Brazil Mining 2011

EMJ_pg48-96:EMJ_pg48-96 1/31/11 10:11 AM Page 49 Brazil Mining Brazil’s immense resource base, and enormous economic and political clout are creating a mining powerhouse that could dominate for generations. A REPORT BY GBR FOR E&MJ TABLE OF CONTENTS Brazil – Not a Country for Beginners ........................................50 An Interview with the Hon. Marcio Pereira Zimmerman, Minister of Mines and Energy......................................................52 This report was researched and prepared by Global Business Reports (www.gbreports.com) for Engineering & Mining Journal. Editorial Environmental Sustainability and Social Responsibility researched and written by Marina Borrell Falco, Matilde Mereguetti, within Brazil’s Mining Industry....................................................62 Caroline Stern and Ozgur Erguney. On the cover, at Fortaleza de Brazil’s Super Miner: Vale ..........................................................64 Minas, Votorantim Metals produces nickel for the company’s Key Minerals, Companies and Projects ......................................68 Niquelândia plant. (Photo courtesy of Votorantim) Brazil’s Services and Equipment Supply Chain ..........................82 JANUARY/FEBRUARY2011 2011 EMJ_pg48-96:EMJ_pg48-96 1/31/11 10:11 AM Page 50 BRAZIL MINING Brazil—Not a Country for Beginners Mining powerhouse sets its sights on becoming a better destination for investment Brazil’s continental scale, its resource base, tional investor. Brazil must be analyzed $1.7 billion in 1973, to $12.8 billion in and its economic and political clout are fast cautiously and patiently by those new to 1980; foreign debt increased from $6.4 rendering the nation a regional and interna- investing in emerging markets. “Brazil is billion to $54 billion over the course of the tional powerhouse. With 8.5 million km2 of not a country for beginners,” said Franklin same time period. Debt led growth land mass and 7,500 km of coastline, Brazil Feder, president, Alcoa, which has a 50- throughout the 1980s and early 1990s dwarfs all of its South American neighbors. year history in Brazil. “The Brazilian people caused inflation, which remained at Differences in size and scale aside, are very gracious, kind and hospitable; how- around 100% throughout the early 1980s, Brazil shares a long history of economic ever, they are often too kind and hospitable. and grew to 1,000% in the mid-1980s and political instability with its Latin You really have to know what you are doing before reaching 5,000% in 1993. America neighbors. However, since the in Brazil in order to get things done here.” Brazil’s politics, meanwhile, have been comprehensive economic reform program equally erratic. In common with much of of 1994—known widely as the Real Plan— Brazil’s Economic and Latin America, Brazil bounced between Brazil has demonstrated more consistency, Political Transformations military dictatorships and populist democ- both in the functioning of its democracy, Brazil’s reliance on coffee production led to racies. The election of Fernando Henrique and in its many years of continuous eco- a sustained period of import substitution Cardoso in 1995 marked a clear turning nomic growth. Today, Brazil stands along- industrialization (ISI) following World War point in Brazil’s political and economic his- side China, Russia and India under the II, continuing until the mid-1960s. In an tory. Cardoso’s “Plano Real,” enacted the BRIC acronym as one of the world’s leading effort to transform the Brazilian economy year prior to his election, was the first suc- destinations for foreign direct investment from one of inflation and debt to that of a cessful political action plan to sustainably (FDI). With an annual gross domestic prod- diversified capitalist market economy, the combat Brazil’s persistent economic chal- uct (GDP) growth rate of 7.4% in 2010, military leadership introduced widespread lenges of managing external debt and infla- coupled with vast geological potential, economic reforms in 1964. tion. The core tenets of the Plano Real Brazil’s attractions are obvious. Neverthe- The economic reforms simplified the were to introduce a new currency (the less, it is important to note that Brazil sits foreign exchange regime, introduced Real) at a relatively high peg to the U.S. sandwiched between Mozambique and incentives for investment and promoted dollar, raise interest rates to curb spending, Tanzania as the world’s 127th economy out exports—the result was a sustained period to encourage investment as well as saving, of 183 for ease of doing business accord- of growth, averaging around 11%, for and to curb government spending. ing to the World Bank’s 2011 survey. Brazil’s economy between 1968 and The Plano Real worked wonders. Brazil Brazil still has huge strides to make in 1973. Despite the oil shock of 1973, the soon became the darling of the interna- terms of translating nearly two decades of Brazilian government continued to back its tional investment community, stabilized economic and political stability into a solid high growth policies, putting major strain inflation, and entered a sustained period of and stable business environment that works on the country’s macro-economic position. economic growth. Brazil’s economy has efficiently and coherently for the interna- Brazil’s current account deficit grew from averaged GDP growth of 5% per year since the turn of the 21st century. It would appear the country’s economic and political instabilities are finally finished. Following Fernando Henrique Cardoso’s successful two terms as president between 1995 and 2003, long-term leftist presi- dential candidate Luiz Inacio Lula Da Silva was elected as Brazil’s president in 2003. He sustained economic growth and political stability throughout his tenure. By electing Lula’s chosen successor, Dilma Roussef, in 2010, the Brazilian electorate demonstrated its approval of Lula’s ideo- logical direction and stewardship of the national economy. Roussef also received the thumbs up from the mining community. Professor Joao Marini of the Agency for Technological Development of the Brazilian Mineral Industry (ADIMB) spoke for many when he said, “When Dilma wins the election, expect conditions for the mining sec- The world’s largest iron ore complex—Carajas mine, operated by Vale. tor to improve.” 50 E&MJ • JANUARY/FEBRUARY 2011 www.e-mj.com EMJ_pg48-96:EMJ_pg48-96 1/31/11 10:11 AM Page 51 BRAZIL MINING The Country of the Future? Brazilian Mining Today Cedraz Nery, general director, National Brazil’s relatively well-developed and diver- Mining in 2008 made up almost 2% of Department of Mineral Production (DNPM). sified economy was one of the first to enter Brazil’s GDP, accounting for $23.95 bil- In 2009, Brazil received only 3% of the and then recover from the recent global lion. Growth in the sector is phenomenal, world’s total exploration budget in mining. financial crisis. After a short period of neg- and mining is expected to reach an esti- So far only 30% of its territory has been ative economic growth at minus 0.2% in mated $46.44 billion by 2014. “Between systematically explored using geological 2009, the Brazilian economy was already 2000 and 2008, the size of the industry mapping. Although its total area is close to forecast a sustained period of strong has grown five times,” said Marcelo Tunes, seven times that of Peru, Brazil has invest- growth by early 2010. Brazil’s vast director of mining affairs, Brazilian Mining ed only half of the amount that Peru has in resource wealth, leadership as a global Institute (IBRAM). geological surveys. agricultural producer, industrial strength, Demand for minerals has pushed up the The Geological Survey of Brazil has emerging services industries and interna- value of Brazil’s mineral production, increas- indicated that there is a high probability of tional status—boosted by Brazil’s hosting ing in U.S. dollar terms by 250% between finding first class poly-metallic deposits— of the 2014 World Cup and 2016 Olympic 2000 and 2008. There was a drop of pro- similar to those found in Carajas in the Games—are all indicative of the increas- duction in 2009, caused by the global eco- north of the country—especially in the ingly strong position the country will occu- nomic crisis, but estimates for 2010 reckon Amazon region. “Brazil is a huge country, py in the global economy. that Brazilian mineral production will sur- similar from a geological point of view to The Brazilian economy represents more pass $35 billion and continue rising 10% to Canada or Australia. The likelihood of find- value, in dollar terms, than all of the other 15% per year. ing major tier one assets remains very South American economies combined. The In 2012, the country is expected to high,” said Professor Marini. Brazilian central bank expected GDP reach the same levels of production and The Amazon region has the potential for growth of 7.3% for 2010, followed by an sales as registered before the financial cri- major undiscovered mineral resources in average 5.5% per year growth from 2011 sis. IBRAM forecasts a total of $54 billion addition to the large reserves of (by volume): until 2013. Goldman Sachs predicts the investment for the period 2010-2014. Iron iron ore, manganese, bauxite, gold and tin. Brazilian economy will become one of the ore is the principal mineral in which the There are, however, concerns about damag- five largest in the world by 2050. investments will be made, and will account ing the Amazon rainforest. Much of Brazil’s Concerns remain, however, with regard for around 67% of the total. future mineral production will depend on to Brazil’s government policies and the Mining directly employed 161,000 finding new approaches and technologies ease (or difficulty) of doing business in the Brazilians in 2008. Studies carried out by that permit responsible and sustainable min- country. A bloated public sector and social the Geological Survey of Brazil (CPRM) ing that will not harm the environment.

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