For the last couple of years, BRICs have been the hottest
buzzword in the global markets - day traders and long-term
investors alike couldn't get enough of assets in the booming
economies of Brazil, Russia, India and China (some include South
Africa as the fifth of five BRICS).
Though it seems to make some intuitive sense, a more careful look
at the BRIC phenomenon makes the grouping look a bit more
arbitrary. China (
) and Russia (
), for instance, may appear superficially similar - they share a
Communist past, a more recent dedication to capitalist economics
and a heavy-handed state.
But China is a growing nation, with a rising military profile and a
voracious appetite for raw materials, while Russia is struggling to
cope with its decline of the last three decades and survives
largely by controlling and exporting oil, gas and the products of
Similarly, Brazil (
) is a major commodity exporter, selling soybeans, sugar and now
crude oil to the rest of the world - particularly China. India's
economy is split between its vast agrarian poor and an
English-speaking knowledge and technology sector, though industrial
giants like Tata (
) are now challenging Western conglomerates like GE (
), GM (GM) and Siemens.
Looked at from this perspective, the BRICS are more an
agglomeration of large nations that, for one reason or another, may
outperform the United States in the coming years. They may share
some common goals - in the foreign exchange market, for instance -
but their interests are diametrically opposed in others. Brazil and
Russia, with new oil and gas fields coming on line, will benefit if
energy prices continue to rise. China, on the other hand, is
battling inflation and fears unrest if its lower and middle classes
find that the cost of living continues to outstrip wage increases.
It may be tempting to simplify emerging market investing to
BRICS and non-BRICS - but the reality is a lot more nuanced.
The author is long BRF, EWS and PBR.