An interesting read by Ruchir Sharma, the emerging markets guy at Morgan Stanley, with each chapter tackling one or several emerging nations, from the BRICs, to Mexico, to Turkey. The book also includes some of his rules of the road when it comes to assessing a country and determining whether its growth prospects are favorable. To wit:
-Pay attention to whether a once productive leader is simply trying to hang onto power for too long.
-A mix of strong companies and a strong market doesn’t necessarily make for a strong economy if it happens within the context of oligopolies.
-Be wary the country where prices feel expensive, even to someone from a rich nation.
-Look at the list of top billionaires. If there is little turnover, and the wealth is in the many billions of dollars for each, the threat of economic stagnation could be on the horizon.
-Find the nations that consistently make the wise political and economic reforms when times are good, as opposed to when they are forced to because the proverbial shit has hit the fan.
-Note the size of the second city as compared to the capital/first city. A healthy ratio is that it should be one-third to one-half the size. And, generally, the more cities in a country with over a million people the better. It all speaks to economic balance.
-Follow the money flows of locals more closely than foreign investors. The former are likely to know first when there are problems, and will either be bringing money home (in good times) or pulling it out (in bad times).
-See whether local companies are going global. While it can be a sign of achievement, it might also be a “vote of no confidence for the local economy” when it is happening in great size.
-Lastly, rules are made to be broken. So while it may be true that when a nation crosses a certain per capita income level (like $4,000 or $10,000), or that when manufacturing becomes 25 to 30 percent of a country’s GDP, that growth could begin to slow, but it is not guaranteed. And, as is always the case, exceptions will exist, so look for them.
In a subsequent post, I may cover some of his country specific observations that I found interesting.
