| Rio de Janeiro: foreign investment may soon dry up |
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Emerging-market professionals in both the private and official sectors are losing a lot of sleep about the prospect of a Brazilian default. They're justifiably worried that such an event would mean the end of emerging markets as an asset class, at least for countries with less than an investment-grade credit rating. That would not only mean thousands of Wall Streeters losing their jobs but could have much more profound consequences for the wider world. If flows to developing countries dry up, the prospects for sustainable growth in entire continents such as south America will evaporate.
To be sure, the emerging markets have heard such forecasts more than once in the past few years, and each time they have emerged intact. But the fact remains that even if the chaos were confined to Brazil, a major crisis there would be devastating for emerging markets.