Countries that are in its early stages are usually attractive to investors. But is investing in developing countries profitable? What are the benefits of doing so? This article will discuss the major aspects involved in investing in the markets of developing countries.
BRIC
The BRIC is a band of countries consisting of Brazil, Russia, India and China. 10 years ago, Jim O’Neill, Goldman Sachs’ asset manager, coined the term BRIC in relation to his prediction in an economic report stating that if the rate of growth and progress of the said countries continue, they would eventually play a larger role in the global economy.
The optimistic scenario that O’Neill foretold was that the GDP share of these countries together would rise from 8% to 14%. In 2008, the actual rise of the combined share in the BRIC countries was around 22%. These countries showed such rapid growth that attracted the attention of investors. It then seemed that investing in developing countries like the BRIC was a good idea.
Growth and Development
The BRIC, together, accounted for about 30% of the global increase in output from 2000-2008. The rate China’s growth and development to date has outmatched the rest of the other BRIC countries.
China has contributed over half the BRIC’s share and has produced more than 15% of the growth in global economic output during that period. The progress and growth that China and the rest of the BRIC countries have shown is one evidence that investing in developing countries is an attractive option.
Potential Risk
There are a few aspects that make investing in developing countries risky. One of these threats is natural disasters. Years of development and growth may easily come to a halt when a natural disaster hits a country you have invested in.
Conclusion
Since 2000, there has only been improvement and growth coming from the BRIC market and it’s definitely a good investment strategy to invest in developing countries as long as you take into account the potential risks involved in any investment.