Brazil has a unique opportunity to develop the mechanisms for early stage, smaller and also more established medium-sized companies to access the funds they need to grow their business through the equity capital markets.
Interest rates are at their lowest in decades, and this tends to drive the attention of investors to other types of investment and reduce the strength of the dominating fixed-income culture.
A group of investment banks, law firms, civil entities and associations and auditors have decided to work in a project to be presented to the government with alternatives to unlock the growth of Bovespa Mais, the only access stock market in Brazil.
In parallel, the exchange itself (BM&FBovespa), together with the securities commission, the National Social and Economic Development Bank, the Brazilian Agency for Innovation and the Brazilian Agency of Industrial Development, presented the results of their analysis on growth markets in other countries with a focus on successful experiences in stimulating access to the stock markets to smaller and medium-sized companies.
The main challenge now is to align the perception and interests of the issuers, intermediaries and regulators aiming at reducing risk perception of traditional investors and, at the same time, demystifying the capital markets to individuals.
The public sector is involved in discussing the proper means to provide relevant contributions for the development of the access market through, among other things, the potential creation of tax incentives for investors and issuers, and subsidies to issuers to help them face the costs of the listing process.
In addition, the regulation should be reviewed to facilitate the access of smaller companies to equity capital markets, more specifically in relation to disclosure rules, simplified offering memorandum, requirements exemptions in restricted offers and periodicity of audit review of the financial statements.
In terms of culture, the reality is that Brazilian companies are used to counting on loans or debt securities to fund their operations. It is necessary to divulge the attractiveness of the equity capital markets as a cheaper source of funds and also the indirect benefits of a more formal and transparent company, such as enhancement of credit profile and reputation before suppliers and clients.
The development of a strong access market is key to ensuring long-term economic growth in Brazil. It seems that all players are mobilised and committed to achieving this common goal – one that will definitely result in the increase of investments, job creation and tax revenues in a sustainable manner.
Rodrigo de Campos Vieira