Vale knew about dam safety issues before collapse

Author

Gustavo Ribeiro
February 07, 2019 • Reading Time: 7 minutes

In today’s issue: Vale knew about dam safety issues before collapse

Vale knew about dam safety issues before collapse

Mining giant Vale knew there were problems with safety equipment in the Brumadinho dam two days before its collapse —which killed 150 people, left 182 missing, and caused an immense environmental disaster. Email exchanges between Vale employees and security auditors show that five sensors to measure liquid pressure weren’t working.

Last week, three Vale employees and two security auditors from German firm Tüv Süd, who attested to the dam’s safety, were arrested—but later released. One of the auditors says he informed Vale of the growing risks of collapse but was pressured into signing a stability report for the Brumadinho dam. Vale has refused to comment on the case.

Vale’s board reportedly fear a new wave of arrests within the next few days following new evidence. Yesterday, the company refused to sign a deal with prosecutors to carry out 40 emergency actions in the region of the incident—including compensation for the next three years to the town of Brumadinho and the state of Minas Gerais. Vale said it must first analyze the deal in more detail.

Lula convicted for corruption. Again

Former President Luiz Inácio Lula da Silva has once again been convicted of corruption and money laundering in an Operation Car Wash-related case. Federal Judge Gabriela Hardt gave him almost 13 years for receiving a country house in the greater São Paulo area as a kickback from construction firms. Prosecutors say a BRL 1 million reform on the property was financed with money siphoned from Petrobras. In exchange, the companies would receive hefty contracts with the federal government.

Already in jail since April 2018 for his first conviction, Lula is now further and further away from a possible release. Furthermore, besides two guilty verdicts, he still faces other seven investigations. Of all the cases against Lula, this was by far the most solid. However, whistleblowers themselves said the kickbacks had no relation to the Petrobras scandal, meaning the case should have been tried in another court, carried out by other prosecutors and before another judge. That fuels the argument that Operation Car Wash has been highly politicized.

A second conviction should make the Workers’ Party even more politically isolated. Without its brightest star, the party has lost protagonism and has not been able to mobilize the left in Congress. Its discourse of delegitimizing the Justice system with no soul-searching whatsoever is making the Workers’ Party more and more sectarian—and pushing it to the fringes.

Central Bank sends message on reforms 

Brazil’s Central Bank kept the Selic benchmark interest rate unchanged at 6.5% for the 7th straight time — a move highly anticipated by the market. The bank’s monetary policy committee (Copom) has tried to help stimulate the still-sluggish economy through cheaper access to credit. But monetary authorities warned that macroeconomic reforms—such as the pension reform—remain crucial for economic recovery, the control of inflation rates, and, therefore, to keep interest rates on a lower level.

Without the reforms, Brazil is expected to remain vulnerable to external shocks, mostly coming from other emerging economies. The bank stated that despite the lowering risks associated with a possible rise in interest rates in the U.S., uncertainties related to a downturn of the global economy keep mounting. Underwhelming numbers in Germany, for instance, should keep interest rates in the Eurozone at low levels.

The next Copom meeting happens in March, when it will be more possible to assess Congress’ commitment to the pension reform. It will also come after the end of the 90-day tariff truce between the U.S. and China, which nears without many long-term solutions.

Stock market has worst day since truckers’ strike

Ibovespa, the main index of the São Paulo stock exchange, had a terrible Wednesday, down 3.74% to 94,635 points. That was mainly due to profit-taking—when investors cash in their profits after their stock has gained enough value. As the offer of stocks increases, prices go down. But lingering doubts about a pension reform have also played a role in yesterday’s performance.

What else you should know

  • Flavio Bolsonaro. Prosecutor General Raquel Dodge has sent an investigation involving Senator Flavio Bolsonaro to a lower court. The politician is suspected of money laundering and of enrichment “incompatible with his declared revenue” during his years as a Rio state lawmaker. Federal elected officials have the right to only be prosecuted and tried by the Supreme Court—but only in cases connected to their terms. Mr. Bolsonaro only took federal office last week.

  • Petrobras.Brazil’s state-run oil and gas company announced USD 16bn in investments for 2019. According to Petrobras CEO Roberto Castello Branco, the bulk of investments will go to oil exploitation activities and production in offshore deepwater reserves (pre-salt). The CEO also said the company will keep a pricing policy connected to international prices, but without a pre-fixed periodicity. “We won’t change prices daily—only when we find it necessary.”

  • Infrastructure.The Ministry of Infrastructure will go to Congress to propose the creation of a “super-agency” for the sector. It would merge existing agencies regulating roadways (ANTT) and ports (Antaq). That would allow the ministry to void the terms of the agencies’ current boards—both of which have been involved in recent corruption scandals. Infrastructure Minister Tarcísio Freitas believes it will stimulate more integration between different transport modes.

  • Banking.Brazil’s three largest private banks distributed BRL 36.8bn in dividends to stockholders, interest on stockholders’ equity and stock buyback. These record-setting numbers come as the Ministry of the Economy is discussing taxing dividends and profits in exchange for lower income corporate taxes. Markets expect the move to keep overall tax rates unaltered.

  • Rainfall.After its hottest summer in a century, Rio de Janeiro was put in a state of emergency due to intense rains. The Rocinha favela had almost 150% of its average monthly rainfall for February within 5 hours last night. Authorities have confirmed three deaths so far.

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