As the world’s economies right themselves so called emerging markets are becoming more and more attractive. The problem is that many investors still think of emerging markets as being in small, backward countries whose primary attraction is cheap labor and raw materials. Emerging market investment in Latin America and investment in Asia is attractive. But, don’t think of countries such as big Brazil, little Panama, or mineral rich Chile as backward. China and India are the world’s most populous nations with immense pools of talent. Emerging market investment in Latin America and investment in Asia may just mean economies that are moving rapidly toward first world status with increasing research and development, more effective political and social systems, and progressively stronger consumer purchasing power.
A recent article in Panama’s weekly “Visitor” news source reported that a business mission from Brazil was in Panama looking for partners, markets, and business contacts. Both nations are often thought of as emerging markets. Panama is one of the strongest banking centers in Latin America and a world class offshore banking center. The recession barely touched Panama’s economy as numerous infrastructure-related megaprojects are keeping employment up and the construction industry is turning the oldest European City on the Pacific (founded in 1519) into a new Miami. In fact, the goal Panama with a population of 3.5 million person is to replace the greater Miami area (5.4 million) as the de facto capital of Latin America. With the 5.2 billion Panama Canal Expansion project due to double capacity of the canal and change world shipping patterns forever and a huge, continuing foreign investment Panama may succeed.
Investment in Latin America brings Brazil to mind. Brazil is turning into a technological and industrial powerhouse. Brazil and Panama, as well as most of the rest of the emerging markets in Latin America, are looking to trade more with other Latin America countries, with Europe, and with Asia in order to reduce dependence upon the USA. They are doing this with some success as countries such as Colombia have free trade agreements with virtually everyone south of the Mexico-US border. The ever-increasing integration of Latin American economies is likely to drive economic growth and prosperity, increasingly independent of the USA. Thus and emerging market investment in Latin America can also be seen as diversification.
A recent online article spoke of a Chinese coastal city dealing Japan despite taking the brunt of Japanese war crimes in WWII. Japanese as well as English is taught in the city’s schools and Japanese companies are encouraged to set up shop, take advantage of cheap labor, and export their products from China. The mayor of the city is quoted as saying that first they (the Chinese) will do the work. Then they will learn the processes. Then they will do the same business as the Japanese, for less. China is in many ways where Japan was fifty years ago. They are going their industrial and scientific expertise while undercutting everyone else with cheap labor. China will likely end up like Japan, with a better paid population, integrated with the other economies throughout Asia as well the West. Investment in Asia will likely, like investment in Latin America, prosper based up increasingly integrated economies, and increasing level of talent, steadily improving infrastructure, and a degree of independence from the USA and Europe. Many nations in Asia have old feuds that go back centuries but there is a pride of moving into the first world that makes these nations put aside old grievances.
A case in point is India and China. These two powerhouses have longstanding disagreements but they are already finding common ground for regional development. Emerging markets do not mean poor countries moving to their first cars and trucks but nations deciding whether to invest more in nuclear power or coal, urban transit or a stronger local auto industry.
Not thinking of investment in Asia as part of your portfolio is probably going to lose you money over the years.