CAF presented analysis regarding corporate governance in public enterprises

(Montevideo, December 19, 2013). CAF, Development Bank of Latin America, jointly with the Energy and Sustainable Development Observatory of the Catholic University of Uruguay, presented the document Corporate Governance in Latin America. Importance for State-Owned Enterprises.  The work, which emerged from studies carried out by companies that received support from the credit multilateral organization to improve their operations, establishes that at a public level, it is necessary to have corporate governance systems that state clear rules and guarantee accounting transparence and the good use of resources. 

Andres Oneto, Principal Executive at CAF's Direction of Public Policies and Competitiveness, stated that one of the main problems faced by public companies is "the drastic change in the management of the property" when governments change.  This leads to administrations which end up "kidnapping" the companies, which usually do not have a General Assembly of Shareholders, and do not have a transparent control and audit system. 

He explained that "in public enterprises, in many cases, the directors act according to a minister's vision, which is always political". He added that this makes it difficult to comply with the responsibility of ensuring the rights of minority shareholders, when the public enterprises have private partners which own a part of the block of shares. 

As in the case of private enterprises, in the document CAF states that the corporate governance of State-Owned Enterprises (EPE for its acronym in Spanish) should include rules that guarantee the existence of five large areas: Right and Equitable Treatment of Shareholders, General Assembly of Shareholders, Board, Control and Transparency Norms, and Financial and Non-Financial Information. However, the document clearly states that these areas are not included in most state-owned enterprises in the region, either due to legal obstacles or lack of political interest. 

Oneto stated that assuming the importance of having good corporate governance is essential for the State, because, among other things, it "provides credibility". He added that "when the rules of the game are changed according to convenience, it is a bad sign for investors". 

At the same time, Alfredo Ibarguen, Director-Partner of IAAG Consultoría & Corporate Finance, stated the importance of having public enterprises incorporate private shareholders and list in the stock exchange to implement adequate corporate governance. 

Juan Jose Cabrera, representing Deloitte Uruguay, was also present in the conference. He reflected on the corporate governance practices in Uruguay in the financial sphere. The expert pointed out that in the sector, the regulations that take precedence are those from the central bank, based on compliance with the guidelines established by the Organization for Economic Cooperation and Development (OECD). 

At the same time, engineers Andres Tierno and Omar Paganini, who participated in representation of the Energy and Sustainable Development Observatory of the Catholic University of Uruguay, highlighted that Uruguayan public enterprises play a social role, making their corporate management more complex.