Private Sector Bows Out of Belo Monte as Vale Slashes Its Stake | Amazon Watch
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Private Sector Bows Out of Belo Monte as Vale Slashes Its Stake

April 16, 2015 | Christian Poirier | Eye on the Amazon

Vale: We transform rainforests into mines and dams, no matter what.

In 2011, when Brazil’s mining giant Vale purchased a 9% share of the Belo Monte mega-dam on the Amazon’s Xingu River, rumors circulated that the company had been strong-armed by the Dilma Rousseff government to fill the project’s alarming void of private sector participation. The dam’s highly questionable technical and economic viability presented a toxic investment to Brazilian and international financiers, who didn’t bother to show up to Belo Monte’s vaunted auction in 2010, leaving the project almost entirely in the hands of the country’s public sector.

When the Brazilian firm Bertin dropped its minority stake in Belo Monte’s Norte Energia consortium in 2011, something had to be done to maintain the illusion of free-market influence in the world’s 3rd largest dam, which was destined for massive public financing – with minimal public oversight – through Brazil’s development bank BNDES. As the world leader in iron mining and owner of the planet’s largest open pit iron mine in the Amazon’s Carajás valley, Vale certainly had a stake in the Dilma government’s aggressive dam-building program. Big mines are ravenous energy consumers and Brazil’s Amazon dams are destined to meet this need: 30% of Belo Monte’s electricity is meant for the mining sector. Vale apparently didn’t feel the need to join Belo Monte’s investors, however, given the project was clearly destined to lose money.

When the Brazilian government controversially privatized Vale in 1997 it retained “golden shares” in the company, giving it significant leverage over its business operations. This would explain the speculation behind why Vale reluctantly picked up the embarrassing private sector slack in the Norte Energia consortium. Their role in the disastrous dam subsequently earned the company a public relations black eye, as they resoundingly won the 2012 Public Eye prize for corporate social irresponsibility.

Vale clearly couldn’t wait to offload its poor investment in a polemic project that’s already run more than a year over schedule and $1 billion over budget. As Belo Monte’s builders are now under investigation for massive fraud, the timing couldn’t be better to sell nearly half of its stake to the Brazilian energy firm CEMIG. Meanwhile, more than half of CEMIG’s stock is owned by the Brazilian state of Minas Gerais, meaning that Vale’s sale has made Belo Monte a greater burden on the public sector and its hapless taxpayers.

Interestingly, while Vale’s $100 million deal dropped its share in Norte Energia to 4.59% the company maintains its 9% share of the future electricity generated by the mega-dam, thanks to a long-term contract signed in 2012. This privileged arrangement is undoubtedly the fruit of the kind of backdoor deal making that epitomizes the corruption that drives Brazil’s national energy sector.

The sale also sheds light on one of the key reasons why Brazilian government is so ruthlessly damming the Amazon’s rivers: to please an energy-hungry mining industry with major plans for the rich minerals under forest floor. Big mining is a cornerstone to plans to industrialize the Amazon, so it’s no surprise that Vale’s earlier sacrifice has allowed it to have its cake and eat it too.


For more information on Vale’s poor track record in corporate social responsibility, see the company’s 2015 Un-Sustainability Report (in Portuguese). The report is an annual publication of the International Articulation of People Affected by Vale.

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