When I think of “North American Powerhouse,” one name immediately comes to mind. Julio Cesar Chavez, the Mexican boxing champion. Over the years, there have been dozens of famous boxers, but Chavez always stood out to me as someone who fought in the lower weight classes but “punched above his weight.” In his prime, he was ranked the best “pound-for-pound” boxer, and at one point in his career, he had an 87-fight win streak. On the world stage, North America – like Chavez – punches above its weight.

North America has less than 7% of the world’s population, yet we account for more than 28% of the world’s economic output as measured by GDP. One underappreciated reason for the prosperity and success of North America is the strength of our public and private capital markets to facilitate entrepreneurship and innovation. Vibrant capital markets provide a crucial foundation upon which the economies of North America can continue to innovate, grow, and remain economically competitive in the 21st century. The combined market capitalization of companies listed on North American stock exchanges accounts for almost half of the world’s total. And that only includes large companies that sell their shares to the public.

While it is difficult to get accurate data on the economic value of small- and medium-sized enterprises (SMEs), it is almost certainly true that North America leads in that category, too. SMEs serve as both engines of innovation and economic growth. According to research by the Kauffman Foundation, SMEs account for all net new job creation over the past several decades. Moreover, Kauffman’s research shows that job creation at startups remains stable during recessionary years, while net job losses at existing firms are highly sensitive to the business cycle. In Mexico alone, it is estimated that SMEs generate almost half of the nation’s GDP, employing over a third of the workforce. Crucially, SMEs will likely provide a path towards prosperity for historically underserved populations. According to the OECD, when microenterprises are included, women account for nearly half of the entrepreneurs in Mexico.

Yet entrepreneurs, including those from historically underserved communities, often face significant hurdles in accessing the capital needed to grow their businesses. The rapid spread of financial technology firms (FinTechs) across North America over the last decade has helped alleviate some of this challenge, directly increasing digital inclusion and bringing capital directly to those in need. As sure as the financial industry must continually innovate to meet the needs of investors and entrepreneurs, so too must policymakers continually evaluate the efficacy of and, where necessary, update their regulatory frameworks to ensure that capital markets can continue to be available to those who need them when they need them. We have created multiple programs at the Milken Institute to accomplish this worthy goal. For example, our FinTech program seeks to educate policymakers and industry stakeholders on the impact of FinTech and its implications for public policy. The program promotes responsible innovation that improves access to capital, drives financial inclusion, and fosters transparency and compliance.

The Jumpstart Our Business Startups Act (JOBS Act), signed into law in 2012 in the United States, was a shining example of bipartisan policymaking focused on enhancing the capacity of capital markets to drive economic growth. It substantially improved access to capital and job creation by small businesses in the United States. The most successful title in the JOBS Act is Title I: Reopening American Capital Markets to Emerging Growth Companies. Title I created a new “emerging growth company” (“EGC”) designation for smaller companies going public and provided them with temporarily scaled disclosures (a regulatory “on-ramp”) and other benefits. Academic research finds that Title I significantly increased IPO volume overall and particularly impacted biotechnology and pharmaceutical companies. I recently had the privilege of testifying at a hearing in which the Financial Services Committee of the US House of Representatives explored ways to build on the success of the JOBS Act.

Similarly, I’ve watched with keen interest the developments in Mexico this year to update the Investment Funds Law (Ley de Fondos de Inversión) and the Stock Exchange Act (Ley del Mercado de Valores). Simplifying regulatory burdens, including registration processes, is crucial for many SMEs that could benefit from exchange-provided access to capital yet lack the expertise and resources to comply with time-consuming paperwork. Providing clear criteria and a path toward an initial public offering could jumpstart business startups in Mexico.

As North American policymakers consider reforms to improve access to capital for SMEs, I urge them also to consider reforms to provide more equitable opportunities for all North Americans to invest in those small and emerging companies. Retail investors across all income levels enjoy more choices and face lower costs and barriers when investing their hard-earned savings in public companies than ever before. The same cannot be said for opportunities for low-income investors to invest in private companies because legal and regulatory rules effectively prohibit them from investing in this high-growth sector of the economy.

Even well-intentioned investor protection policies can ultimately harm the very investors those policies are intended to protect for at least two reasons. First, because of the well-known risk-return tradeoff, prohibiting low-income investors from investing in high-risk securities is the same as prohibiting them from investing in high-expected-return securities. Second, applying modern portfolio theory, low-income investors are losing out on the risk-reducing benefits of portfolio diversification.

At the international level, multiple studies have shown that North American SMEs have been the biggest beneficiaries of free trade agreements. NAFTA and the USMCA have boosted the role of SMEs within the region’s economy. While strengthening capital markets and democratizing access to capital rightfully remains the remit of national regulators, the renewal process of the USMCA in 2025-2026 does present an exciting opportunity to comprehensively examine the linkages between capital markets and SMEs across the region.

In addition to multilateral free trade agreements, SMEs have also benefited from bilateral agreements. At last count, Mexico, Canada, and the United States each have over a dozen free trade agreements, and Mexico has agreements with 50 different countries. Free trade is just one example of how North America leads the world regarding economic freedom. According to the Heritage Foundation’s Index of Economic Freedom, Mexico, Canada, and the United States all rank well above the world average. Together, we are a solid counterbalance to more repressive and regressive forms of economic and political thought.

A better understanding of cross-border public offerings and the interest of investors in engaging through North America, in the context of the USMCA, could help policymakers make more informed choices about increasing prosperity and democratizing capital across North America.

In Central and South America, we see countries embracing populist ideologies and demagoguery. We see emerging markets tempted by the promise of fast and easy foreign direct investment – no-strings-attached debt –to finance infrastructure. But we know that the reality is far from the promise. When these debts come due, the lenders will come knocking, and the debtors won’t have the option of not opening the door.

That is why it is so important for North America to continue to be the beacon of economic and political freedom for the rest of the world. All three countries have long histories of democratically-elected governments accountable to the people. All three countries have long histories of economic growth.

But we cannot rest on our laurels. Continuing to find ways to democratize capital markets, both for the job-creating entrepreneurs who need access to capital to grow their businesses and for the everyday North Americans to invest their hard-earned savings into those entrepreneurial businesses, is essential for continued economic growth and prosperity. The challenges for our shared future are great. But we will be up to the task if we continue to work together and if we – like Julio Cesar Chavez – keep punching above our weight.