Home > Market change > Vale: Roger Agnelli vs. Dilma Rousseff

Vale: Roger Agnelli vs. Dilma Rousseff

March 28, 2011

Sources: Barclays Bradespar Analyst Report Nov. 2010, Vale SEC Filing FY2010

Observations:

  • Dilma Rousseff appears to have won the battle to replace Vale’s CEO Roger Agnelli, as various Brazilian and international newspapers are reporting a more government-minded chief will be appointed instead of renewing mr. Agnelli’s contract.
  • As displayed above the government has strong control over the world’s largest iron ore miner. Valepar S.A., the controlling shareholder, is 49% owned by state pension funds and the government has large influence on two of the three other major shareholders: BNDES, the state development bank, and Bradespar, a daughter of Brazil’s second largest private bank.
  • Key reason for the Brazilian government to push for replacement of mr. Agnelli is the conflict of interests between the company’s shareholders and the Brazilian government. Vale focused on cost cutting in the crisis while the government would have liked the company to keep employment high; Vale had ore carriers build in Asia, while the government would have like to have domestic shipyards build the ships; Vale tries to minimize taxes and royalties paid, while the government tries to maximize revenues.

Implications:

  • As long as iron ore prices stay high the change of leadership is not likely to have a major impact on Vale’s international behavior. The company will likely get more closely involved in Brazilian steelmaking, potentially allying with Gerdau in development of domestic projects. If prices drop, expansion focus will be more centered on Brazil to please the government.

©2011 | Wilfred Visser | thebusinessofmining.com

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