Chinese and Indian companies have already woken up for the advantages of going public abroad. Many of these companies have realised that the old formula of getting loans from local development banks may not the best option. Although such banks may offer interest rates which are lower than the market rate, the costs associated with such loans can be higher than those of a listing on an international stock exchange.

Even the option of being listed on a local stock exchange is not real most of the times. Exchanges in developing countries do not yet provide for a mature junior market, liquid enough to allow real benefits to companies and investors. In such countries, only large companies are able to have their shares listed on a stock exchange. This is the case of Bovespa. Although Bovespa’s trading indices have been sky rocketing, the benefits are still restricted to a small number of companies that managed to grow to a size that allowed its shares to be admitted to trading.

Going public abroad carries a number of advantages yet to be fully appreciated by Brazilian companies, such as:

(i) more funds are made available to the company on a ongoing basis, as there is no obligation to service debt;

(ii) the investor can sell its shares on the market, without taking money out of the company;

(iii) there is no obligation to pay annual dividends to investors;

(iv) the company will promote its brand and trade marks internationally, which is essential for a company aspiring to offer its products abroad; and

(v) facilitated access to a diversified group of investors who understand and accept more risks related to early-stage operations of growing companies.

As to AIM, there are even more advantages, as:

(i) there is no requirement to show a trading record (what makes AIM attractive to early-stage companies with potential to grow);

(ii) no restrictions on the number of shareholders (and therefore some AIM companies to not have a completely dispersed shareholding);

(iii) there is the possibility of raising small amounts, as little as £3 million, for example (roughly R$10 million). This would not be possible in exchanges such as Bovespa, which focus in considerably larger IPOS; and

(iv) the costs associated to an AIM listing are less than in other stock exchanges.

With respect to this last item (costs), it is worth noting that AIM distinguishes itself amongst other markets for its flexible rules, which are less onerous to those companies in early stages of development.

Two recent studies by the London Stock Exchange (one from the London School of Economics, already mentioned above, and the other from Oxera independent consultants) show that AIM’s flexible regulatory system, which is tailored to the needs of smaller companies, is key to the market’s success. It is also worth noting that in 2005 AIM accounted for 52% of total European IPOs. The above-mentioned two studies de-mystify the idea that an IPO in the UK is more expensive than any other international stock exchange, including US exchanges, which are the ones to which Brazilian companies often turn when looking for capital.

The study by the London School of Economics concludes that although a large proportion of AIM companies are early-stage businesses and/or operating in high-risk sectors (such as the natural resources sector - mining and oil and gas), the failure rate on AIM is low, running at less than three per cent in the last four years.

Business opportunities on AIM are not restricted to companies looking to raise funds or looking to raise their international profile. There is a niche that has not yet been explored with respect to nominated advisers authorised to act on AIM, the “Nomads”.

The Nomads have to provide the Stock Exchange with information on whether a company is appropriate to be admitted to the market or not. The Nomad is the principal contact of the company with AIM and must make sure that the company complies with the applicable rules.

According to the AIM rules, there is no requirement for a Nomad to be a UK-bades entity. Indeed, there are currently six "foreign" Nomads on AIM (four Nomands from Republic of Ireland, one from Australia and one from Belgium), not including the foreign firms which established themselves directly in the UK. Such Nomads oversee some 46 AIM companies.

Nonetheless, there is a requirement for the proposed Nomad to have a qualified executive with a “sound” understanding of the UK corporate finance market and AIM in particular.

Therefore, with the growing number of Chinese and Indian companies listing on AIM, it is just a matter of time before Nomads from China and India start operating on the market. By the same token, there is no impediment for Brazilian consultants to be included in the Nomad’s list kept by LSE and to start providing services to companies proposing to have their shares admitted to AIM.

It seems, however, that only companies from China and India have realised that there are a number of advantages in going public and listing on AIM. Instead of waiting for changes in the interest rates charged by banks or new direct investments, these companies are searching for viable alternatives to grow. This will inevitably give an upper hand to such companies and their products in a global context, out-staging their competitors. If such trend is not followed by Brazilian companies, there is a risk the BRIC countries will be known merely as RIC, or even IC.

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* Leonardo Neves is an associate at Fasken Martineau Stringer Saul LLP (London) and a member of the corporate practice group, which is headed by part.