Improving entrepreneurial governance and debt issuance

(Lima, June, 2014.) Distinguished experts participated in an international workshop organized by CAF, Development Bank of Latin America, the Economic Commission for Latin America, and the Caribbean (ECLAC), and the Inter-American Development Bank (IDB), to analyze the importance of corporate governance as a tool to mitigate company risks in the issuance of debt, a very important subject because the growth of said issuances in past years opens a great financing opportunity for entrepreneurial expansion in the countries of the region. 

The aforementioned activity was inaugurated by Eleonora Silva Pardo, CAF's Director Representative in Peru; Fidel Jaramillo Buendia, IDB Director in Peru, and Georgina Nunez, Economic Affairs Officer of ECLAC, in Washington, D.C. 

When opening the event, Silva Pardo highlighted that the analysis carried out in the framework of the workshop is not only relevant for the sustained growth of corporate debt issues during past years, including large and medium-sized Latin American companies, but also because the countries analyzed are framed within initiatives such as the MILA, and the Pacific Alliance. 

In this regard, she highlighted the importance of good corporate governance when issuing debt for a greater diversification of funds, investment tools, competitiveness, positioning against competitors and in value chains, incrementing liquidity, and in the general performance of the companies. 

"The issuance of bonds of a company with corporate governance best practices makes the process more controlled, efficient, transparent, and increases the level of trust in general. Creating more trust in capitals markets and developing corporate governance in every company are cornerstones to strengthen our economies", she stated. 

Fidel Jaramillo Buendia, IDB Director in Peru, referred to CAF's and CEPAL's hard work regarding this subject and indicated that it led to the development of the Latin American Code of Corporate Governance, prepared by CAF, which gathers a set of basic practices and regulations that guarantee a better use of resources in companies, contributes to a higher level of transparency, and mitigates the problems of asymmetric information that characterize the financial markets. 

"The application of these practices will allow the companies of the region to reach corporate governance standards comparable to those recognized in the most developed economies. When analyzing the problems that arise in other countries, Latin America is now more mature, and efforts have been made for more reliable deliveries, and the supervising organizations have made a great effort regarding this subject. These initiatives are key in order to have a more competitive region and wellbeing for Latin Americans", he stated. 

Within the framework of the workshop, the research project "Corporate Governance in Peru and Chile" was presented, which is the continuation of the joint work carried out by ECLAC, CAF, and IDB, "Corporate Governance and the Development of Capitals Markets in Latin America", whose objective was to analyze the regulatory framework regarding the principles of Corporate Governance in the region, and its contribution to the development of capitals markets. 

Germano Mendes de Paula, international consultant from the Federal University of Uberlandia, in Brazil, was in charge of the introduction to the design of a measurement that identifies the role of Corporate Governance in the determination of the risk in the issuance of debt, as well as the role of institutional investors, investment banks, and rating agencies in strengthening these practices in companies that issue debt securities. 

Jorge Echeandia, General Manager of the Huddle Peru consulting agency, spoke about the organic structure of corporate governance in Peru (General Assembly, Administration Council, Risk Specialized Committees, auditing, financial and investments), and other governance bodies. 

In addition, he presented the results in the application of the corporate governance indicator in local companies that have issued debt in capital markets. 

During the working session, the general problems and main objectives of the project were analyzed. Furthermore, a panel of commentators analyzed the results emphasizing the importance of good Corporate Governance in the issuance of debt, and the role of the rating agencies, institutional investors, and issuing banks, considering the local context. 

Carlos Rivero and Gerardo Gonzalez, representatives of the Superintendency of the Stock Market, and Procapitales, respectively, were in charge of the final comments of the workshop, which ended with comments from the General Manager of the Lima Stock Exchange, Francis Stening.