Presenter calls for change and says that interference is one of the “roots” of the country’s “low growth”; Lula gave up on putting Mantega in charge of the mining company
The presenter of TV Globo Luciano Huck criticized this Saturday (January 27, 2024) the “political interference” of the president's government Luiz Inácio Lula da Silva (PT) on OK. The PT member was trying to place former Finance Minister Guido Mantega on the mining company's board. He decided to back down after the negative repercussion and is now working to postpone the choice of the company's new CEO.
For Huck, political interference in the business environment is one of the reasons for “low growth” and from “low productivity” from the country. Gave to declaration on your profile on X (formerly Twitter).
“To think about it: if a privatized company like Vale has this degree of political interference, imagine state-owned companies. This is one of the roots of our low growth and low productivity. This needs to change if we want to generate real opportunities for everyone”he said.
LULA AND VALE
As shown by the Power360the Minister of Mines and Energy, Alexandre Silveirascheduled a meeting with the president of Vale’s Board of Directors, Daniel André Stieler, for the beginning of the week. The meeting must be in Brasília, on Monday or Tuesday (January 29 or 30, 2024). Vale advisor Manuel Lino Silva de Sousa, known as Ollie Oliveira, who represents and leads independents within the company, will also participate.
According to the schedule that was already decided by Vale, an extraordinary meeting of the Board of Directors is scheduled for Friday (Feb 2) with the specific objective of defining who will be in charge of the mining company, whose current president is Eduardo Bartolomeo.
For the government, the ideal is to gain time to try to propose a change of command that is of interest to the Palácio do Planalto. Lula sees Vale as an essential company to help leverage the growth model he defends for Brazil. The President of the Republic wants this company to operate in areas that he considers to be of national interest, supporting projects that may have synergy with the new industrial policy recently announced.
This type of Lula's strategy bothers the financial market. Vale is a private company with limited participation in state capital.
PRESSURE FROM THE PLATEAU
While the strategy defended by Lula to gain Mantega at Vale was in force, Silveira spoke to several private shareholders of the company. He said that it would be good for Vale to have someone with experience in Planalto in charge, and that this would also be positive for the business of private shareholders (many depend on decisions made by the federal administration).
The Union has a small stake in the mining company. A Predictpension fund for employees of the Bank of Brazil, currently has an 8.7% stake in Vale's control and two seats out of 12 on the Board of Directors. The government decides to choose Previ, but the weight is very small.
Little by little, Lula has ordered Previ to return to prominence in the mining company. At the end of 2022, the then President of the Republic, Jair Bolsonaro, and the then Economy Minister, Paulo Guedes, had already reduced Previ's stake in Vale to 8.6%. When Bolsonaro began his term in 2019, total state participation in the government was 26.5%:
As the 2 infographics above show, Vale has become a “corporation”, a large private company with its shares spread across the market. Still, the mining company depends on decisions made by the Brazilian government, such as in the area of railways.
The Lula government plans to re-discuss railway concessions in 2024. These are contracts from operators who have obtained extensions in the management of Jair Bolsonaro (PL). The argument is that the concessionaires would have disbursed amounts considered low from the point of view of the PT federal administration.
Vale operates the EFVM (Estrada de Ferro Vitória a Minas) and the EFC (Estrada de Ferro de Carajás). These mining company contracts to be the concessionaire of these railways are the ones that the government is most interested in reviewing. The initial calculations are that at least R$20 billion extra should be paid by Vale for contract renewals. The EFC accounts for the majority of resources. The line was completely doubled to increase the flow of iron ore from Pará towards the ports of Maranhão.
While campaigning to be president of Vale, Guido Mantega had conversations with businesspeople and financial market operators. The former minister always spoke directly, according to the report. Power360that he would be the solution for Vale in relations with Planalto to resolve the mining company's demands.
For Vale's private shareholders, it is important that the company does not have extra expenses, such as the possible R$20 billion that the Lula government intends to charge to maintain the railway concessions.
On January 18, 2024, the website Infomoneywhich belongs to the investment bank XP, published a report with a revealing excerpt about how Guido Mantega would act in charge of Vale, if he were chosen.
The text “In Vale’s succession, Mantega still yearns for the CEO seat” says the following: “Mantega considers that he has contributions to bring to Vale, on several fronts where the mining company faces problems. For example, granting environmental licenses for current and new projects, renegotiating renewals of railway contracts (the last ones made under the previous federal government are being questioned by the Ministry of Transport) and also in negotiations to repair environmental and social damage caused by the rupture of the Fundão dam, in Mariana. The values placed on the table are tens of billions of reais. The discussions involve Justice bodies, AGU, public ministries, representatives of the states of Minas and Espírito Santo and companies (Vale, BHP and Samarco)”.
Despite Lula's retreat on Mantega's appointment to be Vale's CEO, the main reference shareholders (as they have large lots of shares) will still be sought out to find an exit desired by Planalto.
The Japanese are in the firing line of the Lula government Mitsuithe North American investment fund BlackRockThe Bradespar (Group company Bradesco) and the Cosan –giant with businesses in the areas of sugar, alcohol, energy, lubricants and logistics. All of these Vale shareholders have investments in Brazil that depend on government regulation.
In addition to Previ's two seats on Vale's Board of Directors, two are from Bradespar, one from Mitsui and the other is occupied by a representative of the mining company's employees.
The other 7 vacancies are for independent directors, who represent minority shareholders. They are the majority. Read the names that make up the board in the infographic below:
LULA ADVANCES
On Thursday (January 25th), the date on which the 5th anniversary of the collapse of the Vale dam in Brumadinho (MG) was completed, Lula published on his profile on X (formerly Twitter) that the mining company “did nothing to repair the destruction caused”.
The message was received as yet another demonstration of Lula's dissatisfaction with the current management of the mining company. More than that: it was a demonstration that the wrath of Palácio do Planalto could fall on Vale and disrupt the company's business.
Vale did not comment on the president's statement, but released to the press a set of actions that have already been developed, such as the agreement of reparatory measures signed with the State of Minas Gerais in 2021 worth R$37 billion and separate compensation agreements with 15,400 people, with a total value of R$3.5 billion.
The PT, the president's party, is engaged in the campaign for the government to have more influence within Vale.
When Lula's retreat regarding playing Guido Mantega, the national president of the PT, had not yet become public, Gleisi Hoffmann, defended the appointment of the former minister. In her X account, the federal deputy elected by Paraná said: “He is one of the most wronged Brazilians of our time” It is “he was the target of lies and false accusations”. She further stated that “very few Brazilians are so qualified” as Mantega for Vale.
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