“One effect of these bailouts that appears unclear is how they will affect emerging markets, which are at present the source of highest economic growth in the world,” said Dr. Mirtchev. “Some emerging markets, such as Korea, Russia and Kazakhstan, that are essentially dollar-based economies, have a pronounced liquidity problem — the local banks, which dominate the market, do not have enough cash to maintain their existing debt obligations, and there are no visible options for obtaining additional external financing. Other emerging markets, such as Brazil, Chile and Argentina, have a more cash-rich banking basis, and the dearth of liquidity will not be so visibly felt for a much longer period — in other words, the period of economic slowdown in these countries would either be prolonged or economic recovery would come much later.”
While Worldwide “Bailout Packages” are Perceived as a “Necessary Evil” there is a Hefty Price to be Paid
Today, Dr. Alexander Mirtchev, founder and chairman of the Krull Corporation and an economic expert on emerging markets, expressed uncertainty on the numerous bailout packages established by European nations and the United States. Dr. Mirtchev is also the chairman of Kazakhstan’s development bank, Kazyna.
“One effect of these bailouts that appears unclear is how they will affect emerging markets, which are at present the source of highest economic growth in the world,” said Dr. Mirtchev. “Some emerging markets, such as Korea, Russia and Kazakhstan, that are essentially dollar-based economies, have a pronounced liquidity problem — the local banks, which dominate the market, do not have enough cash to maintain their existing debt obligations, and there are no visible options for obtaining additional external financing. Other emerging markets, such as Brazil, Chile and Argentina, have a more cash-rich banking basis, and the dearth of liquidity will not be so visibly felt for a much longer period — in other words, the period of economic slowdown in these countries would either be prolonged or economic recovery would come much later.”
Other emerging market players have worried the bailout instituted by the U.S. and European governments will give a demonstration to those governments that have been slow to institute market principles in their economies that they might not have been in the wrong. Dr. Mirtchev said, “It would provide banks and institutions that should have died a natural death a ‘stay of execution’ that would irreversibly extend the downward pressure on the local economies, thus lengthening any economic downturn that these economies may be suffering due to the fact that the surviving banks that hold bad assets will continue to hold those bad assets for a longer period of time.”
Dr. Mirtchev did express confidence in the long-term stability of energy-rich economies such as Russia, Bolivia, Mexico, and Kazakhstan. He asserted that with the concept of increased debt by U.S. and European countries, investors would look toward productive assets such as oil. Dr. Mirtchev also made comments on the oil issue to Focus Washington’s Chuck Conconi, the interview can be viewed at www.youtube.com/focuswashington
For more information, visit www.KrullCorp.com.
About Krull Corporation
Krull Corporation is a Washington, D.C.-based advisory and project management firm with expertise in dealing with economic growth, industrial expansion and restructuring issues. Founded by Dr. Alexander Mirtchev in 1992, Krull Corporation capitalizes on his extensive professional experience in market developments and reforms and focuses primarily on emerging and transitional economies. Over the years, the firm has provided its clients with outstanding strategic guidance and professional services in various areas. Combining a unique blend of global reach and understanding of local markets, Krull is able to consistently produce high quality results and returns.