processes was always prioritized; the challenge was to restore the original ecosystems.94

By December 1998, a total of R$430 million had been invested in restoring the area around Del Rey Mine in the municipality of Mariana, Minas Gerais, as part of the Timbopeba Project.95 The main transformations included environmental rehabilitation to enhance the geotechnical stability of mining areas and waste rock piles, control of erosion by installing drainage and sediment containment systems, and the preparation of substrates to restore soils and vegetation.

After preparing the site, medium-term actions were implemented, such as control of forest fires, fertilization of vegetation and maintenance of replanted areas. Everything was based on an environmental diagnosis of Del Rey Mine, conducted by Vale, and a Plan for Restoring Degraded Areas, approved by the State Environment Foundation (FEAM).96

The experience gained in Mariana was valuable when CVRD implemented social and environmental initiatives in its hometown, Itabira. On May 18, 2000, Vale received a Corrective Operating License for Itabira Mining Complex. The license was obtained at the end of a democratic process involving the participation of all stakeholders, including many members of the local community, representatives of the municipal, state and federal governments, and representatives of numerous organizations, not just from Itabira but from the whole of Minas Gerais State. The final approved text contained 54 conditions, encompassing operational control of the mining process,

94 - See the 1998 and 1999 Annual Reports.

95 - See Jornal da Vale, January/February 1999, no. 213, p. 11.

96 - Idem.

rehabilitation of degraded areas, environmental compensation, and improvements to the quality of life in the municipality.97

Throughout the year 2000, the Master Plan for the Protected Green Areas of Itabira was also developed. This was a pioneering initiative to develop a joint program to preserve and protect woodlands in both private areas and on sites owned by the municipal government. The implementation of the programs defined in the Master Plan was one of the conditions of the Corrective Operating License in Itabira.98

Official recognition of environmental issues, specifically in forest protection, then expanded to the north of Brazil. One structural change was the official registration of the nearly 412,000 hectares of Carajás National Forest and the announcement of an agreement with IBAMA to produce a master plan for the region. It was a kind of draft for the organization of the National Forests of Carajás and Tapirapé-Aquiri, both in Pará. Across the country, National Forests are units designed to foster sustainable growth for forested regions. In the case of the National Forests of Pará, which surround Vale’s mines, the overriding goal was to create plans to enable mineral exploitation alongside environmental preservation. This is no easy task and, to obtain good results, Vale used the pioneering experience it had gained at the Vale Natural Reserve in Linhares, Espírito Santo. In both the north and south of the country, the aim was “ecological and economic zoning, and the study of programs related to the sustained use of these reserves.”99

Air and waterContinuing its project to reduce the impacts of its activities, CVRD began to focus more on air and water pollution. Control of atmospheric pollutants was – and continues to be – a fundamental question in the company’s environmental policy. In 1999, the last stage was conducted in the installation of chimney outflow dust


98 - Idem.


Sprinkler machines at Tubarão Complex,

Espírito Santo, in 1994.

270 271


collection systems in iron ore pelletizing plants, and the same occurred at lime hydration plants, at Tubarão Complex in Espírito Santo. This measure complemented the electrostatic precipitators and gas scrubbers installed previously in the region. The program also involved improvements to water sprinkler systems, containment of wastes during transfers between machines, and the implementation of a gas monitoring network in chimneys.100

From 1995 to 1999, the environmental policy implemented at Tubarão Complex aimed to improve conditions in Greater Vitória. Thanks to the particle collection system, a 62% reduction in total residue emissions was recorded.101 This was a notable advance and it contributed to cutting pollution registered in the region.

On June 5, 2000 (World Environment Day), the Automatic Air Quality Monitoring Network began operating in Greater Vitória. Using the most advanced technology at the time, the local environmental entities and the community began to identify the main sources of pollution. The network was donated to the State Environment Secretariat, and CVRD paid for half of the investment as well as the operating and maintenance costs in its first year of use.102

The results, set out in the Greater Vitória Region Sources Inventory (2010), demonstrate that Vale accounts for a relatively small share of pollution in the region. Of pollutants collected, 15.7% came from the company, while 68.2% originated in vehicles circulating in the streets. In the specific case of carbon monoxide emissions, just 4.4% of the material collected originated at Vale, while vehicle exhaust and tires were responsible for 49.7%. Also concerned with water quality, the company invested in the Tubarão Complex Effluent Collection and Treatment project. The main objectives were to reduce the amount of pollution entering water bodies103 and to cut industrial water consumption.104


101 - Idem.

102 - Jornal da Vale, June 2000, no. 223, p. 9.

103 - Available at <http://www.cepuerj.uerj.br/insc_online/itaguai_2011.aspx>.


Effluent collection and treatment was also implemented on the Vitória-Minas Railroad (EFVM) and Carajás Railroad (EFC). The focus was on treating wastes generated by the maintenance and washing of locomotives and train cars in workshops located along the tracks. The target was to improve water quality in receiving bodies (the final stage in the use of water in any industrial process), soil quality, and general hygiene and cleanliness conditions at facilities.105

All of CVRD’s investments in sustainability were endorsed for their effectiveness by the ISO 14001 Environmental Certification obtained by the company in the late 1990s and early 2000s.

CertificationsAs of the mid-1990s, professionalizing environmental management at all business units was a strategic condition for CVRD. Around its mines, plants, railroads and ports, the company was ever more concerned to install and maintain green belts, and emissions control was adopted at all its operations in the North and South Systems.106

In 1998, the Technology and Support areas of Vale’s Non-Ferrous Metals Department (DENF) obtained ISO 14001 certification for the second time. Conducted by Bureau Veritas Quality International (BVQI) on June 18 and 19, the audit recorded zero non-conformities. Vale’s unit in Santa Luzia, Minas Gerais, was the first in the company to receive the certification, in April 1997.107 The international endorsement of the ISO 14001 series proved the balance between maintenance of profitability and the reductions in environmental impacts achieved by Vale over the years.

One of Vale’s biggest accomplishments of 1998 was the awarding of ISO 14001 certification to the Carajás iron and manganese mines following an audit by Det Norske Veritas (DNV). The new certification – added to the series of ISO certifications gained in the latter half of the 1990s – strengthened the competitiveness and image of Vale, which became the first mining company in the world to attain such

105 - Idem.


107 - Jornal da Vale, July/August 1998, no. 210, p. 5.

results. The celebrations were marked by the unveiling of Flower of Carajás (“Flor de Carajás”), a sculpture by Franz Weissmann. Born in Austria, this naturalized Brazilian sculptor, who works mainly with iron plates, has been one of the main exponents of geometric art in the country since the 1960s.108

In the following years, it was the pelletizing sector’s turn to obtain its certification. In July 1999, the Pelletizing and Metallic Goods Department made Vale the first Brazilian iron mining company to receive ISO 9001 certification, following an audit by certification entity DNV. This time, the attainment of the certification took place differently, especially in two aspects: the inclusion of Kobrasco in the list of certified plants; and proof of the capacity of pelletizing operations to develop and design new products with assured quality.109

Finally, on June 22, 2001, a significant event, according to CVRD’s performance report for the second quarter,110 was the inclusion of the Carajás Railroad (EFC) in the ISO 9002 certification. Over the course of 2001, the total freight transported by the EFC and the EFVM reached 167.4 million metric tons, exceeding the previous record of 164 million metric tons attained in 2000. In all, the two railroads transported 12.9 billion metric tons per kilometer (tku) of general freight – up 4% from the previous record of 2000, of 12.4 billion tku.111 From that point on, managing to transport large quantities of while maintaining high standards of quality would be a key challenge.

108 - Jornal da Vale, January/February 1999, no. 213.

109 - Jornal da Vale, July/August 1999, no. 216, p. 11.

110 - See <http://www.vale.com/pt-br/investidores/resultados-e-informacoes-financeiras/resultados-trimestrais/Documents/2001/2%C2%B0%20Trimestre/Press%20Releases/cvrd201p.pdf>.


As of the mid-1990s, professionalizing environmental management at all business

units was a strategic condition for CVRD

Left: Flor de Carajás (“Flower of Carajás”), a sculpture by Franz

Weissmann. Below: CVRD’s old logo on sacks stored in

Parauapebas, Pará, in 2001.


Employees on a Docenave tugboat in 2000.

273

8.4 Shipping and internationalization

The shipping system created by Vale do Rio Doce – featuring large ships and a port complex with support to receive them – was the main element in the company’s fast commercial progress in the 1960s. It was in this period that company president Eliezer Batista instituted the concept of economic distance, which would modify Vale’s export dynamics, especially to Asian countries.

The plan created by Batista consisted of sending giant-capacity ships from Brazil loaded with iron ore and returning them with other products. The volume of cargo was enormous, but the transport costs were lower and so the net effect was always positive. The strategy played a key role in the most successful period of CVRD’s shipping company, Rio Doce Navegação S.A. (Docenave).

At the beginning of the 1990s, transoceanic shipping was one of Vale’s main sources of income. Docenave participated actively in bulk cargo transportation and had its own fleet of ships. In 1992, it had 21 bulk carriers trading with all continents, carrying 28.9 million metric tons of cargo per year.112

The results obtained in the subsequent years continued to improve, although the company had to reduce the size of its fleet over time. In 1993, it had 20 ships.113 In 1994, the same number of ships transported 32.2 million metric tons of goods.114 In 1996, it had 18 ships of its own and another 25 chartered ships.115 In 1997, it had 17 bulk carriers, three ore-oil carriers and eight tugboats.116 In 1998, with 17 bulk carriers of its own and 25 chartered ones, Docenave generated revenues of R$268.7 million.117

With the restructuring of Docenave in 1999, its operating assets directly related to shipping activity were transferred to its parent






117 - See the 1998 Annual Report (Business Areas > Commercial Transport > Shipping), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra1998/index.html>.

company, Navegação Vale do Rio Doce S.A. (Navedoce), which became the holding company for the Docenave Group. Its name was also changed to Docepar S.A. At Docepar S.A.’s extraordinary general meeting of April 29, 1999, the payment of dividends was approved, with the delivery of shares in the new Docenave, which continued to exist. Consequently, both companies became directly controlled by Vale,118 which at the time owned 96.84% of the latter.119

In May 1999, Docenave expanded its participation in Brazilian coastal shipping by entering the container transportation market. To do so, it chartered four multipurpose ships, covering ports between Rio Grande (Rio Grande do Sul) and Manaus (Amazonas). In November, this service was extended to Buenos Aires, Argentina, by chartering another ship. The Port Support Services area was also restructured as a business unit, encompassing tugboats, with the mission of raising the business’ share of this market. Of all the cargo transported during the year, 48% was iron ore, 23% was coal, 13% was bauxite, and 16% was other cargo. This generated revenue of R$321.9 million.120

After 24 years of activity, the Seamar Shipping Corporation continued to be responsible for most of Vale’s transoceanic transportation, while Docenave directly handled the coastal shipping of dry bulk goods.121 In 2000, R$500.3 million of revenue was generated. Of the cargo transported, 53% was iron ore, 21% was coal, 12% was bauxite, and 14% was other cargo. Coastal shipping covering ports between Buenos Aires and Manaus generated revenue of R$58.6 million. Docenave’s fleet was then composed of 15 of its own ships, including five Capesize, eight Panamax and

118 - See the 1999 Annual Report (Financial Statements section).

119 - Idem.

120 - See the 1999 Annual Report (Performance > Logistics), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra1999/ra99_desempenho.htm>.

121 - See the 2000 Annual Report (Business Performance > Transport), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2000/transportes.htm>.

274 275


two Handysize vessels,122 with total capacity of approximately 1.5 million deadweight tonnage (dwt),123 as well as 30 chartered ships.124

In 2001, Vale decided to discontinue its long-distance (transoceanic) shipping operations. At the time, these operations were no longer considered strategic for iron ore as the freight market offered more competitive prices. Accordingly, seven ships in its fleet were sold for US$55 million. Docenave’s activities now focused on tugboat and coastal shipping services.125

Docenave, now 100% owned by Vale,126 remained active in coastal shipping at leading ports between Buenos Aires and Manaus. In 2001, the company handled 42% of Brazil’s total container volume.127 The contraction in its activities and fleet led to a reduction in its revenues, but even so, in 2001 it accounted for 4% of Vale’s gross sales, or R$440 million.128 However, this contraction was inversely proportional to CVRD’s expansion on the international market. From the 1990s to the 2000s, Vale’s activities expanded around the world.

As of the late 1990s, Vale made efforts to further internationalize its businesses. Its actions concentrated on partnerships in South American countries capable of supplying minerals that Brazil had limited scope to produce. In 2001, the company signed a memorandum of understanding with Corporación Nacional del Cobre de Chile (Codelco), the world’s largest copper producer. This coordinated action was aimed at the possibility of establishing a joint venture for joint copper exploration and mining by Vale and the Chilean company.129

122 - Bulk carriers are classified, in ascending order of cargo capacity, as Handysize, Handymax, Panamax and Capesize. A Panamax ship has the maximum acceptable dimensions to pass through the Panama Canal. Capesize vessels cannot use the Panama and Suez canals, but instead go around Cape Horn and the Cape of Good Hope, hence their name.

123 - Deadweight tonnage is the unit that measures a ship’s capacity, including for fuel, crew, cargo and so on. If one says that a ship has DWT of X, it means it is capable of transporting X tons.

124 - The other information in this paragraph was taken from the 2000 Annual Report, available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2000/transportes.htm>.

125 - See the 2001 Annual Report (Business Performance > Logistics > Shipping), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/logistica_navegacao.htm>.


127 - See the 2001 Annual Report (Business Performance > Logistics > Shipping), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/logistica_navegacao.htm>.

128 - Report on 4Q01 GAAP Results, p. 5.

129 - See <http://saladeimprensa.vale.com/pt/release/interna.asp?id=11228>.

While it harnessed the opportunities offered by new trading conditions in its neighborhood, Vale was also crossing distant continents to find partners. Through its subsidiary the Itabira Rio Doce Company Limited (Itaco), Vale, in conjunction with the Gulf Investment Corporation (GIC), acquired full control of the Gulf Industrial Investment Company E.C. (GIIC). This transaction was officially announced on October 6, 2000.

Located in Bahrain, a small island in the Persian Gulf, GIIC was established in 1988 by the Kuwait Petroleum Corporation (KPC), Kuwait’s state-owned oil company. GIIC owned and operated one of the largest independent iron ore pelletizing plants in the world, with annual production capacity of 4 million metric tons of pellets. It also operated a port equipped to accommodate ships of up to 100,000 metric tons, as well as a thermal power plant and a desalinization plant. The pellets that it produced were sold to steel mills around the Persian Gulf, elsewhere in Asia and in North Africa.130

The New York Stock ExchangeBy 2000, Vale had new businesses, new partners and operations in various parts of the world. It was revitalized and ready to face new challenges. Less than three years after it was privatized, CVRD took its biggest ever step in its internationalization process, definitively marking its presence on the global market. In July 2000, the shares of Companhia Vale do Rio Doce – a Brazilian company with a 58-year history – were listed on the New York Stock Exchange (NYSE).131

As of that moment, all investors could buy Vale’s American Depositary Receipts (ADRs) without portfolio restrictions and in a much more transparent market. Investors could trade Vale shares in reais (on the Bovespa), in US dollars (on the NYSE) and in euros (on Latibex, an electronic stock exchange for Latin American shares).132 CVRD’s operating policies, environmental actions, market strategies and commercial partnerships – in fact, all of its actions – would now be tracked day by day, minute by minute, by a group of investors across the world, attentive to the performance of the biggest iron ore producer on the planet.

130 - Jornal da Vale, October 2000, no. 227, p. 3.

131 - Available at <http://www.vale.com.br/pt-br/investidores/perfil-vale/composicao-acionaria>.

132 - Available at <http://www.vale.com/pt-br/investidores/perfil-vale/composicao-acionaria/paginas/default.aspx>.

The New York Stock Exchange in September 2001.

276 277


Palm tree plantation to produce palm oil, used to make biodiesel, in 2010.

Aerial view of the Igarapava Hydroelectric Plant (on the border of the states of São Paulo and Minas Gerais), on November 25, 1998.

electric power.10 Due to its own production, Vale did not face any interruptions to its operations at any of its units during the nationwide blackout of July 1, 2001 – a unique situation among major companies at the time.

The generation and especially the sale of its own energy began to present results as of 2005. Of its total consumption of 16.9 TWh, 9% was supplied by its own hydroelectric plants.11 Self-generation provided an estimated savings of R$110 million in electricity charges.12

In December 2007, the company, in partnership with BNDES, established Vale Soluções em Energia (VSE), with the objective of developing technology programs, focusing on environmentally sustainable processes and the use of renewable energy sources.13 The following year, the company published its Corporate Climate Change Guidelines, with the aim of cutting its greenhouse gas emissions. In 2008, just 7.8% of the company’s carbon dioxide emissions came from its electricity consumption,14 thanks to the strong presence of hydroelectric sources in its energy mix.

Vale now has stakes in nine large and four small hydroelectric facilities in operation, in Brazil. The large plants are the following: Igarapava, Porto Estrela, Funil, Candonga, Eliezer Batista, Amador Aguiar I, Amador Aguiar II, Machadinho, and Estreito. The four small hydro projects are Glória, Ituerê, Mello, and Nova Maurício.15 These investments enable the company to currently supply 45% of its electric power needs from its own hydroelectric plants.16

Vale also invests in its own energy supplies outside Brazil. In Canada, the company supplies part of the power used by its Sudbury operations in Ontario, from five generating stations. In Voisey’s Bay, 100% of the energy consumed is produced using diesel generators. In Indonesia, practically all the power required to operate the local electric furnace is supplied by three hydro plants on the Larona River (the Larona, Balambano and Karebbe plants).

While intensifying investment in hydro power based on each region’s potential, Vale has also pursued other options for clean, sustainable energy. One example of this is the company’s project to generate energy using palm oil. The decision to invest in biofuel gained force when Vale incorporated Biopalma da Amazônia S.A., in February 2011.

Most of the oil produced will be used to power Vale’s locomotives and large machinery in its operations in Brazil, using “B20” (a blend of 20% biodiesel and 80% regular diesel).17 Together with the specific work of producing fuel oil, Vale, through Biopalma, has implemented projects to restore and regenerate 90,000 hectares of native forest in the Vale do Acará / Baixo Tocantins region of Pará. In addition, a family farming program has been planned for 2,000 families in the region. Vale’s idea is for families to produce palm oil on their properties, with the company providing technical assistance and guaranteeing to purchase their output.

By diversifying its investments in energy generation projects, Vale seeks to reduce its costs and protect itself from electric power price volatility, as well as regulatory uncertainty and power shortage risks. In addition, the company works to align itself with global issues related to climate change, to ensure the availability of this resource and contribute to environmental conservation.

10 - Idem, “Desempenho dos negócios,” available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/negocios_energia.htm>.


12 - Idem.

13 - 2007 Annual Report, p. 129, and Vale’s website, available at <http://www.vale.com/pt-br/o-que-fazemos/energia/vale-solucoes-em-energia/Paginas/default.aspx>.


15 - Available at <http://www.vale.com.br/pt-br/o-que-fazemos/energia/usinas/paginas/default.aspx>.

16 - Idem.

17 - See “Vale acelera investimentos em biodiesel” Vale press release of February 1, 2011.

Energy solutions

Energy is a fundamental input for the sustainability of Vale’s activities and is part of its business strategy. As a major consumer of this resource, the company’s priority is to continually improve its energy supply mix to meet the demand of its global operations.1 Accordingly, Vale invests heavily in generating its own energy, always seeking sustainable, clean solutions of low environmental impact. The company now has hydroelectric power plants in Brazil, Canada and Indonesia.

When investing in energy, Vale acts in four main areas: the development of renewable sources; the creation of mechanisms for reducing its own consumption; the pursuit of efficient energy supplies that ensure the sustainability and competitiveness of its operations; and value generation during the development of mining projects through more reliable and cleaner energy solutions.

Over the years, Vale has sought to diversify its energy generation investment projects. The sector became a part of the company’s activities in October 1997, when it established its subsidiary Vale do Rio Doce Energia S.A. (Vale Energia), which works in the oil, natural gas, solid fuel and electricity sectors.2

One year later, in December 1998, the Igarapava Hydroelectric Plant came on line in Rio Grande, on the border of the states of Minas Gerais and São Paulo.3 It was the first hydro plant to be administered by a consortium of which Vale was a member. The following year, Vale Energia was authorized to sell its output on the Wholesale Energy Market.4

With the implementation of a new corporate governance model, the electricity generating business was allocated to the Business Development and Company Stakes Executive Department.5 At this time, the company’s investments in building new hydroelectric projects amounted to US$50.3 million.6

The sector’s deregulation process and the rising trend in electricity prices, which started in 2000, were key factors in Vale’s decision to prioritize the energy area. In November 2000, the Board of Directors approved the creation of the Energy Department, with the purpose of promoting balance between own production and consumption of electric power.7

The electricity rationing that occurred across Brazil in the second half of 20018 showed that Vale’s strategy of investing in hydroelectric projects was prudent.9 In that year, the company consumed a total of 12.5 TWh of

1 - See the 2010 Form 20-F Report, pp. 17-18.

2 - See the 1998 Annual Report (Business Areas – Other Businesses – Energy), available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra1998/index.html>.

3 - Idem.

4 - See the 2001 Annual Report, available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/negocios_energia.htm>.

5 - Idem, “Governança corporativa,” available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/governanca.htm>.

6 - Idem, “Investimentos,” available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/invest_despesas.htm>.

7 - See the 2000 Annual Report, available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2000/energia.htm>.

8 - Available at <http://www.eletrobras.gov.br/Em_Biblioteca_40anos/96-02.asp>.

9 - See the 2001 Annual Report, “Mensagem da presidência,” available at <http://www.vale.com/Util/Conteudo/Investidores/relatorios-anuais-e-de-sustentabilidade/ra2001/mensagem_presidencia.htm>.