Country RiskIn 2001, Goldman Sachs bundled Brazil, Russia, India, and China together into an emerging market basket in deference to the four countries size and economic potential. For most of the decade, despite significant differences in relative economic performance, the BRIC acronym has stuck. This is unsurprising in light of the benign global economic environment over the past ten years, during which growth in the BRIC countries far exceeded historical averages and portfolio inflows into all four economies soared. For various reasons including resistance against recent global crisis, not least its strong public finances, relatively less exposed financial system, low levels of private sector leverage, and potential to raise consumptions share in GDP are of the opinion that of all four BRICs, China is probably best positioned to have more foreign investment, in particular fiscal stimulus, to withstand externally driven crisis and other financial and systematic risks. Due to the collapse in its terms of trade, the falloff in financial account inflows, the distress in its banking system and the absence of excess capacity on the supply side, Russia has access to fewer endogenous cures to the external gloom, although amid all the current difficulties.
This report will be developed by comparing all four countries to each other and by contrasting relatively similar economies such as Russia and Brazil, China and India. We picked the case of recent global crisis to understand each countries overall withstand power against external or/and internal crisis
BrazilWhile in our view the near-term outlook for growth in Brazil has soured, what is comforting is that both Brazils public and private sectors has stronger balance sheets than in the past. For Russias general government, this is even more strikingly the case. Whereas Brazils net general government debt has only declined by 3% of GDP since 2001 versus the remarkable
52% of GDP drop for Russia, this apparent stability of general government debt levels in Brazils case masks, in our opinion, a shift away from external and towards local currency funding at increasingly longer-dated maturities. From 2001 to 2008, foreign currency debts share in Brazilian general government liabilities fell from one-third to one-eighth of the stock. Over the same period, the average maturity of Brazils increasingly private sector-dominated gross external debt stock improved from 4.5 years to over 8 years. In our opinion, such positive developments in Brazils government and private sector repayment schedule owe a lot to the increasing faith of international investors in the countrys policy-making and other institutions, including those charged with the enforcement of contracts and property rights. On the contrary, the data on average maturity of Russias stock of gross external debt shows no meaningful lengthening
The Brazilian government’s fiscal crisis has only intensified in the last year, with its own budget problems and debt-to-GDP ratio still higher than in 2001-2002, a quarter of the country’s GDP. These problems are clearly exacerbated by the recent economic downturn, the absence of large-scale infrastructure investment, low oil revenues and a rising social safety net. However, most structural problems plaguing Brazil remain. Economic restructuring, a broad social welfare reform, the reduction in the current level of public financing for public-private partnerships and the restructuring of government-owned firms have been implemented but have not done much about basic public services.
As a result, the country is in deep financial trouble. In a recent survey of a growing number of households, 44.5% expected to live in near crisis-like conditions in the next several years, although only 3.6% thought it would get better, for example in their own households, or in the public sector. As a result, a large proportion of Brazilians are struggling to live at a reasonable level, even on time.
Brazil, which is divided between the central and rural portions of the country, is more economically advanced than its urban-rural counterpart in terms of the quality of life and amenities, and the quality of infrastructure necessary to live without living in deep poverty. It has the advantage of relatively large and rapidly growing sectors of society, such as agriculture, health care and the education sector. Despite these advantages, economic and economic development are constrained, with low living standards for Brazilian workers and in large part due to lack of sufficient financing for many services provided by private and public enterprises.
Public housing
The social and political conditions in Brazil are not only difficult to manage but also complex. Although the basic public housing system is one of the pillars of economic development, it only consists of two or three units, which remain mostly unused, and the social shelter system remains a poor use. In other words, the private institutions of civil society and many social housing associations have to provide for families of poor household members, some of whom are poor enough to live with an extended family of their choice. This is an increasingly complex and expensive business system that is also a major problem for poorer families.
The public-private partnership sector (PPP) accounts for only 2.07% of the total national income of Brazil at current rates, and is largely financed through state and private grants. The government provides many more public and private grants than the private institutions that have been established, despite considerable tax revenues and spending of considerable amounts. Moreover, the PPP has been in the process of being reformed and in some cases, its status restored. Many of its most important structural changes have come to a head. First, the privatization of private enterprises, by the government, has been brought under control, leaving private enterprises to pay income taxes, rather than pay the costs of restructuring to the government or to the community. Second, the government has been forced to deal with public housing through privatization and development, resulting in a loss of housing in some areas and increased costs of living (for example, housing needed for children) in other parts of the country. Third, in recent months the government has been forced to reduce housing subsidy of 3 percent of GDP, down from 2.33 percent to 1 percent of GDP. The government has also required the local area government (ALENA) to provide better building conditions and has been able to pay for improvements to the schools and hospitals.
Brazil has been an important member of the global development community for many years, including the countries of the South America, the Trans-Pacific Partnership, South Korea and many other multilateral nations. Today, Brazil is at the forefront of international assistance to other emerging countries