Depending on how closely you monitor the international economy, it may or may not surprise you to hear that, over the next decade, almost 70% of the global economic growth is expected to come from the emerging markets. Put simply, an emerging market (or EM) can be defined as one which is thought to be transitioning from ‘developing’ to ‘developed’ status — taking into account a range of socio-economic factors, including the liquidity of local debt, and the level of market efficiency.
With this in mind, if you’re now looking to start up a new business venture, then it’s well worth directing your attention a little further afield than this sceptred isle. Read on for our round-up of the EMs where it will pay to start investing this year.
For the best in raw materials, head to Brazil
According to Justin Kuepper, the owner of JDK Commerce Inc., “the Brazilian phrase ‘É boa pra caramba’ may be the best way to describe its economic miracle.” He explains, “within the lifespan of most of its residents, the country has faced significant economic turmoil, survived a military dictatorship and grown its GDP from $15 billion in 1960 to the world’s seventh largest economy, breaking $2 trillion in 2011.”
International investors will already know Brazil best for its rich natural resources. In addition to its extensive offshore oil fields, the country is the second largest producer of iron-ore in the world and produces more ethanol than Asia and Europe combined.
These resources help it cheaply produce a wide variety of industrial and consumer goods while serving as a key raw material supplier to countries like China.
For skyrocketing growth, look to China
Despite being the second largest economy in the world, China has been considered an EM for over 25 years. Whilst the country has enjoyed massive growth throughout the 1990s and 2000s, it has experienced an economic slowdown over the last decade due to a rise in the state sector and mounting financial risks.
However, it remains true that the Chinese economy is rated as the second largest and fastest growing in the world — with the country also holding the position as the largest exporter and importer of goods globally.
Benefits to investing in China include cheap and reliable technology, a highly productive workforce, fertile land and good weather. China also has the world’s biggest new car market and exports a significant amount of raw materials, particularly steel.
For tech development, choose India
As mentioned, around 70% of world growth over the next few years will come from emerging markets — and China and India alone are predicted to account for 40% of that growth. In fact, according to Investing Haven, India deserves to hold the top spot amongst the best emerging markets for 2019.
“The GDP growth figures for India are mind boggling,” says Taki Tsaklanos, “in the recent quarter, India’s GDP growth was between 7% and 8%.” The surge of IT industries in South India has already pushed that part of the nation to become one of the world’s great info hubs.
According to David Schneider for 80/20 Investors, much of this drive comes from an ambitious, highly educated and forward-looking middle class. “Comfortable that their voice is being heard, and presented with plenty of opportunities, the 20 and 30-somethings of the subcontinent cut a dramatic contrast to the entitled ‘millennial’ of the West,” he explains.
For your agricultural needs, look at Uruguay
Uruguay is a country famous for its beautiful landscapes, which has only recently caught the eye of investors from all over the world. And, if your business is in the agricultural sector, then there really is no better place to be focusing your attention.
Uruguay’s leading industries are the raising of livestock, the processing of animal products and tourism — its main exports are meat, wool and animal skins and hides. According to U.S. News, as one of only two South American countries with an investment grade sovereign bond rating, Uruguay’s economy has been able to remain more buoyant in the face of financial crises than many of its neighbours.
It was also the only country in the Americas to not experience a recession between 2007 and 2009, and in 2005 was the first South American country to export software – a major boon to its economy.
For the best in Southeast Asia, go for Indonesia
According to Becca Cattlin for IG, Indonesia is Southeast Asia’s largest economy, which has helped it attract market attention. However, the emerging market rout of 2018 had a severe impact on the country, due to its reliance on foreign money to fund deficits. The foreign ownership of Indonesian government bonds was up to 40% in 2017, from 33% in 2014.
In December 2018, Indonesian markets rebounded slightly, recovering from tumbling exchange rates after the Indonesian central bank hiked interest rates. “Market sentiment is generally positive for 2019, with Indonesia’s predicted growth at 5.1% for the year,” says Cattlin.
For a gateway to American markets, opt for Mexico
Mexico has quickly become one of the most popular emerging markets among investors — it is the second largest economy in Latin America, and the 13th largest in the world. Although Mexico’s growth slowed down during the global recession, its year-over-year GDP picked up in 2016 and continued to increase in 2018 – rising from $1.07 trillion in 2016 to almost $1.2 trillion in 2018.
Mexico’s economy is heavily reliant on exports to the US, which means that the price of the domestic stock market and currency – the Peso – are closely linked to the US dollar. But, as Becca Cattlin puts it, “despite falls in the price of raw materials and volatility across global markets, the predictions for the country are positive.” In fact, the country’s GDP is expected to continue growing at an average rate of 2.5% in 2019.
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