YCLOAK

Brazilian miner Vale SA identified concerns around its tailings dams in 2009 and studied but did not implement several steps that could have prevented or lessened the damage from last week’s deadly disaster, according to a corporate presentation seen by Reuters.

    

A tailings dam, used to store the muddy detritus of the mining process, collapsed on Friday, killing at least 65 in one of Brazil’s largest industrial accidents on record.            

    

The Brumadinho disaster, coming just over three years after a similar incident at another mine partially controlled by Vale, has fueled calls for a management overhaul and erased more than 70 billion reais ($18.61 billion) in Vale’s market value.      

But a decade ago, the world’s largest iron ore miner was considering ways to use fewer tailings dams, including alternative uses for the waste rock, according to the 73-page presentation.

The presentation pointed to the rising volume of tailings produced at the company’s mines, with some locations producing hundreds of thousands of tons of tailings daily.

    

The report suggested Vale make building materials from tailings, including bricks, a step that would give the company another revenue source and lessen the volume needing to be stored using dams.

    

The 2009 Vale report had recommended the company undertake a project to be called “Zero Dams” that would have involved drying out tailings, among other steps. It was not known whether the report reached the top levels of Vale management nor why it was not implemented.

    

Vale declined to comment. The report’s author, Paulo Ricardo Behrens da Franca, left Vale a year after submitting it and now works as an industry consultant. Reached by Reuters, he did not comment.

    

‘Inherently Dangerous Structures’

Vale’s Brumadinho facility was built using the cheapest and least-stable type of tailings dam design, a commonly used structure in mining known as “upstream construction.”

    

Chile, Peru and other earthquake-prone countries ban the design, in which tailings are used to progressively construct dam walls the more a mine is excavated. Brazil is not as earthquake-prone as its western neighbors, but even small seismic activity has been shown to affect tailings dams.

Because these types of tailings dams are waterlogged, they are easily susceptible to cracks and other damage that can cause bursts like the one that occurred last week near Brumadinho.

“A tailings dam may look safe, but it’s still retaining a lot of moisture behind it,” said Dermot Ross-Brown, a mining industry engineer who teaches at the Colorado School of Mines. “They’re inherently dangerous structures.”

    

Tailings dams tend to be shorter in height than conventional water dams, but often are far wider in span.

    

The disaster’s cause remains unknown. Vale said the dam had not received tailings for about two and a half years and was in the process of decommissioning, a step that should have lessened risk, engineers said.

    

“It’s really puzzling to me this happened as the (dam) was closing,” said Cameron Scott of SRK Consulting, a mining engineering firm. “This disaster will make future mine permitting harder.”

   

The dam had passed a September 2018 inspection by the German firm TUEV SUED AG and Vale Chief Executive Fabio Schvartsman said equipment had shown the dam was stable on Jan.

10.            

 

On Tuesday, Brazilian state prosecutors arrested three Vale employees and two TUEV SUED employees.                

    

Risk

Brazil has nearly 4,000 dams that are classified as having “high damage potential” or being at high risk, with 205 of those dams containing mineral waste, the country’s Regional Development Minister Gustavo Canuto said.             

Analysts and engineers said that the Brumadinho disaster will hopefully push the industry to stop storing wet tailings and instead move toward the more-expensive-but-safer process of storing dry tailings.

That process requires drying the tailings and storing them on-site, abrogating the risk of a dam burst. The approach is becoming more popular in Canada and other countries with stricter mining regulations.    

“The industry doesn’t yet fully realize the risk its taking on with those type of wet tailings dams,” said Matt Fuller of Tierra Group International Ltd, a tailings engineering consulting firm.

 

Officials in Brazil’s Minas Gerais state, where the disaster occurred, say they are now going to push for legislation requiring dry mining and forcing miners to tear down tailings dams when they are located above communities.

A similar proposal failed last summer, with its defeat attributed by the bill’s sponsor to lobbying pressure from mining companies.

    

Brazil is still reeling from the 2015 collapse of a larger dam, owned by the Samarco Mineracao SA joint venture between Vale and BHP, that killed 19 people.

    

After Samarco, the International Council on Mining and Metals (ICMM) issued updated guidelines for its members to try to safeguard tailings dams used to store waste left over from mining operations.

    

The ICCM said on Saturday that the mining industry still has “lessons to learn” from Samarco and similar events.            

Mining companies typically hire engineering firms that specialize in tailings dams to build the structures, not necessarily dam contractors themselves, a step that some industry observers hope changes soon.     

“The mining companies are not placing dam safety at the forefront of their preoccupations,” said Emmanuel Grenier, a spokesman for the International Coalition of Large Dams (ICOLD), a non-governmental organization focused on dam engineering.

The group “is recommending that dams, especially large dams, be built by dam professionals, but it is too rarely the case for tailing dams,” Grenier said.

($1 = 3.7614 reais)
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The U.S. has imposed sanctions on Venezuela’s state-owned oil company, PdVSA, in an increased effort to pressure Nicolás Maduro to relinquish power to Juan Guaidó, now recognized by the U.S. and a number of other nations as the country’s legitimate president. VOA’s diplomatic correspondent Cindy Saine reports from the State Department.
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Brazil eyes management overhaul for Vale after dam disaster

Brazil’s government weighed pushing for a management overhaul at iron ore miner Vale SA on Monday as grief over the hundreds feared killed by a dam burst turned into anger, with prosecutors, politicians and victims’ families calling for punishment.

By Monday night, firefighters in the state of Minas Gerais had confirmed that 65 people were killed by Friday’s disaster, when a burst tailings dam sent a torrent of sludge into the miner’s offices and the town of Brumadinho.

There were still 279 people unaccounted for, and officials said it was unlikely that any would be found alive.

Brazil’s acting president, Hamilton Mourao, told reporters a government task force on the disaster response is looking at whether it could or should change Vale’s top management.

Public-sector pension funds hold several seats on the board of the mining company, and the government holds a “golden share” giving it power over strategic decisions.

“The question of Vale’s management is being studied by the crisis group,” said Mourao, who is serving as acting president for some 48 hours while President Jair Bolsonaro recovers from surgery. “I’m not sure if the group could make that recommendation.”

Shares of Vale, the world’s largest iron ore and nickel producer, plummeted 24.5 percent on Monday in Sao Paulo, erasing nearly $19 billion in market capitalization. A U.S. law firm filed a shareholder class action lawsuit against the company in New York, seeking to recover investment losses.

Igor Lima, a fund manager at Galt Capital in Rio, said the severe threats from the government and prosecutors drove the shares even lower than many analysts had estimated.

“This reaction has brought quite a lot of uncertainty about the size of the financial punishment Vale will have to handle,” he said.

Senator Renan Calheiros, who is in the thick of a Senate leadership race, on Twitter called for Vale’s top management to be removed urgently “out of respect for the victims … and to avoid any destruction of evidence.”

One of Vale’s lawyers, Sergio Bermudes, told newspaper Folha de S. Paulo that management should not leave the company and said that Calheiros was trying to profit politically from the tragedy.

Vale’s senior executives have apologized for the disaster but have not accepted responsibility, saying the installations met the highest industry standards.

Brazil’s top prosecutor, Raquel Dodge, said the company should be held strongly responsible and criminally prosecuted.

Executives could also be personally held responsible, she said.

Repeated Failures

The disaster at the Corrego do Feijao mine occurred less than four years after a dam collapsed at a nearby mine run by Samarco Mineracao SA, a joint venture by Vale and BHP Billiton, killing 19 and dumping toxic sludge in a major river.

While the 2015 Samarco disaster unleashed about five times more mining waste, Friday’s dam break was far deadlier as the wall of mud hit Vale’s local offices, including a crowded cafeteria, and tore through a populated area downhill.

“The cafeteria was in a risky area,” Renato Simao de Oliveiras, 32, said while searching for his twin brother, a Vale employee, at an emergency response station. “Just to save money, even if it meant losing the little guy. … These businessmen, they only think about themselves.”

As search efforts continued on Monday, firefighters laid down wood planks to cross a sea of sludge that is hundreds of meters wide in places, to reach a bus in search of bodies inside. Villagers discovered the bus as they tried to rescue a nearby cow stuck in the mud.

Longtime resident Ademir Rogerio cried as he surveyed the mud where Vale’s facilities once stood on the edge of town.

“The world is over for us,” he said. “Vale is the top mining company in the world. If this could happen here, imagine what would happen if it were a smaller miner.”

Nestor José de Mury said he lost his nephew and coworkers in the mud. “I’ve never seen anything like it, it killed everyone,” he said.

Vale Chief Financial Officer Luciano Siani told journalists on Monday evening that, despite interrupting operations in Brumadinho, the company would continue royalty payments to the municipality. He said Vale royalties made up about 60 percent of the town’s 140 million reais in revenue last year.

Siani said a donation of 100,000 reais will be made to each family that lost a relative in the disaster and said Vale would step up investments in dam safety.

Safety Debate

The board of Vale, which has raised its dividends over the last year, suspended all shareholder payouts and executive bonuses late on Sunday, as the disaster put its corporate strategy under scrutiny.

Since the disaster, courts have order a freeze on 11.8 billion reais of Vale’s assets to cover damages. State and federal authorities have slapped it with 349 million reais of administrative fines.

German insurer Allianz SE may have to cover some of the costs of the dam collapse, two people familiar with the matter told Reuters.

“I’m not a mining technician. I followed the technicians’ advice and you see what happened. It didn’t work,” Vale CEO Fabio Schvartsman said in a TV interview. “We are 100 percent within all the standards, and that didn’t do it.”

Many wondered if the state of Minas Gerais, named for the mining industry that has shaped its landscape for centuries, should have higher standards.

“There are safe ways of mining,” said Joao Vitor Xavier, head of the mining and energy commission in the state assembly. “It’s just that it diminishes profit margins, so they prefer to do things the cheaper way — and put lives at risk.”

Reaction to the disaster could threaten the plans of Brazil’s newly inaugurated president to relax restrictions on the mining industry, including proposals to open up indigenous reservations and large swaths of the Amazon jungle for mining.

Environment Minister Ricardo Salles said in a TV interview on Monday that Brazil should create new regulation for mining dams, replacing wet tailings dams with dry mining methods.

Mines and Energy Minister Bento Albuquerque proposed in a Sunday newspaper interview that the law be changed to assign responsibility in cases such as Brumadinho to the people responsible for certifying the safety of mining dams.

“Current law does not prevent disasters like the one we saw on Brumadinho,” he said. “The model for verifying the state of mining dams will have to be reconsidered. The model isn’t good.”

($1 = 3.7559 reais)
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British officials are war-gaming various strategies for coping with the disruption of Britain leaving the European Union without an exit deal, including declaring a state of emergency and martial law to avert disorder provoked by possible food shortages and energy outages.

Details emerged of Operation Yellow Hammer, the contingency planning underway for a so-called no-deal Brexit, ahead of important parliamentary votes this week that could result in Britain postponing its departure by nine months or even more.

Operation Yellow Hammer has provoked the wrath of hardline Brexiters, who say the war-gaming is excessive and the leaking of what the government is considering is just designed to scare rebel lawmakers into accepting the Brexit Withdrawal Agreement the House of Commons rejected earlier this month.

As the exit day of March 29 looms, the government and businesses are scrambling to prepare for possible chaos wrought by a no-deal exit, which some fear could severely disrupt supply chains, energy networks and basic cross-border services, from banking to travel. Downing Street admits a no-deal exit would bring disruption “but as a responsible government we are taking the appropriate steps to minimize this disruption and ensure the country is prepared.”

Some civil servants have compared the likely disruption to the impact of a war. Defense officials told Sky News Sunday the army is stockpiling food, fuel, spare parts and ammunition in readiness. “An army marches on its stomach. If supply lines break down, they struggle,” an official said.

Earlier this month, nearly 100 trucks took part in a drill to test Britain’s contingency plans for coping with likely customs and security delays in the event of a no-deal Brexit. The port of Dover normally sees 10,000 trucks pass through every day, bringing vital supplies from the continent and sending Britain’s exports to the European Union and beyond. The fear is a large part of southeast England could see unmanageable traffic lines.

 

Hardline Brexiters, like former foreign secretary Boris Johnson, have dismissed the no-deal Brexit warnings as hysteria. “These doom-laden predictions are so hyperbolical as to suffer from the law of diminishing returns. Brexiteers have, for months, been arguing that a no-deal exit is manageable and government warnings are overblown,” Johnson said recently.

The House of Commons is set to vote Tuesday on whether Britain should delay the March 29 exit if a withdrawal deal that will garner sufficient support from lawmakers cannot be reached with Brussels.

More than a dozen ministers are warning they’ll resign if May fails to commit to avoiding a no-deal Brexit, although they’re prepared to give her two weeks to try to conclude a new withdrawal deal first.

In the event she can’t, parliament would have to pass new legislation to delay an exit. But delaying Britain’s departure would also require unanimous agreement from the 27 other EU member states, and Brussels has warned the exit could only be postponed for a handful of months.

Ironically, rebellious hardline Euro-skeptics in May’s ruling Conservative party, who were key in the heavy defeat of May’s Brexit Withdrawal Agreement earlier this month, appear to be softening their opposition to her deal; while pro-EU Conservative rebels and middle-of the-roaders appear to be moving closer together in an alliance determined now to bury it for good.

May’s proposed deal would see Britain locked in a customs union with the European Union for several years while it negotiates a vaguely defined free trade settlement.

In the temporary customs union, Britain would be unable to influence EU laws, regulations and product standards it would have to observe. The transition was reached to avoid customs checks on the border separating Northern Ireland and the Irish Republic, but British lawmakers fear Britain could be trapped indefinitely in the transition.

Leading Brexiters say if May can get a sunset clause written into the agreement to allow Britain to escape the transition agreement later on, if it wished, or if the transition was time-limited, they might reverse their opposition and back the deal.

The possible change of heart is being determined by their fear that pro-EU lawmakers are gaining in parliamentary strength. But it isn’t clear Brussels or the other 27 member states will agree such a clause, they insist there can’t be substantial changes to the deal they agreed on after two years of haggling.

Pro-EU lawmakers across all parties appear emboldened and determined to negotiate a much softer agreement that would see Britain stay in a customs union with the bloc permanently.

 
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The U.S. Treasury has lifted sanctions on three Russian companies connected to Russian billionaire Oleg Deripaska, reversing a move which wreaked havoc on global aluminum markets last year.

To the Treasury and supporters of the move, it was an example of sanctions working as they should by changing a target’s behavior in nine months under suffocating restrictions on trade. Due to the sanctions, Deripaska, a tycoon who has been close to the Kremlin, agreed to reduce his shareholdings to below 50 percent.

Congressional Democrats and some Republicans, however, worry that Deripaska could retain significant influence, even as he himself stays under sanctions.

Here is a look at Deripaska, his companies, and possible consequences of the Treasury ruling.

Putin ally

With his cropped hair and scruffy beard, Deripaska was a familiar face to Russians long before he was dragged into in the U.S. furor over the 2016 election.

Amid the economic chaos that followed the Soviet Union’s collapse, the trained physicist became a major player on the Russian metals market even before his 30th birthday. Even among Russian billionaire businessman, Deripaska’s also notable for his closeness to Russian President Vladimir Putin. A leaked U.S. diplomatic cable from 2006 described him as “among the 2-3 oligarchs Putin turns to on a regular basis.”

As special counsel Robert Mueller investigates alleged collusion between President Donald Trump’s 2016 electoral campaign and Russian interests, Deripaska’s links to former Trump campaign chairman Paul Manafort have come under scrutiny. Manafort, who was convicted last year in the United States of tax and bank fraud, was a former business partner of Deripaska.

The Belarusian model and self-described sex coach Anastasia Vashukevich — known by her pseudonym Nastya Rybka — said last year that she had obtained details of Deripaska’s alleged role in U.S. election meddling while spending time on his yacht. Vashukevich was arrested in Thailand last February and deported this month. She is now in Russia.

Vashukevich earlier indicated she would turn over the recordings she claimed to have if the U.S. could help secure her release, but she later withdrew the offer, suggesting that she and Deripaska had reached an agreement. Deripaska won a Russian defamation suit against Vashukevich and another man last year.

Sanctions collateral damage

The U.S. decision in April 2018 to sanction Rusal — the massive aluminum producer then controlled by Deripaska — had a big impact. Shares in the company plunged over 50 percent, and supply chains around the world were disrupted.

That exposed both the power and the limits of U.S. policy toward Russia, says Tom Adshead of Moscow-based consultancy Macro-Advisory.

Previous sanctions had been written to minimize damage to other sectors of the economy, and in particular Western businesses buying Russian commodities. That changed with Deripaska.

By barring almost any commercial relationship with one of the world’s largest producers of a metal key to international supply chains, U.S. policymakers ensured this time the economic pain would be felt not only in Russia.

“There was collateral damage that wasn’t desirable,” Adshead said. Besides an immediate jump in aluminum prices, that included economic uncertainty for Rusal’s employees outside Russia in countries like Sweden and Ireland.

The Rusal experience could mean the U.S. is more cautious about sanctioning major market players in future, Adshead predicted.

After the sanctions were removed from Rusal on Monday, shares in the company rose to their highest since April, though they remained at only around two-thirds of their value prior to the sanctions.

The price of aluminum largely held steady as other companies have stepped into the void left by Rusal and increased supply, analysts say.

The main winners have been state-owned metal producers in China — just the ones the Trump administration has sought to stymie by imposing tariffs on Chinese aluminum.

Enforcing conditions

The key condition of lifting sanctions on Rusal and Deripaska’s other companies is that the companies “reduced Oleg Deripaska’s direct and indirect shareholding stake in these companies and severed his control,” the Treasury said.

Whether that will actually prove to be the case was a key bone of contention in Congress, which voted this month to try to block the administration’s efforts to remove the sanctions. In the House, 136 Republicans joined Democrats to disapprove the deal while in the Senate 11 Republicans supported the move but fell short of the 60 votes needed.

Deripaska remains a significant minority shareholder — his En+ group says he holds “no more than 44.95 percent” — and other shares are held by smaller shareholders and independent trustees under an agreement with the Treasury.

There’s no other shareholder of the same size and a number of the other shareholders would probably agree with him on many strategic issues,” Adshead said. “Therefore it will almost certainly be run in the way he wants it to be run, but the point is that he no longer has as much freedom or control as he wanted.”

 
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The longest-ever partial U.S. government shutdown cost the country’s economy $3 billion in lost economic activity that won’t be recovered, the Congressional Budget Office concluded Monday.

The CBO said its assessment of the effects of the 35-day shutdown on the U.S. economy, the world’s largest, showed that $3 billion in economic activity was lost in the waning days of 2018 after the government closures took effect December 22, and another $8 billion in January, extending to last Friday when the shutdown was ended.

However, the CBO said with 800,000 federal workers who were furloughed or forced to work without pay being paid back wages in the coming days and government operations resuming, all but $3 billion in economic activity “will eventually be recovered” in the coming weeks.

CBO estimated that about $18 billion in federal discretionary spending was delayed during the shutdown, although most of that is likely to resume again — unless there is another shutdown in less than three weeks.

President Donald Trump and Democratic and Republican congressional leaders agreed to end the shutdown and created a bipartisan panel to negotiate security provisions along the U.S.-Mexico border.

The shutdown was spawned over Trump’s demand for $5.7 billion for a border wall to thwart illegal immigration, perhaps his most prominent 2016 campaign pledge during his successful run for the presidency. Opposition Democrats, however,have refused his demand for border wall money while saying they are willing to offer more funding for other security measures, including tightened controls at ports of entry, more border agents and increased use of technology to monitor illegal border crossings.

Trump said Sunday he thinks there is less than a 50 percent chance the congressional border security negotiators will be able to reach an agreement he would accept by their self-imposed Februay 15 deadline.

He said another government shutdown is “certainly an option” if there is no agreement or he could declare a national emergency and attempt to build the wall without congressional approval by tapping unspent government funds.

However, several prominent Republican lawmakers have urged Trump to not declare a national emergency, an action that would draw quick Democratic lawsuits in opposition.

Smaller GDP

The CBO said the $3 billion permanently lost to the U.S. economy means the projected 2019 gross domestic product of more than $19 trillion will be .02 percent smaller than it otherwise would have been.

But its report said “underlying those effects on the overall economy are much more significant effects on individual businesses and workers.

Among those who experienced the largest and most direct negative effects are federal workers who faced delayed compensation and private-sector entities that lost business. Some of those private-sector entities will never recoup that lost income.”

Still, the CBO said that “all of the estimated effects and their timing are subject to considerable uncertainty. In particular, CBO is uncertain about how much discretionary spending was affected by the partial shutdown, how affected federal employees and contractors adjusted their spending in response to delayed compensation, and how agencies will adjust their spending on goods and services now that funding has resumed.”
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China is moving quickly to push forward a draft version of its first Foreign Investment Law this week.

 

Among other things, the proposed law bans forced technology transfers, guarantees national treatment for foreign investors and steps up intellectual property right protections — all key issues in the ongoing trade dispute with Washington.

 

It also supports a negative-list management for foreign investment. A list unveiled in June last year cut the number of restricted items down to 48 from 63 and removed access restrictions in several sectors, according to state media.

Analysts note, however, that the way the law is being “rushed through” and the vague wording of many of its 39 clauses is casting some serious doubts on authorities’ ability to enforce the legislation after it is passed.

Being rushed through?

Lester Ross, who chairs the China Policy Committee of the American Chamber of Commerce (AmCham) in Beijing, said he’s concerned about the draft’s expedited review, including a two-day legislative session for the draft bill that begins Tuesday.

The meeting comes before the period of solicitation of public comments is set to end in late February.

China’s largely rubber-stamp legislature, the National People’s Congress, is working to fast-track the bill’s passage during its annual meeting in March, which may serve as an olive branch to ease trade tensions with Washington, said Liu Meng-chun of the Chung-Hua Institution of Economic Research (CIER) in Taipei.

While acknowledging the draft’s consistency with the “competitive neutrality” principal, which encourages fair competition between domestic and foreign businesses, Ross said the draft has many shortcomings.

“The problem is that there are many provisions in the law, which do not address the concerns of foreign investors and in addition, the provisions are in some cases so broadly-worded that they actually create a basis for mistreatment of foreign businesses,” he said.

Additional hurdles

For example, article 20 allows the state to take control of foreign investment in the interest of the public. Yet what defines public interest isn’t clear. As is the case when article 33 states the need for safety reviews on foreign businesses, which “influence or are likely to influence national security.” That, Ross said, creates an additional hurdle when the law is intended to reduce hurdles.

As a principal, he urges China to keep restrictions on foreign investment to a minimum in accordance with international norms and China’s own WTO commitments.

Walker Wallace, partner at the U.S. international law firm O’Melveny & Myers’ office in Shanghai, finds the draft’s article 39 problematic. As it is currently worded, the article only gives foreign businesses a five-year grace period to reorganize their existing corporate structure — mainly joint ventures or wholly foreign-owned enterprises.

A problematic deadline

“Putting the five-year term limit basically puts the gun to the heads of the joint venture parties and says you have five years to try and reopen… a deal that was closely negotiated before where people made trade-offs one way or another. And that opens up the possibility for all kinds of mischief,” Wallace says.

He said China should allow foreign-invested enterprises to retain their existing corporate structures till the end of their current contract so that no shareholders, for example, a Chinese land owner and a foreign hotel company with an agreement longer than five years, use the opportunity to unfairly renegotiate.

Another issue, he adds, is the bill fails to spell out the consequences foreign businesses will face if they’re unable to complete such reorganization within the time frame.

Wallace also urged China to add provisions to the draft that would allow foreign businesses to be able to freely establish domestic subsidiaries just like their local competitors.

It remains to be seen whether foreign companies will be governed by China’s Company Law after the bill takes effect. If so, the Company Law presents another set of problems, said Ross.

For example, he added, foreign businesses will find it unacceptable to set up a Communist Party branch within the companies, as required by article 19.

Enforceable assurances?

Compared to the 2015 draft, the earlier version of the law, the new bill further opens up the Chinese market to foreign investment through deregulation and institutional reform.

But how that will all play out in practice remains to be seen as the law’s enforcement will be handled by local governments, CIER’s Liu noted.

“China has often embraced protectionist policies at the local level. If the open-up policy involves sectors that have long been dominated by local government-owned enterprises, it means these government-run companies will now face foreign competition. Given that their performance is tied to local governments’ fiscal [health], it remains to be seen if local authorities will fully execute the central government’s policies,” the economist said.

In other words, the removal of hidden hurdles for foreign businesses that contradict to the law upon its adoption will be key, he added.

Those hurdles include bureaucratic red tape, taxation practices or the level of priorities given to foreign businesses in listing queues, all of which have, in the past, added difficulties to the operation of foreign investment there, observers say.

 

 

 
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Malawi is the latest African country to look at legalizing cannabis, the plant that produces hemp and marijuana, after similar moves in Lesotho, South Africa, and Zimbabwe. As Malawi’s tobacco industry, the country’s biggest foreign exchange earner, has dwindled due to anti-tobacco campaigns, farmers are now looking to grow cannabis. 

Malawi has long relied on tobacco, which accounts for 13 percent of its gross domestic product and 60 percent of its foreign exchange earnings.

But as tobacco prices per kilogram have fallen, farmers like Phineas Chimombo have struggled. 

Chimombo says in most cases farmers like him who are already poor struggle to find money to transport tobacco to the market and sell their tobacco as low as 50 cents per kilogram.

Health campaigns have eaten into tobacco profits, so farmers like Chimombo are looking to cannabis, the plant that produces marijuana and hemp. 

Chimombo says once one grows hemp, just a small portion of it fetches more money than one can get from any crops a farmer can grow. 

Malawi is joining African nations Lesotho, South Africa, and Zimbabwe in looking to legalize cannabis after years of debate.

In March, legislators will consider a bill on legalizing medical marijuana and hemp products. 

Malawi parliament member Boniface Kadzamira has long pushed for the legalization of cannabis.

“We were the first in this part of Africa to start discussing this thing. Those countries that came after us have gone ahead of us and have already started issuing licenses,” Kadzamira said.

Malawi’s anti-drug campaigners worry legalizing medical marijuana will encourage more recreational use. 

Nelson Zakeyu is the executive director of Drug Fight Malawi.

“And because local marijuana is commonly used in the country, then [it is] is legalized, [it] is like they are telling young people to use local marijuana. And that is what we are fearing,” Zakeyu said.

But supporters of legalizing cannabis appear to have won the debate, that it is better to regulate the trade and help Malawi’s economy to grow.
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