The mining industry, one of Brazil's most important sectors

Since colonial times, mining has been an influential part of Brazil’s economy. Like many other Latin American countries, Brazilian soil is a rich source of minerals, precious stones, and valuable metals. Throughout the 18th century, the Portuguese coveted the region that would become the state of Minas Gerais (literally “General Mines”) for its lavish gold mines. The gold rush reached such a point that the Crown signed a bill to limit the number of men leaving Portugal in search of riches in Brazil.

According to think tank Fundação Getúlio Vargas, from 1705 to 1799, almost 180 tons of gold were extracted from Brazilian lands.

Today, Brazil has 187 active mines – and exports amounted to over USD 31 billion in 2016. As it was in the 18th century, Minas Gerais leads the way and, along with the state of Pará, they account for over 87 percent of Brazil’s total mineral output. Even during the worst recession on record, the mining industry recorded trade surpluses, thanks to a gigantic production of iron ore, bauxite, manganese, and copper.

Besides the diversity of Brazilian soil, efficient logistics were crucial to increase Brazil’s performance over the years. “We’ve developed a great system that works especially well in our main ports. Overall, the quality of our work is down to the diversity of mineral goods, its quality and the logistics,” sums up Marcelo Tunes, mining affairs director at the Brazilian Mining Institute (Ibram).


A look into Brazil's mining industry


A look into Brazil's mining industry


Mr. Tunes says demand is also critical to the mining industry and helps explain how Brazil successfully avoided a major recession during the 2008 global financial crisis: “We assumed it would take us about two or three years to reach the previous trade rates, but Brazil’s response was quick because the demand was so high.”

Since 2013, when commodities prices dropped dramatically and helped drag Brazil kicking and screaming into its current recession, the mining sector has managed to maintain an average contribution of 3.5 percent of the country’s GDP.  China’s role was crucial in this outstanding recovery. The country has replaced the United States as the primary trade partner for the Brazilian mining industry, and in Mr. Tunes’ opinion, China won’t be overtaken any time soon.


A look into Brazil's mining industry


New Mining Act

This year, the federal administration has made two important updates to the country’s legal framework with regard to mining. In April, the National Mining Agency was officially created to replace the National Department of Mineral Production, founded in 1934. It will work similarly to other regulatory bodies, such as the National Petrol Agency. For decades, the mining industry has longed for such an agency.

“The department’s model is obsolete. It’s based on monocratic decisions that will now be replaced by rulings made by a board of members. The agency will also release public hearings that will help monitor how decision-making is done,” says Mr. Tunes. The sector also complains about political interference and the slow pace of decisions on licenses and permits. According to the government, the new regulatory entity aims to provide more agility and efficiency in the decisions that guide the market, reduce risks and uncertainties, and boost the credibility and appeal of the Brazilian mining industry to private investors. 


A look into Brazil's mining industry


Back in June, President Michel Temer also signed into law a decree which establishes new rules for Brazil’s Mining Act – one of several initiatives to reform what is a 50-year-old piece of legislation. The changes came after several major environmental disasters took place – starting with the Mariana dam collapse, in 2015, and including a major bauxite residue leak in Pará, in February of this year, and another accident involving Anglo American, in April.

The new rules include stricter environmental policies (whether they will be actually enforced remains to be seen) and will allocate 15 percent of royalties from mining companies to non-producing municipalities that suffer the biggest impacts of mining activity. In 2017, the sector has paid over BRL 1.8 billion in royalties. 

The revised Act was not approved without controversy. An NGO revealed that 31 of the 52 congressmen who approved the new rules were financed by mining companies. Plus, the BBC has shown that parts of the legislation were written by the Pinheiro Neto law firm – which represents mining industry giants such as Vale and BHP Billiton, the controllers of Samarco (the company that owns the dam which collapsed in Mariana).

Read the full story NOW!

MoneyAug 20, 2018

Tags: - -

BY Maria Martha Bruno

Maria Martha is a journalist with 14 years of experience in politics, arts, and breaking news. She has already collaborated with Al Jazeera, NBC, and CNN, among others. She has also worked as an international correspondent in Buenos Aires.