Posted by: Dark Defender | October 6, 2008

The credit crisis and the developing world

I saw this very interesting article on how Iceland is near bankruptcy, it makes sense as a smaller economy it would be pushed to the brink faster.  It made me wonder however how the developing world is doing.

It would appear that thus far the developing world is weathering the storm fairly well.  Though the World Bank is calling for reform (as usual).  I would imagine its because they are more cautious and less connected like the South African banking system appears to be. 

In the short and medium term however I would imagine that Western credit is going to dry up, developing countries are a greater risk after all.  If California is having trouble issuing new bonds, surely Chad will also.

That may not be the case however.  China is already active in the area, and there are good strategic reasons for them to pump money into the developing world as Western credit recedes.  It not only reinforces their relationships with the existing clients (who are often raw material providers China counts on), it expands their influence to new areas, it blocks a return of Western influence and most importantly it is potentially very profitable (bigger risks bring bigger rewards). 

Growth in resource exports

Growth in resource exports from Africa

I wonder how active, India, Brazil and others big developing countries will be in this area.  It will be interesting to see how this develops.  This is all going on under the radar right now while we panic over our own economies, but it could have real long term consequences.


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