Story of a Disaster Foretold

What the worst environmental disaster in Brazilian history tells us about the real cost of privatization.

The devastation in Minas Gerais, Brazil. Bruno Alencastro

On November 5, a dam used as a waste dump owned by the mining company Samarco broke, causing a flood of toxic mud and water which killed twelve, injured many more, and completely destroyed the nearby town of Bento Rodriguez in Brazil. The waste from the spill has gone on to poison the Rio Doce, a major river linking the interior of Brazil’s Minas Gerais State to the eastern coast of Espirito Santo.

60 million cubic meters of waste water has choked off life in and around the river. More than a quarter of a million people have been left without usable water. Entire communities, towns, and cities spread along the Rio Doce and in the waters nearby find their livelihoods and futures threatened.

The exact causes of the breach are still under investigation, however recently released information points towards a construction project that was meant to connect the dam with another nearby dam, quintupling the size of the facility. Samarco has maintained that the waters have not been contaminated with toxic material and that it represents no threat to people or the environment. The government has largely supported those claims.

Nevertheless a recent test showed levels of arsenic and mercury over ten times the legal limit. The United Nation’s Office of the High Commissioner for Human Rights has also criticized the reports by Samarco and has declared the company’s and the federal government´s responses so far to be inadequate

While the true scale of the disaster is still unknown, the devastating effects will be felt for years to come. Responsibility for this disaster lies not only with Samarco but also the destructive economic trends of the last few decades, the privatization of Samarco’s co-owner Vale, and widespread collusion between the ruling political class and mining corporations.

A Global Trend Towards Disaster

The disaster comes in the middle of a major economic crisis in Brazil which acutely affected the mining industry. The global drop in the value of raw resources like iron has contributed to Brazil’s economic downturn.

Mining companies have responded to the crisis by laying off workers and focusing on cost-cutting measures. 2,097 workers in the mining industry of the state of Minas Gerais were fired in the first semester of 2015. In Espirito Santo, one of the states through which the Rio Doce passes on the way to the coast, Samarco’s parent company Vale fired more than four thousand workers.

While Samarco maintains that the dams passed a government inspection in July and were considered safe, the method they are using to deposit waste in dammed local waters is a cheap — and risky — solution. In Chile, where earthquakes are a consistent threat, many mining companies rely on dry storage techniques which cost ten times as much.

The construction of water-based storage areas from scratch on virgin land would also be safer but cost twice as much. This is nothing compared to the death, displacement, and devastation visiting the environment and communities along the river. Yet for a capitalist business, especially under recessionary pressures, the cheapest method possible will always prevail.

This kind of disaster is not exclusive to Brazil and the developing world. It is in fact part of a global trend in the mining industry towards more and more catastrophic failures of water-based waste storage techniques. A report by Lindsay Bowker and David Chambers shows a growing trend towards more “serious” and “very serious” failures starting in the sixties and increasing up to the present.

When companies refuse to opt for costly overhauls, safer storage techniques, and repairs they turn towards makeshift solutions which often expand the storage dumps far beyond their originally intended and designed limits. Targeting the industry’s financial markets and investment trends, the report concludes that there is “a clear and irrefutable relationship between the mega trends that squeeze cash flows for all miners at all locations, and this indisputably clear trend toward failures of ever greater environmental consequence.”

The crisis of waste dump failures looks much like the general crisis of capitalist investment in production. It is not profitable to invest in major overhauls, safe storage techniques, or new, more technically advanced mines.

Facing the crisis of over-production triggered by the fall in global ore prices, private companies are attempting to cut costs, raise productivity, and extract as much as possible from existing mining facilities. Yet pushing extraction to the breaking point has dire consequences for entire communities, regions, and ecosystems.

The costs of cleanup and long-term economic and environmental damage are never fully borne by the company — often itself a subsidiary used by larger corporations to evade liability — but instead are passed on to local and national governments.

In Brazil this is exacerbated as the costs of adopting safety measures or even operating legally often far outweigh the token fines imposed on companies which violate the law. Fees imposed on Samarco are so far some of the largest but still fall far short of the overwhelming economic, environmental, and human cost of this man-made disaster.

Vale was once a national mining company and seen as central to the development of the Brazilian economy and national independence. But the state company was privatized in 1997 under the neoliberal administration of Fernando Henrique Cardoso in a sale widely considered to have substantially undervalued the company.

Its $3.14 billion price tag glaringly omitted the value of its patents, mineral rights, reserves, and stock in other companies. Though it accounted for infrastructure, many mines were still missing from the assessment. On the day the sale was finalized thousands of protesters clashed with police in front of the headquarters in Rio de Janeiro with similar protests across Brazil.

Today the company has an estimated value of over $53 billion and has established itself as a global multinational with a reputation to match. Behind the illusion of South-South solidarity the international operations of the company are just as bad as and often even worse than the practices of European and American multinationals.

Samarco, the company formally responsible for the disaster, is itself is a joint venture owned by Vale and the Anglo-Australian multinational BHP Bilton.

The PT’s Complicity

While Vale may have been privatized under the neoliberal leadership of Cardoso and the right-wing PSDB the new owners of the company quickly found willing partners in the Workers Party of former President Lula da Silva and current President Dilma Rousseff. Legal efforts to challenge the privatization over irregularities in the sale received no support from the PT, who instead embraced Vale, the mining industry, and the banks that own and finance much of industry.

In 2014 alone Vale invested r$8.25 million in the electoral campaigns of the PT and r$23.55 million to the PMDB — a PT ally which controls the Ministry of Mines and Energy as well as the National Department of Mineral Production. Dilma Rousseff’s reelection campaign counted on r$14 million in donations from Vale – far outstripping the r$2.7 million that went to right-wing opposition candidate Aecio Neves — as well as another r$14 million from a variety of other mining companies.

One of the largest stockholders in the privatized Vale is Bradesco Bank. Joaquim Levy, Rousseff’s main economic minister and architect of recently implemented austerity programs, formerly worked as a director for Bradesco. Bradesco recorded record profits of r$4.47 billion in the second trimester of 2015, an 18 percent growth compared to the previous year. The banking sector as a whole has seen unprecedented growth and rates of profit under the PT’s administration and has been a willing partner of the government.

In Minas Gerais, the disaster’s epicenter, the PT’s Fernando Pimental is serving as governor. Far from using the crisis as an opportunity to impose tougher regulations, he and the PT legislatures have instead rushed a bill once championed by the PSDB’s Aecio Neves that speeds up environmental licensing for mining companies. What emerges at the state and national level is a web of complicity and support in which the PT has often been Vale’s party of choice to ensure its economic interests are defended.

Additionally, under pressure from the economic crisis and deeply affected by the corruption scandals, there is now a major proposal to privatize huge sections of Petrobras, the Brazilian state oil company. Petrobras has been moving forward with a plan to sell $15 billion in assets by the end of this year with more sales to come in 2016 and beyond. The estimated cost of the Lava Jato corruption scandal has been as much as $6 billion and along with the fall in oil prices has left the company heavily indebted and facing a serious crisis.

Workers at Petrobras have attempted to resist this trend towards privatization. Petrobras workers recently ended one of the largest strikes in recent history in which workers in many locals occupied platforms and workplaces as well as defied the union bureaucracy’s attempts to end the strike early. Opposition to the privatization plan was a major demand of the strike and a source of rank-and-file disillusionment with the PT government.

However, the main trade union responsible for representing Petrobras workers is deeply linked to the PT and Petrobas management. The discontent expressed in the strike was substantial but still far short of the kind of mass workers movement which would be needed to block the proposed assets sale.

The threat of both ongoing and future privatization represents not only a major issue for Petrobras workers but potentially poses a substantial environmental threat. If privatized sectors of the oil and gas industry follow the same path as Vale the likely consequence will be even more environmental disasters.

Fighting Back

The disaster shows the irreparable damage which capitalist businesses wreck upon the environment and the growing trends across the mining industry towards ever more risky and damaging techniques. Corporate models in environmentally risky industries like mining socialize the dire risks of extraction while privatizing the financial benefits.

Yet while defending state ownership is important, it is far from enough. The crisis of Petrobras and its growing trend towards privatization has itself been driven by the looting of its assets by the governing PT party and its allies. The ability of the ruling and allied parties to steal from Petrobras in league with private business and company management is a weakness of its state-owned and state-controlled character.

The right opposition has until now been able to use the corruption scandals to push for further privatization. Rousseff and the PT have themselves advanced the partial privatization of Petrobras by asset sales as a solution to the immense costs of corruption and the deepening economic crisis.

In the aftermath of the disaster there is a political opportunity to strike a blow against the whole project of privatization. The only alternative which the ruling parties have to offer Brazil is more privatization at a slower or faster rate with more environmental disasters sure to follow.

Against both state and corporate corruption, the Left must retake the old slogan of nationalization under workers’ control — not just as a labor demand but also an environmental necessity. With a crisis at Petrobras and growing popular hatred of Vale, workers’ management represents the only real alternative to a future of private profit and socialized devastation.