2015 was not kind to Brazil.
In addition to a seemingly intractable political crisis that has rendered Congress effectively useless when it comes to passing legislation aimed at shoring up an increasingly precarious fiscal situation, the country is also mired in what might as well be a depression.
Inflation is running in the double-digits, unemployment is soaring, and output has collapsed in the face of an epic downturn in commodity prices, slowing demand from China, and a yuan deval that drove a stake through the heart of the already beleaguered emerging world.
The BRL has suffered mightily throughout and will likely need to “adjust” further before it’s all said and done. That, in turn, will put still more pressure on inflation, ensuring that not only can Copom not cut to save the economy, it will in fact be forced to hike in January, a procyclical move that will likely deal another blow to GDP.
None of that bodes well for the summer Olympic games in Rio. As we’ve detailed in a series of posts dating back to July, Olympians will be forced to deal with some rather unpleasant circumstances including a lack of air conditioning [7] and television in Olympic village and feces-ridden [8] water. And that assumes the games happen at all after longtime Olympic power provider Aggreko pulled out of a tender [9] to supply generators.
Now, in what Bloomberg calls [10] “the year's final indignity,” Brazilians are being forced to cancel their vacation plans due to a “waves of noxious mud” that have polluted the ocean in the wake of the dam collapse in November that “buried entire communities and devastated national parks.”
For those who missed it, you can read the entire account of what happened here [11], but suffice to say a Samarco (which is jointly run by BHP Billiton and Vale) tailings dam burst, sending a river of toxic mud into nearby villages. Here are a few images from the scene:
As Bloomberg goes on to note, "50 million metric tons of sludge is spreading off the coast between Rio de Janeiro and Bahia states, turning the pristine blue waters brown along an expected 30 miles of beaches." Here's a bit more from Ibama, the country's environmental agency (translated [12]):
Mining waste formed a wave of mud which directly affected 663 km on the Doce River and its tributaries, reaching the ocean in 21/11, in Linhares, Espirito Santo.
The destruction of Permanent Preservation Areas occurred on the stretch of 77 km of waterways of Fundão dam to the Carmel River in San Sebastian the Superb (MG). The impacts on the marine environment are still ongoing and have not been evaluated in this report.
Direct environmental and social harm, such as death and disappearance of persons were found; Insulation populated areas; displacement of communities for the destruction of housing and urban structures; habitat fragmentation; destruction of permanent preservation areas and native vegetation; slaughter of farm animals and impact on rural production and tourism, with interruption of economic revenue; restrictions on fishing; slaughter of domestic animals; death of wildlife; decimation of wild fish populations in closed season; difficulties in electricity generation by hydro hit; change in the quality and quantity of water, and the suspension of their use for the people and wildlife such as supply and watering; in addition to the sense of danger and helplessness of the population at various levels.
“I was really worried. Everyone who thought of going for the end of the year will have to cancel," said Paula de Souza Vieira, a 23 year-old who spoke to Bloomberg. Here's more:
Vieira, thought she’d found the perfect spot: A palm-tree lined stretch of empty sand on the edge of a national preserve about 400 miles (640 kilometers) north of Rio de Janeiro. But a dam disaster in southeast Brazil that sent waves of noxious mud downstream into the Atlantic Ocean forced her to scrap her trip.
Some coastal hotels and restaurants, which rely on the New Year’s holiday as a major source of revenue, have seen cancellations surge because of the accident. Reservations for the New Year’s holiday plunged by more than half at the Arana bed and breakfast in Regencia Village, where Vieira planned to stay with her girlfriend.
“Nobody is going to pay 2,000 reais for a holiday package to go to a place where people say the mud is,” said owner Dulce Mendonca. While the water supply hasn’t been affected, the ocean is thick and brown with sludge, she said. Fishermen aren’t allowed to fish, and people are being cautioned to stay out of the water.
Earlier this week, the death toll from the dam collapse was raised to 17. As The Sydney Morning Herald [13] wrote, "the Samarco partners were hit with a fine of 20 billion Brazilian reals in November, and a court in the Brazilian city of Belo Horizonte ruled last week that 10 per cent of that must be paid with 30 days." In other words, BHP and Vale will need to pay some $500 million by January 17. "A federal court has ruled that the potential damages from the disaster could be about 20.2bn reais ($5.2bn; £3.4bn)," BBC adds [14]. "The companies' assets were frozen amid concerns that Samarco does not have enough resources to cover the cost of damages and compensation."
So, in addition to a variety of disease-causing viruses that, thanks to Brazil's lack of waste water treatment centers, are already present in quantities that in some tests measured up to 1.7 million times the level of what would be considered hazardous on a Southern California beach, there's now 50 tons of mine sludge in the water as well.
As for Paula de Souza Vieira (mentioned above), it turns out she would likely have canceled her trip even if it weren't for the mud - she joined the swelling ranks of Brazil's unemployed this month after getting fired from her job as a television producer.
