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What has Vale learned after multiple disasters?

. Sep 16, 2020
vale mining giant Photo: Rafapress/Shutterstock

In 2012, human rights abuses and environmental transgressions earned Brazilian mining giant Vale the inglorious title of the “worst company in the world” by Swiss sustainable development group Public Eye (previously called the Berne Declaration). Vale is the world’s largest iron ore and nickel producer, but it also is in the phosphate and nitrogen industry, as well as copper, coal, manganese, and alloys.

By any standards, its laundry list of crimes should mean significant legal consequences. But for the Brazilian economy, Vale is simply too big to fail. Now, in the wake of Brazil’s worst mining disaster, Brazilian federal prosecutors are running up against a company seemingly still unwilling to make significant changes.

</p> <p>In 2019, the Brumadinho dam collapse unleashed a deadly torrent of mining waste that killed at least 270 people and displaced thousands. It was the worst environmental disaster in Brazilian history — and Vale&#8217;s second dam collapse in less than four years. In 2014, a different collapse <a href="https://brazilian.report/society/2018/11/05/mariana-disaster-2015-tragedy/">killed 19 people and literally buried entire villages</a>.</p> <p><strong>The Brazilian Report</strong> has shown that, in both cases, Vale ignored its own data about the state of its dams and avoided minor investments that might have prevented both tragedies — or, at least, reduced their impact.&nbsp;</p> <p>Now, 18 months after Brumadinho, federal prosecutors in Minas Gerais believe the company has failed to make real changes and are seeking a court order to remove Vale executives accused of disregarding safety procedures. Given its importance to the Brazilian economy, Vale has little incentive to make real changes.</p> <h2>Vale: a history filled with controversy</h2> <p>Vale was created in 1942, as part of former President Getulio Vargas&#8217; development plan —&nbsp;which also included state-owned oil giant Petrobras. Originally one of the biggest firms in Brazil, it would be reborn as a private corporation in 1997.&nbsp;</p> <p>To this day, the USD 3.3-billion price tag is considered by many as &#8220;too cheap&#8221; for a deal. There are credible accusations that many assets were not included in the company&#8217;s valuation process, and many others were undervalued. Bradesco, the bank responsible for the evaluation, took control of Vale a year later and the company’s first director, Roger Agnelli, was a former Bradesco executive.</p> <p>Defenders of the process, however, point out that Vale&#8217;s private era improved management, and <a href="http://www.fecilcam.br/nupem/anais_iv_epct/PDF/ciencias_sociais/02_FARIA_HOMIAK_FERREIRA.pdf">boosted financial results</a>. As a result, the company now pays <a href="http://www.vale.com/brasil/PT/aboutvale/news/Paginas/vale-pagou-us-4-5-bi-em-impostos-e-royalties-em-2019-em-todo-o-mundo-revela-relatorio-de-transparencia-fiscal.aspx">USD 4.5 billion in taxes and royalties</a> per year.</p> <p>Since then, the company has been mired by controversy.&nbsp;</p> <p>In the 2000s, it was one of the Workers&#8217; Party&#8217;s darlings. Alongside construction company Odebrecht, meat-processing firm JBS, and telecommunications operator Oi, it represented what the Luiz Inácio Lula da Silva elected as &#8220;national champions&#8221; —&nbsp;companies that would receive massive inflows of public cash in order to expand Brazilin capital in the developing world as the brand of a &#8220;new, global Brazil.&#8221;</p> <p>But even during its boom years, Vale faced accusations of criminal negligence and labor abuses, not only in Brazil but across the world. They include mining disasters in Canada, a country with much tougher regulations than Brazil.</p> <p>In countries with weaker accountability mechanisms, the company&#8217;s rap sheet seems even worse.&nbsp;</p> <p>In Mozambique, Vale relied on the work of some <a href="https://www.jacobinmag.com/2015/11/vale-corporation-brazil-mining-lula-mozambique-brics">2,500 Filipino workers subjected to slavery like conditions</a>. On top of unfair wages, workers were forced to live in overcrowded compounds with inadequate healthcare, and even food shortages. Other foreign workers from neighboring countries like Zimbabwe, Zambia, and Malawi faced similar abuses.&nbsp;</p> <p>The envisioned idea of South-South development preached by Lula didn’t actually result in much development in Mozambique, but saw significant returns for Vale.</p> <h2>The Brumadinho aftermath</h2> <p>In the aftermath of the Brumadinho disaster, a task force was appointed to look into Vale’s safety procedures and suggest appropriate changes. Eighteen months have gone by, and federal prosecutors are launching a number of new lawsuits, claiming that the company has still <a href="https://brazilian.report/business/2020/03/10/mariana-brumadinho-mining-remains-unsafe-brazil/">only made cosmetic changes</a>.</p> <p>According to State Prosecutor Eduardo Antonio Dias, a member of the Brumadinho task force, Vale’s corporate policy “is disrespectful of human rights” and “shown itself to be a continuous risk to society, to the population, and to communities that live close to its operations.”&nbsp;</p> <p>Prosecutors ask Vale to pay out BRL 54 billion in damages for the Brumadinho disaster, but the company has a powerful ally in battling these demands: the federal government, which has no interest in seeing a company of this size in hot water.</p> <p>Meanwhile, the company is facing two other civil lawsuits. Vale has already paid out USD 2.6 billion to the victims of Brumadinho and has provisioned around USD 3.4 billion for disbursement. In April of this year, Brazil’s National Mining Agency said it would halt operations in 47 dam sites that failed to comply with industry standards, including at least 25 owned by Vale.</p> <p>And the effects of the disaster will linger for generations. According to a <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1002/hec.4151">new research paper</a> on the long-term health impacts of the disaster, published by journal Health Economics, the disaster significantly reduced birth weight and increased infant mortality.</p> <p>Despite all this, the company’s credit ratings have been upgraded by Fitch Ratings from BBB-minus to BBB —&nbsp;and the company will distribute more than USD 2 billion in dividends this year, after suspending such payments to shareholders in 2019, following the Brumadinho disaster.</p> <p>Fait said its new rating &#8220;reflects steps taken by Vale over the past 18 months that have lowered the risk of future dam failures and the implications upon the environment and people in the surrounding community should they occur.&#8221; Vale share prices rose 4 percent last week in the São Paulo stock exchange, showing that, for markets at least, Vale has already done enough.</p> <p>Federal Prosecutors and the victims of Brumadinho, however, think <a href="https://brazilian.report/environment/2020/01/25/one-year-brumadinho-mining-disaster-justice/">justice has yet to be served</a>.

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Benjamin Fogel

Benjamin Fogel is a Ph.D. candidate in Latin American History at New York University and a Contributing Editor to Jacobin Magazine.

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