Emerging Markets’ Nirvana Lost
“Nirvana” is defined as the state of freedom from suffering. For emerging markets, that state is over; but, in some cases, their citizens – still feeling rich from cheap money and high export prices – have no inkling of the suffering that may be upon them.
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SANTIAGO – In the 1970’s, the great Yale University economist Carlos Díaz-Alejandro used to say that the combination of high commodity prices, low world interest rates, and abundant international liquidity would amount to economic nirvana for developing countries. Back then, no sensible economist believed that such a state of grace could ever arrive. Yet arrive it did, and over the last decade commodity-rich countries like Brazil, Indonesia, Russia, and South Africa enjoyed its abundant benefits with abandon.