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Eike Batista: From Billionaire to Bankruptcy

Eike Batista was once Brazil's richest man and worth over $30 billion, but he has since lost almost all of his wealth due to the bankruptcy of his main oil company, OGX. Batista's fortune was closely tied to the performance of his companies in the mining and oil industries, which began struggling in 2013 as Brazil's economy slowed and commodity prices fell sharply. The fall of Batista and his holding companies, EBX, highlights the volatility currently facing Brazil's economy and other emerging markets. Batista had become an example of a self-made billionaire, but his story has now become a cautionary tale about the risks of overexposure to emerging market economies.

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Henry Zhu
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22 views1 page

Eike Batista: From Billionaire to Bankruptcy

Eike Batista was once Brazil's richest man and worth over $30 billion, but he has since lost almost all of his wealth due to the bankruptcy of his main oil company, OGX. Batista's fortune was closely tied to the performance of his companies in the mining and oil industries, which began struggling in 2013 as Brazil's economy slowed and commodity prices fell sharply. The fall of Batista and his holding companies, EBX, highlights the volatility currently facing Brazil's economy and other emerging markets. Batista had become an example of a self-made billionaire, but his story has now become a cautionary tale about the risks of overexposure to emerging market economies.

Uploaded by

Henry Zhu
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Fall 2013 | Emerging Markets Journal | Page 3

THE BANKRUPT

BILLIONAIRE
By Christopher Dean

ould you bear to lose 30


billion dollars?
Eike Batista used to be
on top of the world. Worth
more than 30 billion dollars last
year according to Forbes Magazine,
Eike Batista was at one time Brazils
richest man and the 7th richest
person in the world. However, on
October 30th his main oil company,
OGX, filed for bankruptcy after
struggling to find the cash to pay
its debts. His fortune, obtained
through ownership of Brazilian
mining and oil companies, has been
closely tied to the performance of
his companies, and in early 2013
these companies began to run into
significant trouble.
The EBX group, Batistas holding
company for his assets, has been
plagued by falling commodity
prices and a slowdown in Brazils
economy. OGX, Latin Americas
largest bankruptcy ever, must now
attempt to restructure itself after
talks with creditors failed to produce
any meaningful solutions.
The fall of Eike Batista and his
holding companies speaks greatly
about the state of Brazils economy.
Brazils once high-flying economy
has slowed dramatically in 2013,
partially due to an enormous fall
in commodity prices. IMF growth
expectations of 2.5% for 2014 pale
in comparison to past years where
Brazil has managed to put out
growth rates over 7%. This presents

challenges for Brazil, even


as they prepare to host the
World Cup in 2014.
Eike Batista was seen
by many as the perfect
example of a self-made man.
Magazines wrote flattering
articles about his wealth
and business prowess, while
Brazilians admired him for
his rags to riches personal
life story. In 2012, Time
magazine ranked him one of
the most influential people
in the world. Things have
WIKIMEDIA COMMONS / PHOTO
changed dramatically in A HARD FALL: Formerly worth over $30
the past 2 years, as Batista billion, Eike Batista has lost almost all of
has now become the butt of his wealth in recent months. Though an
extreme case, Batista is an example of the
negative magazine jokes and volatility that has plagued most emerging
an investigation by CVM, markets and Brazil in particular.
Brazils equivalent of the SEC.
Reserve beginning to taper struck
His fortune has crumbled
to around a billion dollars, while in May 2013, stock markets in
he faces lawsuits from many of these vulnerable countries fell
his investors. The bankruptcy is dramatically, exposing weaknesses
expected to take many years to fully in these countrys currencies and
sort out, yet will luckily have little businesses. Many investors realized
they were over-exposed to these
serious effect on Brazils economy.
What happened to Mr. Batista economies and currencies, and
may be a sign of what is to come in the withdrew their money in large
future for many other businessmen quantities, further weakening these
and companies in countries like currencies. It will be important for
India, South Africa, Thailand, and these countries to work quickly and
Indonesia. Many of these countries effectively to minimize any potential
have seen incredible growth in risks in their economies and prevent
the past, yet struggle with account further capital withdrawals. It
deficits, a lack of competitiveness, would be unfortunate to see more
and corruption issues. For example, riches to rags stories similar to those
when rumors of the Federal concerning Mr. Batista.

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