Latin American Capital Markets

ForewordDuring the past two decades, despite suffering damaging financial crises, the countriesof Latin America and the Caribbean have introduced important reforms in their financialmarkets, encompassing changes in the legal and regulatory framework, ownershippatterns, and market infrastructure.The regulatory frameworks have evolvedfrom monopoly and public ownership settings lacking specific regulations, toward scenarioswhere private participation prevails, with supervision, regulation, and competitionplaying complementary roles. However although legal reforms, regulation, andsupervision are pivotal features in reform processes, financial and capital markets inthe region have fallen behind, and have not provided necessary financing to enhancecompetitiveness and spur economic growth.Without effective legislation and enforcement to promote reform and politicalvision accompanied by strong leadership, the situation could become worse, restrainingmarket discipline and further reducing the capability of the economies of theregion to operate effectively in an increasingly global economy. Moreover, several factors—theregion's poor performance compared with other parts of the world; thediversity of experience across countries; the complexity of public policy dynamics; andthe scarcity of human, financial, and institutional resources—complicate the ability ofcountries to implement adequate policies.The Inter-American Development Bank Group, which includes the Bank aswell as the Multilateral Investment Fund (MIF) and the Inter-American InvestmentCorporation (IIC), has actively promoted financial sector reform and recently hasconcentrated efforts on domestic capital market reform. A large number of specificand diverse operations have been approved during the past decade for capital marketdevelopment in the region, amounting to more than US$9 billion. This includesprojects that impact capital markets, such as pension reform, support for nationalsecurities commissions, development of primary and secondary mortgage markets,and insurance.In February 2001, a roundtable on capital markets offered an additional pushto the activities of the Bank in the area of capital market development. Almost at thesame time, the Private Sector Department of the Bank was authorized to enter intospecific financing operations aimed at developing local capital markets in the region.In addition, the MIF has been providing financial support for specific technical cooperationin various countries, including a continental training program for securitiessupervisors. Recently, the MIF launched a program, as part of its Cluster Action Plan,aimed at supporting the competitiveness of countries in Latin America and the Caribbeanthrough the adoption of internationally accepted standards, particularly in thearea of accounting and auditing.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub