Companies focus expansion plans on BRICs countries

Brazil, Russia, India, China are inspiring more investment confidence in terms of business. According to a research conducted by accountancy firm BDO, half of chief financial officers (CFOs) from medium-sized companies are now investing in or planning to enter these markets, compared to only three out of ten in 2011.

Over 1,000 CFOs from mid-sized companies across 14 markets were interviewed. The report only refers to Brazil, Russia, India and China as the BRIC countries, which means the accountancy firm puts South Africa apart from the group.

According to BDO, CFOs are still pursuing international expansion in order to drive revenue, but they are more cautious about where they choose to invest. The “big seven” countries—China, USA, Brazil, India, Germany, Russia and U.K.—lead as the most attractive investment markets, due to size and customer potential, says the report.

China remained the top investment destination, followed by the U.S. Some 69% of CFOs cited China’s market size as a key advantage and 37% were attracted to cheap labor in the country. Brazil has moved up to third position, from sixth in 2011.

“There is a boom in the BRICs—45% of mid-market CFOs are focusing their expansion plans on the BRICs, compared to 29% in 2011”, says the report. According to BDO, the BRIC countries can no longer be termed emerging markets. “They are now seen to be preferred—and known—investment entities”, states the survey.

More than two thirds of CFOs see customer service delivery crucial for international growth, with Brazilian, British and South African companies ranking this the most highly. In terms of revenue, Indian and Russian companies have seen the highest average overseas revenue increases, 18% and 17% respectively, while Brazilian CFOs have reported the lowest increase (5%).

The eurozone crisis, however, is playing an important role, with CFOs from Brazil and China saying that it has had a large impact on their international expansion plans.

Reflecting on the global impact of the eurozone crisis, CFOs from countries both within and outside Europe said their investments were affected: Brazil (58%), China, Germany and India (each 54%), and the Netherlands (50%). The countries least likely to report that the crisis had impacted their international expansion plans are Japan, Australia, South Africa and Canada: around two thirds of CFOs from these countries said the eurozone crisis had had little or no impact.

“Brazil’s increasing investment appeal is now reflected in its top three ranking for general international expansion—it is the third most attractive market in 2012, up from sixth place in 2011”, says the report. “The appeal of Brazil is fairly consistent across the board in terms of sectors, and highest amongst CFOs in France, Canada and USA.”

In China and India, the investments have additional attractions: higher growth rates are a key factor for about half the CFOs investing there, and the cheap labour rate attracts over a third of investors. High growth rates are also important when considering expansion to Brazil. For Russia, attractive profit margins are an important factor, mentioned by over a third of respondents (36%).

In Brazil, a quarter (24%) of CFOs in the professional services sectors are planning to increase their investment in Brazil, compared to 15% overall. Approximately three of ten Chinese and American CFOs are also expecting to increase their investments.

Three of the four BRIC countries are considered amongst the top twenty risky markets; Russia ranks ninth, China thirteenth, and India twentieth (Brazil narrowly escapes, ranking twenty second). This shows that, while BRIC countries are attractive markets for investments, they also come with some risks.


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