Repercussions for emerging markets in America

Good news on jobs in America may fork out troubling repercussions for emerging markets

IN FINANCE as in medicine, legal profession is better than cure. The International Monetary Funds Global Financial stability motif, published on Tuesday April 6th, is the equivalent of a twice-yearly check-up for the international pecuniary system. At the moment, the system seems to be in rude health, the report says. The IMF does worry, however, that proper precautions for the future be not being taken. Unfortunately, in finance as in medicine, no one listens to the physician until nasty symptoms start to show.

As the report confirms, the past 12 months bugger off seen the re-emergence of emerging markets. A strengthening world economy has rediscoered an appetency for their goods, and a raging thirst for their bonds. Spreads--the premium creditors demand from emerging-market governments, over that asked of more trusted governments--have fallen dramatically, despite rising clean in February (see chart above). Brazils turnaround has been among the most dramatic. As a presidential candidate in 2002, Luiz Inacio Lula da Silva laid disordered(p) fear into the hearts of Brazils foreign creditors. But as president, in 2003, he raised $4.4 billion from them. Even Indonesia, laid low by the Asian financial crisis in 1997, got back on its feet in March with its first bond issue for 8 years.

The IMF publishes the Global Financial Stability report.



The Institute for International political economy publishes research and analysis on emerging-market economies. See also the valet de chambre Bank. The US Treasury Department provides news and information on the financial markets, including securities, Treasuries yields and public debt. The Federal Reserve sets monetary policy.

What explains this re-create enthusiasm for emerging markets? Their fundamentals have certainly improved. Exports are strong, public finances are more stable, and currencies more flexible. Countries that at one time sought to maintain currency pegs...

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