MONDAY APRIL 28 1997
By Geoff Dyer in São Paulo
Latin America's largest ever privatisation was thrown into confusion
over the weekend when a judge blocked tomorrow's planned auction of shares
in Companhia Vale do Rio Doce (CVRD), the world's largest iron-ore producer.
The Brazilian government intends to appeal against the decision and said
it was confident that the auction would go ahead tomorrow.
Mr Sergio Amaral, the president's spokesman, said: "We will take all
the necessary measures. The government is convinced that there have been
no irregularities in the privatisation process."
The government plans to sell a 40-45 per cent stake of voting shares in
CVRD to a consortium with at least three members at a minimum price of R$3.3bn
($3.5bn). Its remaining 51 per cent stake will be sold later in the year.
The government hopes to raise more than R$5bn in total.
Any significant delay would be a huge embarrassment to the Brazilian government
which is committed to encouraging private investment.
However, the planned privatisation is opposed by a wide range of groups,
including trade unions, artists and Brazil's Roman Catholic bishops.
Mr João Batista Gonçalves, a judge in São Paulo's sixth
civil court, ruled that the auction should be suspended because the government
had not given a sufficient explanation of the reasons for the sale in the
tender documents.
He also said the privatisation rules had been broken because the government
had not published the tender documents in national newspapers. The injunction
was brought by a group of individuals led by a São Paulo university
professor.
The planning ministry said the injunction had been expected and that the
government had overcome similar legal obstacles to previous sell-offs.
Around 60 legal challenges have been lodged against the sale and the National
Development Bank (BNDES), which oversees privatisations, has a team of over
100 lawyers posted around the country to deal with the court cases.
Two consortia have pre -qualified for Tuesday's auction at the Rio de Janeiro
stock exchange. One is jointly led by Anglo American, the South African
mining group, and Grupo Votorantim, the Brazilian conglomerate; . its other
members are Caemi, the Brazilian mining company, two Brazilian pension funds
and a group of 11 Japanese companies, led by Nippon Steel.
The other was put together by Companhia Siderúrgica Nacional (CSN),
Brazil's largest steelmaker, and includes four Brazilian pension funds,
Suzano, the paper and pulp company, Opportunity Asset Management, an investment
fund, and NationsBank of the US.