Re-thINC - Eike Batista at Zeitgeist Americas 2011


Uploaded by zeitgeistminds on 27.09.2011

Transcript:
He was one of seven. He learned the importance of sharing. With his mother, he cured his
asthma with discipline, swimming in the cold water. With his father, he learned to think
big. He moved to Germany, Belgium, and Switzerland.
When he was 18, his family moved back to Brazil. He was left with his oldest brother and half
the money. He started to sell insurance policies from door to door. When he was 23, he read
in a Brazilian magazine about the gold rush in the Amazon region.
So he went there. Two jewelers have lent him $500,000 to buy
gold there. After 15 months, he traded $60 million and made a $6 million profit. $6 million
dollar, 23 years old. He should have gone to the beach; right?
Wrong. Instead, he decided to build a crazy machine
in the middle of the Amazon. His instinct helped him to find a rich mine among more
than 100 mines. To produce gold in the middle of the jungle, you almost need a military
operation to supply food, water, energy, fuel. You need to put into practice a holistic view.
So he put 11 gold, silver, and iron ore mines into production from scratch.
From 1980 until 2000, he went worldwide, $20 billion of wealth created for investors, and
$1 billion left for him. He learned very important lessons.
How to identify mega trends to find unique natural resource assets, to integrate projects,
arbitrage in efficiencies, be self-sufficient. What we have always done and are still doing
is large scale, long lasting, efficient, state of the art, transformational, responsible.
Since 2000, he decided to focus on Brazil, to build a new Brazil, because he loves his
country and his people. >>Maria Bartiromo: Please welcome Eike Batista.
[ Applause ] >>Maria Bartiromo: Eike, it's great to see
you. I enjoyed that video so much because it showed you, really, when you first started
out and how you embarked on a career and kept going. How tough was that?
>>Eike Batista: Well, it was tough. First of all, thank you for having me. Very
nice, pleasure. Well, I guess education forges you. And, you
know, traveling around with my parents to Europe and then coming back, or my parents
coming back and me living in Europe with half of the money, it's stress and stress, which
I think is important for the younger generation. We pampered -- we pamper our kids too much.
So, I think, for me, it was the initial phase, which, you know, I had this incredible will
to be financially independent. I mean, I wanted to be financially independent, and looking
for opportunities. The gold opportunity was -- when it arose, I did what I did. And today,
you know, mining, logistics, in a country, Brazil, that is allowing me, would allow you
also -- thank you -- thanks that most people are only coming now; they allowed me ten years
in advance -- would allow you to build nation building.
Brazil is a country the size of a continent. And we have resources that you Americans had
at the turn of the century. So we lived through incredible crises. In
'84, we had our democracy back. We had 20 years of military regime.
And between 1984 and '97, Brazil went through ten crises. We were sometimes in Switzerland,
sometimes in Bangladesh. And in '97, Brazil did the bank reform, what you in America did
in 2008. And Europe has to do it now. So when people speak about Brazil being the
country of the future, amigos, we are the country of the future since '97.
>>Maria Bartiromo: Mm-hmm. >>Eike Batista: And then we were extremely
fortunate to have a president, Fernando Henrique, who was there for eight years, and created
the zero inflation program that worked out extremely well, so that he created the base,
you know, for our President Lula, who then also stayed in power for eight years, a man
that surprised not only us Brazilians, but probably all of you, because he embraced all
Brazilians. >>Maria Bartiromo: I want to ask you all about
that, and certainly about what the trends of the world are today.
But I think one thing that was very important in that video that we just saw is that you
were able to spot the trend, the trend that wasn't a trend yet in terms of gold and what
was needed in terms of demand. Today, commodities are in demand huge because
of the growth of the emerging markets, because of China.
And so how was it that you spotted that trend as a mega trend? We're all today's trying
to figure out what are the mega trends of tomorrow. How did you know that would be so
important? >>Eike Batista: Well, some visits to China,
understanding what happened in the last 20 years, seeing 400 million Chinese coming to
the consumer world. And, you know, if -- then analyzing the world resources, I have a very
good picture of the world resources. And Brazil is one of the countries that can match the
Chinese demand, you know. We have a big dragon on the other side of the world eating everything
you can imagine, food, iron ore. So it's good timing.
But the science, really, of identifying -- identifying these rare essences, these -- I would call
them state company resources, this is really what we manage to have, I learned it in my
first days with the crazy machine. I only survived that operation because the mine was
totally idiot-proof. It was so rich, you know, it afforded all my mistakes. I didn't -- I
obviously underestimated diseases, logistical issues, technical problems. I mean, if you
build something in the middle of nowhere, you have to get your own water, your own food
supply, your health issues, mechanical problems. If you don't have a drop of oil, your machines
won't work. So it's perfect background logistics for these
things to happen. You know, this thing looks like the moon landing
machine, doesn't it? [ Laughter ]
>>Eike Batista: So -- but it was in the middle of the jungle. So very complicated.
The other big challenge that I had in Chile -- let me show you the Chile operation -- is
that 4,000 meter altitude. I had to bring water from 200 kilometers, power from 150
kilometers. The thing was involved in 150 legal lawsuits. And I learned -- I really
learned to tackle all this and manage it. And that's from where I created my 360-degree
way of doing business, which includes the social and environmental part big time.
>>Maria Bartiromo: I want to ask you about that, because I know you have a very comprehensive
way of approaching your business, and that is this 360 vision.
Talk to us about why all of these pieces are so important.
>>Eike Batista: You know, I believe that if -- if I fail in one of them, my project -- I
won't go into the zone, you know, which I call -- is -- in the zone, you get when you're
able to really perform on all these different disciplines in a perfect way. You know, it's
the holistic vision of everything. These projects are multibillion dollar projects.
As I said, Brazil has allowed me to play Monopoly. So if you want to play Monopoly in a big way,
in the right way, with rich assets, you have to really be very diligent.
>>Maria Bartiromo: And one of the components of that is people and teams. And keeping in
touch with your people. Let's talk a little bit about how you do that.
You tweet. How is your social media presence? Talk to us about what you're trying to accomplish
when you're tweeting. You're tweeting to your employees? To just -- all of your followers?
What are you trying to achieve when you're tweeting in terms of reaching your people
in this 360 vision? >>Eike Batista: Well, we share and care. Sharing,
I think I use a different model, although I'm a public company with one class of shares,
management gets owner stock, which I think is very different than any other structure
I know in the world. They get it over a ten-year period. But what's most important, you know,
you don't create wealth over a quarter. I mean, I see this way in America, you want
to make money in a quarter, you take -- a fast project is three years. Take five.
So people should start getting their bonuses after the fifth year. I think America has
to change. >>Maria Bartiromo: You're saying think long
term, five years? >>Eike Batista: Five years, yes.
>>Maria Bartiromo: You're saying think long term and not worry about the quarterly meeting
expectations in terms of analyst targets quarter to quarter.
>>Eike Batista: Listen, even our friends here, Google, Google had five, seven years of angel
investors, you know, funding it for very long. So was Facebook, same story. You don't create
wealth in a year's time, you know. I refuse to remunerate -- First of all, they understand
what I am doing and they understand that the wealth will be created after the fifth year.
So everybody joins this. And I share big-time. I mean, I learned to
share. And when we build our projects, I'd say maybe the most important thing is -- our
success of having put 120 environmental licenses in multibillion dollar projects was that we
think locally and in a way that as our projects have a big influence on the surrounding cities.
You know, like, just an example of our super port, we're building Brazil's largest -- South
America's largest super port, a bridge to China, a bridge to the world. And there's
30,000-people city 20 kilometers away. There's another 450,000-people city 45 kilometers
away. And we feel, you know -- we check with all stakeholders, meaning before we really
started the project, I -- we talked to 1,500 stakeholders, the different priests of the
different religions, the fishermen, the farmers, I mean, everybody.
And if you don't win 80% of their hearts, you know, projects like that don't happen.
And I spend the money in advance. So we build -- for the fisherman, we build a multimillion
dollar warehouse. And not only build the warehouse; I also teach them how to make more money so
they can come with the fresh fish, freeze it for a while and then sell it on the Internet
to the restaurants in Rio de Janeiro. So the full integration, bringing the surrounding
environment, which includes people, it's all about people.
>>Maria Bartiromo: And you're allowing those people to know that they have a stake in it
as well. And that's how you're getting their buy-in?
>>Eike Batista: You should see the farm projects that we have. You know, we -- power project
in the north of Brazil where there was a family, 100 families were living out of the garbage
dump. And so we -- we saw this and said, listen, I'm responsible for this. I can't have this
in the surroundings of our project. So we built them houses, schools, I mean,
everything. And we taught them to plant vegetables. Now, instead of eating the vegetables that
people throw away in the garbage -- >>Maria Bartiromo: They're growing.
>>Eike Batista: -- they're selling it to the same people that they used to -- So it's a
beautiful project. And we feel responsible to give them the road, not the fish.
>>Maria Bartiromo: I want to ask you more about this (indiscernible) report and, of
course, how you see the world today. But let's start from the beginning or sort
of way back. You said Brazil has gone through so many crises. And, of course, you are growing
up, then becoming a businessman, dealing with these crises.
Give us your way to deal with those crises. What did you -- How did you respond when you
actually saw that things were very tough? Maybe it was going to be tougher for you to
make money. Maybe things did not go your way, all the way in the beginning, what gave you
the drive to keep going and to actually identify these growth paths?
>>Eike Batista: Be brutally efficient, you know, and look for low-cost assets. This is
when you always survive. This is very much -- it has become our culture. Be very disciplined.
You know, it's a Brazilian company that bought Anheuser-Busch. Anheuser-Busch in the U.S.,
they had theme parks and God knows what; right? >>Maria Bartiromo: InBev.
>>Eike Batista: Right, InBev. We also bought Burger King. It was a great
outfit, we bought it for $4 billion, and it's the -- if we work on management, like we do
Brazilian-style, because we used to live in war in Brazil. Between 1984 and '97, I mean,
this was from hand to mouth. So seven crises, you know, my message to all of you is that
mankind always will find a solution, you know. We -- this is what -- I lived in Brazil so
many times, a big country. Maybe not so big in your vision. But when you live through
so many crises, you get vaccinated. I mean, oh, no, just another one.
>>Maria Bartiromo: So it was the tough times that made you stronger and made you believe
that since you got through the last one, you can get through the next one?
>>Eike Batista: Yes. >>Maria Bartiromo: What was your toughest
day? >>Eike Batista: My toughest day?
>>Maria Bartiromo: Yeah. >>Eike Batista: Well, you know, flying over
the Amazon jungle with bad weather when you didn't know, you know, plane with no radar,
nothing, not knowing where you're going to land. That was tough, yeah.
[ Laughter ] >>Maria Bartiromo: How about in business?
When you look back -- [ Laughter ]
>>Maria Bartiromo: When you look back, what were some of the tough times that you needed
that strong will, that you needed some optimism to get through it? And how did you do it.
>>Eike Batista: Raising money for South America. For two decades, we were thrown into the garbage,
literally. And that's why if you see the chart, I mean, I made my investors $20 billion and
was left only with one, which is not so bad, but --
[ Laughter ] >>Eike Batista: But I had to -- you know,
the interest rates charged, you know, projects needed 3, $4 million 20 years ago for South
America was a major undertaking. So every time, having to go to the banks and explain
that my assets were worth more than the debt of my government's is not an easy task.
[ Laughter ] >>Maria Bartiromo: How do you see the world
today, Eike. Everyone is talking about China, sort of the growth that we're seeing there,
a billion and a half people. And that's really where the demand is coming from, China, as
well as Southeast Asia. Do you think that is still as strong a story
as it was just a few years ago, because, of course, everyone today is talking about a
global economic slowdown. What's happening?
>>Eike Batista: I have Chinese partners, steel -- third largest steel mill in the world,
Wuhan Steel. They're building a steel mill with us in Brazil, because I have a deal with
them that for every three tons of iron ore, you guys produce a ton of steel in my country.
I'm very -- I have to take care of value adding to my country.
>>Maria Bartiromo: Rather than China just coming, paying for the product, and then bringing
it back to China? >>Eike Batista: No, no, no, no. You add value
here in Brazil, okay? Here not, but in Brazil. [ Laughter ]
>>Maria Bartiromo: This is a very important point.
>>Eike Batista: So, you know, I've seen the Chinese meticulously bring 400 million Chinese
into the consumer world in much -- it's much more difficult times. If you look 20 years
back, this is what they've done in the last 20 years.
I have no doubt that the Chinese today, 48% of the population is now urban. And they have
a plan to bring this number up to 64%, which will be another 400 million Chinese.
They will execute on it. That's why -- they've executed it for the last 20 years. Trust me,
the next 15 years or 2025, is tomorrow, and it won't stop. And Brazil is a perfect fit
to all this. So the wealth creation in the southern hemisphere,
you know, it includes Brazil, all our neighboring countries, Africa, that most people forget.
Some countries in Africa grow 10%. And then Asia, of course, with the biggest number.
China, Indonesia, which is a large country. This part of the world is creating 20 million
jobs a year. I repeat the number, 20 million jobs.
>>Maria Bartiromo: So you have seen no slowdown to that? Even though the government there
has said, they are worried about things getting overheated. You haven't see an impact of slowdown?
>>Eike Batista: The slowdown will happen in areas -- I mean, the Chinese export lots of
products to Walmart, right? Well, eventually Europe has to fasten its belt like Brazil
had to do, as I said, between '84 and '97. We lived through 13 years of tightening our
belt. That's c'est la vie. That's what you have to go through.
Europe may grow, I don't know, 0, 1/2%, that's probably -- but it won't collapse, assuming
they do the financial -- the bank reform. Now, America slightly higher growth, but also
highly indebted. Now, these emerging countries -- iron ore, which is something Brazil produces,
food which Brazil is extremely competitive, you survive always when you -- when you're
a low-cost producer and you are more efficient than anybody else.
And Brazil only exports, like you Americans, 11% of our GDP. So the Brazilian story is
a 200 million people -- hungry consumer story, okay? Very low indebtness. Only 5% of Brazil's
GDP are mortgages. So imagine Brazil being what you were probably in 1990 when America
had this gigantic potential pent-up demand which we have in Brazil.
So the growth in Brazil is driven from internal consumption. And whatever we export, we are
the lowest cost in the world or the highest quality in the world, oil, soy, and iron ore,
which are big items on our balance sheet. >>Maria Bartiromo: I was really astounded
when I visited recently because it is not necessarily only the export of the agriculture,
which is the dynamic part of the story, but that domestic consumption story.
What do you worry about to slow that down? I mean, are you worried that the issues of
inflation, the issues of moving too fast in terms of growth will hurt the story?
>>Eike Batista: We need lots of Americans, Europeans, talented people to come to Brazil
to help us grow because we are running full employment. Rio de Janeiro state is 3% unemployment.
We need qualified people to deploy these multi-billion dollar oil assets. There is a Brazil that
is happening offshore, which is invisible and under water and under the seabed. There
is a trillion dollar story. And if two companies, Petrobras and ourselves, we are going to add
4 million barrels a day to Brazil's oil production by 2020. The numbers are brutal, and we need
talent. >>Maria Bartiromo: Brazil will become an oil
exporter? >>Eike Batista: Massive, massive oil exporter.
You know, Brazil is the most western country. We are exactly like you in the U.S. We are
a melting pot of nations. I don't look exactly Brazilian, do I? I'm half German.
Most of the people you meet in Rio, we are Spanish, Portuguese, Italian, Irish, Ukrainian,
you know. >>Maria Bartiromo: Is it hard to find talent
to fill those jobs that you are talking about? >>Eike Batista: Yes, yes. There is a problem
for inflation. So where is our problem? People, you know. Salaries are going up so you have
demand, demand inflation for jobs. And the execution on projects, you know, your cap
ex may be higher because there is no products. >>Maria Bartiromo: What is the most exciting
industry in your view right now? >>Eike Batista: In Brazil?
>>Maria Bartiromo: No, everywhere. Let's say you were just thinking about taking on a job,
thinking about where you would want to go. I mean, mining infrastructure has worked so
beautifully for you. And I know that that is an area that you think will continue to
grow. What else do you find exciting and vibrant
in terms of industry today? >>Eike Batista: Well, the problem is, you
know, I'm a mind-sniffing Labrador. In find these mines, you know, at 80% margins. I don't
think there is another business. [ Laughter ]
I'm sorry. >>Maria Bartiromo: Enough said. Yeah.
>>Eike Batista: Yes. >>Maria Bartiromo: So the mining of iron ore,
of -- what's your time frame in terms of getting that product out of the ground, out of the
sea? For example, let's talk about the big find of oil and gas.
>>Eike Batista: Yes. Well, we are going to start oil production now at the end of November,
two years after our first well. And we are going to deploy 20 of these big Brazilian-designed
engineers FPSOs. These are floating production ships. Actually a Petrobras concept. Each
of them makes $2 billion EBITDA per year. Work it out. It is a big undertaking.
[ Laughter ] >>Maria Bartiromo: Tell us about your average
day. What do you do? >>Eike Batista: Well, I care for my country.
You know, we lost probably 1 1/2 generation of Brazilians through the crisis that we live
-- we had to live through. As I said, between '84 and '97, the year 2000, President Lula
was incredible in spending money in social areas. That's what I said. He embraced all
Brazilians. And I care -- you know, we are going to start generating massive cash flow
as of 2014. And I intend to build hospitals, infrastructure, universities, whatever.
>>Maria Bartiromo: What do you do on an average day? How does your day start?
>>Eike Batista: I run lots of companies, 50 directors, exercise, workout, stay fit. I'm
extremely well-informed. I follow mega trends around the world because during my gold days
of my building my goldmines around the world, I was global before globalization. This was
in the '80s because I had to -- mines are where they are. So I went to Russia and the
mafia and the local (saying name) kicked me out of there.
I went to Greece. And the Greeks -- I knew it before. After spending $330 million, the
Greeks kicked me out. [ Laughter ]
>>Maria Bartiromo: Why did everybody kick you out?
>>Eike Batista: Because jurisdiction, you know. Just example on Greece. It was a mining
project that was running for 30 years, and it was an international auction by the government.
So what would you expect? You expect at the end of your feasibility study, at the end
of your $330 million, you are going to get the mining license, right? Well, no. I didn't
get the mining license. They changed the rules. So, what do you want? If they change the rule
on you, despite the fact that it was a government privatization program -- the largest investment
ever in Greece. So beware. I knew it before. [ Laughter ]
>>Maria Bartiromo: You are one of the most successful people, wealthiest people in the
world today. Is there anything that you have not done yet, whether it is on a business
level or personal level, that you want to do still?
>>Eike Batista: Well, there are three countries in South America that are phenomenal. It is
Brazil, Colombia, and Chile. We are also exploring lots of this expertise that we have in these
two countries big time. We helped Rio de Janeiro win the Olympics.
Brazilians, I hope I'm teaching a generation of young Brazilians to share and care because
my Brazilian culture is an ibaric (phonetic) culture, which is my grandfather, my father,
myself, my grandson, they don't look to the sides. I have learned -- it is the German
way. I think community. And I think there is a whole new generation
that I'm pushing the message towards, you know, let's -- Brazil is rich. Let's share.
Let's care. And, you know, I think it's working out.
>>Maria Bartiromo: It is. Eike, thank you so much. Eike Batista.
[ Applause ] As we wrap up, Eike wants to make sure we
see an important video to show what he is doing in terms of the environment.
>>Eike Batista: Yeah. >>Maria Bartiromo: Let's roll that video.
(Video.) >>Video: A group that is born in a place like
this is born to love life. We are friends of nature. We respect small communities. We know what makes us humans.
But we go beyond. We stimulate education. We promote dignity. Each day mankind demands
more. The iron that holds a bridge, bridges connect families, the oil that moves machines,
machines will carry loved ones. The energy that lights an entire city. Energy will lead
us to better places. Assets that are not given, that are necessary to human development.
But our job is to deliver this wealth, to be responsible, to be sustainable, to lower
impacts, discover new and modern ways to obtain these assets. Our mission is to do more because
we care more. We are EBX Group. [ End of Video. ]
[ Applause ]