|Carlos Augusto Junqueira
Recent investigations into a high-profile corruption
scandal in Brazil have spurred discussions surrounding the
quality of the management of the country's state-owned
enterprises (SOEs). These discussions mainly focus on the
nomination of public office candidates by political patronage.
As a result, federal Law 13.303, published on July 1 2016,
creates a new regime for SOEs that play a role in strategic
sectors of Brazil's economy.
The new law, which the interim government considers a
priority, has become known as the SOEs' Governance Law. It is
now the main legislation ruling government-controlled
enterprises. With a view to aligning SOEs' management practices
with those of the private sector, the new law requires
independent auditing of balance sheets.
Express rules of governance have been introduced. They
establish minimum requirements for transparency in relation to
how SOEs conduct business. Points concerning financial data,
risk factors, management compensation and control structures
must be disclosed to the market. These requirements are similar
to those that the Brazilian Securities and Exchange Commission
(Comissão de Valores Mobiliários, or
CVM) applies to publicly-held companies. SOEs must adopt risk
management and internal control structures by setting up a
statutory audit committee.
The so-called professionalisation of the management of SOEs
is also one of the targets of the new law. It seeks to
disengage the management of SOEs from party politics by
prohibiting the increase in campaign expenditure in election
years for federal government offices to which any given SOE is
linked. Board members and executive officers must have
qualifications and experience compatible with their functions.
Likewise, political patronage will be prohibited.
The new law also establishes rules addressing bid
proceedings and contracts entered into by SOEs. These will
complement the existing general rules for bid proceedings. This
is an important point given the dual structure of SOEs: while
they compete alongside private enterprises in certain economic
sectors, given that they are maintained largely by public
resources, they do not have an unfettered discretion to enter
SOEs have until July 2018 to adjust to the new rules. The
introduction of this new law is a decisive step towards
bettering not only the reputation of SOEs but also their power
to attract investment in key sectors of the Brazilian
Carlos Augusto Junqueira and Eduardo Abrantes