“BRICs” are not building blocks. They are the so-called “emerging” markets or economies of the world. BRIC is an acronym, B for Brazil, R for Russia, I for India and C for China. In the 1970s and 1980s popular economists, most famously the Hudson Institute, pointed to the 21st Century are being the “Century of Japan.” The Land of the Rising Sun would eclipse the USA. Japan faltered, now it is China that will do the job.

The BRICs were already in the news as first the “hot” places to put your investment funds. But then they suffered even more than the mature economies in this worldwide economic slump, so investment advisers began warning against them. What to do now?

I am a great fan of investing in BRICs having lived and worked in several “emerging” markets - Mexico, Turkey, South Africa, to name a few. In 2004 I put my entire small investment fund in two emerging market funds, one heavily invested in Russia and the other totally invested in India. I pulled the money out in 2006. The investment had tripled in two years. Soon after I pulled out, the emerging market funds turned south. But even at that, if you had invested in the early part of the decade, you would still be ahead.

So what do I suggest now? I still like India as an investment. Unlike China, there is no political uncertainty. I mean here that most observers question how long can China remain an authoritarian state with rampant capitalism? On the other hand India is a vibrant democracy and will be so for the foreseeable future.

There is another reason for India. China has bet its growth on exports of manufactured goods. And it will do well until a lower cost producer comes along, hello Vietnam (which is my recommendation from the Far East pool of contenders). However, India has bet its future on export of services, in essence it has jumped the “industrial” phase and gone directly to a service dominated economy. The engines of India’s growth are software and client services. And few can take this away since it rests squarely on the fact that Indians speak English.

What about the rest of the “BRICs?” I recommend Brazil as a well-balanced, growing economy. Mexico will do well as it becomes even more tightly tied to the USA economy. Russia is so rich in resources it will do well. I like Lusophone Africa, i.e. Angola and Mozambique. In fact, maybe Portuguese is the language to learn for the future. I also like Kazakstan which is also blessed with oil and gas.

As for the rest of Eastern Europe, it offers a mixed bag and I cannot recommend any one, except maybe Poland, which should do well, but has some potential problems.

If you have a particular “emerging” market in mind, let me know and I will run it through my crystal ball.

Leo Cecchini
June 2009