Benn Steil

Geo-Graphics

A graphical take on geoeconomic issues, with links to the news and expert commentary.

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Showing posts for "Emerging"

Venezuela’s Risk Unhinged

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2009.12.16.VEN

The credit risk of oil exporting countries such as Venezuela and Russia tends to move with the price of oil. As a country’s oil export revenue improves, so does its ability to pay its debts. Recently, however, Venezuela’s CDS spreads have increased even while the price of oil has been stable. The market’s perception of an increased risk of default coincides with the Venezuelan government’s move to close banks representing 8% of the country’s deposits. On Tuesday December 15th the Venezuelan National Assembly passed a law increasing depositors’ insurance in an effort to prevent a run on the banks. Problems in the financial sector have become the primary driver of Venezuelan sovereign credit risk. Read more »

Emerging Markets and World Growth

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domesticdemandcontribution

With the United States and other developed countries no longer serving as the engine of global demand growth, a new source of growth is needed. In the past few years, emerging markets have been an important source of global demand growth. The IMF expects this trend to continue, with demand in the emerging world recovering faster than demand in the advanced economies. Read more »

BRIC’s Dollar Assets

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bricfx3

Brazil, Russia, India, and China have increased their holdings of foreign exchange reserves significantly over the last decade. But China stands out when it comes to financing the United States. China’s holdings of U.S. financial assets have increased dramatically since 2000. Brazil and Russia have also significantly increased their holdings of U.S. financial assets, but their aggregate increase is still small relative to that of China’s. Read more »

Eastern European Woes

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Many Eastern European countries have a strong need for external financing. Negative current accounts and dangerously high levels of short-term debt are raising fears of financial instability. EU leaders on March 1st rejected calls for a $229 billion rescue fund for struggling economies in the east. Instead of a single plan for the region, the EU will be taking a case-by-case approach. The following articles discuss the problems facing Eastern Europe. Read more »

Shrinking Reserves

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The experience of the 1997-98 East Asian crisis encouraged many developing countries to accumulate vast sums of foreign exchange reserves in order to self-insure against future crises. As our chart indicates, as of the end of November, emerging market countries were burning through these reserves. This crisis will put to test previous thoughts about necessary reserve levels and the efficacy of self-insurance. Read more »

Sovereign Wealth Funds and Transparency

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As the graph above indicates, there is a clear correlation between ‘democracy’ and ‘sovereign fund transparency’. However, the composition of countries with sovereign funds is shifting toward large, poor, and often autocratic countries whose interests are less aligned with the U.S. The articles below discuss how policymakers can act to address the transparency and security concerns raised by the growth of sovereign wealth funds. Read more »

Emergence of State Capitalism

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After years of celebrating the triumph of market capitalism, many of its advocates today are troubled by the emergence of ‘state capitalism’, particularly in the form of sovereign wealth funds. How should liberal capitalism respond when autocracy is the highest bidder? Is autocratic ownership dangerous to economic robustness? Read more »