A Global U.S. Dollar Solution for Vale
J.P. Morgan helps global mining giant lower costs and gain visibility over accounts worldwide
- Vale’s global expansion led to a need to centralize and automate dollar accounts and dollar funding in a single location where possible
- J.P. Morgan helped the company implement a solution that replaced local U.S. dollar accounts with accounts based in the United States and created a new master account centrally managed by Vale’s Treasury
- Benefits include better visibility into and more control over funds, easier access to consolidated cash to pay down debt or invest, and mitigation of risk
Brazil-based Vale S.A. is the second-largest mining company in the world, and the largest in the Americas. With operations as well in the logistics and energy sectors, the company operates in five continents, employing more than 139,000 people in 37 countries. Vale is faced with complex operational challenges, including unpredictable prices for its products and varying and evolving tax policies and regulations in the locations in which it does business.
Vale required a global banking solution that would reduce the total number of its U.S. dollar accounts, lower its banking costs, gain visibility over cash worldwide, and improve liquidity management.
A large, global company that is rapidly expanding into new markets, Vale has hundreds of banking relationships around the world, with local currency accounts in 38 countries. Vale, like many companies in the mining sector, conducts business primarily in U.S. dollars and wished to centralize and automate its global dollar position — and the management of dollar funding — in a single location wherever possible. Vale sought a best-in-class provider in the United States to address its requirements.
“Leveraging our global expertise and consultative team approach, in addition to best-in-class products and IT, we were delighted to deepen our client relationship further with an integrated solution to support Vale in gaining visibility over its U.S. Dollar accounts worldwide.”
— Alejandro Guevara, Head of J.P. Morgan’s Global Corporate Bank in Latin America
J.P. Morgan's Solution
After an extensive search, Vale selected J.P. Morgan’s solution. The two firms have worked together since 1995, with J.P. Morgan providing Vale with a wide range of products and services from our Corporate and Investment Bank division.
J.P. Morgan suggested that Vale replace its entities’ local-country U.S. dollar accounts with dollar accounts based in the United States, and that all eligible, unrestricted accounts concentrate funds to a master entity through a zero-balance account solution, centrally managed by Vale’s Treasury. With that structure in place, all U.S. dollar funding flows from the centralized U.S. master account.
Both the master account and accounts for those locations that cannot commingle funds can be invested overnight in commercial paper. Vale also earns an earnings credit rate on its U.S. dollar balances. The company uses J.P. Morgan’s web-based ACCESS® platform to track its intercompany loans.
“Vale had developed into a global company at a very fast pace. Treasury management complexity increased significantly as the company’s operations expanded into new countries, with different processes, practices and local treasury maturity. J.P. Morgan's support was crucial to help us overcome this. J.P. Morgan did a great deep dive on Vale’s world, understanding its peculiarities such as trading flows, local regulations and strategy and proposing solutions to allow Vale to reach best in class status. J.P. Morgan’s professionals are the best in the market; its technology is first class and the range of products on offer is very good. We are very happy having J.P. Morgan as the main partner in this journey.”
— Marcelo Habibe, Vale’s Global Treasurer
With its U.S. dollar accounts now centralized, Vale has better visibility into the use of its funds and has gained more control over them. The company can fund local accounts and meet local requirements more accurately and quickly.
The company can also access its consolidated cash to pay down debt or invest centrally.
The solution gives Vale scale benefits and the ability to negotiate better terms. It also mitigates risk in several ways— for example, the U.S. provides a safe haven for funds. Centralization, together with automated investments and sophisticated electronic banking tools, makes cash management far more efficient and cost-effective for Vale.
Consolidating dollars in the U.S. also provides benefits, including faster payments to U.S. suppliers; the ability to manage cut-off times for payments and investment in the local time zone is more efficient; and easy access to low-value, high-volume payment systems, which are less costly than cross-border payments.