Emerging Markets on the Rise as the Developed World Falters

Checking in from Cartagena, Colombia...

by Joel Bowman

Look out Greece! Here comes the IMF!

Newly appointed chief of the International Monetary Fund, Christine Lagarde, today urged Greece's political parties to unite behind the proposed, so-called "austerity" measures currently under debate in the nation's parliament in order to right the struggling nation's financial trajectory.

"If there is one message I have to send tonight," said Lagarde in an interview on French television channel TF1 minutes after her formal appointment, "it is to say the Greek opposition must join a national 'entente' with the party that is in power."

The chief's comments come just days after an assortment of financial ministers and policy wonks convened in Brussels to discuss a second bailout for Europe's problem child #1. Careful to play both sides of the coin, Lagarde went on to note that, "All lenders must come to Greece's bedside, but Greece must also be responsible and keep a close eye on its public finances, and those who are the most vulnerable."

Your editor has nothing against the recently promoted Frenchwoman, per se. She dresses with style. She'd probably make for nice dinner company. And we like it when stately ladies keep from dying their pretty grey hair blue. For these things, we're a fan. But we're not a fan of busybodying. Of politicking. Of sticking one's nose in others' business, financial or otherwise. And, since that's the IMF's primary task, we must take issue with Mme. Lagarde.

But there will be plenty of time for that as the euro-tragedy unfolds over the coming months...

Today, we're in quite a different part of the world. We write to you this afternoon from the old fort city of Cartagena de Indias, Colombia. Situated on the Caribbean Coast, to the east of Panama, Cartagena is home to just shy of a million souls. It's surrounding walls and barricades, first erected to ward off advances from pirates and French corsairs, are today thronged with lazily traipsing tourists and sunset-gazing locals, who walk arm in arm as the long afternoons fade behind the early evening storm clouds. The scene is peaceful to the extent that it's near impossible to imagine the place under siege, as it so frequently was during the Colonial and Viceregal eras. But then, it's difficult to imagine much about Colombia's past, both distant and recent, in the light of today.

For many people, Colombia is all about FARC rebels, warring guerilla groups and cocaine kings, like the infamous Pablo Escobar. But there is another, far more interesting story developing here. Colombia is a nation rich in natural resources - its main exports include petroleum, coal, coffee and other agricultural produce, as well as gold. It is also the world leader in emerald exports. Although still considered a "poor" country - adjusted for purchasing power parity, GDP per capita came in at slightly less than $8,000 last year, placing Colombia 82nd in the world – its trajectory is encouraging.

In stark contrast to much of Europe and the United States, Colombia is, if anything, having trouble keeping it's economy from growing too fast. (All governments, by their very nature, are forever having trouble with something...but that's a story for another day.) Colombia's officials had originally forecast a 4.5% growth rate this year, (following 2010's 4.3% figure) though central bank president, Jose Dario Uribe, recently hinted the economy may expand as much as 5.5% in 2011.

Unsurprisingly, therefore, investors have been keen to reward Colombia. Exports have more than doubled during the past five years, accounting for around one third of total GDP, and foreign direct investment has mushroomed in step. Even the ratings agencies - notoriously late on the scene, as we never tire of reminding readers – saw fit to upgrade Colombia's credit rating last month. (Standard & Poor's restored its BBB- rating, restoring the investment grade status lost in September 1999.)

The nation is also surprisingly stable, having never defaulted on its debt and never experienced hyperinflation...quite a remarkable feat for a South American country. According to Merrill Lynch, during times of crisis, Colombia has the fourth lowest risk of any country...not just in Latin America, but the world. And while, during the first few years of the new century, developed world countries were busy piling on ever more debt, Colombia's general government debt level actually fell 10 percentage points of GDP from 2003 to 2007.

In many ways, Colombia's story is the economic inverse of "developed" nations the world over. In the past, investors might have taken that to be a bad thing. Today, as they watch Europe coming apart at the seams, and the United States likely to soon follow, the Colombian image is beginning to look pretty darned good.