11.12.2015
  • Brazil

The Worst Company in the World

Brazil’s Vale corporation masks brutal exploitation with the language of South-South solidarity.

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Both during and after his two terms in office, former Brazilian president Luis Inácio Lula da Silva staked much of his legacy on Brazil’s “South-South” orientation towards Africa. In return, he’s been held across the continent in nearly the same esteem as national liberation leaders such as South Africa’s Nelson Mandela or Mozambique’s Samora Machel.

On his first presidential visit to Mozambique in 2003, Lula got a hero’s welcome and gave emotional speeches about the importance of Global South solidarity. He responded with empathy to the AIDS pandemic and promised Brazilian support for a project to produce affordable drugs to combat it.

But perhaps more telling was not what Lula was saying in Africa, but who he brought along with him. The Brazilian entourage included Roger Agnelli, the brash banker who played a major role assessing the value of Brazil’s premier state enterprise, Companhia Vale de Rio Doce, in the run up to its privatization in 1997.

Agnelli subsequently became Vale’s first president and CEO — leading a corporation that was anointed the “worst company in the world” in 2012 by activists for its labor relations, community impact, and environmental record.

Not that this did much to tarnish Agnelli’s reputation. Buoyed by the “commodities supercycle” with average increases of 150 percent from 2002–2012, the seemingly bottomless Chinese demand for iron ore, and the abundant capital from the Brazilian National Bank for Social and Economic Development (BNDES), Agnelli appeared to have the Midas touch. His time in command at Vale was characterized by aggressive global expansion and fabulous profits and shareholders returns.

Agnelli’s public relations team at Vale worked hard to project a spirit of South-South cooperation in sync with Lula’s rhetoric, claiming that Brazilian mining investments in the Global South would bring jobs and economic development unlike companies from the imperialist “North.”

Yet tracking Vale’s trajectory, whether within Brazil itself, in Mozambique where it has embarked on a greenfield investment in a coal mining, railway, and port complex, or in Canada where it acquired established nickel operations, a very different picture emerges — one characterized by a marked dissonance between Vale’s rhetoric and the realities on the ground across the company’s global operations.

As a staff member in the labor international development fund created by the United Steelworkers, the major union representing mine workers in Canada, I have had the opportunity to monitor this disconnect over the past decade — both in Canada after Vale’s purchase of Inco, a major Canadian mining company, and in Mozambique, where the Steelworkers have longstanding ties through its union training programs.

Vale’s record shows that the practices and attitudes of BRICS-based multinational corporations are no different from global mining companies linked to the core capitalist countries.

On arrival in Canada, Vale touted its corporate management expertise, Wall Street credentials, and ability to cope with meddlesome unions. The company insisted on major concessions as a precondition for even coming to the bargaining table, triggering eleven and eighteen-month strikes by the union — a prolonged arm wrestle in which Vale won much of what it wanted.

Tito Martins, a company executive, made Vale’s intentions crystal clear at the end of the first strike in an article entitled “Vale Celebrates Reducing the Power of the Unions in Canada” published in Valor Economico, a Brazilian business publication:

What was important for Vale in this negotiation was to get the employees in Canada realigned into the same kind of relationship the company has with its employees around the world. This relationship involved three crucial issues: pension plan, bonus, and chain of command between employer and employee without direct intervention of the union.

Since 2011, the company has overseen five fatalities — one in Thompson, Manitoba and four in Sudbury, Ontario, plus two more in a contracted-out operation at arm’s length from Vale. As one worker put it, “Whether underground or in the smelter and refinery, Vale has made it more dangerous than it was before.”

But the company has left an even worse legacy in Africa, where it is less constrained by state regulations. Yet that is there where Vale claims to be uplifting thousands.

Vale in Africa

Local lore has it that Lula introduced Agnelli and Vale to Mozambique, encouraging President Armando Guebuza to reject the Chinese bid for Mozambique’s coal deposits because the Chinese would bring in their own workers rather than employ local labor.

Whatever Lula’s involvement, Agnelli was invited shortly after the Brazilian president’s 2003 visit to become a member of Guebuza’s International Advisory Council. Vale was soon after the first multinational company to be granted a license to develop Mozambique’s major coal reserves.

Similar to 2003, during his return visit to Mozambique in 2012, Lula conveyed mixed messages of solidarity on the one hand, and a sales pitch for investment by Brazilian companies on the other, though this time, he arrived with Agnelli’s successor, Murillo Ferreira.

During the trip the former president gave a public lecture entitled ‘The Struggle Against Inequality” chaired by Graça Machel, widow of Mozambique’s first president, Samora Machel, and a well-known public figure in her own right. She introduced Lula as a hero of the people like Samora. Lula, for his part, lectured on Brazil’s experience under Workers’ Party governance, characterizing it as one of growing and distributing the economic pie at the same time, thus ensuring the creation of jobs and redistributive social programs that could alleviate poverty.

He urged Brazilian companies investing in Mozambique to contribute to this fight against inequality, in the name of social justice. Yet shortly after the speech Lula joined the new Vale president in lobbying Mozambique’s minister of labor, Helena Taipo, to reduce the restrictions on foreign workers in Vale’s operations in the country.

A Brazilian magazine, Veja, picked up the story:

Vale was one of the sponsors of the tour that Luiz Inácio Lula da Silva did two weeks ago in Africa. The company’s president, Murillo Ferreira, traveled on the same jet that carried the former president to Mozambique. There, they met with Labor Minister Helena Taipo, who has been putting barriers to the exploitation of coal by the Brazilian company in Moatize mine, one of the largest in the world. At the meeting, Lula tried unsuccessfully to convince her to reduce the requirement that Mozambicans make up 85 percent of the manpower employed in Vale’s operations.

Brazilian pressure to reduce Mozambican controls on foreign workers is not new. On a labor delegation from Canada and Brazil, we met with the director of labor in the country’s Tete province in 2011, and were informed that Vale constantly pressures authorities to allow the company to exceed the previously negotiated quotas on foreign workers.

The construction phase of the mine project included not only large numbers of Brazilian workers but also construction workers from the Philippines. Many of these workers were hired by Kentz Engineers and Contractors, a company which operates in nearly thirty countries and runs one of the world’s biggest nickel-cobalt refineries in the world in Madagascar.

Kentz employs more than 2,500 overseas Filipino workers in its global operations. After many of the Filipinos working for Kentz in Madagascar were repatriated at the end of 2010, they filed cases with the Philippines Overseas Employment Administration (POEA) alleging unfair labor practices by Kentz, including salary delays, overcrowded barracks, food shortages, and inadequate health care.

Kentz was one of many subcontractors hired by Vale Moçambique as it built its coal concessions in Moatize in the northwest of the country. Department inspectors found workers at the construction site who were denied holidays and weekends and proper protective clothing. Kentz had also failed to register its Mozambican workers for social security.

On November 18, 2011, the ministry of labor in Mozambique finally responded, expelling 115 workers, mostly from South Africa and the Phillipines, illegally brought to the country by Vale subcontractors. Kentz-Engineers was fined close to 34 million meticals (around $1.1 million USD) and granted thirty days to fix irregularities.

The workers based in Tete who participated in the international exchanges indicated that the operational phase of the coal mine today employs not only the quota’s maximum number — or more — of Brazilian workers, but also many other foreign workers, with or without legal residence status, from neighboring, English-speaking countries like Zimbabwe, Zambia, and Malawi. Sons and nephews of powerful Mozambican government and business figures in the national capital, Maputo, also get coveted jobs at Vale.

What’s more, the broader development promised by Workers’ Party and Vale officials is elusive. Despite being the most impacted by the mining boom — and dealing with pollution, scarcity of housing and other services, traffic, noise, and rising cost of living — people in the local communities around the mine and natives of the chronically underdeveloped Tete province have seen few new jobs and little other benefits from the project.

The few opportunities for employment generated by the mining operations and the dramatic inequalities in salaries and benefits between foreigners and nationals create widespread resentment. One Vale worker commented, “I work alongside foreigners but they earn four times more than I do.” Another said: “Mozambican machine operators work together with Brazilian machine operators, some of whom have less training than the Mozambicans, but the Brazilian is automatically the supervisor.”

These sentiments were expressed in a survey conducted in 2012 to determine whether workers’ experiences of Vale in Brazil were similar to what Vale workers in Mozambique and Canada experienced. These comments from workers capture the hollowness of Vale’s promises to create jobs for Mozambicans, while also demonstrating the strength of anti-Brazilian feelings — not so different from anti-American or anti-British sentiments where their companies set up shop.

Mozambique, like other African governments, has not found the means or the political will to use mega-projects in mining as the strategic pillar for a broader industrial strategy. Mining projects have tended to become enclaves, articulated globally but unconnected in the host country.

While there are no systematic studies to draw on, the general sentiment in Mozambique suggests that Vale is actually taking away jobs. Forced resettlements to make way for the mines have left rural families with no land or water for their agricultural activities and no access to local markets.

A recent study carried out by Antonio Jone for the Observatory on the Rural Environment concluded that the families sent to rural resettlement in Cateme have been adversely affected. Vale’s much-touted adherence to all of the World Bank recommendations on forced resettlements turns out to be far from the truth.

In Vale’s official sustainability reports and its PR videos, the Mozambique resettlements are considered models of excellence. But the “unsustainability report” prepared by the International Network of People Affected by Vale goes behind the hype to capture the voices of the resettled who tell a story of no land, no water, and houses with wall cracks and crumbling foundations after the first rainy season.

More recently, Antonio Jone’s study on “food security” in the Vale resettlements corroborates that resettlement has been anything but a success story, and has actually made peasant producers much worse off than they were prior to removal. In addition, local artisans in the areas affected by the mining concession — such as those making building blocks — have been left with no space to practice their trade.

In recent years they have carried out angry lobbying activities directed both at the Mozambique government and Vale. Adopting a page from the corporate playbook, the artisans argue that they have suffered a permanent loss of livelihood through which they could have expected a lifetime income more in the neighborhood of $350,000 USD rather than the $2,000 Vale originally paid them.

In June 2013, Vale declared the matter definitively closed. It has been forced to reopen discussions about compensation, however, since block makers have continued to back up their demands with barricades that have brought mining to a halt, despite the arrest of their leaders. The Mozambique government has responded with continued expressions of concern about profits lost by their “development partner,” Vale.

Vale in Brazil

Vale’s actions have won it enemies at home, as well. The company’s aggressive expansion in the years since its privatization has made it the third largest mining company in the world, with operations in thirteen Brazilian states and in twenty-seven countries on six continents.

Despite its origins as a state company close to the Brazilian government (including significant Vale shareholder blocks still in the hands of Brazilian government workers’ pension funds) Vale’s ascendancy to its current global-player status has been characterized — like any other capitalist corporation — by a ruthless, single-minded devotion to high profits and generous dividends for its directors and shareholders.

Many Brazilians are particularly indignant about how this national icon passed into private hands in 1997 as part of the global pattern of privatizations under structural adjustment programs. In the years before the Workers’ Party came to power, BNDES, the Brazilian Bank for Socio-Economic Development, took responsibility for promoting sweeping privatizations. The sale of Vale is considered to be the most scandalous privatization episode in Brazilian history.

The company was sold for only 3.4 billion Brazilian reais in a period of parity between the real and the US dollar. A 2004 submission to the Federal Regional Tribunal (TRF) in Brasilia highlighted a series of irregularities that proved that Vale was undervalued. Some mines were ignored in the calculations; others, including the forestry sector were depreciated; intangible assets of enormous value (technologies, patents, and technical knowledge related to geology and mining engineering) were not even considered and Vale’s stock holdings in other companies were ignored.

The list of irregularities is enormous. Bradesco, the bank responsible for the evaluation, took control of Vale one year later, and not coincidentally Vale’s first president, Roger Agnelli, was an ex-executive director of Bradesco.

Even a decade later, an informal plebiscite for the renationalization of Vale organized by unions, students, and the Landless People’s Movement in 2007 was able to mobilize three million votes. While President Lula seemingly took no heed of the demands of the plebiscite, he did put public pressure on Vale during the ensuing global economic crisis.

Vale tried to take advantage of the 2008 crisis to carry out large-scale layoffs and renege on planned investments in the Brazilian steel industry. Lula used the popular anti-privatization sentiment expressed through the plebiscite to justify a public scolding of Agnelli. He suggested that for a company as close to government as Vale there was an obligation to respond to a moment of global turbulence by playing a stabilizing role.

During 2009, the Brazilian government’s vision of the role Vale should be taking and Agnelli’s vision of Vale’s role were openly at odds. By September, the Brazilian magazine Exame was suggesting that the government planned to oust Agnelli. In an article entitled “Lula criticizes Vale and articulates ouster of Vale President,” journalist Rafael Souza Ribeiro wrote:

The government’s wish to increase its role in the administrative control of Vale did not begin today. President Luiz Inácio Lula da Silva has already stated several times this year that mining needs to invest more in Brazil to provide employment for the population. Since his dismissal of more than 1,000 employees last year, attributed to the economic crisis, Roger Agnelli, President of Vale, has fallen into disfavor in the corridors of government.

Indeed Agnelli’s use of the global crisis to justify laying off 1,300 workers and backtrack on investment commitments to produce steel in Brazil came back to haunt him when Lula’s term of office expired in 2011. Brazil’s new president Dilma Rousseff orchestrated the Vale shareholder blocks close to government to bring about a change of leadership.

Murillo Ferreira took office as the new president in 2011 and shortly thereafter began visiting Vale operations around the world. The change of leadership from Agnelli to Ferreira and Vale’s promises of a more humane management and a reduction of stress brought hopes for change, but the raised expectations were quickly dashed by Ferreira’s pointed snubbing of union leaders throughout his inaugural tour. However, in response to criticisms, he did agree to meet with the fourteen union presidents of Vale operations linked to mining in Brazil in September 2011.

According to a report by Valerio Vieira, president of the Metabase Inconfidentes union, which represents two Vale mines in Brazil’s Minas Gerais state, most of the union leaders present were happy to buy into Ferreira’s notion of a kinder, gentler Vale and praised his readiness to dialogue with them. They lauded his visible emotion during the discussion on workplace fatalities.

But Vieira, who had worked for Vale on and off for twenty-five years, was not convinced. In his report to Metabase, shared with Vale activists in other countries, Vieira recounted saying to Ferreira that it would take a great deal more than three months for him to change the course of Vale after a decade under Agnelli’s leadership. Moreover it would take a level of political will not yet demonstrated.

Vieira’s report on the meeting identified eight characteristics of working for Vale in Brazil: 1) Vale is noted for being very anti-union; 2) A Vale worker tends to earn less than workers in similar workplaces; 3) Vale managers engage in constant bullying of workers; 4) Vale imposes unrealistically high production goals, thus creating the atmosphere of permanent stress which Vale promised to eliminate; 5) Vale workers live with the constant threat of being fired without due cause; 6) Vale supervisors impose arbitrary disciplinary measures with great frequency; 7) To work at Vale means to work in dangerous conditions because Vale puts production above all else and often covers up health and safety incidents; 8) Vale regularly tries to buy union and government leaders by offering them vehicles, travel, credit cards, and other perks.

In 2012, a small sample of Vale workers in Canada, Mozambique, and Brazil were asked whether these eight characteristics of working for Vale identified by Vieira were applicable to their situations. While the situations in each country are different, the overwhelming response to the survey was that Vieira’s characterization of working for Vale resonated profoundly in the other countries.

Behind the Hype

Despite these contradictions, Vale leads the Brazilian corporations understood to have reached the status of “global challenger.” Companies like Vale project an image of themselves as a “motor of development” both in Brazil and in the countries where they invest, generating employment and economic growth, a symbol of “global Brazil.”

In turn, the Brazilian state attaches high importance to support for these corporations. The large amounts of credit conceded by BNDES and other public policies set up to support and facilitate the global investments of Brazil’s multinationals are seen as fully justified, and the activities of the companies are portrayed as advantageous for Brazil as a whole.

The argument is that through these “global challengers” Brazil will increase the entry of foreign exchange (through deposits of profits), increase its exports, broaden its insertion into chains of global innovation, and benefit its suppliers, who also increase their production.

This narrative is squarely within the neoliberal paradigm — a country that wants to gain a hegemonic position globally is in need of big companies. Despite their ownership by private interests and open prioritization of high profits and good returns to their directors and shareholders, Brazil’s big companies and their global expansion are treated as synonymous with Brazil’s “national interests.” Worker and community resistance to the operations of these companies, whether at home or abroad, is readily categorized as criminal.

Does this much-heralded ascent of the BRICS to the elite club of global powers really encompass the national interests of all citizens of Brazil? Do all Brazilians see Vale’s success as a “global challenger” as cause for celebration? Do they think that Vale’s ability to enter the vicious competition between the global giants in the world of big mining means that Brazil has “arrived,” that it can now stand tall, hold up its head, proudly taking its place in the G20 with the “developed” countries of the North?

To assume Vale’s success and Brazil’s national interests as synonymous is to operate within an old discourse about development that sees the transition of the nation-state from agrarian to industrial societies as the task, with the state as the main actor, the national society as the main target of development planning, and foreign direct investors as the key source of capital for the development goals of employment, modernization, and economic growth to be realized.

Perhaps multinational corporations from the BRICS are better understood by stepping outside this old development discourse based on territories and situating them instead as players in a new global discourse based on flows. This is a world where there is a fully articulated transnational economy with flows of capital, information, technology, equipment and even land, labor, and private security forces. All of this global economy operates outside the logic and largely outside the regulation of national jurisdictions.

A big mining company takes minimum responsibility for the territory — and citizens — in which its mining operations happen to be located, operating instead through global supply chains and the highly articulated flows that now characterize the global economy.

Corporations use branding instruments to “greenwash” their images with strong language about sustainability or “bluewash” them, wrapping themselves in the legitimizing language of the United Nations Global Compact. What is presented to the public as the need for a social license to operate is in fact internally considered an exercise in security risk management. Companies are driven fundamentally by their concern for damage control, seeing any person, policy, or institution that gets in their way as a security risk and, consequently, an enemy of the corporation.

Andre Almeida, a former director in Vale’s Department of Intelligence and Corporate Security, recently handed over a large number of documents to Brazil’s state prosecutor that point to Vale’s involvement in widespread spying and infiltration focused on people and organizations deemed by Vale to be its enemies. These include well-respected journalists, lawyers, and human rights activists, as well as organizations like Justice on the Rails and the International Network of People Affected by Vale.

As disturbing as Vale’s behavior may be, it does not stand apart from class divides both within Brazil and globally. The elite social forces in Brazil and other BRICS that are intent on making their countries competitive in the global economy are part of the new transnational class of winners produced by globalization. Through their multinational corporations like Vale they aspire to world-class consumption.

The desire of government and business leaders in the BRICS to attain global status, measured by triumphs like hosting the Olympics or the World Cup, may genuinely include a component of recuperation of pride, dignity, and respect after centuries of colonial humiliation. The vision pursued, however, offers no alternative to the current world order of exploitive production and consumption for a few. The practices of emerging Brazilian or Indian or South African or Chinese capitalists are little distinguishable from the pillage of their global competitors linked to old imperial centers in Europe and North America.

The vision of the BRICS excludes the poor within their own nations and ignores the environmental impact of the growth model they aspire to. The desire of the BRICS to be players in the current global system and “world-class” consumers exacerbates existing disparities and inflicts further damage on the environment, making them major perpetrators of global instability and injustice.