Brazil external policy and foundations of the steelmaker industry

In 1940 the United States Export–Import Bank authorized US$25 million to build an integrated steelworks at Volta Redonda, financing the state-owned Companhia Siderúrgica Nacional (CSN) and marking a turning point in Brazilian industrialization. This essay asks to what extent Brazil’s diplomatic rapprochement with Nazi Germany influenced that decision. It engages a historiographical dispute between Marcelo de Paiva Abreu, who holds that German trade with Brazil was too limited and wartime delivery too implausible to shift American policy, and Gerson Moura, who argues that the German offer carried political weight independent of its material feasibility. Drawing on U.S. diplomatic records from the Foreign Relations of the United States series, the Vargas archive at CPDOC, and Vargas’s public addresses, the essay finds that German proposals — particularly Krupp’s financing offer — functioned as effective political leverage. American officials privately acknowledged that German financing of the steel project would cost the United States its position in Brazil, and Washington moved from vague assurances to concrete credit only after Vargas publicly signalled that alignment had a price. The case suggests that industrial policy in a dependent economy can be advanced by exploiting rivalry between great powers, and that the political value of a competing offer may exceed its material credibility.