Brics hold steady, but increased anxiety over China now makes Brazil safer bet

Jeremy Weltman
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Some of the world’s emerging powerhouses have seen their scores rise in Q3 2012, and China has now lost its safest-Brics status.

The world’s emerging powerhouses (Brics) have experienced contrasting score changes during Q3 2012. Whereas South Africa, Russia and, to a lesser extent, India have all seen their risks ease, Brazil and China have seen more deterioration – the latter especially so, which is a concern given its size and influence on the global stage.

Given these trends, the two giants have now exchanged places in ECR’s rankings – symbolic perhaps, but still a substantial development given China’s superior A-grade credit ratings, vis-à-vis B-graded Brazil. These ratings now appear outdated, according to ECR’s survey.

As for the other Brics, Russia has seen a substantial improvement during the quarter, moving up two places to 59, and above India (down one to 60th). Yet India’s risks are also slowly easing, bolstered by recent market reforms, including a liberalization of rules affecting inward foreign direct investment and a privatization drive aimed at shoring up the currency and improving the balance of payments.

One of ECR’s experts, Amjad Bashir, chief economist at the Lahore Chamber of Commerce & Industry, argues that "India has taken a very measured approach to reforms recently, which is going to [remove] some of the risks and concerns people have about [the] economy.

"[As for country risk], I am very optimistic about India, given the government is working on long-term capacity of India’s economy to grow. Fluctuations in market news and in market sentiment can go either way but we need to look at India’s long-term capacity, which remains very strong, and that is the reason why I am optimistic about it."