Vale’s last step to becoming a true corporation

. Oct 27, 2020
vale mining giant Vale truck in Indonesia. Photo: Kaisar Muda/Shutterstock

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Today we cover major changes within mining giant Vale. How criminals are trying to influence the November 15 election. And the new trends of the coronavirus in Brazil.

Big changes ahead for Vale

Brazilian giant mining company Vale is set to make its biggest corporate change since privatization in 1997. On November 9, a 2017 agreement between its main shareholders will expire,

and Vale is set to become a company without a controlling group.</p> <ul><li>Vale is currently under the de facto control of a handful of major investors, who combine to own a one-third stake in the company. The deal for joint action allows the group to control the majority of board seats and dictate the strategies of the mining giant.</li><li>As the deal expires, these major shareholders become free to sell just over 20 percent of the company&#8217;s equity. While most are expected to retain most of their shares, analysts see the Brazilian National Development Bank (BNDES) as a potential seller —&nbsp;in August, the bank sold BRL 8.1 billion in Vale shares in a single day. However, this movement should be tempered, in order to avoid depreciating the stock.</li></ul> <p><strong>Why it matters.</strong> This process towards being a company without a single controlling group is Vale&#8217;s last step to becoming a &#8220;true corporation.&#8221;&nbsp;</p> <ul><li>It is expected to reduce political interference in the company — something that remained years after the privatization — even though the federal government will retain the so-called &#8220;golden share,&#8221; that is, the right to the final say on certain strategic matters.</li></ul> <p><strong>Size. </strong>With a market value of BRL 335 billion (USD 59.7 billion), Vale is the biggest Brazilian company — and has a tremendous effect on the domestic economy.</p> <p><strong>Challenges.</strong> Vale has sped up plans to <a href="">improve governance</a> after catastrophic dam collapses in <a href="">Mariana</a> (2015) and <a href="">Brumadinho</a> (2019), which killed hundreds and literally buried entire villages under seas of toxic iron-ore sludge. But, as we showed in September, Brazilian federal prosecutors are running up against a company they say remains <a href="">unwilling to make significant changes</a>.</p> <hr class="wp-block-separator"/> <h2>How organized crime influences Brazilian elections</h2> <p>In just two and a half weeks, Brazilians will head to the polls to elect their new mayors and city councilors. And while much of the focus has been on how the pandemic is affecting campaigns, another outside factor could have a major impact on the results: organized crime —&nbsp;especially in the states of Rio de Janeiro and São Paulo, where the two biggest drug cartels are based.</p> <ul><li>A report by the Rio de Janeiro Public Security Department&#8217;s Crimestoppers initiative shows that voters have made at least 37 complaints in 14 cities of crime gangs trying to tamper with campaigns, threatening opposition candidates and/or trying to force people to elect their allies. Thirteen of these complaints concerned drug traffickers, and 24 related to urban police mafias known as &#8220;militias.&#8221;</li><li>In São Paulo, the Civil Police opened an inquiry to investigate how the First Command of the Capital (PCC) drug cartel — a <a href="">massive criminal brotherhood</a> which is present in multiple countries — is using its control over certain communities to influence election results. Candidates of the Brazilian Social Democracy Party (PSDB), which controls the state government and the capital, reported receiving threats from the PCC, with the group creating &#8216;no-go zones&#8217; for opposing candidates.</li></ul> <p><strong>What they are saying.</strong> Zeca Borges, who coordinates the Crimestoppers hotline, says that the pandemic disrupted the revenue stream of the drug trade, encouraging these groups to move into electoral politics. &#8220;One novelty we see this year is drug dealers and militia bosses running for office themselves, instead of appointing a puppet candidate. This is a dangerous trend, as these groups have a big influence in peripheral communities. Their migration into public office represents an existential threat for Brazilian institutions,&#8221; he told Agência Brasil.</p> <p><strong>Meanwhile … </strong>A recent <a href="">survey</a> shows that cases of violence against candidates (from threats to actual attacks) have tripled over the past four years. Between 2016 and 2020, no less than 327 such cases were reported.</p> <hr class="wp-block-separator"/> <h2>Vaccines, second wave … a pandemic update in Brazil</h2> <p><strong>Different stages. </strong>Brazil&#8217;s overall average of new daily deaths is down to 461 — the lowest since May 7. However, as we have explained multiple times on <strong>The Brazilian Report</strong>, in a country as big as Brazil, nationwide tallies rarely tell the full story. Ten of the 27 states show a growing number of deaths, especially Amazonas (North) and Ceará (Northeast) where the 7-day rolling average of new deaths soared 80 and 52 percent, respectively, over the last 15 days.</p> <div class="flourish-embed flourish-map" data-src="visualisation/4147460"><script src=""></script></div> <p><strong>Vaccines.</strong> The University of Oxford announced that its potential coronavirus vaccine has induced a &#8220;strong immune response&#8221; among elderly volunteers, adding that the results will be published in scientific journals &#8220;within the next few weeks.&#8221;&nbsp;</p> <ul><li>Meanwhile, President Jair Bolsonaro once again spoke out against making immunization from Covid-19 mandatory in the country. He added that courts should not meddle in the issue — a jab at the Supreme Court, which has three cases on the issue waiting to go on the docket.</li><li>Instead of making inoculation mandatory (whenever a vaccine is available), Supreme Court justices are reportedly considering an intermediary solution: imposing restrictions on those who fail to get their shots. That could include travel bans and the impossibility of entering commercial establishments, for example. That goes in line with the current legislation. Vaccines are not mandatory in Brazil, but families are denied access to a number of public services — such as school enrollment or financial aid — if their kids are not vaccinated.</li></ul> <p><strong>By the numbers.</strong> Brazil has confirmed 5.4 million Covid-19 cases and 157,400 deaths.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Polls.</strong> A new survey published by the National Transport Confederation (CNT) shows that 41 percent of Brazilian voters rate the Jair Bolsonaro administration as either good or great, against 27 percent deeming it bad or terrible. The president&#8217;s personal approval ratings are even better: 52 percent.</li><li><strong>New Chile?</strong> In the aftermath of Chile&#8217;s <a href="">referendum</a> in which 78 percent of voters decided that the country will draw up a <a href="">new Constitution</a>, Congressman Ricardo Barros, the government&#8217;s whip in the lower house, suggested that Brazil should also redraft its charter, claiming that the <a href="">1988 Constitution</a> made the country &#8220;ungovernable.&#8221; He says the Brazilian Constitution grants too many rights and imposes too few duties on people. Mr. Barros&#8217; words sparked negative reactions from both politicians and legal scholars.</li><li><strong>Oil and gas.</strong> Rio&#8217;s Acting Governor Cláudio Castro meets with Supreme Court Chief Justice Luiz Fux today, to plead to the court for the postponement of a trial that could alter how <a href="">oil royalties</a> are shared between states — and potentially cause a loss of revenue to Rio de Janeiro. In 2012, a law established that oil royalties should also be shared with non-producing states — but it was suspended soon after, and the legal imbroglio surrounding it has yet to be decided.</li><li><strong>Aid.</strong> The government has proposed granting two extra <a href="">unemployment</a> insurance payments to workers fired during the pandemic. Usually, the benefit is granted for three months. The move would come at a cost of BRL 7.3 billion and could benefit 2.76 million people. </li><li><strong>Environment. </strong> A report by NGO Climate Observatory shows that around BRL 2.9 billion of the Amazon Fund — created to finance anti-deforestation initiatives — has been left unused since 2019. Since the fund began laying dormant, deforestation has increased: 34 percent in 2019, and another 34 percent in 2020.</li><li><strong>Elections. </strong>Brazil&#8217;s Electoral Justice system granted <a href="">Mayor Marcelo Crivella</a> of Rio de Janeiro the right to run for re-election on November 15. Mr. Crivella had been declared ineligible for public office after a conviction for electoral crimes, but his punishment will be suspended until the verdict is made final and unappealable. The mayor is polling at 13 percent, 15 points behind Eduardo Paes, a former mayor who is going for his third non-consecutive term.

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