Apologies to those who have heard me make this argument and to those who have figured this out already. You all can stop here. Others may want to read on.

The Brazilian economy boomed in the decade that started in 2003. The story was they were selling iron ore and soy beans to China and this drove growth. Simple, intuitive, compelling–and demonstrably wrong.

Brazil’s a closed economy in terms of exports as a share of GDP, but, tellingly, it became even more closed over the course of the boom. In 2003, Brazilian exports amounted to 15% of GDP. And while this is fairly closed as economies go, the part that many will find counter-intuitive is that this ratio fell to 11% by the end of the boom. Even if you adjust for exchange rate/terms of trade moves, it strains credulity to ascribe the Brazilian boom to its exports.

What did drive growth, then? Simple: domestic credit. As part of the massive global financialization that led to the Global Financial Crisis in developed economies, emerging markets, importing many of the very same ‘financial innovations’, saw cohorts that had never previously had access to credit buy on installment. Successful macro stabilization polices across EM in the early 2000s added a Minsky element to the borrowing spree.

And boy did they go on a spree. Brazil, Turkey, South Africa, Korea, etc. ‘enjoyed’ unprecedented consumer credit booms. (China had a credit boom as well, but of a slightly different nature.)

In the case of Brazil, domestic credit to the private sector grew from 28% of GDP at the beginning of the boom to 70% by 2014. This series makes it pretty hard to argue Brazil’s boom was export led. (In the case of Turkey, this ratio went from 14% to 74% over the same period.)

This is not about making the bull case for Brazil. In fact, that it is about working out from under a rapid rise in domestic credit arguably makes it a tougher slog and more prone to policy errors. But if you understand that domestic credit to the private sector, not exports to China, drove the boom, you’ll have a better idea of what to look for when the next turn comes.