Emerging market borrowers have come through the summer storms battered but unbowed. This description could also apply to staff at the World Bank after the turmoil surrounding the forced departure of former president Paul Wolfowitz. Incoming World Bank head Robert Zoellick faces a difficult task in restoring morale among staff at the supranational agency, while not giving ground on the need to tackle corruption in its client countries.
Zoellick also has to continue the work of reshaping the way the World Bank pursues its goal of alleviating poverty. Some of this involves a move from direct lending to enabling World Bank clients to better manage their core risks. Evolving financial instruments that blend capital market and insurance industry techniques can play a role here, and IFR examines the successes and failures to date in using weather derivatives to manage emerging market risk.
The World Bank also has to adapt to changes in the political and economic backdrops in different regions. China is making an increasingly aggressive push into lending in Africa, as it pursues its political goal of securing access to natural resources. This complicates the task of traditional multilateral lenders like the Work Bank.
The growing maturity of the central and Eastern European components of the EEMEA market space is also bringing change to the role of the agency lender. For true emerging market exposure, equity and loan investors are beginning to look at sub-Saharan Africa. IFR examines those markets.
Specialist supranational institutions have also been forced to evolve. IFR looks at how the Inter-American Development Bank is attempting to shift from direct lending to fostering of securitisation markets, loan guarantees and local currency trades and also examines the Asian Development Bank's efforts to face up to the challenges that come out of Asia's growing prosperity.
We also look at the way major emerging market borrowers weathered the global crisis of confidence seen during the summer. Credit spreads for Argentina more than doubled as investors added concern about the effect of the coming presidential election on borrowing to the general worry that prices had rallied too far during the recent bull-run.
Brazil has also seen spread widening, but it remains the success story of the region. Clumsily handled regulatory reform is stalling the progress of some new capital markets in Brazil, but its economic fundamentals have never been better.
Like other Latin American countries, Brazil has moved to free itself of dependence on the IMF by paying back money it owed to the fund.
A major driver of this trend has been Venezuela’s Hugo Chavez, who has been willing to throw the country’s oil wealth behind a move to reduce reliance on the IMF. IFR looks at whether this spending spree is sustainable, and how it changes the dynamics of emerging market funding.