Brazil corruption tentacles hit Vale

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Thursday, May 18, 2017

The alleged attempt by Aécio Neves (pictured), former president of center-right Brazilian Social-Democracy Party (PSDB) and now a suspended senator, to interfere in the appointment of mining giant Vale's CEO and other executive positions would be one of the reasons it is pushing to become a company with dispersed share ownership.

That's according to Pedro Galdi, founder and chief analyst at research firm Upside Investor, who told BNamericas that Vale is trying hard to eliminate this kind of 'interference' from politicians.

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Galdi's comments follow a report from local paper O Globo affirming that Aécio Neves offered the chairman of meatpacking giant JBS, Joesley Batista, the possibility to appoint executives at Vale.

According to the paper, during the conversation, Batista was asked to contribute 2mn reais (US$595,000) for the payment of Neves' defense attorneys' fees in the Lava Jato graft probe, where he is being investigated. Neves wasn't aware that Batista was recording the conversation.

THE RECORDINGS

O Globo reportedly said that the conversation caught on tape shows Batista telling Neves that he would like to see Aldemir Bendine as Vale's new chief-executive. Bendine, a former CEO of state-run oil company Petrobras and bank chief from Banco do Brasil, is also being investigated by the Lava Jato probe.

Neves allegedly said he could not do it, but told Batista he had already appointed the new CEO for Vale and that his name would be unveiled soon. Furthermore, Neves affirmed he added the name of his protégé among the three potential candidates chosen by a headhunter hired by Vale to do the choice and gave Batista the opportunity to name executives for any of Vale's executive positions, the report said.

According to O Globo, Batista said Neves did not mention names. But three days later, when Fabio Schvartsman was appointed as the new CEO of Vale, Neves reportedly told several of his political partners that he was responsible for the appointment.

Confronted by the local media about the accusations, Neves said on Thursday that his relationship with Batista is merely a friendship, without involving any kind of "political favors."

But the paper affirmed that for Neves to be able to offer such changes at Vale showed the political interference of Brasilia on the mining company and his influence on Temer's government.

Meanwhile, on Thursday Neves was removed from the presidency of his PSDB party and had his mandate as senator suspended by the supreme court. Earlier on Thursday, Brazil's federal police raided Neves' office in congress and his home.

VALE

On March 28, the mining company said Schvartsman was chosen from a list of 20 names of current and former CEOs of important multinational companies compiled by headhunter Spencer Stuart, who was hired by Vale.

In February, Vale's controllers accepted a proposal to turn the iron ore giant into a company with dispersed share ownership and list it on the Novo Mercado market of the São Paulo stock exchange BM&FBovespa.

Pension funds Funcef, Previ, Petros and Funcesp, all linked to state-run institutions, hold 49% of Valepar, the company that controls Vale with around 53% of its common stock. Other Valepar shareholders are local bank Bradesco, state development bank BNDES and Japan's Mitsui.

Under the agreement, Valepar would merge with Vale in a process in which preferred shares are converted into common shares.

When asked by BNamericas early on Thursday about Vale's position on Batista's accusations, the company press office said it needed more time to check the facts. An official statement is expected in the afternoon.

Vale is the world's largest iron ore producer and exporter.