A newly released survey reveals that North American and Eurozone institutional investors believe Latin American investor relations and corporate governance practices have taken a turn for the better.
But the report released by JPMorgan’s Depositary Receipts (DR) business does call for companies based in Latin America to continue improving governance practices as the competition for global capital intensifies.
The report, ‘North America and European investor opinions of Latin American companies,’ found that Brazil and Colombia are the most promising markets for investment over the next one to three years. Investing in Peru, Venezuela and Argentina were labeled ‘tentative,’ due to the political instability in those countries.
The survey also showed that investors in North America and Europe remain optimistic about the overall investment opportunities across Latin America. The main reason for this is the region’s anticipated economic growth, which is expected to boost demand for goods and services. Moreover, investor confidence has been restored by sound corporate governance standards, the prevalence of natural resources, low levels of consumer debt, and the continued development of capital markets and infrastructure across Latin America, the survey reports.
The study was conducted in June and July of 2011 and gathered the opinions of 40 institutional investors, which collectively hold approximately $57.3 billion of actively managed equity in Latin American companies.
‘Countries such as Brazil, Chile and Colombia have been aiming to reach international standards of investor relations and corporate governance,’ says Bruno Silveira, senior corporate counsel at Embraer, a global aircraft manufacturer based in Brazil. Silveira points out that Latin America’s internal markets have been growing continuously, even during the global economic crisis. That continuous growth, plus the fact that ‘Latin America-based companies are now much more concerned over internal controls, compliance programs, board independency and financial transparency,’ is making them more attractive to many multinational companies for investment.
Silveira [pictured right], who has been a business lawyer in Brazil for eight years, says that foreign statutes like SOX, FCPA and the 
UK Bribery Act have become applicable to many companies based in Brazil and Mexico. Besides that, improved Brazilian enactment and enforcement of laws and regulations on corporate transparency are now mandatory.
More than 50 percent of survey participants believe Brazil has the best corporate governance standards in the continent due to the creation of the Novo Mercado (New Market), a special section of the Sao Paulo exchange that requires listed companies to align governance polices more closely with international best practices.
The Novo Mercado is known for its stringent corporate governance requirements, which mirrors many US and European regulations, Silveira says. 
John Dionisio, chairman and CEO of AECOM Technology Corporation, has been capitalizing on Brazil’s growth as it has improved governance standards over the years. His company, which offers professional, technical and management support services, has seen that fewer business risks and less rigid institutional frameworks underpinning corporate governance and ethical business cultures have made Brazil a hot spot for foreign investment. ‘The influence of heightened standards for proper business conduct is reflected in improved business practices,’ says Dionisio [pictured left].
Recently, AECOM was named one of the World’s Most Ethical (WME) Companies, a designation awarded to companies that bridge the gap between corporate ethics and best practices in compliance, according to New York-based think tank the Ethisphere Institute.
Dionisio doesn’t see Brazil as the only strong prospect in Latin America. ‘Other nations, such as Colombia, Peru, and Chile, present similar opportunities,’ he says. ‘These economies may not be as big as Brazil, but the growth opportunities are likely to be just as attractive.’
However, those opportunities will only be available if countries continue on the path of improving transparency. Silveira points out that the commitment to transparency among Brazilian companies has increased and grown stronger because of the massive penalties imposed on companies for non-compliance with international regulations.
Investors will likely continue to place bets on Brazil, making competition for capital between the BRIC nations more fierce. Companies are no longer simply competing against each other within one country; now the real competition is against companies in other emerging markets.
‘There will always be a natural competition for leadership because emerging markets are under global pressure to reach high standards of corporate governance and compliance matters and for them to become a developed nation and sustain their position, these countries will have no choice other than to comply with international regulations,’ Silveira concludes.
