Forget the BRICs and look at the MINTs

You might think that a mint is a rather pleasant and refreshing sweet, but it is now becoming a new phrase coined to describe a group of countries that are being tipped as the next investment opportunity of the decade. MINTs (Mexico, Indonesia, Nigeria and Turkey) could offer the next big opportunity for investors after the excitement of BRIC (Brazil, Russia, India and China) according to some fund managers. (Published by Investment International.com, UK – 05/05/2011)

Investors in the BRIC group of countries have enjoyed excellent returns over the last ten years. Whilst outright replacements for the BRICs are impossible to find, there are a number of genuine emerging market opportunities a layer down from the BRICs that are not as well appreciated but have similar long term investment potential. Of these emerging countries, Indonesia is the most similar to the BRICs, owing to its very large population of 245 million. In December 2010, the government articulated an economic vision in which Indonesia would grow to become one of the world’s 10 largest economies by 2025. If it succeeds in this objective, investing in Indonesian assets early on could prove to be very rewarding.

‘The long term outlook for countries such as Indonesia and the Philippines is supported by a powerful mix of favourable demographic factors, including quite large populations that are dominated by young people whose disposable incomes are rising,’ said Teera Chanpongsang, manager of Fidelity’s Emerging Asia fund. The Turkish economy has bounced back very strongly since the global downturn, growing by an estimated 8.1% in 2010. The country is now reaping the benefits of the reforms and policies it pursued after its own crisis of 2001. Its banking system survived the global crisis in relatively good condition and the government’s budgetary and public debt position is significantly better than many countries in the Eurozone. An important driver of structural reforms has been Turkey’s EU accession process which has paved the way for comprehensive changes, including the increasing role of the private sector in the Turkish economy, the enhanced efficiency and resiliency of the financial sector and a more solid social security system. ‘In recent years, Turkey has made good progress in terms of implementing reforms and improving its infrastructure whilst retaining its fiscal discipline. Gross Domestic Product per capita has more than doubled in the last decade while the country is set to benefit from favourable demographics, with around a quarter of the country’s 70 million plus population under the age of 15,’ said Nick Price, manager of Fidelity’s Emerging Europe, Middle East and Africa (EMEA).

Africa often remains off the radar for many Western investors as a result of the negative perception of the continent shaped by images of poverty, famine and conflict. The gap between perception and the reality on the ground leads to some very exciting investment opportunities, according to analysts. Nigeria is arguably at the forefront, home to Africa’s largest population and a country richly endowed with natural resources, which is helping to boost investment trade flows and economic growth, Price believes. ‘While more fashionable emerging markets have been getting a lot of attention, the real long term growth stories that investors should be getting excited about are in the frontier markets. Countries such as Nigeria offer good diversification and low correlation to other more established emerging markets,’ he explained. ‘I find some of the most interesting opportunities in the consumer-related sectors. The banks in Nigeria are now highly regulated, well capitalised and set to benefit from the penetration tailwind that exists with one of the lowest levels of retail credit penetration in emerging markets,’ he added.

Both a potential strength and weakness in Mexico is its very high economic exposure to the dominant US economy. Around 80% of Mexico’s exports go to the US, and as well receiving substantial amounts of US investment, Mexico also benefits from the remittances of the large Mexican-origin community that resides in the US. ‘Mexican economic performance tends to be quite well correlated with that of the US, largely due to its dominance as a manufacturing hub for its northerly neighbour. Mexican goods are taking an increasingly larger percentage of imports into the US. We have a fairly positive outlook on the US recovery, so Mexico stands to benefit as a result,’ said Alex Duffy, co-manager of Fidelity’s Latin America fund.

ALC fue la región donde más creció la inversión extranjera directa en 2010

En 2010 América Latina y el Caribe fue la región donde más creció el porcentaje de recepción y emisión de inversión extranjera directa (IED) en el mundo, según un informe presentado hoy en Ciudad de México por la Comisión Económica para América Latina y el Caribe. El año pasado los ingresos de IED a la región aumentaron 40% respecto a 2009, alcanzando 112.634 millones de dólares, mientras que los egresos casi se cuadriplicaron en el mismo periodo, totalizando una cifra histórica de 43.108 millones de dólares, lo que pone de relieve el gran dinamismo de las empresas transnacionales latinoamericanas y caribeñas, conocidas como translatinas. En un contexto de caída de las corrientes de inversión extranjera hacia los países desarrollados (-7%) y de aumento en los países en desarrollo (10%), América Latina y el Caribe incrementó su participación como región receptora de 5% a 10% entre 2007 y 2010. (Fuente: CEPAL – 05/05/2011)

Para 2011 se espera que los flujos de IED hacia América Latina y el Caribe mantengan la misma tendencia, aumentando entre 15% y 25%, con lo que podrían alcanzar un nuevo récord histórico, según las proyecciones del informe lanzado por la Secretaria Ejecutiva de la CEPAL, Alicia Bárcena, y el Secretario de Hacienda y Crédito Público de México, Ernesto Cordero. “Las cifras que presentamos hoy dan cuenta de la creciente inserción de América Latina y el Caribe en el proceso de globalización económica. Los países de la región no solo siguen siendo atractivos para los inversionistas extranjeros sino que también se están atreviendo cada vez más a conquistar otros mercados a través de las translatinas”, destacó Bárcena. No obstante, la alta funcionaria enfatizó que “para mejorar la capacidad de absorción de los beneficios de estas inversiones insistimos en la necesidad de aplicar políticas de desarrollo productivo, focalizadas en la innovación y en el fortalecimiento de las capacidades locales para fomentar la creación de empleos de calidad. La IED debe ayudar a la región a crecer con igualdad”. Según el informe “La inversión extranjera directa en América Latina y el Caribe 2010″, el mayor receptor en la región fue Brasil, donde las entradas de IED tuvieron un aumento récord de 87%, pasando de 25.949 millones de dólares en 2009 a 48.462 millones de dólares en 2010. El segundo país receptor fue México (17.726 millones de dólares), seguido de Chile (15.095 millones de dólares), Perú (7.328 millones de dólares), Colombia (6.760 millones de dólares) y Argentina (6.193 millones de dólares). En América Central las corrientes de inversión extranjera crecieron en todos los países, excepto en El Salvador (-79%), mientras que en el Caribe registraron una caída de 18%. México fue el país que realizó mayores inversiones en el exterior en 2010, por un monto de 12.694 millones de dólares. Le siguió Brasil (11.500 millones de dólares), Chile (8.744 millones de dólares) y Colombia (6.504 millones de dólares).

Entre los factores que posibilitaron el crecimiento en la recepción de IED en 2010 figuran el mejor desempeño de las economías desarrolladas y el dinamismo de ciertas economías emergentes que impulsaron algunos sectores por aumentos en la demanda. Estados Unidos sigue siendo el principal inversionista en la región, responsable del 17% de la IED recibida en 2010, seguido de los Países Bajos (13%), China (9%), Canadá y España (ambos 4%). La decimotercera versión del informe de la CEPAL destaca especialmente la irrupción del gigante asiático. En 2010 las empresas chinas invirtieron cerca de 15.000 millones de dólares en países latinoamericanos y caribeños, básicamente a través de fusiones y adquisiciones. Más de un 90% de las inversiones chinas confirmadas en América Latina, se han dirigido a la extracción de recursos naturales. A mediano plazo se espera que las empresas transnacionales de ese país sigan llegando a la región y que se diversifiquen hacia los sectores de infraestructura y manufacturas. Al analizar los sectores de destino de la IED, el organismo de las Naciones Unidas advierte que los flujos están reforzando la especialización productiva de la región. En América del Sur los sectores con mayor recepción en 2010 fueron recursos naturales (43%) y servicios (30%) y, en comparación con el período 2005-2009, se observa un aumento del peso de los sectores primarios en las inversiones. En México, América Central y el Caribe, las inversiones continúan llegando principalmente a manufacturas (54%) y servicios (41%). La participación de América Latina y el Caribe como destino de inversiones con alto contenido tecnológico, es aún reducida en comparación con otras regiones, aunque se observa un incremento de proyectos de IED en sectores de tecnología media-alta y asociados a investigación y desarrollo. La publicación de la CEPAL también aborda la situación de la IED en América Central, Panamá y República Dominicana. Según el organismo, se mantiene el objetivo de las empresas transnacionales de invertir en los países centroamericanos para generar plataformas de exportación, pero han variado los sectores de destino, pasando de las manufacturas a los servicios (especialmente turismo, negocios inmobiliarios y servicios empresariales a distancia). Finalmente, el documento revisa las principales inversiones extranjeras y las estrategias empresariales observadas en la industria regional de telecomunicaciones, donde se destaca la convergencia hacia la banda ancha, así como la creciente participación de América Latina en la industria del software, que se ha transformado en un motor de crecimiento económico.

Reflections on Brazil’s Global Rise

This is the first article I have written since leaving the foreign ministry of Brazil. As someone who was very active in formulating foreign policy during what might be called “the Lula era” (and still without the benefit of much hindsight), it is an opportunity to begin taking stock of what has been achieved so far. The most remarkable fact about Brazilian foreign policy in recent years has been Brazil’s new and more prominent stance in the international arena. To be sure, this qualitative change, which resulted in The Economist describing Brazil as “a diplomatic giant,” is not solely—or even principally—due to foreign policy. In recent years, Brazil has grown economically while keeping inflation under control, improved income distribution and, above all, strengthened its democracy. Who could have predicted after years of military dictatorship, immediately followed by the impeachment of the country’s first popularly-elected president, that Brazil’s next three heads of state would be an intellectual who fought against the dictatorship, a labor leader routinely labeled as a dangerous revolutionary, and now a woman who once was a political prisoner? These changes have had a major impact on Brazil’s stance toward other countries and also on how other countries view Brazil. As I said in a recent interview, Brazilian foreign policy may not have created the wave, but it learned how to ride it. It should come as no surprise that international interest in Brazilian foreign policy has increased notably in recent years, culminating with the 2010 elections.

(…..) From the first months of President Lula’s mandate, when his administration courageously opposed the Iraq invasion, we demonstrated that Brazil’s new foreign policy would not be timid or overly cautious. This change of attitude and posture did not occur overnight. It was the result of a lengthy process of democratic maturation and increased self-confidence on the part of the Brazilian people. The process of change, the subterranean shift and currents, if you will, had started some time before and culminated in the election of an ex-lathe operator as president. The “yes we can” slogan used in Barack Obama’s campaign could just as easily have explained the sentiments of most voters who cast their ballots for Lula in 2002. Our foreign policy captured this state of mind and tried to translate it into concrete actions that could affect the course of regional and world events. In doing so, we changed the international agenda. One example of this is the one-time plan of the United States to establish a Free Trade Area of the Americas (FTAA). Rarely has a policy priority of the greatest power in the hemisphere been taken off the agenda because of the firm stance of another country. We don’t need WikiLeaks to know that Brazilian resistance prevented what was an essentially unbalanced trade negotiation process—based on the then-outdated ideas of the “Washington Consensus”—from becoming reality (…..)

(…..) Cancún and Miami were two events that had symbolic importance for Brazilian foreign policy. Concurrent with these two processes (one regional, the other global, but both involving the most powerful nation on earth), Brazilian diplomacy was working to promote South American solidarity and integration. A great deal of President Lula’s personal efforts (and mine as well) were dedicated to this objective, with remarkable results in the economic, commercial, infrastructural, and political spheres. Our main goal is to transform South America into a true “Peace Zone”—a goal Brazil is gradually achieving. I emphasize these facts not only for the practical results they produced—reflected in trade and investment figures—but also because they are unprecedented. Rarely, if ever, during my approximately 45 years of diplomatic life (from which I should subtract seven during which I was busy performing other government functions) have I observed such dramatic change in such a short span of time. In the early days of the Lula administration, Brazil’s foreign policy was marked by an essentially defensive agenda in the FTAA and the WTO—a situation we reversed in only one year. At the same time, we also managed to place South American regional integration at the forefront of Brazilian diplomacy. We restored confidence in Mercosur and initiated the process that led to the creation of the 12-member Union of South American Nations (UNASUR), which includes the whole continent from Colombia to Argentina (…..)

(…..) Our work with countries across the global South has helped to strengthen the perception of Brazil as a nation whose interests and influence go beyond its own region. This, in addition to our growing strength in the areas of trade, economics and the environment, has contributed to the European Union’s decision to make Brazil a strategic partner and to the establishment of a dialogue with the U.S. to work together on global issues. Analysts and government officials from several countries, including the U.S., have noted Brazil’s arrival as a global player—though only time and other factors, including subjective ones, will confirm the permanence of our newfound status. Most of the comments have been positive. But one notices a natural ambivalence from some, especially in the United States. If Brazil continues on its current path, it will be the first time that another country in the Americas becomes a global player. To be sure, in terms of “hard power” Brazil cannot compete with the United States. This is obviously true in military terms, where the supremacy of the U.S. is undeniable. Furthermore, in economic terms, the differences between the GDPs of the U.S. and Brazil remain large. In other spheres, too, the gap is considerable (…..)

(…..) This text was originally sent to the editors of Americas Quarterly before two important facts were known (one of them more of a process than a fact): the announcement made by President Barack Obama that he would visit Brazil (as well as Chile and El Salvador) in March, and the spreading unrest in various Arab nations following the demonstrations that brought about the fall of Zine el Abidine Ben Ali in Tunisia and Hosni Mubarak in Egypt. When commenting on the announcement of the visit, several U.S. government officials stressed the global reach of their relationship with Brazil. On the other hand, there has been no lack of criticism by U.S. pundits regarding the direction of Washington’s relations with Arab nations. Is it not time to use Brazil’s good relationship—and that of other South American countries—with the Arab world to begin a new dialogue that promotes the values we share while respecting the rhythms and processes of each country? In this, Brazil can serve as an effective broker or third party in negotiations. Moreover, the example of Tunisia is doubly illuminating: first, because it occurred endogenously, without being externally induced through sanctions or other pressures; and second, because it occurred in a country whose leader was considered an ally in the war on terror. Perhaps a less Manichean and more nuanced view of reality, such as the one Brazil and other South American countries have shown, would be useful in dealing with these thorny situations, especially in the Middle East. We may have finally reached a time to move beyond dialogue to a global strategic partnership.

Full-Length article: http://www.americasquarterly.org/node/2420