Not many years ago, Eike Batista, a Brazilian billionaire used to brag that he was on track to be richer than Carlos Slim, the world’s richest man. He was a real show-off, loving his flashy lifestyle. He was known for his exquisite Mercedes-Benz McLaren that he had parked in his living room.
No one could imagine the speed at which his empire fell was really fast. The guy who was known for his champion speedboat racing, and who became a symbol of the Brazilian economic boom was having one of his companies filing for protection against bankruptcy.
Batista was born with a silver spoon in his mouth. His own father was a minister of mines and energy. He also ran the Vale mining firm that was run by the government but now has been privatized. Batista went to the Amazon in his twenties, where he would score gold and later sells it in Europe and Brazil’s big cities for a hefty profit. This is where he started his empire. This background was what led to his booming business in the world of mining. oil, real estate and even infrastructure. However, all these companies are all suffering a fate of collapse. This is similar to the OBX Company, which was once really highflying but is now facing liquidation.
Batista married Luma de Oliveira, who is a former supermodel and a Carnival queen, one of the most popular in Brazil. They were married for a decade and had two sons. Their private life was splashed out on the tabloids and social magazines, attracting as much publicity as his corporate life.
Early 2012, he was listed in Forbes magazine as having an estimated $34.5 billion. The 56 year-old Batista’s fortune has really taken a nosedive, and is allegedly only one percent of this value. The financial crisis has been really bad that he has had his luxury yacht cut-up as well as sold as scrap.
It is not only his financial life that has been affected, but his problems have also spilled over into his private and personal life. His 21-year-old son, Thor was in June convicted of manslaughter. This came after he ran over a cyclist with a Mercedes Benz.
Batista is claimed to have given false information regarding the size of oil fields that his company OGX found in the past years. Critics also claim that Batista’s struggles are an indicator that Brazil’s economic troubles are not about to end anytime soon. The Brazilian economy grew by 7.5 percent in 2010, only to drop to a meager 0.9 percent gain in the previous year. All this happened hand in hand with a downturn in global prices and spending by the Brazilians. When asked to comment, OGX did not give any response. It wasn’t meant for his star to dim its shine in such a short while.
To be powerful in South America, you have to be transparent and you have to have a very clean reputation. Transparency for me today is a magic word in South America. Power comes from transparency and a track record of execution.
The president Dilma Rousseff was in a commissioning ceremony for offshore oil productions by OGX. He commissioned that Petrobras, the state-run oil company would partner with Batista’s firm. Rousseff made a statement saying, “Eike is our expectation, standard, and better still the Brazilian pride particularly when its a matter of businessmen in the private sector”.
Batista’s failure in his company was majorly due to inability to produce offshore oil, followed by the inability to get a higher credit for investment. This came up as a result of the worsening environmental conditions and Batista’s company having underlying weaknesses.
A Latin American analyst known as Jefferson Finch who works with Eurasia Group, a New York-based consultancy firm. He said, “What’s a phrase? In this case, when a tide goes down, an individual can clearly see the man without a bathing suit. That was the same case with Eike Batista”.
Finch claims that around 2011, the investor enthusiasm began turning on Brazil, which happened after a five years period of hope that there would be an economic turnaround and that South America’s biggest nation would become one of the superpowers, and finally fulfill its promise of success.
He continued to say that even while looking at the overall issue, Brazil did not have a promising future, no matter how much optimism people portrayed, as well as the effervescence in the country’s economy, amid all the structural changes. He goes on to add that Brazil is not quite as bad as people claim it to be. It has been said that Batista’s downfall was a big blow to the nation’s economy.
“The whole situation has had a real negative effect on the Brazil’s public image as well as reinforces for stronger corporate leadership in the country. In fact, the reality never came up to the many people’s expectations created by Batista.” These were the words of Cassia Pontes, which is the oil industry analyst who works with the Lopes Filho consulting company based in the Rio de Janeiro”.
OGX, upon its inception in the year 2007, had promised to produce great amounts of the offshore oil. It had reported a huge number of finds from 2010, and its market value hit over $ 34 billion mark. in the first-half of the year, the company had an average output of only 8500 barrels a day. It made up to $2.5 billion in losses.
In the year 2012, the field had nearly 1 billion barrels. However, recently, it lowered the projections it had to 285 million barrels. This was a big blow to the people who had injected all their cash into stock buying for the company.
According to the Miriam Leito, which is one of the biggest mistakes that Batista made was to lie to the potential investor, and mislead them by declaring to have what he did not have. Leitao said that Batista had built himself cards’ house since he had made it a habit to lie to investors.
Batista’s OGX, a subsidiary of EBX, a company of his too, has filed a bankruptcy protection, and thus has 60 days to formulate a plan of restructure. The investors will get over 180 days of accepting or declining the debts. If the plan is declined, the company will face liquidation.
A 27 years old and a graphic designer known as Henrique Matias Lorenzo while in Sao Paulo says the downfall of Batista’s should be a dose of reality of the country. Lorenzo has also been quoted saying ” Eike had too much optimism which also spread to other people who also believed in the project which was not entirely based on the solid facts and figures”.