Central American Linked Stock Exchanges `a Necessity'

Aug. 28 (Bloomberg) -- An integrated Central American stock exchange is ``a necessity'' to increase trading volume and attract foreign investors, the chairman of Panama's stock exchange said.

The exchanges of Panama, Costa Rica and El Salvador plan to integrate their operations, Ricardo Arango told a conference of the association of Central American and Caribbean stock exchanges, known as Bolcen, in Panama City today. An official of the International Monetary Fund said in separate remarks at the conferment that such a move may spur the region's expansion.

``Financial integration contributes to financial development and financial development has a profound effect on growth,'' IMF economist Hemant Shah said. The integration may take several years, he said.

Panama trading volume totaled $206 million last year and is about $69 million so far this year, according to Interbolsa SA. Trading volume in Costa Rica, Central America's oldest and largest stock exchange, is at $28.1 billion so far this year, according to the exchange. That compares with Brazil's daily average this year of $3.5 billion and $45 billion on the New York Stock Exchange, according to data compiled by Bloomberg.

``These markets are a new frontier,'' Rupert Stebbings, head of international sales at Interbolsa, Colombia's largest stock brokerage, said earlier. ``Individually, they've lacked the scale and liquidity needed for foreign investors to enter but combined they'll move onto Wall Street's radar screen.''

The Dominican Republic and Nicaragua are joining Bolcen, the association's chairman, Orlando Soto, told the conference in an opening speech.

To contact the reporters for this story: James Attwood in Santiago at jattwood3@bloomberg.net.