Billionaire Ludwig's Brazilian Gamble

The richest man in America risks his fortune in the Amazon, opening an untamed area

The scene is jarringly surrealistic. For thousands of square miles, there is nothing but the endless green of the Amazon rain forest, forbidding, primeval, untamed. Then, on a remote bend of the Jari River, a fast-flowing tributary, the vista changes dramatically. There, as tall as a 16-story building, stands a monument to modern engineering: a brand-new, spanking-white pulp plant, which reaches out with ducts, cables and conveyor belts to a wood-chipping mill, a chemical factory and a power generating facility.

The towering plant was built in Japan and towed in two sections last year to Brazil's interior, where it began start-up operations six months ago. The centerpiece of an industrial and agricultural complex of audacious scope and cost, the plant stands on a company-owned property of about 5,800 sq. mi., which is larger than Connecticut. The pulp factory and its ancillaries cost $400 million to construct. A companion plant is expected to be towed up the river and put in operation by the mid-1980s. To feed the plants with young trees, a vast reforestation is under way that will clear the land of old growth and establish huge new timber farms. The principal planting is the Gmelina arborea (pronounced malina ar-bor-ea), a hardwood native to Burma and India that grows to 15 in. in diameter in five years and 30 in twelve, or roughly twice as fast as the southern pine, a major source of American pulp.

Trees constitute only one of the crops.

Brazilian and U.S. experts, using the "miracle rice" imported from the Philippines, are developing the world's largest fields, which already cover some 7,900 acres. A big poultry farm is being set up, and experiments are under way to breed a more robust strain of water buffalo.

All this has been conceived, directed, and largely financed by one man: Daniel Keith Ludwig; 82, the secretive shipowner and industrialist whose estimated net worth of $3 billion or more makes him the richest American. Tough-minded and intensely shy, Ludwig is sole owner of his enterprises and thus must answer to no one. Operating from offices in Manhattan's Burlington House, he runs a maze of companies (he has 19 in Brazil alone). His flagship firm, National Bulk Carriers, operates one of the world's largest private fleets of huge supertankers and cargo ships. He is also proprietor of an array of global enterprises, which include the Princess hotel chain in Mexico, the Bahamas and Bermuda, oil refineries and a number of savings and loan associations in the U.S.

Ludwig's fortune is based on foresight; after World War II, he built the first supertanker in Japan and devised the means to finance ships through long-term charters. Recalls a former aide: "Often he just sits in his office and thinks three or five years down the road." In the 1950s Ludwig began pondering the world's increasing use, and dwindling supply, of pulp and timber. After surveying sites in Venezuela and elsewhere he settled on Brazil, in part because he found an immense tract for the right price. He bought the land in 1967 for less than $1 an acre.

But the Amazon is so wild that Ludwig was obliged to become a one-man development program. In the past twelve years, his Jari Forestry and Agricultural Enterprises has invested some $780 million, of which $520 million came directly from Ludwig's resources. He has carved from the rain forest four towns (the largest of which is Monte Dourado), as well as an 85-bed hospital, four schools, 4,500 miles of roads and trails, a 26-mile railroad, and three small airports. The project has attracted so many job seekers, peddlers and hangers-on that the population of the area has surged from almost nothing to 30,000.

Reports TIME'S Buenos Aires bureau chief George Russell, who visited the project: "Ludwig's efforts in the Amazon are capitalism in its most epic sense. But he has wisely insisted on 'Brazilianizing' Jari: only 40 of the 8,500-member labor force are non-Brazilian. He has drawn university graduates from the country's south, illiterate laborers from Brazil's economically stricken northeast, and equally unfortunate natives from the Amazon's primitive villages. Ludwig's managers at Jari claim with pride that they have created a true meritocracy with instant opportunities for advancement for anyone who shows talent and the desire."

Since Brazilian law prohibits a corporation from profiting from the many services necessary in running a community, the Jari enterprise must give away or sell at no profit a large range of services and amenities. It operates a supermarket where goods are sold at just above cost, provides free meals to employees in company cafeterias and runs an air shuttle service that charges no fares.

Even for a man of Ludwig's wealth, the Jari project can be a drain. His executives believe that funding for the project is catch as catch can. When Ludwig has surplus funds from his many ventures, he pours them into Jari. When his cash flow is tight--a situation that even a billionaire occasionally encounters--everybody is told to start saving paper clips.

Ludwig has built barracks for ordinary laborers as well as fancier bungalows for the technical and managerial staff. But he cut back substantially on plans for additional housing, especially for the lowest-paid workers. Result: squalid slum towns, inhabited partly by whores and thieves, have sprung up near the sites, and many workers live in unsanitary and unsavory conditions. At first, Ludwig relied entirely on Brazilian contractors to supply laborers, and some of the bosses exploited their men and skimmed off their wages. Now Ludwig has set up safeguards to ensure that the workers receive their full pay, which averages about $12 daily, or three times the national rural average.

The lack of satisfactory living conditions in the rough territory has contributed to a debilitating rate of turnover, more than 50% a year. This adds enormously to the cost of training programs that Ludwig's managers must conduct in order to acquaint the largely backwoods work force with modern machines.

The turnover at the top in Jari has been higher than at lower levels. In the past dozen years, between 22 and 26 chief operating executives at the Jari project have been fired or shifted out (nobody seems to recall the exact number). Some moved on because they had fulfilled the phase of development that required their particular expertise. But many were shunted aside because they disagreed with Ludwig or failed to anticipate his wishes.

Despite his age and a painful back ailment from a shipboard accident in the 1920s, Ludwig is amazingly energetic and keeps close watch on Jari. He receives a constant flow of reports at his headquarters. More important, several times a year he flies to Belem on Brazil's northern coast, traveling economy class except when he can hitch a free ride on a friend's corporate jet. At Belem he waits for the Fairchild turboprop that makes the 90-min. flight daily between the port city and Jari. Disdaining VIP treatment, Ludwig crowds on board with newly recruited laborers, technicians returning from a few days of whooping it up in Belem and families coming back from shopping trips.

Once at Jari, Ludwig ignores the successful projects to concentrate on problem areas. Like a conceptual architect who carries the blueprints in his mind, he supervises new undertakings down to the most minute detail. Yet he is becoming less dictatorial. The present project chief, John Trescot Jr., 54, an ace cost cutter who has been on the job for six months, claims that he can actually argue with him over decisions. Ludwig is beginning to accept a substantial dilution of his authority. He has created an eight-man committee that exercises an overall policymaking role. Also, Ludwig has willed Jari to a Swiss-based cancer institute that he has set up, and ultimately it will use profits from the project to promote medical research.

There is method in Ludwig's mellowness. The Jari project is approaching the crucial second stage of development. The present pulp mill is planned eventually to turn out 750 metric tons daily, making it moderately large by world standards. If the project is to be fully successful, Ludwig needs to install another plant, which might process pulp into newsprint. Luckily, large deposits of kaolin, a white mineral used in papermaking, have been found on the Jari property.

Until now, in order to run the operation as a one-man show, Ludwig has even refused Brazilian tax credits that could have saved him roughly 50% of his own investment. However, since the next stage will cost $650 million to $750 million and perhaps much more, he is seeking to line up credit from American and European financial institutions.

He faces noisy opposition in Brazil.

The government requires him to sell all of his rice and most of his paper pulp within the country so that Brazil can save scarce foreign currency. But unless Ludwig can export to hard-currency countries, he will have a difficult time raising money.

Ludwig, who was born in South Haven, Mich., is frequently portrayed in the Brazilian press as an avaricious gringo out to despoil the Amazon. Lurid newspaper stories tell of Brazilian workers being held slaves by squads of former Green Berets, and Brazilian environmentalists accuse Ludwig of raping the native forests. Both the Brazilian senate and chamber of deputies have started investigations into the Jari project. One leading nationalistic critic charges that Ludwig's project is only the first step in a takeover of Brazil's Amazon by big multinational firms.

None of these wild charges have been shown to have any foundation.

On the environmental front, Ludwig has been extremely careful. Though planting of imported trees has altered the surprisingly fragile ecological balance in the Amazon basin, Ludwig's foresters claim the new growths are actually revitalizing the rain forest's mineral-deficient soil. Rather than ruining the Amazon, the project holds the promise of opening a vast region that can serve the whole country, which needs the jungle's wealth, and the world, which needs the pulp, paper and food it can produce.

Yet the hostility can handicap, or possibly abort, Ludwig's grand plan.

That would be tragic, for Brazil as well as for Ludwig. Brazilians have responded ineffectually to the lure of the Amazonian frontier. They have ignored the ill-nourished natives and have failed to rally the dedication that made possible the U.S.'s winning of its own West. Ludwig's predictions two decades ago of pulp and timber shortages are reflected today in tight markets and high world prices. He or his successors probably could turn the Jari project into a profit maker, though it may take decades to recover his investment. That, according to his few close associates, is not one of his major concerns. What he wants is one final, enduring achievement --showing that productive riches can be created in one of the world's last and most remote undeveloped areas. sb

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