The two sides of emerging markets
Some emerging markets have found the route to salvation, others are a whisker from damnation. By Michael Peterson
Investors who owned single-B Ecuador bonds and double-B Mexico debt at the beginning of 1999 might have been forgiven for thinking that their holdings were in the same asset class. But these two Latin American countries have taken very different paths since then. While Ecuador left investors shell-shocked by becoming the First country in 50 years to default on its international bond obligations, Mexico has become one of the stars of the emerging markets.
Even before Moody's upgraded Mexico to investment grade in March this year, the country was borrowing like a member of the world's developed elite. Earlier that month the country issued a e1 billion 10-year bond priced at 210 basis points over German government bonds. Not a bad spread for a country that suffered a devastating currency and banking crisis only six years ago.
In some ways, Poland's transformation has been even more dramatic.