4 MILLION SHAREHOLDERS ARE WATCHING HIM

who is and what thinks murilo ferreira, the new president of vale. and why he has become a crucial figure to the brazilian capitalism

ROBERTA PADUAN

 

Dear Sirs and Madams,

After more than 15 months of efforts and good results, I’ll be soon leaving Studio Investimentos.

See below the notice the company is sending its clients and friends.

Best,

Murilo P. de O. Ferreira

The message above was sent on February 14, 2011, and on it, Executive Murilo Pinto de Oliveira Ferreira informed around clients and friends that he was leaving his resource management company Studio Investimentos, created by him and six other partners in 2009. Exactly 48 days later, on April 4, Ferreira, a renowned professional in the universe of mining, but unknown outside this segment, would be announced the new president of Vale, the largest private company in Brazil and the second largest mining company in the world. His indication was a surprise. His name had never been included in the various lists of candidates since Roger Agnelli’s embarrassing situation became a public subject. Why was Murilo Ferreira chosen?

This is a question that even the new president of Vale cannot answer emphatically. To some people close to him, Ferreira ensured that, on the occasion of his message announcing that he was leaving Studio, he didn’t think of coming back to Vale, a company that he left in 2008, after a series of disagreements with Agnelli. The decision of being far from the financial market would have been encouraged by recent investigations of headhunters. Since February, he would have participated in two selection processes. In the third week of March, Ferreira and his wife Fernanda — to whom he’s been married for 25 years —, spent three days in New York.

In this period, he had an intense agenda of employment interviews. He would have come back to Brazil with a proposal of being the president of a mining company in Asia, but he refused it, as he didn’t want to be far from his 19-year-old daughter, who goes to college in Rio de Janeiro. On the same occasion, Ferreira would have been invited to be the president of a holding company in São Paulo. He accepted it. The employment contract would have been signed at 3 pm on April 4. But the trip from Rio to São Paulo was canceled in the morning of April 4 after a telephone call from Ricardo Flores, president of Previ, the pension fund company for the employees of Banco do Brasil, and Valepar, the controller of Vale. He had been chosen for Agnelli’s place, probably the greatest Brazilian executive in this early century. That was the end of the most turbulent corporate succession process in the country with the highest media attention.

This choice, still involving more questions than answers, is very likely to be more related to the differences than the similarities when compared to his antecessor. Just as Agnelli, Murilo Ferreira is not a politician and has no partisan links. He’s a technical professional. Unlike his antecessor, he would always be willing to listen — and negotiate. Apparently, that was what the main shareholder of Vale — the government — wanted now: someone that could listen to its demands. Starting on May 22, Ferreira, a 57-year-old miner, will run the company that has 119,000 employees across 38 countries, is the owner of Carajás, the world’s largest iron ore mine, and the operator of ports, railways and power plants. Vale’s combined businesses generated the revenue of 46.5 billion dollars and profits of 17 billion dollars in 2010. With stocks negotiated in four main stock exchange markets — São Paulo, New York, Hong Kong and Paris —, the company has more than 4 million investors globally. These shareholders — large funds, small savers, workers and retired people — who are not alert to Murilo Ferreira’s steps and decisions.

INDEPENDENCE

He’s become a crucial character of Brazilian capitalism. Not only for the dimensions of the company in his hands. Not only for the exceptional moment of commodities in the world. But also, and maybe above all, for the circumstance in which he is assuming the position. The process to replace Agnelli, a decision of the government, which owns almost 61% of the controller through the BNDES (the Brazilian Development Bank) and pension funds, such as Previ and Funcef, has left a trace of doubt. Will Vale be managed according to the standards and interests of a private company (which it indeed is) or will it serve the needs of current governmental projects? Who will Murilo Ferreira work for? And what are the consequences of his choice to the company and its millions of shareholders?

Any ambitious executive would like to be now in his place. To weave the web of public and private interests that involves Vale, Ferreira will receive around 15 million reais a year (salaries and bonuses), as well as benefits that include a jet plane and a helicopter at his disposal, and security staff for him and his family. Being the president of a company like Vale would also mean being at the professional career peak to most executives from Brazil and abroad.

In his 34-year career, Murilo Ferreira had never been so close to something huge. His professional life can be summarized in five jobs — something that was unknown even to headhunter Arthur Vasconcellos, of CT Partners, urgently hired and who, in four days, conducted the process that chose the name of Vale’s new president. (In an interview to EXAME, Vasconcellos said that the mining company was Ferreira’s only job until 2008.) When Ferreira first worked at Vale, he stayed there around one year. He started in the company in 1977, as a trainee, in the financial area, when he was 23 years old. He had just graduated in Business Administration at Fundação Getulio Vargas, in São Paulo. He was born in Uberaba and moved to São Paulo when he was 14 years old with his brother, two years older than Murilo, to study at traditional Colégio Bandeirantes. On the occasion, both of them used to live in a small apartment in Pinheiros, a section in the west part of the city, and eat at a boarding house nearby. Ferreira usually mentions his parents with proud. His mother graduated in Odontology in 1950, a great achievement, as it was unusual for the women in those days. His father was a doctor, he was considered one of the greatest Brazilian researchers on Chagas disease. Ferreira inherited the religiosity from this parents. He’s catholic, usually attends Mass once a week and has a close relationship with the Franciscan priest from the parish where he usually goes to, near his apartment, in Leblon, Rio de Janeiro. Fernanda, his wife, is a strong presence in his life. For instance, she started answering Ferreira’s cell phone and directing the calls after his name was indicated for the president of Vale.

After his start at Vale, Ferreira spent two years working for Caraíba Metais and then we worked at Consual, a partnership that involved some Japanese companies, the Japanese government and Vale, whose purpose was to build two plants in Pará, one to produce aluminum and one to produce alumina. He says that it was in this phase that he learned his best negotiation lessons due to the contact with the Japanese partners. The following ten years were dedicated to consulting service, especially to mining companies. Because of one of these projects, Ferreira was invited to come back to Vale in 1998. The company had just been privatized and he was hired by Luiz Paulo Marinho Nunes, who was the president of the aluminum division and area of participations, to work as a consultant. Ten days after signing the consulting service contract, he was invited to run Aluvale, an aluminum holding company owned by Vale, constituted of Albras, Alunorte and Paragominas. "I was really impressed with his knowledge of the sector and his very refined strategic view, two things I needed at that moment to restructure a sector that was having negative results", says Nunes. In one year, Ferreira effected the sale of 25% of Alunorte participation to Norwegian Norsk Hydro for 200 million dollars. In a time when aluminum assets were seen with uncertainty in the market, the price was considered an achievement. "Murilo his Japanese patience for reaching his targets, even in very difficult negotiations", says Nunes. In five years, the aluminum division showed surplus results.

But it was in 2004, already under Agnelli, that Ferreira gained international visibility. Promoted to executive director of Vale, he was in charge of the areas of participations (which included coal, steel and energy), new businesses and mergers and acquisitions. In this period, he met Dilma Rousseff, who was then the Ministry of Mines and Energy of Lula’s team. Both met a few times to discuss the new model of energy purchase through auctions. The contacts ended after Dilma became part of the Brazilian Presidential Staff. In 2006, Ferreira made the purchase operation of Canadian Inco for more than 17 billion dollars, the greatest international business that has already been made by a Brazilian company. With the incorporation, Vale grew from the fourth to the second largest mining company in the world — behind Australian BHP Billiton only. In January 2007, Ferreira moved to Toronto, in Canada, to assume the control of Vale Inco.

That was in this period of managing the Canadian subsidiary that Murilo Ferreira had the greatest challenge of his career. He and other 69 Brazilian executives faced a scenario of defeat and distrust when they arrived in Toronto. The employees of centenary Inco remained with the expectations that

that they would be the purchasers — and not the purchased party. The Brazilians also found an uneconomical culture, which they had to change as part of their mission. Inco headquarter had just been transferred to the Royal Bank Plaza, a condominium whose windows are coated with a thin layer of gold. "I’ve worked also on weekends to see all operations and meet everyone", Ferreira said to EXAME at the time. Ferreira could not prevent the Royal Bank Plaza occupation by Inco, but he prevented, for instance, a full floor of the building from being rented just to accommodate meeting rooms. Ferreira waited more than one year to make a symbolic change: place all management team into a single room, without partitions, just as in Vale head office in Rio de Janeiro. A good amount of potential gains of Inco came from reduced cost of mines, which operated as small companies with full independence — also to negotiate labor agreements with the unions. Sectors and employees were given high priority, but an agreement established on the occasion that the Canadian mining company was purchased did not allow dismissals for three years.

The problem was that Agnelli started to pressure Ferreira to cancel such agreement and start the dismissals. "The long time to start restructuring was bothering the head office", says an executive close to Vale.

The discomfort increased with the world financial crisis in 2008. The reduced price of nickel and copper made Vale’s profits with these businesses (almost all of them concentrated on Inco) fall from 7.5 billion reais in 2007 to only 500 million reais in the following year. With a restructuring plan in all operations in the world in his hands, Agnelli increased the pressure to make Inco’s executives speed up the changes. In the project ordered by Agnelli, 900 employees of Inco from total 10,000 worldwide would be dismissed — most from the headquarter offices and mines. Ferreira did not agree with the dismissals. As he reported to close friends, he couldn’t see any gap in the contract with the union, which would expire in October 2009. In December 2008, Ferreira traveled from Toronto to Rio de Janeiro to discuss the question. In the headquarter, he had a very hard meeting with executive Carla Grasso, vice-president of Human Resources and one of Agnelli’s most loyal allies, who, according to close executives, pressured Ferreira to start the dismissals as soon as possible. (Until now, among close people, he doesn’t say the name Carla Grasso. He refers to her as “that lady”.)

When he returned to Toronto, he didn’t feel well and went to the hospital. On that occasion, a rumor said that Ferreira had had the "beginning of infarction". To close people, he refers to the rumor with irony. "There’s no intermediate situation, you have an infarction or not, just as pregnancy", he says. His health problems occurred as a result of a nervous breakdown. In those days, his relation with Carla — and with Agnelli — was unbearable, and he asked to be fired. In January 2009, the head office sent Tito Martins to replace him at Vale Inco. Ferreira left Vale and created Studio Investimentos with other former executives of the company.

The different styles of Ferreira and Martins soon became perceptible. When Martins arrived in Canada, he provoked the local union with a plan of dismissal and changes in labor contracts. The most affected unit was the largest company, located in Sudbury, in northern Canada, where 300 professionals were fired in February 2009, which corresponded to 10% of the company’s staff. The reaction was a strike that lasted one and a half year — the longest strike in the company’s history. "We used to have an open and frank dialog with Murilo, and there was no violation of the long-term contracts we had signed with the company", said to EXAME Wayne Fraser, a union director in Ontario region, where most Inco Canadian operations are. "Later, the decisions became unilateral and radical." The recent information of Ferreira as the new president of Vale was celebrated by the Canadians. "We hope this change results in a better dialog from now on", said Fraser. "We want them to kick the current president out of here."

Ferreira’s skills in balancing different — and many times conflicting — interests will be hardly tested when he assumes the control of Vale. "We were relieved with the selection of his name, because he’s a qualified professional, but what really matters is to know how independent from the government he will be", says the director of an American bank that has followed the company’s actions. The task won’t be easy, especially because the government has openly declared its intention to interfere in the company’s decisions. "We want to agree with Vale on a governance that considers not only its interests as a private company, but also the national interest, as these both spheres are not incompatible", said Fernando Pimentel, the Ministry of Development, to EXAME.

One of the first conflicts that Ferreira will have to face is related to possible investments of Vale in the steel industry — an old government project, rejected by Agnelli while he could. "Vale’s participation as a stockholder in steel plants makes sense, as it will induce the sector growth and sell more ores, but only as a minority stockholder", said Agnelli in a recent interview to EXAME. "Otherwise, we will become competitors of our clients." Besides the competition problem, a more aggressive participation of Vale in this sector would demand very high investments, which could affect its profitability, an unpleasant idea to common investors and the financial sector. "Our concern is that the Brazilian government keeps trying to induce Vale to invest in sectors like steel and hydroelectric power plants, which will provide a small return to the company", says Jonathan Brandt, analyst at HSBC Bank in New York. Another delicate issue is the bill of 4 billion reais that the government expects Vale to stop contesting at the Justice. This amount would be given back by Vale to the cities where the company extracts ores, the states and the federal government in the form of contribution known as the “ore royalty”.

The divergences between Vale and the government in relation to the calculation of that bill have been discussed for two decades and would have been the turning point for the government to speed up the changes at Vale. On March 14, Roger Agnelli sent President Dilma Rousseff a 3-page letter — which EXAME had the access to — in which he contested the debt and claimed that in 2010, Vale collected 12.4 billion reais in taxes, "at much higher levels than its [international] competitors, proportionally to its revenues". In the text, Agnelli also suggested to hire an auditing company to analyze the bill values. "The president got furious with the letter", said a presidential officer.

Ferreira will also have to face the inevitable comparisons to his antecessor, Roger Agnelli, the executive that changed the former state-owned and lazy company into the second largest mining company in the world. For better or worse, Ferreira so far been has defined as an antithesis of his antecessor. Charismatic and mercurial, Agnelli is famous for his skills in forging conflicts the same way as he can produce admirers. People who have already worked with Ferreira describe him as a discreet, reserved executive, of group behavior. When Agnelli was informed of his successor’s name, he would have said that he was sorry for the choice. But it doesn’t really matter now. Murilo Ferreira will be judged by the council, the government, the media, by his subordinates. But, as long as Vale is a private company, no judgment will be more important and decisive than that made by all over 4 million shareholders of the company. And, after all, it will be essentially dependent on the new president’s capability to deliver results. ■

by Cristiane Mano and Angela Pimenta