We have our problems in the USA with cronies on the take, and we do things on the grandest scale. Witness Bernanke this afternoon. But just imagine what it’s like doing business in Brazil, Russia, India, China, or South Africa.
The common theme in these countries? A lack of respect for property rights.
South Africa used to be pretty good on property rights but has been slipping in recent years. Brazil, Russia, India, and China however have a long history of doing business crony style and have gotten worse since the beginning of the financial crisis.
“People were launching BRIC funds three, four, and five years ago. When Jim O’Neill made the call it was a fantastic call for a few years but then, as with these things, it was taken too far. The reason they are uninvestable is because of the extent of state intervention in those markets, which nobody would have foreseen three years ago,” Smith said.
I wouldn’t say that nobody foresaw the governments in developing countries seizing assets, engaging in wholesale cronyism etc. It is the reason why many people chose never to go down that investing road in the first place. So somebody foresaw what has happened.