By MoneyMorning.com.au
Ed Note: David Thomas, BRIC expert and entrepreneur, gave a great presentation at ‘After America’, Port Phillip Publishing’s first investing conference. You can pre-order the After America DVD now to learn more about investing opportunities in these emerging markets.
Whilst each of the BRIC countries offer exciting opportunities for entrepreneurs, business leaders and investors, forward thinking companies will develop an overall BRIC strategy and focus on the following trends:
The annual BRICS Leader’s Meeting is laying the tracks for greater “intra-BRIC” trade and investment co-operation in the years ahead. This is vital to the global economy and a mega-trend for BRIC followers and observers.
With a combined GDP of $8.7 trillion in 2010, the BRIC economies already account for 45% of global economic growth, and the combined BRIC share of world trade increased from 6.9% in 1999 to approximately 14.2% in 2008. Furthermore, BRIC collective trade with the world increased almost six times from $790 billion in 1999 to $4.4 trillion in 2008.
Intra-BRIC trade, or trade among the BRIC members, has accounted for the fastest growth rate in global trade in the last decade, and is expected to continue as the BRIC economies become more dominant. According to the IMF, intra-BRIC trade, which is valued at more than $170 billion, has grown at the rate of 30% p.a. since 1999 and now accounts for 8% of global trade.
During the 10-year period up to 2009, intra-BRIC trade increased nine-fold compared to global trade, which only doubled over the same period. In recent years, Intra-BRIC trade has been mainly characterised by Russia and Brazil supplying natural resources to satisfy the industrial and infrastructural needs of India and China.
However, this is likely to change. Watch out for more investment and trade deals between the BRICs as they create their own trading bloc and invest in each other’s capabilities.
With hung parliaments around the world, short parliamentary terms, continuous electioneering, disengaged and disgruntled voters, and career politicians with vested interests, the will to engage in structural reform and long term planning has virtually disappeared in the western world.
In contrast, the political systems of China and Russia (now with the prospect of Putin serving as President until 2024, having first been elected President in 2000) look remarkably strong, stable and effective, despite the way they are portrayed in the western media.
And Brazil’s recent economic success can largely be credited to the successful 8 year terms of two reforming, pragmatic and popular Presidents, Fernando Henrique Cardoso and Luiz Inacio Lula da Silva.
The question now is whether India, the largest democracy in the world, will be able to remove the stifling influence of Government bureaucracy and consensus to allow their entrepreneurial culture to thrive.
India’s growth rate would be much higher with decent infrastructure, and the hope is that India’s Government can finish the job of transforming India into a modern economy. With its young demographics, entrepreneurial flair, technological excellence and strong domestic demand, India will surely demonstrate that democracy is still alive and well!
It’s too early to know for sure, but the BRICs benefit from “latecomers advantage”. The opportunity to leapfrog technological advances, capitalise on knowledge and past experiences, tap into existing networks and, above all, learn from the mistakes of those who have gone before. They also have the funds to spend on research and equipment, which is rapidly running out in the west.
Here lies the big question for the BRICs to address….and for the US and the developed world to ponder. Will the next Steve Jobs be Chinese? Will Bangalore in India take over where Silicon Valley left off? Will Brazil become the world’s primary source of clean energy, transportation and food? Will Russia put the first man on Mars?
David Thomas
Contributing Writer, Money Morning
The “After America” Archives…
‘After America’: The World Reset
2012-03-17 – Callum Newman
‘After America’: Threats and Opportunities
2012-03-16 – Callum Newman
China and The Revolution
2012-03-15 – Callum Newman
Cocktails and Central Banks
2012-03-14 – Callum Newman
Prelude to ‘After America’
2012-03-13 – Callum Newman