What worries the BRICs

December 10, 2009

Some fascinating data about the growing power of emerging markets, particularly the BRICs, was on display at the OECD‘s annual investment conference in Paris this week. Not the least of it came from MIGA, the World Bank’s Multilateral Investment Guarantee Agency, which tries to help protect foreign direct investors from various forms of political risk.

MIGA has mainly focused on encouraging investment into developing countries, but a lot of its latest work is about investment from emerging economies.

This has been exploding over the past decade. Net outward investment from developing countries reached $198 billion in 2008 from around $20 billion in 2000. The 2008 figure was only 10.8 percent of global FDI, but it was just 1.4 percent in 2000.

Not surprisingly, the lion’s share comes from the BRICS — Brazil, Russia, India and China — which together made up 73 percent of outflows last year. BRIC outward investment jumped to $144.3 billion in 2008 from $29.6 billion three years earlier.

Perhaps the most interesting data, however, concerned political risk insurance. MIGA studied the kind of insurance BRICs outward investors were taking to see what kind of things worried them.

Brazil had a mixed of concerns, but Indians were most worried about transfer and convertibility restrictions, the Chinese concerned themseves with war and civil disturbance and Russians were extremely worried about breaches of contract.

Sceptics might be tempted to see this as a reflection of national concerns. But MIGA said it was more micro than that. Russian investment, for example, is dominated by commodity exploration, an area said to be more subject to contract problems than others.


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Anecdotally, we see more younger Russians taking investment out of Russia due to violence, demands for protection money, and unofficial or official corruption.

Back in the 90s there were the same risks, maybe more, but the stakes were higher. But now many of the younger generation are voting with their feet and wallets by deciding a long-life is worth considerably more than another million or two.

So in the past there was a lot of return-tripping going on. Money out of Russia to abroad and then re-invested in Russia under ‘new’ ownership as FDI. Now we are less sure. We feel more money is leaving permanently. That can only make Russia that much poorer in the end.

There is definitely a diminished appetite for political risk.

Posted by MrBill | Report as abusive

Very thought chewing, stimulating article from your editor on this subject.
I have already written on Brazil,Russia, China, And South Africa!s tremendous survival from the latest worst world recession, and their upcoming markets, economic advantages on many core sectors, increasing trend in trade and commerce, labor productivity and involvement, and adjusted social and economic atmosphere and etc.etc. to this website.
All my writings were published.
After reading of this article, As an economist graduate, voracious reading, keep on writing to major news channels , i have not noticed any set back or any adverse comments from world bank and from any development nations problems in regard to exports, imports, reserved cashes and foreign exchanges from any world quarters.
What have you mentioned on some worries are not any serious concerns for day today positive, encouraging trends are not making any serious threatens by any way.
Hereafter, all many major producing countries will have second thoughts are sidelining of these upcoming countries.
Some examples can be shown here-
Indian economy is growing, profits are showing, production and demand are increasing on road development, ports expansions, steel, gold,silver, and information technology structure are showing very positive, and very encouraging results on day today basis.
The above same good trends are in cards for worlds calendar and for quick introspection for difficult economic conditions to follow or at least to accept a final, real results for their future planning, jobs retaining, jobs creations, awareness towards less expenditure, cost cutting measures, creating more infra structure to their already slow down business.
Still, i can write pages and pages for our users,team and for our world watchers.
If time permits, i will highlight more on these subjects.
To sum up, Nothing to worry from the above developing economies.

Posted by mdspatsy | Report as abusive