Brazil

Capitalization Bond

Capitalization Bond issued under the Brady Plan restructuring agreement in Bearer and Registerd securities form. Eligible for tendering in privatisation programme at 75% of face value. Brazil can repurchase the bonds in the market 2 1/2 years after issue.

Banking System

Institutional Structure

The Brazilian banking system is characterized by the presence of large, private financial conglomerates, State banks and smaller, private banks.

Brazilian Capital Market: Statistics

Listed Companies

At the close of 1995, there were 874 public companies in Brazil, of which 570 whose shares were listed on the stock exchanges. Below is a chart showing changes in the number of companies listed on the exchanges since 1973:

GEOGRAPHY

Brazil, the fifth largest country in the world, contains 8.5 million square kilometers (approximately 3,281,000 square miles) of territory and occupies 47% of the South American land mass.
It is located between the 5º North and 32º South parallels, and hence is a predominantly tropical country -- only the far South can be described as having a temperate climate. Average temperatures fluctuate between 23º C and 29º C in the hottest months and between 17º C and 24º C in the cooler season.

Brazilian Derivatives Market

Intermediaries

Brazil boasts a vast network of financial intermediaries authorized to operate in the derivatives market. Besides the intermediaries linked to the capital market, which has been mentioned above, there are those linked to the exchanges dealing in futures and to banking and non-banking financial institutions, all actively participating in the derivatives market. In addition, Swap operations are carried out by financial institutions in general. On the over-the-counter market, operations are mainly registered in the CETIP. However, the majority of Brazilian financial institutions have the potential to participate in the derivatives markets.

Brazilian Capital Market: Institutional Features

Intermediation System

The distribution and intermediation system of the Brazilian capital market is made up of 566 institutions, of which 227 are brokerage firms dealing in securities, 316 are distributors, 17 are categorized as investment banks and six can be described as development banks. Another three companies are responsible for custody and registration of operations. Bearer shares are not authorized in Brazil and almost all other transactions are registered, a method which demands a high level of operational sophistication from the companies looking after their custody.

All trades on the stock exchanges are made through brokers; that is, even financial institutions must use brokerage services. The commissions levied in Brazil are fixed at competitive rates and all negotiations are performed in the name of the end client.

The Brazilian Investment Funds Industry

The investment funds industry in Brazil is regulated by Law N^o. 4728/65, which establishes the essential structure of requirements for listing, reimbursement of investors, tariffs and administrational practices. The responsibility for the supervision and discipline of all the funds originally fell to Brazilian Central Bank. But once the CVM was created the latter took over the duties of regulating the funds containing assets yielding variable returns, while the bank retained responsibility for the funds yielding fixed returns. The various categories of investment funds are currently regulated through the Resolutions of the National Monetary Council and disciplined through Circulars issued by the Central Bank and Directives from the CVM.

INCOME AND PRODUCTION

Brazil's Gross Domestic Product for 1995 totalled US$632 billion, placing it ninth among the leading nations in the world. Owing to its extensive territory and considerable population, considered in conjunction with a per capita GDP of US$4,051, Brazil offers investors one of the world's most attractive consumer markets.

GDP per capita from 1991 to 1995

** At constant prices (US$ 1,995)
Source: IPEA/ IBGE

The distribution of the GDP according to sectors has undergone few modifications over the last 25 years.

Banking System

The regulatory system for the Brazilian market is made up of five main agencies: the National Monetary Council (CMN), the Technical Commission on Currency and Credit (COMOC), the Brazilian Central Bank (BACEN), the Securities Commission (CVM) and the Superintendency for Private Insurance (SUSEP). Each one performs one or more of the following functions: standardization, regulation, oversight and consultations regarding activities of the Brazilian financial system. The self-regulating bodies play a similar role and are represented for the most part by the stock and commodities exchanges.

Brazil: Capital Markets and the Securities Commission

by Euchério Lerner Rodrigues   June, 1996

The CVM was created in 1976 through the Law No. 6,385 with the objective of regulating and disciplining the workings of the Brazilian capital market and, consequently, to fulfil the role of one of the institutions responsible for the process of building up savings and assisting economic development. In this way, by offering investors appropriate security and operational flexibility on the capital market, it contributes towards the process of company capitalization, the dispersion of prosperity and better allocation of productive sector resources.