General Articles

THE LIGHT

You have to go to Brazil to find Canada’s biggest public utility. It all started with a donkey deal

CHARLES LYNCH,PIERRE BERTON August 15 1947
General Articles

THE LIGHT

You have to go to Brazil to find Canada’s biggest public utility. It all started with a donkey deal

CHARLES LYNCH,PIERRE BERTON August 15 1947

THE LIGHT

General Articles

You have to go to Brazil to find Canada’s biggest public utility. It all started with a donkey deal

CHARLES LYNCH

PIERRE BERTON

TO MOST CANADIANS, if they’ve ever heard of it at all, the name “Brazilian Traction” conjures up a picture of an obscure and struggling enterprise engaged in the manufacture of tractors.

As for “The Light,” which is Brazilian Traction’s nickname, they’re all in the dark about that.

Yet, to most of Brazil, the nickname of this giant Canadian company, now approaching its fiftieth birthday, is a byword —part of the language.

What the average Canadian doesn’t know—perhaps because Brazilian Traction

has never got around to telling him—is that, next to the banks and the railroads, the huge South American utility is the biggest single corporation in Canada. It surpasses such giants as International Nickel, Bell Telephone and the Aluminum Co. of Canada, in its total assets.

Brazilian Traction, Light and Power Co., Ltd., which of course has nothing at all to do with tractors, is one of the world’s largest utilities. It is Canada’s largest foreign holding and it is the largest single corporation in Brazil.

By the end of 1946 Brazilian Traction had 478 million Canadian dollars in the kitty and, to quote an old Brazilian expression, that ain’t coffee beans.

Right now it’s providing tramway service, electric energy, telephones and gas to 20 million people, or roughly about twice the population of Canada.

Last year its customers paid out 1,560 million cruzeiros (or $78 millions) in light, telephone and gas bills and tram tickets.

It is, in short, a sort of Brazilian version of Bell Telephone, Ontario Hydro and Toronto Transportation Commission rolled into one. Or you might compare it to the B. C. Electric which serves three Pacific Coast cities with gas, streetcars and electric power.

And yet the only tangible sign that Brazilian Traction is a Canadian company is four floors of unpretentious offices in Toronto’s Canadian Bank of Commerce building, with 150 people working quietly and a heavy incoming mail, most of it bearing Rio de Janeiro postmarks.

The other 49,850 employees are all in Brazil— in the southeastern triangle between the cities of Santos (157,000), Rio de Janeiro (2,000,000) and Sao Paulo (1,500,000), the industrial core of the country which Brazilian Traction serves. Ninety per cent of these employees are Brazilians, few are Canadians. Canadians, the company found out early in the game, just get settled, then they want to go home.

Brazilian Traction got its start in the late 1890’s when Sir William MacKenzie, a Toronto financier and head of the Canadian Northern Railway (later to become part of the CNR), suddenly bought a set of donkey-drawn streetcars in a town he’d hardly heard of—Sao Paulo. This came about largely by accident and as the result of other men’s misgivings. The tramline franchise was held by a Brazilian named Souza and an Italian immigrant named Guaico, both of whom began to realize that as far as streetcars were concerned the days of the donkey were numbered.

Neither Guaico nor Souza could afford to electrify their tram system so Guaico set out to peddle the Sao Paulo franchise—in Italy, in England, in the United States. But the financiers weren’t having any of Gualco’s slips of paper. In Montreal, however, Guaico was told that those mad, impetuous Torontonians, who had been flinging a railroad across their native country, might be willing to take a flier in South America. Sure enough, with a little wheedling, the Torontonians were.

Off to Brazil went a young lawyer from Kincardine, Ont., Alexander MacKenzie (no relation to Sir William, the railroad builder). His commission: Investigate this Guaico, look over the prospects, come back in six months.

MacKenzie stayed 30 years.

He plunged into a study of Brazilian law and became one of its greatest experts. He learned to speak Portuguese like a native. He broadened the holdings of the tiny power and traction company. In the generation he spent in Brazil he weathered the country’s ever-shifting, always unpredictable politics, fought to keep Brazilian Traction an allBrazilian entity, and checkmated the notorious international financier, Lowenstein, who wanted to merge and gain control of power interests operating in Barcelona, Mexico City and Brazil. He retired in 1928 as Sir Alexander MacKenzie, the greatest single influence in the affairs of Brazilian Traction, and left the bright, white streets of Rio for his native Kincardine on the shores of Lake Huron where he died in 1943.

Inaugurating a power service in a country whose transportation was essentially primitive wasn’t all bananas and cream. Brazilians shook their heads when Dr. Frederick Stark Pearson, one of the world’s great engineers, arrived around 1900 to build the first power plant (36,000 horsepower) at Parnahiba, on the outskirts of Sao Paulo. Dr. Pearson looked glum, too. There were no roads at all and all the equipment had to be hauled to the site by oxcart. But the plant was built.

Today, Brazilian Traction has seven huge hydroelectric plants, with a total of 881,200 horsepower.

Call a Trolley, James

WHEN MacKenzie arrived, just before the turn of the -century, the trams of Rio and Sao Paulo were tiny, open affairs each drawn by three mules. The Emperor had his own private streetcar, brightly gilded, and emblazoned with the royal coat of arms. Electricity brought in all manner of new trams. There were special cars for weddings and funerals and Rio still has baggage trams, mail trams and trams for carrying garbage.

During the war, when gasoline was rationed and Brazilians were either burning charcoal in their cars or riding by streetcar, the old opera trams were revived on Rio Streets. These were special trams with immaculate white seat covers for transporting Rio opera patrons to their homes.

Today the tram system, which was the cause of it all, is pretty much of a headache to company officials. Rio’s open trams (they’re built that way for ventilation in a tropical climate) are jammed to bursting. Instead of entering by a door at one end, as on Canadian streetcars, Rio citizens climb aboard anywhere. There are two wooden running boards on either side of the car. You don’t drop a ticket in a box; the conductor comes along and collects your fare. Brazilians cling precariously to the tram, standing two deep

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on the outer steps on these open cars.

trams, and so is the company, but to date neither side has been able to come to any arrangement. “Brazilians are modern-minded — they like the liest, but they don’t want to pay the shot,” is the way one official put it. The city limits the number of trams (the company operates 1,200 in Rio), doesn’t let the company put in new tracks,

“lhey d even ride on the roof if wed let ’em,” one company official remarked.

An intensely modern city, Rio is pretty sensitive about, these antiquated

and will not sanction fare increases.

Thus, in a city where operating and maintenance costs are high, tram rides cost as little as one cent. Another peculiarity is that Rio operates both firstand second-class trams. Secondclass cars usually are trailers to firstclass cars. There’s really no class distinction, but people in shirt sleeves or working clothes usually ride second class along with those who can’t jam themselves onto the first class.

The company breathed a sigh of relief when the municipality of Sao Paulo took over the tramway system there. The municipality set up a separate company to operate all transj port there and Brazilian Traction will j

hold shares in the company. There has been talk of a similar development in Rio.

After 48 years the trams have become the orphans of the big holding company which brokers refer to simply as “Brazilian” and Brazilians refer to simply as “The Light.”

Light is indeed the big stock in trade of the Brazilian Traction, Light and Power Company which holds nine offspring companies in the palm of its corporative hand. Today Rio de Janeiro has the best-lighted streets in the world. Grab a picture postcard of Rio at random, and the chances are it will show the famous “string of pearls,” the lights that outline the winding shores of the city at night, made possible by Canadian enterprise.

The industrial triangle of land which The Light serves is to Brazil what southern Ontario is to Canada—only more so. It covers 342,000 square miles and has the highest population density of the country. Rio and Sao Paulo are two of the largest cities in South America. The “municipality” of Sao Paulo (of which the city is the heart) is Brazil’s great coffee state. Santos is one of Brazil’s most important seaports. These three cities are the hub round which The Light interests revolve. In this small area it produces 60% of Brazil’s total electric power, 75% of her telephone service.

Uphill, Downhill

Nobody is quite sure whether or not The Light grew up with Sao Paulo or whether Sao Paulo grew up because of The Light. But there’s little doubt that this wonder city of South America has enjoyed boom-town growth because of cheap, abundant hydro - electric power. It has reached a population of 1,500,000 and is the world’s fastest growing city. Factories, warehouses and practical American-style homes shoot up on its ever-widening borders.

The , Light’s biggest hydro plant is also the continent’s biggest — at Cubatao on the cliffs above Santos on the sea. Although it isn’t as big as some Canadian hydro developments (the one at Shipshaw, Que., for example, is bigger—-over a million horsepower), Cubatao is one of the biggest high-head plants in the world. In Canada the water doesn’t usually drop more than 200 or 250 feet. At Cubatao the headwaters of the River Plate, which flows more than 2,000 miles to Montevideo on the sea, are dammed and pumped uphill, a rise of 100 feet, into a huge reservoir at the edge of the plateau, where the water can be spilled 2,300 feet over the cliffs. The impulse wheels at the foot of the drop are the largest in use anywhere, and they develop 472,000 horsepower.

The Cubatao development lies between Sao Paulo on the plateau and Santos on the seacoast below. Although the ground slopes gently southwest down past Sao Paulo, almost from the edge of the cliffs, the engineers have succeeded in forcing the water to flow northeast—the opposite way. They straightened out one of the tributaries of the River Tieté, on the outskirts of Sao Paulo, turned it into a canal, and installed two pumping stations in order to suck the water« of the river up into the Grande Reservoir (capacity : 835,000 acre feet), an artificial lake which is fast becoming a summer cottage resort.

The Lages hydro plant is the result ©f an equally spectacular development. In this case, the reservoir is swollen by water which is pumped under the rolling hills through a four-mile tunnel which connects two parallel rivers. Two pumping stations lift the water a total of 125 feet through a second tunnel so that the company can take

advantage of a 1,000-foot drop over the cliffs. This plant has an installed capacity of 190,000 horsepower.

In its drive for electrical franchises, Brazilian picked up as incidentals the rights to operate Brazil’s gas and telephone enterprises. Today nearly everybody in Rio, Santos and Sao Paulo cooks with gas but only 330,000 use telephones. Part of this is due to the telephone shortage (there are 100,000 on the waiting list) but most of it springs from Brazilian illiteracy which is Public Enemy Number One in the country and the object of an intensive governmental campaign.

The growing increase in telephone customers is a ready index to the percentage of illiteracy. As the Brazilian learns to read, he seems to want a telephone. But there’s a longway to go yet: In Sao Paulo only six people per 100 have a telephone, in Rio, eight. In Toronto, the figure is 22 to 100 and in Victoria, B.C., it’s over 30.

Canadian officials of the telephone company have, as a matter of fact, made some interesting changes in Portuguese, the language of Brazil. In Portuguese, the words “three” (tres) and “six” (seis) sound almost exactly the same. So the phone company urged its subscribers to say “half a dozen” (meya duzia) instead of six. So today if his phone number is 26-4676 the Carioca says: “Two half, four half, seven half a dozen.” It works fine. The company also claims credit for inventing the verb “disear” (to dial).

The typical Brazilian is a quiet, cultured, violence-hating soul. (His revolutions are the least bloody of all South American political uprisings.) He’s trusting, too, if the story about the con man who sold a farmer a Rio streetcar can be believed. The farmer paid $3,000 down, rode to the end of the line and became irate when the conductor refused to turn over the cash fares to him. Art and music are part and parcel of the Braziliero’s life. But he’s not brought up to be a businessman nor an engineer. This lack of practical ability was most noticeable when Brazilian Traction took over the meagre telephone network of the city of Campos in 1917.

The existing system had been built by Brazilians working from textbooks written in English and was, at the time, one of the lesser-known wonders of the world. The same company supplied the town with both electrical energy and telephone service. Phone lines and power lines were strung side by side on steel poles. As time passed the glass insulators became broken and the uninsulated phone and power wires came into contact. The result was that subscribers received electric shocks of varying intensity thrown in with their phone conversations—a weird blending of the works of Thomas Edison and Alexander Graham Bell. In the central exchange, the hapless operators sat on chairs mounted on glass insulators and wore insulators strapped to their feet. It was bearable in dry weather, but when it rained the operators had to flee their posts, and subscribers went near their phones at the peril cf their lives. Today, Campos has a top-notch automatic service.

Torontonian President

Brazilian’s new president is 45-vearold Henry Borden, K.C., from Toronto, a nephew of Sir Robert Borden. He took office last year. His main task is to revitalize Canada’s “unknown company” and to give impetus to the five-year expansion plan that will pour $160 millions into Brazil.

One of Borden’s big tasks will con-

tinue to he that of public relations, a task that has always called for skilful diplomacy. A company official puts the problem rather neatly:

“Suppose,” he says, “you had a single corporation in Canada owned by Chinese which was running the TTC, Ontario Hydro, Consumers Gas and Bell Telephone in Toronto—and was also doing the same thing in Montreal and Ottawa. How do you think some Canadians would react?”

Main thorn in the company’s side right, now is a small, but persistent Communist campaign demanding that the government take over The Light. Being a huge utility and foreign owned, The Light is a natural for vilification campaigns. Main Communist slogan is the cry of “colonizing capital.”

The other major political factor the company has to face is a labor article inserted in the new Brazilian constitution of 1946, under president Dutra, which requires “obligatory and direct participation of the workers in the profits of the concerns, on the terms and in the way provided by law.” Its effect on The Light won’t be known until implementing laws are passed.

The axe of nationalization, suspended by slender threads of political whim has always hung over the corporate neck of Brazilian Traction. Yet the company has succeeded in weathering many a coup, upset and revolt. It has done it chiefly by leaning over backward to prove that it has no interest in things political. “We have no politics whatever. Whoever is in charge is our master,” a company spokesman said the other day. Often, however, oil has to be poured on troubled waters and the chief pourer in the last 27 years has been a sandyhaired World War I hero, Major Kenneth McCrimmon, G.B.E., D.S.O., whose official title is vice-president and whose unofficial job, though the company is reluctant to admit it, is “trouble shooter.”

McCrimmon, who is a nephew of old .Sir Alexander MacKenzie, had his work cut out for him in 1932 when Getulio Vargas, the swarthy, military dictator, talked about enforcing the

nationalization planks in the platform that swept him into power. Nationalization was on the statute books of Brazil during the Vargas regime, but, thanks perhaps to McCrimmon’s phenomenal popularity, never enforced as far as Brazilian Traction was concerned. Brazilian’s other main worry came shortly after 1940 when it began to look as if the country might enter the war on the side of the Germans. The no-par common stock, which had been steadily climbing since the stock market crash (when it was $82) to $303T in 1937, tumbled to $3M in 1940. The company held its breath, while the situation eased. In the summer of 1942 it had moved up to $11^. Then the Nazis sunk five Brazilian ships in a week and it dropped a point. Shortly after Brazil entered the war on the Allied side and today Brazilian common hovers around $22.

The proportion of Brazilian’s seven million-odd shares held by Canadians is not published, but it’s significant that eight out of 12 of the company’s directors are Canadian. And it’s always been a favored investment with Canadian stock market followers, although no dividends were paid on common stock in 1933, 34 and 35 and again in 1939 and 1940.

This didn’t mean that Brazilian wasn’t earning money. But, because of exchange difficulties arising out of the collapse of the coffee market, a Brazilian Government ruling prohibited sending money out of the country except for necessary purchases. Now the man who owns Brazilian common gets a dollar a share in December and another dollar in June, which at the present rate of purchase is a good nine per cent on his money.

And, when you stop to think of it, that’s probably a lot more than canny old Sir William MacKenzie figured on, when Guaico the Italian sold him a length of streetcar track, a few old trams, a stableful of donkeys, and the right to string electric light wires along the oxcart trails that cut through the great, green river-creased mass of southeast Brazil. A"