Emerging markets are going through tumultuous times, as the tapering of the US Federal Reserve's quantitative easing programme has exposed countries that have been overly reliant on portfolio flows – or ‘hot money’ – to fund their current accounts. Lower levels of global liquidity along with better growth prospects and higher interest rates in the developed world have provoked an emerging markets sell-off. The currencies of developing countries have plummeted along with bond prices and stocks. In the two weeks to February 7, 2014, investors removed $12bn from developing country equities, as reported by Bloomberg.
Until early this year, Latin America was represented in a group of countries known as the ‘fragile five’ – so-called because of their exposure to the Fed's tapering – by Brazil (along with India, Indonesia, South Africa and Turkey). Now fresh concerns have added protectionist Argentina as well as Chile, traditionally a poster boy for economic development in the region, to the larger group of eight – which includes Russia too.