Justin Fox today lays
out the reasons why Brazil and Rusia pale in importance besides India and
China. "I’ve always been a little dubious of the famous Goldman Sachs forecast
about the future importance of the ‘BRICs’ economies," he writes. "BRICs,
I fear, may be a great acronym in search of a corresponding economic reality.
ICs doesn’t look or sound nearly as good, but that’s where the real action is."
In terms of macroeconomics, he’s probably right. Russia is a demographic nightmare,
rich in commodity wealth but poor in endogenous growth. Brazil has a much larger
and younger population, as well as a strong entrepeneurial class, but it, too,
has largely been riding the commodity boom.
But what Fox misses is that the BRICs idea was never purely macroeconomic:
it’s primarily an investment thesis. And what Brazil and Russia lack in terms
of long-term outlook, they more than make up for in terms of investability.
It has been much easier and much more lucrative in recent years to buy stocks
in Russia and Brazil than it has been to try and get stock-market exposure to
the relatively closed economies of China and India.
Especially now, with the Chinese stock-market bubble about to burst, faith
in China’s long-term prospects isn’t going to make you lots of money. Investing
in the likes of CVRD and Gazprom looks like a safer, smarter bet.