1. Mike Lubrano International Finance Corporation April 8, 2002
A Review of Corporate Governance Initiatives in Latin America ( )
Mike Lubrano
International Finance Corporation
April 8, 2002

2. Committing to Good Governance Rules and Enforcement Mechanisms
Private
Quasi
Private/
Public
 Ex Ante (establishing the rules)
Contract
Voluntary Standards
Law/
Regulation
Ex Post (enforcement)
Arbitration
Special Arbitral Bodies
Judicial

3. Colors of the Spectrum – From Public to Private (and Mixed)
Legal Reforms (Chile, Brazil, Mexico, Argentina)
Legal Investment Regimes (Chile, Brazil, Colombia)
Stock Exchange Listing Rules (Bovespa)
“Voluntary” Codes of Best Practice (Mexico, more in the works)
Ratings (Voluntary and Comparative)
Ad Hoc Contracting (Tag-along; Non-voting Shares)
Basically, this presentation sets out what I hope is a useful typology.

4. Legal Reforms Response to Scandal; Crisis
Made CG a Permanent Part of Development Agenda (Capital Markets; Competitiveness)
Battle Lines Drawn (Good, Bad, Ugly)
Considerable Political Capital Expended
“One-Size-Fits-All” Problem
Results – No Panacea; Compromise; Raised the Floor

5. Legal Investment Regimes
Reflect Growing Importance of Pension Regime
Use of Regulatory Authority (Prudential Norms)
Normative (Chile, Brazil) vs. Disclosure (Colombia)
Focus on Access to Capital
Results: Still Early; Companies Forced to Consider Future Financing Sources; Highlights Need for Greater Engagement by Fund Managers; Care Required – Potential for Distortions

6. Listing Rules Born of Dramatic Contraction of Markets
Reflect New Focus on Quality vs. Quantity of Issuers
Unavoidable Conflict with Some Issuers
Requires Consensus on Objectively-Determinable Shortcomings in Law/Practice
Novo Mercado Represents a Solution to “One-Size-Fits-All” Problem
Results: Exchanges Clearly in the Game (Sometimes Innovators); Provides Companies with a Means to Communicate Their Good CG to Investors; Impact on IPO Market, Public Expectations; Element in Development of Regional Mid-Cap Market?
This was easiest in Brazil because components were those that failed to be included in the legal reform

7. Codes of Best Practices
Public/Private (Mexico) or Private (Brazil) Standard-Setting Initiatives
Disclosure Requirements for Listed Companies (Mexico)
Drafting Process Can Serve Educational, Engagement Goals (Direct Involvement of CEOs)
Results: Important First Step in Developing Sustainable Culture of CG for Both Public and Private Companies; Require Institutionalization with Multi-Sector Involvement (Institutes of Directors/Corporate Governance)

8. Ratings
Response to Perceived Demand for Independent CG Analysis of Companies
Commercial, Non-Profit (Code-based), Journalists
Commercial CG Rating Services Still in Search of a Viable Business Model
Who pays?
Voluntary or Involuntary?
Intensive or Extensive?
National or Global?
Is There a Market for “Free-Standing” CG Analysis?
Of course, CG is (or should be) an integral element of debt rating carried on by established agencies.

9. Ad Hoc Contracting Always Present / Always Will Be
Usually Primary-Market Driven
Focus on Objectively-Determinable Issues: Tag-Along; Minority Rights; Conflicts of Interest; De-listing, Squeeze-Out
Importance for Policy Makers: Revealed Preference (What Do Investors Really Want, What Will They Pay?); Set Precedents for More Institutionalized Responses (Code Content; Listing Rules, etc.)
Focuses on the Primary Market, when Investors have the greatest influence

10. Gracias / Obrigado / Thanks
Mike Lubrano
International Finance Corporation
Latin America Corporate Governance Roundtable
Third Meeting
Mexico, DF April 8, 2002