Lula slams Vale for delay in tailings dam compensation, raising political interference concerns

Brazilian President Luiz Inácio Lula da Silva lambasted mining giant Vale for the delay in making compensation payments to victims of tailings dam tragedies in Minas Gerais state.

Although Lula's criticism was primarily aimed at the company's privatization in the 1990s, the timing could generate additional legal challenges for Vale.

"Vale, which was privatized and was raffled off to thousands of investment funds, does not have an owner for us to discuss [the issue with]. When I say there is no owner to talk to, it is because since the Mariana and Brumadinho dam disasters, compensation has not been paid to the families. A good, big company has to have someone responsible for it so that things can work properly," said Lula in a televised speech.

In 2015, a tailings dam collapsed in Mariana operated by iron ore pellet maker Samarco, a joint venture between Vale and BHP, which caused 19 deaths and the biggest environmental tragedy in the country's history, with mining waste polluting rivers and reaching the Atlantic Ocean. Then in 2019 a Vale tailings dam collapsed in Brumadinho, causing the deaths of almost 300 people.

Lula's criticism comes at a time when financial compensation for the Mariana disaster is experiencing a decisive moment.

"Lula has the right to criticize companies, but to do so in a very open way, through speeches, provides more fuel for international law firms to seek compensation via lawsuits in international courts. This is not bad just for Vale and for the government because Vale is one of the largest exporters in the country, but generates financial problems for the company that impact the country," mining consultant Pedro Galdi told BNamericas.

The federal attorney general’s office (AGU) and representatives of the two states affected by the Mariana incident – Minas Gerais and Espírito Santo – are negotiating with Samarco, Vale and BHP to reach a compensation agreement that could total some 140 billion reais (US$26bn), which would make it the largest settlement on record in Brazil.

In parallel, lawsuits have been filed in both the UK and the Netherlands on behalf of dozens of municipalities in the area, representing some 700,000 people affected. The claims in European courts filed by UK firm Pogust Goodhead demand 230bn reais in compensation.

"Another issue that concerns me is that Lula’s criticism of Vale comes at a time when the company is in the midst of a CEO change. It seems to me that Lula is wanting to interfere in the choice of Vale's CEO and if the government has influence in this process this will tend to have a very negative result for the company, with political rather than technical criteria having priority," said Galdi. 

Vale, one of the world’s largest iron ore producers, recently revealed the schedule for the process to replace its CEO Eduardo Bartolomeo and will name a new chief executive on December 3.

Vale hired consultancy Russell Reynolds for the selection process. It will produce a shortlist of three names that will be submitted to the company's board by the end of September.

The contract of the new CEO will then be drawn up and rubberstamped before the selected candidate’s name is announced on December 3. The new chief executive will assume the post on January 1, 2025. 

Bartolomeo will continue as CEO until December 31, supporting the transition process until end-February next year. After that, Bartolomeo will act as a company advisor until the end of 2025.

For months, there has been speculation that the Brazilian government is attempting to influence the choice of Vale’s CEO.

The government, which claims that Bartolomeo is too focused on short-term financial results rather than pushing large projects, has significant influence in Vale through Previ, the pension fund of federal lender Banco do Brasil which owns 8.7% of the company. Vale’s other major shareholders are Mitsui (6.3%) and BlackRock (5.8%).