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Roger Agnelli The secret of success

Sep 1, 2013

Urbanization and a growing middle class will buoy demand for raw materials, says former Vale CEO Roger Agnelli

By Katie Llanos-Small

As chief executive of Vale, Roger Agnelli oversaw the extraordinary transformation of a Brazilian company into a global one.

During his 10 years at the helm – he left the company in 2011 – Agnelli turned Vale into one of the world’s biggest mining firms. In so doing, he helped change the face of Brazilian industry.

In 2001, his first year with Companhia Vale do Rio Doce, as it was then known, the company posted Ebitda of 5.1 billion reais. A decade later, adjusted Ebitda was $33.8 billion (81 billion reais).

The impact of Chinese demand for raw materials on Latin America’s commodities exporters was an important part of this success, he tells LatinFinance.

"The demand for natural resources that China brought, and is still bringing, to the market has been incredible – demand for food, energy and mining South America benefitted very, very much from Chinese demand, as did other countries in Asia and even Europe at the beginning of the last decade."

But he acknowledges that a slowdown in Chinese demand for commodities – a major force behind Latin America’s advance over the past decade – could complicate the outlook. "I pray for China every day, because for Latin America, China was a kind of a miracle," he says.

But he dismisses suggestions that a period of exceptional demand for raw materials has come to an end. Even if Chinese growth moderates, he says, it will still be significant. "The second largest economy in the world is going to grow 7%, which is a lot," Agnelli says. Moreover, urbanization and an expanding middle class will mean commodities are in ever-greater demand, he says.

Brazil offers the ideal environment to incubate Latin champions like Vale, he says. "The global companies have to be here," he says. "The local market is very strong, opportunities are very good. The macro-economic scenario is good. Other countries in the region are doing very well, and the middle class is growing."

Nevertheless, there remain a number of shorter term challenges facing Brazilian industry, he says.

"The labor force, education, infrastructure, regulation and reducing bureaucracy: those are the obstacles that we have to overcome," he says. "The long term trend for countries like Brazil is still positive. In the short term, it depends how well we do our homework. And our homework from my point of view is going to be measured by how in favor of the market economy we are."

As well as searching out new areas of exploration, at Vale Agnelli also looked to acquisitions for growth. Of those, Vale’s $18.68 billion purchase of Canadian miner Inco in 2006 was the most notable. Vale’s global reach helped it attract the finance – and the deal cemented its status as a truly global corporation.

Now running his own energy investment firm, AGN Participações, which is developing a biofuel project, Agnelli is again looking at acquisitions. A tie-up with Brazil’s BTG Pactual, called B&A Mineração, has already bought some greenfield copper and fertilizer projects – areas the company views as strategic.

This year’s market rout makes shopping easier – adding "rationality" to the prices, he says. "It’s much more feasible, but much more challenging: you have to have the guts to buy." LF

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