Many Latin American economies have experienced significant reductions in growth recently, as a result of the end of the commodity super-cycle and the rebalancing of China’s growth, and a number of global banks have been leaving the region. Although Latin American countries were generally less affected by the global financial crisis (GFC) than other regions, the region continues also to suffer from the protracted sluggish growth in advanced economies. The timing may now be propitious for Latin American economies to work towards greater regional financial integration. Regional financial integration could facilitate the adoption of best practices by Latin American economies in such areas as supervision and accounting, inward investment, enable markets to achieve minimum viable size, and add a dimension of diversification, such that these economies would not rely solely on domestic or global developments, but could reap benefits from the economic stability of other countries in the region.
The Inter-American Development Bank (IDB) has been firmly committed to assist in the development of robust capital markets in the Latin American and Caribbean region. To this extent, for the last decade, IDB has been supporting the late MILA integration which became the Pacific Alliance financial integration initiative, as one of the central axis for the integration for the four countries. This IDB-SIPA Capstone project seeks to identify concrete steps that could be taken by governments and private sectors in the Latin America and the Caribbean, with the assistance of the IDB, toward faster functional integration of capital markets in the frame of economic development. The final report will provide specific recommendations on concrete steps to be taken by governments and private sectors in the LAC region (individually, by a sub-group of countries in the region, or for the region as a whole) and advise the IDB on how to best contribute for the necessary cross-jurisdictional cooperation among countries resulting from such recommendations. The idea is to obtain the “business case” for public policy and for the capital markets to integrate.