* Opposition slams government for meddling in Vale
* Could harm Rousseff's market-friendly image
* Gov't says Vale not helping develop economy
By Raymond Colitt and Brian Ellsworth
BRASILIA/RIO DE JANEIRO, March 24 (Reuters) - Brazil's government is facing a political backlash over its apparent efforts to force out the head of mining giant Vale, a case that renews concerns over state meddling in private companies.
Opposition leaders on Thursday demanded Finance Minister Guido Mantega explain reports he asked a shareholder of Vale, the world's largest iron ore miner, to help seek a replacement for CEO Roger Agnelli.
The incident could tarnish President Dilma Rousseff's mostly market-friendly image earned during her first three months in office through strict fiscal discipline and defense of central bank autonomy.
"She believes in a big, strong government and has issues with Agnelli. I have no doubt this pressure is coming directly from Dilma," said Jose Luciano Dias, a Brasilia-based political analyst.
According to government sources, Mantega had approached Brazilian bank Bradesco, a key Vale shareholder, to request help replacing Agnelli with another CEO.
Vale, the government and Bradesco officially declined to comment. Vale's top executives will tender their resignations if Agnelli leaves, according to a company source who spoke on condition of anonymity.
Relations between the government and Vale have been tense for years as politicians complained Vale was not doing enough to create jobs by investing in steel production and was not sufficiently involved in the country's economic development.
Rousseff's predecessor Luiz Inacio Lula da Silva, who championed the revival of Brazil's shipbuilding industry, was also upset with Agnelli because he bought foreign-made vessels.
TENSIONS RISE
Agnelli, 51, a former banker, has further aggravated government officials in recent weeks with his tough stance over a mining royalties debt the government says could reach $2.4 billion.
He may benefit in the short term from having politicians rush to his defense, analysts say, but in the long-run government pressure on Vale will remain because state pension funds are major shareholders.
Most investors believe Vale's strong iron ore project pipeline and low operating costs make it attractive despite the political risks.
They have hailed Agnelli for turning the firm into a global mining giant and the world's top iron ore producer, but the country's top political leaders never forgave him for laying off workers and cutting investments in the wake of the 2008 financial crisis.
Opposition leaders say Mantega's move foreshadows a government takeover of the former state-run firm, which was privatized in 1997.
"This creates the risk of devaluing Brazil's largest private company, we can't allow it to become a government slush fund," said Senator Cyro Miranda, who filed the petition to hear Mantega. "Even government legislators are worried and want to know what is going on."
The government cannot directly push Agnelli out of office, but it indirectly holds a majority stake in the company's controlling shareholder Valepar via state pension funds and the state development bank BNDES.
The company's board of directors can decide whether or not to change the CEO. Analysts say the government would need the support of one of the two other main shareholders of the company, Bradesco or Japanese trading house Mitsui. (sourced:Reuters)
Opposition leaders on Thursday demanded Finance Minister Guido Mantega explain reports he asked a shareholder of Vale, the world's largest iron ore miner, to help seek a replacement for CEO Roger Agnelli.
The incident could tarnish President Dilma Rousseff's mostly market-friendly image earned during her first three months in office through strict fiscal discipline and defense of central bank autonomy.
"She believes in a big, strong government and has issues with Agnelli. I have no doubt this pressure is coming directly from Dilma," said Jose Luciano Dias, a Brasilia-based political analyst.
According to government sources, Mantega had approached Brazilian bank Bradesco, a key Vale shareholder, to request help replacing Agnelli with another CEO.
Vale, the government and Bradesco officially declined to comment. Vale's top executives will tender their resignations if Agnelli leaves, according to a company source who spoke on condition of anonymity.
Relations between the government and Vale have been tense for years as politicians complained Vale was not doing enough to create jobs by investing in steel production and was not sufficiently involved in the country's economic development.
Rousseff's predecessor Luiz Inacio Lula da Silva, who championed the revival of Brazil's shipbuilding industry, was also upset with Agnelli because he bought foreign-made vessels.
TENSIONS RISE
Agnelli, 51, a former banker, has further aggravated government officials in recent weeks with his tough stance over a mining royalties debt the government says could reach $2.4 billion.
He may benefit in the short term from having politicians rush to his defense, analysts say, but in the long-run government pressure on Vale will remain because state pension funds are major shareholders.
Most investors believe Vale's strong iron ore project pipeline and low operating costs make it attractive despite the political risks.
They have hailed Agnelli for turning the firm into a global mining giant and the world's top iron ore producer, but the country's top political leaders never forgave him for laying off workers and cutting investments in the wake of the 2008 financial crisis.
Opposition leaders say Mantega's move foreshadows a government takeover of the former state-run firm, which was privatized in 1997.
"This creates the risk of devaluing Brazil's largest private company, we can't allow it to become a government slush fund," said Senator Cyro Miranda, who filed the petition to hear Mantega. "Even government legislators are worried and want to know what is going on."
The government cannot directly push Agnelli out of office, but it indirectly holds a majority stake in the company's controlling shareholder Valepar via state pension funds and the state development bank BNDES.
The company's board of directors can decide whether or not to change the CEO. Analysts say the government would need the support of one of the two other main shareholders of the company, Bradesco or Japanese trading house Mitsui. (sourced:Reuters)
Posts
No comments:
Post a Comment