Topic- Are emerging economies dependent on US?

The spate of reports emanating since the beginning of 2008 that the largest Economy in the world, the US, is indeed headed for a recession has set the think-tanks the world over to ponder over the possible fall-out of this development on global economic prospects. One concept that has caught the imagination of the analysts is the possible 'decoupling' of the US from the major economies.

Decoupling has generally been referred to as the phenomenon because of which even though the US is experiencing a slow down, the rest of the world will hardly feel the impact of this development and would continue to grow and prosper. The proponents of this 'decoupling' thesis have argued, in particular, that the growth momentum achieved in the Bric countries will provide the necessary impetus to the global Economy for it to remain unaffected by the downswing in the US Economy.

Recent developments in at least two of the Bric countries—China and Brazil provide some support to the 'decoupling' thesis. In both countries, their external payments position has displayed significant positives. While in the case of China, the trade surplus has expanded at record levels for the third consecutive year in 2007, Brazil's central bank announced in a report that the country's debt crisis was over.

Brazil, which defaulted on its debt in the 1980s and declared a moratorium on debt payments, is riding a boom in demand for key exports such as beef, iron ore and soy. International reserves nearly tripled from $64 billion in 2003 to reach $188.2 billion last week. Contributing to the increase in reserves was when the country's trade surplus reached $40 billion last year. Coupled with rising foreign investment and fuelled by Brazil's high domestic interest rates, net currency inflows reached a record $87.5 billion in 2007.

Perhaps more importantly, the Brazilian central bank predicted that the country would become an external creditor for the first time ever in January 2009 by an amount of $4 billion and gain a strong buffer against adverse overseas events for the Economy in the year ahead. In the past couple of years, the rating agencies have been taking cognisance of Brazil's growing stature in the global Economy by upgrading the country's sovereign rating. In May 2006, for instance, Fitch Ratings upgraded the sovereign rating for Brazil to BB+ from BB, thus becoming the first ratings agency to put the country within one notch of investment... Source  (Financial Express)