Sell-off sparks fury

May 23, 1997

ACADEMICS and students in Brazil have united to block the planned sell-off of Companhia Vale do Rio Doce, the world's largest mining company.

Brokers Merrill Lynch had drawn up the sell-off tender for CVRD, setting a lower limit for the first 45 per cent of the company of Pounds 1.9 billion.

In the past two weeks 1,000 demonstrators - including students - have clashed with police in the streets of Rio de Janeiro, where the sell-off was to have gone ahead.

Academics at the Federal University of Rio de Janeiro claimed that their studies showed CVRD was undervalued by as much as Pounds 1.2 billion, a considerable sum for a country with a national debt of Pounds 118 billion.

Two consortia made up of steel concerns, pension funds and banks were ready to open the bidding which should have started last week.

The academics, backed by an array of lawyers, said that the Merrill Lynch evaluation failed to take into account reports about new gold and uranium deposits found in the Carajas region north of Brazil. These discoveries, if verified, would add to the value of CVRD - the world's largest producer of ore.

Working with the Workers Party (PT), the academics are also trying to force a parliamentary inquiry to look into the matter because of a conflict of interest for the brokers, which they claim favoured the Valecom consortium, one of the two bidders, rather than the rival group CSN.

The Brazilian constitution allows anyone (who can provide a good reason that it is in the national interest) to take out injunctions against state assets being sold off.

The PT and the academics say that Merrill Lynch, which drew up the terms for the CVRD sale, has a conflict of interest because it owns a Johannesburg broker which conducts transactions for Anglo-American, part of the Valecom bid.

When the bid was evaluated, the outsider CSN won, possibly because of the professors' pressure in the courts. Appeals are now being made against the decision.

Several injunctions were taken out against the sell-off, including one from a group of individuals led by a Rio de Janeiro university professor and another from Sao Paulo, who claimed the government had not published the tender documents in national newspapers.

These injunctions were overcome by BNDES, the Brazilian development bank handling the sale, after appeals to the supreme tribunal of justice.

But then Salete Maria Macaloz, a professor of law at the Catholic University of Rio de Janeiro, took out another injunction, claiming the whole process was unconstitutional. She stated that the 1990 privatisation law that set in motion the possibility of the sale of CVRD (which employs 15,500 people directly and thousands more indirectly) was "invalid".

Brasilia has already upheld one injunction brought by Professor Macaloz, halting the sale of 411,000 hectares of land in the company's huge Carajas mining complex.

Supporting her attempt to block the privatisation are Milton Temer, federal deputy for the PT party, and its two leading lawyers, Luis Eduardo Greenhalgh and Luis Carlos Sigmaringa Seixas.

Brazil's President Fernando Henrique Cardoso, attending a trade meeting in Uruguay, is said to be furious that his privatisation plans have been delayed. President Cardoso was once a sociology professor at Sao Paulo State University and is a former Marxist turned Social Democrat.

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