Sunday, October 26, 2008

Russia As An Emerging Market

BRIC stands for Brazil, Russia, India and China. These countries are considered by many to be the top emerging markets. I first heard this term when I was surfing around the Goldman Sachs website, because who doesn't want to be a research analyst in emerging markets at Goldman Sachs? Well, I think it'd be a cool job. Anyway, what's the big deal? The infinitely reliable Investopedia defines BRIC as, "An acronym for the economies of Brazil, Russia, India and China combined. The general consensus is that the term was first prominently used in a Goldman Sachs report from 2003, which speculated that by 2050 these four economies would be wealthier than most of the current major economic powers."  

Well, that's pretty cool. I guess learning Russian is a good investment after all. But how does Russia factor into this economic idea? Well, Goldman Sachs predicts that Russia and Brazil will become dominant suppliers of raw material. Raw material like natural gas? No way. Russia would never use its oil reserves to elbow its way into a leading role on the global stage.  

I keep tabs on financial news, because I'm cool like that. And Russia is having a ball buying up oil companies and ousting old leaders from the rosters of the newly acquired. Furthermore, they realize this raw material monopoly won't last forever, and they are making efforts to diversify their earnings into new technologies. I guess that's good for Russia, but is it good for us? 

To back track a bit, there's been a lot of recent polling due to an election or something like that coming up, and it's been noted that Obama is the more popular worldwide candidate. However, Russia happens to be one of the few countries that's somewhat less excited about the prospect of Obama as president. What does this have to do with Russia as an emerging market? Well, Russia has been behaving badly towards its neighbors lately, and has been getting away with it. It's my immensely uneducated opinion that Russia perceives Obama as being more interested in social justice and less interested in economics, which would be antithetical towards Russia's intentions regarding current business practices. I mean, Obama's economic know-how probably extends as far as reading the back cover of "Freakonomics" anyway. That's a good book, but it's not exactly Adam Smith. And if he wants to raise taxes on hedge fund managers' income by a few measly percent, he probably won't be hugely sympathetic towards Russia's lumbering tactics towards economic power.  

So, we have an emerging market that doesn't like our likely president, and this emerging market happens to be supplying something Americans are somewhat preoccupied with. Is this a problem? Perhaps, that depends on a lot of factors that are totally outside the scope of this blog. Is Russia a good investment? Goldman Sachs seems to think so, and they managed to pull out of the mortgage mayhem right quick, so I'd probably bet their way on this one too. It will be interesting to see how our relationship with Russia develops as it takes on more importance in the global economy and we elect a new president. I'm reluctantly hoping Obama gets the go ahead, because I think he appeals to the sentiment of the nation - and the world - and that's a makeover we could certainly use. I just hope he takes all that bipartisanship to heart when he makes economic decisions, and barring that, I hope that our economy can shake off the threat of overzealous re-regulation and provide a shining testament to free markets once again.

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