Dialogue on the Socially Responsible Performance of Corporate Governance in the Issuance of Corporate Debt September 5, 2012 OAS Hall of the Americas Washington, D.C. XLIII OAS Policy Roundtable

Corporate Governance and Debt Finance in Selected Latin American Countries Dr. Germano Mendes De Paula Federal University of Uberlândia

Corporate governance, corporate social responsibility and strategies in Latin America  The first comprehensive approach made by ECLAC on corporate governance in Latin America.  The book, organized by João Carlos Ferraz, Georgina Núñez and myself, was published in 2005 by Mayol Ediciones. It was developed by ECLAC, with co-operation with OECD and funded by German Development Foundation (GTZ).  The book consists of two main issues:  Corporate governance: definitions, the relationship with corporate social responsibility, and the key characteristics in Latin American countries (improving best practices, but maintaining concentrated ownership);  Corporate strategies: how different the strategies carried out by Latin American companies are in comparison with Anglo- Saxon patterns. 3

Corporate governance and capital markets in Latin America  The book, organized by Georgina Núñez, Andrés Oneto and myself, was published in 2009 by Mayol Ediciones. It was an effort carried out by ECLAC and CAF.  There are some important differences from the previous book:  The framework was defined first and then applied by the authors, which allowed a better comparison among selected countries (Brazil, Chile, Colombia, & Mexico);  A deeper analysis of each country is provided, stressing in particular the public policies directed at improving corporate governance practices;  The focus was to generate concrete proposals on corporate governance regulations. 4

Corporate governance in Brazil, Colombia & Mexico: determining the risk in corporate debt instruments issuance (1)  The book, organized by Georgina Núñez and Andrés Oneto, was published in 2012 by ECLAC. It was an effort carried out by ECLAC, CAF and IDB.  The framework (as similar to the previous book) and the metrics (an improvement) were defined beforehand and applied by the authors from the beginning, which allowed a better comparison among the selected countries (Brazil, Colombia, and Mexico).  More importantly, less attention has been paid to the relationship between corporate governance and corporate debt, despite the relevance of debt markets. This is the core of this third book. 5

 Therefore, the new aspect of the book was the proposal of a specific metric concerning corporate governance and private debt issuance. It consists of 10 categories, 15 standards, and around 32 questions. A low index shows how far a given company strays from the optimal benchmark.  The contributions of the third book also highlight the complexity of the case studies considered: Brazil (6 companies), Colombia (4 companies), and Mexico (4 companies).  Each author analyzed at least one financial company and one oil & gas producer to assure that the proposed metric is not restricted to manufacturing firms, as well as to show that an international comparison of companies that play in the same sector is possible. 6 Corporate governance in Brazil, Colombia & Mexico: determining the risk in corporate debt instruments issuance (2)

 It is important to stress that for the second and third books, seminars were organized with experts, who delivered outstanding contributions to improve the articles’ quality.  In addition, in order to increase knowledge sharing, the third book included with training workshops. This important step occurred in Colombia and Mexico, but in spite of our best efforts it was not possible to replicate this experience in Brazil.  There is considerable literature about corporate governance and the expropriation of shareholders (by the managers in a pulverized ownership company) or minority shareholders (by the majority shareholders), but not as much for lenders (by companies). The latter was the main contribution of this book on corporate governance, an exciting theme that has been proving its relevance for the development agenda in Latin America, which includes the development of capital markets. 7 Corporate governance in Brazil, Colombia & Mexico: determining the risk in corporate debt instruments issuance (3)

Thank you! 8