1. VII ACSDA General Assembly 29 – 31 March 2006 San Salvador, El Salvador FIAB Project: Brazil – Mexico Update The Brazilian Clearing and Depository Corporation Monique Almeida

2. Brazil – Mexico Integration Project BackgroudBackgroud FIAB’s initiative in order to promote the capital market liquidity in the Latin America based on a Correspondent Broker Model whereas Latin American brokers sign bilateral agreements establishing rules for order routingFIAB’s initiative in order to promote the capital market liquidity in the Latin America based on a Correspondent Broker Model whereas Latin American brokers sign bilateral agreements establishing rules for order routing The Brazil – Mexico Integration Project was chosen as a pilotThe Brazil – Mexico Integration Project was chosen as a pilot An agreement between Brazilian and Mexico Stock Exchanges was signed in 2004An agreement between Brazilian and Mexico Stock Exchanges was signed in 2004

3. Brazil – Mexico Integration Project BackgroudBackgroud The Exchanges – BOVESPA and BMV – and the CSDs - CBLC and INDEVAL - have been working together on the operational model as well as the regulatory needed adjustments for supporting the link between Brazilian and Mexican brokersThe Exchanges – BOVESPA and BMV – and the CSDs - CBLC and INDEVAL - have been working together on the operational model as well as the regulatory needed adjustments for supporting the link between Brazilian and Mexican brokers Technical meetings in Brazil and MexicoTechnical meetings in Brazil and Mexico Conference callsConference calls Along the path, some bottlenecks were identified in both regulatory and operational frontsAlong the path, some bottlenecks were identified in both regulatory and operational fronts

4. International investment in Brazil Macroconomic aspects In the recent economic history of Brazil (and many Latin American countries), the current account balance has been much dependable on capital inflows through international investmentsIn the recent economic history of Brazil (and many Latin American countries), the current account balance has been much dependable on capital inflows through international investments As a result, Brazilian macroeconomic policies have been mostly focused on attracting capital inflow and limiting capital outflowAs a result, Brazilian macroeconomic policies have been mostly focused on attracting capital inflow and limiting capital outflow

5. International investment in Brazil Macroconomic aspects Although international investment in Brazil is well consolidated...Although international investment in Brazil is well consolidated...

6. International investment in Brazil Macroconomic aspects... Brazilian investors who decide to invest outside national boundaries still have some limits to the extension of their investments... Brazilian investors who decide to invest outside national boundaries still have some limits to the extension of their investments Currently, the capital flows among Latin American capital markets are not expressiveCurrently, the capital flows among Latin American capital markets are not expressive Brazil as a case (Latin America countries’ participation in CBLC Depository Service) *Brazil as a case (Latin America countries’ participation in CBLC Depository Service) * Uruguai – 2,3%Uruguai – 2,3% Argentina – 1,7%Argentina – 1,7% Chile – 0,009%Chile – 0,009% Others - zeroOthers - zero * Source: CBLC Monthly Depository Report – Feb/2006

7. International investment in Brazil Regulatory aspects The regulatory framework for international investment reflects the economic orientationThe regulatory framework for international investment reflects the economic orientation Res. 2689 – Establishes rules for international investment in the Brazilian capital marketRes. 2689 – Establishes rules for international investment in the Brazilian capital market The rules for Brazilian investors to invest abroad are more restrictedThe rules for Brazilian investors to invest abroad are more restricted Brazilian brokers were not authorized to offer foreign companies stocks in the local marketBrazilian brokers were not authorized to offer foreign companies stocks in the local market

8. International investment in Brazil Foreign exchange aspects Regulatory environmentRegulatory environment The Brazilian Foreign Exchange Regulation, aligned with internationally recognized recommendations for money laundering prevention, establishes that investment in international capital markets must be done through a specific FOREX transaction typeThe Brazilian Foreign Exchange Regulation, aligned with internationally recognized recommendations for money laundering prevention, establishes that investment in international capital markets must be done through a specific FOREX transaction type The FOREX transaction type for capital markets investment still demands specific rules to be issued by the Brazilian Central Bank and the the Securities CommissionThe FOREX transaction type for capital markets investment still demands specific rules to be issued by the Brazilian Central Bank and the the Securities Commission Operational environmentOperational environment Currently, there is not a FOREX market for transactions between Reais and Mexican PesosCurrently, there is not a FOREX market for transactions between Reais and Mexican Pesos This type of transaction is done in two stepsThis type of transaction is done in two steps  Real – USD  USD – Mexican Peso This “FOREX triangle” implicates in additional costs for Brazilian and Mexican financial institutions willing to participate in the Integration ProjectThis “FOREX triangle” implicates in additional costs for Brazilian and Mexican financial institutions willing to participate in the Integration Project

9. International investment in Brazil Final investor identification aspects The Brazilian Law, aligned with recent IOSCO issued guidelines, is very sensitive to money laundering issues as well as ‘know your customer’ practices, especially involving international investors’ investments in the capital marketsThe Brazilian Law, aligned with recent IOSCO issued guidelines, is very sensitive to money laundering issues as well as ‘know your customer’ practices, especially involving international investors’ investments in the capital markets There are specific rules determining that local brokers have to obtain and maintain updated all relevant information regarding final investor identification, including financial information, and that all available information should be delivered to Brazilian authorities upon requestThere are specific rules determining that local brokers have to obtain and maintain updated all relevant information regarding final investor identification, including financial information, and that all available information should be delivered to Brazilian authorities upon request All trading information should be completed by brokers identifying the final investor in order to settleAll trading information should be completed by brokers identifying the final investor in order to settle CBLC, as clearinghouse, should have control of all setlled trades in the beneficial owner level and, as CSD, should have control of all custody positions in the same levelCBLC, as clearinghouse, should have control of all setlled trades in the beneficial owner level and, as CSD, should have control of all custody positions in the same level

10. The Agreement between CBLC and INDEVAL has to contemplate final investors identification rules in order to assure the availability of information and documents of Mexican investorsThe Agreement between CBLC and INDEVAL has to contemplate final investors identification rules in order to assure the availability of information and documents of Mexican investors As INDEVAL has an account structure in the broker level, the information flow to be implemented between INDEVAL/Mexican brokers and CBLC will have to consider final beneficiariesAs INDEVAL has an account structure in the broker level, the information flow to be implemented between INDEVAL/Mexican brokers and CBLC will have to consider final beneficiaries International investment in Brazil Final investor identification aspects

11. CBLC account structure CBLC’s account structure identifies beneficial owners (natural and legal persons)CBLC’s account structure identifies beneficial owners (natural and legal persons) Investors are represented before CBLC by the custodians (CBLC’s depository agents)Investors are represented before CBLC by the custodians (CBLC’s depository agents) Banks, brokers and dealersBanks, brokers and dealers Custodians are totally responsible for the safekeeping of all assets in custody accounts as well as for all related movements among beneficial owners accounts – deposits, withdrawals and transfersCustodians are totally responsible for the safekeeping of all assets in custody accounts as well as for all related movements among beneficial owners accounts – deposits, withdrawals and transfers

12. CBLC account structure CBLC Custodians Proprietary account Investor Custodians Proprietary account Investor

13. Integration Project Brazil – Mexico Agenda with the Government Bodies Although Brazilian investment is becoming increasingly international, Brazilian investors still face some restrictions for investing in the international capital markets as a result of both a macroeconomic orientation and the regulatory framework in placeAlthough Brazilian investment is becoming increasingly international, Brazilian investors still face some restrictions for investing in the international capital markets as a result of both a macroeconomic orientation and the regulatory framework in place The Integration Project for Brazilian and Mexican capital markets is being responsible for deepening the dialogue with the Brazilian government bodies in relation to this matterThe Integration Project for Brazilian and Mexican capital markets is being responsible for deepening the dialogue with the Brazilian government bodies in relation to this matter The Integration Project has already been discussed with the Finance Ministry, the Brazilian Capital Markets Commission formed by the Central Bank, the Securities Commission and the National Treasury as well as with the Brazilian and Mexican EmbassiesThe Integration Project has already been discussed with the Finance Ministry, the Brazilian Capital Markets Commission formed by the Central Bank, the Securities Commission and the National Treasury as well as with the Brazilian and Mexican Embassies

14. Integration Project Brazil – Mexico Agenda with the Securities Commission CBLC/BOVESPA have an agenda of discussion with the Securities Commission who is finalizing the regulatory framework for the Latin American capital markets integrationCBLC/BOVESPA have an agenda of discussion with the Securities Commission who is finalizing the regulatory framework for the Latin American capital markets integration The regulatory framework coversThe regulatory framework covers The recognition of Latin American issuers’ registration in BrazilThe recognition of Latin American issuers’ registration in Brazil The conditions for order routing between Latin American correspondent brokersThe conditions for order routing between Latin American correspondent brokers The rules to be issued by the BOVESPAThe rules to be issued by the BOVESPA The rules for the information dissemination on Latin American issuers and local legislationThe rules for the information dissemination on Latin American issuers and local legislation The minimum terms of the agreement between CBLC and INDEVALThe minimum terms of the agreement between CBLC and INDEVAL

15. Integration Project Brazil – Mexico Securities Commission Regulatory Framework The conditions for order routing between Latin American correspondent brokersThe conditions for order routing between Latin American correspondent brokers Mutual cooperation agreement with the Latin American Securities Commission for information exchangeMutual cooperation agreement with the Latin American Securities Commission for information exchange Signed contract between correspondent brokersSigned contract between correspondent brokers The recognition of the Latin American issuers’ by the Securities CommissionThe recognition of the Latin American issuers’ by the Securities Commission Signed agreement between Brazilian and Latin American CSDSigned agreement between Brazilian and Latin American CSD The rules to be issued by the BOVESPAThe rules to be issued by the BOVESPA Minimum terms for the contract between correspondent brokersMinimum terms for the contract between correspondent brokers Order routing specific rules as well as order registration policyOrder routing specific rules as well as order registration policy ‘Know you customer’ procedures between correspondent brokers‘Know you customer’ procedures between correspondent brokers

16. Integration Project Brazil – Mexico Securities Commission Regulatory Framework The recognition of the Latin American issuers’ registration in BrazilThe recognition of the Latin American issuers’ registration in Brazil Documentation requirementsDocumentation requirements Evaluation procedures and timeframesEvaluation procedures and timeframes Rules for information dissemination on Latin American issuersRules for information dissemination on Latin American issuers The agreement between CBLC and INDEVALThe agreement between CBLC and INDEVAL CBLC obligation to maintain an account structure allowing the full control of Brazilian investors’ ownership of Mexican securitiesCBLC obligation to maintain an account structure allowing the full control of Brazilian investors’ ownership of Mexican securities The CBLC/BOVESPA obligation to make available material coveringThe CBLC/BOVESPA obligation to make available material covering The rules for clearance, settlement, risk management and custody in Latin Americam countriesThe rules for clearance, settlement, risk management and custody in Latin Americam countries Latin American legislation on Corporate Law, investors protection mechanisms, accounting rules and issuance rules, among othersLatin American legislation on Corporate Law, investors protection mechanisms, accounting rules and issuance rules, among others

17. Integration Project Brazil – Mexico Agenda with the Securities Commission and the Central Bank The Securities Commission’s regulatory framework is serving as a reference for both the Central Bank and the Securities Commission in order to establish specific rules for FOREX transactions among Latin American countriesThe Securities Commission’s regulatory framework is serving as a reference for both the Central Bank and the Securities Commission in order to establish specific rules for FOREX transactions among Latin American countries CBLC and BOVESPA are also regularly discussing this subject with the Securities Commission and the Central Bank in order to present results soonCBLC and BOVESPA are also regularly discussing this subject with the Securities Commission and the Central Bank in order to present results soon

18. Integration Project Brazil – Mexico Final considerations Along the path, the Integration proved to be much more than building up the operational model and its correlated proceduresAlong the path, the Integration proved to be much more than building up the operational model and its correlated procedures The integration is involving the review of regulations, market practices and is involving not only the Stock Exchanges and the CSDs but also all relevant regulatorsThe integration is involving the review of regulations, market practices and is involving not only the Stock Exchanges and the CSDs but also all relevant regulators It is also involving systems development and integration mainly related to information exchange between both marketsIt is also involving systems development and integration mainly related to information exchange between both markets

19. Integration Project Brazil – Mexico THANK YOU GRACIAS OBRIGADA

20. www.cblc.com.br