Latin American Capital Markets

458 MIKELUBRANO• Ad hoc negotiations between issuers and investors will continue to becritical, and will inform the thinking that goes into future public and privateinnovations.• Standardized private rulemaking (and dispute resolution), such as the NovoMercado in Brazil, probably works best when there is general agreement onthe set of objectively determinable deficiencies of the legal framework andcorporate governance practices and when there are a reasonably large numberof issuers and investors (such that no single issuer or investor is likely toset the standards and negotiate directly).• Private standard setting of any type (listing rules, voluntary codes, or ratingcriteria) is likely to have the most immediate impact on the IPO market, assuch standards provide investors with a common negotiating position.• Dominant domestic investors, such as pension funds in small markets, maybecome the de facto corporate governance standard setters. However, thiswill depend on how well such investors are themselves governed.There are good reasons for continued optimism about the prospects of furtherpublic and private sector initiatives in corporate governance in Latin America.One is that, as some of the cases described in this chapter demonstrate, much of theimpetus for corporate governance reform in the region has been largely of domesticorigin.The Enersis case in Chile burst on the scene before the Asian crisis and longbefore the recent corporate governance scandals erupted in the United States. InChile and the other major Latin American markets, domestic institutional investors(particularly pension funds and mutual fund managers) are among the most importantadvocates for equitable treatment of shareholders, albeit often with a great dealof support from international fund managers and foreign shareholders. On the whole,Latin American governments (notably Chile, Colombia, and Brazil, but also Mexicoand Argentina) were relatively quick to respond to the domestic pressures for a bettergovernance regime. In some countries outside the region, notably in East Asia, theofficial response came only haltingly, and then often only at the urging of the internationalfinancial community in the wake of a crisis. Most, although not all, stock exchangesin Latin America also openly identify themselves with efforts to improve thegovernance of listed companies.Another encouraging factor that bodes well for the sustainable success of theLatin American corporate governance movement is the speed with which those interestedin better corporate governance have come together, both within countriesand across the region as a whole. This chapter has described the timely cooperationCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub