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Brazil's Steel CityDevelopmentalism, Strategic Power, and Industrial Relations in Volta Redonda, 1941-1964$

Oliver Dinius

Print publication date: 2010

Print ISBN-13: 9780804771689

Published to Stanford Scholarship Online: June 2013

DOI: 10.11126/stanford/9780804771689.001.0001

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(p.233) Conclusion
Brazil's Steel City
Stanford University Press

Abstract and Keywords

The coup d'état brought numerous changes to the National Steel Company (Companhia Siderúrgica Nacional; CSN) and transformed industrial relations in Brazil. CSN's directors were replaced with new ones, most of them company veterans, all engineers, who opposed the erosion of managerial authority in the early 1960s. General Oswaldo Pinto da Veiga, the company's former vice-president (1962) and director for raw materials (1962–1963), was appointed president, taking over Admiral Lúcio Martins Meira, while coup plotter Mauro Mariano da Silva was retained as industrial director. The military cracked down on the labor union and prohibited union elections until 1966. This chapter outlines that lessons can be learned from the history of industrial labor at CSN and its steel mill in Volta Redonda.

Keywords:   Brazil, industrial relations, National Steel Company, industrial labor, Volta Redonda, steel mill, military, labor union, Oswaldo Pinto da Veiga, Mauro Mariano da Silva

After the coup, the CSN's new directors placed industrial relations on a new footing. The military rulers had appointed mostly company veterans, all engineers, who deeply resented the erosion of managerial authority in the early 1960s. General Oswaldo Pinto da Veiga, the company's former vice-president (1962) and director for raw materials (1962–1963), replaced the Goulart appointee Admiral Lúcio Martins Meira as CSN president. Coup-plotter Mauro Mariano da Silva retained his position as industrial director, eager to fully reestablish the managerial prerogative. His very first order after the coup was to dissolve the mixed commissions created to study and reform the company's career ladders and labor management. No longer would union representatives participate in the writing of occupational descriptions, propose improvements on the shop floor to reduce accident risks, or work with company representatives to determine salary adjustments proportional to the cost of living increases. Mariano da Silva wanted to reassert managerial prerogative and reevaluate expenditure, not least on social programs, in order to free up money to modernize production and return the company to profitability.1

A thorough military crackdown on the union facilitated the transition to a new industrial relations regime. The commander of the 1st BIB, which had occupied mill and town, handed control of the metalworkers union to an intervener, Orlando Alvisi, and prohibited union elections until 1966. The military authorities tightly controlled the elections that did take place in 1966 and 1968. Wilton Meira, an opposition candidate linked by military intelligence to the resistance group Ação Popular, ran twice, only to have his slate disqualified by the Labor Ministry both times.2 In 1968, he won the majority of votes, but the Labor Ministry annulled the result and reappointed Orlando Alvisi as intervener with a mandate to hold new (p.234) elections in 1969. The CSN fired Meira after the military regime issued Ato Institucional no. 5, which restricted basic civil liberties.3 The 1969 union elections brought victory for the much more conciliatory Olímpio Gomes, who remained at the helm of a much weakened union throughout the worst years of military repression (1969–1973) under the government of General Emílio Garrastazu Médici.4 With the union so tightly controlled, Catholic lay groups and the increasingly militant local bishop became the most vocal voices of opposition to the regime and the CSN. In November 1967, for example, two members of the youth organization Judica threw pamphlets denouncing the military regime onto the streets from the diocese's VW minibus and were promptly arrested by a patrol of the 1st BIB.5 Bishop Dom Waldyr Calheiros stood up for his parishioners and workers that had been treated unjustly, but that voice of courage could not replace a viable union.

On economic policy, the military regime adopted a more stringently state capitalist logic that emphasized production and profit. It ended a policy that the state-owned companies such as the CSN could sell their products only domestically. In June 1964, two months after the coup, the new directorate signed an agreement to export pig iron to the United States. The military regime's monetarist advisers, led by Roberto Campos, believed that Brazil could not grow any further if it shielded itself from the world markets. Therefore, they abolished the obligation for national manufacturers to purchase nationally produced basic industrial goods regardless of quality. The CSN no longer enjoyed the captive market that had sustained its privileged and strategic position through the entire postwar republic, and it gained serious domestic competition when USIMINAS and COSIPA began production in the early 1960s. These mills made mostly steel plate, of higher quality than the CSN's because of greater specialization and newer technology. In 1966, the U.S. consulting firm Booz, Allen & Hamilton conducted a study of Brazil's steel industry and recommended that the CSN specialize more and cede market share to USIMINAS and COSIPA, a proposal the CSN directors fought tooth and nail because it would have meant that their company would no longer be the largest producer in the country.

The radical political change and the revised priorities in national development policy translated into much more gradual economic change for the CSN's workers. The government placed wages on an index that nominally protected them against inflation but in reality permitted a slow and controlled erosion of real income. In an exercise to legitimize these losses the regime made the metalworkers union, even as it was under intervention, sign off on contracts that simply applied the index to the company's salary tables. The CSN maintained its commitment to the scientific management (p.235) practices introduced in the 1950s. The first union contract after the military coup declared the goal to expand incentive plans (art. 17) and promised a revision of occupational descriptions (art. 21).6 The descriptions from the late 1960s would be much leaner than those from the early 1960s in order to protect managerial prerogative and limit the opportunities for legal challenges. In the 1970s, when the Boston-based consulting firm Arthur D. Little advised the CSN on occupational descriptions, they became minimalist one-page documents that described employee responsibilities in the most generic terms. The postcoup union contract also explicitly recognized the 1952 personnel rules as the document governing industrial relations and preserved clauses of the last precoup contract on the distribution of profits (art. 3).7 Legally guaranteed social benefits such as the salário família (family salary) remained untouched.8

The directors preserved some social assistance programs and abolished others. The 1965 union contract guaranteed that the Centro de Puericultura would continue to offer services free of charge to employees with lower incomes, and the CSN continued to provide generous credit at the hospital and in stores.9 The decision to abolish the daily milk ration was the most symbolic change because it had been closely associated with the image of the CSN as caring mother. Apparently, too many workers used the ration to make sweets and sold them to supplement their incomes, which in the CSN's eyes was not the purpose of its social assistance programs.10 The CSN also shed responsibility for the company town. It had commissioned a first report on the possible sale of the houses in 1960, but the years of the Goulart presidency had not been an opportune time to implement such sweeping change, not least because his government was closely allied with the local metalworkers union. The military rule opened a new window of opportunity. The CSN transferred its real estate to a holding company, the Imobiliária Santa Cecília S.A. (CECISA), which prepared the sale. The plan remained controversial and came to fruition only in the late 1960s after the company agreed to grant priority to current inhabitants and extend them credit at below-market rates to purchase their home.11 The scaling down of the assistance programs eliminated some of the vestiges of the Catholic paternalism and continued a push for a more rational labor regime. As for many of the earlier rationalization measures, those adopted in the 1960s had the most adverse effect on low-income employees. Many could not afford the house they lived in, for example, and had to move to less desirable neighborhoods in the city. The dissolution of the company town accentuated the socioeconomic differences between employees who had made a successful career with the CSN and those who merely worked there without the same prospects for professional and social advancement.

(p.236) Albeit gradual and incremental, the changes to the industrial relations framework and relations with the community represented a new factory regime driven by a different politics of production. The military regime and the veteran engineers leading the CSN wanted a revitalized desenvolvimentismo with much less trabalhismo. They believed that the CSN's primary contribution to Brazil's development was to produce large quantities of high-quality steel and that the social welfare goals enshrined in the trabalhista agenda should not interfere with that mission. They saw the experience of the late 1950s and early 1960s, when the union's strong political position and aggressive bargaining had made it—in the engineers' view—impossible for the CSN to fulfill its original mission, as evidence that developmentalism had been hijacked by the laborist left. The union, serving its constituency, had given precedence to fulfilling the social welfare goals of trabalhismo for the people of Volta Redonda over broader national development objectives pursued by the Brazilian state. The military regime's politics or production reemphasized desenvolvimentismo at the expense of fulfilling the promises of trabalhismo. Under the guise of a rhetoric in favor of national development, the military regime subjected the CSN to a more stringently capitalist logic and abandoned the postwar republic's social development agenda aimed specifically at industrial workers.

Considering this general political reorientation, the implementation of a new factory regime at the CSN changed surprisingly little for most of the workers. The political defeat of trabalhismo altered the power context for industrial relations, but it hardly affected the technical context and had limited impact on the market context. The workers lost their political voice but they did not lose their latent strategic power or their privileged material conditions compared to workers in other industries. The national wage index led to a gradual erosion of real income, but it preserved the high wage levels compared to other Brazilian industrial workers as well as the wage differences within the company. The strategic workers saw no reason to risk dismissal, persecution, and possibly even torture for trying to revitalize the union in the first decade of military rule. For most of them the promise of trabalhismo had been fulfilled, and they had no personal investment in the broader developmentalist promise to bring economic and social development to the entire country. Under the postwar republic, their union had employed technically strategic power to assure them of the full benefits granted by the labor law and to provide them with a relatively high standard of living. Under the military regime, their strategic position allowed them to retain many of these gains.

The fact that the union's success in using the institutions of trabalhismo to extract higher wages and greater benefits helped undermine the development model of the postwar republic speaks to internal contradictions of (p.237) the model and, in Burawoy's terms, of the respective politics of production. Setting up strategic industries in order to accelerate the country's industrial growth was the core goal of the developmentalist policy as conceived under the Estado Novo. However, the full implementation of the institutions of trabalhismo—chief among them the labor laws—in the 1950s created the conditions for workers in these industries to translate strategic power into concrete material gains and to reshape the factory regime for their benefit. They took full advantage of the CSN's strategic position in the economy and their strategic power based on the division of labor in an integrated steel mill to advance their economic interests, utilizing the institutional framework created under trabalhismo to its fullest extent. These findings cast new light on the trajectory of Brazil's developmentalism and invite comparison to other Latin American countries such as Chile, Colombia, Mexico, Peru, and Venezuela, which also built large state-owned steel mills under their respective import-substitution industrialization programs. The case of Brazil and the CSN shows that the creation of strategic industries such as steel inherently produced a category of strategically powerful workers that could exploit their position in ways that undermined the economic viability of the industry and thus the original development model. Critics of Latin American development have identified inefficiency and corruption (however defined) as its major flaws, but the case of the CSN shows that the roots of the problem go deeper than mismanagement.

Beyond Latin America, the study can serve as point of departure for a comparative analysis of steelworkers and their strategic power under a spectrum of political and legal regimes. The Soviet Union and India, for example, also had state-controlled steel sectors and adopted officially laborfriendly policies, but under very different market contexts and political regimes. Stalin's state-led industrialization in the 1930s, for example, assigned the steel complex in Magnitogorsk a role that was not unlike the CSN's role in Brazil's economy under the postwar republic. Technologically, Magnitogorsk and the CSN were very similar, since both had been built by Arthur McKee. With respect to market context, the Russian economy was, if anything, even more self-reliant than Brazil's, which enhanced the strategic position of the Soviet Union's major steel complexes and empowered their workers. But what did it mean for steelworkers under Stalinism to have strategic power? Did it guarantee the workers certain privileges that the state tacitly agreed not to challenge as long as the workers did not disrupt production, not unlike the situation at the CSN after the military coup? In the North Atlantic economies and Japan, on the other hand, which featured developed, privately owned steel sectors and thus very different market contexts, one would expect the strategic position of a given mill and its technically strategic workers to have been comparatively weaker.

(p.238) The history of industrial labor in Volta Redonda offers lessons for the study of other strategic state-owned companies in Brazil such as the oil giant PETROBRAS, founded in the 1950s, whose labor history has received even less scholarly attention than the CSN's.12 Otherwise, in the mid-twentieth century, the only entities with strategic positions comparable to the CSN's were the major railroads, the ports of Rio de Janeiro and Santos, and the large electric companies. Scholars writing labor histories of those companies would be well advised to pay close attention to the industry's strategic position in the national economy as well as its internal division of labor in order to assess workers' strategic power. On the other hand, the lessons learned from this study of the CSN are less applicable to the manufacturing industries in greater São Paulo and in the city of Rio de Janeiro, even though they employed most of the country's industrial workforce throughout the twentieth century. Not even the most technically complex of those manufacturing industries, such as the automobile assembly plants in the ABC, could rival the strategic position of core industries of the Second Industrial Revolution. Workers at the CSN, LIGHT, the Santos port, or EFCB had greater power to impact national politics and national development policy under the postwar republic than workers in less strategic industries, even if the latter displayed high levels of militancy, such as in the São Paulo textile industry.13 The existing scholarship on industrial labor in Brazil with its heavy focus on privately owned manufacturing industries in greater São Paulo has thus barely touched on an important dimension of the postwar economy: the power that workers derive from their industry's strategic position and its internal division of labor.14 It is my sincere hope that this study of the CSN will serve as a stepping stone for future scholarship that reflects the complexity of the twentieth-century industrial economy, incorporates strategic analysis into labor history, and thereby renders a more nuanced history of industrial labor in postwar Brazil.


(1.) Interview with Waldyr A. Bedê, former union leader (1961–1963), Volta Redonda, Jan. 20, 1998.

(2.) Internal Document, Nov. 16, 1964, DOPS/DGIE, DOPS 46 Dossier 2, 1–19. Letter from the CSN to DOPS, Aug. 1968, DOPS/DGIE, Secreto 25, 159–62.

(3.) Internal Document, DOPS/DGIE, Secreto 25, 157–58.

(4.) Recorte de Jornal—Ultima Hora, Aug. 7, 1968, DOPS—RJ, Prontuário 40.497—Companhia Siderúrgica Nacional; Interview with Olímpio Gomes de Oliveira, former union president (1969–1973), Volta Redonda, Nov. 11, 1998.

(5.) Judica was an open Catholic youth organization that did not restrict membership by sex, age, or profession, unlike most other organizations under the umbrella of Catholic Action. O Bispo de Volta Redonda: memórias de Dom Waldyr Calheiros, org. Celia Maria Leite Costa, Dulce Chaves Pandolfi, and Kenneth Serbin, 2nd ed. (Rio de Janeiro: Editora FGV, 2001), 93–98.

(6.) Acordo Sindical entre CSN e STIMMMEBMVRRBP, Oct. 16, 1964, Acordos Sindicais, CSN, Gerência de Assuntos Trabalhistas, anexo.

(8.) Acordo Sindical entre CSN e STIMMMEBMVRRBP, July 1, 1965.

(10.) Interview with Ervin Michelstaedter, former head of the CSN's Engenharia Industrial, Volta Redonda, July 22, 1998.

(11.) Cláudia Virginia Cabral de Souza, “O espaço urbano e a dominação,” in Arigó: O passaro que vem de longe, Revista do Centro da Memória Sindical (Volta Redonda: Sindicato dos Metalúrgicos de Volta Redonda, 1989), 35; Interview with Rosalice Magaldi Fernandes, daughter of Othon Reis Fernandes, Volta Redonda, Oct. 10, 1998.

(12.) One clear indication of the strategic position of Brazil's state-owned industries was that the military regime assigned a high-ranking industrial security officer from the Serviço Nacional de Informações (SNI) to each of these companies soon after the 1964 military coup.

(13.) Fernando Teixeira da Silva's study of labor at the Santos port in the interwar period shows an awareness of the industry's strategic position. Fernando Teixeira da Silva, Operários sem Patrões: Os trabalhadores da cidade de Santos no entreguerras (Campinas: UNICAMP, 2003).

(14.) John Humphrey pays close attention to the differences the technically determined organization of work makes for labor movements, but he does not consider the strategic position of the industry or its workers. John Humphrey, Capitalist Control and Workers' Struggle in the Brazilian Auto Industry (Princeton, NJ: Princeton University Press, 1982).