What is an emerging market?

The term emerging market is used to refer to countries in which there is a process of economic opening, a transition with important reforms and a low per capita income. The reason is that, although the economy is improving, due to openness and reforms, these are countries with a large population. Precisely the disparity that usually exists between market growth and the way it affects the population, can constitute a stumbling block in the growth process. This type of economías they represent approximately one fifth of the world's economies.

Characteristics of emerging markets

Although, precisely because of the above, within this category large countries can be observed, such as China, or other very small ones. In the same sense, although in all cases there is a period of modifications, the stage in which each economy finds itself may be different. It is characteristic of countries that come from a closed economy or with little openness to the outside, however, they are in a process of economic reform, which can encompass different levels, and which, at some point, also affects the currency.

The reason is that there are investors with an interest in emerging markets. However, precisely because of their transitory period, they are markets that represent risks. Therefore, if the authorities of the corresponding country wish to benefit from foreign investments, at some point they reform their monetary system, in order to give security and stability to their currency, and not go so much, to the variations of the exchange rate. On the other hand, in these types of markets, internal investment also increases.

As a consequence of the above, the country experiences an increase in employment, greater availability and transfer of technology, and, subsequently, an increase in the Gross Domestic Product, and, as a consequence, also of the per capita income.

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