This Capital Access Index focuses on the impacts of recent events in Asia and Russia upon Latin America and the transition economies.
Both Latin America and countries of the former Soviet bloc have large, concentrated financial and industrial sectors, states that play major roles in the economy, corporatist or socialist institutions and traditions, and embryonic and still-fragile capital markets. In earlier research, we have shown how high levels of financial and industrial concentration, overdependence on bank debt, undeveloped markets, stifled financial innovation and over-regulation constrain capital access and economic growth. In finance, a run-up of short-term credit to finance long-term assets always predicts trouble. Yet, international banks prefer to promote such financing over fixed-rate, long-term financing. Financial crises unleash massive changes in investor risk, default, and liquidity premiums and the related social and financial costs in destroyed capital and jobs.
Our effort here is to disaggregate the impacts of such crises in Asia and Russia on these regions in transition from both socialist and corporatist states.