Privatization in Latin America: New Roles for the Public and Private Sectors

By Werner Baer; Melissa H. Birch | Go to book overview

Mexico may have already faced north through the North American Free Trade Agreement. However, South American countries with companies that have significant potential, need to address the reality that their equity markets are too small to give them the liquidity needed by international investors, or the safe haven required by domestic investors.

In addition to a cross-border market, investors in Latin American markets, indeed in all markets, need to face the new reality of global capital markets. That reality is that what happens in one country has an effect, which may be immediate and profound, on the market in another.33 Governments and local investors must face the impact that increasingly-integrated global capital markets can have on local markets. Increased interest, capital, and integration, comes at the cost of increased outside influence. Larger markets provide that buffer.


CONCLUSION

What is needed in Latin America is new capital for Latin American companies. Such capital must not "fly" out of companies when investors change their interest in the company or the economy; it must become more independent of the investors' desire to sell or buy; and it must come at the cost of votes and integration into the global economy. I believe that Latin America is poised to gain real and permanent access to such equity markets. The challenges are for corporate owners to share control with new investors, for governments to allow local capital market conditions to be significantly influenced by international investors, and for the region to found a liquid, cross-border market of lasting interest to international investors.


NOTES
1.
Of course, the success was recently tempered with a bout of the volatility, which is inherent in emerging markets.
2.
See, for instance, Foxley ( 1987), who, among many others, described the events that brought financial market instability to corporate financing in Latin American countries.
3.
This is also a time when markets in many countries such as South Korea and Taiwan were becoming attractive to larger investors.
4.
The last great capital expansion was in hard assets, such as railroads and steel mills. The capital expansion and change discussed in this chapter involve assets that are financial, technological, and intellectual, and are thus much more difficult for governments to measure, monitor, or control.
5.
Trading and arbitrage activities generally have high returns, coupled with high degrees of risk.

-177-

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Privatization in Latin America: New Roles for the Public and Private Sectors
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures and Tables vii
  • Preface xi
  • Notes xiii
  • 1 - Privatization and the Changing Role Of The State in Brazil 1
  • References 18
  • 2 - Privatization and the Role of the State In Post-Isi Mexico 21
  • Notes 41
  • 3 - The Regulation of Newly Privatized Firms: an Illustration from Argentina 45
  • References 68
  • 4 - Privatization: the Role of Domestic Business Elites 71
  • Notes 91
  • 5 - Foreign Direct Investment in Latin America During the 1990s 95
  • Conclusion 112
  • Notes 113
  • References 114
  • 6 - The Financial Sector in Latin American Restructuring 117
  • Notes 131
  • Notes 132
  • 7 - Privatization with Share Diffusion: Popular Capitalism in Chile, 1985-1988 135
  • Conclusion 153
  • Appendix 155
  • Acknowledgements 158
  • Notes 159
  • Refferences 160
  • 8 - Liquid Equity Markets as an Engine For Long-Term Growth in Latin America 163
  • Notes 177
  • Notes 180
  • 9 - Privatization in Spain 183
  • References 200
  • Selected Bibliography 201
  • Index 207
  • About the Contributors 213
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