Vale Pressured by Lula to Invest as Brazil Recovers: Week Ahead

[Blue_Tires]

Sept. 21 (Bloomberg) -- Brazil’s President Luiz Inacio Lula da Silva is pressuring Vale SA, the world’s biggest iron-ore producer, to build steel mills that will create more jobs. Shareholders say he’s putting politics ahead of their profits.

“This pressure is a bother for Vale,” said Regis Abreu, who helps manage 2.5 billion reais ($1.4 billion) in assets, including Vale shares, for Rio de Janeiro-based Mercatto Investimentos. “Any company that suffers political pressure ends up being diverted from its main objectives.”

Lula, 63, has publicly urged Vale to build steelworks at least half a dozen times since April. Mines and Energy Minister Edison Lobao also proposed that Vale pay more royalties, a topic that mining companies will discuss this week at an industry conference in Belo Horizonte. In addition, Lula urged the Rio- based company on Sept. 11 to buy Brazilian-made vessels to export ore to international markets such as China.

Vale has risen 48 percent in Sao Paulo trading this year through Sept. 18, trailing a 62 percent gain in the Bovespa stock index. London-based Rio Tinto Group more than doubled, while BHP Billiton Ltd., the world’s third-biggest iron-ore exporter, rose 27 percent. BHP is based in Melbourne.

‘Not Irritated’

“I’m not irritated with Vale,” Lula said in an interview with Brazilian financial daily Valor Economico published Sept. 16. “I’ve insisted, systematically, that Vale builds steelworks in Brazil. Vale can no longer afford the luxury of just being an iron-ore exporter.”

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