Latin American Capital Markets

DEVELOPING A STRATEGY FOR REFORMING CAPITAL MARKETS 27Box 1-5 I Recent Developments in Capital Market Integration• The Ibero-American Securities Markets Institute was founded in May 1999 to facilitate cooperationand exchanges among the regulatory bodies that supervise securities markets in Spain,Portugal, and 15 Latin American countries. Other objectives include fostering their developmentand promoting legal harmonization in the area.• The Argentine, Brazilian, and Uruguayan stock exchanges signed an agreement that will allowthem to interconnect their operations in the future.• The new euro-based Latin American stock market, LATIBEX, began trading in 2000.This newexchange, established with Spanish capital, is designed to help generate financing in Europeanmarkets for firms in the region.• The Brazilian and Mexican stock exchanges are participating in negotiations among 10 worldstock markets led by the NYSE to establish a common stock market that would allow 24-hourtrading around the world.sary to address specific considerations relating to the benefits of integration, the regionor regions to which the strategy should apply, barriers to integration, and methodsfor removing them.ConclusionAlthough Latin American and Caribbean economies have implemented programs andpolicies to foster the development of capital markets over the past decade, the evidencedemonstrates that many of the markets are still fragile and lack depth andliquidity. This chapter has discussed several factors that explain the current status ofcapital markets in the region and presented a strategy for governments to fully developcapital markets. We support an approach that encourages increased marketactivity and liquidity and advocate advancing a second generation of legal and regulatoryreforms. These reforms should emphasize the adoption of internationally acceptedaccounting standards, development of good corporate governance, and increasedtransparency and disclosure to encourage supply and demand of securities totake place in local capital markets.The roots of the encouraging movement toward capital market development,undertaken by the largest countries of the region, are driven by government'srecognition that local capital market development constitutes a public good thatneeds to be pursued. Political will and leadership are the crucial ingredients for sue-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub