2. Latin American Corporate Governance Roundtable Third Annual Meeting Mexico City, April 2002

3. Agenda How investors view transparency Regulation in Brazil Where do we go from here ?

4. How Investors View Transparency

5. FACT: INVESTORS IGNORE AUDIT REPORTS Dull, repetitive, “not useful” 75% of the text is disclaimers Recent failures to identify problems Enron, Global Crossing Banco Economico, Banco Nacional, Bamerindus, Mesbla, Casa Anglo

6. How Investors View Transparency Hard to punish auditors Who is the regulator ? No significant ruling against auditors FACT: INVESTORS PERCEIVE ENFORCEMENT TO BE WEAK

7. Attitude in Conselhos Fiscais How often do auditors resign ? FACT: AUDITORS ARE NOT SEEN AS INDEPENDENT How Investors View Transparency

8. Real work performed by junior employees Smaller firms can’t stand this They prefer local firms But investors cannot separate o joio do trigo FACT: BIG 5 (4?) DOESN’T MEAN MUCH FOR MOST COMPANIES How Investors View Transparency

9. Regulation in Brazil

10. Regulatory Bodies Law 6404 (Corporate Law) Includes some accounting rules CFC/CRCs Regulator of the accounting profession “Independent” Controlled by accountants Issues accounting standards

11. CVM Jurisdiction over public companies New powers with new corporate law Ibracon Auditor’s institute Issues standards Central Bank / CMN Jurisdiction over banks Regulatory Bodies

12. Bovespa Listing requirements Novo Mercado Increased disclosure requirements Intercompany contracts Self dealing Prospectus Regulatory Bodies

13. Regulation in Brazil Proposals Bill to reform Accounting Standards Already outdated Creation of Accounting Standards Committee CONCLUSION Framework complicated, and getting even more so

14. Regulation in Brazil CVM Instruction 308/99 Innovative Introduced key concepts discussed today Auditing vs. Consulting Auditor Rotation Liabilities BLOCKED BY INJUNCTIONS FROM AUDITING FIRMS Technicalities What does it tell ?

15. Regulation in Brazil Forex Deferrals Questionable ruling by the CVM Complicates accounting Reduces credibility Should be avoided in the future New Corporate Law Veto right by minority board member

16. Where do we go from here ?

17. Arm the sheriff Centralize, consolidate, expedite Make IN 308 work Take Volcker’s advice Stop cross subsidy to auditing Take accounting off the law… …but don’t give it to accountants Introduce more variables in reports

18. Where do we go from here ? Watch the opportunity for smaller auditing firms Support them, help market identify good and bad firms Improve CVM’s standard forms MD&A, Shareholder lists,… Continue to move towards IAS