Latin American Capital Markets

430 OSVALDO R. AGATIELLOnational cooperation could be instrumental in accomplishing discrete targets and acceleratingthe process.At the national level, like all efforts in an integrated community willing to growtogether, the progress of the whole is part of the progress of individuals and intermediategroups. Trust is a wager, and the size of any wager is a direct function of theresources at stake, the perception of risk in the given environment, and the expectedgains. 15 "Putting suspicion to sleep," to use the felicitous phrase attributed to ThomasPaine, is harder when there is a recent, traumatic history of government, corporate,or professional deception or mismanagement from which to draw conclusions andproject future outcomes.Nevertheless, there is no civilizational stumbling block—religious, philosophical,or psychological—that cannot be resolved with concerted effort and external cooperation.16 Latin American and Caribbean countries and markets are not scorchedearth. On the contrary, those that could lead the way have vibrant, competitive exportsectors, highly integrated financial systems, and a highly educated workforce willingand able to compete in the globalized marketplace.They need ever more sophisticatedcapital markets to help finance their socioeconomic growth in a more efficientmanner, and some of them have the human capital to build now, even in the midst ofunfavorable conditions in the world economy. Some remain committed to the prejudicethat the countries of Latin America and the Caribbean lack the cultural fabric todevelop capital markets; those individuals advance a line of reasoning that was widespreadin the 1960s and 1970s, when the region was deemed not ready for democraticgovernance.An abundant literature describing the social and economic requisites fordemocracy sprang from the seminal research of the late 1950s and provides startlingempirical evidence (Upset 1981; Camp 1996). It confirms that higher levels of wealth,industrialization, urbanization, and education are directly correlated with democraticgovernance and socioeconomic progress.These are not sufficient conditions, but thatthey are necessary nobody doubts by now.There is also empirical evidence showing that the higher their level of education,the likelier it is for people to trust others and to trust more, to support rules15 O'Donnell (1999, p. 29) says, "Political democracy ... is the only regime that is the result of an institutionalized, universalistic,and inclusive wager" A wager of trust one might add. Also see Di Raima (1990).16 Quigley's theoretical and empirical analysis (1979) delved into the notion of civilizational decline in the 1970s, whichcan be predicated from manifestations of increased antisocial behavior (violent crime, drug abuse), family decay, lowlevels of social capital, a relaxation of the work ethic, and low levels of scholastic achievement Huntington's (1996)"clash of civilizations" and religious fundamentalism have brought this discussion back to the fore.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub