Latin American Capital Markets

16 VALERIANO F. GARCIA AND LUIS ALBERTO GIORGIOsure investors the availability of transparent information.Transparency does more thanjust improve market efficiency by reducing price disparities; it is also crucial for thesuccess of good governance practices and a major enforcement instrument.The marketcan indeed be an excellent enforcement mechanism. For this to happen, informationhas to be transparent (readily available at little cost), full (detailed and complete),reliable (accounting in compliance with minimum standards), and timely.Transparent,full, reliable, and timely information is directly related to market-based regulations anddiscipline.This is especially crucial in situations were there is weak enforcement. In fact,forbearing and general lack of strict enforcement of rules and regulations seem to bethe rule in many underdeveloped countries. This is particularly the case if the governmenthas the leading regulating role.Capital markets could better rely on self-regulatory bodies.This is particularlyimportant now that capital markets are becoming increasingly more sophisticated.Different types of businesses are flourishing under complicated financial arrangements.Most of the time, financial innovations are ahead of government regulationsand regulators.BibliographyBeckT, A. Demirguc-Kunt, R. Levine, and V. Maksimovic. 2000. Financial Structure andEconomic Development Firm, Industry, and Country Evidence. In Demirguc-Kuntand Levine (eds.).Bekaert, G., C. Harvey, and C. Lundblad. 2001. Does Financial Liberalization SpurGrowth? Columbia Business School, Duke University and Indiana University,April 20.Bencivenga,V. R., B. D. Smith, and R M. Starr 1996. Equity Markets,Transactions Cost,and Capital Accumulation: An Illustration. The World Bank Economic Review 10(2).Bossone, G., R Honohan, and M. Long. 2001. Policy for Small Financial Systems. Backgroundpaper for the workshop "Small Financial Systems: Many Small Problemsor a Big One?" World Bank, Washington, DC.Bottazzi, L, and M. Da Rin. 2000. Euro NM and the Financing of European InnovativeFirms. Mimeo, Univesrita Bocconi and Universita diTorino.July I I.Boyd, J., and B. Smith. 1996. The Coevolution of the Real and Financial Sectors in theGrowth Process. The World Bank Economic Review 10(2).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub