Bric Analysis

Topics: Economics, Automotive industry, Gross domestic product Pages: 13 (4927 words) Published: August 30, 2012
Executive Summary
In 2003, Goldman Sachs, a leading investment banking company published a report on the future of the world economy. According to the report, the BRIC countries will become leaders in the economic powers of the world by 2050, with the USA and Japan amongst the six largest economies of the world.

The forecast predicts that BRIC will show higher returns, increased demand for capital, and stronger national currencies. The research that has been conducted on these countries will (1) reveal the country ratings for risk, (2) business environment opportunities, (3) condition that contribute to the country ratings, and (4) a thoroughly examination of the GDP, PDI, exports & imports (in US currency) for 2011 and 2015.

The goal of country risk measures is to forecast political or economic events in a country that may, “affect the business climate in such a way that investors will lose money or not make as much money as they expected when the investment was made” (Howell, 1998). Based on the findings of the country assessment analysis, StrataGEM will select a country that has strong characteristics in macroeconomic performance, long term growth projections, technological innovation, sustainable growth, human capital, and infrastructure, protection of private property, economic freedom, and quality of governance. These elements are critical aspects of the selection criteria process. As the qualitative context of each component is essential in formulating a global decision will be influential to the financial stability of the MNE.

StrataGEM has been charged with selecting one of the BRIC countries for a new multinational enterprise to purpose business opportunities. Based on the analysis, the team will make a recommendation that is most appropriate and financially beneficial to the company. Country Risk Assessment and Business Environment

Table 1. Country Risk and Readiness Ratings

Brazil is considered to have moderately low risk in the banking sector and banking regulations that are in line with international standards. Conversely, there is limit household debt capacity. Standard and Poor’s (S&P) Banking Industry Country Risk Assessment (BICRA) framework identifies Brazil with a rank at level five in economic risk and level three in industry risk on a ten-point scale where ten is high (S&P, 2012). Specifically, they indicate that “‘5’ reflects our opinion that Brazil has ‘high risk’ in terms of ‘economic resilience,’ ‘low risk’ in terms of ‘economic imbalances,’ and ‘high risk’ in terms of "credit risk in the economy,” (S&P, 2012). The overall economic risk and economic resilience are rated as such because largely because Brazil is still considered to be a low-income economy. Furthermore, the country continues to underperform when compared to other emerging economies, as is seen in Table 2, when compared to China. Nonetheless, the political environment appears to be relatively stable, which StrataGEM believes is reflected in EIU’s business environment rating (Table 1.). S&P describes Brazil’s government as being committed to developing fiscally responsible policy and focused on economic improvement (S&P, 2012). Russia’s business environment is good for buying property, but the process seems endless. The process takes too long to retrieve permits and electricity. Also, the country is at high risk for credit due to the number of citizens that spend more than they earn. Using the aforementioned BICRA framework, the overall country rating according to the banking industry is a 7, which is considered to be a high risk. India has its own unique environment. It is one of the largest democratic countries in the world, with vast untapped natural and human resources. It is ranked third in the world (following the U.S.A. and USSR) in having scientific and technical manpower, and has well-developed infrastructure and research and development facilities. India is viewed as...
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