American investors seeking sustained growth in their portfolios should follow in the footsteps of Starbucks and continue to look to the BRIC countries (Brazil, Russia, India and China), says Nigel Green, the chief executive of the deVere Group, an independent financial advisory group.
Green’s comments come as it is announced that the Seattle-based coffee shop chain is set to open its first establishment in India in November as part of an initial investment of $78 million in the subcontinent.
“Some recent reports claim that the global economic crisis has cast a dark shadow over the BRICs and that investors should now be looking elsewhere. But Starbucks, like many multinationals, is fully aware that the BRIC economies still hold huge potential to investors, with much of this potential being fueled by soaring consumption. This is a firm which knows that the BRICs story is far from over,” explains Green.
More growth on the horizon
Forecasts show that the BRIC countries’ combined share of the global Gross Domestic Product in terms of dollars will grow from 18 percent currently to 26 percent in the next decade. By 2030, these four nations—Brazil, Russia, India and China--will contribute about one-third of the world’s GDP. In terms of Purchasing Power Parity, the BRIC nations will contribute 45 percent of global GDP by 2030, compared to the 30 percent today.
“To give a specific example, which investor wouldn’t want to capitalize on the fact that only four percent of China’s 1.4 billion population, which has a soaring disposable income, currently owns a car?” asks Green.
“Bearing in mind these immense figures and forecasts, and considering that the BRIC countries are not riddled with debt, are rich in resources, are home to a young and increasingly educated and wealthy population, and that returns are still expected to outperform those in most developed countries over the next few years, it would be crazy for investors not to continue to look at BRIC-based investments,” Green says.
Another important factor that holds the BRICs in good investment standing is that the bloc is not only an economic super power, it is also increasingly becoming a political one-- something that is highlighted by the annual BRIC summits, Green adds.
“If these countries had greater say, as they are lobbying for, in organizations such as the UN, the IMF and the World Bank, they could certainly evolve into the global puppet masters. This potential combined economic and political might is something that other ‘emerging’ markets could only aspire to for the time being at least.”
The deVere Group is an independent international financial consulting group. International investors and expatriates employ the firm to find financial-services products that suit their medium- to long- term requirements for investments, savings and pensions. With more than US$8 billion of funds under administration and management, deVere has more than 60,000 clients in over 100 countries. (www.devere-group.com).
By Ayo Mseka