The Fall of the House of Batista and Lessons for Brazil

By Edmund Ruge

On January 24, Brazil’s former richest man boarded a flight from Rio de Janeiro to New York City using a German passport.  Two days later, Brazilian police declared him a fugitive, requesting an international warrant from Interpol. Batista turned himself in on January 30, and now awaits trial at Rio de Janeiro’s infamous Bangu jail.

Batista stands charged on counts of corruption, money laundering, and criminal organization.  The state accuses him of  paying bribes of approximately US$16.5 million to former Rio de Janeiro State Governor Sergio Cabral, also held at Bangu. Allegedly, the two conspired in a number of construction contracts preceding the 2016 Rio Olympics profiting off public money to build several now defunct stadiums.

Batista’s rise and fall closely tracks Brazil’s own boom and bust.  Son of former mining hegemon Eliezer Batista, Eike founded a series of companies under the conglomerate EBX in the early 2000’s -- MMX Mineração, LLX Logistica, MPX Energia, OGX Petroleo, OSX Brasil, all designed to work in tandem in an offshore oil mega-project at Rio de Janeiro State’s Açu port. In each of these cases, the “X” at the end of the name was meant to indicate a multiplier on returns.  In 2008, oil hit US$145.30 per barrel and Batista raised US$7 billion in IPOs, and  in April 2010, Forbes named Batista the 8th richest man in the world with an estimated net worth of US$27 billion.

But commodity prices took it all down. OGX floundered as highly-anticipated oil wells, especially in the much-hyped “Blue Shark” field, proved to be duds. The company defaulted on US$5 billion of debt in 2013, and the rest of EBX soon followed. Batista made the cover of Bloomberg Businessweek with the title: “How to lose a $34.5 billion fortune in one year.”

He began selling off assets and quickly ran into legal trouble, standing trial in 2015 under accusations of insider trading. Legal proceedings halted, however, when photos emerged of presiding judge Flavio Roberto de Souza driving Batista’s seized Porsche Cayenne.  Batista’s lawyers successfully delayed proceedings and Batista kept his head out of the press (except for that time in March 2016 when he dumped R$700,000 into the ocean at Ipanema in an offering to the deity Iemanja).  As the rich have done for so long in Brazil, Batista evaded justice.

But not this time.

This time, Batista shares the fate of over 600,000 other Brazilians as he awaits judgement in an overcrowded, squalid prison.

There may be some satisfying feeling of public vengeance behind all of this, maybe even some room to laud advances in the rule of law. But against the horrific background of Brazil’s recent prison riots, massacres, and decapitations, and against the staggering number of pretrial detainees (nearly 40% of Brazilian prisoners), the tribulations of a former billionaire who famously showed off his Maclaren by parking it in his living room are relatively trivial by comparison.

Batista warrants mention nonetheless. In his rise, his brash pinnacle, and precipitous fall, there lies a part of Brazil itself over the last 15 years. He rose to the apex of the global elite by the resource-driven economy of the 00s and early 10s that awed the world, and brought billions of investment and growth. And then he fell as his projects and companies in particular, and Brazil overall, were unable to live up to their early promise. Like Brazil, he crashed back to earth along despite lofty claims. And now he, as so much of the rest of the Brazilian elite, is caught up in scandal and fraud and webs of deceit that are being exposed as the judiciary, for the first time in modern Brazilian history, is revoking the impunity that the upper echelons of Brazilian society have been accustomed to for so long. This Judicial independence is perhaps the only remaining bright spot of the story, and even that is now threatened by the Presidency and Legislature.

Like Eike Batista and his dreams of business empire, the story of Brazil in the 21st Century is so far a story of a grand promise never fully realized. But for the country as a whole, at least, the dream remains alight.

_______

Edmund Ruge is Lead Fellow at the Met Society. Follow him on Twitter @edmundruge