ISSN 2359-4101

Brazilian Literature in Translation / Literatura Brasileña en Traducción

Issue / Numero

year/año: 2015
issue/numero: # 07

All in

Author | Autor: Malu Gaspar

Translated by Lisa Shaw


Eike Batista entered the large boardroom accompanied by two advisors. He

was dressed in a business suit and was unshaven. His expression was heavy

but oddly tranquil. His trademark toothpaste-advert grin had been replaced

by just a faint suggestion of a smile, the result of months of public agony.

After greeting a few board members he sat at the table and glanced around

him. He knew that the meeting would bring to a close a chapter in his career. He

was ready to lose power within the company. He had already sold a good chunk

of his shares over the past few months. He was aware that it was a terrible time

but, inwardly, he was already making plans to return with full force. But he could

not have anticipated what happened next. “Eike, you’re out. As of today you’re no

longer the boss of this company. Creditors are taking over and I’ll be representing

them. And if you dare to try and claim any compensation, we’ll sue you.”

The businessman opened his blue eyes wide and faced his interlocutor, but he

offered no resistance. On the contrary, he bowed his head and stayed quiet. There

was nothing else to be said. The Brazilian Midas, the man who had the incredible

ability to multiply shareholders’ money, had reached the end of the road. There

was no point in arguing to shareholders and creditors that, before the crisis, he

had made many people rich; that several of his enterprises had been bought by

powerful big companies; that his audaciousness had paved the way for countless

entrepreneurs; or even that he had been as much a victim of circumstance as they

had all been. For those who had watched the value of their stocks be reduced to

a few cents, powerless to do anything about it, it seemed obvious that while Mr.

Batista was at the helm, the company’s fate would continue in free fall until it completely


The once celebrated “Midas touch” had become a curse. No one laughed at

his jokes or curried his favour with perks any more. No one asked him for business

advice. For a while now he had stopped giving interviews because journalists

who used to praise him in earlier interviews now portrayed him as a lunatic. His

public appearances, once frequent and over-the-top — veritable live-audience

shows, were now restricted to safe environments, protected from the potential

jeers of disgruntled individuals. It seemed obvious that it was vital to remove

him from power before there was nothing left to be sold to pay off the debts.

After receiving this ultimatum, Eike Batista signed his letter of resignation and

left the board of the company he had built from nothing and transformed into a

phenomenon, a true symbol of his power and genius. Surrounded by half a dozen

loyal supporters, he headed home and went back to square one.

Although it seems incredibly current, the above episode did not happen in

Brazil or in 2013. It took place in Toronto, Canada’s financial capital, in 2001. It was

in that foreign country that Eike first experienced glory and failure with his TVX

gold mining company. This story of his rise and fall in Canada bears a striking resemblance

to the drama that unfolded in the business world in Brazil in 2013, which

was avidly followed by millions of stupefied Brazilians.

When the “X empire” — the conglomerate of mining, logistics, energy and

oil companies created by Eike over the previous decade — went into bankruptcy,

causing shockwaves in the Brazilian stock exchange, there was a general sense of

bewilderment. How could Eike Batista — the man who symbolized Brazilian capitalism,

who had amassed one of the largest fortunes in the world, had been lauded

by the biggest names in the world’s financial markets, and whose failure in 2001 no

one knew about – be totally wiped out like that?

For the majority of the public, it was both surprising and frustrating that the

“X companies” — created from ambitious plans and a rare combination of longterm

vision and sharp intuition for opportunities — were in the end just incomplete

projects riddled with problems. The usual explanations were given. Eike’s success

had been the result of a bubble, and the two had burst simultaneously. Or perhaps

he was the product of the self- righteousness of the PT (the Brazilian Workers Party),

and his success had dissolved hand in hand with that of the Brazilian economy.

For some, he was simply an embezzler who had cheated the shareholders and

wanted to get away with it all. For others, he had been the victim of his delusions

of grandeur and his faith in Brazil, a modern equivalent of Brazil’s Baron of Mauá,

someone who could not be blamed for his mistakes.

None of the above theories adequately explains the rise and fall of his group

of companies between 2006 and 2013. Only by examining what was going on

behind the scenes of this exciting and unique business saga — the product of an

unprecedented time in the country’s history and of a complex and controversial

personality – is it possible to obtain a fuller understanding of the phenomenon.

For the first time in decades, Brazil was in the spotlight on the world’s economic

stage. The country’s market — the hot tip for those who believed in the emergence

of a new and powerful economic player — was one of the greatest beneficiaries

of the excess of liquidity that had taken over the world up to 2008 and one of the

prime players in the cycle of over- valorisation of commodities and emerging economies

that followed the economic crisis that year. Moreover Brazil had elected a leftist

president who, nevertheless, understood the market well. The country had it all.

Eike Batista, with his insatiable entrepreneurial zeal, was the right man in the

right place at the right time. He had projects to sell to those who could not find

anything to buy. He knew how to play the ‘free-for-all’ game of the markets, and

he employed the boldest strategy of Las Vegas gamblers, but he did not apply

the same filters that most Brazilian entrepreneurs did. The story of his Canadian

failure shows that he was always like this. It was Brazil that had changed. When

the time was right, Eike took the plunge and did what he knew how to do — the

same as he had always done.

He was so convinced of his own power that he believed it was possible to stop

time or at the eleventh hour turn the tables and prevent harsh truths from coming

to light. However, time did not stop, the portal closed and reality punished him

again the same way as it had done the previous decade.

To tell the story of Eike and the “X empire” is to lay bare one of the most

colourful and controversial characters of recent times. It is a story that is both a

metaphor for Brazil as a nation and a cautionary tale for the future. It exposes a

country that aspires to be special, modern and sophisticated, but relies on vices of

all kinds to move forward.

Who is Eike Batista? A compulsive liar or an entrepreneurial genius? A nationalist

committed to Brazil’s progress or a self-centred individual with no boundaries

or morals? A man ahead of his time or a cheat?

These are the questions that I have sought to answer in the following pages.

Chapter 7


Someone popped his head around the door of the OGX boardroom and warned:

“There’s going to be a meeting this afternoon at the Florida Hotel and you all

have to be there.” It was 22 April 2008. The team of geologists had lunch quickly

and set off on foot to the meeting, held just a few blocks away from the X group’s

head office. They knew the venue well, since it was where Petrobras used to hold

their exploration team meetings. They were curious and became even more so

when they realized that almost all the forty people in the room were strangers.

They then sat down on chairs set out in a U shape and were given a brochure on

the cover of which was written “The Doors Project — next steps”. It was marked

“strictly confidential”. They looked at each other. Next steps? What on earth were

the first ones?!

None of the bankers or lawyers gathered there seemed to notice that the

OGX technical specialists did not have the slightest idea why they were there; nor

did they attach any importance to the look of shock on their faces when they discovered

that the “The Doors Project” was the IPO of OGX — and that they would

have less than two months to float the company on the stock exchange, on 17 June

2008, according to the schedule outlined on the second page.

The tribute to the Californian band, they would later discover, had been the

idea of Marcelo Torres, the company’s financial director, who played the guitar

and was a fan of the rock musician Jim Morrison. The text outlining the steps that

needed to be taken was a deluge of ‘finance speak’. Deadline for printing of “pre-

deal research” — 9 May; deadline for finalising “road show presentation” — 16 May;

deadline for sending “backups” — 21 May; launch of “road show” — 27 May. The

heavy gunfire lasted four hours – long enough for the former Petrobras employees

to familiarise themselves with that kind of vocabulary. Their presence was fundamental

to help build the case — the bankers from the Itaú BBA and Credit Suisse

banks explained.

In a nutshell the technical experts would help to create and cement the story

that would be told to the business world to convince people to invest in the company.

Some of them would even be given top jobs in the organisation, and be invited

to attend meetings with investors. Charts, statistics, geological terminology, explanations

of the potential of the exploratory fields – all this would be left to them.

On leaving the Florida Hotel, walking down Catete street the team of geologists

seemed to be suffering from a kind of claustrophobia. If that schedule was serious

— and it seemed to be —, there would be no time to do anything else. “We’re scuppered.

We’re never going to see our families any more...” one of them commented. In

just a few minutes, however, their concerns gave way to euphoria. They would finally

be participating in one of Eike Batista’s IPOs. They were going to be rich!

Their boss had begun 2008 insufferable, excited about the success of

OGX’s debut on the financial market and about having launched yet another

record-breaking IPO for a company that was still only at the planning stage, the

energy company MPX. In December 2007 this company had raised 1.1 billion US

dollars on the stock exchange.

And as early as February, when the first stock-market jitters of what would

prove to be a crisis year damaged the company’s performance, he injected a further

1 billion dollars into MPX. He had also closed the sale of MMX to Anglo, delighting

the shareholders. Those who had invested 1 dollar when the mining company was

floated in 2006 would have made 6 dollars with its sale to the multinational. Furthermore,

this megadeal had succeeding in lessening the doubts of the market and the

press about Eike’s ventures. “What company with a market knowledge like Anglo’s

would invest 5.5 billion dollars in a business set up to dupe careless shareholders?”

This was the question posed by the magazine Exame in a report about the deal.

However, despite his association with this billion-dollar deal and his new status

in the business world, Eike still felt he was an outsider, discriminated against

and misunderstood by Brazil’s economic elite — the likes of Jorge Paulo Lemann

and Joseph Safra. In his opinion this stigma had to do with the fact that his companies

are in Rio de Janeiro, something the long-established business elite of São

Paulo could not tolerate. Although he was born in the state of Minas Gerais, Eike

felt more at home in Rio than most cariocas. He loved the city and wanted to invest

there. If, on top of that, this enhanced his public image, so much the better.

In the last few years he had invested in some smaller ventures, like the restaurant

Mr Lam, a medical clinic in the Barra da Tijuca district and the newly launched

Pink Fleet — a ship built in the 1970s that he had renovated for tourist cruises in

Guanabara Bay. All of these, he used to say, were presents for the city and part of

his fictitious company MPIX (which stood for ‘Die of envy, São Paulo’).

In March 2008, just after he had announced the sale of MMX to Anglo, Eike

went public with the fictitious MPIX group’s greatest venture to date. He had

bought the down-at-heel Glória Hotel, which at one time had been home of presidents

and international celebrities in Rio, and he promised to restore it to its former

splendour. He paid 80 million Brazilian reals for the building and some of the

furniture and art works. His idea was to transform around 20% of the building

into the X group’s head office. The rest would continue to be a hotel, which he

planned on transforming into his personal empire’s calling card. The extensive refurbishments—

in which he estimated that he would spend more than 200 million

reals — would make the Glória Hotel one of the most modern and sophisticated

in the world. Looking forward to the glory and prestige that this initiative would

bring him, he registered the name he planned on giving to his new venture at the

National Institute of Industrial Property (INPI): Billionaire.

With his high-profile businesses resulting in improvements for the city of Rio

de Janeiro, Eike soon came to personify the state of Rio’s economic renaissance.

The state governor, Sérgio Cabral also profited from the entrepreneur’s moment

of glory and exploited the positive mood that seemed to emanate from him. After

giving him generous support during the electoral campaign, Eike had become very

close to the governor. As each of the entrepreneur’s projects progressed—signing

a memorandum with a potential business partner, receiving a license or starting

building works —, the authorities would find occasion to immediately turn it into an

event, with speeches, a lot of flattery and a large number of interviews.

In addition to having a success story to tell, Eike, unlike his peers, made a

point of being accessible. There were no middlemen between him and the leading

columnists and reporters in Brazil, whom he always supplied with information that

underscored his successes. Like a good salesman he excelled at the art of self-promotion

and used it to its full potential.

There was, however, something that Eike understood even more than self-promotion

and marketing: bankers. “Greeeed”, he used to say, in a reedy, fairy-tale

witch’s voice, rubbing his index and middle fingers against his thumb, when explaining

what motivated them. If it was money they wanted, he would give it to

them. Plenty of it. Since 2004 he had already sold six companies or parts of companies,

two of which had been floated on the stock exchange. And he had even

created a new one, a logistics company, which he called LLX.

They were all deals the banks worked on and that were generously remunerated.

In MMX’s IPO, for example, he had paid the banks 6.22% commission — the

equivalent of 64 million reals. By the standards of the Brazilian market this was an

extraordinary amount. He had also made a point of not claiming back the money

taken from his own pocket to ensure that the IPO took place. Paying well, however,

was not everything.

Another trick that he had used throughout his life was to divide the commission

into two parts: a fixed fee, depending on the money involved, and a discre-

tionary amount that was performance-related. Eike used to say that this was the

“carrot” that he would offer to make them work like they had never worked before

on his public offering. With an eye on the variable portion of the commission, the

banks bent over backwards to please the entrepreneur, selling the X group’s companies

like there was no tomorrow.

Not that it was a very difficult task. During those years of irrational exuberance,

with all the world’s banks swimming in easy money obtained from the real-

estate bubble in the USA, there were hordes of investors looking for more profitable

assets than the paltry 3.9% per year offered by the American Treasury’s

long-term bonds.

Even before setting off on his first international trip to sell MMX, Eike had

grasped the obvious: the big international investors were desperate for ventures in

emerging markets, which were then recording economic growth unparalleled anywhere

else on the planet. From 2003 to 2007 the daily amount dealt by foreigners

on the Brazilian stock exchange had risen in geometric progression, increasing

from 49 million to 410 million reals. Boosted by this demand, twenty construction

companies had gone public on the Brazilian stock exchange – the Bovespa – twice

the number available on the US capitals market.

Medium-sized banks, retailers, construction companies, energy companies.

There was an appetite for everything. “We realized we could sell anything”, one of

the bankers that lived through the IPOs era later reflected. It signalled the victory

of one of the oldest commandments of the financial market: “If the ducks are

quacking, feed the ducks”. For that group of quacking ducks, Eike had prepared a

veritable banquet.

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