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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