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Is the rapid rise of BRICs sustainable?
April 9, 2008
The economies of Brazil, Russia, India and China are growing with what appears to be no end in sight, but is this trend truly sustainable?...and I don't mean like the environmental movement.
According to a new report by London-based Business Monitor International (BMI), these four nations' GDPs will collectively rise 8% a year to 2012. But as the package-printing and converting industries become more and more global with offshore outsourcing and new greenfield plants in far-flung locales, will US converters and investors keen to exploit these new markets leave themselves dangerously exposed to the first major Emerging Markets crisis of the 21st century?
Of course, the potential rewards are staggering, says BMI. Forecasts for nominal GDP of the BRICs will triple between 2006 and 2012 to US$15.4 trillion, with combined exports of US$3.6 trillion boosting domestic growth and creating a whole new generation of consumers. "At a time when growth is slowing in Europe and the US, the BRICs are a uniquely compelling growth opportunity for companies able to penetrate these largely virgin markets," says Terence Alexander, BMI head of country risk.
What are the risks? The economies of China and India, whose recent growth has been triggered by investment and exports of manufactured goods, are vastly different from resource-fuelled Russia and, to a lesser extent, Brazil. Any strategy to exploit the BRICs must take into account the unique risks faced in each, most notably the dangers to oil-price stability for Russia and the immaturity of financial markets, calls for higher wages and recent inflationary pressures for China. Throw in fears of further economic nationalism in Russia and the labyrinthine bureaucracies of China and India and anybody investing in the BRICs better think and plan for the much longer-term...not just the next financial quarter or two.
Posted by Mark Spaulding on April 9, 2008 | Comments (2)
In response to: Is the rapid rise of BRICs sustainable?
Observer commented:
Economies need a jump start about two decades so new generations can come out with different and confident attitudes. Starting with the 1990s and continuing to the 2000s, the West provided this. Now these countries have their own dynamic internal markets. And more importantly, they're starting to spend rather than the old habit of saving. Especially true for the younger generation, while the Western consumer is maxed out. Will there be a crash? Less likely in the short and medium term. I am making these comments because I had talked with some Indian engineers with more spending power than their counterparts in UK. The attitudes have changed. When Indian companies buy out flagships like Jaguar/Land Rover and prowl for more. When on a dusty road a sight of a Mercedes or BMW doesn't stir the attention, then you know times have changed.
In response to: Is the rapid rise of BRICs sustainable?
Rohit Madan commented:
The growth rate in such countries as China and India with large home consumption is not only natural but imminent. However, in the long run, the political climate clubbed with the stability of the exchange will play a dynamic role, too, in keeping up or steadying the growth rate.