Latin American Capital Markets

ENHANCING MARKET INFRASTRUCTURE IN EMERGING ECONOMIES 261natural next step for check systems would be an ACH, but the lack of an appropriatelegal and regulatory framework has delayed the introduction of ACHs in the case ofEl Salvador for example.The appropriate legal and regulatory framework is an obstaclefor modernization, in particular in regards to electronic payments, dematerialization,and registration of securities. In many countries, efforts to pass appropriate legislationare being undertaken, but the process is slow.In the securities markets, clearing and settlement tend to be on a decentralizedbasis.The establishment of CSDs in the region is relatively new, and, in a numberof countries, the depository functions are the responsibility of a department of thestock exchange. As in the case of payments, the lack of updated securities laws hatbeen a serious obstacle to progress in a number of countries. New securities laws arebeing passed, however as in the case of Honduras in 2001 and the Dominican Republic.With this foundation, modernization should be able to move ahead.A regional initiative by financial institutions in Costa Rica, El Salvador, Guatemala,Honduras, Nicaragua, and Panama is under way to develop a common clearingand settlement platform that will be used in all these countries and a central depositorywith branches in each country.The Inter-American Development Bank and theBanco Centroamericano de Integracion Economica (BCIE) are providing support forthis initiative, which is being designed to meet international standards. Initially, eachcountry will have its own central security depository, and these will be linked to carryout the proposed functions and communications.The BCIE has been undertaking feasibilitystudies with private sector consultants.The new platform is expected to buildon technology developed for a real-time electronic funds transfer system, which issponsored by the BCIE. Implementation is expected to start in 2002.Caribbean CountriesIn recent years, considerable progress has been made in modernizing market infrastructurein the Caribbean in terms of supporting legislation, launching new institutions(CSDs), and preparing for a regionally integrated capital market. Jamaica hasbeen leading the efforts, both in terms of developing its own market infrastructureand encouraging the regional initiative. In 1998, the Jamaica Central Securities DepositoryLimited (JCSD) started operations as a wholly owned subsidiary of the JamaicaStock Exchange (JSE). 21 That same year, the JSE launched its own automated clearingand settlement platform. CSDs have recently been established in Barbados, Bermuda,Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub21 An annual report and other information on the JCSD can be found at www.jamstockex.com.