Brazilian President Luiz Inacio Lula da Silva on Thursday criticized mining giant Vale for “not having done anything to repair the destruction” caused by the collapse of a tailings dam in Brumadinho in 2019.
Why it is important
Lula’s comments come as Reuters reported last week, citing a source familiar with the matter, that the leftist president wants former Finance Minister Guido Mantega to be appointed to a board seat at Vale or even as its chief executive.
Markets have been reacting negatively to the possibility of Mantega’s appointment, with shares of the company down 10% so far this year, as it would suggest government influence over the firm that was privatized in the 1990s.
Key quotes
“Five years and Vale has done nothing to repair the destruction caused,” Lula said in a post on social media platform X.
“Support for victims’ families, environmental recovery and, above all, inspection and prevention in mining projects are needed so we do not have new tragedies.”
Context
Jan. 25 marks the fifth anniversary of the Brumadinho disaster, when the collapse of a tailings dam at a Vale-owned mine unleashed a wave of mud killing 270 people and damaging homes, forests and rivers.
Vale, which expects expenses related to the Brumadinho and the similar 2015 Mariana disaster to reach 3 billion reais ($610.10 million) this year, did not immediately respond to a request for comment.
Vale last week published a report saying it “remains committed to Brumadinho repairs,” adding it has so far reached deals with more than 15,400 people to pay damages. It also noted it has been decommissioning its upstream tailing dams like the one that collapsed in Brumadinho.
Mines and energy minister Alexandre Silveira contacted key Vale shareholders and proposed replacing Eduardo Bartolomeo, whose three-year term ends in May, with former finance minister Guido Mantega, O Globo newspaper reported.
Requesting anonymity, a representative of a minority shareholder confirmed to BNamericas that Silveira made contact and that the situation is worrying.
"The fact that Mantega's name is being considered brings an important element of concern because his name refers to policies adopted by past administrations of the [leftist] Workers' Party marked by high state intervention in the economy that resulted in problems," André Pereira César, a political analyst at Hold Consultoria, told BNamericas.
A CEO evaluation process is ongoing. And while Bartolomeo expressed interest in another term, shareholders must notify him in the first quarter if they opt for a change.
Vale, one of the world's largest iron ore producers, does not have a single controlling shareholder, but various groups hold significant interests. Previ, the pension fund of state lender Banco do Brasil, has an 8.7% stake, while Mitsui has 6.3%, BlackRock5.8% and Brazilian conglomerate Cosan around 5%.
The federal government – which has indirect influence via Previ – wants the company to invest more domestically, including in the rail sector.
Lula's preference for state participation in the economy has translated into more public infrastructure investments and a turn in federal oil firm Petrobras' strategy, with plans to increase investments.
Mantega was finance minister from 2006 to 2015, during the administrations of Lula and his successor, Dilma Rousseff.
Toward the end of his term, Mantega’s defense of heavy public spending was criticized by economists, who blamed him for causing the severe recessions in 2015 and 2016.
His lack of experience in the mining sector is also causing concerns, as Vale is sharpening its focus on copper and nickel to take advantage of the energy transition.
"It’s very worrying. If this happens, the CEO of Vale will be appointed for political reasons. If [Mantega] is confirmed, we will quickly see a depreciation in the company's shares. It causes concern that the government tries to suggest a name like Guido Mantega, who has no experience in the mining sector," Pedro Galdi, mining and metals equity analyst at Mirae Asset Wealth Management, told BNamericas.
The government recently announced a local industries incentive program. Although the program was hailed by some industry leaders,
BHP in $15b damages order over Brazil dam disaster
Marta Nogueira - Reuters
Fri, 26 January 2024 at 10:13 am AEDT·1-min read
A Brazilian judge has ruled that miners Vale and BHP and their joint venture Samarco must pay 47.6 billion reais ($14.7 billion) in damages for a 2015 tailings dam burst, according to a legal decision seen by Reuters.
Vale and BHP, which are Brazilian and Australian multinationals, said in separate statements they were not informed by the judiciary about the decision.
Samarco declined to comment.
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The dam collapse in the southeastern city of Mariana caused a giant mudslide that killed 19 people and severely polluted the Rio Doce river, compromising the waterway to its outlet in the Atlantic Ocean.
In the decision, federal judge Vinicius Cobucci wrote the amount was fixed taking as a parameter the value of expenses already acknowledged by the companies in repair and compensation actions.
He said the 47.6 billion reais needed to be adjusted by monetary correction and late payment interest.
It was not immediately clear how much of the total stipulated in the sentence each company owes.
The judge wrote in the legal document that the money would be put in a state fund and used for projects and initiatives area affected by the dam collapse.
The companies can appeal the decision.
In the securities filing, Vale said the Renova foundation, which the companies have been using to pay for some of the repairs, had paid until last December 34.7 billion reais in socio-economic and environmental compensation.
FMG Price at posting:
$28.97 Sentiment: None Disclosure: Held
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