By Arnout Nuijt

In April 2010 I visited the EBX head offices in Rio together with a couple of foreign business reps. They were both seasoned fellows, gentlemen who had been everywhere and seen it all. For reasons of discretion, let’s call them the Accountant and the Banker. We were curious about EBX, the expanding group of companies owned by – what the international press described as – the billionaire businessman Mr Eike Batista. We were not just curious, there was also a certain pressure from local and trade reps, diplomats and others: go talk to Eike!

Mr Batista was building ports, had ventured into mining, energy and recently oil exploration. But the ports wouldn’t not just be ports, they would be Superports. One was planned south of Rio (the Sudeste) and one to the north of the Marvelous City (Açu). The latter was dubbed as Brazil’s future ‘Rotterdam”. So a visit to Mr Batista’s holding company, EBX, and its ports and logistics subsidiary LLX, was sort of inevitable.

Mr Batista was doing much more than that. He had supported Rio’s campaign to host the 2016 Olympic Games financially and he had cleaned up the Rodrigo de Freitas lagoon in the middle of Rio. On top of that he had bought the famous Hotel Gloria, a landmark, and set out refurbishing it. He was everywhere.

Mr Batista publicly said his ambition was to be the world richest man, which is of course a sound ambition. He hitchhiked on the reputation of his father, a former federal minister and CEO of mining giant Vale, when it was still a State Owned Enterprise called CVRD. But on the eve of our visit all three of us were sceptical. Each of Mr Batista’s companies was in an initial stage. He wasn’t making any money by producing. Instead his fortunes were rising simply because of speculation. It was virtual wealth.

After slick presentations and a couple of questions to EBX managers (we never met Eike himself), we fell silent, said goodbye and left. Outside, in the pouring Rio autumn rain we scrambled for a cab and drove off. We were shocked. The Accountant bristled that EBX would fail any accountancy rule in Europe. The Banker, shaking his head, had looked in vain for security. He sighed and noted EBX was one hell of a risky business. EBX was at its best a big bluff, a gamble. That was the conclusion we reached during that taxi ride in April 2010.

Later that day, when we talked to some Petrobras reps elsewhere in the city, we asked what their opinion was about EBX’s new oil exploration venture, OGX.  They smiled grimly, shook their head and told us OGX’s wells were previously owned and explored by Petrobras. We don’t think there is oil or gas in there, they said, looking meaningfully.

That was our second shock. I also realised that in all the contacts I had had in 2009 and 2010 with EBX and its affiliates like LLX and MMX, I had seen different people each and every time, which is always a bad sign. The offices, occupying one or two floors in a big building on Praia do Flamengo, felt like they doubled as meeting place for all his companies. They can’t have been big.

This piece is not about telling you I told you so. There was always that faint notion that – given the right macroeconomic circumstances, Mr Batista’s plans might succeed, he might just pull it off. And EBX was simply too big to fail. He would get help from the state or federal government and get bailed out if necessary.

But Mr Batista’s paper empire has been unfolding over the last year or so. When a tycoon starts selling his boat and planes, the end must be near. Enough has been written about the fate of his projects and companies. An American group took over the port under construction at Açu, German energy firm E.on, already a minority shareholder, took control of MPX. Other parts of the group are still struggling. Mr Batista faces investigations by the authorities and angry investors are taking him to court.

That may not be the end of the ordeal. Mr Batista played politicians, especially in Rio. Can we expect more scandals? What did EBX get in return for its subsidy of the Olympics campaign and what for cleaning up the lagoon? Were the land deals involving Sudeste en Açu ports clean?

But the underlying worry is not what will happen to EBX in the future, but on how this could happen. Why did companies invest in just power point presentations? How come solid companies from Canada (the Ontario Teacher’s Pension Fund) and Germany invested hundreds of millions of dollars in his projects, without any security? Why did no one investigate him better? Why was there no quality media organisation in London or New York that produced a thoroughly researched warning about EBX? Why did no one pay attention to the fact that Mr Batista in 2006 had been convicted for bankrupting a group of no less than 10 companies?

Mr Eike Batista managed to sell his power point gambles with charisma. He is a brilliant salesman, he has the so called X-factor. When back in 2010 we tried to share our conclusions with several people we were ignored. Our info did not fit the picture. Mr Batista was a god, he was royalty. Of course there was no problem with him. Investors, diplomats and foreign dignitaries on pilgrimage to Rio continued to fall for his X-factor or whatever it is that makes men admire and blindly follow other men.

But above all his rise and his optimism were part of Brazil’s recent boom. Brazil was finally shaking off its “forever country of the future” syndrome. It was booming and Mr Batista was one of the boom’s symbols of optimism. Other countries were struggling and here in Brazil was a man who promised to solve the country’s infrastructure bottlenecks as well as high returns. Coincidentally, Mr Batista’s fortunes went down as Brazil’s economy started slowing again to its pre-boom mediocre growth rate.

In his book about his successful rise to riches, Mr Eike Batista’s gives away some tips for wannabee billionaires. Tip 9 is highly recommended: “Look at a business in all its depth and think of every detail with maximum accuracy and minimum risk.”

Incredible.