Vale Pressured by Lula to Invest as Brazil Recovers

Diana Kinch and Helder Marinho-Bloomberg, 09/21/09

Brazilian 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.

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