Fulfilling the potential of Latin America's financial system - The McKinsey Quarterly - business management strategy - Economic Studies

Many Latin American countries have adopted economic reforms in the past 15 years, but their financial systems remain small.
The region’s lack of financial depth has significant consequences for the economy because small and midsize businesses find it hard to raise money.
The situation may improve. Since 2002 Latin America’s stock of financial assets has grown by 20 percent annually, up from just 5 percent from 1995 to 2002. Foreign investors are starting to take notice: inflows to stock markets and private-equity investments rose in 2005.
Is Latin America on the verge of a breakthrough? That depends on whether policy makers go on reducing the level of public debt while further reforming the financial and legal systems.

Note: This article includes translations in Portuguese and Spanish.

Exhibit 1: Latin America’s financial depth is low.
Exhibit 2: Latin America’s banking sector is notably underdeveloped.
Exhibit 3: Latin America has a smaller share of the rapidly growing volume of capital crossing global borders.
Exhibit 4: Latin America’s private sector receives little credit.
Exhibit 5: Latin America’s stock of financial assets has nearly doubled since 2002.