Emerging Capital Markets and Globalization: The Latin American Experience

by Stanford University Press, Augusto de la Torre, Sergio Schmukler

Overview

Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk. Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best. 'Emerging Capital Markets and Globalization' analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms. And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

Product Details

ISBN-13:	9780821365434
Publisher:	World Bank Publications
Publication date:	10/20/2006
Series:	Latin American Development Forum
Pages:	228
Product dimensions:	6.00(w) x 9.00(h) x 0.53(d)

About the Author

Augusto de la Torre is Senior Regional Financial Sector Advisor for Latin America and the Caribbean. Sergio Schmukler is a Senior Economist in the Development Research Group of the World Bank.

Table of Contents

Foreword     xi
Acknowledgments     xv
About the Authors     xvii
Abbreviations     xviii
Whither Capital Market Development?     1
Why Does Financial Development Matter?     5
Evolution and Globalization of Capital Markets     8
Main Developments in Domestic Capital Markets     13
Factors behind the Development and Internationalization of Capital Markets     15
Policy Implications     19
Conclusions     21
Developments in Capital Markets     25
The Global Context     26
Developing Countries in the Global Context     30
Developments in Domestic Capital Markets     43
Participation in International Capital Markets     72
Conclusions     80
Annex: When "Marking to Market" Becomes "Marking to Model"     81
Factors behind the Development and Internationalization of Capital Markets     83
Factors behind Capital Market Development     85
Stock Market Internationalization     110
Domestic Capital Market Development in Latin America     129
Conclusions     131
Whither the Reform Agenda?     139
What Went Wrong and What to Do Next?     144
Back to Basics     152
Final Remarks     162
Annex: Regional Capital Markets Integration-A Viable Alternative?     164
Endnotes     167
References     185
Index     203

Recipe

Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk.
Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best.
Emerging Capital Markets and Globalization analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms. And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

Editorial Reviews

"This insightful analysis of what went wrong in Latin America's capital markets since the 1990s is a must read for anyone interested in financial markets, international finance, or economic development. I learned an enormous amount from reading Emerging Capital Markets and Globalization and will recommend it highly to students and colleagues."—Ross Levine, Brown University

From the Publisher

"This insightful analysis of what went wrong in Latin America's capital markets since the 1990s is a must read for anyone interested in financial markets, international finance, or economic development. I learned an enormous amount from reading Emerging Capital Markets and Globalization and will recommend it highly to students and colleagues."

Brown University - Ross Levine