The government’s bad signal when trying to appoint Mantega as head of Vale

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Whoever has a friend has everything, singers Emicida and Zeca Pagodinho said, citing a popular saying in the song of the same name. The belief is valid for the former Finance Minister Guido Mantega. And the friend he has is the most influential person in the country: the president Luiz Inácio Lula da Silva. In recent weeks, Mantega has seen this friend, or “comrade” — as it is common to say among members of both parties, the PT —, making a behind-the-scenes effort to try to fit him into the leadership of Vale, the second largest Brazilian company. . At the center of the goal was the position of executive president, one of the most coveted and best paid in the corporate world. If not the presidency, it would be at stake to obtain at least a place on Vale’s management board.

Planalto’s offensive was not solitary. PT president, Gleisi Hoffmann, was the face of the operation. She went public, on Thursday 25th, in defense of Mantega’s appointment as head of the company. On social media, she stated that he is one of the “very few Brazilians” qualified to sit on the company’s board, a group that includes shareholder representatives. On the other hand, the company received notice of a fine of 47 billion reais for damages caused by the rupture of the Mariana dam — a tragedy for which Vale really has to respond.

Contrary to what Gleisi suggested, Mantega’s CV does not indicate the predicates necessary to take a position at the top of one of the largest mining companies in the world, which competes in a fierce and specific market. “The appointment of Mantega, who was not even a good minister, has no technical criteria, only affective criteria”, says economist Elena Landau, former Vale advisor. “The government is not satisfied that the company has become private.” The pressure for Mantega hit the company’s management and board badly and had repercussions on the market. The PT was forced to rehearse a retreat in the offensive. “Vale’s compliance created mechanisms that prevent the hiring of a president who does not have important technical conditions, and he does not,” says Pedro Galdi, investment analyst at brokerage Mirae Asset.

TREATMENT STATION – Cedae: privatization gave great results (André Coelho/EFE)

Despite the momentary defeat, the government must continue its interventionist impulse. The Vale episode was another in a series of initiatives to increase political influence in strategic sectors. In electricity, there was an attempt to increase the government’s votes on the board of directors of Eletrobras, another company that, like Vale, is a former state-owned company. In the area of ​​sanitation, there were efforts to change the regulatory framework, which were blocked by Congress. In oil and gas, changes were made to Petrobras’ statute following an amendment to the State Law that will be judged in the plenary session of the Federal Supreme Court.

In fact, Vale, privatized in 1997, has always been in the PT’s sights. In 2009, pressure began to resign the then president, Roger Agnelli, who remained in office until 2011. At the time, Lula criticized the company for investments outside Brazil and the acquisition of capital goods, such as ships, from foreign suppliers. And it was precisely Guido Mantega who led the pressure on reference shareholders, internally classified as “unbearable”. A senior company executive says privately: “The government wants to rewrite the past and the message is clear: interfere in economic activity.”

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Today, the scenario is not the same as in 2009, and that is why the government, so far, has not been successful. At that time, the portion of Vale’s shares under the influence of the Union was 26.5%, which included shares of BNDESPar and the holding company Litel Participações, formed by the pension funds Previ, Petros and Funcef, all owned by state-owned employees. Today, only Previ, one of Banco do Brasil’s employees, has representation on the board, due to its 8.6% of Vale’s capital. “We created vaccines for very crude political interventions, such as the dispersion of Vale’s control,” says Sérgio Lazzarini, professor at Insper and specialist in privatizations. “Unfortunately, we have not been vaccinated on other fronts.”

The first interventionist attack made by the Lula 3 government was through a decree to try to empty the Sanitation Framework, approved in 2020. This even after the private sector had shown results in a needy area, as occurred with the privatization of the operator Cedae , in Rio de Janeiro. The main changes introduced — and overturned in the Chamber — provided that state public water and sewage companies could provide services through contracts without bidding and also include in their proof of economic and financial capacity operations that are currently under challenge.

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Then, it was Eletrobras’ turn. Last year, the Union filed a lawsuit with the STF so that it would have a vote proportional to the shares it holds in the company. The government argues that the law irregularly reduced the weight of votes to which it would be entitled. With privatization, the Union remained the holder of 42% of the shares; however, the government’s vote share was limited to 10%. The action is still before the STF.

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Another open front to make political appointments more flexible was the removal of sections of the State Law, which lost steam after a decision by then STF minister Ricardo Lewandowski, now Minister of Justice. As one of his last acts in court, he granted an injunction lifting the three-year quarantine for politicians to take management positions in public companies. Petrobras has already changed its statute to receive nominations.

NONCONFORMISM - Vale: privatized, the former state-owned company often comes under pressure
NONCONFORMISM – Vale: privatized, the former state-owned company often comes under pressure (Dado Galdieri/Bloomberg/Getty Images)

These pressures occur amid other emergencies, mainly fiscal. The government announced that it would have a deficit of 230 billion reais in 2023, equivalent to 2.1% of GDP. The nominal result is not good, since the target was a deficit of 1% of GDP. But the increase was the result of the decision to pay court orders (debts of the Union that are final and unappealable) and the agreement made with governors to compensate ICMS losses on fuels.

Despite the commendable initiative of clearing previous pending issues, the result leaves doubts regarding the achievement of the goal of balancing the accounts this year. That alone would be quite a task. But the government creates additional problems for itself and the country with its interventionist bias and insult to the private sector. The history of past interference left a trail of corruption, market distortions and inefficiency. His return creates an environment of uncertainty for investors, both Brazilian and foreign. It would be better to do without it — word from a friend.

Published in VEJA on February 2, 2024, issue no. 2878

The article is in Portuguese

Tags: governments bad signal appoint Mantega Vale

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