Shared Experiences of Dam Failures and Blackouts in Brazil and the United States
The high scale environmental disasters which have happened on both countries show the consequences of the standard action course preferred by the market’s private agents
Publicado 14/07/2021 - Atualizado 14/07/2021
In April 2021, a phosphate mine storage facility threatened to release radioactive material into the Tampa Bay in Florida; a few weeks earlier, a gold mine dam in Brazil broke, contaminating the drinking water of 4,000 people in the state of Maranhão. In February and March, residents of Mississippi and Texas (U.S.A.) encountered electricity blackouts and lack of potable water. In November 2020 in Brazil the state of Amapá suffered from a lack of electricity for 3 weeks, which affected 765 thousand people during the Covid-19 pandemic. In Brazil, since 2000, there have already been at least 12 dam ruptures, an average of 2 per year. In the state of Minas Gerais, the second largest producer of iron ore in the country, there were 7 mining tailings dam failures in 13 years.
At first glance, these events seem unrelated. Dig a little deeper, however, and commonalties are uncovered. Dam collapses, mining disasters, lack of potable water and water scarcity, and energy blackouts are not just “natural” disasters but are caused by the action of private market agents. These situations are the result of hundreds of years of imperialism and colonialism, followed by decades of neoliberal reforms with privatization, unbridled financial speculation, and a lack of accountability and regulation on the part of corporations and governments.
Global Finance and Mining
Globally, 85% of the extracted phosphate is used to make fertilizers; the US state of Florida is currently responsible for 25% of the world’s phosphate production. One of the world’s largest fertilizer plants exists in Polk County, Florida, owned by Mosaic, the world’s largest privately held phosphate company. Even in the face of mass popular opposition, the local government approved the expansion of plant operations. One of the reasons for this opposition is that phosphate mines and fertilizer factories produce a waste called phosphate gypsum, which is radioactive. While the phosphate industry continues to lobby to use this waste for construction and road building material, the US Environmental Protection Agency (EPA) does not recommend such use because it considers the material hazardous to health. So, the industry stores it. One of these waste storage sites, Piney Point, made international news in early April, when the storage reservoir was at risk of collapse, and work crews pumped millions of gallons of this contaminated (radioactive) water into Tampa Bay, an environmentally precarious area.
As an article in The Guardian reported, the site has a long history of pollution, even though the site’s owners have changed over the years. Florida Governor Rick DeSantis announced that he is planning to close Piney Point and clean up the area affected by the development and its aftermath. The government also wants to hold the company HRK Holdings – the company that now owns the site – accountable. But the local population has doubts whether this plan will actually be carried out by the government. HRK Holdings also has common shareholders with the Canadian company Xemplar, which owns a uranium mine in Namibia.
Water, energy, and mining are closely related in terms of production, control, and ownership. The international investment management firms BlackRock and Vanguard, for example, hold shares in Equinox Gold, based in Canada, and also in Vale SA. Blackstone holds shares (second largest holder) of Energy Transfer (Texas), discussed below. The same financial system and the same corporate actors are at stake: lack of international measures to hold corporations accountable, and financial mechanisms that allow shell companies to be essentially stateless and accountable to no one, make it difficult to hold them accountable.
Brazil is the second largest iron ore producer in the world and Brazil’s main buyer is China. Iron ore was the third most exported product by Brazil in 2019. The two states with the largest iron ore production in the country are Pará and Minas Gerais. Both states have suffered from recent mining tailings dam failures. The company responsible for the last two dam failures in Minas Gerais is Vale. Vale is the second largest mining company in the world, headquartered in Brazil, but with capital traded on the world’s main stock exchanges. More than 45% of Vale’s shareholders are international, including some of the world’s largest investment management companies based in the United States. For example, BlackRock and Capital Group each own about 5 percent of the shares in Vale and the Vanguard group also owns shares in Vale. Vale uses a maneuver called triangulation, which is carried out by several other companies as well, as a way to reduce the payment of taxes. It sells its iron ore production in Brazil to its subsidiary in Switzerland, at prices lower than market prices and therefore pays low taxes in Brazil. Afterwards, Vale Switzerland resells the ore to China at market price. With this maneuver, Vale failed to pay the Brazilian State US$12.4 billion from 2009 to 2015.
The exploitation of gold by the mining company Aurizona Mineração, which is part of the Canadian group Equinox Gold, has existed in Maranhão since 2010, but mineral research in this region dates back to the 1970s and gold mining has existed there since the 19th century. The name Aurizona it is also the name of the community where gold is exploited, meaning “gold zone”. The company holds a history of problems in its operations. In 2014 there was a leakage of material from the mining area that caused fish deaths, in 2018 a landslide of a sterile pile occurred, blocking roads and affecting a mangrove region. And in March 2021, a dam broke that affected Lake Juiz de Fora, used by the community of Aurizona for their water supply. With the collapse of the dam, people in the community are without access to water. The approximately 4,000 people managed to get the company to supply them with water, but the water has come with a strong smell and color. Equinox Gold is the result of the merger of several Canadian companies such as Luna Gold and Trek Mining and it also has relationships with Pan American Silver, and both companies share the same CEO.
Dam ruptures are intrinsic to the current mining model. In the midst of capitalism’s crisis, to recover and raise their profitability rates, companies increase ore production when the value of iron ore in the international market drops and reduce expenses with the maintenance of tailings containment structures. Companies spend even less on security to ensure the continued exorbitant profits. Thus, with the increase in ore production, there is also an increase in tailings production and the collapse of dams. Thus, at the end of each cycle of rise and fall in the international value of iron, there is a high probability of another disaster. All companies responsible for disasters are private companies but it is the population and the environment that suffer the damage. Companies experience increased profits, as is the case of Vale, which in 2 years after the collapse of its dam in Brumadinho, experienced an appreciation of 119.8% in its shares.
The failures of privatization and deregulation
In February 2021, a winter storm swept across Texas, leaving 4 million people without power in one of the coldest periods in recent history. This was not just a “natural” disaster. The state of Texas has a deregulated market, which supporters have promised to provide more reliable and cheaper energy; however, since the 2004 decades, people have actually paid $28 billion more. Texas is the only state not connected to networks in other states. The blackouts in Texas were caused by deregulation and privatization—the international system of neoliberalism, which is promoted as a “solution” to the world’s ills, when in fact it perpetrates them. While people suffered—and some even died—during the winter storm, executives at fossil fuel companies profited. Energy prices during the blackout also climbed, reaching U$ 19 thousand/MWh in Texas, representing a paradise for the financial capital that controls and speculates on these businesses.
While the winter storm and Texas power outage received national and international attention, less attention was drawn to the effects of the same winter front in Mississippi. Due to power outages, in Mississippi’s capital city, Jackson, residents went without water for a full month. Over 82% of Jackson’s residents are Black, and environmental racism and government disinvestment led to this moment. Again: a “natural” disaster is not the root of the problem. Rather, an infrastructure crisis fueled by decades of deregulation, austerity, and neoliberal reforms, along with structural and historical racism, are the root cause. More than $743 billion is needed to repair aging water infrastructure in the United States. President Biden has proposed a $2 trillion infrastructure package to eliminate lead pipes and improve “the health of our country’s children and communities of color,” according to the White House website. While this is good news, we must also be cautiously hopeful: there are efforts (including by Democrats) to use this bill to grant license to private industry and to promote so-called “public private partnerships,” which time and again have proven to be disastrous for the people, in whichever country they occur.
States are accomplices of companies in these violations of rights, since they are responsible for overseeing their activities. But the State under the domination of neoliberal doctrine suffers what we call corporate capture, which is the direct influence that companies exert on decisions that must be taken by public authorities. The complete capture of the regulatory agencies is proof of that. This is because in today’s society large companies have more power than States and negotiate with them what they might not gain if they act against the interests of companies. In Brazil, the interests of companies cause the State not to organize itself to inspect the dams. There are neither adequate structures nor availability of the necessary resources for the inspection area. The National Mining Agency (Agencia Nacional de Mineração or ANM) must inspect 816 dams, but it only has a third of the technicians needed to carry out inspections on the structures and its budget has been decreasing every year. In Brazil today, there are more than 45 dams at extreme risk, without attested stability. Of these, 42 are in the state of Minas Gerais. In the U.S., dam safety regulation is also left up to individual states and is not federally regulated.
In Brazil in 2001, the population suffered from a large electricity rationing throughout the country. This blackout was the result of the neoliberal economic model implemented in the country in previous years that privatized energy companies, as well as reduced the state’s planning and investment in the electricity sector. The result? National collapse. In 2020, the state of Amapá suffered from a lack of electricity. The Spain-based company Isolux (which changed its name in 2019 to Gemini Energy) was responsible, and was unable to find a solution to the problem of lack of energy. An energy structure that should have lasted for 30 years, collapsed in less than 10 years of private control. Eletrobrás, a state-owned company that the Bolsonaro government wants to privatize, acted to resolve the energy crisis in Amapá. Under this same neoliberal policy, in 2014 in the state of São Paulo, residents suffered from a lack of water due to the logic of maximum profitability, in less time and with minimum expenditure to ensure service quality. It is not just a lack of government planning and investment in the sector, it is the essence of the private logic in public services. While the population rationed water in São Paulo, around 500 private groups were privileged with low water prices by the São Paulo State Sanitation Company (Sabesp), including industries, shopping malls, condominiums, and large hotels. In Brazil, the water and sanitation sectors are formed mostly by state-owned companies (90%), but privatization is on the way with the increase in public-private partnerships in this area.
The majority—64%— of electricity in Brazil comes from water sources. This energy source has one of the lowest production costs, but the price paid by the Brazilian consumer is one of the highest in the world. High water and energy tariffs are another feature and consequence of privatization. To make matters worse, the Bolsonaro government intends to privatize what is left, including the privatization of Eletrobrás, which is the country’s state energy company. Today, Eletrobrás hydroelectric plants sell energy at R$ 65.00 per Megawatt hour. With the privatization of the company, it is possible that this value will reach R$ 250.00 per Megawatt hour, following the rules of market prices. This increase in the sale value of energy will be paid for by consumers.
The examples discussed above show how natural goods that should be at the service of the population are actually being appropriated by private companies and used as a commodity to generate profit. Blackouts, mining disasters, and lack of water, among others, are not natural events. All of these situations related to water, energy and mining originate from the private control of companies, shaped by financial capital that dictates corporate priorities: presenting high profitability for shareholders, high returns for the banks and financial groups that invest in them, and many of these groups are common among companies. It is the poorest and most vulnerable who suffer the most from the corporations’ profit priority, mainly because they have to pay high tariffs and access low quality services performed without safety regulations that cause environmental contamination. Governments accept these situations, and do not monitor and hold accountable, because they are guided by a neoliberal policy that encourages the corrupt relationship between states and companies. In other words: the state is captured by capital to serve companies, as an agent at the service of the ruling class.
Bad for the majority of people, this reality is common in both the United States and Brazil—and in the world. It is then up to those affected by this reality to organize themselves collectively to confront this system that sets out to destroy their ways of life in the name of capital.