As Brazil's Batista falters, Rio dream does too

Reuters

By Paulo Prada

RIO DE JANEIRO, Oct 20 (Reuters) - Investors who bet on EikeBatista have lost billions over the past year as the Brazilian'sephemeral business empire imploded.

But they haven't been the only losers - the onetime Amazongold trader and former speedboat racer's hometown of Rio deJaneiro has also been shaken by his rapid decline.

Beginning in 2006, Batista floated a series of mining,energy and shipping companies through share offers that by 2012made him the world's seventh richest man, valued by Forbesmagazine at $30 billion. All the companies' names, includingthat of his EBX conglomerate, ended in X, a letter he saidsymbolized the multiplication of wealth.

With the same verve he used to woo investors, Batista alsobecame the biggest booster of a hoped-for revival in Rio, theverdant, seaside metropolis whose glorious past as Brazil'scapital and cultural center had in recent decades given way tocrime, violence and the unfettered sprawl of slums.

At his peak, Eike, as the 56-year-old is known locally,bankrolled the campaign that lured the 2016 Olympics to Rio. Hepaid for police vehicles in poor neighborhoods and partiallydecontaminated a popular local lagoon.

He bought a landmark waterfront hotel and nearby marina andvowed to make natives of rival São Paulo, the country's businesscapital, "die with envy." Along with some progress by localofficials against crime, litter and other urban blight,Batista's efforts helped fuel a sense that a rebound was indeedunderway, at least in wealthier parts of town.

"I don't know where we would be without him," says RosaCelia Barbosa, a Rio cardiologist who received a 30 million real($13.9 million) donation from Batista in 2011 for a charityhospital for children. After struggling for more than a decadewith funding, she finally had enough to pay for finalconstruction and equipment costs.

But now, as creditors pick over what's left of Batista'sholdings, his dream for Rio is all but bankrupt.

His star is burning out just as the city readies for theOlympics and next year's World Cup soccer tournament, two eventshe hoped would showcase his role as Rio's self-styledbenefactor.

"People here believed in this patron, this tycoon who wouldfinance a transformation that not even the government could,"says Fernando Gabeira, a former national Congressman and mayoraland gubernatorial candidate. "He meant well, but reality tookover."

Batista, through a spokeswoman, declined to comment on hisderailed Rio plans.

It's too early to say what the ultimate economic toll ofBatista's downfall might be on Rio's economy.

As headquarters for a group that attracted tens of billionsof reais through stock offerings and credit, there is theunknown cost of what might have been had his vision worked out.

But most of the companies were still new, didn't make moneyand didn't represent significant sources of tax revenue.Employees and suppliers still hope that the ventures, some ofthem under new ownership, might still prove profitable. And theinvestors who lost money were not concentrated in Rio.

Some of the impact, though, is already apparent in a citywhere his can-do spirit, while it worked, manifested itself allover town.

The logos of Batista's various companies, once emblazonedeverywhere from beachside volleyball nets to scaffoldings inRio's run-down center, have vanished almost as quickly as theyappeared. And gone with them is the largesse.

Consider the 351 vehicles he donated to police forces nowdeployed in Rio's favelas, notorious shantytowns long dominatedby drug gangs. The pickups, vans and motorcycles were part of amulti-year partnership Batista struck with the state governmentto contribute 20 million reais annually, starting in 2010, to anongoing effort to "pacify" the slums.

In August, though, he pulled the plug on the partnership.

Now, many of the vehicles sit unused and in disrepairbecause the state had not included them in an insurance contractthat covers the rest of its fleet. A September report by Extra,a Rio newspaper, revealed that some police officers, many ofwhom are paid little more than the minimum wage, have beenfooting the bills for repairs.

A spokesman for the state government said it is working toremedy the problem and that the donation, while welcome, was asmall part of a total budget of more than 3 billion reais forthe "pacification units," as the slum patrols are known. Assuch, the spokesman added, no crime or other securityconsequences are expected because of the ruptured agreement.

SUGAR DADDY

During his ascent, Batista eagerly cast himself as Rio'ssugar daddy - employer to thousands, but also the visionary whocould reverse a half-century of decline during which Brazilmoved its capital to Brasília and São Paulo eclipsed it as anindustrial and financial hub.

His local efforts began in 2008, when he started a project,in conjunction with the city and state governments, to clean upa briny lagoon nestled between some of Rio's best-knownneighborhoods. Despite years of pollution, the lagoon remained apopular destination for boaters and joggers.

Batista pledged 28 million reais to dredge it, insulate itfrom sewerage and other pollutants and study proposals toaugment the natural flow of seawater into the lagoon, necessaryfor a sustainable balance of nutrients. When finished, Batistaboasted, Rio would see him swimming there.

That same year, Batista paid a reported 80 million reais forthe Hotel Gloria, an aging landmark that once hosted presidentsand foreign dignitaries in an opulent, city-block sized palaceon a bend in the Rio shoreline. He would invest another 80million reais, Batista said, and restore the grandeur of aneighborhood by then better known for transvestite prostitutes.

In 2009, he won a concession to manage and modernize anearby marina, a circular harbor a stone's throw from the artdeco skyscraper where he would soon be moving his headquarters.Batista said he would connect the marina and hotel with anambitious shopping, entertainment and conference complex.

Meanwhile, he kept cutting checks for charity and othercauses. He sponsored a volleyball team. He donated funds for aproject that would re-plant Atlantic rainforest, the nativewoodland, in southeastern Brazil.

ULTERIOR MOTIVES?

Skeptics questioned the motives for Batista's generosity,especially because at times it extended to politicians andgovernment leaders charged with regulating some of hisbusinesses - from the local marina, licensed by the city, to amassive port complex he was building north of Rio, where thestate government has authority.

In 2009, for instance, he lent a private jet to Rio'sgovernor and mayor so they could attend an Olympic event inCopenhagen as part of their bid for the 2016 games. Batista hadalready provided 23 million reais in funding for the campaign -more than any other company or private individual.

Batista, the governor and the mayor all repeatedly dismissedsuggestions of any conflict of interest in comments at the time.The donations were to the Olympic campaign and not to thepoliticians, and was permitted under Brazilian law.

By 2010, some of his Rio plans, much like his oil and portprojects, began suffering setbacks - from licensing delays tocourt challenges.

Refurbishment at the Hotel Gloria, originally scheduled tobe completed by 2011, was repeatedly, and for undisclosedreasons, postponed until after the World Cup. Some marina usersbegan pushing back against the plan to turn the harbor intosomething other than a boating facility.

"It was not a marina project," says Alexandre Antunes, afishing boat captain who opposed the proposal.

Last year, when investors en masse lost faith in his abilityto deliver profits, Batista's business and other interests wereso entwined that they all began crumbling together.

The hotel, now for sale, remains an empty shell behindscaffolds and sooty canvases. Instead of revitalizing commerceon the decrepit streets around it, the abandoned job site drawshomeless people and pigeons.

"We were supposed to be busy with cab drivers and hotelguests by now," says Manuel Gonçalves, a bar owner one blockaway. Instead, "it's just a few old locals."

At the marina, manager Ricardo Passos says he's gettingready to pack up as soon as Batista sells the concession. "Idon't know when, but we are on the way out," Passos says.

The lagoon, meanwhile, looks much like it did before thedredging. Almost no one, Batista included, regularly swimsthere.

"I catch even fewer fish than I used to," says WalterMarins, a 66-year-old who is one of about 30 fishermenauthorized to catch snook, shrimp, crabs and other marine lifethere. The dredging, he says, disturbed the habitat.

A full cleanup would require building underground ducts thatcould ferry more seawater into the lagoon. Though Batistahimself never promised to pay for their construction, he didfinance a study that proposed the ducts to the local governmentand his once-contagious boosterism was expected to help ithappen.

"It's a shame he hit hard times," says Paulo Rosman, anengineer at the Federal University of Rio de Janeiro whoauthored the study and says local authorities have been slow toact on it. "It won't be long before the lagoon is dirty again."

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