Latin American Capital Markets

GLOBALIZATION.TECHNOLOGY AND REGULATION IN CAPITAL MARKETS 39Globalization and technological innovations provide both opportunities andchallenges for market development and also for regulators.The window of opportunityis small because of intense global competition; however, Latin American marketsare well positioned to exploit it. Latin America has several large companies that areactively traded and of interest to global investors. However; if markets truly becomeglobal, there will be little need for these companies to trade on the local domesticexchange.Therefore, local exchanges must develop a strategy to attract liquidity andglobal investors. Caribbean countries are developing a regional approach, and this isappropriate for their long-term strategy.The Current Status of Emerging Capital MarketsEmerging markets have made significant progress in market infrastructure, institutions,and regulation. Computerized trading systems have been set up with expanded capacityand transparency. Market capitalization and trading volume increased significantlyduring the past 15 years. World market capitalization increased almost 10times, from $3.39 trillion to $32.26 trillion between 1983 and 2000; for the U.S. markets,it increased from $1.9 trillion to $15.1 trillion.The most dramatic increase wasfor emerging markets, from $67 billion to $2.74 trillion (see table 2-1).The rise in trading volume provides evidence of increased liquidity in themarkets. Worldwide trading volume increased 40 times, from $ 1.2 trillion in 1983 toTable 2-1 I Market Capitalization and Trading Volume, 1983-2000I (Billions of U.S. dollars)Year19831986198919921995199819992000World3,3896,51411,71410,93317,78826,94836,14932,260Market capitalizationUnitedStates1,8982,6373,5064,4856,8581 3,45 11 6,63515,104Emergingmarkets672387389911,9111,8553,1522,740World1,2283,5747,4684,78310,22722,57530,36047,870Trading volumeUnitedStates7971,7962,0162,0825,10913,1481 8,5743 1 ,862Emergingmarkets25831,1666281,0462,4153,1114,052Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pubSource: IFC (1992, 1995,2001).