Flow of Capital Soars To 'Emerging' Nations; Private Investment Surge Echoes 1990s
Private investment is pouring into developing countries at the fastest rate since just before the Asian financial crisis of the late 1990s, according to a report released yesterday by the leading international association of financial institutions.</br></br>The trend has some of the features of a "bubble" that could lead to market turmoil in the future, the group's director acknowledged.</br></br>The Institute of International Finance Inc., which represents more than 300 banks, investment firms and other major financial companies, said the flow of private money to 29 "emerging market" nations reached $279 billion last year. That is more than double the 2002 level, and close to the $287 billion posted in 1997, the year that Thailand's currency collapsed, sparking a flight of capital from Asia. The record was in 1996, when $322 billion flowed into emerging markets.</br></br>The flow of capital has been especially strong in recent months to China and Russia, but was also up last year in Latin America, Eastern Europe, Asia and the Pacific, and Africa and the Middle East.</br></br>The pace will continue this year, according to the group's forecast. Net flows of private capital -- the amount of new private investment and loans less outflows and repayments -- will be $276 billion in 2005, the institute predicted.