Brazilians fret, reasonably, that faster rate rises will attract even more foreign capital.
Fat corporate profits are paying for mergers and acquisitions, which bring even more foreign capital into France.
Even if foreign capital is not a big part of the wager, the odds are that India will embrace modern retailing.
It might even attract foreign capital into rupiah-denominated bonds, shares and direct investments, avoiding the currency mismatches that doomed the country in the late 1990s.
Many believe Standard & Poor's will follow Moody's and upgrade Mexico's sovereign debt to "investment grade," which will bring in even more foreign capital.
But loose monetary policy in the rich world makes it hard for emerging economies to tighten even if they want to, since that would suck in even more speculative foreign capital.Walking a fine lineWhether the world economy moves smoothly from the Great Stabilisation to a sustainable recovery depends on how well these divergent challenges are met.
"Even if all foreign capital went away," says Tim Rucquoi-Berger, an entrepreneur who restructures and sells SOEs, "they would still do it in fact even more".
Many of the national stock markets are very small — the Ho Chi Minh index has 118 companies, many of them worth less than $1 million — and even a little foreign capital can drive them up rapidly.
But even in Brazil, foreign capital accounts for only about 10-20% of bank-funding needs.In this section Keeping their fingers crossed In good faith Reprints Related items The credit crunch: World on the edgeOct 2nd 2008Equity markets in Latin America are shallow (apart from in Brazil), which reduces the chances of one path of infection.
If the European crisis deepens, the Indian trade deficit would widen even more rapidly, and India would have even more trouble attracting foreign capital.
