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Brazilian Multinational Vale S.A. establishes an academic foothold at Columbia University and pushes for doing the right thing for business, for developed and for developing countries – a marriage between ODA and FDI. Will it work?


Vale S.A., formerly Companhia Vale do Rio Doce (CVRD), is a diversified mining multinational corporation and one of the largest logistics operators in Brazil. In addition to being the second-largest mining company in the world, Vale is also the largest producer of iron ore, pellets, and second largest (after Russia’s Norilsk) of nickel. Vale also produces manganese, ferroalloys, copper, bauxite, potash, kaolin, alumina and aluminum. In the electric energy sector, the company participates in consortia and currently operates nine hydroelectric plants. The company was established in the State of Minas Gerais as a Brazilian Federal government mining company in 1942, and privatized in 1997.

Since November 2007 it is known by the Vale name.

Vale was started as the Brazilian center of iron mining, it diversified later into non-ferrous metals, and into coal with major operations in Australia and China. It further is conducting mining operations in many other counties including –  Finland, Canada, Mongolia, India, Angola, South Africa, Chile, Peru.

Vale is headquartered in Rio de Janeiro and has its logistical office in São Paulo. Vale also has offices all over the world:  Brisbane,  Buenos Aires,  Johannesburg,  Lima, London, Seoul,  Shanghai,  Singapore,  Tokyo,  Toronto, Vaud. Vale had an investment budget of $11 billion for 2008, the largest annual investment program ever undertaken by Vale or by any mining company in the world. The 2008 budget is part of the firm’s strategic plan and underpins the 5 year, $59 billion investment program,  as compared with the period 2003-2007, estimated at $18 billion.

Now we come to our point here – thanks to the fact that it is such a large multi-multinational company it is also involved in creating a more friendly image for the globalization of business.  At the UN Vale is involved in the Global Compact, that is looking at the social responsibilities of the Multi National Corporations. Vale went on one step beyond the UN Global Compact and established with the Columbia University School of Law and the Columbia University Earth Institute whose Director is Prof. Jeffrey Sachs who is active also at the UN as an advisor to that Institution’s 38th floor office holders – at this time UNSG Ban Ki-moon.

The VALE COLUMBIA CENTER (VCC) ON SUSTAINABLE INTERNATIONAL INVESTMENT seems to have further direct support from the government of Finland, and is headed by Dr. Karl P. Sauvant as its Executive Director.


VCC is a forum for discussion by scholars, policy makers, development advocates, other stakeholders, in issues of Foreign Direct Investment (FDI) in the global economy – and paying special attention to concepts of the company investment to environmental, social, and economic sustainability.

Previously the above was part of ODA (Official Government Development Assistance – some like to call this as Overseas Development Assistance) that we know had little permanency even though money was made available – now it is the new mantra that public opinion will push big globalized corporations to come up with programs needed to make their own operations sustainable – as it also became clear that rape of host counties will not make anyway for long-term profitability for any such large globalized firm. Vale is thus a leader in this new endeavor.

Inquiries regarding the Center’s activities can be directed to Ms. Lisa Sachs at  LSachs1 at law.columbia.edu see also – www.vcc.columbia.edu

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November 4, 5, and 6, 2009 VCC backed by The University of St. Gallen, Switzerland, the Vale Company and The Ministry of Foreign Affairs of Finland, presented a series of important International Investment Workshops and Conferences.

First, on Wednesday November 4th there was a Workshop on “The Role of ODA in Promoting Sustainable Development in Developing Countries;” then on Thursday – Friday, November 5-6, there was the “FDI, the Clobal Crisis and Sustainanle Recovery” International Investment Conference. I was not present at the November 4 and 5 meetings, but I made it my business to go to the Concluding Roundtable on November 6th, titled – “FDI, the global crisis and sustainable recovery: the way forward,” that was chaired by VCC Head and had on his panel Karin Lisaker, former US Executive Director of the Board of the IMF and now Director of Revenue Watch Institute; Manfred Schekulin, chairperson OECD Investment committee; Daniel M. Price, a former assistant to President G.W.Bush; and Professor Jeffrey Sachs whose independent stands are known.

Before going to the Concluding Rountable, let me nevertheless glance over the events that I did not witness directly – specially the first day of the three days – for which there was made available already a Workshop Report (authored by Barry Herman, Research Director of VCC and former staff member of UNDP), courtesy of the Ministry of Foreign Affairs of Finland that is working with OECD on investment policy reform – the PFI ( “Policy Framework for Investment”) with South  Africa specifically in mind. formin.finland.fi

The idea is to use funds legislated by donor governments for ODA and revert them to ways that lead to more sustainable FDI in aid receiving countries – “in particular through support of policies and activities at the sub-national level.

The workshop participants numbered 16 experts from developed and developing country governments who came in their personal capacity to discuss two themes: (1) How ODA might leverage at national or sub-national levels so as to encourage FDI that meets sustainability criteria, and (2) How ODA might help foster linkages between the foreign firms operating in an economy and domestic firms, thereby enhancing local employment and stimulating domestic entrepreneurship.

An important observation was that developing counties, as all countries, need regional and urban development strategies rather then the conventional dealings with a central government. Without denying the responsibility of the national government to ensure coherence of local strategies with national priorities, it is nevertheless the local stakeholders that know best what they need. A conclusion of the report is thus to strengthen the national government’s capability to develop its representation in the sub-national levels. Donors might also encourage foreign affiliates operating in a country to monitor suppliers and enterprise customers with which they have relations as by sharing costs of trainers. Alternatively a donor could support an information hub locally, however the donor must align himself with the national government of the country.

Local enterprise development is also a priority for reaching out to the MDGs, and ODA in support of FDI linkage programs can be effective in this regard.

Those topic were addressed from different angles on the second day – i.e. Georgetown University Professor Theodore H. Moran spoke of CSR – “Enhancing the contribution of FDI to development: a new agenda for the corporate social responsibility community.  and for the UN, Assistant Sec-Gen. Robert Orr, Strategic Planning Unit in the office of the Secretary-General, spoke of “Climate Change, FDI and the Copenhagen Summit.” He is connected to the Global Compact unit at the UN.

Mr. Moran left behind a copy of his slides – so I know that he aimed at the relationship between the NGOs and the CSR Community which are the right companies that will attempt to do good because it is also good for them. There is skepticism of mere multinational corporate philanthropy – the correct approach is the realization of optimizing benefits – this is specially important in the extractive sector FDI.

He called for improving the extractive industry transparency by taking the route of the initiative (EITI).
It helps if you publish what you pay and spend – he said.

The usual wide canvas was painted by University Professor, Clombia University, Professor Joseph E. Stiglitz whose title was “US recovery, global sustainable development, and FDI.”

While in 2007 there was a peak of $2 trillion in global FDI, that figure was reduced by 14% in 2008 and it is expected to fall by 40-50% in 2009. It is thus important to look at the effect of crisis on social conditions, CSR, and resource nationalism – that was the topic in one or other form of most presentations.

Now to the summary session:

Speaking of the G-20 meeting, Manfred Schekulin, Chairperson of the OECD Investment Committee noted that there was no competence on the EU level at the table – only in some EU member states – thus the meeting reverted to a plain bilateral US-China event. {I must say that this vindicates many of our own comments on the fact that the EU pushes itself out from becoming that needed additional G – to put before us a G-3.

Daniel M. Price who was with the inner circle of the G.W. Bush Administration bemoaned that nobody said the “capitalism” word except Turkey, India and Russia. He said he agrees we need global roots, but with the bilateral agreements – you get in total global roots. Price tried his best to say that the US was the leader and mentioned in specifics – the Montreal agreement on ozone, on Cap and Trade in the sulfur area, on various aspects of Africa policy like malaria. He points out that this was during a Republican Administration.

Karen Lissakers of the IMF pointed out that there is a lot we do not know – things like who is drilling off-shore, who has the know-how, who will pay taxes or just disappear. Talking of global rules for investment as advocated by Manfred, she has the answer that we do not really know who invests. Then Chair Sauvant, in a McGloghlin fashion says – It seems Transparency and Accountability and Global Rules are needed.

Price adds that China wants to grandfather things before an agreement – but is not ready to enumerate what. “The best investment is to marry the interests of the investor to make profit with the national needs of the host government.”

Prof. Jeffrey Sachs said that mining companies know how to run mines with competence but not about sustainability. Host governments do not know how to deal with this – they know little about commissions, royalties etc. How do they run the contracts? This results in mistakes and abuses. The contracts are related to high expenses and in the end neither shareholders nor the government see the profits.

Ms. Lissakers said that the IMF advises the government not to go for a contract before they have laws on the books only then you go for bids. South Africa listened; Liberia did not and now they get more and more lawyers. She said that many developing country cases point at having been locked into an agreement that was bad. Sorry – you got locked into a bad 25 year agreement because you had corrupt leaders, bad lawyers, wrong economic conditions … etc. You are stuck.

Sachs says the Clinton Administration achieved nothing in these areas and Bush just very little and this very little only in the last two years – it is just unfair to spend only 0.17% of the GDP on foreign aid to the developing countries.

Manfred said the US-China are converging and there will be another round of global negotiations.
Multinationals are on the payroll of governments – just like me except they are paid better.

Jeffrey says that a VP for Sustainability is not the same thing as a VP for Sustainable Development. Companies might be interested in Sustainability but cannot really be asked to take over sustainable Development – that is something for governments. A company will deal with toxicity and the environment.
If you open up a large area for farming there will be many problems to be dealt with.

Development has a triple bottom line:

(1) On the social level – you want to understand the effects on the local, national and global communities.

(2) on the eco-system level – like GHG emissions and climate change,

(3) On the economics level – the need of the investors and the transparency to the locals.

A project getting into a country might be the biggest thing they will see for years, but then situations might result like you have a pipeline and no domestic energy beyond coal – and this with the World Bank having been involved.

Prof. Jeffrey Sachs believes that major companies are ready to look into these problems right now.

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