Executive Briefings

Picture of Economies in Emerging Markets Coming Into Focus, And It Isn't Pretty

For years developing countries have been thrice blessed. First, near-zero interest rates in the U.S. drove investors into bourses from Mumbai to Mexico as they searched for higher returns. Next, China emerged as the trading partner of choice as it gobbled up Indonesian palm oil, Cambodian hardwoods, and Brazilian iron ore. Finally, with the exception of the Middle East, the politics of most emerging-market countries were stable. The blessings have run out.

In the eight weeks through July 17 investors pulled $40.3bn from emerging-market bond and equity funds amid signs that the U.S. Federal Reserve may start scaling back its stimulus effort. At roughly the same time, massive demonstrations in Turkey, Brazil and Egypt shook the foundations of power in those countries. Adding to the turmoil is a slowdown in China that's affecting exports, from coal to copper to potash.

These three challenges could feed off one another and have the potential to set back some emerging-market economies well into 2014. Developing nations deprived of cheap funding from the capital markets are punished far more during downturns than rich nations with extensive social safety nets like the U.S. or Europe.

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Keywords supply chain management, international trade, foreign direct investment, FDI in emerging markets, supply chain risk management, logistics & supply chain

In the eight weeks through July 17 investors pulled $40.3bn from emerging-market bond and equity funds amid signs that the U.S. Federal Reserve may start scaling back its stimulus effort. At roughly the same time, massive demonstrations in Turkey, Brazil and Egypt shook the foundations of power in those countries. Adding to the turmoil is a slowdown in China that's affecting exports, from coal to copper to potash.

These three challenges could feed off one another and have the potential to set back some emerging-market economies well into 2014. Developing nations deprived of cheap funding from the capital markets are punished far more during downturns than rich nations with extensive social safety nets like the U.S. or Europe.

Read Full Article


Keywords supply chain management, international trade, foreign direct investment, FDI in emerging markets, supply chain risk management, logistics & supply chain