How they do investor relations in Brazil

How many members does IBRI have, and among those members, how well represented are investor relations professionals at companies listed on the Brazilian stock exchange?
IBRI today has 460 members. Of these, 60 percent are IR professionals. The remaining 40 percent are professionals in some way connected with the capital markets, such as lawyers, consultants, or financial officers of unlisted companies. All of IBRI’s members are individuals, but if you check their names against the companies listed on the Brazilian stock exchange, these IR professionals represent roughly 135 publicly listed companies. When checked against the exchange’s principal stock index – the Ibovespa – they represent 90 percent of total market capitalization. We can therefore conclude that IBRI is extremely representative of the Brazilian investor relations world.

How does IBRI help its members to keep up to date with the best investor relations practices in Brazil?
IBRI has gone to great lengths to promote best IR practice among its members. Each year we hold a variety of events and courses. The most important event for IBRI is the National IR and Capital Markets Convention, lasting a day and a half and attended by 700 participants, where we discuss the latest market developments and challenges. We also hold webinars and attended events to discuss specific issues. We run an IR MBA course with 370 hours of tuition, which is already in its 11th class. We recently launched a shorter version, with 100 hours of tuition, also aimed specifically at providing training in IR issues. There is also a 16-hour tuition course in conjunction with the BM&FBovespa stock exchange, aimed specifically at unlisted companies that are thinking of going public. Another area of activity is our publications, which we see as having important educational value. These already number five and consist of books, folders and codes of practice.

Finally, two other initiatives: the first is the research and surveys carried out into specific IR matters, which already total over ten. The second is the Market Information Disclosure Guidance Committee (CODIM), coordinated by IBRI and the Capital Markets Research Analysts and Investment Professionals Association (APIMEC), with the participation of another eight Brazilian capital markets entities, as well as the national regulatory authority, which also takes part in the discussions. CODIM, in short, provides a summary of what, in the opinion of these ten entities, makes up the best market information disclosure practices.

What is IBRI’s agenda for the next two years?
During the period 2010-11, IBRI will seek to develop, in addition to its normal agenda of courses, events and surveys, a new publication on the impact of International Financial Reporting Standards (IFRS) on the activities of IR professionals. In Brazil, reporting in IFRS format becomes obligatory from December 2010 onwards, although companies are free to begin this type of reporting during the year. It is of crucial importance that IR professionals are able to correctly report their company financial statements in accordance with the new accounting standards.

We are also planning to publish two new manuals: one regarding how to handle contacts with individual investors, and the other regarding the role of the IR professional in public debt issues. Another issue being hotly discussed is certification of IR proficiency. We shall be using as our benchmark our sister entity the UK’s IR Society, which has a similar program.

What is the regulatory situation regarding IR in Brazil?
Our starting point is the IR officer function, which the CVM, the Brazilian capital markets’ regulatory authority, has determined is obligatory. Consequently, all publicly listed companies, however small the free float, must have an IR officer, who may also accumulate other functions, typically those of the CFO. In fact, this is the most common configuration: the CFO is also responsible for the IR function in 65 percent of companies, according to our latest survey. This survey also shows that only 11 percent of IR officers are dedicated exclusively to the IR function. The IR function in Brazil is staffed by four persons, on average, and 96 percent of companies say they have an area within the company exclusively dedicated to IR.

What, in your opinion, should be the focus of IR professionals under today’s market conditions?
In my opinion, one of the chief attributes of the IR professional today should be his ability to think in terms of strategy. Let me explain: the IR officer should seek to bring to the attention of top management the pressures and demands he receives from the outside world, and to help the board of directors to make decisions. The IR world is increasingly globalized, receiving messages from a variety of stakeholders, and this is of great importance to publicly listed companies.

How well do you think Brazilian IR professionals are handling the growth of digital social networks?
Digital social networks are beginning to change the way in which companies communicate, which in itself is a challenge, and a considerable one. The introduction of Twitter, for example, which is already beginning to be adopted by Brazilian corporates, needs to be monitored, since the company gets commented on through these social networks and opinion formers make their opinions known on the internet. This is directly related to a company’s intangible assets, or, in other words, its brand name and reputation. We are beginning to understand the challenge this poses for companies. It seems to us that social networks are here to stay, and IR officers should get used to them and take advantage of the not inconsiderable benefits they can offer.

What are the leading challenges for IR professionals in Brazil? What has been IBRI’s contribution to Brazilian IR professionals?
Recently the CVM issued a new instruction with rules altering the registration procedures for publicly listed companies. The alterations are intended to adapt to International Organization of Securities Commissions standards, which, among other things, include the concept of a shelf-registration system. This would allow Brazilian companies more streamlined access to capital markets, enabling them to tap the market with less delay and to therefore be in a position to take advantage of any windows of opportunity offered by the market. The new rules pose considerable challenges for IR professionals, who are responsible for submitting the required information to the CVM. The deadline for submitting the new application forms was May 31, 2010. IBRI hosted an event in February of this year, attended by 200 participants, to discuss this issue. This is clearly the main challenge facing IR officers at this time.

What are the most important factors to consider when communicating with Brazil’s capital markets?
One aspect of disclosure in Brazil is that what is considered full disclosure consists first of filing information with the CVM and BM&FBovespa. At the same time, this information is disclosed to the market by means of communications channels such as the news agencies and the wire systems. This is clearly intended to guarantee what I believe are the most important aspects of communication between companies and the market: timeliness and equal access to information. Other characteristics of almost equal importance are the objectivity and clarity with which the information is disclosed and the transparency with which facts and events are treated.

IR magazine and GIRN interview series
To promote the exchange of ideas among investor relations societies around the world, IR magazine and the Global Investor Relations Network (GIRN) are conducting a series of interviews with leaders of GIRN member societies.