It would be exaggerated to call Davos the “money Oscars”, as Jon Stewart did on the Daily Show. But this year, WEF participants did like to think of countries as winners or losers, especially among emerging markets. In this last roundup, beyondbrics summarises who, to paraphrase the FT, “was hot – and who decidedly not.”
The #1
Mexico was the EM country most patted on the shoulder – and president Enrique Peña Nieto reacted by puffing out his chest.
“When it comes to reforms, one country stands out and has done exceptional work,” Angel Gurria, secretary general of the OECD and himself a Mexican, told beyondbrics. “I said this with great pride: it’s Mexico.”
During the conference, business leaders not only said they believed Peña Nieto; they announced new investments in his country. Cisco announced plans to spend $1.3bn, Nestlé $1bn, and PepsiCo a whopping $5.3bn.
Indra Nooyi, PepsiCo’s CEO, said in Davos that “this investment shows our confidence in [the president] and his cabinet,” and that she hoped to grow “in Mexico, with Mexico, and for Mexico.”
The runners-up
Growth countries in Africa, such as Nigeria, Tanzania, Kenya and Uganda were another group of EMs that convinced participants good things will happen in 2014. They could count on a well-received pep talk from Aliko Dangote, Africa’s richest man and co-chair of the WEF.
“Don’t wait until the next elections to do business in Nigeria,” he said. “I say, go ahead, invest: there is no government that is going to be against business. You can’t make a mistake coming into our countries.”
WEF participants, by and large, welcomed Dangote’s comments. “We believe in Africa because it’s the last frontier,” Tenbite Ermias, head of Africa at consulting firm BCG, told beyondbrics. Africa’s fundamentals are improving, the native Ethiopian said, and that allows for a positive spiral. “Before, the view of opportunity was limited, and therefore the reality was limited. That has changed now.”
Mark Bowman, managing director of SABMiller Africa, agreed. “It’s not easy to do business in Africa. If it was easy to do business in Africa, all of our competitors would do it. But it’s worth the investment, because on average, things are moving up.”
In the balance
Participants worried, as so often, about whether China would be able to provide fast enough growth for its upcoming middle class to stay contented.
But the fact that it has successfully done so in the last decades gave the country’s leaders credibility that some other EM leaders lacked. “I’m both worried about emerging markets and bullish on China,” said Lloyd Blankfein, CEO of Goldman Sachs, summarising those feelings.
The execution of the country’s reform plans constitutes its Achilles’ heel. “Everyone knows that from good policy and good intent, there’s a long way to reality,” said Rich Lesser, CEO of Boston Consulting Group. Blankfein agreed. “The execution is going to be critical. Everything won’t go well.”
On average though, optimism prevailed. “This could be China’s century,” Blankfein said, and in the room, people nodded in agreement.
Neutral to negative
Based on its growth prospects, of 5 to 6 per cent, it would be unfair to categorize India as a loser. But certainly, neither India’s representatives, nor the other WEF participants, were very enthusiast about the country.
“I think the Indian economy has gone a bit off the rails,” said Vineet Nayyar, vice-chairman of Tech Mahindra. “We spent a fortune subsiding oil, diesel, gasoline during the last five years, instead of spending it on the infrastructure we need. We’ve become an entitlement society.”
According to Nayyar, “any growth below 9 per cent is bad for India,” given its population growth and inflation. But with the exception of S Gopalakrishnan, this year’s co-chair of the WEF and co-founder of Infosys, most participants weren’t optimistic on the prospects of achieving that number in the next years. Or as Paul Fletcher of Actis put it eloquently: “I’m neutral, wanting to be positive.”
The loser
Brazil was the country least mentioned on the “hot” list of Davos. With a perceived lack of structural investments and the feeling that too much growth was coming from consumption, it wasn’t easy to hear a positive note about the country.
“Brazil cannot rely on more consumption to resume growth,” Ilan Goldfajn, chief economist at Itaú-Unibanco, Brazil’s biggest private-sector bank, told beyondbrics. “It needs more investment in infrastructure. To attract such investments, you need investor confidence on a horizon of up to 20-30 years. The government struggles to provide this confidence.”
That Dilma Rousseff came straight from opening a World Cup stadium to Davos didn’t do anything to change that mood. “She said the right words, but what about execution?” wondered Ana Clara Costa, a financial journalist from Brazil’s influential publication Veja.com.
In the final debate of the meeting, Haruhiko Kuroda, governor of Japan’s central bank, told participants they could be “cautiously optimistic” on the world economic outlook. The optimism, most likely, was about the US. The caution, we may assume, was about EMs. That caution is at least partially warranted.
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