Ensuring Effective Enforcement

Second Latin American Corporate Governance Roundtable

GILBERTO MIFANOBOVESPA - SÃO PAULO STOCK EXCHANGE

BUENOS AIRES, MARCH 2001

Changes in the Brazilian Environment

At present, there is a project within the National Congress to reform the Corporate Law, aimed at adapting it to the changes that have occurred in the capital markets in recent decades

The same project also seeks to strengthen the Brazilian Securities and Exchange Commission - CVM, giving it greater financial and functional independence

The Brazilian legal system does not have an appropriate structure for settlement of conflicts between shareholders and corporations, but recognizes arbitration

BOVESPA as a self-regulatory body

BOVESPA - the São Paulo Stock Exchange - is a self-regulatory organization supervised by the Brazilian Securities Commission

Our self-regulatory powers basically reach the member brokers and traders, and are very limited towards the listed companies

BOVESPA’s monitoring of companies on the traditional

market

Real-time surveillance of trading, observing the behavior of prices and quantities

Monitoring of company information to the market:

analysis of information monitoring of all press coverage

Request for explanations Suspension of trading in extreme cases

The Novo Mercado

Section for the trading of companies committed to greater transparency and better corporate governance practices

Voluntary adhesion, via contract, to the Regulation

Private solution

Anticipates some of the desired regulatory changes

Novo MercadoListing Requirements - I

Issue of voting shares only Board of Directors: unified one year terms for all

members General Meetings: minimum 15 days notice Tag Along: tender offer should be extended to all

shareholders within the conditions obtained by the controlling shareholders

De-listing: mandatory tender offer at the economic value

Novo MercadoListing Requirements - II

Annual balance sheet in US GAAP or IASC GAAP Minimum free float of 25% Disclosure:

acts and contracts between the company and related parties

stock options programs trades carried out by managers and controlling

shareholders with company’s shares and derivatives

any shareholders agreements

Special Corporate Governance Levels

Level 1 - greater transparency

Level 2 - greater transparency and better corporate governance Voluntary adhesion, via contract, to the Regulation Directed to companies already listed at BOVESPA Non voting shares are admitted

Level 1Requirements

Additional disclosure requirements, as on the Novo Mercado rules

Minimum free float of 25%

Calling of General Meetings with 15 days notice

Level 2Requirements

Level 1 requirements plus: Board of Directors: unified one year terms for all

members Tag along: same conditions for holders of common

shares and 70% of the amount for preferred shares Public offer to de-list at the economic value Adhesion to the Market Arbitration Chamber Concession of voting rights to holders of preferred

shares on specific matters Balance sheet in US GAAP or IASC GAAP

Novo MercadoEnforcement

BOVESPA enforces the listing requirements through a contract:

Pecuniary fines Suspension of trading De-listing

The Market Arbitration Chamber

BOVESPA created the Market Arbitration Chamber, where disputes between participating members must be settled:

Companies listed on the Novo Mercado Company controlling shareholders Company management and directors Shareholders BOVESPA

USA 12 points Brasil - current situation 5 points Novo Mercado 15 points

Source: Merrill Lynch

Global Ranking 2000Shareholders’ Rights