Investment management takes center stage in this issue, with several features about and for investors in the region. First, as stock markets have turned in dismal performances over the last year, investors have become more sensitive to issues of minority shareholder rights. As Associate Editor David Swafford finds in his cover story, “Storming the Castle,” in more than a few recent acquisitions, minority shareholders found that their interests were trampled underfoot in deals which offered sweeter terms to the controlling shareholders and their new partners.
The difficulties lie in the legal systems, but also in the fact that some companies-traditionally controlled by families used to making unilateral decisions-are struggling to adapt to the demands of minority shareholders in a changing marketplace. Investors are cautiously optimistic that they are slowly gaining headway in making their interests heard, by putting pressure on local regulators and company officials. They are also quick to point out that many companies are making efforts to improve, such as changing their shareholder structures to eliminate the differences between classes of shares, and that others like Mexico’s Cifra and Argentina’s Perez Companc, to name a few, have excellent reputations when it comes to disclosure and investor relations.
In Brazil, correspondent Jennifer Rich examines recent steps by that country’s securities and exchange commission, the CVM, to plug holes in the law which were causing minority shareholder rights to fall through the cracks, as in the case of JC Penney’s acquisition of supermarket chain Lojas Renner.
Investors agree that the regulator is going in the right direction, but the currently much greater concerns over the state of the economy are likely to slow progress in the near future.
This issue also features our annual Latin American Investment Management Review, in which we use data from Standard&Poor’s to highlight the best performing Latin American regional and country funds, in both debt and equity categories, over several time periods.
In addition to our traditional one-, three- and five-year returns, we have added seven-year returns this year. Also new this year is the use of risk-adjusted returns to pick the winners in all but the one-year category, by using Sharpe ratios to determine the rankings rather than straight percentage returns.
Interviews with the winning fund managers highlight the strategies which made them successful, and examine the personalities behind the numbers.
Looking ahead, the results of LatinFinance’s Predictor 99 conference summarize the investment recommendations of over 60 analysts in 14 sectors and asset classes, with their best-and worst-investments for 1999. The securities to buy and to avoid are listed in detailed charts, while the edited transcripts highlight the analysis behind the recommendations.
Other articles in this issue focus on the utilities sector, including the rising tide of privatization in the water sector, as well as concerns over how Brazil’s economic slowdown will affect demand for gas in that country, placing pressure on gas transmission and distribution utilities. In another article, former Nikko Latin America economist Miguel Diaz examines Brazil’s internal debt problem, and a contributed article from Scotia Capital Markets examines how the use of total return swaps and credit default swaps can help institutions alter their risk profiles and take advantage of the opportunities provided by swings in asset valuations. On a final note, we are proud to announce that Associate Editor Onelia Collazo was a recent recipient of a fellowship from the National Press Foundation for its seminar on e-commerce at Vanderbilt University in Nashville.