Latin American emerging economies have growth substantially during the last decade, gaining participation in international investors’ portfolios. The necessity of having more developed financial markets in these countries has been recognized not only by investors, but also by governments, which are mainly concerned to achieve sustainability of economic growth. Since this has become a common goal for governments in Latin America, financial integration and economic agreements have become part of the strategy for the development of the region. The objective of this study is to provide an overview of a current financial integration process, which is the Latin American Integrated Market (MILA) formed by Chile, Colombia and Peru, which is an initiative of the economic integration called the Pacific Alliance that also includes Mexico. The first stage of this integrated market, a common stock trading platform, offers possibilities of diversification for investors, becoming more attractive and developing financial markets size. However, there is a long way to go in order to improve the different dimensions of financial markets development such as depth, efficiency, access and stability. The study identifies the potentials of this integration, as a result of the member’s synergies and diversity, recognizing the advantages over other economic blocks in the region and the challenges for the future development that this market faces. This not only highlights the aspects that should be developed such as equity market and bond market, but also suggests new areas that have not been considered by this integration such as new financial instruments and potential additional markets. The findings in this study suggest that despite the notorious individual economic growth of each MILA country and that their integration has allowed them to compete against the giant in the region, Brazil, the full potential of the integration has not been materialized. MILA has only advanced 20%, which is the result of the abolition of several direct transaction cost and the integration of stocks systems, but advancing the remaining 80% will require more complex developments such as homogenization of financial regulation, financial reporting and economy policies, which are the cause of several barriers for financial integration. As it is concluded through this study, as countries’ economic development increases, the importance of financial markets increases. Therefore, policy makers will need to continue improving financial markets, so they do not become a limiting factor to the economic development.
|Educations||MSc in Finance and Strategic Management, (Graduate Programme) Final Thesis|
|Number of pages||161|