Latin American Bond Markets - Essay Example

an that, it examines Latin Americas international capital markets access starting 1980 to 2005 while dwelling mostly on the role of factors both domestic and external. Since the nineties, several of the Latin American countries have undertaken major policy reforms directed at ensuring the development of bond markets that had previously been non-existent. This has resulted, decades later, in an unevenly developed bond market, with thriving government and private bond markets that are still yet to be consolidated.

These markets mainly concentrate on small numbers of large suppliers and show spurs in monetary growth that is unsustainable over time. As such, in several of these countries, bank credit is still the main source of financial credit to date. However, market based financing has experienced a lagging performance. Several efforts to explain this lag in performance have been made, none of which has explicit focus on the bond markets. This has left many questions regarding these markets unanswered.

1Empirical approaches to the capital markets have been descriptive with no intent to pursue models looking into market participant behavior. This raises the question as to whether, basing on policy, private bond markets development is crucial for the growth and development of economies of the involved countries, and if so, to what extent? In recent years, domestic bond markets in Latin America have constituted a growing finance source for the economies of respective countries and for global investors, a portfolio allocation.

This brings up the question as to whether the region’s countries can borrow, at longer maturities, in local currency. Over the past decade, domestic issuance of securities has had a rapid expansion. This growth has led to fixed income markets domination as a funding source for both private sector and public sector. It is clearly evident that bond markets in Latin America have a long way to go in as far as policy reformation is concerned.