‘Clearly a political decision’ as Vale chief executive ousted

RIO DE JANEIRO • Brazil is moving to cast off the last shackles of government influence at iron- ore giant Vale SA — but not before replacing the CEO with someone more politically palatable.

Murilo Ferreira’s six- year contract won’t be renewed when it expires in May, the Rio de Janeiro- based company said in a statement Friday. The announcement came days after Vale unveiled a plan to scrap its controlling shareholder pact amid criticism the miner was run like a quasi state company.

While the company didn’t say who decided Ferreira’s fate, analysts including Upside Investor’s Pedro Galdi say politics were involved. He took the CEO job in 2011 as part of a management shakeup driven by then- president Dilma Rousseff. The current government of Michel Temer has sought to distance itself from authorities and executives with perceived allegiances to Rousseff, who was impeached last year.

“Clearly this is a political decision and Temer will have the final say in appointing the new CEO,” Galdi said by telephone from Sao Paulo. “This should be the last time there is political interference in appointing a CEO, as Vale is breaking down control.”

Brazil’s presidency didn’t respond to emails requesting comment. Vale’s shares fell 0.5 per cent in Sao Paulo on Friday.

Under Ferreira, 63, the company has been on a roller-coaster ride. Over that period, Vale’s shares lost about 30 per cent as commodity prices tumbled amid slowing Chinese demand and expanding supply. In the past year, though, there’s been a sharp turnaround.

As the CEO stepped up cost- and debt- cutting efforts and prices recovered, the company’s stock jumped more than 250 per cent, outperforming rivals.

His efforts to focus on new deposits in northern Brazil were applauded by investors. That shift has culminated in a US$14 billion mining complex in an area where ore quality is higher and costs will be lower. But back in Vale’s home state of Minas Gerais, the strategy riled politicians from the PMDB party, to which Temer also belongs.

While local political opposition would normally be of little consequence for an independently run company, Vale is controlled by a holding company whose owners include state pension funds and the country’s development bank.

Some PMDB lawmakers rallied behind criticism over Vale’s initial response to a tailings dam collapse at its joint venture with BHP Billiton Ltd. in November 2015. Vale has defended both its initial and ongoing response to the Samarco disaster and its strategy to focus investments on low- cost deposits in northern Brazil.

“I never entered the political arena to guarantee my term,” Ferreira said Friday on a conference call with journalists.

The board will use an international recruiting firm in its search for a replacement, Vale said.

The next CEO will take over Ferreira’s effort to break up a controlling shareholder group that has made Vale a quasi- state- controlled company.