Most firms headquartered in Latin America are not large enough to rank highly among the top firms in the world, and do not operate in industry sectors that are classified as rapidly growing. Most explanations for this do not assign a causative role. It is argued that those financial systems have played a role in determining the kinds of firms that obtained financing, and thus share the responsibility for the small number of world class, high growth, high valued-added firms in the region. This chapter argues that the national financial systems suffered from attributes that diminished their capability. Six attributes are identified, which would hinder the growth of these sorts of firms. Some of the attributes are well known (i.e., that Latin American national financial systems are small relative to the economies in which they operate, and suffer frequent collapses), while other attributes are less well known (i.e., that those financial systems tended to channel loans to plantations, mines, and firms that produce commodities). Evidence is presented indicating that four of the attributes do describe Latin American financial systems accurately. There are also arguments why the attributes would lead to the mix of firms observed today. The evidence is not complete enough to prove decisively that Latin America's national financial systems were the main determinants of the size and sophistication of the firms that have risen in the region.
Keywords: Latin America, financial systems, firm growth, causative role