Vale Names Ferreira CEO After Brazilian Government Criticism

Vale SA (VALE5), the world’s largest iron- ore producer, named Murilo Pinto de Oliveira Ferreira to replace Roger Agnelli as chief executive officer after the Brazilian government criticized management over the past two years.

Ferreira, president of Vale’s Canadian unit until leaving the company in 2008, will take over on May 22 after Agnelli’s mandate expires, Vale said in a filing yesterday. Ferreira’s appointment, following a nomination by the Valepar SA group of controlling shareholders, is pending board approval.

Brazil’s government, which holds direct and indirect stakes in Vale, repeatedly criticized the company for not investing more in the domestic steel and fertilizer industries to generate jobs and boost exports. Rio de Janeiro-based Vale, which denied as recently as January that Valepar was discussing a replacement for Agnelli, 51, said March 31 that the group was hiring international recruiters to help pick three possible candidates.

Ferreira, 58, joined Vale in 1998 as a director for its aluminum businesses. After holding several management positions he left a decade later, when he was head of Vale’s Canadian unit and an executive director for nickel and base-metals sales, according to the company. He was trained in business administration at Sao Paulo-based Fundacao Getulio Vargas and has more than 30 years’ mining-industry experience, Vale said.

Ease Concern
“Murilo can be considered an internal candidate, bringing the least disruption to Vale, and can ease the concerns of a higher government intervention,” Felipe Hirai, a Sao Paulo- based analyst at Bank of America Merrill Lynch, said in a note to clients. “We hope the assault on Vale, as we saw over the last few weeks, eases with his nomination.”

Vale rose 23 centavos, or 0.5 percent, to 48.47 reais in Sao Paulo trading as of 9:16 a.m. New York time. Before today, the stock had lost about 0.5 percent this year, compared with a 0.6 percent gain for the benchmark Bovespa Index.

Over the past six months, Brazilian newspapers reported that the government was pushing Vale shareholders to name a new CEO. Valor Economico said March 24 that controlling shareholders would choose Tito Botelho Martins, head of the company’s base- metals unit, without saying where it got the information.

Under Agnelli, the former state-owned company became the world’s second-largest miner by market value, after BHP Billiton Ltd. (BHP) Vale, valued at about 278 billion reais ($172 billion), has risen more than 10-fold in Sao Paulo trading since July 11, 2001, the day before Agnelli was named CEO. That’s more than twice the gain in the Bovespa index. BHP rose sevenfold during the period, while Rio Tinto Plc, the third-largest mining company, advanced about fourfold.

Canada’s Inco
A former banker at Brazil’s Banco Bradesco SA (BBDC4), Agnelli oversaw more than $84 billion in investments and acquisitions at Vale between 2002 and 2010, including the purchase of Canadian nickel miner Inco Ltd. in January 2007 for C$19.4 billion ($20 billion). Vale sold units and assets amounting to $3.95 billion over the period, according to the company’s website.

During the global recession two years ago, Vale fired 1,300 employees and said 5,500 more would be put on paid leave. The company pared investments by about half to $9 billion, from an announced $14.2 billion, a decision criticized by then-President Luiz Inacio Lula da Silva, who said it had “no reason” to cut spending as it had “lots of cash” to help the economy grow.

Fertilizer, Steel
Agnelli also faced government criticism for buying ships in China when Brazil was setting up its own shipyards. The former president urged Vale to spend more on fertilizers and, between April and September 2009, asked the company to build steelworks at least half a dozen times.

Lula’s successor, Dilma Rousseff, objected to Vale’s focus on selling raw materials abroad when she was Lula’s cabinet chief, saying the company should be subject to government “controls.”

More recently, Energy and Mining Minister Edison Lobao said Vale was interested in becoming a partner of the Belo Monte dam project, according to local newspapers. Vale said March 25 that it was still assessing the venture and hadn’t made a decision.

The company reacted to the government’s demands by boosting some investments in its steel and fertilizer businesses. Vale opened a joint steel venture in Rio de Janeiro state with ThyssenKrupp AG in June and will start developing two new steel projects later this year. The company also spent $5.8 billion in 2010 buying fertilizer assets as part of a plan to almost triple potash and phosphate rock output by 2015.

Valepar Shareholders
Previ and Funcef, the pension funds of state-run banks Banco do Brasil SA and Caixa Economica Federal, hold 49 percent of Valepar along with Petros, the retirement fund for government-controlled oil producer Petroleo Brasileiro SA.

Other Valepar shareholders include Bradespar SA, the holding company of Bradesco, Mitsui & Co. and BNDESPAR, a subsidiary of the Brazilian state-owned development bank.

In addition to the BNDES stake and the ruling Workers Party’s ties to the pension funds’ management, the government owns 12 so-called golden shares in Vale that give it veto over decisions including the location of the company’s headquarters.

The golden shares stem from the 1997 privatization of Vale, founded by Brazilian dictator Getulio Vargas in 1942 to supply steelmaker Cia. Siderurgica Nacional SA as part of a drive to industrialize the country.

Vale posted profit of $17.3 billion last year, which it said was the most ever for a mining company. It plans to invest a record $24 billion this year, about 64 percent of it in Brazil, as it seeks to boost iron-ore production to 522 million metric tons by 2015. The company budgeted 73 percent of its $11 billion investment in 2008 to Brazil, regulatory filings show.