Latin American Capital Markets

DEVELOPING BOND MARKETS: A COMPREHENSIVE VIEW 313Table 10-2 | Access to the Market, by Type of AuctionAuction, countryUniform priceArgentinaChileColombiaPeruMultiple priceCosta RicaHondurasJamaicaPanamaUruguayVenezuelaBoth methodsBrazilMexicoSource: World Bank (2001).Calendar of issuesYesYesYesYesYesNoYesAnnualNoYesYesQuarterlyParticipationFinancial intermediariesFinancial intermediaries andinstitutional investorsPrimary dealersStock brokersStock brokersEveryoneEveryoneStock brokersFinancial intermediariesFinancial intermediariesFinancial intermediariesFinancial intermediariesthe disadvantages of primary dealers are collusion in countries with small financial sectors(World Bank and IMF 2001); limited competition, particularly in small markets;and limited development in cases of scarce liquidity due to lack of repos and otherhedging instruments.The authorities must ensure fulfillment of the required conditions that primarydealers need to operate as market makers in the secondary market. At the same time,the government needs to have the capacity to properly monitor the performance ofthe primary dealers to avoid market manipulations or artificial activity.The governmentmust carefully analyze the benefits and risks associated with the primary dealer systemin order to determine its useful ness. Transparency and information disclosure are alsoimportant components of a sound debt management strategy.This includes providinginformation about funding needs and costs, debt structure and strategies, the issues calendar;expenditures, and revenues. Finally, it is important that the government developsa dynamic interaction with private and public market participants to obtain feedbackon its actions and build internal capacity to better read and follow the market. Table10-2 shows the types of auctions that selected Latin American governments are implementingas well as the countries that work with primary dealers.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub