Mercados Emergentes

EMERGING MARKETS.

CHINA.

When you think about emerging markets, you may think first of the People’s Republic of China, if only because it’s so big. Still officially a Communist nation, the Chinese government maintains a tight control over the people’s lives, while promoting private ownership, international investment, and entrepreneurial ventures.

Type of government: Communist state

Major industries: Aluminum, armaments, cement, chemicals, coal, commercial space launch vehicles, consumer products (including footwear, toys, and electronics), fertilizers, food processing, iron, machine building, mining and ore processing, petroleum, satellites, steel, telecommunications equipment, textiles and apparel, transportation equipment (including motor vehicles, rail cars, locomotives, ships, and aircraft)

Currency: Yuan, also known as the renminbi (“people’s currency”) or RMB

The pros of doing business in China

China is the world’s workshop, with the people manufacturing or assembling a wide range of products in demand around the globe. Already an emerging-market success, the country has plenty of room to grow before it’s considered a developed economy.

A strong financial-services sector: The country’s financial sector has evolved to meet the needs of a modern economy with global trade. In addition, the Chinese are savers, the national government has no debt, the banks have a good track record for responsible lending, and consumers keep saving money so the banks have funds to lend out to new businesses.

One billion consumers: China’s large population is its greatest opportunity. Most Chinese have a decent income by emerging-market standards. The Chinese have been making money and saving it, waiting for the day when consumer products are easy to get — a day that’s coming soon.

Privatization: Many of China’s largest industries have been privatized, and the government is working hard to convert more companies to private ownership structures. As that happens, China likely will see more growth and innovation. And international investors will have more access to securities in order to get exposure to China.

Risks of doing business in China

China’s transition to a market economy has been huge and mostly trouble-free, but that may not continue. Possible risks include:

Demographic imbalances: The government’s controversial one-child program has kept the population’s growth rate in check, and the preference for sons contributes to a growing gender imbalance. The policy has also contributed to an aging of the population the average age is 35. As the population starts to skew older and male, it will shrink, and that may cause the economy to shrink, too as jobs are unfilled and the population of single men grows.

Environmental damage: China’s economic miracle has come at a high cost to the land, the air, and the water. The country is losing agricultural soil to erosion and to industrialization. The water table is dropping, access to clean water is limited, and the air quality is terrible.
Increased production and consumption is likely to tax China’s resources further. If the government and the people don’t commit to improving the environment, China’s progress could dry up literally.

Potential for unrest: Communism is theoretically a workers’ party, but many workers are unhappy, feeling underpaid for the long hours the work producing goods that sell for high prices overseas — some companies have experienced strikes. A shortage of skilled workers is pushing some wage rates up, which makes other sources of cheap labor more appealing.
And how long the Chinese people accept restrictions on speech and tight government control over their lives remains a question. As China does more trade with the world and has access to more ideas, the people may want more freedom. (C.Logue, 2014)

INDIA.

India is a diverse country that’s always been open to the rest of the world, and its emerging marketplace shows the power of a diverse, open economy.

Although only 60 percent of the people are literate, most who have an education understand English — it’s one of two official languages of the government — making India the largest English-speaking nation in the world after the United States.

A program of economic liberalization started in 1991 led to rapid growth. India’s large population and low starting point mean that it can sustain much faster average long-term growth than most other countries on earth.

India has its own numbering system that uses a number that’s between a thousand and a million: the lakh, which is equal to one hundred thousand. If a company reports earnings of 20 lakhs rupees, that means it earned 2 million of them. Another number, the crore, is equal to 10 million. A company with assets of 100 crores rupees has 1 billion rupees in assets.

What you should know about India:

Type of government: Federal republic

Major industries: Armaments, caustic soda, cement and other construction materials, ferrous and nonferrous metal fabrication, fertilizers, food processing (particularly sugar refining and vegetable oil production), petrochemicals, petroleum, textiles.

Currency: Indian rupee

The pros of doing business in India

India has huge scale growing off of a small economic base. Even small improvements in income, when multiplied across more than a billion people, add up to big money. That opportunity is huge, but it’s not the only one:

Saving big to encourage enterprise: Indians are big savers, so Indians who want to start businesses have access to local capital — from family members or local banks. The country’s culture encourages enterprise.

Improving infrastructure: India has long been hampered by poor infrastructure, ranging from dirt roads (if roads exist at all) to electrical systems with frequent blackouts. The infrastructure is improving, though, slowly but surely.

Serving the bottom of the economic pyramid: Much of India’s population is poor, but Indian companies have been developing products, services, and packaging to appeal to people who have little cash and small savings butwho want to lead a better life.

Risks of doing business in India

Although India’s growth and prospects have all the excitement of a big Bollywood movie, the country has

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