Category Archives: Russia

The BRIC is Becoming Really Investment Critical

As per this recent article over on World Trade 100, it’s time to ask if your company [is] ready to export to BRIC, it’s time to start thinking about exporting to BRIC countries because:

  • 45% of global GDP is estimated to originate from seven emerging economies: Brazil, Russia, India, China, Mexico, Turkey, and Indonesia
  • it is estimated 55% to 60% of the nearly one billion households that will have incomes in excess of 20,000 will be from the developing world within a decade

However, one thing that needs to be noted is that many of these countries have sub-markets, and if the products aren’t localized to the sub-markets, it could be difficult to maximize your return. For example, China has 20 to 40 different sub-markets on its own. And some of these markets are only two hours apart. For example, Guangzhou and Shenzhen are both tier-one cities in China, located in the same province and just two hours apart but there is a marked cultural difference between the two. According to a study done by McKinsey, “Guangzhou’s people mainly speak Cantonese, are mostly locally born, and like to spend time at home with family and friends. In contrast, more than 80 percent of Shenzhen’s residents are young migrants, from all across the country, who mainly speak Mandarin and spend most of their time away from their homes”.

The article has some good thoughts to keep in mind when planning to expand into China, India, Brazil, and Russia. So ask yourself, Is Your Company Ready to Export to BRIC?.

Do You Know What Disaster Will Strike You Next?

Of course you don’t, but you can calculate the risks of one disaster vs. another and one site vs. another with some simple research into natural disasters.

Earthquakes are more likely near the edges of tectonic plates than they are in the interior, especially if the plates are moving together and pushing on each other (and there is a history of earthquakes and activity). You can quickly identify areas at high risk by looking at a tectonic map, such as the one over on ThinkQuest. One quickly sees that high risk areas are the west coast of North and South America, South East Asia, Japan, and the island domains north of Australia, as per the Global Seismic Hazard Map over on

You can get a list of volcano activity reports from the Smithsonian Institute which maintains a USGS Weekly Volcanic Activity Report. Most are usually in the Ring of Fire, which encompasses the high-risk earthquake zone around the Pacific. Google maps them for easy viewing.

Coastal areas near sesimic hazard (earthquake) zones in the oceans are at the greatest risk of Tsunamis, which tend to build up in power and force as they approach shallow water and land. This says that some of the riskiest araes are on the Ring of Fire in western North and South America, Japan, and south-east Eurasia in the island domains North of Australia. More information on Tsunami Risk Zones can be found over on the International Tsunami Information Center.

The greatest risk centers for hurricanes are coastal areas near the equator where hurricanes are normally a problem. The east coast of the US is particularly susceptible to hurricanes. The Global Weather Oscillations site specializes in in hurricane risk probability zone forecasts for the US and the risk zones for the coming year can be found on the Global Weather Cycles web site. The National Weather Service tracks the 10 global hot zones over on the National Hurricane Center site and a review of historical data will tell you how risky a certain area is.

Tornados can occur anywhere in the world (including Antarctica, although this is the one continent where a tornado has not been documented) when the atmospheric conditions are exactly right. However, the most at risk zones are the middle latitudes between about 30 degrees and 50 degrees North or South where cold polar air meets warmer subtropical air and generats convective precipitation along the collission boundaries. As a result, taking weather patterns into account, the most at risk areas are the United States, western Europe, South Africa, the eastern and western coasts of Australia, New Zealand, the eastern and western borders of China, the estern coast of Argentina, Japan, South Korea, and the Philippines. Good information on tornado climatology as well as a great map of global risk zones is found over on the National Climatic Data Center site.

Ice Storms
Blizzards can be bad, but generally don’t do much in the way of lasting damage. Ice storms, on the other hand, can do severe damage to infrastructure on a wide scale by downing power lines, and grids, damaging structures from the sheer weight of the ice, and even taking down trees. The most at risk areas tend to be Canada, the US, the UK, and most of Northern Europe and Russia.

Floods are not limited to the coastal variety, and can happen anytime the water level rises too quickly. Thus, in addition to worrying about flooding in coastal areas as a result of a tropical storm, hurricane, tsunami, or storm surge (tropical cyclone), flooding inland can occur from intense thunderstorms, sustained rainfall, or rapid snow melt. Thus, all of the coastal areas identified in your hurricane and tsunami risk lists are at risk at flooding plus any area with a history of flash floods, sustained rainfall (like they get in India during Monsoon season), or rapid snow melt (in Northern Canada) are at risk of floods.

Wild Fires
Wild Fires can occur on any continent at any time whenever the conditions are right and are likely to follow heat waves, droughts, and cyclical climate changes (such as El Nino) and high-pressure ridges. They are most common in climates that are sufficiently moist to allow regular vegegation growth but where extended dry, hot periods are also present. This keep parts of Africa, South America, South Eastern Eurasia, and Eastern Eurpe at high risk, but parts of the Southern US, Mexico, India, and Australia also enter the high risk zone on a regular basis.

In other words, there’s no excuse for not knowing which suppliers are at risk of which natural disasters and how great that risk is. (Some historical research will give you frequency of disasters in the area and a local climate institute likely has probabilities of occurence for the event, such as once every twenty years.) So while it may be hard to say how risky your supply chain is from a holistic perspective (as some financial or political risks may not be identifiable until the last minute), it should not be hard to say how risky it is from a natural disaster perspective.

To Russia with Hope?

A month or so ago, I asked North American Nearsourcers is Brazil in your future, referencing a special report on business and finance in Brazil in the Economist that noted that, for the first time in modern history, Brazil is democratic, experiencing economic growth, and realizing low inflation.

Today, I’m asking European Nearsourcers if Russia is in theirs? In a recent Harvard Business Review article on The Promise and Peril of Russia’s Resurgent State (subscription required), we are told that there is money to be made in Russia, as long as companies play by the rules imposed during Putin’s tenure as president and that it is just as promising as other members of BRIC; it is no more corrupt, violent, or prone to institutional upheaval. Furthermore, the recent high oil prices have helped to propel economic growth, which has been strengthened by improved tax administration and energy company taxes, and resulted in recent fiscal surpluses.

Of course, with the good come the bad. The Kremlin’s apparently infinite appetite for power represents a growing threat, as do the complexities of doing business in Russia. The current fluctuations in commodity prices, of which Russia is largely dependent on, can make things uncertain as well and Russia isn’t rising to the centre stage in the same way that Brazil, India, and China are. And it’s current president has warned time and time again that Russia will be doomed unless both the economy and the society modernize, hand-in-hand.

But balancing everything out is the fact that Russia’s economic situation will improve with the economy, when oil prices again stabilize (in the $80+ range according to most projections). (European) Energy companies have no choice but to invest in Russia. Inflows will surpass $100 B annually, the nouveaux riches will devour luxury products, and the middle class, that will have an average income of $16K, will expand. During the eight years Putin was President, he did everything he could to enforce the Kremlin’s power to achieve his goal of developing a market system and integrating Russia into the global economy — including the creation of a prudent macroeconomic management policy. (In Putin’s government you did not get involved with politics, did not buy politicians, and paid your taxes. If you were a business who played by the rules, everything was fine, and you were free to get rich if you could. If you didn’t, you were in trouble.) And Putin’s handpicked successor, Dmitry Medvedev, has repeatedly said that tackling remaining corruption is his top priority. Plus, dealing with Russia’s state led capitalism is often easier than coming to grips with China’s single party, multi-level authoritarianism or India’s multi-party, chaotic democracy.

Anyone have any thoughts to share?

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