Brazilians Now Operate Paper and Rice Empire : Ludwig’s Amazon Project Thriving
Daniel K. Ludwig’s dream of a paper and rice empire in the tropical wilderness here on the banks of the Jari River is alive and well under new Brazilian management.
Ludwig, an American shipping magnate, put about $1.4 billion into his visionary project. When he pulled out in 1982, locked in political conflict with the Brazilian government, Ludwig accepted $580 million, payable over 40 years, from a syndicate of Brazilian corporations.
The venture that Ludwig left behind, surrounded by controversy and suspicion, was a pioneering effort to use the tropical rain forest and the rivers of the Amazon Basin to produce cellulose for the world’s paper markets, plus rice on mechanized plantations to feed Brazil’s growing population of more than 130 million.
Last year, the pulp plant, floated here on barges from Japan, began producing 230,000 tons of snow-white cellulose and more than 200,000 tons of kaolin that is then shipped to Western Europe and other far-off markets.
The rice plantation, now 8,000 acres of leveled and irrigated land that is seeded from airplanes, is producing 35,000 tons in two annual crops. Big new yellow combines can be seen shearing through green fields of ripe rice, while nearby fields are being drained in preparation for seeding the next season.
Edmundo Barbosa da Silva, a director of Companhia Monte Dourado Forestal S.A., which runs the Jari project, estimated operating revenue this year at about $110 million. That would provide a slight profit after two years of losses.
“There should be a statue to Ludwig,” Barbosa da Silva said. “He led the way when no Brazilian investors would have run such risks in the Amazon.” Barbosa da Silva, a former career ambassador, works for Augusto de Azevedo Antunes, the new owner of the Brazilian mining company that leads the 23-company Jari syndicate.
The new owners say that Ludwig’s visionary genius was not matched by an adequate administrative structure nor the clear government policy necessary for its success. This has left a legacy of serious problems that the Brazilian owners have yet to overcome.
When Ludwig bought the title to the Jari properties, which lie partly in the state of Para and partly in the federal territory of Amapa, he paid $5 million for the shares of a company that was devoted to gathering Brazil nuts in the forest. He also obtained claims to 8,000 square miles of land, an area the size of Massachusetts. The titles are now in a tangle of litigation with federal and state agencies. The issue is complicated by the presence of about 600 squatters on the land.
Ludwig cleared about 250,000 acres of virgin forest and planted trees suitable for cellulose production, including a fast-growing species called gmelina . It was found later that the gmelina did not do well on sandy soil, and replanting has shifted toward eucalyptus and Honduran pine. Until forest management improves yields and the area is enlarged, a second pulp plant called for in the original plans cannot be installed.
Cost control did not figure prominently in Ludwig’s administration. He built a pretty company town with brick buildings for about 6,000 employees and workers and did not charge for electricity or schools. Many older workers remember him with affection, among them his former housekeeper, who says: “He never raised his voice to me.”
But during his three or four visits a year, Ludwig often changed plans and fired managers. The operation was run basically from a New York office. There is evidence in the records that huge amounts of diesel fuel, barged in from distant ports, was pilfered. Spare parts for bulldozers, logging lifts, trucks and a small railroad were flown in from abroad. There was little or no attempt to make local repairs.
Some drastic changes have been introduced. The work force of the forestry and industrial operation has been reduced by 3,000 from the 10,000 reached under Ludwig. Diesel fuel consumption, mainly for a 55,000-kilowatt power plant and lime kiln, has been replaced by wood chips and wood gasification, cutting petroleum fuel consumption to 18,400 tons last year from 91,000 tons in 1979.
“Productivity per man in the cutting of the 6,000 tons of wood we take out each day has been doubled,” said Janusz Wscieklica, the director of Jari’s operations. Wscieklica, who came to Brazil from his native Poland in 1948, was industrial director of a steel plant before coming to Jari.
The new operators have set a goal of reducing operating costs to $6 million a month from $12 million, and a new approach to the maintenance of equipment, including 1,100 heavy vehicles, has already produced major savings. Spare parts are now made in a big new machine shop at Jari or are procured elsewhere in Brazil.
With operating costs now matched by revenue, the big challenges facing Jari involve additional investments. The private owners are getting help from the Brazilian government’s development banks, which have taken over $240 million in foreign debts in exchange for non-voting shares.
“We need a hydroelectric power plant to expand pulp production and develop a refractory bauxite mine on the property,” Barbosa da Silva said. “We are negotiating with Electronorte, the state power company, to build a 100-megawatt plant at a site on the Jari River.”
Ludwig tried to get the same plant built, but under his administration Jari was attacked by Brazilian nationalists as an “imperialist” project, and this blocked any government help.
Now, under Brazilian management, the Jari operation is seen as a test of Brazilian enterprise, and criticism has virtually disappeared from the local press.
“We are going to make this work,” said Jayme Mascarenhas, director of forestry, who came here six months ago after 23 years in forest management in southern Brazil. “Jari is a window on the future of the Amazon. If we succeed, it will be a 200-year advance for the region.”
There are already about 40,000 people living in and around the Jari project, including many in camps of wooden shanties spread along the river across from the company town.
The rice plantation and a water buffalo ranch, with 9,000 head, are not only contributing to food supplies in Belem and Manaus, the major Amazon cities, but are also providing demonstration areas for how Amazon river lands can be made productive. Other projects are being modeled on this experience.
