Identifying the Fiscal Situation of the Municipalities Affected by the Rupture Disaster of the B1 Tailings Dam - Córrego do Feijão Mine in Brumadinho - MG

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Published on 11/06/2021

On January 25, 2019, the B1 tailings dam at the Córrego de Feijão Mine in Brumadinho (MG) ruptured causing widespread environmental, socio-economic, and human devastation. In the wake of the disaster, economic, social and environmental impacts have accumulated, which must be measured in order to allow for reparation.

One of the economic dimensions affected by the dam breach is the fiscal situation of municipalities. The paralysis of Vale-related activities in the impacted municipalities had important economic consequences, due to the reduction in the value of production and income in these locations and, consequently, in tax collection. In this case, particularly noteworthy are the effects on the service sector, such as those associated with commerce and the hotel sector. 

On the other hand, the disaster caused increased demand for public services, given the situation of greater economic and social vulnerability of post-disaster families. This scenario implies fiscal imbalances in the affected municipalities, with lost revenues and increased expenses compared to a scenario in which the disaster had not occurred.  

Thus, the fiscal situation of the municipalities affected by the Brumadinho disaster should be estimated from empirical methods that accurately measure the impacts caused in order to make possible a possible repair. To this end, comparative scenarios will be built, considering the period before and after the incident. First, the fiscal situation will be analyzed. Next, multivariate analysis techniques will be used (cluster analysis), in order to build a representative group of control municipalities. Finally, the econometric modeling technique will be applied to predict comparative scenarios. The intention is to isolate the effect of the disaster on the public finances of the affected localities in order to measure the possible impacts. From the results of each step the following products will be generated: 

Produto 1:  Avaliação da situação fiscal dos municípios atingidos no período 2014-2018; definição dos municípios do grupo de controle, a partir da análise de cluster; comparação da situação fiscal dos municípios atingidos com municípios similares (grupos de controle) no período 2014- 2018;  

Produto 2: Elaboração de cenários para situação fiscal dos municípios atingidos nos cinco anos subsequentes ao rompimento da barragem (2019-2023), supondo ausência de ruptura da barragem e com ruptura da barragem; 

Produto 3: Comparação dos cenários dos municípios atingidos com cenários de municípios similares (grupos de controle), a partir da análise da situação fiscal dos municípios prospectada nos cenários;  

Produto 4: Avaliação as ações mitigadoras e reparadoras executadas e planejadas considerando os estudos anteriores. Precisamente avaliação das perspectivas orçamentárias dadas as condições do desastre e o pano de fundo macroeconômico;

Produto 5: Relatório Final com a consolidação e revisão dos relatórios parciais. 

Considering that the project foresees interviews with mayors, finance secretaries or whoever they indicate, the research was forwarded to the COEP-UFMG (Research Ethics Committee).We emphasize that all ethical precautions will be adopted during the development of the research. 

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