NEWSMAKER-New CEO of Brazil’s Vale to balance govt, investors

* Mining veteran Ferreira to replace Agnelli as Vale CEO

* Emerges as compromise pick amid state meddling in Vale

* Faces delicate balancing act to please govt, holders

* Reputation enhanced after integration of Inco in 2006

By Guillermo Parra-Bernal and Brian Ellsworth

SAO PAULO/RIO DE JANEIRO, April 5 (Reuters) – Murilo
Ferreira, the future chief executive of Brazilian mining giant
Vale, faces a delicate balancing act to satisfy the company’s
investors and the politicians that pushed out his predecessor.

Fortunately for him, his background alone should win him
points with both sides.

The 58-year-old mining veteran’s repeated clashes, when head
of Vale’s Canada unit, with outgoing CEO Roger Agnelli will
likely endear him to the government of President Dilma Rousseff,
who led a campaign to oust Agnelli on charges he was doing
little to help Brazil’s steelmaking and shipbuilding sectors.

Ferreira’s extensive experience at the world’s biggest iron
ore producer should relieve investors who have for weeks worried
that Rousseff would seek to install a politician appointee who
would put social development goals above profits.

The soft-spoken business administrator established a
reputation as a cost-conscious manager by quickly integrating
Canadian nickel producer Inco into Vale’s overall operations
after Vale bought Inco in 2006.

Graphic on Vale shareholders:

Graphic Vale profits, iron:

Breakingviews column: [ID:nN01181676]


“He is tough and sharp — he knows what he’s doing,” said
one former Vale employee who asked not to be identified.

Vale’s non-voting shares (VALE5.SA: Quote, Profile, Research), the company’s most
widely traded class of stock, have shed almost 10 percent since
mid-January, when speculation over Agnelli’s departure mounted.

That reflects concern over the risk of “increasingly
non-business related decisions being made, leading to higher
costs and lower returns”, according to Fraser Phillips, an
analyst with RBC Dominion Securities in Toronto.

According to sources close to Ferreira, he saw Agnelli as a
leader that offered little room for internal dissent and
centralized power within the company, straining ties with
national politicians, regional leaders, and local communities.

Ferreira reportedly opposed Agnelli’s bid to buy out rival
miner Xstrata (XTA.L: Quote, Profile, Research) because the Swiss mining company’s mix of
high quality and low quality assets made the purchase risky.

Vale’s bid for Xstrata ultimately failed just before the
2008 financial crisis, avoiding enormous financial headaches for

Until the start of the year, Ferreira was a founding partner
of Rio de Janeiro-based hedge fund Studio Investimentos. He
founded the firm with a former colleague from Vale and other
industry contacts after quitting the company early in 2009.


Ferreira’s immediate challenge is to fend off government
pressure for Vale’s involvement in steel projects, popular among
politicians because they create jobs but unattractive to Vale
because of the lower returns on offer.

He will also have to seek a quick resolution to a dispute
with the government over a mining royalties debt that state
officials says could reach $2.4 billion.

During his 10-year stint at Vale that began in 1998,
Ferreira presided over the firm’s aluminum unit Aluvale and was
later responsible for seeking expansion opportunities around the
globe as head of Vale’s mergers and acquisitions division.

People with knowledge of the situation say that Ferreira
rushed to trim costs at Inco after Vale took control, cutting
lavish expenses by Inco’s directors and streamlining the
company’s structure.

Ferreira “can be considered an internal candidate, bringing
the least disruption to Vale, and can ease the concerns of a
higher government intervention”, Bank of America Merrill Lynch
analyst Felipe Hirai said on Tuesday.

He could help rebuild relations between Vale, the government
and customers, and still attain Agnelli’s target of making Vale
the world’s largest diversified miner in a few years, Hirai

Ferreira’s designation came as a surprise following reports
in recent days that Tito Martins, currently head of Vale Canada,
was the top name for the job. Former Vale chairman Sergio Rosa,
paper and pulp executives and even the chairman of Banco
Santander Brasil (SANB11.SA: Quote, Profile, Research), Fabio Barbosa, were also target of
speculation as contenders for the job.
(Additional reporting by Denise Luna in Rio de Janeiro;
Editing by Mike Nesbit)

NEWSMAKER-New CEO of Brazil’s Vale to balance govt, investors