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Tuesday 30 July 2013

Brazilian car crash

The news has been full of appalling train and bus crashes in Europe, but my eye was drawn once more to a Brazilian car crash: the revelation that former squillionnaire Eike Batista is now almost wiped out because of his massive debts. Only a year or so ago Batista had claimed to be within a whisker of becoming the world's richest man. His conglomerate was supposed to exemplify the new BRIC powerhouse that was Brazil.

Of course, his actual business - exporting commodities - was not exactly mould-breaking in a country that has generally failed to rise above a commodity-driven economy. But at least Batista was meant to be bringing new efficiencies and dynamism to Brazil's clogged arteries and ossifying infrastructure.

Or not. Now that the BRIC hype has all but vanished and the tide has gone out, we're able to see "who has been swimming naked" (in the immortal words of Warren Buffet). Apparently no-one was more unclothed than Batista, the Brazilian clown prince, whose $35bn personal fortune was one magnificent castle in the air. The Bloomberg Billionnaires index has never before recorded a wipeout quite so rapid, vast and complete as that of Batista. Only in Brazil, only in Brazil.

Before his brief elevation to international notoriety, Batista's "colourful" private life had been noted in his home country, where an ex-wife had very publicly run off with a fireman. More recently, the Brazilian soap opera theme crescendoed into tragedy when Batista's indulged son, Thor (a perfect soap opera name), hit and killed an impoverished Brazilian cyclist while out speeding in daddy's supercar. No surprise that daddy's PR people were straight on the case, spinning the story so that harmless young Thor was more victim than perpetrator. Despite this, the 21-year-old was handed a two-year community service sentence for involuntary manslaughter and a $490,000 fine.

It seems almost too perfectly cliched that Batista junior's "Bonfire of the Vanities" moment should coincide so neatly with the beginning of the end of Batista Senior's fortune. No amount of spin could dampen the flames consuming this once "rock-solid" business empire. Where are the firemen when you really need them ?

Update: The following reader comments from a Bloomberg Businessweek article seem to me to be very pertinent, showing how intertwined Batista was with Brazil's economic dysfunction:

  • Kleber Verraes

    Eike Batista's ongoing financial troubles clearly show the limits of Brazil's crony capitalism.

    As a matter of fact, the current economic situation in Brazil is the result of almost a century of promiscuous relations between a heavily interventionist state, a lousy private sector and corrupt trade unions. Such market distortions have created a classic crony capitalism environment, whereas unbridled corruption and lavish spending of taxpayers' money on subsidies to oligarchs are not only acceptable, but the norm.

    Whenever one sees a billionaire like Eike Batista joining forces with an ultra-corrupt politician like Lula, one is certainly in crony capitalism territory.

    Thanks to archaic economic policies, Brazil remains one of the most closed economies in the world; allowing oligarchs like Eike Batista and corrupt politicians to become extremely rich. Thus, Brazil suffers from terrible market distortions and is crippled by the lack of modern infrastructure, such as railroads and ports, to facilitate the export of its commodities.

    Brazil's slowing economy, rampant corruption at the highest echelons of the federal government and rising inflation should serve as a powerful wake-up call. Brazil has a totally dysfunctional government and needs to change course. The country must abandon archaic economic policies of the 1950s to finally move into the 21st century; like Chile has already done. Without a fundamental change of course, Latin America's largest economy is going the way of Greece.

    Undoubtedly, Brazil is becoming neither more nor less than a full-blown kleptocracy.

    Kleber Verraes
    São Paulo, Brazil
  • GoyGuy

    eike batista, whose father eliezer batista was minister of mines during the brazilian military dictatorship of the 60s and 70s and is famous for registering in his name half the mines prospected at the time by the brazilian govt, is reportedly former president lula's facade. he sold lots of air to lots of suckers while he and the former brazilian prez were in business together.
    separated from a former "model" and starlet who was originally his bachelor party "gift", eike raised 2 kids infamous for, in grade school, bribing colleagues to get their homework done, declaring in interviews never to have read a single book and later for running over a man on a bike while doing over 90 mph on a 55 mph road.
    eike batista, nicknamed "Panzer Fuhrer" by his sons, is a fraud, his business is toxic, he has no vision beyond scheming. your money is as safe with him as it would be in bernie madoff's or alan stanford's hands.
  • Barry Benedict

    I'm always amused by all the ''self made'' rich who have unlimited credit because of their rich family.

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