The government is already preparing plan B to deal with the Vale crisis

BRASÍLIA E RIO – Concerned by the consequences of the tragedy caused by the rupture of the Mine do Feijão dam in Brumadinho (MG), the government is already preparing a plan B to deal with the Vale crisis. Informally, he started talking to some of the major shareholders about a possible change of company and has already consulted the Federal Attorney General's Office (AGU) on how to chart this course. Contacts were also made with the Federal Police regarding the progress of investigations to identify the culprits.

Effective action will only be taken if there are concrete indications of corporate responsibility. The worry of Plbadto's palace is not to convey an image of interventionism that runs counter to the government's discourse.

Ministerial Meeting

On Tuesday, the day after the acting President, Hamilton Mourão, raised the possibility of leaving the Vale Board of Directors, the Minister of the Civil House, Onyx Lorenzoni, publicly announced to minimize the episode. , recalling that it is possible to act in case of the company's responsibility. According to Onyx, one must first determine the causes of the tragedy, then act:

– The government must have two necessary things: the humility of knowing that it can not do everything and the prudence of knowing that the issue is, in addition to and above all of life and the safety of Brazilians, an economic sector that is very relevant to our country.

Onyx admitted that a government intervention in the company would be a bad sign for the market:

– There is no requirement for intervention, as this would not be a desirable signal for the market, in a country that wants to receive partners able to use this fantastic biodiversity that we possess. So you have to respect, and the government knows you have limits.

The minister argued that the government is waiting for the progress of investigations. According to him, it is not up to the state to support a company or board of directors, but admitted that in case of failure of the mining company, that He could convene a meeting of the Vale Board of Directors:

– If the investigation shows that there is a problem, that there has been a failure, it is clear that the government will exercise its right – said Onyx.

In discussions with the AGU, the government wanted to know what legal possibilities existed to dismiss the board of directors or its members, given that the company had been privatized in 1997. The union holds always a special action clbad, called action which gives the state a veto right in some decisions, but not in the exchange of command of society. The solution would be to work on the board to get the support of most of the company's advisors. According to sources that accompany the case, the board of directors of the company is suffering from discomfort. The badessment is that what happened is very serious and requires actions of this nature.

Increase of 0.85% of shares

The possible elimination of the board of directors was discussed at a ministerial meeting on Tuesday. Justice Minister Sérgio Moro was reportedly asked whether it would be possible to speak of responsibility but said that the case was still under investigation.

If the government actually decided to articulate a change of control, the most likely solution would be to align with the pension funds or BNDES.

Foreign investors own 47.7% of Vale's capital. Previ Pension Funds, Petros, Funcef and Funcesp hold 21% of the shares through Litel. BNDESPar (investment branch of BNDES), with 6.7%, Bradespar with 5.8% and Japanese Mitsui (5.6%). Since the tragedy, some of the major investors have held rounds of negotiations, but no decision has yet been made on the way forward.

Among the pension funds, Previ is the one with the largest participation. Its share corresponds to 80.62% of Litel, followed by Funcef (11.50%), Petros (6.94%) and Funcesp (0.94%). The investment of Previ in ​​the Vale corresponds to about 25.45% of the total equity of Plan 1, the oldest.

According to sources, the accident could hinder the plans of the largest pension funds, which planned to sell some of their shares from 2020. In 2017, Vale decided to migrate to the New Market. To do so, it entered into a shareholders' agreement, which provided a means for the mining company to hold only ordinary shares (voting power), without a defined controller. The pension funds agreed that they could sell part of their roles in two stages: from 2018 to 2020.

– Thus, the funds were programmed to sell the shares in several parts and jointly. In this way, it would be possible to reduce investments in variable income, an important factor in balancing pension plans – a source of the sector.

Previ, for example, aims to reduce equity investments from 46.9% to 30% over five years.

– The climate among the shareholders is not among the best. Some initiatives will be reviewed as the sale of Vale's shares will always be coordinated with shareholders, a source close to shareholders said.

Preought said he did not experience any differences between members who are part of the Vale shareholders' pact, as well as talks to change the board of directors. The entity states that it does not need to sell Vale's shares for the time being and that any paper sales will proceed in a planned and organized manner, in accordance with its divestment policy.

Another source close to the shareholders considers that one of the main problems is that the partners do not yet have elements to badess whether there has been a loss of confidence in the management of the company. Among the unanswered doubts, he pointed out that it was still unclear who was responsible for the fact that the Brumadinho dam is not on a list of structures in critical condition and presenting a high risk of disturbance.

Petros said his interest in Vale was preserved. "Purchases and sales of badets are part of daily management", but have not commented on the possibility of activating the order. Wanted, Bradespar, BNDES, Mitsui, Funcef, Funcesp, Petros and Vale have not responded on the subject.

One day after registering the largest decline in market value of a Brazilian company in a day, Vale closed the trading session with a slight increase of 0.85%, valued at R $ 42.74 . The rating agency Moody's stated that she had put the miner's note in the study for a possible downgrade. The day before, Fitch had already reduced the note of the minor.