Latin American Capital Markets

INSTITUTIONAL INVESTORS AND CAPITAL MARKET DEVELOPMENT 127Figure 5-2Institutional Investor Development and MarketCapitalization, 1999Source: OECD (2000); World Bank (2001); ICI (2001).pension and macroeconomic reforms, Chile's market capitalization increased from$44.8 billion in 1993 to $60.5 billion in 2000, with administradores de fondos de pens/ones(pension fund administrators) owning more than 10 percent of all Chilean equitiesand accounting for approximately one-quarter of all transactions in Chile's stockexchanges (Bolsa de Santiago 2001). In general, however the region's market capitalizationremains relatively low (figure 5-2).The markets also suffer from lack of liquidity,another indicator of capital market developmentThe region's corporate bond andequity markets are particularly illiquid, while the government debt markets are generallydeeper and more liquid (S&P 2001 a).The Importance of Domestic Institutional InvestorsInstitutional investors contribute to local capital market development in a number ofways. In turn, well-functioning capital markets provide an efficient means of directingsavings to meet the financing needs of private enterprises and governments andare increasingly viewed as a critical element for overall long-term economic growth(Levine 1997).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub