By next year, three of the biggest and most important emerging markets will have had elections for president, in large part referenda on their move to free markets as well as free political systems.
The elections, the first of which occurred in Mexico last month, serve, in addition, as referenda on foreign institutional investors, such as those based in the United States.
None of the tests investors face in the daily movements in these markets provides a more significant judgment on a political and economic policy as an election does. Brazil will hold its presidential election later this year and Argentina next May.
Worries about emerging markets have been colored by "we've seen this before" scenarios. More recently, much of the worry concerns the big drop in the value of debt instruments, volatility in the equity markets, the assassination of Luis Donaldo Colosio, Mexico's leading presidential candidate, and the Chiapas rebellion.
But for investment managers to remove emerging markets from investor consideration would be an overreaction and would show a lack of understanding of the fundamental and sweeping changes taking place.
Despite their perceptions, investors haven't seen this particular kind of boom before. This boom is based on an infrastructure of thoughtful ideas and policies, grounded in free markets and political freedom, never so fully recognized before in these countries and, sadly, often not even in the United States, their model.
So far, the returns in these fastly advancing economies have, by and large, supported those decisions. But the elections provide a much more profound endorsement. The elections reaffirm, so far in Mexico at least, investors - through the storied invisible hand - are creating prosperity for the masses and not just capital market profits for capitalists.
Even though feel-good investing isn't the criteria ERISA pension sponsors or most other stewards of money should use, such progress provides an indirect sanction for such investments. The ultimate success of any system has to rest on the extent it is best able over other systems to improve lives. The elections demonstrate the stability of the systems, improving the prospects that such profiting will continue.
In many emerging countries, like Mexico, Brazil and Argentina, the capital markets are more open than their counterparts in many developed markets. Only a few years ago, these three were authoritarian regimes and, despite perceptions, mostly symbiosis of socialism and supermonopoly capitalism.
Brazil has its continuing political troubles but its new democratic system has performed well after impeaching last year its first president ever elected by popular vote. That hardly seems like a sign of vitality for the fledging democracy. But we can't think of any other country, even the United States, ever impeaching and then trying its chief executive, not to mention providing a smooth constitutional transition.
For its election, Argentina will have a direct referendum on the radical changes of President Carlos Menem, who revitalized his bankrupt country.
This optimism isn't to dismiss all worry, such as economic restrictions imposed by the Venezuelan administration, or the enriching lifestyles of South Africa's new political leaders. But no guarantee exists any government or market will remain stable or free. Even this country has seen its prosperity and freedom eroded by increasing government control and moves away from free markets.