Charts of the Day: The Future Of Emerging And Frontier Markets

CarnacTheMagnificentThanks to Ernst & Young, I’ve got my retirement destination all picked out: Turkey.

Because, you see, in 2040, when I’m 67 years old, forget the BRICs or Mexico or Dubai or South-South anything; Turkey’s gonna be an export boomtown. Or at least that’s one of the forecasts E&Y is touting in its new Rapid Growth Markets forecast. And if, come 2040, I’m not rolling G-style through the souks of Istanbul, I’m definitely suing the crap out of the 2040 incarnation of Ernst & Young,  which by then might be better known as ErnstPWCDeloitte-Slim/Gates LLC dot unit D sector. 

In all fairness E&Y does a dependable job of summarizing the main economic characteristics of developing markets for those who don’t plug into this stuff every day.

And they also have a nifty online interactive tool you  can play with here.

For the rest of us…the thing is I really just have a hard time taking seriously any forecast that goes out to 2040. But let’s try anyway. According to the charts, those of us lucky enough to still be alive in 2040, assuming there’s still a human race by then, should probably be doing something with exports. But definitely not anything between the Eurozone and the US:

EandY Exports from the Eurozone

Preferably we should be doing it somewhere in a rapid growth economy:

EandY Exports as percent of global GDP

Doing it from Sub-Saharan Africa to, I suppose, Latin America, should be fruitful:

EandY Exports from SSA

Alternatively, from the Middle East to anywhere “Emerging”:

EandY Exports from Middle East


But here’s the king daddy of them all really – Turkey:

EandY Exports from Turkey


Am I the only one who suspects these charts were retro-fitted to data that would produce pretty curves and lines?

I grant that even if these aren’t going to be exact predictions, they’re probably going to roughly match the eventual trend line and the overwhelming  trends here do open a lot of questions, not all of which are necessarily hopeful.

Let me state that last thought a different way. Anytime you find someone trying to sell you on the bullish side of any of these rapid growth markets, see if you can find out the answers to the following questions:

1. Where is this huckster from?

2. What is their financial interest in the subject at hand? Who are their clients?

3. What is the extent of experience this person has in the market in question as it pertains to a) trying to get from point A to point B; b) procuring a government contract; c) relative ease of workaday obligations relative to its immediate neighbors? d) safely arranging a taxi from the airport at a reasonable price upon arriving in country?

I read a statistic recently from Morgan Stanley’s Ruchir Sharma, which said that according to some IMF study, moving freight via road from Abidjan to Bamako — a distance of 690 miles — can take 500 hours, or slower than walking speed.

Stop whatever else you’re doing right now and just think about that for a moment.  To the North Americans in the house, 690 miles is more or less New York to Chicago (711 miles). To the Europeans, 690 miles is 1,110 kilometres. So think Paris to Madrid (1,053 km).  To the Asians and Pacific folks — well you guys grew up with such massive distances anyway,  so you’re just going to have to be patient with us Westerners.

And 500 hours – well that’s three weeks.

The closest I can come to even conceiving of the Abidjan–Bamako freight path — and I’m going to say this already knowing it won’t measure up — is thinking of sweating it out on an overnight bus from Belém to São Luis in Brazil when I was in my mid-20s. That distance — 800 km, 500 miles — is not the longest I’ve ever traveled by ground transport in one shot, but given that it was mostly dirt roads and that I was coping with the onset of dengue fever, it may as well have taken forever.

Those of you unfamiliar with “Rapid Growth Markets”, or RGMs, are advised to see a previous discussion here.

If you think reading what’s between the charts above is worth doing, get the original report here.

The bottom line here…I don’t dispute the prospect of future growth or promise or potential. I just question the extent to which any of this will be accessible to anyone without the right connections, often government-related. If we’re talking about investing through some ETF…well realize that the ETF only comes into play because the smart money has already laid the groundwork for an ETF to even be possible and the days of triple-digit returns are long gone. Without those essential connections to be part of the action from ground level, you’re not even a spectator in the arena – you’re watching the game from some bar across town.

Oh well. See you in Istanbul in ’40!

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