Latin American Capital Markets

HUMAN CAPACITY DEVELOPMENT 479structuring the development needs for all participants in a given sector The secondperspective would involve a flexible, needs-driven approach that reflects the nuancesof the market.The latter approach is pragmatic and intrinsically situates the developmentof curricula in the realities of stakeholders in the region. Given the diverse stagesof development of the capital markets in Latin America and the Caribbean, this latterapproach seems best suited to the needs of the region.Many benefits may be derived from having a knowledgeable professional baseand an informed investor group. Three main aspects of the current status of humancapacity development in Latin America and the Caribbean could impede further capitalmarket growth: low trust in market intermediaries, limited market activity, and limitedconfidence in the market.Low Trust in Market IntermediariesIssuers or other financial intermediaries typically have a more expansive quantity andquality of knowledge of the securities being traded than the individual investor Thistype of information asymmetry places the investor in a vulnerable situation and, whenlosses occur; might reduce trust levels between these two key participants. It is thereforecritical to ensure that issuers are educated on the importance of their relationshipwith investors and their contribution to building stable markets.Limited Market ActivityInformed investors are able to discern between reputable and dishonest issuers aswell as to recognize that capital markets are not long-term alternatives to the deposittakingsystem of banks or credit unions. In the absence of a structured public educationprogram, the value of capital market products and services would not be understood;this could consequently limit market development at the domestic level.Limited Confidence in the MarketRegulators play a key role in the development of capital markets when they implementregulatory guidelines to build domestic savings and investments by limiting thelevel of offshore investment permissible from local savings.They create attractive marketsby being transparent in their requirements and by engendering transparencyfrom companies they regulate.The confidence developed in the system through thework of regulatory agencies cannot be overstated.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub