Latin American Capital Markets

12 KENROY DOWERS, FELIPE GOMEZ-ACEBO, AND PIETRO MASCIBox I-1Trade ActivityThe data on Latin American stock exchanges present a picture of decline. Over the period1991-2000, the number of listed companies on Brazil's Sao Paulo Stock Exchange declined byabout 19 percent from 570 to 459. Argentina's stock exchange has experienced an even greaterdecline, falling by 27 percent, from 174 to 127 listings.In the same period, the value traded on the Argentina Bolsa went from $ 15,679 million in 1992to $50,956 million in 1997 and declined to $4,189 million in 2002. In 2000, on average, stock marketcapitalization in Latin America was about 34 percent of GDP In the United States, it was almost200 percent, while it was well above 80 percent in Europe.Liquidity, measured as turnover of the capital of the companies listed over GDP is about 10percent in the major Latin American exchanges, more than 200 percent in the United States,around 70 percent in Europe, and more than 130 percent in Spain.decade, the region had a decrease in foreign direct investment, reflecting the completionof many large-scale privatization projects (see table I -1). Foreign direct investmentcontinued to rise and offset the disappointing performance of bank lendingand portfolio investment Emerging Latin American and Caribbean countries are atthis point investment-starved due to high levels of public sector debt, which reducesthe resources for local capital market development, while making international investorsnervous and therefore leading to capital outflows.Moreover, the political events of September I 1, 2001, the Argentina crisis,and various setbacks in the U.S. stock market have accelerated the slowdown ingrowth and increased asset price volatility, playing an important role in determiningthe terms and conditions under which Latin American market entities can access internationalcapital markets.The increasing role of mature market developments in theTable I -1 | Net Flows of Private Capital to Western HemisphereEmerging Markets, 1993-2001(Billions of U.S. dollars)Private capitalPrivate capital flow, netDirect investment, netPortfolio investment, netOther private capitalflows, net199337.412.245.5-20.3199447.122.865.0-40.7199544.024.20.819.0199666.440.338.8-12.7199770.656.2.25.9-11.5199871.360.618.7-8.0199943.264.1II. 1-32.0200042.561.64.6-23.8200127.167.20.9-41.0Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pubSource: IMF (2001 a, 2002).