Money lent by the EC through the European Iron and Steel Confederation has paid for the creation of the Carajas railway line, which runs 900km - about the distance from Glasgow to Dover - from the biggest iron ore reserves in the world to Sao Luis, a deep-water port on the northern coast of Brazil. There is enough iron ore in Carajas to last 350 to 400 years.
It is difficult to convey the infernal impression of more than 140 charcoal kilns belching heat, smoke and choking fumes in the tropics. I was appalled; for days afterwards my eyes smarted and throat itched. The kilns can produce nearly 1,500 cubic metres of charcoal every six days. Thousands of hectares of rainforest are being destroyed to make iron.
I asked to be shown around. The manager was proud of his plant. Yes, they did use forest trees - they make better charcoal. He was employed by a local iron-smelting company and it was his job to get the charcoal to its furnaces. Only his supervisory staff had their work cards stamped. The rest were not officially employed. The workers who loaded the kilns were paid about pounds 12 for a 72-hour week - about 16pan hour.
The shanty towns where the workers live are dreadful. They are miles and miles from anywhere up loggers' earth roads and there is no water supply to the houses.
The EC was the largest funder of the railway project. The European Iron and Steel Confederation put up a loan of dollars 600m, European banks put in dollars 450m and the World Bank dollars 300m. The justification for the EC is that we gain access to 13.6 million tons a year of cut-price iron ore, for 15 years. The trains - 2km long - that pull the iron ore from Carajas to Sao Luis will provide half our iron-ore imports.
A different view would be that we are doing a good job in undermining the European steel industry. The iron smelters have their charcoal for next to nothing; the wage costs for their workers are about pounds 60 a month. Brazilian federal and local government have offered major grants and tax concessions to the smelters by the railway line.
All around Acailandia we saw where vast acres of forest had been felled and converted to fazendas - great ranches where the trees had been cut down and the land put down to pasture, although usually there was no sign of cattle on the property. The wealthy had been offered incentives to move in for purely speculative development.
One such plan is to establish a cellulose industry by the railway line. Two multinational companies have already been given approval to proceed. Vast swathes of land are to be planted with eucalyptus trees - a degrading monoculture that is useless for the small farmers who will be displaced.
One cellulose factory alone needs 250,000 hectares of eucalyptus to be permanently supplied. Cellulose production requires frequent washing in a chloride solution. If normal practice is followed, this will be discharged straight into the river Tocantins. Chloride is not kind to fish or humans.
Already thousands of dispossessed, landless peasants are on the move. Some live in the shanty towns while many others squat on the ranches, in an attempt to establish residence rights which would, in theory, give them possession under Brazilian law.
Violence is rife and the Brazilian police and judiciary have scant regard for upholding justice. I talked to a town councillor in the state of Para, who had been shot. His companion had been killed. In Para and other states of the north-east, 41 people were killed in land disputes in 1991. The persistent failure to apprehend the guilty has fostered an atmosphere in which violations of human rights are becoming increasingly common.
Both the industrial and rural unions have a precarious and threatened existence. They support attempts to form co-operatives and to research new crops. But the research money goes to the eucalyptus growers.
Of course, Brazil has every right to develop its mineral riches. But what can be done to stop the impoverishment of its poor and the destruction of the rainforests and the environment? I would want to strike a very hard bargain indeed before cancelling any of the country's enormous debts. Unlike other Latin American countries, such as Mexico and Chile, which have introduced reforms, Brazil has continued to pursue the worst aspects of predatory capitalism, protectionism and state enterprise on behalf of the powerful. It cannot be bothered to set up an effective tax collection system. Inflation is currently more than 1,000 per cent.
The country has on seven occasions made promises to the IMF to make economic reforms - seven times those promises have been broken. If you want a primary school in the area where I was visiting, you have to build it yourself and support the teacher, who may then be provided with a 'salary' of dollars 5 a month by the state.
If Brazil's foreign debt was cancelled, its ruthless rulers would ensure that only they benefited. Debt is far and away the most important leverage we have on behalf of Brazil's dispossessed.
At the same time, however, Europe should be giving much more support to the work of aid organisations such as Oxfam, who support the poor by building up their capacity to defend themselves socially and economically - to establish land rights, negotiate wages and increase income-generating activity.
It is grim to meet courageous local people fighting feudal conditions in late 20th-century Brazil. They know they are being impoverished, just as their environment is.
There is another dimension. The Carajas railway line is a prime example of the EC's democratic deficit. The European Commission and satellites such as the Iron and Steel Confederation are virtually independent fiefdoms which use our money without any effective accountability.
European governments utter weasel words about the world's poor and sustainable development, while at the same time lending practical assistance to the destruction of poor communities and the rainforests. When this project was approved, it was known that there would be human and environmental destruction - but who cared? Democratic accountability must be brought in.
The efforts made by the Brazilian government in preparation for the Rio Conference on the Global Environment a year ago, amounted to no more than a charm offensive. We are still a long way from halting the destruction of the rainforests and their beleaguered communities.
The author is Labour MP for Clydebank and Milngavie and an Opposition spokesman on overseas development.
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