Latin American Capital Markets

xxFOCUS ON CAPITALto investors to protect them; enhance market fairness, efficiency, and transparency; andreduce systemic risk—rather than the manner in which that information is delivered.Chapter 4 provides policymakers and financial experts with an overview ofthe most relevant issues related to the effect of macroeconomic policy, institutionalarrangements, and other exogenous structural factors (such as market size) on thedevelopment of capital markets in emerging economies, with particular emphasis onLatin America. The chapter analyzes the constraints that the macroeconomic environmentimposes, which are characterized by the impact of exogenous factors onthe effectiveness of capital market performance. The chapter highlights the negativeimpact of financial regulations that give preferred status to banking over capital marketinvestment and financing instruments.Chapter 5 examines the relevance and role of institutional investors in fosteringcapital market development. On the basis of the experience of the United Statesand other countries that belong to the Organisation for Economic Co-operation andDevelopment, the chapter provides policy guidance on how governments and policymakerscan further encourage the growth of domestic institutional investors inLatin America and the Caribbean while capitalizing on the sector's potential benefitsfor the region's capital markets.The chapters in part III review several important issues for developing strategiesto implement capital market reform and offer guidance for building a capital marketstrategy. The issues addressed include regional integration, the bond and derivativesmarkets, international trends in clearance and settlement systems, and the roleof corporate governance in fostering capital market development. Moreover, this partof the book goes considerably beyond many texts on financial sector reform by tacklingthe elusive topics of human capacity development and ethics.Developing an approach to regional capital market integration is one of themost crucial topics in Latin America and the Caribbean. Chapter 6 examines thecosts and benefits of and typical barriers to integration. It identifies the principles andmethods that might be employed to promote integration, including regulatory standardizationand harmonization, multiple listing, links and mergers between stock exchangesand other types of market institutions, technical interfaces, and informationsharing.The chapter describes the success or failure of attempts to promote integrationin different regions, identifies the elements of a strategy to promote integration,and discusses the optimal role and functions of policymakers, private sector entities,government agencies, regional bodies, and international financial institutions.Chapter 7 emphasizes the role of information disclosure and accounting standardsand practices in capital market development It discusses accounting standardsCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub