Bolsonaro's Pro-Business Stance Tested by Deadly Dam Break

(Bloomberg) -- Brazil’s second deadly dam accident in scarcely more than three years will put to the test new President Jair Bolsonaro’s leadership skills and may upend his environmental and mining reform plans.

On Saturday morning, Bolsonaro flew over the site where a tailings dam owned by miner Vale SA broke and buried homes and roads under one million cubic meters of waste. Authorities scrambled to rescue stranded citizens and protect local fresh water sources. There are 299 missing people and nine confirmed deaths so far, according to local media.

“We’ll do what’s within our reach to support the victims, minimize damage, investigate the facts, ask for justice and prevent new tragedies,” Bolsonaro wrote on his Twitter account on Saturday. “It’s difficult to stand before this scenario and not be moved.”

The Brazilian leader also said Israeli Prime Minister Benjamin Netanyahu, who visited the country for Bolsonaro’s inauguration earlier this month, had called him to offer technology and support in the search for missing people.

According to Bolsonaro, Brazil’s government will create a council, to be coordinated by Chief of Staff Onyx Lorenzoni, that aims to monitor and supervise policy responses to the dam collapse.

Bolsonaro's Pro-Business Stance Tested by Deadly Dam Break

The 63-year-old former Army captain is signaling he will react quickly after his first weeks at the helm of Latin America’s largest economy were marred by contradictions and miscommunications.

The dam accident is likely to only heighten scrutiny from NGOs and opponents who’ve criticized Bolsonaro for nearly closing the country’s environment ministry and showing a willingness to open up new lands for mining. It also comes after another tailings dam collapse killed 19 people in nearby Mariana in November 2015.

Investors are counting on Bolsonaro to make good on pro-business pledges, including spending cuts and the sale of state-controlled companies. Brazil’s stock market has surged to a record on bets his administration will help revive growth in an economy still scarred by back-to-back years of recession.

“The economic and political fallout tends to be limited if the president responds forcefully,” said Christopher Garman, managing director for the Americas at the political consultants Eurasia Group. “He seems to be doing so already.”

Bolsonaro's Pro-Business Stance Tested by Deadly Dam Break

On Friday, Vale Chief Executive Officer Fabio Schvartsman said some 300 employees were on site when the accident occurred and the exact number of victims was still unknown. The company’s ADRs fell as much as 13.5 percent on Friday and ended the day down 8 percent, the biggest daily loss since March 2017.

“The environmental laws from Minas Gerais state and Brazil are strict and it’s early to do any diagnosis of the tragedy,” Minas Gerais governor Romeu Zema told reporters on Saturday. “But it’s quite worrying. That’s something that couldn’t have happened.”

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