ARACAJU - Brazil's government could apply "tougher measures and sanctions" on Vale to combat the mining giant's "arrogant" stance towards the country, Mines and Energy Minister Alexandre Silveira told Reuters.

His comments mark an escalation of the government's rhetoric against the firm, which has been fueled by delay in reaching a deal for Vale and partners to pay reparations over a 2015 dam disaster.

In an interview on Wednesday on the sidelines of an event in Sergipe state, Silveira said the government was analyzing Brazil's laws and public policies as it considers potential measures against Vale, but did not go into details.

Since President Luiz Inacio Lula da Silva took office in 2023, Brazil's government has regularly criticized the miner for two dam collapses in Minas Gerais state in 2015 and 2019, and for not investing enough in the country.

"I'm worried about Vale's stance, which seems unfortunately will only change when we have to apply tougher measures and sanctions on the company," Silveira said.

The minister criticized what he sees as lack of leadership since Vale announced chief executive Eduardo Bartolomeo would leave the firm at the end of this year, saying that has delayed a deal for reparations over the 2015 Mariana dam disaster.

'HEADLESS'

Vale, BHP and their joint venture Samarco, which operated a tailings dam in Minas Gerais state whose collapse killed 19 people and polluted a river, have been in talks with the government for a multibillion-dollar reparations deal.

All parties had expectations for an agreement in the first half of the year, but the firms' proposal did not meet the money the government had aimed for.

"It shouldn't be like this, but Vale is now 'headless' and that is clearly delaying a deal," Silveira said. "Since they announced the departure of the CEO, Vale was left without someone with authority to deal with extremely relevant matters."

Vale declined to comment on the minister's remarks, but said it its committed to reparations over the 2015 disaster.

According to a source familiar with the matter, who asked not to be named, potential measures being analyzed by the government against Vale could involve changes to Brazil's mining rights rules.

Silveira said the government's tolerance with Vale was "getting very close to the limit" and complained about a lack of investments by the firm, saying Vale is "almost monopolistic and has ceased to exploit strategic assets" in Brazil.

"It has started to sell them to international investors and distribute dividends without any strategic criteria converging with the country's interests."

Markets have been wary of potential government interference at Vale since reports last year that Lula wanted a former finance minister, Guido Mantega, to be appointed to the company's board or even as its CEO.

Vale was privatized in the 1990s and has a dispersed ownership, but the government still exerts significant influence as its main shareholders include a pension fund operated by state-run lender Banco do Brasil.

Two independent board members have resigned in the last few months, one citing allegations of political influence in the succession plan.

Silveira has always maintained the government has not sought to influence who will be Vale's next chief executive.

"There has never been any government interference when it comes Vale," he reiterated.