Category Archives: India

Frontier Markets Opportunities and Risks, Bloomberg Edition

As part of last month’s Bloomberg Dealmakers Summit in London, the following roundtable took place, featuring Timur Issatayev of Verny Capital, Parag Saxena of New Silk Route LLC and Danladi Verheijen of Verod Capital Management. It’s 22 minutes and all worth it, but if you want the single most profound statement for my time, fast-forward to 15:10, when Parag Saxena has the following to say when asked about investment risks in South Asia:

“If you stay away from purely government-granted things you can probably do all right but sometimes that is where the opportunity is so it’s hard. To me the big surprise that I learned in India, having been in the investment business for 31 years and thinking that I have made already most of the mistakes that I was going to make in my investment life, the one that surprised me in India, and I know it’s true in Pakistan and Bangladesh too, is the lack of talent. So when I invest in the U.S., which I continue to do, I know that even for a pretty tough to fill job, in 120 days to 180 days I can fill almost any job. And so typically now at my age, I get resumes from my friends’ children. I used to get them from my friends at one point and now I get them from my friends’ children. And in the US I think it’s going to be hard to actually place them because there is so much talent available for a limited number of jobs. In India, I find myself grabbing every resume because I can hire baristas for somebody that wants a summer internship job, we have a restaurant company and cellular tower company and we need CEOs, so I can hire CEOs for those companies, and everything in between. So the biggest surprise to me, and the opportunity, is training for lower level jobs. And that’s a real unexpected risk, because time is the enemy of internal rate of return and if it’s going to take you more time to fill these slots and you can’t get stuff done, you have a real problem.”

Here’s the video in full:

A Diplomatic Way Of Saying A BRICS Development Bank Is A Stupid Idea

Dani Rodrik has this in Project Syndicate today:

It can be cause only for celebration that the world’s largest developing economies are regularly talking to each other and establishing common initiatives. Nonetheless, it is disappointing that they have chosen to focus on infrastructure finance as their first major area of collaboration.

This approach represents a 1950’s view of economic development, which has long been superseded by a more variegated perspective that recognizes a multiplicity of constraints – everything from poor governance to market failures – of varying importance in different countries. One might even say that today’s global economy suffers from too much, rather than too little, cross-border finance.

What the world needs from the BRICS is not another development bank, but greater leadership on today’s great global issues. The BRICS countries are home to around half of the world’s population and the bulk of unexploited economic potential. If the international community fails to confront its most serious challenges – from the need for a sound global economic architecture to addressing climate change – they are the ones that will pay the highest price.

Yet these countries have so far played a rather unimaginative and timid role in international forums such as the G-20 or the World Trade Organization. When they have asserted themselves, it has been largely in pursuit of narrow national interests. Do they really have nothing new to offer?

Read the rest here.

Chart Of The Day: Food & Agriculture Demand And Supply

What this screams is the urgency of leveraging Africa’s arable land potential. I wonder how Africa would stack up against the righthand chart:

2013.04.03.Food-Agriculture demand supply

From @CamboRobert.

What The BRICS Really Have In Common

2013.03.28.BRICS as The_Breakfast_ClubSometimes news editors exercise such brain-dead judgment that it’s a wonder journalism as a practice even survives.

That sentence was one of a few I conjured up as a possible lead-off thought. Well, technically, it was the only sentence, since the rest are thoughts posed as questions. Here they are:

Is the BRICS Durban conference officially the acronym’s 14th minute of fame?

When will the country grouping of France, Uganda, Chad, Kenya, Oman, Fiji and Finland finally supplant the BRICS as the political economy cadre du jour? What about Bulgaria, Uganda, Lithuania, Latvia, Spain, Haiti, Italy and Thailand?

2013.03.28.bric_summit_durbanDoes anyone honestly still believe in the BRICS as an investment theme?

Am I the only one seeing that Brazil, Russia, India, China and South Africa may actually have less in common than a brain, an athlete, a basket case, a princess and a criminal?

What drives this apparently human need to shrink everything down into bite-sized archetypal infonuggets?

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Global Remittances Zig, Mexico Zags

First came a report from BBVA that remittances to Mexico have decreased for five consecutive months, with the $1.695 billion recorded in November apparently 5.1% lower than in November 2011. Furthermore:

“Among the factors explaining the fall in remittances to Mexico over recent months are: the weak employment situation of Mexican migrants in the U.S., associated with the uncertainty regarding the future of the US economy, with alternatives being sought to adjust the major fiscal deficit. There is also a comparison effect with November 2011, when annual growth in remittances was 9.4%.”

But let’s let the pictures to the talking:

2013.01.10.Mexico remittances

Then comes this article from This Day in Nigeria:

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Rapid Growth Markets: Behold THE FUTURE

I’ve just spent way too much time playing with Ernst & Young’s interactive spider graph thingy that allows you to compare their 25 “rapid-growth” markets across a range of macroeconomic indicators. According to E&Y, these 25 countries possess the most promising “long-term potential to generate strong business opportunities.”

So since a picture is worth a thousand words, here’s how all 25 of these economies will change from 2011 to 2016 from the meta-macro view, compared against each other:

Okay! Is everybody ready to go out and make some money?
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9 Emerging and Frontier Markets Uncle Sam wants YOU to export to

On the heels of the latest update to the World Bank’s annual Doing Business index, I thought I would use this opportunity to try a different take on the usual blather surrounding this study about which country did or didn’t move up five spaces in the shareholders’ rights category.

I recently happened to attend a function sponsored by the US Export-Import Bank that was part of its Global Access for Small Business Initiative. In the interest of not getting bogged down here by too much bureaucratese, the nutshell of this initiative can be summed up as such:

“Increasing exports and access to foreign markets is a proven tool for strengthening our economy and creating durable jobs. The United States is well positioned to capitalize on the types of products and services that fast-growing markets around the world are demanding. Ex-Im Bank is committed to ensuring that American small businesses can compete in this global climate.”

For those not in the habit of tuning in to this sort of thing, this initiative basically is targeting American small businesses looking to export to emerging and frontier markets. At first glance, this isn’t too far off from what the Overseas Private Investment Corporation (OPIC) does, but the focus here is less about investing overseas and more on businesses looking to export overseas. Where exactly overseas? Officially, anywhere, but Ex-Im representatives made a point of letting the audience know that those looking to export to the following nine countries would receive special attention, determined by “a variety of macroeconomic indicators”:
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Mexico, the new Brazil, when it was the new China, before Africa and Switzerland showed up

According to the Financial Times, in perversion of all perversions, we’re now supposed to believe that Switzerland is the new China. Got that?

“Switzerland is the new incipient China,” said Steven Englander, Citigroup’s head of foreign exchange strategy.

Apparently, Switzerland’s attempts to keep the franc artificially weak while building up its central bank reserves make it so.

Well gee. Not too long ago, Brazil was supposed to be the new China:

That is, until Australia was dubbed the new China, at least as far as General Electric is concerned:

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The top 5 challenges to India’s economy

So says Indian Prime Minister Manmohan Singh:

  • Bring complete clarity on all tax matters. We want the world to know that India treats everyone fairly and reasonably and there will be no arbitrariness in tax matters.
  • Control the fiscal deficit through a series of measures which my officials are working on and on which we will build consensus in the government.
  • Revive the Mutual Fund and Insurance industries which have seen a downturn. Absence of investment avenues has pushed Indian savings into gold. We need to open new doors so that savings can be recycled into productive investments that create jobs and growth, not into gold.
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The Rupee Has More Room To Fall, But At Least It’s Not Infosys

By now the cat’s out of the bag: The Reserve Bank of India cannot fight the run on the rupee.

From a macro standpoint, India’s prognosis is a pretty difficult one to put a positive spin on, except perhaps that it’s probably not too late for a shorting opportunity. The rupee is at historical lows, foreign portfolio flows are low and going lower, and retail inflation at more than 10 percent handcuffs the central bank’s ability to cut interest rates further. And so a cycle has begun of rupee weakness driving higher inflation, which will drive further rupee selling.

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