Latin American Capital Markets

DEVELOPING CAPITAL MARKETS—ETHICAL ISSUES 425lated through rational processes of reasoning, based on principles that disavow coercion(justice as fairness). 9In times of great moral crisis, enduring changes can be implemented, as thelack of an adequate ethical framework becomes self-evident and reveals a systemicgap that needs to be addressed.The Watergate crimes and misdemeanors producedsuch a turning point in the early 1970s, prompting an overhaul of the required ethicaltraining for the legal profession in the United States.The current scandals involvingEnron, WorldCom, and Arthur Andersen, among others, may provide a similar opportunityfor the trading and capital markets professions around the world, especiallyin the development of new international accounting and auditing standards and extensiblebusiness reporting languages, such as XBRL (see Masci and Sotomayor, thisvolume). Latin America and the Caribbean may profit immensely from this turn ofevents, by acquiring state-of-the-art tools and procedures to update the regulatoryand technical frameworks of their capital markets, and in their quest for convergenceand integration with the capital-exporting economies.This is a peremptory priority, so that the improvements that are introducedin mature capital markets, now and in future, do not pass by the region and leave itbehind. A positive influence would be that the direct democracy advanced by themarketplace would contribute to the consolidation of a political democracy able todeliver sustainable socioeconomic progress.To achieve this, the region would have toconsciously and consistently pursue an ambitious ethical agenda in the coming years.An Ethical Agenda for Latin America and the CaribbeanSpeaking of Latin America and the Caribbean as a unit whole, especially in terms offinancial markets, may be rather misleading.The only activity of this order in the Caribbeanbasin is that related to offshore banks and funds. Argentina, Brazil, Chile, andMexico have disparate capital markets, with Sao Paulo being the largest (arguablylarger than that of Canada) and Santiago the most consolidated one. In the rest ofLatin America, trading activity is negligible in economic terms. In most cases, though,local stock and commodity exchanges enjoy significant monopoly powers and areclosely related to the political apparatus.9 Much moral theoretical reasoning is modeled after methods of analysis that are legal (the Benthamite approach) oreconomic (the Hobbesian approach) in nature.The doctrine of law and economics aims at an integrated approach(jamieson 1993). Perhaps, in Latin America and the Caribbean, lawyers should understand more economics, economistsshould understand more law, and all should understand more ethics.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub