Brazilian mining company Vale said on Monday it agreed with Germany's ThyssenKrupp Steel to increase its stake in steelmaker Siderurgica do Atlantico (CSA) to nearly 27 percent from 10 percent for 965 million euros ($1.42 billion).

The move follows recent pressure from Brazil's government for Vale to invest more in Brazilian industries such as steel.

The Brazilian mining giant said in a statement filed to Brazilian market regulators that it would raise its stake in CSA to 26.87 percent.

CSA, a project in Rio de Janeiro state that will turn out 5 million tonnes of steel slabs per year, is expected to come online in the first half of 2010 and its iron ore feedstock will be supplied exclusively by Vale.

The plant would be the first large steel mill built in the country since the mid-1980s and Vale said it would be the largest industrial investment the Latin American country has seen for a decade.

President Luiz Inacio Lula da Silva has criticized Vale in public on several occasions in recent weeks, calling on it to increase employment for Brazilians through the establishment of new steel mills. The government may have even tried to thwart Vale's reported bid for fertilizer giant Mosaic. [nN218820]

Lula's ruling party faces elections in October 2010 and the president will be campaiging for his chosen successor partly on the strength of the economy and jobs created for Brazilians.

(Reporting by Cesar Bianconi; Writing by Peter Murphy; editing by Stuart Grudgings and Leslie Gevirtz)