Vale: The World's Largest Iron Ore Miner Laying off 1,300 Workers
Vale (VALE5.SA: Quote, Profile, Research, Stock Buzz), the world's largest iron ore miner, said on Wednesday it is laying off 1,300 workers and putting 5,500 more on paid leave, the latest sign of Brazil's exposure to the international crisis.
Brazil's second-biggest firm said that the credit crisis and weak demand had led it to make the layoffs and enforced leaves, which in total account for 11 percent of its global work force of 62,000 workers.
"We have a credit crunch, contraction in the economy, huge destockings taking place of raw materials and the demand is really dull," said Fidel Blanco, managing director of iron ore sales at Vale at a Metal Bulletin steel conference in Paris.
The dismissals will occur globally, but some 20 percent of them will occur in Minas Gerais, Brazil, where some of Vale's main iron ore mines are located.
Along with Vale's layoffs, Vale's partners are realigning their companies as well. Vale's biggest client ArcelorMittal announced last week a dismmisal of 9,000 workers, after the heavely production cuts which are expected.
Vale's huge layoff is a solid sign of just how vulnerable the emerging markets are to the crisis as well. Brazil seems to be slowing down at a fast pace, the automobile industry which was booming, is now also laying off thousands of workers. The giant Brazilian companies such as Petrobras and steel producer Gerdau have postponed projects of expansion.
"Vulnerability exists," economist Alexandre Gallotte at the Tendencias consultancy told Reuters. "Brazil is vulnerable on two fronts: to external demand and to domestic demand."
One of the pillars of Brazil's economic growth over the past year has been domestic demand, fueled by increased buying power among Brazil's large population of poor.
But consumer confidence has begun to falter in reaction to the crisis.
"Domestic demand is subject to consumer sentiment which has started to weaken," said Gallotte.
What is your take on emerging economies, are they better off then the countries which are at the center of the crisis, just as bad or even worse positioned than those at the center?