Volkswagen's Brazilian subsidiary has been ordered to pay BRL165mn ($30mn) in what marks the largest compensation award of its kind in Brazil, after a labour court found the German carmaker guilty of subjecting hundreds of workers to conditions "analogous to slavery" at an Amazon cattle ranch during the 1970s and 1980s.

The August 29 ruling by a Pará state labour court breaks new ground in Brazil's reckoning with corporate abuses during its military dictatorship era, when multinational companies partnered with the authoritarian regime to develop the Amazon region.

Volkswagen do Brasil announced it would appeal against the decision, maintaining that it "consistently upholds the principles of human dignity and strictly complies with all applicable labour laws and regulations," as reported by AFP. The Wolfsburg-based company, which has operated in Brazil for 72 years, said it would "continue its defence in pursuit of justice and legal certainty before higher courts."

According to the Washington Post, Judge Otávio Bruno da Silva Ferreira determined that workers at the Santana do Araguaia ranch had been subjected to "debt labour, violence and submitted to degrading conditions" that met "the definition of contemporary slave labour." Beyond the financial penalty, the court mandated that Volkswagen issue a formal apology and publicly acknowledge the abuses.

“Slavery is a ‘present past,’ because its marks remain in Brazilian society, especially in labour relations,” Ferreira stated.

The case sheds light on a largely forgotten chapter of Brazilian economic history. The Volkswagen ranch, acquired in the mid-1970s as part of a government scheme to encourage Amazon settlement, became a site of systematic exploitation. Workers were recruited through labour contractors known as "gatos," who lured impoverished labourers from rural towns with false promises of high wages.

"If anyone tried to escape, the guards went after them and shot them," José Pereira, a former worker, told German broadcaster ARD in 2022, describing the armed surveillance that enforced the debt bondage system.

The compensation will not go directly to victims but rather to a Pará state fund dedicated to promoting dignified working conditions and eradicating slave labour. This decision has disappointed some survivors, though they expressed relief at the formal recognition of their suffering.

Long road to justice

The case owes much to the persistence of Ricardo Rezende Figueira, a Catholic priest who spent decades documenting the abuses, the Washington Post reported. Now 73 and a human rights professor in Rio de Janeiro, Rezende first investigated the ranch in the early 1980s, gathering testimonies from dozens of labourers who had escaped.

His 1983 public denunciation — "Priest says there are slaves on Volks farm," as the Correio Braziliense newspaper reported — triggered multiple official investigations that confirmed forced labour conditions. Yet no action was taken for decades.

The breakthrough came in 2019 when Rezende, observing that Volkswagen Brazil had acknowledged political persecution of factory workers during the dictatorship, submitted his 1,000-page dossier to federal prosecutors. The documentation identified 69 alleged victims, backing up their cases with notarised declarations, police statements and parliamentary reports.

Corporate complicity under dictatorship

The cattle ranch scandal forms part of a broader pattern of Volkswagen's collaboration with Brazil's military regime, which ruled from 1964 to 1985. Christopher Kopper, a historian at Germany's Bielefeld University commissioned by Volkswagen to investigate its Brazilian operations during the dictatorship, uncovered systematic cooperation with security forces.

"VW worked closely with the dictatorship's security apparatus," Kopper told DW, noting that this extended beyond the ranch to the company's main factories. "Correspondence with the board of directors in Wolfsburg documents full acceptance of the military dictatorship up until 1979."

The parallels with Volkswagen's notorious origins in Nazi Germany, where the company systematically exploited forced labour, have not gone unnoticed. Kopper noted that many VW managers in Brazil during the 1950s and 1960s "had been army officers and Nazi party members" in their youth.

The Fazenda Volkswagen itself was established in 1974 under Swiss agricultural economist Friedrich-Georg Brugger. Whilst directly employed VW workers enjoyed proper housing, schools and medical facilities, subcontracted labourers faced vastly different conditions.

"They worked under conditions akin to indentured servitude," Kopper explained, adding that management consistently deflected responsibility by claiming they were not accountable for subcontractors' treatment of workers.

The long shadow of corporate accountability

Federal prosecutors hailed the ruling as potentially transformative for corporate accountability in Brazil, where the crime of "reducing someone to conditions analogous to slavery" carries no statute of limitations.

"It is without doubt a historic mark," said Ulisses Dias de Carvalho, a federal prosecutor on the case, as quoted by the Washington Post. "This sentence will serve as an example for the next cases and open up the opportunity to hold other companies to account."

Rafael Garcia, who leads the Brazilian Labour Ministry's slave labour division, called it a "historic" decision for a nation that has never fully confronted the human suffering inflicted during Amazon development. "This conviction is for the country. It is a day to celebrate the struggle for human rights."

Volkswagen's ambitious expansion plans in Brazil — recently revised upward to BRL16bn ($2.9bn) by 2028 — are now tarnished by the shadow of this ruling. The company, which opened Latin America's first VW production facility outside Germany in São Paulo in the 1950s, has positioned itself as a modernising force in Brazilian industry.

Yet as Brazil continues to grapple with its authoritarian past, the scandal demonstrates that corporate complicity in historical abuses remains a live issue, one that carries both reputational and financial consequences decades after the fact.