Q&A INTERNATIONAL FIRMS Take a local example. We have lots of interface with indigenous people
in Brazil, mostly because of our railway system in the north. Up in the north of Brazil, in the Amazon region, it is common to see the Xikrin tribe, be- cause they live very close to the railways. We are dealing with them regularly. This provides a good example of how the tribes and the government interact. The government, through the entity called FUNAI, the national foundation for indigenous people, and the public prosecutor’s office, they are legally re- sponsible for defending the interests of the indigenous people. It is a good partnership. The idea is to maintain separation and at the same time be able to share the benefits of the development that will come without harming their traditions.
In certain areas in Brazil, because of the different scopes of our projects,
each one may be regulated by a different agency or even more than one agency, and we have to create internal capabilities. So I can say we have bet- ter lawyers in-house than you could find in law firms in certain areas of practice. That is a type of work that we do not share with law firms. Port and railway regulatory work are good examples.
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When deciding about different projects in different countries, there are several issues that we have to look at, such as short and long term plans, risk assessment, or type of structure for the deal
Whom do you see as your biggest competitor? In Brazil, there is no big competitor. Our main competitors are BHP Billiton and Rio Tinto. We are the biggest iron ore producer in the world, Rio Tinto the second, BHP the third.
If you could change or abolish one law or regulation in Brazil, which would it be? At Vale, we are active in so many different segments of Brazil’s economy
and industries. If I chose a law in one area to change, I would leave other clients of mine unhappy. But I will say that, as head of our tax department as well, I would like to simplify the taxation system in Brazil, that would be my preferred move. Right now, it is one of the most complicated tax systems in the world.
What is the basic problem? There are too many taxes all over, from the municipal levels to the state levels to the federal levels. These different levels, they do not normally com- municate as often as they should and one of the consequences is that there is in Brazil an ongoing tax war among the states. The federal government and the congress are working now to try to mitigate the situation. But as it stands now, the tax code is what makes things more difficult. There have been so many changes throughout time, arising partly from the need of the different federation entities to obtain a budget for their activities. The laws are not the same for all, they are just different everywhere that you go, and it certainly would help to have a more standardized treatment in different states. In addition, you see new taxes being created all the time. At this very moment, there are ongoing discussions for a new mining code that will change taxation of the mining sector.
So, the upshot of all these conflicting regulations is a lack of stability that
prejudices potential investors. It turns away people who might otherwise want to invest in Brazil.
Do you think the Brazilian government’s stance concerning the un- paid taxes of Vale and other companies is reasonable and fair? It’s not only Vale; all Brazilian companies doing business abroad are in the same situation. The provisional measure was created in 2001 and the Brazil- ian national industry confederation, CNI, filed a claim in the Supreme Court asserting the unconstitutionality of such 2001 provisional measure. If the provisional measure is upheld, there will be a clear loss of competi- tiveness of the Brazilian companies to do business abroad.
When it comes to choosing outside counsel, what do you look for? With regard to transactional counsel, we look if they are present in the dif- ferent countries where we have operations, businesses or projects and the specialty of each counsel assigned to us. At this moment, we have a base of law firms, and we tend to rely on the relationship partner to introduce us to their colleagues when we need assistance in other countries. We have part- nerships with high quality law firm where we give them scale and in ex- change we get a good fee structure.
Do you work with a lot of firms or a few? We work with many law firms. Usually we tend to have a handful of firms that are more full-service, but we also work with several law firms with spe- cific niche or expertise. Especially for transactional work, we tend to go for firms that can provide us full support. These are law firms that can look at the transaction from different perspectives (tax, corporate, potential litiga- tion and antitrust).
We look for a firm that serves us in all areas of business and we have in
Brazil a big group of firms that meet such requirements. Locally, as examples, we use Machado Meyer, Xavier Bragança Advogados, Veirano Advogados, Mattos Filho, Vieira Rezende, Trench and some others, we have a good group of firms. We have business all over the country in different segments, and we are also listed in five different countries, so we have to have good local counsels that have the ability to work with international counsels and to complement the work we do internationally.
Roughly what is the division of legal work, internal/external? Internally, we do a lot of work, especially at the beginning of a project, where my team participates in every meeting regarding the conception of a business or a new strategy.
When deciding about different projects in different countries, there are
several issues that we have to look at, such as short and long term plans, risk assessment, or type of structure for the
deal.The legal and tax departments will participate in all the analysis during all this conception period in order to assist the business department to choose the best strategy. Once the strat- egy is defined, we engage an external counsel. We have to check different issues relating to the legal framework of that particular country. There are times when we cannot find good external counsel in a country – that is a reality in some countries in Africa – and so we have to bring in international law firms that have some experience dealing with issues in that specific coun-
try.There is a good amount of work that is done internally, but there is a bigger chunk that goes to law firms. Usually, due to the complexity of our operations and project, we have to have more senior people with experience in order to identify the best opportunities and minimize the risks, as a result we tend not to have many junior people. As in-house lawyers we have to understand the needs of the business in order to be able to identify the rel- evant issues, identify the best external counsels for each specific project and manage their work in an efficient manner.
We have a handful of international law firms that we work with. We do
a lot of work with Cleary Gottlieb Steen & Hamilton, Clifford Chance, White & Case, Allen & Overy, Reed Smith and Chadbourne & Parke.
For international trade and potential international disputes we tend to ENERGY & INFRASTRUCTURE | LATIN AMERICA 2013 9
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