Brazil, Russia, India and China -- the so-called BRIC nations -- may look to buy the debt of troubled European countries. But will it end the euro crisis?
NEW YORK (CNNMoney) -- In the late 1980s, developed nations helped bail out Latin America and other emerging markets.
The issuance of so-called Brady bonds (named for the former Reagan/Bush-era Treasury secretary) enabled Brazil and other debt-laden countries to find a way out of the fiscal abyss.
With Europe's credit and banking crisis seeming to get worse by the day, there are now several reports that Brazil -- as well as Russia, India and China -- may look to buy up a portion of sovereign debt from troubled European nations. You could a call it a BRIC Brady bond plan for the 21st century.
"Capital is flowing from lesser developed countries to higher per capita income countries. We are not used to that," said Jeffrey Bergstrand, a professor of finance with the Mendoza College of Business at the University of Notre Dame." But it makes sense because of the dramatic shift in global wealth."
Although China premier Wen Jiabao confirmed at a World Economic Forum meeting Wednesday that it may step up its purchase of European debt, nothing is set in stone (or BRICs if you will.)
But a rescue of Europe by some of the more rapidly growing emerging markets would be a delicious twist. And it would also be a savvy move by the leaders of the developing world.
After all, it doesn't do Brazil any good if Europe is in such a mess that it starts to buy less oil. And all those "made in China" consumer goods? Europe (and the U.S., of course) is a big importer.
"It's an ironic turn of events. But emerging market sovereign wealth funds can invest in Europe to help keep their customers afloat," said Robert Howe, CEO of Geomatrix, an Asia-focused hedge fund based in Hong Kong. "It could stop the euro zone from freezing up, which would help keep their own economies from stalling."