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Private Equity & Venture Capital in Brazil: Private Equity & Venture Capital in Brazil: State of the Industry and OpportunitiesState of the Industry and Opportunities
NYC – September 25th, 2006NYC – September 25th, 2006
The Brazilian Private Equity and Venture Capital AssociationThe Brazilian Private Equity and Venture Capital Association
Amsterdam Beijing Chicago Emeryville Hong Kong JohannesburgCambridge Frankfurt
London Los Angeles Madrid Manila Milan Moscow Mumbai Munich New York Palo Alto
Paris San Francisco São Paulo Seoul Shanghai Stockholm Tokyo Toronto ZurichSingapore
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 2EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
ABVCAPABVCAP
The AssociationThe Association of of the Brazilian PE & VC industrythe Brazilian PE & VC industryWho Are WeWho Are We
Our MissionOur Mission
MembershipMembership
Promote and develop Promote and develop long-term investments in Brazillong-term investments in Brazil
Over 100 membersOver 100 members, including fund managers, , including fund managers, entrepreneurs and service providersentrepreneurs and service providers
Copyright © 2006 by Monitor Company Group, L.P.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of Monitor Company Group, L.P.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 3EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
This presentation is an excerpt from a study by the Monitor Group,This presentation is an excerpt from a study by the Monitor Group,
a member institution, a member institution,
hired to assist ABVCAP in its creation of a roadmap for the futurehired to assist ABVCAP in its creation of a roadmap for the future
of the Private Equity and Venture Capital in Brazilof the Private Equity and Venture Capital in Brazil
ABVCAP wishes to thank FINEP and the Brazilian GovernmentABVCAP wishes to thank FINEP and the Brazilian Government
for their support in this initiativefor their support in this initiative
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 4EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
ObjectivesObjectives
Summarize the state of the PE & VC industry in Brazil
Illustrate the attractiveness of its investment opportunities
Present alternatives to viable exits
Discuss key elements of the enabling environment for PE & VC
– Macroeconomics
– Capital Markets developments
– Global standards of Corporate Governance
– Institutional & Regulatory landscape
– Quality of the Human Capital
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 5EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Brief History of the Brazilian PE & VCBrief History of the Brazilian PE & VC
* Includes only fund managers that existed in 2004Source: Private Equity and Venture Capital in Brazil – 1st Census – FGV / GVcepe; ABVCAP; Monitor Analysis
Over US$ 4BN invested, 400+ deals, during the past 10 years
As of today: 250+ portfolio companies, additional US$ 5BN committed capital
Over US$ 4BN invested, 400+ deals, during the past 10 years
As of today: 250+ portfolio companies, additional US$ 5BN committed capital
19991999 FutureFuture
From 8 fund managers in 1994 to 45 in 2000 *– Real Plan– Privatizations– Dot-coms
Mostly local investment banks, and their international competitors
Followed by:– Global VC/PE funds– BNDES (1996)
Brazil = key market for international investors– Investment peak
Economic slowdown– Global factors:
Internet bubble burst Argentina default
– Local factors: Devaluation (1999) Energy crisis (2001) Elections (2002)
Almost no sizeable PE investments nor exits
International LPs divested too early
Improvements in legislation and corporate governance standards
Renewed interest in PE & VC– By local investors– By entrepreneurs
Several successful IPOs
New vintage of funds– local pension funds LPs
More stable Economy– Falling interest rates– Falling country risk
Full impact of previous institutional changes– Corporate governance– Legal improvements
20042004Mid 90’sMid 90’s
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 6EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
The Brazilian PE & VC Industry in NumbersThe Brazilian PE & VC Industry in Numbers
as a % of GDP (2004) Investments in US$ million
1) Includes 2 mezzanine investmentsNote: Includes data from 57of a total of 65 fund managers with local offices in BrazilSource: Private Equity and Venture Capital in Brazil – 1st Census – FGV / GVcepe; Monitor Analysis
Software& IT
Telecom Retailers
ManufacturingBiotech
Other
Transp /Logistics
Portfolio by Sector (2004)Number of Invested Companies according to
the Stage of Development (2004)
MBO
Seed
Start-up
Expansion1
Later Stage
AcquisitionFinance
BridgeFinance
Turnaround
Brazilian PE & VC has already proved itself in multiple sectors, and shows strong potential for growth
Brazilian PE & VC has already proved itself in multiple sectors, and shows strong potential for growth
6
36
7298
42
5 3 1
35%
16%11%
6% 6% 4%
22%
1.11
0.64 0.570.37
0.14 0.13 0.10 0.04 0.02
UK Canada SouthAfrica
SouthKorea
Argentina India China Brazil Mexico
456379
281 261 256 253
1999 2000 2001 2002 2003 2004
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 7EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Source: Monitor Analysis
The FundamentalsThe Fundamentals
Enabling EnvironmentEnabling Environment
AttractiveAttractiveInvestmentInvestment
OpportunitiesOpportunities
Viable ExitViable ExitOptionsOptions
Favorable Macroeconomics
DevelopedInstitutional &
RegulatoryLandscape
DevelopedCapital Markets
World-ClassCorporate
GovernanceStandards
QualifiedHuman
Resources
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 8EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
The BasicsThe Basics
Two key strengths of the Brazilian PE & VC equationTwo key strengths of the Brazilian PE & VC equation
Enabling Environment
AttractiveAttractiveInvestmentInvestment
OpportunitiesOpportunities
Viable ExitViable ExitOptionsOptions
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 9EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Attractive Investment OpportunitiesAttractive Investment Opportunities ExamplesExamples
Established Global CompaniesEstablished Global Companies Emerging Global CompaniesEmerging Global Companies
Electric engines Founded in 1961 5 plants and 19
subsidiaries worldwide Revenues: US$ 1.0 BN
Airline Created in 2001 2nd highest profitability
in the world Revenues: US$ 1.1 BN
Automotive (bus) Created in 1949 Plants in 6 countries Revenues: US$ 0.7 BN
Cosmetics Created in 1969 Revenues: US$ 0.9 BN
Aerospace Founded in 1969 Among world’s top 3 in
commercial airplanes Revenues: US$ 3.8 BN
Petrochemicals Consolidation of 6
companies in 2002 LATAM leader Revenues: US$ 4.8 BN
Brazilian track record in creating successful global playersBrazilian track record in creating successful global players
Note: Revenues = Net Revenues for 2005 @ US$ 1 = R$ 2.42
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 10EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Attractive Investment OpportunitiesAttractive Investment OpportunitiesDiversity of the EconomyDiversity of the Economy
Note: * Constant 2000 US$Source: Science & Technology Ministry; Merrill Lynch; IBGE; Global Entrepreneurship Monitor; IDG; Monitor Analysis
Attractive SectorsAttractive SectorsRecent Regional GDP GrowthRecent Regional GDP Growth
GDP
Growth
2000 - 2003
(%)
GDP (US$ billion*) – logarithmic scale
DF
SE
TOGO
MT
MS
PAMA
AMSC
ES
RSBA
PR
MG RJ
SP
Infra-Structure– Investment gap: US$ 25 – 30 billion
Real Estate– Housing deficit: 7.2 MM houses– Demand will increase with population ageing
IT– “IT investments will increase 15% in Brazil in
2007, reaching US$ 18.6 billion(...)higher growth when compared to China” – IDG
Biotech– Full domain over gene-sequencing technology
Agribusiness– Leading technology for ‘green’ / biomass fuels– Ethanol demand could reach 26 billion liters
until 2010 (63% increase)-4
-2
0
2
4
6
8
10
12
14
0.1 1 10 100 1000
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 11EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Attractive Investment OpportunitiesAttractive Investment OpportunitiesOther FactorsOther Factors
Elements Description
Source: ABVCAP; Sebrae; Global Entrepreneurship Monitor; CVM; Monitor Analysis
Increasing trend for professional management
– 40 among top 50 Brazilian corporations are professionally managed
– Family ownership still widespread: 73% of 5 million SMEs
Professional Professional Management in Management in Family-Owned Family-Owned
CompaniesCompanies
One of the 7 most entrepreneurial countries (GEM report)
over 15 million entrepreneurs Over 200 incubators – more than 3,000 companies Over 450,000 new companies established yearly
Entrepreneurial Entrepreneurial CultureCulture
Repressed demand in consumer goods LBOs Distressed assets (e.g. Parmalat, Varig) Increased interest by entrepreneurs
Enabling Enabling Environment Environment Unleashes Unleashes
OpportunitiesOpportunities
Fragmented Fragmented SectorsSectors
Fragmented sectors are opportunities for consolidation
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 12EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Increasingly Liquid Exit OptionsIncreasingly Liquid Exit Options
Note: 1) Considers primary and secondary offers separately, even when offered jointly – up to April 2006Source: CVM; PE and VC in Brazil – 1st Census – FGV / GVcepe; Monitor Analysis
Most Common Exit Mechanisms(1999 – 2004)
IPO
Trade-sale
Secondary-sale
BuyBack
Write-off
Number of PE-backed Public Offerings1
Falling interest rates, developed capital markets and strong corporate governance all point towards sustainability of IPOs as a viable option
Falling interest rates, developed capital markets and strong corporate governance all point towards sustainability of IPOs as a viable option
9
12
21
2004 2005 2006
52330
37
215
40
198
45106
183 904
9 56
Quantity Amount (US$ MM)
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 13EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Recent Successful PE & VC ExitsRecent Successful PE & VC Exits
9%
242%
199%
40%
38%
36%
26%
22%
481%
Construction
Energy
Sector
Airline
IT
Medical Services
E-commerce
Airline
Logistics
Car rental
Time to Exit
2 years
1 year
<1 year
5 years
6 years
9 years
8 years
7 years
8 years
Net Revenues 2005 (US$ million)
273
1,100
90
217
172
202
2,317
70
350
Equatorial
Company
GOL
TOTVS1
DASA
Submarino
Gafisa
TAM
ALL
Localiza
Investment (US$ million)
11
26
16
100
83
78
77
202
49
12%
130%
32%
20%
IT
Logistics
Telecom
IT
4 years
7 years
4 years
6 years
n/a
137
353
n/a
Akwan
Autotrac
Atrium
Microsiga2
n/a
2,5
20,5
7
IPO
sIP
Os
Tra
de-
Sal
eT
rad
e-S
ale
ExamplesExamples
Estimated IRRs in US$
Note: 1) BNDESPar; 2) Buyback; 3) 2004Source: Press Clippings; Company websites; Interviews; Brazilian Capital Markets and Private Equity (R. Freitas, P. Passoni); Monitor Analysis
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 14EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Enabling EnvironmentEnabling Environment
AttractiveInvestment
Opportunities
Viable ExitOptions
Favorable Macroeconomics
DevelopedInstitutional &
RegulatoryLandscape
DevelopedCapital Markets
World-ClassCorporate
GovernanceStandards
QualifiedHuman
Resources
Brazilian PE & VC industry meets stringent Global StandardsBrazilian PE & VC industry meets stringent Global Standards
Enabling EnvironmentEnabling Environment
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 15EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Enabling EnvironmentEnabling EnvironmentOverviewOverview
Favorable Favorable MacroeconomicsMacroeconomics
Developed Capital Developed Capital MarketsMarkets
Stable economy de-linked from politics Falling interest rates and country-risk Investment grade expected in 2007 / 2008 Social inclusion of low-income families
Market Characteristics Positive Factors Challenges
Bovespa 116 years old, US$ 581 billion market cap
Futures exchange among world’s top 5 Pension funds increase allocations to
alternative investments Active representation by ABVCAP IPOs attract interest of entrepreneurs
High interest rates hamper LBOs and limit access to debt markets
Growing but still limited funds for PE & VC in Brazil– Still limited exposure by
foreign investors– Low exposure of local
investors to PE & VC model
Although falling, interest rates are still high, limiting investment opportunities
Qualified Human Qualified Human ResourcesResources
Experienced and skilled fund managers Wide availability of qualified managers
and other personnel for portfolio companies
Brazilian labor laws
Source: BACEN; Social Security Ministry; IBGE ; CVM; Interviews with PE / VC specialists; BOVESPA; ANBID; BEST; Monitor Analysis
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 16EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Enabling EnvironmentEnabling EnvironmentOverviewOverview
World-Class World-Class Corporate Corporate
Governance Governance StandardsStandards
Developed Developed Institutional & Institutional &
Regulatory Regulatory LandscapeLandscape
Source: BACEN; Social Security Ministry; IBGE ; CVM; Interviews with PE / VC specialists; BOVESPA; ANBID; BEST; Monitor Analysis
World-class CG standards are increasingly applied in Brazil– Market driven standards, best practices– Transparency and protection for
minority shareholders– 23 out of 30 recent IPOs adopted most
restrictive levels of CG
Autonomous / independent regulatory agencies
More reliable environment / new legislation– Reduced legal and credit risk– Increased investor protection– “Bankruptcy Law” = safer investments
Arbitration
Tax exemptions for foreign investors
Still pervasive culture of mixing personal and company funds
Majority of public companies still not adopting restrictive CG levels
Complex and slow legal system
Regulation in some sectors – not fully developed – may increase risks
Red tape to set up and shut down companies
Market Characteristics Positive Factors Challenges
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 17EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Challenges for Growth of the PE & VC Industry in BrazilChallenges for Growth of the PE & VC Industry in Brazil
High interest rates and limited access to debt markets
Limited capital availability
Global Corporate Governance still not widely applied
Complex and slow legal system
Regulation in some sectors not fully developed
Main Challenges Mitigating Factors / Outlook
Falling interest rates, stable economy with little spill-over from politics
Increasing interest by local pension funds ABVCAP roadshows coming of age Ex-ante-partnership, and shareholders’
agreements; top advisors; arbitration Access to arbitration; new bankruptcy Law
protects investors Opportunity to shape the future
Enabling Environment
Closing a Deal and Creating
Value
Exiting Alternatives for exits
Low exposure of PE & VC concepts and models by entrepreneurs
Informality
Creating the ex-ante-partnership Rigorous due diligence and local expertise Availability of capable managers
More developed IPO market
Source: Monitor Analysis
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 18EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Conclusion: Why Invest in PE & VC in Brazil Now?Conclusion: Why Invest in PE & VC in Brazil Now?
Across diversified sectors and regions Strong entrepreneurial culture
Source: Monitor Analysis
New opportunities New opportunities due to improved due to improved
enabling environmentenabling environment
Significant other Significant other opportunities to opportunities to
create valuecreate value
More developed More developed market for exitsmarket for exits
Wide range of Wide range of opportunities opportunities
availableavailable
IPOs, viable alternative
Falling interest rates should allow LBOs Success of IPOs created awareness around PE & VC Distressed assets represent new opportunities Economic inclusion creates demand for consumer goods
Consolidation of fragmented sectors High growth in some sectors / companies Significant financial leverage with falling interest rates
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 19EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Brazil offers Brazil offers unique, valuableunique, valuable
PE & VC opportunitiesPE & VC opportunities and, on the back of a and, on the back of a
much-improved investment environmentmuch-improved investment environment, is , is
positioned for positioned for fast growth to thefast growth to the benefit of the benefit of the
better-positioned playersbetter-positioned players
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 20EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Appendix: HyperlinkAppendix: Hyperlink
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 21EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Note: *Emerging Markets Bond Index (EMBI+)Source: Central Bank of Brazil; IBGE; Clippings; JP Morgan; Monitor Analysis
Brazil is expected to reach investment grade in 2007 – 2008Brazil is expected to reach investment grade in 2007 – 2008
Real Interest Rate & Country-risk*Real Interest Rate & Country-risk*
Market Estimates
Real interest rate – left-hand scale
% /
yea
r
Bas
is p
oin
ts
1999 devaluation
2002 presidential
election
Despite the presidential election this year, interest rates are expected keep decreasing
Enabling EnvironmentEnabling EnvironmentFavorable MacroeconomicsFavorable Macroeconomics
Country Risk (EMBI Brazil spread of Treasury bonds) –
right-hand scale
0%
5%
10%
15%
20%
25%
30%
35%
40%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
0
200
400
600
800
1,000
1,200
1,400
1,600
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 22EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Source: Social Security Ministry; CVM; Interviews with Private Equity Players / Stakeholders; BOVESPA; Monitor Analysis
Brazilian institutionals turn to alternative investments due to falling interest ratesBrazilian institutionals turn to alternative investments due to falling interest rates
Other CharacteristicsOther Characteristics
116 yr old Stock Exchange– 342 listed companies – US$ 581 billion market cap
Futures exchange is 5th largest worldwide (BM&F)
Free flows of equity– Brazil has never restricted
dividend flows
Limited access to debt markets– Bank spreads still high– Sovereign crowds out Private
Emerging LPs: Pension FundsEmerging LPs: Pension Funds
Total Assets (US$ billion)Total Assets (US$ billion)
70,7
66,2
60,5
71,5
87,9
122,5
136,3
Pension Fund Assets represent 16% of
Brazilian GDP (2005)
Pension Fund Assets represent 16% of
Brazilian GDP (2005)
Enabling EnvironmentEnabling EnvironmentDeveloped Capital MarketsDeveloped Capital Markets
37.1 44.554.7
76.8 83.816.820.7
26.4
37.2
43.4
4.0
3.7
4.0
4.8
5.23.9
3.7
2.9
2.6
2.6
2000 2001 2002 2003 2004 2005 2006
Fixed Income Equities Real Estate Others
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 23EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
* Amcham is the American Chamber of Commerce in BrazilSource: BOVESPA; CVM; Brazilian Institute for Corporate Governance (IBGC)
Main Corporate Governance AgentsMain Corporate Governance Agents
Stock Stock ExchangeExchange
Stock Stock ExchangeExchange
Brazilian Brazilian Securities & Securities & Exchange Exchange
CommissionCommission
Brazilian Brazilian Securities & Securities & Exchange Exchange
CommissionCommission
Brazilian Brazilian Institute for Institute for Corporate Corporate
GovernanceGovernance
Brazilian Brazilian Institute for Institute for Corporate Corporate
GovernanceGovernance
Established in 1995 by demand from the market
Develops and Recommends CG programs
Advanced regulation for public co’s and PE & VC funds on disclosure and shareholders’ rights
Out of 33 IPOs since 2004, 23 compliant with ‘Novo Mercado’, 6 other with Level 2Out of 33 IPOs since 2004, 23 compliant with ‘Novo Mercado’, 6 other with Level 2
Enabling EnvironmentEnabling EnvironmentWorld-Class Corporate Governance StandardsWorld-Class Corporate Governance Standards
3 levels of world-class
corporate governance
standards (1, 2 and ‘Novo
Mercado’)
Principles of ‘Novo Mercado’Principles of ‘Novo Mercado’
Highest Corporate Governance requirements in BOVESPA
Information disclosure and standards– IFRS or US GAAP
Protection to minority shareholders– 100% tag along– All stocks with voting rights– Minimum free float: 25% of
shares
Incentives for using arbitration
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 24EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Note: *Except countries considered “low-tax jurisdictions” by Brazilian Tax Authority – usually tax havensSource: ANBID; Bacen; BEST 2006; Brazilian Company for Custody and Liquidity (CBLC); CVM
Legislation for investors fully reviewed (1999 / 2000)– Reduced legal and credit risk for investors– New “Bankruptcy Law” made investments safer
Favorable tax regime* for foreigner investors
Independent Independent InstitutionsInstitutions
Independent Independent InstitutionsInstitutions
Legal SystemLegal SystemLegal SystemLegal System
Financial Market Financial Market StructureStructure
Financial Market Financial Market StructureStructure
Other institutional and legal environment improvements are expected in the near future (e.g. Tax Reform)
Other institutional and legal environment improvements are expected in the near future (e.g. Tax Reform)
Solid and safe financial infrastructure: around 2,500 institutions Electronic payments system – compliance with BIS Brazil follows all 20 recommendations of G30 regarding custody,
settlement, payments system and data security
Capital markets institutions are independent Central Bank and Securities Commission are autonomous Stock and Futures Exchanges are self-regulated
Significant improvements in the past few years established more comprehensive and stable environment for investments
Enabling EnvironmentEnabling EnvironmentDeveloped Institutional & Regulatory LandscapeDeveloped Institutional & Regulatory Landscape
Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 25EQT-CAP-Apresentacao-25-09-06-PF Copyright © 2006 Monitor Company Group, L.P. — Confidential — SAO
Source: ANBID; Science & Technology Ministry (MCT); IBGC; 1st Brazilian Census of Private Equity and Venture Capital – FGV; Monitor Analysis
Financial Market /Auditor
CEO / Director
Consultant
Entrepreneur
Other
Post-Graduated
Master /MBA / LLM
PHD “… great availability of talented and qualified managers to run businesses”
Brazilian Institute of Corporate Governance has already trained over 1,200 executives
270,000 researchers, including 40,000 PHDs
Brazilian companies invest hundreds of millions of US dollars on innovation every year
>20 years
>15 years
>10 years
>5 years
– PE fund manager
Basis: 233 managers in 65 firms
Non-Graduated
Graduated
Experienced Professionals for PE & VC ManagementExperienced Professionals for PE & VC Management Human CapitalHuman Capitalfor Portfolio Companiesfor Portfolio Companies
Enabling EnvironmentEnabling EnvironmentQualified Human CapitalQualified Human Capital
36%
1%
48%
21%
25%18%
15%
19%13%
58%
8%
23%
4%12%
Fund ManagersExperience
Fund ManagersEducation
% of Funds byExperience of Most
Senior Manager