Eike Batista Is Slowly Becoming The Poster Boy For Everything That's Wrong With Brazil

It isn't often that a former central bank president feels the need to reassure a country that it's economic problems are not the fault of one single man.

This weekend, however, former Brazilian central bank president Arminio Fraga told the press that erstwhile billionaire tycoon Eike Batista's losses were not the reason for the country's stock market malaise.

Batista himself, over a year ago the 7th richest man in the world, has lost billions from his commodities and logistics empire — EBX — and is now estimated to be worth only around $200 million, including debt.

As of August 1st, the six companies under EBX's umbrella — OGX, MPX, LLX, MMX, OSX and CCX — have lost a combined $9.7 billion in 2013. All 300 publicly traded companies in Brazil have lost $203 billion in the same period.

Three of Batista's companies — OGX, LLX, and MMX — are among the 10 biggest losers in the Ibovespa Sao Paolo Stock Exchange Index.

So Fraga, a former fund manager for George Soros who was also an early investor in Batista's most battered business, oil and gas company OGX, just had to say it:

“Our problems are growth, lack of investments. It’s not Eike...I think Eike was one of the first entrepreneurs (in Brazil) to grow using the capital markets,” said Fraga, who just a few months ago stepped down as chairman of Brazil’s sole stock-exchange operator, BM&F Bovespa SA.

Fraga is no longer invested in OGX, which is down almost 90% over the year. He blames Brazil's problems on its statist economic plan and the general economic slow down in China, which consumes a lot of Brazil's raw materials.

Just as Fraga pulled back from his investment of OGX, Goldman Sachs just announced that it would pull back from its investment in Brazil, citing a weakening growth outlook for the country specifically in equities and mergers-and-acquisition deal volumes, Bloomberg reports.

So it's not hard to see why, at this point, it's as if the entire country is losing faith in Batista — a man that used to symbolize all the energy and vitality of a growing Brazil. This weekend, a number of investors prepared to file an insider trading lawsuit against him over his sale of OGX stock.

The investors maintain that Batista's sale of 56 million OGX shares between June 7 and June 13 was (as one put it) "clearly an act done in bad faith — especially considering that in October Batista promised that he would buy $1 billion worth of OGX shares by April of next year.

The group of investors is being lead by a Marcio Lobo, the same Rio de Janeiro lawyer that got an injunction against Batista so that he couldn't sell any OGX assets.

From FT:

“OGX released about 55 regulatory filings giving information about the capacity of its wells, which in the end turned out to be mistaken,” said Mr Lobo, who also invested in OGX and had already tried to pursue legal action against it independently.

Batista, once vocal on Twitter, has been silent since June 25th. Regular Brazilians are less so. This story has clearly captured their imaginations, and they've taken to social media to express a wide range of emotion, from hatred to admiration for the former billionaire.

Brazilian celebrity news is even reporting that Batista is seeking help from a famous spiritual center, Casa do Mago, in Rio.

If that's true, he's not alone in his soul searching (from WSJ):

“The central bank has said it doesn’t have a goal, but the market understands that it has a goal,” Mr Fraga said. “In practice, it’s clear that it [the central bank] hasn’t made a huge effort to meet a particular value for the currency..."

All in all, pretty dark stuff.