Emerging Capital Markets and Globalization: The Latin American Experience (Latin American Development Forum)

✍ Scribed by Augusto de la Torre, Sergio Schmukler,

• Publisher: World Bank Publications
• Year: 2006
• Tongue: English
• Leaves: 232
• Category: Library

✦ Synopsis

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.

✦ Table of Contents

Contents......Page 9
Foreword......Page 13
Acknowledgments......Page 17
About the Authors......Page 19
Abbreviations......Page 20
1 Whither Capital Market Development?......Page 21
Why Does Financial Development Matter?......Page 25
Evolution and Globalization of Capital Markets......Page 28
Main Developments in Domestic Capital Markets......Page 33
Factors behind the Development and Internationalization of Capital Markets......Page 35
Policy Implications......Page 39
Conclusions......Page 41
2 Developments in Capital Markets......Page 45
The Global Context......Page 46
2.2 Stock Market Development in Selected Developed Countries, 1975–2003......Page 50
2.10 Capital Market Reforms in Latin America......Page 63
Participation in International Capital Markets......Page 92
Conclusions......Page 100
Annex: When “Marking to Market” Becomes “Marking to Model”......Page 101
3 Factors behind the Development and Internationalization of Capital Markets......Page 103
Factors behind Capital Market Development......Page 105
Stock Market Internationalization......Page 130
Domestic Capital Market Development in Latin America......Page 149
Conclusions......Page 151
4 Whither the Reform Agenda?......Page 159
What Went Wrong and What to Do Next?......Page 164
Back to Basics......Page 172
Final Remarks......Page 182
Annex: Regional Capital Markets Integration—A Viable Alternative?......Page 184
Endnotes......Page 187
References......Page 205
Index......Page 223
2.1 Capital Market Development in Selected Developed Countries, 1975–2004......Page 47
2.3 Bond Market Development in Selected Developed Countries, 1994–2004......Page 51
2.4 Net Capital Flows to Developing Countries, 1970–2004......Page 53
2.5 Private Capital Flows to Developing Countries, 1976–2004......Page 54
2.6 Financial Liberalization Index, 1973–2001......Page 56
2.7 Relation between Reforms and Capital Market Development......Page 59
2.8 Cumulative Amount Raised by Privatization in Latin America, 1988–2003......Page 61
2.9 Pension System Reform in Latin America......Page 62
2.11 Institutional Reforms in Latin America, 1984–2004......Page 64
2.12 Capital Market Development in Latin America......Page 66
2.13 Stock Market Development in Selected Regions, 1978–2004......Page 67
2.14 Bond Market Development in Selected Regions, 1990s to 2004......Page 69
2.15 Development of the Credit Market, 1978–2004......Page 70
2.16 Stock Market Concentration of Top 10 Firms in Selected Markets, 2004......Page 71
2.17 Average Bond Maturities in Latin America, by Jurisdiction......Page 73
2.18 Trading of Futures Contracts, 2004......Page 75
2.19 Structured Finance in Latin America......Page 77
2.20 Stock Market Listings between 1990 and 2004......Page 79
2.21 Composition of Mandatory Pension Fund Investment Portfolios in Latin America, Year-end 2005......Page 81
2.22 Development of Domestic Capital Markets of Selected Countries, Year-end 2004......Page 83
2.23 Bond Issuance by Chilean Firms, 1995–2003......Page 85
2.24 Mexican Corporate Bond Market Concentration......Page 91
2.25 Internationalization of Stock Markets in Selected Regions, 1990–2000......Page 94
2.26 Internationalization of Stock Markets Relative to GDP, Selected Years......Page 95
2.27 Internationalization of Stock Markets Relative to Domestic Activity, Selected Years......Page 96
2.28 Internationalization of Bond Markets Relative to GDP, Selected Years......Page 98
2.29 Internationalization of Bond Markets Relative to Domestic Activity, Selected Years......Page 99
3.1 Relation between Domestic Stock Market Development and Income Level......Page 107
3.2 Relation between Domestic Bond Market Development and Income Level......Page 108
3.3 Relation between Domestic Stock Market Development and Fiscal Deficit......Page 110
3.4 Relation between Domestic Stock Market Development and Securities Market Regulations......Page 111
3.5 Relation between Domestic Stock Market Development and Size of the Economy......Page 113
3.6 Relation between Domestic Bond Market Development and Size of the Economy......Page 114
3.7 Relation between Government Bonds Outstanding, by Currency, and Size of the Economy......Page 117
3.8 Relation between Government Bonds Outstanding, by Currency, and Size of the Domestic Financial Sector......Page 118
3.9 Currency Composition of Government Bonds: Relation with GDP and Total Deposits......Page 120
3.10 Currency Composition of Government Bonds: Relation with Exchange Rate Regime and Government Notes and Bonds......Page 121
3.11 Relation between Domestic Stock Market Development and Privatization......Page 127
3.12 Relation between Domestic Stock Market Development and Introduction of Electronic Trading Platforms......Page 128
3.13 Relation between Domestic Stock Market Development and Institutional Reform......Page 129
3.14 Stock Market Internationalization Relative to GDP: Relation with GDP per Capita and GDP......Page 133
3.15 Stock Market Internationalization: Relation with Equity Flows and Fiscal Deficit......Page 134
3.16 Stock Market Internationalization: Relation with GDP per Capita and GDP......Page 136
3.17 Stock Market Internationalization: Relation with Equity Flows and Growth Opportunities......Page 137
3.18 Relation between Stock Market Internationalization and Domestic Stock Market Development......Page 138
3.19 Relation between Stock Market Internationalization and Stock Market Liberalization......Page 140
3.20 Relation between Stock Market Internationalization and Reforms......Page 141
3.21 Relation between Stock Market Internationalization and Stock Market Liberalization......Page 143
3.22 Relation between Stock Market Internationalization and Reforms......Page 144
3.23 Actual and Predicted Domestic Stock Market Development, Selected Latin American Countries......Page 152
A.1 Economies Included in the Analyses......Page 154
A.2 Economies That Implemented Reforms, and Year Implemented......Page 156