In countries like China and Mexico, where political transition took place in 2012, new leaders have had time to draw up detailed plans. Next up to the plate will be India and Indonesia, where elections are being held over the next few months for a combined population of almost 1.5bn people. In both countries, voter demand for change is thrusting reform-oriented candidates into the limelight.
Inevitably, though, there are always laggards. In Brazil and Turkey, the political response to the demand for change has been significantly less forthcoming. In both countries, elections are scheduled to take place later this year. However, as yet, the leading candidates have failed to announce any reform plans, and the risk of political unrest remains high. Still, Brazilian and Turkish interest rates have squeezed higher in an effort to attract global capital and stabilise the currencies, and this has diminished the risk of full scale balance of payments crises.
What does all this mean for global investors? Convergence will continue to pull these countries towards Western living standards, just as economic gravity continues to shift away from the West. And while the emerging market downswing gets into full gear, the reform fever sweeping across these countries only increases the speed at which convergence might take place.
Now, while fickle global capital remains disoriented by crises past, this could be the best time to hunt for long-term investment ideas.
Subitha Subramaniam is chief economist at Sarasin & Partners
