Latin American Capital Markets

500 KENROY DOWERS, RUBEN LEE, AND ANTONIO VIVESCreating and Implementing a Capital Market Strategy:Some RecommendationsChapters 2 to 5 of this book discuss a wide range of areas that could be included ina capital market strategy, including different policies for different types of markets.Thissection suggests guidelines for these aspects of capital market development and proposessome pragmatic approaches to implementing a strategy.The creation and implementation of a strategy for capital market developmentin a particular jurisdiction are complex undertakings and involve a process ofreform and adjustments. Nevertheless, there are some useful generalizations, andwe make recommendations on three broad aspects of such strategies: the core policytargets of capital market development strategies, the factors affecting an optimalsequencing strategy, and the roles that different types of institutions play in capitalmarket development strategies.Core Policy Targets—"The Five I's"In developing a capital market strategy, it is important to identify the key targets forpolicy. A useful typology for categorizing policy reform may require a focus on thefive I's: information, institutions, instruments, infrastructure, and regional integration.Policy initiatives could be developed to address all of these areas and be suitable targetsfor implementing reform.Information DisclosureThere is almost universal acceptance of the need to promote corporate disclosurein order to enhance investor protection and to provide the raw data for investoreducation. Notwithstanding this consensus, recent experiences confirm that corporatedisclosure is effectively delivered in only a few countries and requires continuousmonitoring and fine-tuning. While there are many policies that may be used to furtherthis goal, one of the most effective in an environment with little corporate disclosureis also extremely simple.Listed companies are typically required to release basic quarterly and annualfinancial statements. However, in many developing countries, the underlying frameworkto promote information disclosure is not in place. Lessons from experience indicatethat information disclosure requires a combination of explicit enforcement byimproving government agencies (such as the securities regulator) and incentives thatCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub