INTERVIEW: Investment story still built like a BRIC outhouse

By bne IntelliNews October 23, 2009

Ben Aris in Istanbul -

On the sidelines of October's IMF meeting in Istanbul, Jim O'Neill, head of research at Goldman Sachs, is holding court, surrounded by a buzz of journalists keen to talk to "Mr BRIC," the man who predicted in 2001 the big four economies of Brazil, Russia, India and China would emerge as the largest in the world within the next 20 years.

Before the crisis, the BRICs were seen as a trendy investment theme that made investors good money if they were lucky enough to invest in a non-crisis year. There was even talk more recently of adding a new country to the quartet, Indonesia, which has been growing fast, and appending the anonym to BRICI (or iBRIC if you want to be really trendy - the term, after all, is little more than a marketing tool for equity salesmen).

But things have changed since the financial world went into meltdown in September 2008. The G20 has replaced the G8 and countries like China and Russia have been promoted to the top table as key partners in global efforts to jumpstart the world economy. Still, O'Neill says that the West still hasn't dropped their prejudices to what is still widely referred to as the "emerging markets."

"The global approach to the international crisis is coming from a western perspective; Asia is still growing," says O'Neill. "The crisis made obvious to all the interconnected nature of the global economy and the fact that it is not dominated by one player so we now have to work together."

Relevant again

The International Monetary Fund (IMF) has also been prompted. After eight years of boom, the IMF was looking obsolete, but the collapse of financial systems around the world shoved it back into the frontline and its stand-by agreements are back in fashion as the must-have financial accessory for many developing economies.

At the Istanbul meeting, IMF chief Dominique Straus-Khan said that going forward his institution wants to play a new role as a super-national central bank that will pool currency reserves of countries that run large surpluses - China and Russia are both in the top five cash-richest countries in the world - and will implement the decisions reached by the G20 heads of leading countries.

O'Neill is positive on this development. "The crisis is good for the world, as the solution will have to be done on a global level. We got into this mess in the first place as everyone was focused on the US consumer before. Now we need to develop a more balanced approach that takes in the economies of the whole world. We wouldn't have had this crisis if it weren't for the bubble in the US housing market."

China, India and, to a lesser extent, Brazil have come through the crisis smelling of roses, but not Russia, leading some to suggest that the "R" should be removed from BRIC. "All this talk about removing Russia from the 'BRIC' is ridiculous. It will still grow, but of course it has specific problems and it will not grow as fast as China," says O'Neill. "Russia has faced the biggest challenges of any country during this crisis because it had such high leverage and it was so dependent on oil - both these things collapsed."

O'Neill goes on to say that the basic investment story for Russia hasn't changed and on several occasions says that investors and international financial institutions are not paying enough attention to the positive aspects of the crisis. The Kremlin was wrong-footed by the global collapse, but it came at a time when it was losing its focus on the need to reform - a need that has just been underscored in the most dramatic way possible. "Russia needs to change its model and the elite say they want change, but to change will be hard," says O'Neill. "But ongoing growth in all these countries means that over 100m have been lifted out of poverty even now. The West is preoccupied with its own problems and has lost sight of what is happening elsewhere. Things look bad now, but in a few years we will look back and see this was a defining moment in the ongoing shift of economic power to the east."

Send comments to The Editor

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.