Latin American Capital Markets

•CHAPTER 13Developing Capital Marketsin Latin America and the Caribbean:Ethical IssuesOsvaldo R. AgatielloTrust and similar values, loyalty and truth-telling, are examples of whatthe economist would call 'externalities.' They are goods, they are commodities;they have real, practical, economic value; they increase the efficiencyof the system ... But they ore not commodities for which trade onthe open market is technically possible or even meaningful.Arrow (1974, p. 23)There are more than one reason and way to explain why every economy south ofthe Rio Grande is a developing one. It is obviously not a question of size because atleast three Latin American countries rank among the first quintile of nations in termsof gross national product. It would only be natural that their capital markets radiatedtheir influence on the subregions of Central America and the Caribbean, the Andeanarc, and the Southern Cone, respectively. It is not a question of longevity because, atleast in the case of the larger Latin American economies, most of their stock exchangeswere established during the second half of the nineteenth century. But, arguably,the only two consolidated capital markets in the Western Hemisphere, interms of both market capitalization per capita and depth, are those of the UnitedStates and Canada, and only the former exerts a commanding influence across theregion.One or two exceptions can be argued for; but even then queries of contestability(favoritism, information imperfections, and market reserves) and transparency(money laundering and other forms of underground economic activity) loomlarge in the collective psyche of economic agents.The impact of fractious instability ininternational financial and commodity markets or internal security concerns can dis-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub