Brazil's richest man Eike Batista is making business headlines,
but not for the right reasons. 2011 was a bad year for his
EBX Group, but this year looks even worse. Is Brazil losing
faith in its greatest entrepreneur?
[caption id="attachment_67931" align="alignright" width="300"
caption="Brazil's Eike Batista"]
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An unfinished metallurgical degree behind him, in the
80's Batista devoted himself to trading in gold and
diamonds. In 20 years, he was able to generate $20
billion and create his own group: EBX.
Today EBX includes five publicly traded commodity and logistics
companies, two of which are available to American investors: oil
driller OGX (
OGXPY
,
quote
), mining outfit MMX, power-generation company MPX (
MPXEY
,
quote
), port developer LLX, and shipbuilder OSX. Eike Batista also owns
private gold miner AUX in Columbia and invests in Rio de Janeiro
real estate.
In 2011, Batista's assets were valued at $30 billion. He was
listed by
Forbes Magazine
as the 8th richest person in the world, first among all South
America. This year he was number 7.
However, something has changed for Eike Batista, especially in
the last month. In late June the company announced reduced
production estimates at oil company OGX, causing a strong share
decline.
In two days OGX lost 40% of market value
. Market alarms were immediately triggered for EBX Group amid a
rain of criticism.
Brazilians are now looking at their richest man with disbelief.
Not so much at a failed or flawed entrepreneur, but what he
signifies for the country itself. There is a saying that Brazil is
the land of the future -- and always will be. Eike Batista had been
saying that Brazil's future had finally arrived, but he just proved
himself wrong.
Experts dismiss the episode as
the entrepreneur's failure. Former International Monetary
Fund economist Simon Nocera see it as "a reflection
of what is happening to the country as a whole", given commodities
prices entering a bear market cycle.
On the other hand, analysts had to reflect the lower production
estimates in their view of the stock. Merrill Lynch and Itaú BBA
have reduced their price targets. Itaú underlined that "they
maintain their outperform recommendation for OGXPY, but maintain
our cautious stance for short-term performance, with the absence of
a catalyst to restore market confidence."
As for Eike Batista himself, his determination is unabated. His
losses have already been partially recovered and he stated his
"fortune is in his assets", and since he did not "sell a single
action, ha[s] not lost anything!"
