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Big party, few guests

At first blush, capital markets in Latin America and the Caribbean look impressively vibrant. All but a handful of the region's countries boast functioning securities exchanges. According to the International Finance Corporation, by late October 1997 some $515 billion worth of stocks and bonds were listed on these exchanges, up from just $37 billion listed in 1987.

But a look at these same stock markets as they stood in December 1996 shows a high degree of concentration. The region's eight largest economies account for more than 90 percent of total market capitalization (a measure of the total value of listed stocks and bonds). Brazil represents slightly less than half of the total. Mexico, Chile and Argentina dominate the remainder, while exchanges in Colombia, Peru and Venezuela together have a market capitalization of just under $40 billion. Market capitalization in the rest of the region's countries combined amounts to a little more than $5 billion.

The concentration appears starker still when the market value of individual firms is taken into account. In a ranking of the region's top 100 publicly traded companies recently published by Latin Trade, a Miami monthly, 30 corporations in Brazil, Mexico, and Argentina accounted for around 45 percent of the region's $479 billion market capitalization in December 1996. The top 10 companies accounted for almost a quarter of the total. Even the sectors represented in the stock markets are highly concentrated: telecommunications firms alone represented more than $85 billion of the region's total market value; oil and electricity companies accounted for another $82 billion.

The concentration of Latin America's securities markets has been accentuated by comparatively slow growth in the number of new companies offering shares. Although the opening of new exchanges in many of the region's smaller countries helped boost the total number of listed companies from 1,746 in 1987 to 2,173 in 1996, the number in Brazil, Argentina and Venezuela actually declined during that period.

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