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August 2013 Global Economic Analysis (Overview)
The emerging markets have continued to weaken along with Europe, as the US economy and stock market gain more momentum.
India was the first of the three major emerging markets we cover to show weakness nearly two years ago, followed by Brazil several months later.
Over the past three years, capital inflows have been at the forefront of economic woes in many nations throughout the globe. However, India’s problems were largely internal due to a complete failure in leadership, business investment suffered as a result of the low confidence regarding the future business environment.
In contrast, Brazil’s problems were directly due to massive inflows of foreign direct investment, which at first aided the economy, but would later negatively impact export trade. The response by Brazilian officials sought to boost trade and domestic consumption, but it was too little too late. We have been warning readers about these risks for some time now.