The Novo Mercado is Bovespa's latest attempt to bring Brazilian
equity markets up to western standards of transparency, liquidity
and governance. It is modelled on Germany's Neuer Markt, but so far
hasn't had any listings. When companies do come to market, if they
choose the new market they will have to do away with the invidious
Brazilian practice of issuing preference shares rather than common
stock, which allow families with tiny shareholdings to control
companies. Two-thirds of a company's equity can be in the form of
preference shares, which don't carry voting rights, which means
that 50.1% of the common stock would be just 16.67% of the company
as a whole. That controlling stake can then be put into a holding
company, and a family can hold a majority of shares in that, and so
on.
"Our economists here that have been following the new market are
extremely...
