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Brazilian tycoon takes a tumbling

A company of Eike Batista, a larger-than-life self-proclaimed symbol of Brazil's economic boom, goes bankrupt.
Last modified: 31 Oct 2013 14:39

Mr Lam restaurant sits discreetly on a little side street in an upscale neighbourhood of Rio de Janeiro.

It's Rio's most posh Chinese restaurant, where you'll find on the menu "Mr Batista's Prawns," described as "breaded prawns, with garlic shavings and springs onions in a ginger sauce."

It will set you back $44.

The dish is named after the owner, Eike Batista, Brazil's fallen billionaire tycoon.

But Mr Lam is simply Batista's fun side project. His real business is EBX, the umbrella group of his network of 10 different core companies, the flagship being his oil and gas exploration unit he named OGX.

In Brazil, Batista is more than a businessman. He is a brash, larger-than-life self-proclaimed symbol of Brazil's economic boom times, the past six years.

Early last year, when he was still worth nearly $35bn and was ranked the world's seventh wealthiest person, he used to tell everybody how he planned to be the world's richest person.

In the US, there’s "The Donald," and in Brazil, there is simply "Eike."

Investors blindly poured money by the tens of billions into anything Batista stamped his famous X moniker on.

Where it all went wrong

Batista's jewel was OGX, but he also created other feeder companies like OSX (offshore marine), LLX (logistics), MPX (power generation), MMX (mining) and CCX (coal).

But at its core, OGX was promised to provide the inflow of cash to all the other X's once the oil started gushing.

Problem was that the deepwater oil wells OGX had were pretty much dry.  

There was no cash on hand, but there was nearly $5bn in debt Batista couldn't pay, because his personal wealth was mostly speculation on paper, but nothing more.

There was no choice but for Batista to swallow his pride and file OGX for what would become one of the largest bankruptcy filings ever in South America.

Batista was a gambler, who went all in one hand he called OGX.

If the oil he promised materialised, it would have been the endless ATM for all his other companies, and he likely could have become the world’s richest man.

He was close, but it all fell apart too soon.

Now the fall of OGX will likely take some of the other X's with it. It's inevitable.

The exception

On Wednesday Batista's 5-star hotel project, the revitalisation of the famed Hotel Gloria, sat half-built and abandoned. A homeless man sat smoking a cigarette on the front steps.

Batista's company headquarters still had broken glass from vandalism from a recent street protest. There was no interest even to get it fixed apparently, there were bigger issues to tackle.

The OGX bankruptcy is a huge hit to Batista's ego. But Brazil will survive, because the only thing bigger than Batista's ambition is Brazil itself. When it comes to business, Batista was the exception, not the rule.

The lasting effects on Brazil's economy will be miniscule, because OGX was a company with few employees, big promises, but not much else. And Brazil is bigger than one man.

Batista has some rough times ahead. For sure he'll find himself crushed at the bottom of a pile-on of naysayers.

But I wouldn't count him out completely. Batista is too ambitious, too well-connected, and there is still too much opportunity in Brazil to be had, especially for a man who knows how to swim through the murky waters of the Brazilian bureaucracy.

There are a million Batista’s in Brazil, but there’s still only one Eike. I wouldn't be surprised if in five years Batista re-bounds and re-invents himself in some way.

Until then, if you’re in Rio and feel like breaded prawns in ginger sauce, you know where to go. But better get there quick. No telling how much longer it will be around.

Follow Gabriel Elizondo on Twitter