our boards frequently exhibit a diffuse segregation between their own responsibilities and that of the administration, in addition to informal structures, low number of professionally trained board members or members with a small degree of independence. 6. as a result, the main challenge to be faced in brazil in governance issues involves the relation between controlling stockholders and minority stockholders or creditors. how to face this challenge? 7. as far as the brazilian financial system is concerned, the central bank follows some well established principles of corporate governance, including : • transparency, facilitating the analysis of the activities of the company, its economic and accounting reports and non - financial aspects inherent to its businesses, offering to those interested a comprehensive vision of the corporation ’ s performance. the administration shall go beyond the obligation to inform, and reach the desire to inform, in addition to fostering good internal and external communication, which shall not be restricted to financial aspects, but shall be wide and comprehensive. • discipline, that is to say, commitment by the management in adhering to behavioral standards widely recognized as correct and appropriate. • independence, in what it relates to arrangements to safeguard or minimize possible conflicts of interest, such as the control by an executive or a majority stockholder. such arrangements include, for instance, a balanced composition of the executive board and administration and the use of external audit. • accountability, according to which agents of corporate governance shall be accountable for their actions before those who elected them and shall fully answer for acts practiced in the performance of their duties. • responsibility, by which executives shall care for the continuity of the organization and, therefore, shall incorporate considerations of social and environmental content in defining their businesses and operations, including a system for corrective actions and punishment, as needs be. • equality, which is translated into a fair and equalitarian treatment to all minority groups, either of capital or of other stakeholders, where discriminating policies or attitudes shall be deemed unacceptable. 8. based on the foregoing principles, the central bank, in its supervising role, follows the best international practices, materialized in the standards defined by the basle committee of the bank for international settlements, according to which corporate governance represents a critical issue in the banking environment. management shall monitor the establishment of corporate objectives, performance of the day - byday operations, defense of stakeholder interests, conformity to applicable laws and regulations, and care for the interests of depositors. 9. therefore, the directive applied by the central bank reaches beyond the mere relationship of

higher productivity is the element that underpins economic growth. to achieve higher productivity growth, it is essential to increase the public sector's savings rate, thereby allowing society to invest in production as opposed to primarily financing the public sector. aside from its effect on output growth, a permanent reduction in inflation inherently and unmistakably brings about a reduction in poverty, with the consequent social inclusion, in addition to sowing the seeds for reducing inequality. this government is committed to price stability, the inflation targeting framework, fiscal austerity, a realistic economic policy, and a quest for management excellence. my level of comfort has increased with every meeting in which i have participated, with every speech and the first decisions made by minister palocci, as well as by our friends at the other ministries and by the president of the republic. in regard to the autonomy of the central bank, i would like to emphasize that this is a proposal of the government, and not the central bank. this issue was not part of the discussions i had when i was invited by president lula and minister palocci to take this position. the central bank's autonomy as proposed by minister palocci aims at institutionalizing the central bank's role as a guardian of the currency and signals brazil's permanent commitment to price stability. the modern central banks in the world count on clear rules in regard to their roles, composition and renewal of the board of directors. in this context of the transition to a new central bank law, it was important to count on the contribution of the entire board of directors of the brazilian central bank, so as to avoid problems in the conduct of their actions. this is the case of the inflation targets that are defined by the government. this government is entirely committed to democracy, to the federal constitution, and to the codes of law. we will honor the laws of the nation and our international agreements. there will be no imprudent adventures. the social and political choices will be carried out within the federal budget, with a review in priorities and a quest for excellence in management of the resources. i am positive of this evaluation. as the head of a financial institution for 28 years, of which 12 were served as president in brazil, i have carefully followed the president's and his party's trajectory since 1989, when i first met with the president and his team. i had many chances to interact with the party, including in successful partnerships in the social area. this allowed for increasing