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The club was founded in 1921 under the name Palestra Itália, but had to change its name in 1942 due to the imposition of the New State of Getúlio Vargas, which prevented any Brazilian association from exalting Germany, Italy or Japan, Brazil's opponents in World War II. The new name made reference to Cruzeiro do Sul, the constellation represented in the flag of Brazil. Until 1925, Cruzeiro only accepted players of Italian descent into its squad.