Monthly: January 2019

Brazil Eyes Management Overhaul for Vale After Dam Disaster

Brazil eyes management overhaul for Vale after dam disaster

Brazil’s government weighed pushing for a management overhaul at iron ore miner Vale SA on Monday as grief over the hundreds feared killed by a dam burst turned into anger, with prosecutors, politicians and victims’ families calling for punishment.

By Monday night, firefighters in the state of Minas Gerais had confirmed that 65 people were killed by Friday’s disaster, when a burst tailings dam sent a torrent of sludge into the miner’s offices and the town of Brumadinho.

There were still 279 people unaccounted for, and officials said it was unlikely that any would be found alive.

Brazil’s acting president, Hamilton Mourao, told reporters a government task force on the disaster response is looking at whether it could or should change Vale’s top management.

Public-sector pension funds hold several seats on the board of the mining company, and the government holds a “golden share” giving it power over strategic decisions.

“The question of Vale’s management is being studied by the crisis group,” said Mourao, who is serving as acting president for some 48 hours while President Jair Bolsonaro recovers from surgery. “I’m not sure if the group could make that recommendation.”

Shares of Vale, the world’s largest iron ore and nickel producer, plummeted 24.5 percent on Monday in Sao Paulo, erasing nearly $19 billion in market capitalization. A U.S. law firm filed a shareholder class action lawsuit against the company in New York, seeking to recover investment losses.

Igor Lima, a fund manager at Galt Capital in Rio, said the severe threats from the government and prosecutors drove the shares even lower than many analysts had estimated.

“This reaction has brought quite a lot of uncertainty about the size of the financial punishment Vale will have to handle,” he said.

Senator Renan Calheiros, who is in the thick of a Senate leadership race, on Twitter called for Vale’s top management to be removed urgently “out of respect for the victims … and to avoid any destruction of evidence.”

One of Vale’s lawyers, Sergio Bermudes, told newspaper Folha de S. Paulo that management should not leave the company and said that Calheiros was trying to profit politically from the tragedy.

Vale’s senior executives have apologized for the disaster but have not accepted responsibility, saying the installations met the highest industry standards.

Brazil’s top prosecutor, Raquel Dodge, said the company should be held strongly responsible and criminally prosecuted.

Executives could also be personally held responsible, she said.

Repeated Failures

The disaster at the Corrego do Feijao mine occurred less than four years after a dam collapsed at a nearby mine run by Samarco Mineracao SA, a joint venture by Vale and BHP Billiton, killing 19 and dumping toxic sludge in a major river.

While the 2015 Samarco disaster unleashed about five times more mining waste, Friday’s dam break was far deadlier as the wall of mud hit Vale’s local offices, including a crowded cafeteria, and tore through a populated area downhill.

“The cafeteria was in a risky area,” Renato Simao de Oliveiras, 32, said while searching for his twin brother, a Vale employee, at an emergency response station. “Just to save money, even if it meant losing the little guy. … These businessmen, they only think about themselves.”

As search efforts continued on Monday, firefighters laid down wood planks to cross a sea of sludge that is hundreds of meters wide in places, to reach a bus in search of bodies inside. Villagers discovered the bus as they tried to rescue a nearby cow stuck in the mud.

Longtime resident Ademir Rogerio cried as he surveyed the mud where Vale’s facilities once stood on the edge of town.

“The world is over for us,” he said. “Vale is the top mining company in the world. If this could happen here, imagine what would happen if it were a smaller miner.”

Nestor José de Mury said he lost his nephew and coworkers in the mud. “I’ve never seen anything like it, it killed everyone,” he said.

Vale Chief Financial Officer Luciano Siani told journalists on Monday evening that, despite interrupting operations in Brumadinho, the company would continue royalty payments to the municipality. He said Vale royalties made up about 60 percent of the town’s 140 million reais in revenue last year.

Siani said a donation of 100,000 reais will be made to each family that lost a relative in the disaster and said Vale would step up investments in dam safety.

Safety Debate

The board of Vale, which has raised its dividends over the last year, suspended all shareholder payouts and executive bonuses late on Sunday, as the disaster put its corporate strategy under scrutiny.

Since the disaster, courts have order a freeze on 11.8 billion reais of Vale’s assets to cover damages. State and federal authorities have slapped it with 349 million reais of administrative fines.

German insurer Allianz SE may have to cover some of the costs of the dam collapse, two people familiar with the matter told Reuters.

“I’m not a mining technician. I followed the technicians’ advice and you see what happened. It didn’t work,” Vale CEO Fabio Schvartsman said in a TV interview. “We are 100 percent within all the standards, and that didn’t do it.”

Many wondered if the state of Minas Gerais, named for the mining industry that has shaped its landscape for centuries, should have higher standards.

“There are safe ways of mining,” said Joao Vitor Xavier, head of the mining and energy commission in the state assembly. “It’s just that it diminishes profit margins, so they prefer to do things the cheaper way — and put lives at risk.”

Reaction to the disaster could threaten the plans of Brazil’s newly inaugurated president to relax restrictions on the mining industry, including proposals to open up indigenous reservations and large swaths of the Amazon jungle for mining.

Environment Minister Ricardo Salles said in a TV interview on Monday that Brazil should create new regulation for mining dams, replacing wet tailings dams with dry mining methods.

Mines and Energy Minister Bento Albuquerque proposed in a Sunday newspaper interview that the law be changed to assign responsibility in cases such as Brumadinho to the people responsible for certifying the safety of mining dams.

“Current law does not prevent disasters like the one we saw on Brumadinho,” he said. “The model for verifying the state of mining dams will have to be reconsidered. The model isn’t good.”

($1 = 3.7559 reais)
…

Report: ‘Food Shocks’ Increasing in Frequency Over Last Five Decades

Food shocks, or sudden losses of crops, livestock or fish, due to the combination extreme weather conditions and geopolitical events like war, increased from 1961 to 2013, said researchers at The University of Tasmania in a report released Monday.

Researchers saw a steady increase in shock frequency over each decade with no declines.

The report, published in Nature Sustainability, said that protective measures are needed to avoid future disasters.

The authors studied 226 shocks across 134 countries over the last 53 years and, unlike previous reports, examined the connection between shocks and land-based agriculture and sea-based aquaculture.

“There seems to be this increasing trend in volatility,” said lead author Richard Cottrell, a PhD candidate in quantitative marine science at the University of Tasmania in Australia. “We do need to stop and think about this.”

Extreme weather events are expected to worsen over time because of climate change, the report said, and when countries already struggling to feed their populations experience conflict, the risk of mass-hunger increases.

The researchers found that about one quarter of food resources are accessed through trade, and many countries could not feed their populations without imports, making them particularly vulnerable to food shocks of trading partners.

As the frequency of shocks continues to increase, it leaves what Cottrell called “narrowing windows” between shocks, making it nearly impossible to recover and prepare for the next one.

The report said trade-dependent countries must find ways to store food in preparation for inevitable shocks elsewhere.

Countries must invest in “climate-smart” practices like diversifying plant and animal breeds and varieties and enhance soil quality to speed recovery following floods and droughts, the report said.

“We need to start changing the way we produce food for resiliency,” Cottrell said, adding that he had yet to see much action being taken by wealthy food-producing countries. “Because we are going to see a problem.”

The report was released the same day the United Nations Food and Agriculture Organization reported findings on conflict and hunger.

That report stated that around 56 million people across eight conflict zones are in need of immediate food and livelihood assistance.
…

US’ Mnuchin Expects Progress in ‘Complicated’ China Trade Talks

U.S. Treasury Secretary Steven Mnuchin said on Monday the United States expects significant progress this week in trade talks with Chinese Vice Premier Liu He, but the two sides will be tackling “complicated issues”, including how to enforce any deal.

The talks, scheduled for Wednesday and Thursday in Washington, will include a meeting between Liu and U.S. President Donald Trump and take place amid worsening tensions between the world’s two largest economies.

The U.S. Justice Department on Monday unsealed indictments against China’s top telecommunications equipment maker, Huawei Technologies Co., accusing it of bank and wire fraud to evade Iran sanctions and conspiring to steal trade secrets from T-Mobile US Inc.

China, meanwhile, formally challenged U.S. tariffs on Chinese goods in the World Trade Organization’s dispute settlement system, calling the duties a “blatant breach” of Washington’s WTO obligations.

U.S. Commerce Secretary Wilbur Ross insisted at a news conference that the Huawei indictments are “law enforcement actions and are wholly separate from our trade negotiations with China.”

The Huawei indictment came as a Chinese delegation including Liu and Vice Commerce Minister Wang Shouwen was already in Washington preparing for the talks, a person familiar with the discussions said.

Mnuchin, speaking at a White House news conference, said the two sides were trying to tackle “complicated issues,” including a way to verify enforcement of China’s reform progress in any deal with Beijing.

The Treasury chief, who will be among the top U.S. officials at the negotiating table, said Chinese officials had acknowledged the need for such a verification mechanism.

“We want to make sure that when we get a deal, that deal will be enforced,” Mnuchin said. “The details of how we do that are very complicated. That needs to be negotiated. But IP (intellectual property) protection, no more forced joint ventures, and enforcement are three of the most important issues on the agenda.”

Reuters reported earlier this month that U.S. officials were demanding regular reviews of China’s progress on pledged trade reforms, which would maintain the threat of tariffs long term.

Mnuchin added that there had been “significant movement” in the talks so far, and there will be around 30 days for further negotiations after the meetings in Washington on Wednesday and Thursday to reach an agreement before a March 2 deadline for increasing U.S. tariffs on Chinese goods.

Mounting concerns for both countries, including China’s slowing economy and Trump’s need for a political win, could prod both sides towards a “partial, interim deal,” said Eswar Prasad, a Cornell University trade professor and former head of the International Monetary Fund’s China department.

“There remains a vast distance separating the negotiating positions of the two sides, making a comprehensive and durable deal unlikely,” Prasad said.

China is unlikely to give much ground on industrial policy and state support for industries, but it could promise to improve intellectual property protections and enforcement.

However, persuading U.S. negotiators that these can be verified will be a “hard sell,” Prasad added.

The White House said that U.S. Trade Representative Robert Lighthizer would lead the talks for the American side, with participation from Mnuchin, Commerce Secretary Wilbur Ross, White House economic adviser Larry Kudlow and White House trade and manufacturing adviser Peter Navarro.

It said the meetings will take place in the Eisenhower Executive Office Building, part of the White House complex.
…

Federal Prosecutors Charge China’s Huawei with Financial Fraud, Theft  

Federal prosecutors on Monday unsealed two separate indictments against China’s Huawei Technologies, it’s chief financial officer and several affiliates for financial fraud and theft of American intellectual property.

In a 13-count indictment unsealed in federal court in Brooklyn, New York, prosecutors charged the Chinese tech giant, its top financial officer, Wanzhou Meng, and two affiliates with violating U.S. sanctions on Iran.

In the second indictment returned in Washington state, prosecutors charged Huawei and its U.S. affiliates with theft of trade secrets, wire fraud and obstruction of justice.

“This indictment shines a bright light on Huawei’s flagrant abuse of the law — especially its efforts to steal valuable intellectual property from T-Mobile to gain unfair advantage in the global marketplace,” said First Assistant U.S. Attorney Annette L. Hayes of the Western District of Washington.

The announcement comes amid trade tensions between Washington and Beijing and stepped up U.S. scrutiny of Chinese economic espionage. In November, the U.S. Justice Department announced an initiative to combat Chinese economic espionage and theft of American intellectual property. 

The new China initiative will be led by John Demers, assistant attorney general for national security, and carried out by a senior FBI official, five U.S. attorneys and several top department officials. Former attorney general Jeff Sessions said at the time that the initiative “will identify priority Chinese trade theft cases, ensure that we have enough resources dedicated to them, and make sure that we bring them to an appropriate conclusion quickly and effectively.”

Tensions between the U.S. and China escalated in December after Canadian authorities arrested Meng, Huawei’s chief financial officer and the daughter of its founder, for extradition to the U.S. Meng remains under house arrest in Canada. The U.S. has until Jan. 30 to file an extradition request with Canadian authorities.
…

In New Lithium ‘Great Game,’ Germany Edges Out China in Bolivia

When Germany signed a deal last month to help Bolivia exploit its huge lithium reserves, it hailed the venture as a deepening of economic ties with the South American country. But it also gives Germany entry into the new “Great Game,” in which big powers like China are jostling across the globe for access to the prized electric battery metal.

The signing of the deal in Berlin on Dec. 12 capped two years of intense lobbying by Germany as it sought to persuade President Evo Morales’ government that a small German family-run company was a better bet than its Chinese rivals, according to Reuters interviews with German and Bolivian officials.

While the substance of the deal has been reported, how China, Bolivia’s biggest non-institutional lender and close ideological ally, lost out to Germany has not.

China has been quietly cornering the global lithium market, making deals in Asia, Chile and Argentina as it seeks to lock in access to a strategic resource that could power the next energy revolution.

China has invested $4.2 billion in South America in the past two years, surpassing the value of similar deals by Japanese and South Korean companies in the same period. Chinese entities now control nearly half of global lithium production and 60 percent of electric battery production capacity.

German officials told Reuters they championed the bid by ACI Systems GmbH because they saw an opportunity to lower Germany’s reliance on Asian battery makers and help its carmakers catch up with Chinese and U.S. rivals in the race to make electric cars.

The German push included a series of visits by German government officials who talked up the benefits of picking a German company. Bolivian officials also toured German battery factories, Bolivia’s deputy minister of High Energy Technologies, Luis Alberto Echazu, told Reuters.

German Economy Minister Peter Altmaier wrote a letter to Morales, an environmental champion, emphasizing Germany’s commitment to environment protection.

The lobbying effort was capped by a call last April between Altmaier and Morales, Bolivian, German and ACI officials said, without offering details of what was discussed.

German diplomats in La Paz also stressed high-level German government backing for the project, potential loan guarantees and the tantalizing prospect of supply agreements with German automakers, ACI and Bolivian officials told Reuters.

ACI’s win means Germany now has a foothold in the final frontier of South America’s so-called Lithium Triangle: the Uyuni salt flat in Bolivia, one of the world’s largest untapped deposits. The triangle comprises lithium deposits in an area that includes parts of Chile, Argentina and Bolivia.

“This partnership secures lithium supplies for us and breaks the Chinese monopoly,” Wolfgang Tiefensee, economy minister of the German state of Thuringia, an automotive manufacturing hub, told Reuters during a visit to the Bolivian capital La Paz in October.

Some risks

The venture in Bolivia is not without risk for ACI.

While Uyuni boasts at least 21 million tons of lithium, Morales has made nationalizing natural resources a key policy plank. Bolivian officials assured ACI that foreign investments in the Uyuni would be guaranteed should anything go awry, CEO Wolfgang Schmutz said in an interview.

In addition, unlike Chile’s sun-drenched Atacama salt flats, snow and rain slow the evaporation process needed to extract lithium from brine in Uyuni, and the landlocked nation will have to use a port in neighboring Chile or Peru to ship the metal out.

ACI, a family-run clean tech and machinery supplier, has no experience producing lithium. The company dismisses concerns from some lithium analysts about its ability to deliver, saying its small size gives it more flexibility to bring partners from different fields into the project.

Schmutz said the company has preliminary lithium supply deals with major German carmakers, but declined to provide details, citing non-disclosure agreements.

None of Germany’s top three carmakers — BMW, VW or Daimler — confirmed any agreement with ACI when contacted by Reuters.

BMW said it was in preliminary talks with ACI but had made no decision. VW said ensuring supplies and stable prices for raw materials was important, but noted lithium production in Bolivia was particularly demanding. Daimler board member Ola Kaellenius said: “If it’s happening, we’re not part of it.”

ACI said the carmakers that it was in talks with would not be able to confirm anything publicly until final deals were made.

The “Great Game” — lithium version

The global battle for control of lithium has been likened to the “Great Game,” the term coined to describe the struggle between Russia and Britain for influence and territory in Central Asia in the 19th century.

The Bolivian project includes plans to build a lithium hydroxide plant and a factory for producing electric car batteries in Bolivia. Once completed, the factory will help to fulfill Morales’ ambition to break with Bolivia’s historic role as a mere exporter of raw materials.

ACI has said it expects the lithium hydroxide plant to have an annual production capacity of 35,000-40,000 tons by the end of 2022, similar in output to plants operated by the world’s top lithium producers. Eighty percent of that would be exported to Germany.

ACI’s willingness to build a battery plant in Bolivia helped to seal the deal, said Echazu, the deputy minister.

The Chinese did not want to build a battery plant in Bolivia because they felt it made no economic sense to ship in materials to make the batteries only to re-import the final product to China, he said.

China’s embassy in La Paz declined to comment on the Uyuni project, but said the potential for future cooperation with Bolivia on lithium was “huge.”

Bolivia’s state-owned lithium producer YLB will own 51 percent of the new joint venture. Control of the project was another key demand of the Bolivians, who have bitter memories of foreign powers meddling in the former Spanish colony to seize its natural resources.

Juan Carlos Montenegro, the head of YLB, said geopolitics was a factor for Bolivia in deciding which companies to work with.

“We don’t want a single country to set the rules, we want balance and other world powers must help create that balance,” he said. “So for Bolivia, it’s important to have not just economic partners for markets, but geopolitical strategic partners.”

He stressed, however, that Bolivia had not been predisposed against China in deciding who had made the best offer.

“China-Bolivia relations are still good. China is present in every country in the world and impossible to avoid,” he said.
…

Leaders Skip Davos Amid Domestic Troubles, Anti-Globalist Backlash

The World Economic Forum summit in Davos, Switzerland, that wrapped up Friday, had some notable absentees, including U.S. President Donald Trump.

With a backlash against a perceived ruling elite gaining ground in many countries, analysts say some leaders steered clear of a gathering often seen as an inaccessible club for the world’s super-rich. Others argue it is vital they get together to discuss urgent issues like climate change and world trade.

On the surface, though, it was business as usual: On a sealed off, snowbound mountaintop, world leaders rubbed shoulders with global executives, lobbyists and pressure groups. It remains a vital gathering of global decision-makers, said Leslie Vinjamuri, head of the U.S. and the Americas Program at policy group Chatham House.

“They’re there to do business, they’re there to engage in an exchange of ideas. And so I think it’s still tremendously important.”

President Trump stayed away because of the partial U.S. government shutdown, which ended Friday. China’s President Xi Jinping wasn’t there, neither was Britain’s Theresa May, nor France’s President Emmanuel Macron.

“They’re tremendously preoccupied with the troubles they face at home, which isn’t a good sign for globalism. The criticism and the critique that surrounds Davos is extraordinary. People say, ‘You know, it’s where all those people go to have dinner with each other, it has nothing to do with the rest of us.’ And, of course, it’s about a lot more than that, but the optics are tremendously negative at this point in time,” Vinjamuri said.

Behind the heavily guarded security perimeter, delegates were well aware of a growing global backlash beyond.

David Gergen of the Harvard Kennedy School echoed the concerns of many at Davos during a debate at the summit.

“It’s worth remembering we’ve just had the longest bull run in our stock market in history. We’ve had good economic times. Incomes have gone up in a number of countries and yet the discontent is deep and it’s threatening our democracies. And there’s something that’s not working here that we need to figure out,” Gergen told an audience Wednesday.

The absence of many big players means others have stolen the limelight. Ethiopia’s Prime Minister Abiy Ahmed Ali has been widely praised for making peace with Eritrea. Speaking at the forum, he said African countries must deepen their ties.

“We believe integration must be viewed not just as an economic project but also as crucial to securing peace and reconciliation in the Horn of Africa,” Ali said.

Other issues also rose up the Davos agenda, notably climate change. New Zealand’s Prime Minister Jacinda Ardern urged action.

“This is about being on the right side of history. Do you want to be a leader that you look back in time and say that you were on the wrong side of the argument when the world was crying out for a solution? And it’s as simple as that I think,” Ardern said.

The Davos 2019 will likely be remembered, however, for the lack of global leadership, according to Vinjamuri of Chatham House.

“That space has been vacated and nobody necessarily even wants to take things forward at the level of providing a vision,” Vinjamuri said.

The lack of such a vision at a time of profound global change sent a chill far beyond the confines of this winter resort.
…

Germany to Phase Out Coal by 2038  

A government-appointed commission laid out a plan Saturday for Germany to phase out coal use by 2038. 

The commission — made up of politicians, climate experts, union representatives and industry figures from coal regions — developed the plan under mounting pressure on Europe’s top economy to step up efforts to combat climate change.

“This is a historic day,” the commission’s head, Ronald Pofalla, said after 20 hours of negotiations.

The recommendations, which involve at least $45.6 billion in aid to coal-mining states affected by the move, must be reviewed by the German government and 16 regional states.

While some government officials lauded the report, energy provider RWE, which runs several coal-fired plants, said the 2038 cutoff date would be “way too early.”

Despite its reputation as a green country, Germany relies heavily on coal for its power needs, partly because of Chancellor Angela Merkel’s decision to phase out nuclear power plants by 2022 in the wake of the 2011 Fukushima disaster in Japan.

Coal accounted for more than 30 percent of Germany’s energy mix in 2018 — significantly higher than the figures in most other European countries. 
…

Commission: Put People First in Drive to Automate Jobs

The world of work is going through a major transformation. Technological advances are creating new jobs and at the same time leaving many people behind as their skills are no longer needed. A new study by the International Labor Organization’s Global Commission on the Future of Work addresses the many uncertainties arising from this new reality.

The International Labor Organization agrees artificial intelligence, automation and robotics will lead to job losses, as people’s skills become obsolete. But it says these same technological advances, along with the greening of economies also will create millions of new jobs.

Change is coming

The co-chair of the ILO Global Commission on the Future of Work, South African President Cyril Ramaphosa, says these advances offer many opportunities. But he warns people must harness the new technologies for the world of work and not be allowed to control the future shape of work.

“In the 20th century, we established that labor is not a commodity. In the 21st century, we must also ensure that labor is not a robot. We propose a human in command type of approach ensuring that technology frees workers and improves work rather than reducing their control,” he said.

Ramaphosa says change is inevitable and will happen whether people like it or not.

“We believe that we would rather be ahead of the curve rather than behind it and get the developments that are unfolding to shape us and to lead us. We need to be ahead so that we can shape the type of world of work that we want to see,” he said.

Human-centered conversation

In its study, the 27-member commission has adopted a human-centered approach. At this time of unprecedented change, ILO Director-General Guy Ryder says having people at the heart of this debate is critical for achieving a decent future of work.

“I think people, families, countries around the world are indeed grappling with the challenges and the opportunities of transformative change at work and the ambition of our commission … is, in a very concise and a very clear, and I think above all an action oriented way to try to set out a road map of how we can indeed seize the opportunities and deal satisfactorily with those challenges,” Ryder said.

Ten recommendations

After 15 months of work, the commission has come up with 10 recommendations for attaining decent and sustainable work. They include a call for a universal labor guarantee to protect workers’ rights, an adequate living wage and a safe workplace.

The commission proposes social protection measures from birth to old age. It says technological change must be managed to boost decent work. It says the gender gap should be closed and equality achieved in the workplace.

Ryder says the report puts a heavy emphasis on life-long learning and the renewal of skills throughout one’s working life.

“With the rapidity of change being what it is at work today,” he said, “it is simply not realistic to believe that the skills that we acquire at the beginning of our lives in our education, what we tend to think of as a period of our education will serve us throughout a working life. I mean, the shelf life of skills acquired at the beginning is a lot shorter than working life is going to be.”

Ryder notes the future number of jobs or the future of employment will not be determined alone by the autonomous forward march of technology. He says that will depend on the choices of policymakers.

The commission study indicates it is reasonable to assume that humans and robots will be able to live in harmony with one another — if humans are put in control of the forward application of technology.
…