Emerging market investing has been a hot-and-cold investing subject for three decades, and the BRIC countries of Brazil, Russia, India, and China have really tended to dominate the discussion over the past 10 to 15 years. While it is true that there is incredible promise in these countries, there are also more challenges and dangers than many investors realize. Investors would do well, then, to take a closer look at these economies and consider some of the risks that could undermine these "once in a lifetime" investment opportunities. (Brazil, Russia, India and China are becoming more popular for investing, but there is still plenty of risk among BRIC countries. Check out Understanding BRIC Investments.)
Poverty
Poverty is a dangerous problem for any country to have, as it not only prevents people from maximizing their potential, but it also represents a dangerous store of resentment and potential political instability. Poverty is a significant issue in Brazil and India, as roughly one-quarter of those populations live below their country's poverty lines.
Unequal distribution of wealth is a similar problem, and perhaps even more problematic from an investment statement as a voting populace may look towards politicians that promise to address this inefficiencies with business-unfriendly practices (as has happened in Venezuela). Brazil scores very high on lists of inequality (as measured by the Gini coefficient), and China is quite high as well (many people do not realize how poor the Chinese living in the countryside are). In comparison, Russia and India are much closer to the standards of the Western world in terms of income distribution.
To read the full column, please follow this link:
http://financialedge.investopedia.com/financial-edge/0711/Potholes-In-The-Golden-BRIC-Road.aspx
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