Are you interested in investing abroad? Chances are you may have heard of the BRIC or BRICS as an investment option. So what does BRIC or BRICS stand for? Well, they can be seen as the same things really with a slight difference. The BRICS is a group of five emerging economies that in the early 2000’s was tabbed as the next great frontier. The countries in this group are Brazil, Russia, India, China and in some instances South Africa. These at the time were some of the fastest growing economies in the world and were seen as future powerhouses in the global scene.
The BRIC was indeed a powerhouse for anyone who wanted to invest abroad, and the returns were stellar from 2001 to about 2010. Then the BRIC started to see trouble in their collaboration as an economic power. Part of the reason for that is each is heavily dependent on the price of natural commodities that they sell. And let’s face it over the last six years we have seen some dramatic shifts in the prices of the major commodities. Silver and gold are near six-year lows and have been the better part of the last year. Recently the price of oil has been near lows not seen in a decade. China is slowing its investment in its infrastructure. So the last few years have been rough on the BRIC nations in regards to commodities and their use.
But do not discount the BRIC just because they have fallen somewhat out of favor with their economies. The BRIC nations comprise half the world’s population, a fifth of the world’s GDP, and a quarter of the world’s land mass. While the BRIC may not be advancing the way it did from 2001 to 2010 there is plenty of room for it to get back to its economic heyday so to speak.
But the union of the BRIC nations is not one without its share of issues. Consider that these four countries have very different agendas in mind for their economies and political agendas. India is closely allied with the United States both politically and defensively. This can cause issues for partner members China and Russia who do not ally themselves with the United States. Brazil has limited its growth with a trade partner that keeps its secrets very closely held in China. As China’s economic growth goes so does Brazil’s.
So why does the BRIC experience so much pain in recent months? That is because as I alluded to earlier, their economies are commodity driven, and those have seen a bearish marketplace for some time. China is not buying Brazil’s iron ore in the bulk it once was. The price of gold and silver are down significantly compared to 2010 hurting Russia and Brazil in their mining of the precious metals. And oil is at historic lows in the 21st Century, and that is crippling to Russia’s economy which relies heavily on oil and gas production.
I do not see the BRIC as the investment it was in 2010, but there are still some very intriguing investment opportunities in emerging markets in general. Each of the BRIC countries is still a force to be reckoned with if not now again in the future. And emerging markets are experiencing lows even lower than the US markets. With proper due diligence and homework, there are some investing opportunities outside of the US in emerging markets and even in developing markets if you feel adventurous.
All investors need some exposure to the international markets to help and aid in their portfolio risk management. Yes, it is true that emerging markets on a whole right now may seem a risky investment they are a buying opportunity if done properly now while they are experiencing economic issues. But just as investing in the US markets always do your due diligence and do not put all your “eggs” in one basket so to speak.
If you have any questions or need additional information, do not hesitate to contact me.
