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Lula Pushes Ally for Vale CEO as Brazil’s Iron Ore Miner Weighs Succession

(Bloomberg) -- Political lobbying as much as boardroom maneuvering could determine who wins the race to become the next boss of Vale SA, the world’s No. 2 iron ore producer.

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Brazilian President Luiz Inacio Lula da Silva wants the top job for his staunch ally — and former finance minister — Guido Mantega when Chief Executive Officer Eduardo Bartolomeo’s term expires in May, according to people familiar with the matter. Lula might also back Bartolomeo for another shorter stint, if that smooths the way for Mantega to be appointed to Vale’s board, preferably as chairman, the people said, asking not to be identified as the matter is private.

Ultimately, the buck stops with a board that’s expected to make a decision by the end of this month. While Vale was privatized in 1997, the wrangling over the succession puts the spotlight on government influence in the mining sector. The metals producer could play a strategic role in Lula’s efforts to reboot Brazil’s economy, but equally government assent is key to cutting through the red tape that’s hobbling Vale’s ambitions.

The federal government didn’t respond to a request for comment. Vale declined to comment.

Mantega, a 74-year-old member of the Workers’ Party, was Brazil’s longest serving finance minister, under both Lula and Dilma Rousseff. Charges brought in 2018 by federal prosecutors against Mantega — accusing him of administrative improbity because of an accounting maneuver carried out by the government to meet tax targets — were dropped by a regional court five years later.

In terms of direct influence, the federal government keeps special shares with limited veto rights. In addition, Previ — the pension fund of state-controlled Banco do Brasil SA — is still Vale’s biggest individual shareholder with an 8.7% stake. But that’s far away from giving Lula control.

Indeed, the company’s bylaws aim to shield it from direct political interference, which in the past led to the ouster of Vale CEO Roger Agnelli in a dispute over strategy and investment.

The CEO appointment is a test for Latin America’s third-most valuable company, according to corporate governance expert Alexandre Di Miceli.

“The board must take into account the best interests of the company, focusing on the desired profile, and avoiding a name that seeks to execute an individual shareholder’s agenda, whether state-owned or private,” said Di Miceli, founder of Virtuous Company. “The CEO needs to have leadership experience in a private company. No one can parachute into such a position.”

Still, the fortunes of Vale and the state are closely intertwined. The mining sector accounts for 4% of Brazil’s gross domestic product, with iron ore among the country’s top exports. Vale is also a major producer of energy transition metals.

Read More: Vale-BHP Talks With Brazil on Mine Disaster Deal Delayed

Bartolomeo took the helm at Vale in the wake of Brazil’s deadliest tailings dam collapse in 2019. The company is still under scrutiny, as well as negotiating a final settlement in relation to another environmental disaster at Samarco, a Vale-BHP Group Ltd. iron ore venture.

Lula’s backing could help end that legal and financial overhang, plus speed up environmental permitting that would revive iron-ore output. The need to ease rules that hinder exploitation of deposits in the Amazon, and maintain a concession renewal for a railway serving the key Carajas region also support the case for better government relations.

Succession Race

The candidature of Mantega, who also served as planning minister, may be a way of getting Lula a seat at the negotiating table, but, so far, those talks haven’t reached Vale board level, according to the people familiar.

Other minority shareholders — such as BlackRock Inc., Capital Group, Mitsui & Co., Bradesco and Cosan SA — could also wield influence, especially if they coordinate their efforts.

Read More: Vale Poised for Shakeup as Sugar Giant Seeks to Join Board

Should neither Bartolomeo nor Mantega make the cut, Cosan’s former CEO and Vale board member Luis Henrique Guimaraes is being touted as another potential candidate to take the helm or be appointed to the company’s executive, according to the people familiar.

--With assistance from Martha Beck.

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