My Opinion...

Marcus' thoughts on business, education, society, culture, and ethics around the world.

BRIC Countries

Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Brazil, An Economy of Extremes

Posted on Thursday, 31 January 2013 in BRIC Countries

I recently returned from Brazil, and while observing the hustle and bustle of Rio’s international airport, busier than ever, it dawned on me that Brazil has much to be proud of. I am Brazilian, and therefore, admit to being a tad biased, but the fact remains that a decade of accelerated growth and progressive social policies has brought the country prosperity that is ever more widely shared. The unemployment rate for December was 4.9 percent, a little higher than the lowest on record, 4.7 percent from January of last year. Credit is flourishing, particularly to the swelling numbers who have moved out of poverty status and into the ranks of the middle class. Income inequality, though still high, has fallen sharply.

For most Brazilians life has never been as hopefualtl, and to some extent we see plenty of paradigm shifts. Women’s salaries are growing twice as fast as those of men, even though they only occupy a mere 21.4 percent of executive positions, despite the fact they hold most of the doctoral degrees in the country (51.5 percent) and dominate the area of research (58.6 percent). They also own more companies in the Latin American region (11 percent) than any other emerging country. The new shifts in the Brazilian economy also benefit the black communities, which have seen their salaries increase four times faster than their white counterparts, bringing the population of the middle class blacks from 39.3 percent to 50.9 percent. According to research conducted by the Federal University of Rio de Janeiro, of 20.6 million people who entered the workplace, only 7.7 million where white. Overall, the country is enjoying the boom brought by commodities, in particular oil and gas, despite the global economic slowdown. Are American entrepreneurs taking advantage of this?

If not, they should, but with a caveat. I believe what worked for the Brazilian economy ten even twenty years ago, such as a focus on commodities, low labor costs, excessive focus on exports and so on, won’t work moving forward. Today, Brazil is a new country, with new habits and customs, and believe it or not, a population that possesses an extremely elevated self-esteem. Meaning, the fledgling and rapidly growing Brazilian middle class, 52 percent of the population since 2008, is in love with itself and ready to spend. According to Goldman Sachs, more than two billion people around the world will belong to the middle-class by 2030, but the majority of Brazilians are already there.

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Time to Pay even More Attention to China

Posted on Friday, 26 October 2012 in BRIC Countries

It is not news that investing on emerging markets is a good idea, especially with advanced economies struggling to gain some foothold. But watch for China's twelfth-straight month of manufacturing contraction, according to HSBC's survey of purchasing managers in China’s manufacturing sector.

While the index rose slightly to 49.1 from 47.9 reported in September, it still came in below the vital demarcation of 50.0 that signals expansion in the sector. This is in line with my forecast back in April, in an article to benzinga.com titled "China: the White Elephant Versus the Dragon."

However, China's Unstoppable Relevance, title of another article on mine in early September for the Worcester Business Journal, remains true. New orders are being reported at a six-month high of 49.7, and exports showed an upward trend to a five-month high. This is after the country reported a rise of 9.2% in industrial production for the month of September, up from 8.9% in August.

Beyond some planned infrastructure spending this summer and a hastened approval process for new projects, the government has been fairly quiet on monetary or fiscal stimulus since its last cut to the reserve requirement in May. The move followed several cuts to banks’ required reserves ratio and two interest rate cuts.

While I do acknowledge my bias for the region, those interested on investing in China can make a reasonable bet on strength over the next few months, as production and investment data are showing positive momentum, and the manufacturing surveys are hovering just below 50. If a new government stimulus programs is announced, which likely will, the economy may jump-start and promote an even greater FDI (foreign direct investment) inflows into the country's economy.

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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China’s Communist Capitalism

Posted on Sunday, 21 October 2012 in BRIC Countries

 

Recently, I returned from China, and during my return flight, I came to the realization that although I teach on the subject of China in my international business program at Nichols College, I had missed the point when it came to that country’s profile. I kept thinking about how Taipei, a democracy in Taiwan, with all of its tall gray buildings seemed more like a communist country than China. In contrast, Hong Kong’s Time Square, the World Trade “Centre,” Causeway Bay, and its SOHO seemed more like Manhattan on steroids. Despite the plethora of books and articles I’ve read on the subject, I came to realize that Chinese communism today isn’t anything like my antiquated vision of it which was shaped by the Soviet Union, and living in the United States (US).
 
The communism I witnessed in Hong Kong and Macau, although we must note these two countries are China’s Special Administration Regions (SARs), are true examples of capitalism at its core. In contrast to the West and most advanced economies today, unemployment rates in Hong Kong and Macau are only four and two percent respectively. Hong Kong hosts the most skyscrapers in the world, with New York City a distant second, with only half the amount. Hong Kong is also the city which holds the most Rolls Royce’s in the world. Macau’s per capita income is $68 thousand dollars, in contrast to $48 thousand in the U.S.
 
What impacted me the most during my twenty-one days there was its people’s optimism, in contrast to the cynicism I hear constantly in the West, whereby people seem to have lost their excitement about the future. There, young and old, people yearn and strive for more than what they have. I agree with Goldman Sachs’ Jim O’Neill, who coined the “BRIC countries” back in 2000, in his assertion that “China is the greatest story of our generation.” China’s general macroeconomics is very promising. It scores well for its stable inflation, external financial position, government debt, investment levels, and openness to foreign trade. At the micro level it falls just below average on corruption and use of technology. But the latter is changing rapidly.
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