A sputtering engine

It is time to worry about Germany’s economy

The country’s economic golden age could be coming to an end



THE WORLD is used to a thriving German economy. A decade ago, during the financial crisis, it shed relatively few jobs, as unemployment soared elsewhere. Since then it has been an anchor of fiscal stability while much of the euro zone has struggled with debt and deficits. Its public debt is below the target of 60% of GDP set by EU treaties—and falling. Thanks to labour-market reforms introduced during the 2000s, Germans enjoy levels of employment that beat job-friendly Britain, even as inequality is barely higher than in France. Its geographically dispersed manufacturing industries, made up of about 200,000 small and medium-sized firms, have mitigated the regional disparities that have fuelled populism across the West (see article).

Yet the German economy suddenly looks vulnerable. In the short term it faces a slowdown. It only narrowly avoided a recession at the end of 2018. Temporary factors, such as tighter emissions standards for cars, explain some of the weakness, but there is little sign of a bounceback. Manufacturing output probably fell in January. Businesses are losing confidence. Both the IMF and the finance ministry have slashed growth forecasts for 2019 (see article). In the longer term, changing patterns of trade and technology are moving against Germany’s world-beating manufacturers. In response, on February 5th Peter Altmaier, the economy minister, laid out plans to block unwanted foreign takeovers and to promote national and European champions.

Germany is getting both the short and the long term wrong. Start with the business cycle. Many policymakers think the economy is close to overheating, pointing to accelerating wages and forecasts of higher inflation. In their view, slower growth was expected, necessary even. That is complacent. Even before the slowdown, the IMF predicted that in 2023 core inflation will be only 2.5%—hardly a sign of runaway prices. In any case, higher German inflation would be welcome, as a way to resolve imbalances in competitiveness within the euro zone that would elsewhere adjust through exchange rates. The risk is not of overheating but of Europe slipping into a low-growth trap as countries that need to gain competitiveness face an inflation ceiling set too low by Germany.



The slowdown also portends deeper problems for Germany’s globalised economic model. Weakness in part reflects the fallout from the trade war between China and America, two of Germany’s biggest trading partners. Both are increasingly keen on bringing supply chains home. America is due soon to decide whether to raise tariffs on European cars. Trade is already becoming more regionalised as uncertainty grows. If global commerce splits into separate trading and regulatory blocs, Germany will find it harder to sell its goods to customers around the world.

Reform has made Germany’s labour market strong, but it will soon face new challenges. Industrial jobs look particularly vulnerable to automation, yet lifelong learning and retraining are relatively rare in Germany. The workforce is ageing. Neither the government nor business is much digitised and neither invests enough. If technological change demands that its economy embraces digital services, Germany will struggle.

The government is not blind to these problems, but Mr Altmaier’s protectionism is the wrong medicine. The left, meanwhile, wants to roll back labour-market reforms. Better to expand a recent boost to infrastructure spending and press ahead, at scale, with tax incentives for private investment. Both should help growth today and boost the economy’s long-term prospects. Significantly lower taxes on households would encourage a rebalancing away from exports and towards consumption. A dose of competition could invigorate coddled service industries. The German economy has had an impressive run, but cracks are appearing. It is time to worry.


US-China conflict echoes Europe’s past

Markets are much too sanguine about the possibility of de-globalisation

Rana Foroohar



Here is a story that should seem familiar. A great power, unsurpassed in military might and technological prowess, exports its free-trade economic model throughout the globe. Borders collapse, distance shrinks and the world seems smaller.

But market excesses and political dysfunction eventually lead other nations to question the wisdom of its approach, and another power rises — one whose dominance is built on a system of economic nationalism and industrial policy. As it flourishes, the first stagnates, sparking a conflict that leads not only to war, but to a decade-long decline in global trade and financial assets.

I’m referring of course to the last wave of globalisation involving Great Britain and Germany, which eventually died with the first world war and the Great Depression. It was a boom that lasted nearly eight decades, during which global trade and financial openness nearly doubled. Yet as the Bank for International Settlements put it in their 2017 annual report, “the collapse of the first wave was as remarkable as its build-up”, resulting in “an almost complete unwinding” of cross-border trade and financial flows.

Markets did not see it coming. And at the risk of being a Cassandra, I wonder if they aren’t just as oblivious to what is happening today with the US and China. The conflict between these great powers has obvious similarities to the earlier story, not just in terms of opposing economic models and rising nationalism, but also in the boom-bust timeline. It has, after all, been more than seven decades since the current wave of postwar globalisation began.

Stock markets, which took fright late last year, have recovered much of their losses. This happened, even though every day seems to bring a new harbinger of conflict that is much bigger than soyabeans, or steel, or tariff rates.

Two recent events have, for me, moved the market worry dial from yellow to red. First was the US request that Canada arrest and extradite Huawei’s chief financial officer followed by its decision to charge the Chinese chipmaker with espionage and sanctions violations. As investor Luke Gromen put it in his recent newsletter, the FBI has effectively declared “the official time of death of globalisation”.

The US also stepped up pressure on its allies to limit Huawei’s ability to do business in their markets — something that mirrors sentiment already brewing in places including Germany, which is once again pushing industrial policy and “national champions”.

This underscores the reality that the political impetus for deglobalisation does not begin and end with the Trump administration. It is no longer limited to the far-right or far-left. Most of the announced Democratic presidential hopefuls for 2020 — Elizabeth Warren, Kamala Harris, Kirsten Gillibrand, Sherrod Brown — appear to be coming around to the view that the economic relationship between the US and China will have to substantially change.

There are already a number of bipartisan legislative efforts around things like Chinese intellectual property theft and the spread of Chinese influence in the US. Curbing economic ties between the US and the Middle Kingdom is no longer considered “China bashing”, but has become a mainstream view.

The second thing markets should fear is the recent warning from a committee of Wall Street luminaries that advises the US Treasury. They estimated that the federal government is going to have to sell $12tn worth of bonds in the coming decade to fund its burgeoning national debt at a time when Chinese purchases of treasuries are falling.

Analysts have long speculated about what would happen if China stopped funding US debt. But now the question is coming to the fore at a time when there is more debt in the world than ever before. Global sovereign debt levels are far higher today than they were after the last round of deglobalisation following the first world war. Financial products have grown so much faster than the real economy that financial assets are now more than three times global gross domestic product, which of course amplifies the impact of any correction.

Deglobalisation is a complex, slow-burn process and not yet a done deal. But already, companies are under increasing pressure to choose whether they want to do business in the US, or in China, particularly in highly contentious areas like 5G networks. I recently asked Cisco chief executive Chuck Robbins whether he worried about the political implications of being a US company wiring up smart cities in China. “China owns the data, we just provide the infrastructure,” he answered, attempting to distinguish between the role of a private company and a state actor.

But that line is becoming tougher to draw. Over the next few months, as the US-China trade talks continue and the 2020 presidential race gets into gear, we may see shifts in cross-border supply chains and investment flows that once seemed impossible.

What will this mean for markets? Mr Gromen argues that “US corporate margins as a percentage of GDP could easily fall by 30-60 per cent just to return to the long-term range” that existed before China entered the World Trade Organization and sparked a trade boom.

Time to rethink investment choices and re-read history.


Donald Trump is itching to surrender to China on trade

US president’s restless desire for a deal defies the patient negotiations required

Edward Luce


US president Donald Trump (left) wants a trade deal that will buoy the stock markets, but his advisers want to hang tough in talks with Chinese leader Xi Jinping © AFP



We have seen this streaming drama before. President Donald Trump has a strong impulse — say to withdraw US troops from Syria, or declare an emergency on the Mexican border. He reluctantly submits to contrary advice. The cycle repeats, rinses and washes a few times before Mr Trump loses patience. Then he does what he always wanted — trusts his instincts above those around him. That is what is now happening on China. Mr Trump wants a trade deal that will buoy the stock markets. His advisers want to hang tough in talks with Chinese leader Xi Jinping, even at the expense of short-term US growth. It is a matter of time before Mr Trump overrules them. The question is how much face America will lose when he does.

The answer is a lot. Mr Trump is the mirror image of Theodore Roosevelt, the US president who said America should speak softly and carry a big stick. He has promised the moon on China but seems poised to accept a modest chunk of meteorite. Mr Trump’s end goal was to reduce China’s surplus with the US, which is on course for the first time to exceed $400bn this year. His administration’s goal was to force China to agree to a level playing field in technology. The two goals are very different. Mr Trump wants a headline that would boost his short-term bragging rights. The rest of his administration — and the broad global consensus — wants to ensure China makes deep structural changes to its system.

Mr Trump has little interest in the patient work of negotiating changes, good or bad, that do not show up on his electoral radar. The result is a deep split within his administration. The main casualty is Robert Lighthizer, Mr Trump’s hawkish trade representative, whose life’s work is to make China alter course. His only counterpart was Jim Mattis, the former US defence secretary, who resigned in December after Mr Trump said he would withdraw all US troops from Syria. The two men stood out in Mr Trump’s cabinet for possessing the authority to push back on the president. Mr Lighthizer has forgotten more about trade than Mr Trump will ever know. They are now airing their disagreements in public.

Last week Mr Lighthizer publicly corrected Mr Trump’s definition of a memorandum of understanding, which the president said was not a binding trade deal. Mr Trump had confused a real estate MoU with what it means in trade parlance. On Wednesday, Mr Lighthizer raised the stakes higher. He told Congress that the US would only accept a trade deal with China that was deep, structural and enforceable. Otherwise there would be no deal. “Don’t go for the soyabean solution,” he said. “This is our one chance.” But China agreeing to buy more US soyabeans, and other commodities, is exactly what Mr Trump is seeking. This would assuage the pain of US farmers in key mid-western swing states. It would also reduce the US trade deficit, albeit temporarily.

Which approach is likely to prevail? Ultimately Mr Trump always wins, even if America does not. The US stock market’s reaction to Mr Lighthizer’s testimony increased the chances Mr Trump will lose patience sooner than later. Equity prices dropped sharply the moment Mr Lighthizer began to speak. It is possible that what Mr Trump agrees with Mr Xi when they meet in Mar-a-Lago in March will be a short-term truce only. China has a spotless record of reneging on deals. The agreement is likely to include “snap back” provisions that allow the US to re-impose tariffs on China. Even so, Mr Trump will have surrendered a moment of acute leverage. Another few years of enforced technology transfer could be all China needs to take the lead in the race to dominate artificial intelligence.

Two other consequences are apparent. First, Mr Trump has opened the space for Democrats to say that he is soft on China. Having partly been elected because of his tough China rhetoric, Mr Trump has made it the bipartisan consensus. Second, Mr Trump’s credibility as a negotiator would plumb new depths. Those limits have already been tested this week in his failed nuclear summit with North Korea’s Kim Jong Un. It is wise when negotiating with Beijing to read strategists Sun Tzu or Carl von Clausewitz. Forewarned is forearmed. Mr Trump seems to prefer the Grand Old Duke of York, who marched his men to the top of the hill only to march them down again.


The Philippines Tries to Save a Treaty

What are the security options for a country that can dictate terms to neither friend nor foe?

By Phillip Orchard

 
Next week, the U.S. and the Philippines will open exploratory talks on salvaging their 1951 Mutual Defense Treaty. This comes after a month of renewed drama that has come to typify the hot-and-cold relationship between the U.S. and its oldest security treaty ally in Asia. In late December, Philippine Defense Secretary Delfin Lorenzana called for a comprehensive review of the treaty for updating. A week later, he announced that Manila had begun studying the possibility that the pact could be scrapped altogether.

Philippine President Rodrigo Duterte has threatened to withdraw from the treaty repeatedly since his election in 2016. Duterte says a lot of things, often changes his mind before the sun has set over Manila Bay, and is mostly incapable of fundamentally restructuring Philippine foreign policy to his personal tastes, anyway. But this particular warning came from Lorenzana – an advocate for robust U.S.-Philippine ties, a former attache to the Pentagon, and a Philippine defense establishment check on Duterte – suggesting that the anxieties Manila has about U.S. security commitments are born not from the vagaries of Duterte but from a more immutable set of circumstances: The U.S. and the Philippines face a common threat in China but have starkly divergent views on how to manage it.
 
Arguments Ring Hollow
The main problem with the treaty, according to Lorenzana, is that the U.S. won’t confirm that it includes Philippine holdings in disputed parts of the South China Sea. The treaty says the U.S. is obligated to respond to “an armed attack on the metropolitan territory of either of the Parties, or on the island territories under its jurisdiction in the Pacific or on its armed forces, public vessels or aircraft in the Pacific.” But the text leaves some room for interpretation on what would actually trigger the treaty – and what “acting to meet common dangers” in such an event actually means in practice. This debate isn’t academic; this week, for example, imagery published by the Center for Strategic and International Studies showed as many as 90 Chinese naval, coast guard and fishing vessels near Pag-asa Island, the Philippines’ largest holding in the Spratlys, ostensibly in response to Manila’s plans to resume work on a beaching ramp on the island.
 

 
For Washington, the ambiguity is at least partly deliberate. When the pact was signed in 1951, it argues, the Philippines did not yet control the nine features in the hotly contested Spratly archipelago that it does today. The U.S. is officially neutral on the territorial dispute, which began in earnest in the late 1980s, emphasizing instead that such matters should be resolved in accordance with the United Nations Convention on the Law of the Sea. The 2016 ruling by the Permanent Court of Arbitration at The Hague on a case brought by Manila invalidated Beijing’s claims that its Spratly holdings were entitled to territorial seas, but it did not rule on the rightful ownership of any of the reclaimed islands. So if the U.S. were to formally include the South China Sea in the treaty, it would ostensibly abandon a policy it applies in disputed hot spots around the world – one that serves the broader U.S. interest of bolstering a “rules-based” international order.

But this argument rings hollow to Manila for several reasons. For one, in 2015, the Obama administration agreed to updated guidelines in its Mutual Defense Treaty with Japan that, in no uncertain terms, included the disputed Senkaku Islands, which are administered by Japan but also claimed by China and Taiwan in the East China Sea. Washington can point to minor differences in the language of the two treaties to defend its position, but it’s the kind of legalistic rationale you invoke only if you’re looking to keep a pact weak. (The U.S. hasn’t always been so circumspect. The Clinton administration twice confirmed that the treaty covered the South China Sea, even though the Philippine Senate voted to boot the U.S. Navy from its strategically invaluable base at Subic Bay in 1991.)

Perhaps most telling, the legal case for covering the Scarborough Shoal, just 130 miles (210 kilometers) from Luzon, is more straightforward. The U.S. formally took administrative control of the resource-rich reef from Spain in 1900 following its victory in the Spanish-American War, and the Philippines acquired formal control upon gaining independence in 1946. The Philippines established a U.S. naval operating area covering a 20-mile radius around Scarborough Shoal in the 1960s, and the two allies used the reef as bombing range into the early 1980s.

Yet, when Chinese forces seized the shoal in 2012, the U.S. declined to forcefully intervene. The Obama administration reportedly warned China in 2016 that it would consider an attempt to turn Scarborough Shoal into yet another artificial island a red line. But neither the Obama nor the Trump administration has moved to stop China from exercising effective control over the surrounding waters. Nor has the U.S. expressed any willingness to defend Manila’s right to drill for oil in waters the U.N. tribunal determined were Philippine. From Manila’s viewpoint, in other words, the U.S. is going out of its way to keep the Philippines at arms’ length.
 
Words on Paper
Unfair as it may appear, the U.S. has strategic reasons to keep its options open. It doesn’t want to get dragged into a war with China, at least not one that wasn’t started on its terms, and so it doesn’t want to give the Philippines reason to think the U.S. will automatically have its back if it picks a fight it can’t win on its own. The U.S. is basically content with the status quo in the South China Sea. It doesn’t really need to escalate matters there to contain China on other fronts. So long as the Chinese navy can’t challenge the U.S. Navy directly, the U.S. is happy to cripple China by choking its maritime traffic along the first island chain and around the Strait of Malacca.

The problem for the U.S. is that this strategy gives the Philippines little choice but to do whatever it deems necessary to remain friendly with China. Over the past two years, this has meant limiting the scale of cooperation with the U.S., presumably at Beijing’s behest, while allowing China to gradually expand its commercial and political influence in the country in ways that could come back to haunt the U.S.

For example, Manila has dramatically slowed implementation of the Enhanced Defense Cooperation Agreement, a 2014 deal providing U.S. forces with rotational access to five Philippine bases. Construction on U.S. facilities was delayed by more than two years before finally breaking ground earlier this month. Two bases, including the one closest to the Spratlys, may now be excluded, and any hope that the deal would expand in scope, which Duterte’s predecessor’s administration assumed was inevitable, has been quashed.
 
 
Meanwhile, Chinese firms are making plays for assets at what were once the U.S.’ two most important bases in Luzon – Clark airfield and Subic Bay naval base. There’s no guarantee that commercial ownership will mean China will ever be able to get these assets for military purposes. We’re skeptical of the strategic utility of so-called Chinese “debt traps” in general. But the potential threat is real enough that those concerned about China across the region are moving to counter or block outright Chinese acquisitions of strategically valuable infrastructure abroad. (Lorenzana, for example, is calling for the government to take over the shipyard at Subic Bay to keep it out of Chinese hands.) Perhaps just as important, in November, Manila approved entry to the Philippine market of a wireless consortium led by China Telecom, which is likely to aid Chinese efforts to export fifth-generation wireless technologies to strategically important states, the military implications for which are potentially game-changing.
Ultimately, to blow a hole in the U.S. containment line, China needs one of the countries along the first island chain to flip fully into its camp. Weak as it is, the Philippines may be China’s best bet, even if it’s not an especially good bet. Even if Manila scrapped the Mutual Defense Treaty outright, it wouldn’t automatically bring the U.S.-Philippine partnership to an end. In practice, the U.S. hasn’t been cooperating with the Philippines substantially more than it has been with other regional allies with which it has no formal treaty. And in any case, Washington and Manila struck a more detailed and arguably more important visiting forces agreement in 1999 that has facilitated the bulk of recent cooperation, including U.S. assistance in the Philippines’ fight against jihadist militants in Mindanao. (On the other hand, the EDCA would likely need to be renegotiated if the Mutual Defense Treaty is snuffed out. This would be a substantive setback to bilateral cooperation.)
The Duterte administration’s outreach to Beijing is less an expression of preference for China over the U.S. than one of a desire to keep its options open. Nearly every strategically located state on China’s periphery is keen to play the U.S. and China off each other, and to balance ties with any number of outside powers, to their advantage. The Philippines has been eagerly deepening military cooperation with U.S. allies like Japan, Australia and South Korea accordingly.
Still, countries as weak as the Philippines don’t get to dictate terms, whether to friends or to foes, and an “omnidirectional” foreign policy is no substitute for using the U.S. to deter the Chinese. Treaties are only as relevant as the strategic logic underpinning them, but they can be important for facilitating things like military interoperability, intel-sharing and basing agreements – the flesh and bones of a balance of power strategy. A Chinese alliance with Manila, then, may never be in the cards. But a divided, uncertain Philippines – one vulnerable to influence and fruitlessly trying to keep its own options open – is the next best thing.

sábado, marzo 02, 2019

A TIDAL WAVE OF MUD / THE NEW YORK TIMES MAGAZINE

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A Tidal Wave of Mud

A mining dam collapsed and buried more than 150 people. Now Brazil is casting an anxious eye on dozens of dams like it.

This article is by Shasta Darlington, James Glanz, Manuela Andreoni, Matthew Bloch, Sergio Peçanha, Anjali Singhvi and Troy Griggs.


















BRUMADINHO, Brazil — Luiz de Castro was installing lamps at a mining complex in Brazil late last month when a loud blast split the air. He figured it was just a truck tire popping, but a friend knew better.

“No, it’s not that!” the friend said. “Run!”

Dashing up a staircase, caked in mud and pelted by flying rocks, Mr. Castro clambered to safety. But as he watched, a wall of mud unleashed by the collapse of a mining dam swallowed his co-workers, he said. Tiago, George, Icaro — they and at least 154 others, all buried alive.

The deluge of toxic mud stretched for five miles, crushing homes, offices and people — a tragedy, but hardly a surprise, experts say.

There are 88 mining dams in Brazil built like the one that failed — enormous reservoirs of mining waste held back by little more than walls of sand and silt. And all but four of the dams have been rated by the government as equally vulnerable, or worse.

Even more alarming, at least 28 sit directly uphill from cities or towns, with more than 100,000 people living in especially risky areas if the dams failed, an estimate by The New York Times found.

In the disaster last month, all the elements for catastrophe were there: A bare-bones reservoir of mining waste built on the cheap, sitting above a large town nestled underneath. Overlooked warnings of structural problems that could lead to a collapse. Monitoring equipment that had stopped working.

And perhaps above all, a country where a powerful mining industry has been free to act more or less unchecked.

The threat of poorly constructed mining dams in Brazil goes far beyond one company. The latest deadly failure — the second in Brazil in three years — has made it clear that neither the mining industry nor regulators have the situation under control.

Vale S.A., the world’s largest iron ore producer, says it will close all 10 of its dams in Brazil with a design similar to the one it ran in the town, Brumadinho. Still, the company, which bought the mining complex in 2001, defended its management of the dam, which had been sitting there, inactive, since 2016.


“The dam had a safety factor in accordance with the world’s best practices,” Vale said in a statement. The structure, it said, had been inspected regularly, ​and the reports “attest to the physical and hydraulic safety of the dam.”

But questions about the safety of the dam had been brushed aside for years. Despite them, the company had managed to get its plan to expand the mining complex in Brumadinho fast-tracked for approval by local officials.

“When you have this sort of structure upstream of a population center, that sends up all sorts of red flags,” said William F. Marcuson III, a former president of the American Society of Civil Engineers.



The Solidity of Mud

It is one of the oddest structures known to engineering — and, unless it is designed, constructed and monitored with great attention to detail, one of the most terrifying.

Dams like the one that collapsed in Brumadinho are, in essence, lakes of thick, semi-hardened mud consisting of water and the solid byproducts of ore mining, which are known as tailings.


     Antonio Lacerda/EPA, via Shutterstock


Like any dam, they can fail in a number of unsurprising ways. They can overtop if filled too quickly. They can spring a leak, or sustain damage in an earthquake. Or they can fall victim to sloppy construction or maintenance.

But they are not like any dam.

Indeed, the structure at Brumadinho strained the very definition of “dam.” It had no separate concrete or metal wall to hold back its contents. Instead, the structure, known as an upstream tailings dam, relied on the lake of mud to remain solid enough to contain itself.






“Basically they are like landfills, but wet landfills,” said Gregory B. Baecher, a member of the National Academy of Engineering and a professor at the University of Maryland.

The dams’ unique construction makes them vulnerable to a bizarre and potentially devastating process called liquefaction. When that happens, a solid material seemingly resting safely in place can abruptly become a murky liquid, flowing downhill and destroying nearly everything in its path.

Even a subtle change, like an increase in water content because of especially heavy rains, say, or poor management, can create enough internal pressure to push apart the solid tailings and liquefy the mud.

The people of Brumadinho know all too well what can happen next.

“The forces are absolutely phenomenal,” said Dirk Van Zyl, a professor of mining engineering at the University of British Columbia, who investigated a 2014 collapse of a tailings dam in Canada. “You really have to see it to understand.”

A video of the Brumadinho collapse makes clear that the mud behind the dam did liquefy, experts who have seen it said. What is not clear is whether liquefaction caused the collapse, or followed it.

The video appears to show where the dam failure began.



Mr. Van Zyl said: “Ultimately everything liquefies and it’s gone. It’s pretty darn bad.”

Many engineers cautioned that it was too soon to draw firm conclusions about what precisely went wrong with the structure in Brumadinho, called Dam I of the Córrego do Feijão Mine. And they said it was possible to build upstream tailings dams safely.

“There’s nothing blatantly wrong with this method of construction,” said W. Allen Marr, founder and chief executive of Geocomp, based in Boston, and a member of the national academy. When the structures fail, Mr. Marr said, “it’s usually a combination of several things that should have been done but don’t get done.”

In 2010, Washington Pirete, whose LinkedIn profile and a professional publication list him as a longtime Vale employee, wrote a master’s thesis focused on the dam at Brumadinho. Mr. Pirete concluded that the risks of liquefaction were low to moderate, but several engineers say now that his analysis, if anything, cast doubt on the safety of the dam.


     Douglas Magno/Agence France-Presse -- Getty Images


Mr. Marr said that Mr. Pirete’s safety calculations “raise questions about the stability of the dam.” Mr. Van Zyl said that if he had calculated the safety margins Mr. Pirete found for the dam, “I wouldn’t sleep well.” He said his first reaction on seeing the thin margins was that the dam “should have failed earlier, almost.”

Mr. Pirete did not respond to several requests for comment.

The thesis describes a method of construction, which began in 1976, that is in many ways routine for upstream dams.
A so-called starter dike was built across the valley above Brumadinho, and the mining company piped waste behind it. When the waste neared the top of the dike, the company built another slightly uphill — hence the name upstream construction. The second dike sat directly on the hardened mud.

Over the decades, a towering structure rose over the mining complex, its integrity dependent entirely on the solidity of the mud.



A closer look at Mr. Pirete’s figures, some of which were scarcely above the collapse threshold, left some engineers questioning how Mr. Pirete could have considered the dam safe.

“That’s way too close to the margin,” Mr. Baecher said.

Last year, a German company hired by Vale took its own look at the dam and calculated higher stability factors than Mr. Pirete did — but it did raise safety concerns.

The company Tüv Süd found blocked drainage pipes and cracks, and made note of a small wooden structure that had been erected to stop part of the dam from slumping. The company also found water visibly seeping from at least one area, and said there was a risk of liquefaction.

To reduce the risk of triggering a collapse through vibrations, they advised Vale to avoid letting heavy equipment onto the dam or allowing detonations nearby. They also advised work to keep the water level from rising.


A Looming Threat

Two weeks after the Brumadinho tragedy, sirens went off in the middle of the night 76 miles away, in the town of Barão de Cocais. “Attention! This is a real dam break emergency,” loudspeakers blasted. “Abandon your homes immediately.”

The alarms wreaked havoc as nearly 500 people were ordered to evacuate. Vale, which owns the mining complex in Barão de Cocais, called it a “preventive measure,” explaining it had initiated its emergency plan after the consulting firm Walm refused to attest to the dam’s stability.
“We hope it doesn’t burst, but unlike many cities we had time to act,” said Décio dos Santos, the town mayor. “We didn’t know the dam was dangerous.”
The true risk of dams in Brazil — and elsewhere — is largely unknown.
Just as in Brumadinho, the dams above the now evacuated areas of Barão de Cocais and another town, Itatiaiuçu, are upstream dams. There are a total of 88 upstream dams throughout Brazil, and all but four have the same safety rating as the collapsed structure — or worse — according to government records.


In Itatiaiuçu, just 20 miles west of Brumadinho, residents were also awoken in the pre-dawn hours on Friday. Authorities and representatives of the ArcelorMittal mining company went door to door in one neighborhood, ordering some 200 people to evacuate.
Here, too, the company said it had initiated its emergency plan after auditors adopted “a more conservative methodology” and refused to attest to the stability of a nearby dam — although the conditions themselves were unchanged.
A Company Town Says ‘Enough’

When the dam collapsed at the Córrego de Feijão mine shortly after noon, 11.7 million cubic meters of mining waste — enough to fill almost 5,000 Olympic swimming pools — descended toward the town below. As it did, it slammed into a company cafeteria, where there were a couple of hundred employees.
It took rescue workers days to reach them.

     Antonio Lacerda/EPA, via Shutterstock


Vale is the main source of income for the 37,000 people living in Brumadinho, but as the death toll rose, public anger boiled over at the company.

Even run-of-the-mill activities became daunting, with a mass of thick brown sludge now cutting through the town.
Two days after the dam collapse, Mayor Avimar Barcelos described Vale as “incompetent and reckless.” Vale workers, once proud, felt subdued. One said he no longer felt comfortable wearing his uniform on the Street.
“I’d be lynched,” he said.
At the entrance to town, a monument bore a scribbled accusation: “Murderous Vale!!!”


The company says it is still investigating what caused the rupture and insists there were no warning signs.
The dam had been inactive for almost three years, according to Vale, and had been certified as stable in September, despite warnings in a 2015 environmental impact study that some of the monitoring instruments were faulty.
Three years ago, a similar dam burst in the city of Mariana, 75 miles away, killing 19 people and unleashing one of the worst environmental disasters in Brazilian history. That dam was jointly owned by Vale and the Anglo-Australian mining company BHP.
After the Mariana collapse, officials vowed to adopt rigorous safety protocols. That never happened.
In Brazil, given the dearth of government inspectors, companies are allowed to self-regulate, hiring independent auditors to verify dam safety through regular inspections and an analysis of written records — all provided by the company.
Experts say that creates a conflict of interest.
“You can’t have the person doing the inspection getting paid by the company he is inspecting,” said Evandro Moraes da Gama, a professor of engineering at the Federal University of Minas Gerais who specializes in mining waste.

Four days after the Brumadinho dam burst, the police arrested the outside inspectors who had attested to its stability, along with three Vale employees responsible for safety and environmental licensing. A judge later ordered them released.
“They’re taking it out on the inspectors, arresting them, but it’s the system that’s flawed,” Mr. Gama said.
Many residents of Brumadinho believe that the failure of the company’s warning system cost many lives. In a statement, Vale said the “speed at which the event occurred made it impossible to trigger the sirens.”
Mr. Castro, the Vale employee who escaped the deluge, said, “If the alarm had sounded, the environmental tragedy would still happen, but no one would have died.”
Jefferson Ferreira dos Passos, whose sister worked at an inn downhill from the dam, said that when he heard it had burst, he immediately called her. When she didn’t answer, Mr. Passos ran four miles to the site — only to find an expanse of mud.
He and another man started carrying survivors out of the sludge. When they found a woman clinging to a tree trunk with her legs broken, they waited by her side until a helicopter airlifted her out.


He never found his sister.


Hooked on Mining

The first Portuguese explorers came searching for gold and diamonds in the state of Minas Gerais, whose name means “general mines.” It remains the hub of Brazil’s mining industry, producing 53 percent of the country’s output, with more mines and tailings dams than any other Brazilian state. Here, critics say, the laws are written by the mining companies, not for them.
Last December, an extraordinary meeting of the state council on mining regulations was called to vote on a proposal by Vale to expand operations at Córrego de Feijão and another mine. The proposal had been declared a “priority” by the state.


Vale bought the mining complex in 2001. Antonio Lacerda/EPA, via Shutterstock

Maria Teresa Corujo, an activist who represents the community vote on the council, angrily pointed out that council members had been given just four business days to pore over thousands of documents.

“The environmental management of our state continues to be focused on the G.D.P. index, on mining interests,” she said, according to minutes of the meeting that were sent to The Times. “This is destroying Minas Gerais.”
Júlio Cesar Dutra Grillo, the state representative from the federal environmental protection agency, warned the council that the dams were not risk free. “Any negligence on the part of those conducting risk management, and they rupture,” he said.
The proposal passed with one dissenting vote, from Ms. Corujo, and an abstention by Mr. Grillo.
 
The board's decision came despite growing concern about accidents after the Mariana dam collapse. In public hearings, activists in Brumadinho would try to convince residents that tourism, not mining, was the city’s path forward.

But tourism is not what keeps the city spinning. Mining started here in the 1950s and many communities in the city were created by its workers.
Fernando Coelho, 35, was born in a small community inside the Córrego do Feijão mining compound. “My umbilical cord is buried there,” he said.

Mr. Coelho started working there alongside his father, Olavo Coelho, when he was 19, but was at home after a night shift on the day the dam broke. He knew his father would be having lunch at the cafeteria and rushed to his car. When he got there, all he found was mud.

Mr. Coelho said he was desperately sad — but angry, too. Months before the collapse, his father had been called in to fix a leak. Ever since then, according to his son, he had been saying the dam was not safe.
“He warned the dam could burst,” he said. “But he isn’t the one making decisions.”
Mr. Coelho said he told the prosecutors in charge of the investigation what his father had told him. Three other workers also told The Times they were aware of leaks.
But Mr. Coelho said that despite his father’s warnings, he had never worried the dam would break. His whole life, after all, revolved around the mining complex. He feels differently now.

“I won’t ever go back,” he said. “It killed my father.” 


In the days after the rupture, Vale said it would give the families of each victim 100,000 reais, or $27,000, independent of any legal settlements.
State and national governments quickly called for stricter regulations, but, as experts point out, the outrage after the Mariana dam collapse did little to improve the regulatory framework.

“After Mariana, the system just got more flexible, facilitating the traffic of influence inside the licensing system,” said Klemens Laschefski, a Federal University of Minas Gerais professor who participates in the council meetings. “I’ve been to 40 meetings on priority projects — not one was rejected,” he said.

Ademir Caricati, a community leader in a neighborhood where roughly 40 houses were destroyed, said that Vale officials told residents last year that the dam posed little danger.

The officials even offered an odd sort of reassurance, pointing out that the mine’s administrative offices were right below the dam.

“We would be the first to die,” one said.


Shasta Darlington and Manuela Andreoni reported from Brumadinho, and James Glanz, Matthew Bloch, Sergio Peçanha, Anjali Singhvi and Troy Griggs from New York. Meghan Petersen and K.K. Rebecca Lai contributed additional work.