Mining pulls Brazil GDP down

Data released Thursday (30) by the Brazilian government’s statistics agency IBGE reveal that the developments of the tailings dam collapse in Brumadinho, Minas Gerais state, influenced the 0.2 percent reduction in Brazil’s gross domestic product (GDP) in the first quarter this year from the last quarter of 2018.

Since the disaster with the dam controlled by mining giant Vale, a stricter inspection in mining procedures has led a number of facilities to interrupt operations.

The survey also found a production 6.3 percent lower than the last quarter of 2018 in raw-material extraction. Compared to the first quarter in 2018, the drop in the sector was reported at 3 percent.

The outcome is reported to have been chiefly influenced by lower iron ore extraction.

“The reduction in extractivism is the most significant since the fourth quarter of 2008, when we had a 6.3 percent decline. The current scenario is linked to the tragedy in Brumadinho and the resulting interruption of activities at other dams,” said IBGE Manager for National Accounts Claudia Dionísio. Oil and gas extraction also saw a negative performance, though less significant than iron ore.

Since the dam break in Brumadinho, Vale has had more than 30 of its dams shut down in Minas Gerais. The interruptions came as a result of court rulings or decisions made by the National Mining Agency and the company itself. Efforts to have security conditions scrutinized have also led to the suspension of operations at other mining firms.

Industry and the GDP

Industry accounted for the most drastic decline in production. A slip of 0.7 percent was reported from the last quarter last year. This is the second consecutive quarter on the wane. “In addition to raw-material extraction, the manufacturing industry has also reported a negative performance, and it’s the bulkiest within industry,” Dionísio said.

Agriculture also slipped 0.5 percent, whereas services went up 0.2%. “The part of services closest to industry—like trade and transport—had negative effects: they either slowed down year-on-year or remained negative. The positive highlights were seen in services more closely linked to families, like real estate rental services and information services,” she added.