Latin American Capital Markets

xviFOCUS ON CAPITALLocal capital markets embody market infrastructure, the legal and regulatoryframework, and organizations and institutions. These markets function effectivelythrough competition and enhanced information by using existing instruments, such asequity and bonds, and by creating new ones.The markets therefore ultimately permiteconomic growth and constitute a relevant development target.Many Latin American and Caribbean countries can easily be included in thecategory of those that have not developed a fully functioning capital market and havesuffered grave and recurrent crises.There is an extensive literature on capital marketdevelopment in emerging markets in general and in Latin America and the Caribbeanin particular The literature provides analysis, insights, and recipes for building vibrantcapital markets in the region.Building on this literature and experience, the overarching goal of this bookis to provide a forward-looking perspective on the issues that affect capital marketsin emerging market economies.To this end, the book presents a set of critical issuesthat constitute the ingredients for a policy initiative to ensure local capital market development.The issues raised are addressed in a synergistic rather than isolated fashion,recognizing that the challenge for policymakers and regulators is to minimize interferencewith the functioning of markets but allow continuous oversight to detectproblems and make appropriate interventions.The Message of the BookThis book answers several questions: What is the status of market development inLatin America and the Caribbean? Which strategic initiatives foster market development?Who are the key players in the development of local capital markets? How arecapital market institutions and organizations built? And how can trust and confidencebe assembled and sustained to support the development of a capital market?The book's authors assume that capital market development is a relevant initiativefor policymakers to embrace.That is, ensuring the stability of the financial sytem and developing a capital market are worthy objectives of public policy. In pursuingthese objectives, the political decision to reform the financial sector rests with thehighest level of government, while the finance ministry has the day-by-day responsibilityto build the necessary consensus among parties, design a long-term strategy, andmonitor implementation.In shaping the public policy interventions to develop capital markets, the governingauthorities need to recognize that they must abstain from interfering withCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub