SAO PAULO, Brazil — A little over a year ago, Brazilian playboy Eike Batista was reputed to be the seventh-richest man in the world and was in the habit of boasting loudly that he'd soon be No. 1. By this week, he had become one of the world's biggest paupers.
On Wednesday, his flagship oil company, OGX, filed for bankruptcy. A personal fortune once valued at $30 billion had collapsed into a personal debt estimated at more than $800 million. Some Brazilians, long since soured on his cocky persona, responded with glee on social networks to the news that Batista's yacht, the Pink Fleet, would soon be sold for scrap.
No one wanted, or could afford, the $19-million boat intact.
Batista's spectacular fall may say more about his personal failings, and what Alan Greenspan called the "irrational exuberance" of the market, than it does about Brazil. It turned out that his much-hyped empire was built on vastly overconfident assumptions — in particular, oil deposit estimates that bore no relationship to reality.
"He ended up swallowed by his own myth," columnist William Waack wrote for Brazil's Globo media group.
Still, as Brazil's economy sinks back to reality after boom-time highs, his implosion has served as a warning to investors, and to Brazilians at large, that much of the fabulous wealth that was on the horizon so recently was based on little more than promises.
Batista "is vain. And at a certain point his vanity prevailed over common sense," said Adriano Pires, director of the Brazilian Infrastructure Center, an energy consulting firm in Rio de Janeiro. "The case of Batista is not just bad for him and the companies around him, it is very bad for all of Brazil, especially in a moment when we need international investors. He is blemishing Brazil's credibility a little all around the world."
Batista grew up the son of Brazil's wealthy former minister of mines and energy. In a country famous for corruption and nepotism, it seemed a bit more than coincidental when the younger Batista literally struck gold in the mining industry in the 1980s, despite the assertion in his autobiography, characteristically titled "The X Factor: The Path of Brazil's Greatest Entrepreneur," that his fortune was the result of hard work and ingenuity.
He acquired government licenses to exploit some of Brazil's newly discovered offshore oil reserves, and created an interconnected set of energy, mining and logistics companies based around the wells. He cashed in big from international investors, selling stock at a moment when the world believed more than ever in a Brazilian boom and, after the shock of the U.S.-based financial crisis, was looking for a new place to invest.
It was a heady time for Batista and for Brazil. The economy was in rapid expansion, the government was extremely popular, and a rising middle class was euphoric with higher wages. Certifying the country's ascendance, Brazil was awarded the 2014 World Cup and 2016 Olympics.
Amid assurances of big gains — each of his companies had the letter X in its title, signifying multiple returns — his personal fortune soared, even as the companies brought in little revenue. After he tapped equities markets for all they were worth, he turned to debt markets, borrowing even more to pump up his companies.
"He built his empire based on what have now been proven to be very unrealistic expectations," said Tony Volpon, a New York-based economist for international bank Nomura Securities. "He made the cardinal sin of using debt to finance what were very risky exploratory activities in oil, and no one does that."
"He didn't understand that oil and gas projects are high-risk ventures," said Pires, of the energy consulting firm. "In this business there is no certainty, just probability. He went around preaching and promising."
Batista branched out into luxury hotels, rock festivals, restaurants, soccer and ultimate fighting, all without much economic logic behind them, Pires added.
Things began to fall apart last year in dramatic fashion. His bodybuilder son, Thor, struck and killed a cyclist while speeding in a million-dollar Mercedes-Benz SLR McLaren that the Batistas had been in the habit of keeping on display in their living room. The public was shocked by Eike Batista's response, as he took to Twitter to blame the "carelessness" of the cyclist, an impoverished cargo worker who had to commute by bike on a dangerous highway.
Soon after, it became clear that some OGX wells wouldn't hit production targets, and the money began to fall away. Batista again took to Twitter, this time to attack those who didn't believe in him.
After deposits he valued at more than a trillion dollars turned out to be woefully small this year, his company lost more than 96% of its value and has been unable to pay back creditors. Brazil's state-run banks, which had supported Batista's companies, backed away.
Though analysts put the lion's share of the blame on Batista, he sold his projects to investors who were willing to believe him. Brazil seemed to be experiencing a once-in-a-generation moment when its deep social and infrastructure problems were forgotten. Stock investments were soaring across the board as the value of Brazil's currency was pushed up to what economists warned were unsustainably high levels.
After growing more than 7% in 2010, Brazil's economy nearly ground to a halt in 2012. Then the social questions again came to the fore in what is one of the world's most unequal countries. Though inequality dropped dramatically and most Brazilians are better off than ever — the economy is expected to rebound modestly this year, wages continue to rise, and unemployment is still low — the ruling Workers' Party, during its decade in power, has not invested in much-needed transportation, healthcare or education to adequately satisfy the demands of a new and dynamic middle class.
After a police crackdown on a protest against a bus fare hike, protesters with wide public support filled the streets in June, demanding better public services, and demonstrators still take aim at symbols of capitalist excess. Among the targets of their rage have been the windows of Batista's office building.
Batista's fall seems, at least to some, to be a reflection of Brazil's torn social fabric.
"I never liked Eike, since I don't believe it's possible to get so rich like that, especially in Brazil today, without infringing on the rights of the poorest," said Erica Alves, a 26-year-old teacher from Rio de Janeiro who is active in left-wing organizations. "He became rich 'winning' rights from the government to exploit the country's resources. I wasn't surprised by his fall, because fast and easy wealth can't be sustained."
In Brazil's new, more austere and more politically conscious moment, Eike Batista has had little to say. His once-active Twitter account has been dormant for 126 days.
Bevins is a special correspondent.