1. Regional Seminar on NBFI in Latin America Challenges for Domestic Equity Markets December 4-6 Santiago,Chile

2. Challenges for Domestic Equity Markets Contents Overview of Brazilian Equity Markets The Four Objectives Recent Reforms CVM Recomendations on Corporate Governance Key Points for Further Debate

3. Challenges for Domestic Equity Markets Overview of the Brazilian Equity Markets Market Capitalization and Liquidity ADR Listings Primary and Secondary Offerings

4. Market Size 19981999200020012002 (october) Market Capitalization (US$billion) 160.9228.5225.5185.4114.07 Daily Volume - Bovespa (US$million)¨ 377.3497.1334.1265.3142.9 Concentration (10 most negotiated) 77%57%55%54%60% source: CVM/BOVESPA Foreign Investment 19981999200020012002 (jan-oct) FDI (US$bi) 23.7325.5628.6322.6413.91 Foreign Investment Portfolio (US$bi) (2.46)1.1(1.83)(0.728)1.3 source: bacen Registration of Public Distributions 19981999200020012002(jan-oct) Primary - Equity (US$bi) 3.421.540.720.580.36 Primary - Fixed Income (US$bi) 18.818.268.378.84.0 Secundary (US$bi) 1.531.056.212.042.19 Secundary ( in units) 15 16124 Bovespa listed Companies 527478459428405

5. Challenges for Domestic Equity Markets Key Differences from Developed Markets Defined control Majority non-voting shares History of poor enforcement/low protection Lack of equity culture/incipient activism

6. Challenges for Domestic Equity Markets Simplified Rationale Flow Old Paradigm: Top Down----Macro Variables— Price—Buy New Paradigm: Good Co.– Good Governance— Good Rules– Confidence(Macro &Price)— Buy(Active Investor)

7. Challenges for Domestic Equity Markets The Four Objectives Corporate Law Reform Corporate Governance Sheraholder Activism Enforcement

8. Challenges for Domestic Equity Markets CVM recommendations on Governance Transparancy of Ownership and Control, shareholder meetings: e.g.30 days --- list of shareholders—description and details to be discussed---- voting process Structure and Responsabilities of The Board of Directors: e.g. Composition, term, committees and by-laws, minority shareholders Minority Shareholder Protection: e.g. Tag-Along, Transactions Among Related Parties, Arbitration to Solve Divergences

9. Challenges for Domestic Equity Markets CVM recommendations, continuation: Accounting and Auditing :e.g. MD&A and factors/risks performance, Fiscal Board Access to Information,Auditing/ Other services For complete guide please refer to WWW.CVM.COM.BR

10. Challenges forDomestic Equity Markets Key Points For Further Discussion: Sarbanes-Oxley Act of 2002 NYSE Corporate Accountability and Listing Standards for non-US issuers Auditing Standards – IAS or USGAAP Bovespa Novo Mercado The Role of Development Banks Shareholder Activism—Brazil’s Experience