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Curtis Mewbourne discusses what Ecuador’s recent default means for emerging market investors in PIMCO's latest Emerging Markets Watch titled 'Rewind or Fast Forward?'

The document is available for download on the Opalesque site at the link below. Mewbourne further explains that "in emerging market external debt there will be a significant differentiation between the countries and companies that have access to insurance, either via selfinsurance or external support, and those that do not.

We would argue that default probabilities for countries like Brazil, Korea, Mexico and Singapore remain very low, and that current spreads for their sovereign debt represent a compelling risk/ return opportunity. At the other extreme, we would argue that access to finance will be significantly reduced for countries with unorthodox economic strategies, and therefore the possibility of defaults will likely increase markedly for these types of credits.

How emerging markets can break away from the current crisis

Second, extremely low policy rates in the US, Japan and Europe and the sharp slowdown in global economic activities will create the scope for lower policy rates across many emerging economies. Further, because the current global crisis started in the developed economies, the many emerging economies that entered this crisis with improved balance sheets have an opportunity to break from past crises, when the typical EM policy response......................

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