Vol. 79/No. 43      November 30, 2015

 
(front page)

Mine owners deny responsibility for
destruction after dams burst in Brazil

 
 
A vast area of the Brazilian state of Minas Gerais is covered in mud after two dams holding water and mineral waste from the Samarco iron ore mines burst Nov. 5. At least nine people are confirmed dead and another 19 missing, most likely buried in the sludge. As local communities fight to cope with the human and environmental disaster, mining giants BHP Billiton and Vale, co-owners of Samarco, deny any responsibility. Vale officials called it an “unfortunate and sad accident.”

The disaster exacerbates the economic and political crisis in Brazil, where Latin America’s biggest economy faces a sharp contraction and the government has been wracked by corruption scandals.

When the two Samarco dams broke, millions of tons of sludge that had piled up since 1977 rushed 270 miles into the mountain valleys below, covering everything in the way. Hundreds of residents have been evacuated, and water supplies for more than half a million people risk becoming contaminated.

Minas Gerais is the center of Brazil’s mining industry, a pillar in the economy. Samarco is the second biggest iron ore mining operation in the world and is jointly owned by Brazilian Vale, the world’s largest ore producer, and Anglo-Australian BHP Billiton. Local municipalities revolve around mining and up to 85 percent of their budgets depend on this industry. The area was already reeling from the global slump in ore prices, which are at their lowest level in a decade.

To offset falling prices, Samarco was ramping up production, which rose by almost 40 percent last year. Work was being done to expand the first dam when it burst. Thirteen mine workers are among those dead or missing. The company says the mine’s environmental licenses were up to date and the dams had been inspected in July.

“No operation of this size just breaks without warning,” Minas Gerais state prosecutor Carlos Eduardo Ferreira Pinto said after the disaster. A report ordered by his office before the company’s license was renewed in 2013 found the mine waste structures were unstable and prone to erosion. But the state went ahead with the renewal anyway.

Facing the prospect of paying hundreds of millions of dollars in damages, Vale and BHP insist that responsibility for the disaster lies solely with their subsidiary, Samarco. Stocks fell sharply for both companies following the burst.

Economic crisis, corruption scandals

Brazil’s economy expanded between 2002 and 2008 as exports of iron ore, oil and sugar boomed. But the main markets for these products in China, the U.S., Argentina and Europe are shrinking, and the country now faces its worst recession since the 1930s.

Working people bear the brunt of the contraction. The official unemployment rate that covers data only from the six biggest cites rose by more than 50 percent in the first nine months of this year to 7.6 percent. Inflation is nearly 10 percent, and higher for food, while Brazil’s currency, the real, has lost one-third of its value this year. Payments on the public debt were 25 percent higher in 2014 than the year before because of soaring interest rates.

To win re-election last year President Dilma Rousseff implemented a series of stimulus measures, price controls and tax breaks. But controls on fuel and energy prices are now being scrapped, with electricity rates scheduled to rise up to 30 percent this year.

Rousseff is now accused of manipulating budget accounts to hide the scope of the budget deficit. More than a dozen requests have been filed with Congress to impeach her for doctoring the figures for the past two years.

Fifty legislators from seven parties have also filed a motion to open a process to unseat Eduardo Cunha, head of the country’s lower house of Congress, for allegedly taking millions in bribes in a scheme of money-laundering and corruption in the state-owned oil firm Petrobras.

In March 2014, federal police arrested Paulo Roberto Costa, Petrobras’ former head of refining. In exchange for a lower sentence, Costa started talking. More than a year and half later ruling political and business figures continue to be drawn into the scandal.

Nestor Cervera, former international chief of Petrobras, was sentenced to 12 years in prison Aug. 17. More than two dozen executives from Brazil’s largest construction firms have been arrested for transferring money to slush funds for political parties. Most of the alleged bribe-takers belong to Rousseff’s Workers Party, which has governed the country since 2002.

On Oct. 2, the Supreme Court authorized the questioning of former President Luiz Inácio Lula da Silva, also of the Workers Party. The court claims that the scheme started with Jose Dirceu, da Silva’s former chief of staff.  
 
 
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