III. Global Shift: Brazil Steals the Show
Developing nations ought to be learning how to feed their people, how to cloth their people, how to house their people, how to educate their people. Instead, they want to be major steel...
...LAER, November 3, 1978...
...4 LOOKING FOR TAKERS In the mid-30s, Vargas took steps to make Brazil's steel industry commensurate with its iron ore potential...
...4 4 According to the original arrangement, Kawasaki and Finsider were to purchase 40% of the plant's output of semi-finished steel, and would supply 66% of its equipment needs...
...Calmon de Sa, Minister of Industry and Commerce, cited in LAER, August 25, 1978...
...Metal Bulletin, December 15, 1978...
...Acominas, a steelmill to be located in the state of Minas Gerais, is designed to produce two million tons of heavy sections and rails by 1982, and 10 million in its final phase...
...steel industry, which historically has ventured into relatively few foreign steel initiatives...
...Self-sufficiency is now the obsession of Brazilian steel planners...
...Steel spokesperson, no underdeveloped capitalist country has the potential for a "Japanese miracle" in steel and the Third World "doesn't have a prayer" of denting the U.S...
...Another response is the massive injection of capital into the indigenous development of heavy industry...
...Steel's withdrawal was its reluctance to accept a minority interest, which today is often the precondition for joint ventures in the less developed world...
...Is this afeasible strategy in countries where wealth is being concentrated in still fewer hands, where foreign domination of the economy is essentially unchecked and antagonistic to genuine domestic needs...
...In combination with vociferous environmental protests, the Japanese see the situation as "almost impossible" for future or sustained steel growth...
...But an increasingly significant factor is the steel potential of the less developed world...
...They charged that the Tubarao agreements did not provide for "effective national control of the steel works...
...The Japanese and Italians got cold feet about absorbing so much output at a time of low demand...
...2 0 Certain export markets have already been successfully penetrated...
...Many developing countries are intent on producing steel themselves...
...Brazil will surely become a major steel producer in the not-too-distant future, but on whose terms and for whose benefit remains to be seen...
...Wall StreetJournal, January 18, 1977...
...steel companies are heavily involved in Brazil's ambitious steel endeavors...
...Eventually, in a compromise move, the share for domestic suppliers was raised to 50% of Tubarao's needs...
...This selfreliance has led to cautious investment practices, by and large...
...Until this pays off, Brazil has made trade deals with many oilproducing countries...
...Brazil's large and growing internal market caught the interest of various foreign investors...
...BRAZIL MAKES THE TOP TEN My impression is that within 25years Brazil will be in the club of great powers and will be producing not less than 100 million tons of steel ayear...
...The nature and extent of Japanese foreign involvement is very different...
...Producer cartels, such as OPEC, are one possible response to this situation, effective so long as the supply of oil holds out and world demand remains high...
...In an ironic twist, Brazil considers its U.S...
...5. Wall Street Journal, January 23, 1974...
...Quoted in Metal Bulletin, October 22, 1976...
...Since World War II, $4.5 billion of U.S...
...The U.S...
...approximately 35 other countries have since joined their elite ranks...
...As of 1973, all government interests in steel were consolidated within SIDERBRAS, the national holding company for steel...
...But these three form the backbone of Brazilian steel, together accounting for about half of total production...
...Another important factor common to these countries' steel programs is the crucial role of the state...
...Business Latin America, December 21, 1977...
...Twelve more were being negotiated at that time, many of which, the Chinese being the most notable, have since been brought into production.36 Japan is the third largest investor in Brazil after the United States and West Germany...
...The labor laws enacted after the military coup of 1964 rescinded virtually all job-related rights, including the right to strike, to negotiate directly with employers instead of the state, and to establish trade union representation within factories...
...2 2 Brazil is also entering joint investment ventures in foreign coal mines...
...Not until the government substantially increased its role in steel initiatives did the sector really begin to flourish...
...Here, our point is to illustrate a process of restructuring in the steel industry and manufacturing in general, and to probe its implications for independent development in Third World countries...
...4 6 A BNDE official attributed this to political debts: "From an economic point of view, the project is a very bad mistake...
...In 1978, Brazilian auto workers paralyzed the industry with a major strike, sending second thoughts about so-called "liberalization" into the minds of the Brazilian military and ruling class...
...In 1950, the United States, Great Britain, and the six original members of the European Coal and Steel Community were responsible for 72% of the world's steel output...
...Tubarao, a joint venture between Japanese Kawasaki, Italian Finsider and SIDERBRAS, is designed almost exclusively for the export of semifinished steel...
...But the structure of the world economy has changed significantly...
...MetalBulletin, September 22, 1978...
...SIDERBRAS is to receive $3.5 billion a year between 1978-1981, which represents about 8% of Brazil's total fixed capital investment...
...This is not because Brazilian steel is unattractive to foreign investment...
...interests are not one homogenous entity, equally endangered by "foreign" competition...
...cit., pp...
...This change has sharply reduced the relative contribution of the senior steel producers to total steel output...
...4 Therefore, the Japanese stand to gain much more from the growth of steel industries in the less developed capitalist countries...
...The government is determined to keep wages in the steelmills down, to ensure the competitiveness of Brazilian steel on the world market...
...Kawasaki Steel Mulls...
...Another factor underlying the enormous growth in steelmaking among the less developed countries is the availability of cheap labor...
...3 7 Much of that investment is held in Brazilian steel, which accounts for some ofJapan's largest overseas ventures...
...Brazil: oMajority interest in Armco do Brasil...
...The original pledge was for $20 million but as wartime costs soared, a total of $45 million was eventually committed.' In 1941, the National Steel Company (CSN) was founded, essentially as a government-owned and operated firm...
...Some new projects are being planned, the most impressive of which are the ones geared for exports...
...steel companies...
...Unlike older producers, these late starters have little capital tied up in old or obsolete equipment and therefore do not have to undertake the slow and costly process of upgrading plants...
...The Brazilians could hardly exert much leverage, given their heavy dependence on outside financing...
...In comparison to other regions of the world, Latin America will be surpassed in its demand for steel only by China and other Asian countries (excluding Japan...
...Noticias,July 24, 1978...
...This production level represents a 21.8% jump from 1976, with 1978 figures expected to reveal another increase of 10...
...specialty cold strip products Other: *Majority interests in Armco Argentina, Armco Chile, Armco Mexicana, Armco Peruana, and Armco Venezolana The other major steel firms have no significant investments in Third World steel...
...Mackenzie, op...
...In the 1950s, other major steelworks were begun...
...For a general history of the Brazilian steel industry, see Baer, op...
...The European Coal and Steel Community comprises France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg...
...U.S...
...Despite its early start, however, steel production remained minimal until the 1930s...
...Major steel plants are being built in isolated and depressed areas, where workers may be reluctant to jeopardize scarce jobs...
...Metal Bulletin, November 7, 1978...
...The less developed world's late entry into the steel business has brought certain advantages...
...emphasis added) Clarence Long, House of Representatives Steel evokes an image of industrial capacity, modernity and power...
...Brazil's own producers of steel equipment argued that they could satisfy 80% of the project's equipment needs, instead of their meager one-third allotment...
...These savings are especially important in steel manufacture, where delivery costs for iron ore alone can comprise up to 40% of its final price...
...Metal Bulletin, July 25, 1978...
...International banking and loan agencies have played a key role in steel programs throughout the developing world, despite consternation and criticism from traditional steel producers...
...19 Brazil's full export potential will not be realized quickly, but the Big Three mills have steadily increased their exports, and construcJanlFeb 1979 2324 NACLA Renort tion has begun on the two mills expected to carry the burden of the export drive...
...As we have learned through studies of other industries, foreign competition is not always so foreign...
...And foreign capital is increasingly attracted by the profitability picture of steel production abroad...
...Steel withdrew before the scenario reached a conclusion...
...For a discussion of Japan's participation in Usiminas, see S.W...
...As a result, 10% of Brazil's steel needs must be met by imports, which poses a tremendous burden on its foreign exchange reserves...
...Steel production formed the backbone of industrial development in the advanced capitalist countries and, increasingly, is the coveted goal of the lessdeveloped nations...
...Wall StreetJournal, January 23, 1974...
...This "freedom of choice" was evidenced by the CSN episode of the 1940s, where, despite U.S...
...2 4 And a Brazilian-owned mining company in the United States, Cari International Mining Corp., now owns three coal mines in Georgia, Oklahoma, and Alabama (not West Virginia...
...2 5 But these efforts are recognized as essentially stopgap measures, and even with increased mining prospects in Brazil, a 4:1 ratio of foreign to domestic coal is being used for future projections...
...These trends in steel production reflect major reversals in current and projected rates of steel consumption...
...Steel made a proposal which would have NACLA Report 22JanlFeb 1979 23 given it control over the new steel project and certain mining rights as well...
...They decreased their original commitment by half, leaving their Brazilian partner with a lot of extra semi-finished steel, a low-priced item in the best of times...
...And JanlFeb 1979 1920 NCARpf within this option, national production of steel invariably leads the list of priorities...
...Nevertheless, the steel that is produced by these newcomers is likely to incorporate significant technological advantages...
...Most of its coal contracts with U.S...
...Has U.S...
...And the still more ominous implication for older steel producers is that this upstart production threatens to invade their own home markets...
...The non-flat and special steels, which are less costly to produce, have been left to private firms...
...2 6 For new projects, Brazilian steel is in the forefront of introducing direct reduction processes to minimize coal consumption...
...What accounts for this contrast...
...Steel is expected to assist Pennzoil in its search for offshore oil and natural gas...
...The most notable impetus for Brazil's early entry into the steel business is its enormous, high-quality, iron-ore reserves, which continue to be its most significant advantage...
...Says one Japanese diplomat, "Members of [my] government want to be involved in what they see as the long-term trend toward developing countries increasingly doing the 'dirty work' of producing semifinished products from iron ore, which countries like Japan would then import for rerolling...
...Kawasaki Steel Mulls Brazilian Venture," OrientalEconomist, August 1975...
...Given the historic relationship between the United States and Brazil, it would be logical to assume that U.S...
...82-3...
...money on foreign steel when domestic producers face a capital shortage, steelmills are closing and thousands of workers are out of jobs...
...steel interests have tried to prohibit ExlmBank from financing any more foreign steel projects geared for export, essentially subsidizing their foreign competition 4 In some ways, it is understandable that many people consider it "un-American"if not irrational to spend U.S...
...Brazilian Business, June 1978...
...Furthermore, Brazil was predominantly agricultural at this time, and most private capital was channeled into cash crops...
...7 This potentially vast market for steel could have created an economic bonanza for traditional steel producers, in the form of increased exports to the less developed countries...
...It is the case of Tubarao, however, that best illustrates the conflicts between foreign interests, domestic aspirations, and the obligations to foreign capital...
...Primary emphasis is being placed on the successful completion of expansion plans at CSN, COSIPA, and Usiminas in order to guarantee the supply of flat rolled products...
...Befitting Brazil's ambition to climb the ladder of steel-producing countries, becoming a major exporter is part of the overall plan...
...steel companies have not been immediately forced to secure raw materials abroad...
...Noticias, October 2, 1978, and LAER, August 18, 1978...
...3 As evidenced in the chart, Brazil received more aid than any other country by a significant margin...
...LAER, August 25, 1978...
...Rather, the answer lies in the particular characteristics of the U.S...
...The Japanese, growing increasingly skeptical about the project, were unwilling to increase their participation and the BNDE again had to compensate for the lack of private funds...
...In order to subsidize its projects, the state has sought large amounts of foreign capital and foreign loans...
...Rather than self-sufficiency, therefore, attention has turned to processes which are not dependent on coking coal...
...Many are only now building the railroads, the factories and the basic infrastructure of an industrial society which absorb such massive amounts of steel...
...The agency coordinates all financial and management decisions, and wields a considerable amount of authority over its member companies...
...But the decision was essentially political and I am not going to talk about politics...
...Vargas persisted in his efforts to bring Brazil into the ranks of the steel-producing elite...
...4 0 With world demand expected to increase substantially, they don't want to lose their share of the market simply due to space inadequacies...
...Moreover, inflation was rampant during the years of construction, and building costs soared...
...Most importantly, steel production in the NACLA Report 20JanlFeb 1979 21 developing countries offers competitive advantages over production in the advanced countries...
...The greatest impediment to Brazil's steel industry is the lack of high quality coking coal...
...Whatever steel capacity they maintain will most likely remain in the United States...
...See Chart I) THE SAUDI ARABIA OF IRON ORE The most basic problem of our economy is that of steel...
...suppliers will expire by 1982, and will be replaced by other sources...
...The estimated growth rates for Latin American steel consumption are particularly high...
...foreign assistance has been used to develop steel in 46 different countries...
...In 1977, Brazil's forty-odd steel mills produced 11.2 million tons, making it the 8th largest steel producer in the capitalist world...
...prices of iron ore dropped by 6% between 1955 and 1970 while the price of finished steel rose by 57% .2 Steel production is being promoted in the developing capitalist countries as a motor for rapid industrial development...
...In general, the United States is still the leading investing country in Brazil and its biggest trading partner...
...Japan suffers from a severe land shortage, which allows little room for the expansion or creation of steel plants...
...Its success rate is evidenced by its debtservice obligations, which are the highest in the developing world...
...Steel and Armco-have the following foreign interests: U.S...
...2. MetalBulletin, October 19, 1976...
...11-15...
...A new town was created to house the new steelworks at Volta Redonda, an isolated site in the state of Rio de Janeiro...
...Brazil hopes to find coal in cooperation with Venezuela and Colombia along their common borders...
...4. Business Week, September 19, 1977...
...4 7 What does this imply for Brazil's ability to industrialize on the basis of domestic needs...
...Kung, "Brazil and Japan-Partners for Economic Growth," Oriental Economist, June 1978...
...According to one executive, "In the case of Brazil there is no worry about phase-out of investment by foreign interests, and the investment climate is by far the best in all of Latin America...
...Ibid., August 25, 1978...
...And as a further illustration of role reversals, the Brazilian steel industry has set its sights primarily on the lucrative markets of the United States and Canada, as well as Latin America and Africa...
...Japan finds Brazil particularly well-suited to meet these needs...
...SELF-SUFFICIENCY OR A NEW FORM OF DEPENDENCY...
...This phenomenon is not a question of patriotism or generosity, not of one nation competing against another...
...Steel, cited in "The Crisis in World Steel," Economist, February 12, 1977...
...Steel's desire for a base of operations in the growing steel markets of Latin America, the risk was seen as excessive...
...And, more importantly, is this strategy of promoting capitalist growth a desirable alternative...
...In fact, a $10 million trade package was recently signed with China to exchange iron ore for oil...
...One advantage to producing steel in the less developed countries is their easy access to raw materials...
...by 1975, their share had shrunk to 35% .3 Most of this decline is attributed to the enormous growth of steel production in Japan and the Soviet Union...
...9 The Brazilian economy as a whole has been cited as a model of "miraculous" growth, with development of the steel sector as the most dynamic element...
...3. Ibid...
...Metal Bulletin, December 15, 1978...
...Private Brazilian capital, however, was not enticed by massive steel endeavors...
...Other important inputs into the steelmaking process are also scarce in Brazil...
...The cost of modern steel capacity has skyrocketed since the Japanese-once late starters themselves--launched their steel program, however, presenting a serious obstacle to a similar performance...
...It acts as the agent in foreign loan and joint-venture negotiations, and also coordinates steel imports...
...For the financial history of CSN, see David G. Greene, Steel and Economic Development: Capital-Output Ratios in Three Latin American Steel Plants (East Lansing: Board of Trustees of Michigan State University, 1967), pp...
...THE STATE TAKES CHARGE By the mid-60s, Brazil was the largest steelmaker in Latin America, with most of its capacity in government hands...
...Direct investment in the Brazilian steel industry by U.S...
...For a summary of the Master Plan, see Metal Bulletin, December 15, 1978...
...Moreover, the diversification process taking place domestically is also affecting the pattern of foreign investments by U.S...
...4 2 Coincidentally, that 'dirty work' is also the least profitable aspect of steel production and requires the most space-the profit from steelmaking is in the finishing stages...
...Brazil is the largest steel producer in Latin America and rolls out almost half the region's total production...
...many firms are applying their expertise to overseas mining ventures and raw materials...
...The Paulista Steel Company (COSIPA) was founded in 1953 to build a large integrated steelmill near Sao Paulo...
...Serious problems arose during construction of the mill...
...The 1979-1988 National Steel Plan is predicted to call for an investment of $25.4 billion.29 The state has made the steel sector one of its top budgetary priorities...
...These countries have quadrupled their output since 1960...
...ExImBank participation continues to be critical to CSN's expansion plans, as it has become for most major steelmills in Brazil...
...Although it is claimed that Vargas could have consolidated his position, U.S...
...The success of its aggressive policies has raised official optimism about becoming a world steel power...
...This loan marked a new stage in world financing, as the first ExImBank loan to a significant industrial project abroad...
...The state also tightly controls the setting of annual wage increases, which lag far behind inflation...
...Elizabeth Bossong, U.S...
...The International Iron and Steel Institute (IISI) forecasts that consumption will double to 48 million tons by 1985 - an average annual growth rate of 7.1% for 1970-1985...
...AID FOR FOREIGN STEELMAKING CAPACITY (U$S millions) Total Nation Assistance ExlmBank AID OPIC World Bank IFC* IDB* ADB* Brazil $941.2 Mexico 624.5 Turkey 401.8 Argentina 380.5 Japan 307.5 Spain 255.2 Yugoslavia 253.8 Italy 249.8 India 205.5 Chile 122.4 Taiwan 121.3 Subtotal** (top 11) $3,863.4 Others-35 countries 677.9 GRAND TOTAL** $4,541.4 $245.0 247.9 72.3 295.0 149.6 255.2 170.2 249.8 122.4 121.3 $1,928.7 410.9 $2,356.6 $5.5 234.5 8.5 3.0 $1.2 2.1 .7 $251.6 $3.9 11.6 $251.6 $15.5 $347.0 165.0 76.0 157.9 13.0 189.0 $947.9 110.3 $1,058.2 $104.5 $238.0 39.5 145.0 19.0 20.7 74.8 - 60.0 12.8 - - $256.5 $457.7 - 25.5 18.5 1.1 $282.0 $476.3 $1.1 *IFC = International Finance Corp...
...By that point, with domestic demand well-satisfied, the steel industry will be able to aggressively enter the world market...
...3 8 Clearly, the ability to rely on plentiful resources continues to play a key role in U.S...
...In order to compensate for the weakness and reluctance of the domestic private sector, Vargas turned to foreign capital...
...When the Tubarao project was conceived in 1968, it was hailed as a model partnership between domestic and foreign capital...
...Roberto Procopio Lima Neto, planning director of the BNDE, Ibid...
...But as the world steel market entered the downturn of the mid-70s, enthusiasm for the project waned on all sides...
...The deal involved a particularly large commitment from the Japanese: A $190 million investment by Kawasaki, plus a $700 million loan from Japanese banks - the largest Japanese loan ever to a single borrower...
...LAER, October 14, 1977...
...Has American "generosity" become self-sacrificing as critics allege...
...The Master Plan of 1979-1988 is the most recent formulation of official steel policy.'" Production goals are to be achieved through the maximum utilization of existing plants...
...Jim Green, interview with Arnaldo Goncalves, President, Metal-Workers Union of Baixada Santista, Sao Paulo, December, 1978...
...steel firms' investment policies...
...They also implied that Japan and Italy had pressured the Brazilian government to go ahead with the project in order to reap windfall profits from equipment sales...
...The key to this success is severe repression, pure and simple...
...The governments of resource-rich countries in the developing world are acutely aware that the wealth of their mines, wells and seas is not inexhaustible...
...ADB = Asian Development Bank * *All figures and totals rounded...
...3 " If U.S...
...Brazilian steel interests, represented by the Federacao de Industrialias de Estado de Sao Paulo (FIESP), became increasingly critical of the project...
...Real wages have declined, wealth has not been redistributed but further concentrated, malnutrition and death from starvation have not been eliminated...
...Unlike the U.S...
...We will now turn to the role of direct investment from the developed nations to steel in the underdeveloped world..JanlFeb 1979 27 CAPITAL SHORTAGE OR CAPITAL SHIFTS...
...With an average wage rate one-twelfth that of the United States and one-sixth that of Japan, developing countries are able to compete with more advanced manufacturers...
...In recent years, as we have seen, environmental regulation has added enormous costs to steel production in the industrialized countries...
...Most of the developed capitalist nations no longer require everincreasing amounts of steel, and their average annual consumption rates are predicted to stabilize or even decline...
...2 0 China is another lucrative market for Brazilian steel...
...During the presidency of Getulio Vargas, Brazil's economic priorities began to shift...
...Furthermore, the majority of unions, including those in steel, are controlled by government-imposed leaders...
...By the time production began in 1962, the Japanese share had dropped below 20%.16 Other plants were built during this period, with both private and public funds...
...The labor supply was abundant and cheap, but since most local workers had never worked with machinery, accident rates in the early years were extremely high...
...In the 1940s, he obtained a loan from the Export-Import Bank (ExImBank) in the heyday of the U.S...
...emphasis on traditional agricultural exports JanlFeb 1979 2122 NCARpr gave way to industrialization attempts...
...Metal Bulletin, March 10, 1978...
...Ex-Venezuelan President Perez, one of the most outspoken proponents of this "nationalist" course, spoke for many countries by insisting that foreign interests could not continue to "exploit the mineral resources of the Third World indefinitely...
...IDB = Inter-American Development Bank...
...The site, located in Vale do Rio Doce, was chosen for its proximity to iron ore deposits...
...According to one U.S...
...After all, Japan, with no iron ore or coal of its own, is still the third largest steel producer in the world...
...2 0 Despite its favored status, steel must still compete for funds with the other rapidly developing sectors of the economy...
...He went on to say that Latin America, which sits on 20% of the world's iron ore reserves yet produces less than 3% of the world's steel, had no interest in exporting its raw materials when they could be used at home to produce steel and create employment...
...It should produce three million tons by 1982, on its way to reaching its target of 12 million tons per year...
...By 1947, steel production began, and Volta Redonda became the first coke-based integrated steelmill in the Western Hemisphere outside the United States...
...The underdeveloped capitalist world, on the other hand, provides a virtually regulation-free environment...
...Werner Baer, The Development of the Brazilian Steel Industry (Nashville: Vanderbilt University Press, 1969), p. 68...
...Financial Times, April 12, 1978...
...Getulio Vargas, 193112 Brazilian-made steel is not a new phenomenon...
...foreign aid gone haywire...
...is predicted to reach a spectacular $40 billion, with interest and amortization payments totalling $8 billion.31 Needless to say, steel has been a major factor in this massive financial burden...
...It was initiated by funds from private Brazilian sources and the state of Sao Paulo, but again, due to the insufficiency of private capital, the Brazilian Economic Development Bank (BNDE) eventually became the majority shareholder...
...This is compounded by current economic sluggishness, but reflects the economic maturity of these countries...
...6 The less developed countries, on the other hand, have high rates of industrial and population growth...
...These questions are posed as food for thought and cannot be addressed directly in this study of steel production in Brazil...
...3 9 Next to its resource-rich competitor, Japan must aggressively compensate for its own inJan/Feb 1979 2728 NACLA Report ability to provide the necessary conditions for expanded steel production...
...that the rising cost of imported manufactured goods is draining their economies of much-needed capital...
...2 7 AN UNCERTAIN PEACE Cheap labor is considered one of Brazil's major advantages in steel production over the advanced capitalist countries...
...As we have seen in the case of steel equipment sales, U.S...
...if all proceeds as planned, this goal should be realized by 1981...
...9. Eileen Mackenzie, "Steel Industry's Race with the Future," Brazilian Business, August 1975...
...But Brazil was still an insignificant steelmaker in 1940 and imported about 70% of its steel needs...
...8. Hindson, "The Changing Map," in Szekely, op...
...The state was unresponsive to domestic criticism, proclaiming that "it was a government decision and these decisions are not open to discussion...
...MetalBulletin, December 15, 1978...
...Indeed, steel production would be inconceivable in these less developed countries without the active backing of the state, given the organizational and financial weakness of private domestic capital...
...Will steel production in the capitalist developing countries benefit the majority or only strengthen the hand of the local bourgeoisies...
...The plant went into full operation in 1965...
...President Vargas was enthusiastic about this deal, but nationalist forces attempted to block the plan, fearing foreign control over mining and metallurgy...
...THE UPSTARTS At the end of World War II, steel was produced in 32 countries...
...In 1939, U.S...
...and that the perpetuation of this traditional division of labor can only make for perpetual underdevelopment...
...The partners include SIDERBRAS (51%), Japanese Kawasaki (24.5%) and Italian Finsider (24.5...
...2 8 Yet as the gap widens between governmentset wages and the cost of a meager existence, as the push for political reforms gains momentum, steelworkers in Brazil may stop being the "export advantage" they are today...
...Whether this so-called advantage will become a liability in the not-too-distant future is very much on the minds of Brazilian planners and officials...
...But it apparently found that very few countries could match U.S...
...3 2 2526 NACLA Report POST-WORLD WAR II U.S...
...In 1976, George Stinson, Chairman of National Steel and then Chair of the IISI, predicted that massive support for foreign steel exports would not be forthcoming: If large amounts of financial assistance are concentrated on steel, the result could be to flood world steel markets, with damaging consequences to the donor nations...
...Signs of economic and political unrest are already beginning to break through the thin surface of labor peace in Brazil...
...steel firms can afford to pick and choose among investments, and can reject less favorable arrangements...
...As of 1974, the five largest steel companies in Japan had interests ranging from five to 90% in 32 plants in 17 countries throughout Asia, Africa, and Latin America...
...The Japanese are currently involved in two of Brazil's largest steel projects, Usiminas and Tubarao, as well as a number of smaller ventures...
...It has come to symbolize the attainment of genuine economic development and self-sufficiency, a break with the traditional division of labor between the industrial potentates of the capitalist world and their subservient suppliers of raw materials and basic agricultural goods...
...And organized labor-once one of the most militant and politically conscious movements on the continent-has been 24 NACLA ReportJan/Feb 1979 Brazilian metalworkers in Sao Paulo face uncertain future...
...New York Times,January 26, 1978...
...They also plan to guarantee that this global shift results in a new "division of labor" that is equally as profitable as the old...
...DEPENDENCY REVISITED...
...LAER, August 25, 1978...
...Approximately one-half of its pig iron is derived from coke-based blast furnaces, but Brazil can only supply about 25% of its coal domestically...
...These reserves represent at least three-fourths of Latin America's total supply, and are probably the largest in the world, outside the USSR...
...it is the largest buyer of Brazilian iron ore, absorbing one-third of its total output...
...Latin America Economic Report (LAER), June 17, 1977...
...growth rate is predicted to stabilize around the relatively low figure of 3% during the next decade...
...To what extent can a country like Brazil afford to alienate foreign capital, upon which its present political and economic system is so dependent...
...Colonel Ciro Borges, then Planning Director of the National Steel Company...
...2 3 It has negotiated a deal with Kaiser Resources for an interest in an underground coal mine in Canada...
...steel interests, however, is virtually non-existent...
...Cited by Representative Clarence Long (Md), Congressional Record-House, March 8, 1978...
...Em Tempo) a primary target...
...Like Volta Redonda, however, the area was secluded and a town had to be built...
...Brazil's gross foreign debt for 1978...
...Yet Brazilian "development" is termed an enviable success...
...Instead, they want to be major steel producers like us...
...Even Japan's economy, which has been industrialized more recently and at one time used 20% of its steel in the construction of steelmills alone, is having difficulty absorbing large portions of its output...
...JanlFeb 1979 6. Metal Bulletin, October 22, 1976...
...Other contracts are being negotiated...
...A major factor in U.S...
...World Bank assistance has been directed primarily to CSN and COSIPA...
...in fact, steel has a longer history than most of Brazil's other heavy industries, with some plants originating in the 1920s...
...As we have seen, the state's assistance has been fundamental in creating the base for steel development, even in the United States...
...government's "Good Neighbor Policy" toward Latin America...
...The Chinese have verbally agreed to buy at least 1.5 million tons of steel at $500 million between 1979 and 1981 .21 FROM VENEZUELA TO SOUTH AFRICA Brazil may be one of the most resource-rich countries in the world, but it still lacks an adequate domestic supply of certain inputs into steel production...
...It also feared potential nationalization of its holdings...
...Usiminas, today the largest mill in Brazil, was founded in 1956, with 40% equity in the company controlled by the Japanese NipponUsiminas Kabushiki Kaisha group...
...The United States is resource-rich, and U.S...
...coal supplies (mainly from West Virginia) as too unstable due to labor unrest in the coal fields...
...Two of the world's largest steel companies-U.S...
...The Japanese have been involved worldwide in new steel plants...
...Brazil's fast-growing economy requires an enormous amount of steel and even this remarkable growth in production does not yet satisfy domestic demand...
...FIESP also charged that Japan and Italy were supplying equipment for the project at prices 5% higher than the international market value, while the Brazilian state supplied iron ore, energy, transportation, and water at bargain rates...
...Furthermore, unlike the United States, the Japanese are forced to go abroad in search of raw materials...
...Since 1964, the Brazilian "economic miracle" has taken a heavy toll on Brazilian workers...
...The steelmills still have a lot of catching up to do, however...
...U.S...
...To modify existing blast furnaces, Brazil signed a deal with Ensidesa, Spain's largest steel producer, for sophisticated coal-blending technology...
...In fact, since economies of scale are so large for modern steel capacity, almost all new steelworks in the developing world must produce beyond domestic consumption needs in order to be cost-efficient...
...Indeed, Brazil represents a bonanza for equipment producers, who anticipate orders amounting to $8.5 billion in the next ten years...
...Domestic sources can now supply only 20% of the steel industry's oil needs and huge sums have been sunk into oil exploration...
...GLOBAL SHIFT 1. MetalBulletin, October 12, 1976...
...This reduces transportation costs and limits the producer's dependence on outside, potentially unreliable, supply sources...
...steel industry, Brazilian steel is rapidly integrating the most advanced technological procedures...
...O Globo, September 29, 1978...
...Billions have already been spent to create the basis for a sizeable steel industry in Brazil, but the continued expansion of new and existing plants requires increasing amounts of capital...
...It has therefore looked elsewhere for more "secure," cheaper and diversified sources...
...Estimates indicate that by the 1980s they will have installed 10% of the world's steel capacity and will produce 25% and consume 24% of the world's steel by the year 20004...
...Existing steel plants were too small to provide adequate funds for expansion, and steelmill owners, fearing their own destruction, opposed his plans for a large-scale industry...
...steel companies are supplying foreign steelmills with equipment, and failing to upgrade plants at home, are they also investing directly in foreign steel...
...His point is driven home by the fact that f.o.b...
...The amount of total steel capacity under its control is expected to reach 80% by the early 1980s, up from 60% in 1972.17 In effect, this figure suggests that production of all semi-finished and flat products will be in the public sector...
...Noticias,July 17, 1978...
...In Brazil, U.S...
...Source: Office of Representative Clarence D. Long George Stinson was wrong-testimony to the fact that the long-run profitability of steel production in the Third World is considered a worthwhile risk...
...By 1988, with production levels targeted at 34 million tons, Brazilian steel output will have tripled in just a decade...
...Key among these are Australia, Poland and South Africa...
...Metal Bulletin, October 6, 1978...
...Steel has recently considered producing semi-finished steel overseas for re-import to the States for processing...
...Such a development would be unsound, and it could hardly be expected that the industrialized nations would support financially such a building program...
...The next expansion plan of the Volta Redonda works alone will require $3.71 billion...
...It is not so common to see a less developed country such as Brazil actively securing sources of raw materials around the world...
...7. Kenneth Warren, World Steel: An Economic Geography (New York: Crane, Russak and Co., 1975), p. 308...
...production costs, and was hesitant to risk supply interruptions...
...For Brazil, the age of iron will signify its economic opulence...
...Spain: *27% controlling interest in Altos Hornos de Vizcaya *Financing a $400 million subsidiary mill at Altos Hornos de Vizcaya *Recently relinquished 15% interest in Altos Hornos de Mediteraneo due to prospective nationalization Italy: *50% interest in Terninoss-Acciai Inossidabili Spa, a stainless steel plant, since 1961 Nicaragua: *majority interest in Metales Y Estructuras, since 1968 Guatemala: *100% ownership of light industrial tube plant A rmco...
...ExlmBank alone is responsible for almost half that amount, which has been put toward creating 37 million tons of new foreign steelmaking capacity...
...4 3 Total cost of the project is estimated at $2.6 billion...
...Steel...
...steel market...
...As we have seen, it is standard practice for the advanced capitalist countries to secure their raw materials from abroad, through trade agreements or direct investment...
...Confab, the leading Brazilian steel tube producer, recently won a $20 million contract from Pemex, the Mexican state-owned oil company, against competitors such as Sumitomo Metals, Nippon Steel and Kawasaki...
Vol. 13 • January 1979 • No. 1
