The Fractures in Latin American Finance

Latin American finance is strongly bank-oriented and dominated by local family groups. In recent years, however, sustained growth, changes in industrial patterns, and a surging middle class have increased the demand for better functioning stock markets and arm’s length access to finance. Meeting this demand is essential to sustain the process of economic growth in the region and may play a role in a regional political struggle between moderate social democracy and radical populism also known as the ‘battle for Latin America’s soul’. This paper throws some light on the mismatch between the supply and demand sides of Latin American finance, in an attempt to address the question of whether or not the promotion of domestic stock markets is a sound policy objective for the region.