Those interested in anniversaries are sure to note the impending decennial of the Asian Crisis, which started with the devaluation of the Thai baht on July 2, 1997. That seemingly minor financial contagion spread throughout the region, torching the currencies and exchanges of Malaysia and Indonesia. To shore up their finances, those economies held fire sales on assets, putting downward pressure on various commodities. That led, albeit indirectly, to the Russian default and the infamous collapse of the Long Term Capital Management hedge fund in 1998.
The culminating episode of this unfortunate period was the massive break of the Brazilian real (BRL) in January 1999. Brazil had been engaging in a policy of controlled devaluation throughout the 90s, but the dam broke on Jan. 12, 1999 when the currency began an abrupt slide from 1.211 to the dollar to 2.16 on March 1. Given the recent unhappy experience with the December 1994 Mexican peso collapse, it was reasonable to suspect Latin America in general, and Brazil in particular, might be facing something on the order of what happened in Asia eighteen months earlier.
It was a buying opportunity.
What makes this even more remarkable is how Brazil pulled itself together economically, politically and financially while still finding time to elect an avowedly leftist president, Luiz Inácio Lula da Silva, in October 2002. This date, coincidentally, marked the bottom of the global bear market in equities. Any dollar-domiciled investor who bought into the Brazilian stock market (the Bovespa, shown in as IBOV) enjoyed both a turnaround in the BRL and a bull market in Brazilian equities that dwarfed the total return on the S&P 500 in both BRL and USD terms.
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