Review: Not another BRIC in the wall
By Katrina Hamlin
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
BRICs is by no means an obsolete tag. The acronym coined by Goldman Sachs economist Jim O’Neill in 2001 continues to operate as both a useful shortcut and a fertile provocation to compare and contrast the world’s four biggest developing economies: Brazil, Russia, India and China. But like all neat catchphrases, there is a danger that one day it will veer into cliché. It’s already easy to over-associate the term with all emerging markets.
Ruchir Sharma is anxious to prevent jargon freezing into unassailable truths. Individual countries are distinct and diverse, even at comparable stages in their economic evolution. This very simple idea informs Sharma’s approach in his new book “Breakout Nations: In Pursuit of the Next Economic Miracles,” in which he identifies which developing countries have the potential for stable growth worthy of investor attention.
Sharma’s wealth of knowledge as Morgan Stanley Investment Management’s head of emerging market equities and ample experience on the ground are strong foundations for his exploration of what makes economies break out, or break down. And his analysis offers the reader a set of original and actionable revelations about which countries may offer compelling investment prospects. Among them, he argues that Poland is underrated, Nigeria is on the up and Thailand is at a turning point. He is less enthusiastic about the directions Brazil, Vietnam and a few other investor darlings are headed.
Importantly, “Breakout Nations” helps readers recalibrate their assessment of the BRICs and other well-covered markets. For example, Sharma writes, investors have staked out extreme positions on China: either extremely negative or excessively boosterish, when perhaps they should just be moderately bearish. China will grow, but those banking on 9 percent forever will be disappointed. The book was published a few weeks before China reported that official GDP for the quarter ending June 2012 had dipped to 7.6 percent.
As with any rushed trip around the world in 14 chapters, there’s still plenty of scope to revisit certain areas. In many cases, while Sharma’s enthusiasm for a particular market is fully explained there is no time to tackle some of the questions his narrative raises. For instance, while the book highlights the bright side of Indonesia’s “efficient corruption” and low costs, the downside – cronyism and a vast wealth gap – casts a silent shadow over the argument.
For all Sharma’s emphasis on acknowledging the developing world’s diversity, he could also do more to fully explore the diversity within important individual markets. Although a large chunk of the book is dedicated to China, the author appears to have focused his exploration on the industrialized east coast. Despite a detailed discussion of what lies ahead for the Chinese consumer, he could have delved further into China’s vast, fast-growing interior.
Sharma’s biggest shortcoming may simply be in the marketing of his investigation: he lacks a snappy acronym to trump BRICs. Without a catchphrase, Sharma’s investment ideas may prove less memorable than O’Neill’s in the long run. But his examinations of how some countries manage to grow and make both their people – and investors – prosperous will be worth remembering.