Eike Batista, the Brazilian tycoon that tied his fortunes to the country’s commodities apogee in the past several years, is coming down from the mountaintop.
The flashy billionaire, who ends each of his companies’ names with the letter “X” to symbolize a multiplication of wealth, might need to start thinking of those X’s as strikes on his ambitions.
After months of signs that his oil and gas exploration was failing to make forecast targets (not unlike the way Petrobras has conducted its business) and share delistings, today the FT reports that Batista’s mining giant MMX was hit by a US$1.9bn fine from the Brazilian government for tax evasion. The fine, according to the FT, is equivalent to about 80% of the company’s market value (and likely more than its market value once the news sets in).
This raises the question of whether Batista’s fortunes are more closely linked with the underlying value of his operations, the overall macro environment in his industries, or the government’s opinion of his contributions to Brazil. Brazil’s creeping statism is no mystery to anyone trying to do business in sensitive sectors, but Batista’s seeming success in building and listing companies in areas traditionally controlled by the state once-upon-a-time seemed to be a private diamond in the rough of state control.
Now that his fortunes seem to be fading, serious Brazil observers should be asking questions about the country’s byzantine tax laws and treatment of foreign investment (the fine principally relates to Anglo-American’s stake in an MMX mine). This is not to mention thornier questions around how receptive the country is to private investment and how active the government is in picking winners and losers.
Still, one undoubted loser this year is Eike, who has lost his title of Brazil’s richest man and wunderkind to the private sector. It’s hard to drum up tears for someone becoming less of a billionaire, but easy to lament what this means more broadly for Brazil’s trajectory.