I have written some about developing markets and the difficulties that firms face navigating such markets (see So You Want to Do Business in a Developing Country? and The Birth of Plenty).
As a Corporate Strategy scholar, I am generally more interested in how foreign firms make decisions to enter developing markets and how they manage their operations in those markets than the economic development path of any of the individual economies. However, it goes without saying that economic development (or the lack thereof) impacts the calculus of firms considering doing business in foreign markets. I was therefore interested to read a recent Op Ed about Russia in the Globe and Mail written by my colleague Nouriel Roubini (see BRICkbats for the Russian Bear).
In that article, Roubini questions the soundness of the Russian economy:
One powerhouse in the BRIC group is just hanging in there. Hint: It isn’t Brazil, India or China
One piece of bubble wisdom that has escaped relatively unscathed…is the assumption that the BRIC countries – Brazil, Russia, India and China – will increasingly call the economic tune in years to come.
Yet, the economic crisis that began in 2008 exposed one of the four as an imposter.
The weakness of the Russian economy and its highly leveraged banks and corporations, in particular, which was masked in recent years by the windfall brought by spiking oil and gas prices, burst into full view as the global economy tumbled. Saddled with a rustbelt infrastructure, Russia further disqualifies itself with dysfunctional and revanchist politics and a demographic trend in near-terminal decline.
While Russia retains the world’s largest (if somewhat aging) arsenal of nuclear weapons, as well as a permanent seat with veto power on the UN Security Council, it is more sick than BRIC.
Roubini’s conclusion is that the Russian economy is facing an inexorable decline, and as a result, it no longer deserves to be considered in the same class with the other fast-growing, dynamic BIC economies. He suggests that it is time to find a replacement.
Disclosure: No positions