<b>Brazil - The rights and wrongs of government</b>
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<b>Brazil - The rights and wrongs of government</b>

    Headline: Brazil - The rights and wrongs of government
Source: Euromoney
Date: March 2000
Author: Brian Caplen

Minority investors get a raw deal in Brazil. Usually their shares do not have votes and they lose out in battles with the controllers. One fund manager says minorities in Brazil "don't have rights, only obligations". The government made things worse just so it could sell privatization assets at higher prices. But now reform is on its way. With privatization half-finished the government is the country's largest minority shareholder. Surprise, surprise - minorities are about to get better treatment. Brian Caplen reports

Investors in Brazil should position themselves alongside the government. A close look at the country's corporate law shows that it has changed with the specific aim of increasing the value of the government's own shareholdings.

For the past few years those working alongside the government such as foreign strategic investors in the privatization programme have profited handsomely and minority shareholders have suffered. That followed legal changes in 1997. Now with government becoming the country's largest minority shareholder the law is about to alter again - this time in favour of minorities.

"The privatization programme has been very aggressive but the government continues to be the largest minority shareholder in the country," says Gabriel Wallach, in charge of Latin American equities at Baring Asset Management in Boston.

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