When the BRICs Crumble
Eight strategies for managing investments in the much-hyped, now-teetering big emerging markets.
When Goldman Sachs economist Jim O’Neill came up with the BRICs concept in 2001, it served as shorthand for a group of economies that deserved special attention even if they weren’t quite ready to join South Korea and Mexico as new entrants to the OECD group of developed economies.
But in one important sense, it represented pure concoction: Except that they were big and interesting, these countries had almost nothing whatsoever in common.
Yet the fortuitous acronym had legs. It called attention to places that deserved to be watched. And it caught the imagination of international investors.
So if you run a global company that has carefully built a BRIC strategy, what do you do now? We polled the experts.
Begin to think more holistically
CEOs must begin to stand up for sensible public policy, labor reform and protection of human rights in emerging markets, according to Bhaskar Chakravorti, senior associate dean of International Business and Finance at The Fletcher School at Tufts University.
If companies continue to rely on the BRICs to fuel growth, he warns, they are setting up the equivalent of what he views as a global pyramid scheme that is bound to ultimately collapse. While the economics of the emerging markets are attractive, he says, people often forget that there is more than just a “market” in the emerging market; there is a surrounding context. In his view, what is unusual about this new global order is that the “contextual factors” that dictate how the emerging markets perform have not kept up with their growth rates.
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