This content is from: Local Insights


Until the early 90s, Uruguay's capital markets looked modest. Most securities traded were public instruments issued by the Central Bank; and not many companies quoted their stock on the Montevideo Stock Exchange, the one stock exchange in place.

Since 1993, the securities market has grown continually for these reasons:

  • the stock markets of neighbours Argentina and Brazil have developed;
  • the new Bolsa Electronica de Valores stock exchange was established;
  • institutional investors have emerged which either did not exist until then or were prevented from investing in securities;
  • the Securities Market Act established a comprehensive and transparent legislative body for the securities market.

Consequently, local and foreign companies started to issue securities through the capital markets instead of the traditional banking system. To encourage the stock market, the Executive Branch issued Decree No. 146/97 of May 7 1997, and the Central Bank issued Circular No. 1554 of June 26 1997 on how to register a statistical rating entity. No rating companies are yet registered under the Circular. The one rating company operating in the market is in the process of adjusting its by-laws and rating mechanism for registration.

Under existing regulations, an official rating and risk assessment is not mandatory for traded securities but the consensus among market operators is to change this. To make rating easier, the Central Bank may allow international rating companies to operate from their foreign premises, without establishing a local presence. The Circular allows local nominative-share corporations and representatives of foreign rating companies to register with the Central Bank. Applicants must submit procedural manuals and rating methods, the rating categories used, and a list of senior individuals. Where these individuals act ad hoc, except in US SEC-registered companies, their appointment must be reported to the Bank's Capital Markets Division.

The Circular requires rating companies to carry a ledger of rating opinions, specifying their information source and the assessment criteria used. Rating opinions must be forwarded to the Central Bank within 48 hours of issue, with a statement signed by the acting professional that there is no conflict of interest prejudicing the opinion. The relevant stock exchange must also be informed. The rating opinions are publicly available in the Central Bank Registry and stock exchange bulletins. The public information includes the name of the rating, the security rated, the rating obtained and its significance, and a clarification that it is not a recommendation to invest.

Banks, insurance companies, pension funds, issuers of securities, stock exchanges and stockbrokers, as well as their respective directors, officers, employees and counselors, are prohibited from being shareholders, directors or employees of the rating companies. Rating organizations must refrain from investing in the securities they have rated; using the information obtained for their own benefit or the benefit of third parties; and rating the securities issued by relationship companies in a way that compromises their independence.

Jonas Bergstein

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