Gone are the days when listing a company on the New York Stock Exchange was the biggest gold mine for depositary banks that operate in Brazil. With foreign investors directly accessing the local market, fewer and fewer companies are willing to carry the costs that trading on American exchanges will incur. To bridge the ensuing gap in the market, banks are turning to the less liquid programs they had previously pushed to the back burner.

In other words, level 1 American Depositary Receipts (ADRs), which can only be traded in OTC markets, and receipts issued during restricted-effort distributions (144-A or Reg-S), which only access qualified institutional investors. Twenty-five level 1 programs have been registered since 2008, according to data from the Brazilian Securities and Exchange Commission (CVM). Over the same period, only a single level 3 program was recorded (allowing both exchange listing and receipt issuing in the United States): Santander's in 2009.

Competition for sponsorship of level 1 ADR programs is fierce. "We've been contacted by three banks in the past three months", reveals Diogo Zinsly, the investor relations (IR) manager at Cteep, whose ADRs are already traded on the American OTC market. Zinsly believes that the rising investor interest in Cteep is what sparked the competition among banks. But the depositaries' proactive behavior is certainly spurred by an additional fact: Cteep is one of the market's biggest dividend-payers, in line with the electricity sector's history of profit distributions. Dividend payment services mean bigger commissions for the banks.

The compensation packages are yet another chapter in the story. They include a series of additional services, ranging from targeting – which helps trace the profile of target investors – to IR team training and road show guidance. One more significant factor will affect a company's choice of depositary: the budgets offered by the banks in exchange for the issuer's exclusivity. In 2009, about US$ 11.6 million of the total budget assigned to the IR department at Petrobras was donated by J.P. Morgan, its depositary.

Companies have their eye on this "benefit". "We are hoping to leverage our IR allowance by 30% to 40%", reveals an investor relations professional. His company sponsors an unlisted ADR program. In other words, it bears no regulatory costs for accessing American investors and is about to obtain an important source of funds to maintain its IR activities.