Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 451interest (together they represented most of the country's highway construction industry),investors insisted on protections going beyond those of the Novo Mercadorequirements. Discussions focused on special procedures for approval of contractsbetween the company and the controllers. CCR's management is reported to haveoriginally offered to empower a majority of the company's independent directors toorder an appraisal (fairness opinion) in the case of any transaction in excess of $1 millionreais ($450,000) between the companies and affiliates. In the end, the companyhad to go beyond this, agreeing that any single director could demand such an independentappraisal. This provision was duly incorporated into the company's charterand was described in the final prospectus for the offering. The $300 million reais($ 135 million) offering was successfully concluded in late January 2002.Ad Hoc Contracting: Alive and WellUltrapar and CCR show that ad hoc contracting on corporate governance betweenissuers and investors is practiced in Brazil. Ultrapar's experience was well publicizedin Brazil and certainly contributed to the thinking behind, and the eventual content of,Bovespa's Novo Mercado rules. Institutionalized contracting arrangements such asNovo Mercado can grow out of shared experiences with ad hoc contracting. At thesame time, the CCR case demonstrates that institutional mechanisms such as NovoMercado can complement and also be supplemented by ad hoc arrangements thattake the packaged institutional arrangement as a basis on which to build an appropriatecompany-specific governance structure that the markets deem credible.Voluntary Codes in MexicoThe understanding most practitioners have of a national code of best practices is thatof a set of voluntary standards of corporate behavior produced by some sort ofgrouping of representatives from the private sector, academics, and market participants.However in some emerging markets, the government has taken the lead role,push-starting the effort. l6 The Mexican Code of Best Corporate Practices, adopted in2000, provides an illustration of this trajectory. 1716 The recently issued German Corporate Governance Code was produced by a commission appointed by the Germanjustice ministen with the government restricting its intervention in the process of drafting the code to issues oflegal interpretation. The German government thus regards the German Corporate Governance Code as an act ofprivate self-regulation (www.corporote-governonce-code.de).17 For Mexico, see Business Coordinating Council, Cod/go de Me/ores Pract/'cos Corporot/Vos (www.cce.org.mx).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub