The stinky CIVETS - will they overtake the BRICS?

source:slowvelder.wordpress.com

Few days ago, the financial website of the Year “thisismoney.co.uk” published an updating article about the CIVETS in their Investing column. Former chief executive of HSBC, introduced the term CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa). He was referring to a group of countries that are believed to be the next global growth engine. The Civets, he suggested, might be in their way to replicate the dynamic growth of the BRICS. From a personal point of view I agree with this statement. If we consider major economies in Europe or in North America, we cannot expect much growth in the coming decade. In the same way, most of the growth has already come from BRIC countries and might already be a bit too late to catch opportunities there. I think opportunities are definitively in emerging markets and these six countries have demonstrated interesting growth prospects for the coming years. I do believe however; as it happened with the BRICS, that it will take a while for the CIVETS to get on traction. Going a bit further, it might be an interesting point for countries under this acronym to start building alliances and closer relations to rectify the term and leverage their already strong economy.

source:resourceinvestor.com

Focusing more in the individual countries inside this group, I consider South Africa could be one of the strongest prospects here in economical terms. However having a particular interest in Colombia, I could rectify that it could be a really interesting prospect for the ten years to come. To study Colombia it is relevant to compare it to its neighbours in Latin America. During the second part of the 20^th century, the country has never experienced an economic meltdown or a populist revolution, or being under pressure of hyperinflation; phenomenons that have actually characterize the rest of the region in the last decade. Colombia follows a similar business cycle as any other commodity producing country. It has been a really stable country in the middle of an instable region. It is true however that Colombia has never shown signs of a fast growing economy. It has advanced in a continuous at a slow but steady pace. Good times means the economy growths slightly over 4% and bad time slightly under.

Summarizing a bit the history of Colombia, we could said that Colombian as always been a forgotten country. Colombia was never really interested in the world, and the world had never paid attention to Colombia. This was a common fact until the 1990s, where drug trafficking broke this equilibrium and gave way to the high levels of urban violence. By the end of 1990s, Colombia was suffering its worst economic crisis in more than a century. Neighbours and other countries named Colombia the “Sudan of the Andes”, it was already considered a “failed stated”. President Alvaro Uribe stepped in the right moment and with his “democratic security” agenda, managed to prepare the country to take advantage of the economic expansion the world enjoyed between 2003 and 2008. Over this period of time, Investment grew to 28% of gross domestic product from 12% in the previous years. Foreign Investment reached for the first time USD 10bn a year, and keeps on growing. Stock markets skyrocketed and fiscal deficit came to its lowest in years, only 4%.

Looking the future of the country, most economic forecast indicate that Colombia will continue to growth at is usual mediocre growth of 4% per year. In the same way, many problems still present in this country. Inequality has never been higher among its people. The country remains the world’s largest exporter of cocaine. And Still a pretty isolated country.

Many investors might think that this “frontier markets investing” is more volatile and riskier than either established BRICS or western markets. However from a personal perspective it could be argued that that CIVETS are by no means less stable that Western economies in Europe or America that are highly in debt.