Brazil pins hopes to huge -- and touchy -- iron ore project in Amazon

Right now, Australia is the world's leading exporter of iron ore.

But Brazil could take away that title by the 1990s, government officials here say, if a massive but controversial investment program in the eastern Amazon continues on schedule.

An estimated $65 billion in diversified investments are planned for the Carajas Mineral Province, 160,000 square miles of dense jungle 500 miles southwest of the Amazon River port of Belem.

''Carajas is the only project of its size being developed anywhere in the world today,'' according to Paulo Vivaqua, an official of Brazil's giant state-owned mining concern, Companhia do Vale do Rio Doce (CVRD), which has primary responsibility over the project.

In fact, government officials from President Joao Figueiredo on down are tireless in reciting Carajas's remarkable statistics: 18 billion tons of 64 percent pure iron ore, the largest and purest known iron ore reserve in the world, 1 billion tons of copper ore, 60 million tons of manganese, 40 million tons of bauxite -- enough to give Brazil the world's third-largest bauxite reserve -- 47 million tons of nickel ore, and 1 million tons of gold ore.

''As to the iron ore,'' says CVRD's chief Amazon geologist, Brenno dos Santos , ''this is filet mignon: double the average purity and quite close to the surface.'' So close, in fact, that the airstrip at Serra dos Carajas, CVRD's outpost in the heart of the mineral province, is a bare slab of red, iron-hard ore. Says one engineer, ''You feel like you're working on the planet Mars.'' The red dust sometimes covers everything in the barrackslike compound, and geologists use chunks of ore as doorstops and paperweights.

CVRD has developed a two-phase, 10-year program to exploit the ores. Phase 1, which is 50 percent completed, will give the region a basic mining, processing, and transportation infrastructure, including a 550-mile railroad to the Atlantic seaport of Sao Luis and a 4,000-megawatt hydroelectric plant at Tucurui, on the Tocantins River north of Carajas, at a cost of $5.1 billion.

About 40 percent of the Phase 1 money is coming from CVRD working capital and 60 percent from foreign, especially Japanese, loans. Despite the foreign money, however, Phase 1 is 100 percent owned by CVRD.

What Brazil will get for its $5 billion is raw export power. According to CVRD vice-president Euclydes Triches, Carajas will produce 15 million tons of export iron ore by 1985, rising to 50 million tons by 1990. He estimates total Brazilian iron ore exports for that year at 90 million tons, enough to equal projected Australian iron ore exports.

In 1980 Brazil exported 58 million tons of iron ore, against Australia's 75 million tons. According to Mr. Triches, total earnings from all Carajas export ores ''should reach $15 billion a year by 1990.''

In fact, 26.5 million tons of Carajas iron ore, scheduled for delivery in the late 1980s, has already been sold to steel manufacturers in Japan, West Germany, Luxembourg, South Korea, and France.

Brazil, Triches admits, will need the money. In fact, the country will need at least $15 billion in 1982 alone to service its $62 billion foreign debt, now the largest in the developing world.

A traditional way of servicing that debt is direct foreign investment, and authorities have said they will encourage such investments in Carajas through the mid- and late 1980s.

Phase 2 is a 10-year project estimated to cost $60 billion. It includes a massive integration of the region's mineral ore potential with various related and unrelated economic activities, including three separate steel complexes, vast farming and cattle raising operations, and experimental programs in alcohol , charcoal, and even natural rubber production. Nothing less than the transformation of the eastern Amazon is contemplated.

But Phase 2 is controversial. The prospects of massive foreign participation have given rise to a nationalist backlash.

Miguel Arraes, a former governor of Pernambuco State, whose 15-year political exile was ended by an amnesty decree in 1979, wrote in a recent newspaper column , ''We are giving our resources away in order to meet the desperate immediate problem of the foreign debt. And we're even building the infrastructure for them (the foreign business interests) to use in the exploitation of our resources.''

A Rio de Janeiro economics writer, Sergio D'Nilo, argues that ''Brazilian capital alone could meet the demands of Phase 2 investment if the program were stretched out to 20 years. That's what Brazilian business interests are asking for, but the government won't change its mind.''

Meanwhile, other critics are concerned that Brazil will radically upset the delicate ecological balance of the eastern Amazon. Otavio de Brito, secretary-general of the Minas Gerais state Environmental Quality Commission, says: ''Mining is predatory to the environment by its very nature, and its control is much more difficult than the control of industrial pollution. Mining exhausts a region and is irreversible. The landscape of (the mining state of) Minas Gerais is there for you to see the impact of mining. The consequences in a region such as the Amazon could be catastrophic.''

Critics are particularly worried about a plan to cut down 2.4 million hectares (5.9 million acres) of forest land each year to supply the three Phase 2 steel complexes with an estimated 25 million cubic meters (32.5 million cubic yards) of charcoal.

Many doubt whether reforestation efforts in the delicate Amazonian environment will be successful. Geologist Francisco Fonseca points out that ''the soil of the Amazon is remarkably poor. This is one of the paradoxes of the Amazon: How can an exuberant vegetation live in unfertile soil? It's only recently that we have begun to understand tropical ecosystems. . . . What we have learned is that the rain forest is relatively self-sufficient. Over the centuries it has achieved the best possible equilibrium. Any interference by man can only have the effect of upsetting that equilibrium.''

Nevertheless, the CVRD's Mr. Triches replies: ''It can be done without causing any damage whatsoever to the ecological system.''