Lula criticizes Vale and says he wants companies to agree with the government

President Luiz Inácio Lula da Silva (PT) increased his criticism of Vale this week, making it clear that he has not given up trying to interfere in the direction of the mining company, privatized almost 30 years ago.

Lula is looking for alternatives that could increase his power of influence in the country’s second largest company, after a failed attempt to install former finance minister Guido Mantega (PT) as president of the company. The current CEO, Eduardo Bartolomeo, discreet and not paying attention to political dialogues, never counted on Planalto’s sympathy.

But Lula’s aspirations don’t stop there. In an interview on Tuesday night (27) with TV network, the president explained his conviction that companies should follow the government’s guidance in their decisions. The president stated that Vale “does not own Brazil” and that, like all Brazilian companies, it must be aligned with the government’s development thinking.

“Vale cannot think that it owns Brazil, it cannot think that it can do more than Brazil. So what we want is the following: Brazilian companies need to be in agreement with the government’s development thinking Brazilian. That’s what we want”, he stated.

The statement drew attention due to its developmental and authoritarian content in relation to a private company. “It’s a basically fascist vision, it refers to [Benito] Mussolini [ditador italiano] think that the company has to meet the government’s objective”, says Marcelo Faria, president of the São Paulo Liberal Institute (Ilisp).

Although Lula wants to define Vale’s direction, the government has not had a stake in the company since BNDES sold its shares, during the government of Jair Bolsonaro (PL). What remains is a kind of indirect interference through Previ, the pension fund for Banco do Brasil employees. The mining company’s largest individual shareholder, the fund has two representatives on the board of directors, which has 13 seats in total.

The economist notes that, in his speech, Lula is not referring to state-owned or mixed-economy companies, in which the government has a stake, but to Brazilian companies in general. “Apparently, the private sector must do what is important in the vision of the great commander Lula, who knows what is best for the country”, he highlighted.

Hélio Beltrão, president of the Mises Brasil Institute, corroborates the argument. “This speech has the tone of a despot. He [Lula] He doesn’t own Brazil or Vale, but he acts as if he owns the world. Why is any natural or legal person obliged to agree with the worldview of the government elected to administer the country for four years?” he asked in a comment to CNN.

“And what is it called when someone wants to force a person to agree with anything? No one is forced to agree with the government. Lula cannot deal with divergence, with disagreement. From his point of view, whoever does not agree with him is fascist”, added Beltrão.

State leadership is the essence of Lula’s thinking

Samuel Pessôa, from the Brazilian Institute of Economics at Fundação Getulio Vargas (Ibre/FGV), regrets that the president continues to think that economic development is achieved through the State.

“Instead of thinking about the profitability of the company, which generates income for shareholders, workers and also for the government, through taxes, Lula wants more state intervention. He wants the company to do the things that he thinks are most correct, be it exploring a mine in Mozambique or add value to iron ore, or increase a steel industry”, he says.

Lula also complained, during the interview, about Vale’s abandonment of a mine project in Africa, which the government had committed to opening doors.

For the Ibre professor, state dirigisme and the notion of development induced by the State are the essence of Lula and PT’s thinking) But remember that this is not just a left-wing vision. “Nationalism and developmentalism exist on both sides of the political spectrum. We already had this during the period of the military dictatorship, especially in the government [Ernesto] Geisel [1974-1979]”, it says.

There are also recent experiences that, in Pessôa’s opinion, should not be forgotten, such as the economic policy developed during the Dilma Rousseff government (2011-2016). “It’s sad to see that leaders don’t learn from their mistakes. We already tried this state capitalism once and it resulted in the biggest crisis in our history”, she recalls.

Errors, contradictions and hypocrisy

In addition to the alleged abandonment of strategic projects, Lula criticized what he called the mining monopoly, although the company is not the only one exploring the activity.

“I didn’t quite understand what the president meant by Vale’s monopoly,” says Pessôa. “The company works with a commodity that has its price defined by the international market. Nothing prevents competition from other companies. On the other hand, statements like the president’s keep any external investor away from Brazil.”

Experts highlight the government’s contradiction in criticizing the mining company’s supposed monopoly, but trying to restore Petrobras’ monopoly, renationalizing refineries privatized under the previous government.

“Apparently, the government likes public monopolies,” says Pessôa. “It’s great hypocrisy on the part of the government,” says Faria, from Ilisp.

Lula has already sent other messages

This is not the first time that Lula has sent messages to pressure the mining company. In January, after the board of directors’ resistance to Mantega’s name became evident, the president took advantage of the five-year anniversary of the Brumadinho tragedy, in Minas Gerais, to warn about the need for inspection of mining projects.

“It is necessary to support the families of victims, environmental recovery and, above all, inspection and prevention in mining projects, so that we do not have new tragedies like those in Marina and Brumadinho”, wrote the president on X (formerly Twitter).

In the last interview, Lula returned to the topic, saying that Vale did not pay for the “misfortunes” caused by Brumadinho’s breakup. The mining company, however, has already paid off 69% of the R$37.7 billion reparation agreement for 15,400 people.

Lula also made other mistakes. He stated that the company has sold more assets than it has produced iron ore, an argument contradicted by annual reports, which point to increased production. In 2023, 321 million tons of ore will be produced, compared to 308 million in 2022.

Under the command of Eduardo Bartolomeo, since 2019, Vale has only made one sale of iron ore assets, worth US$140 million, and made two acquisitions totaling US$682.5 million.

Highly regulated, mining is sensitive to pressures

Despite the market’s negative reaction to Lula’s speeches, economists warn that the government has effective pressure power, since the mining sector is externally regulated and that the mining company’s large private shareholders – Mitsui, BlackRock, Bradesco and Cosan – they also depend on decisions by the federal Executive for numerous demands. Companies value having a good relationship with the government.

There are several interests at stake. Among them, the granting of environmental licenses for current and new projects and also negotiations to repair Vale’s environmental and social damages. These are discussions that involve tens of billions of reais and government bodies, Justice and Public Ministry.

In this sense, Lula cited the suspension of Vale’s projects in Pará, by the State Secretariat for the Environment and Sustainability of Pará (Semas), due to “non-compliance with environmental conditions”. The company appealed and is operating under an injunction from local civil courts.

Vale also has a pipeline of projects, especially in infrastructure, that involve federal agencies, such as, for example, railway concessions to transport production. The Executive intends to re-discuss the contracts extended under the Bolsonaro government, under the argument of the supposedly low amount disbursed by the concessionaires.

According to behind-the-scenes reports, former minister Guido Mantega told interlocutors that he would be able to help with the agenda, serving as a link between the company and the Palácio do Planalto. It didn’t help.

Lula avoids succession and denies interference

Lula did not want to talk about the company’s succession. On previous occasions, she had also denied interference, despite numerous press investigations reporting the dialogue between the Minister of Mines and Energy, Alexandre Silveira, and Vale’s advisors.

The latest behind-the-scenes information shows that the president still insists on a seat for Mantega on the board of directors and that he would be working to put forward the name of Paulo Cafarelli, former president of Cielo – a company whose partners are BB and Bradesco as a second alternative. , also a Vale shareholder.

Pessôa notes that, despite Vale’s governance, the Lula government has already managed to create an impasse within the board of directors. “Shareholder representatives are divided. There were swings in votes on the reappointment of the current president,” he says.

The economist refers to the last meeting of the collegiate on the subject, on February 15th. Of the 13 councilors, six voted to reappoint Bartomoleo and six to begin the selection process for another name.

The two representatives of Previ, the one nominated by Bradespar, two other independent directors and the workers’ representative voted against the reappointment of the current president.

The other independents and Mitsui’s nominee voted to maintain the current CEO. Luís Henrique Guimarães, Cosan’s nominee on the board, abstained. “Lula is already having success with his strategy,” says Pessôa.