Street Revolt

President Dilma Rousseff, in the aftermath of Brazil’s biggest street revolt in more than 20 years, vowed to keep a lid on spending even as she addresses protesters’ demands for better schools, hospitals and public transportation. She’s also begun unwinding capital controls put in place during the past five years to protect Latin America’s biggest economy from what she’s called a “currency war” unleashed by rich countries.

The unrest and sluggish growth in emerging markets, which now account for nearly half the world’s economic output, threaten to erode company profits. Coca Cola Co. Chief Executive Officer Muhtar Kent said July 16 that the protests in Brazil and the Middle East contributed to an “unusually weak” second- quarter performance.

$10 Daily

The expansion of the middle class -- defined by the World Bank as earning more than $10 a day in Latin America -- is reshaping politics around the globe, according to South African Finance Minister Pravin Gordhan.

“It creates anger that some people are getting away with a lot of the growth process and others not so,” he said in a July 19 interview from Moscow.

About 50 million people in Latin America alone rose out of poverty during the past decade, joining a group that now accounts for 30 percent of the region’s population, the World Bank said last year.

To be sure, emerging markets aren’t heading toward another 90s-style balance-of-payments crisis, said John Williamson, who retired last year as a senior fellow at the Peterson Institute for International Economics in Washington. Two decades ago, he coined the term “Washington consensus” to praise the free- market policies then being embraced around the world.

Original Sin

Governments that committed the so-called original sin of selling bonds in dollars have reduced their external vulnerabilities by building up record currency reserves and issuing more debt locally. Most countries also have embraced free-floating exchange rates, and inflation in emerging markets, averaging 5.9 percent according to the IMF, is less than half 1995-2004’s 13.1 percent.