Latin American Capital Markets

THE IMPACT OF THE MACROECONOMIC ENVIRONMENT ON CAPITAL MARKETS 109of the 1990s. During this 10-year span, most developing countries' regulatory frameworksallowed for more openness, transparency, and simplicity.The goal was a morecompetitive and market-friendly environment. This trend affected stock exchangesthrough the privatization of mega public sector corporations. In addition, developingcountries welcomed foreign direct and portfolio investment, which also benefitedstock markets.GlobalizationGlobalization is the direct result of the information technology revolution. It is affectingall areas of the world in general and the economic environment in particular Theworld-class stock exchanges have greatly benefited from this phenomenon, whilemany small domestic exchanges have languished.The integration of stock exchanges within and across countries has facilitatedbusiness by increasing liquidity, reducing intermediation costs, and providing betterservices and more timely business information to a wider customer base. Large businessconcerns have received direct benefits, and SMEs have probably benefited, but ina more indirect way. As more relatively large concerns open their capital, there is adissemination or cultural effect about the benefits of raising capital in the stock exchange.Thismay be particularly important in countries where not even large businessconcerns have a tradition of opening capital.Large enterprises and conglomerates have benefited from the reduction incost due to the integration and globalization of capital markets. An example is the successfuldevelopment of NOREX (the Nordic Exchange), which includes Denmark, Norway,and Sweden. Other alliances include the Paris, Amsterdam, and Brussels stockexchanges (Euronext), and the London, Milan, Frankfurt, Zurich, and Madrid stock exchanges.In the United States, the New York Stock Exchange is guiding the constructionof the Global Equity Market (GEM), which will create an electronic market that will beopen 24 hours a day.The over-the-counter NASDAQ has worldwide reach. And therehas been integration within countries; for example, all the Spanish regional bourses (Bilbao,Valencia, Barcelona, and Madrid) have the same platform. Brazil has seven regionalstock exchanges that provide information, marketing, training, and technical assistanceto corporations and investors.Two of them—Bovespa in Sao Paulo and BVRJ in Rio deJaneiro—were bitter rivals; they have merged, and the former specializes in shares andthe latter in fixed-income instruments.The new arrangement has been successful, andBovespa is part of the GEM. Brazil has incorporated the modern system of trading, includingthe home broker doing business with shares through the InternetCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub