The nations that were labeled BRICS by a British economist were meant to be the next big thing in global economic growth. The countries that make up BRICS, Brazil, Russia, India, China and South Africa are certainly strange bedfellows economically speaking. China’s economy is 30 times larger than South Africa’s, and China’s output is twice the size of the rest of the group combined. And to make matters worse, China and India are bickering over a territory issue, and the political structure of the countries are drastically different
So what is the real reason why these countries are joined at the economic hip? Some investors say they need each other and investors need them too. None of those countries will ever have the economic growth that the United States produces when it is functioning on all economic cylinders, and none of them can achieve the global power that the U.S. possess.
Instead of being the next big thing, BRICS is just an economic label that doesn’t mean much to investors. But some investors fall for the pitch that has come out of the various perceptions that the media tries to lay on the investment world. The truth is, according to Ken Griffin, the hedge fund genius and CEO of Citadel LLC, one of the largest investment firms in the world, is BRICS is an illusion created by the countries in that alliance.
Griffin knows a lot about these so-called emerging markets. Griffin knows Brazil has been producing excellent returns for the last four years, but the country is well-known for political corruption and weak international interaction. Griffin also knows Russia is going to be Russia, and that means Putin and company will do whatever is necessary to keep Russia as the number two power in the world. India is making some progress, but India doesn’t have the product creativity it takes to make the world want to buy their goods, and that’s a problem for investors. Griffin and his group of limited partners invest in those three markets, but they do it knowing they are long term investments.
Mr. Griffin pulled his company out of the hands of bankruptcy by investing in assets in these countries, so he know what to invest in and what should be left alone. Griffin claims China is the only BRICS country that can give investors some incredible returns, but the government controls who can invest and who can’t, and that can make investing in that market difficult. South Africa is a wild card, according to Griffin. Griffin likes to invest in wild cards, but he thinks South African investments are strictly long-term. The government has to fix some economic flaws before it can function as a true emerging market.
The only emerging market that is acting like an emerging market in the BRICS alliance is India, and Griffin thinks there are opportunities for investors there, especially in technology and oil.
When all the facts are studied, the BRICS alliance is not a strong one. China and Russia are members of the UN Security Council, but they have only given lukewarm support to the other members when it comes to joining them. Investing in BRICS as a group may sound like a good idea, but investors should be careful, according to Griffin.