The BRIC Risk

 “Living on the edge” is the name of the game when it comes to chasing topline growth in the modern world, and that means doing business in volatile emerging markets.  Too much volatility – war zones, crime-ridden areas, corruption – can put a stop to that, so companies have focused on countries that are slightly more developed but provide high growth.

The big name in that space is BRIC – the large, similarly developed economies of Brazil, Russia, India, and China.  They are supposed to represent the ‘safe’ developing markets, inasmuch as they are unlikely to be torn apart by civil war but are still growing at a double-digit clip.

That group might be losing a member now though – with the recent sanctions levelled against Russia starting to take a political toll, the leadership there has decided to levy sanctions of their own:

Russia has banned most food imports from the West in retaliation for sanctions over Russia’s involvement with Ukrainian separatists who are also suspected of shooting down a passenger jet.

The sanctions will cost Western farmers billions but could also lead to empty shelves and high food prices in Russia….

The Prime Minister Dmitry Medvedev said at a televised cabinet meeting yesterday that Russia’s retaliatory ban covers all imports of meat, fish, milk and milk products, fruit and vegetables from the United States, the European Union, Australia, Canada and Norway. It will last for one year.

…

In 2013 the EU’s agricultural exports to Russia totalled £9.4bn [$15.8 billion], while the US Department of Agriculture says food and agricultural imports from the US amounted to £771m [$1.3 billion].

This tit-for-tat may be small in the great grand scheme of things, but if you’re a Western company that’s bet heavily on Russia to maintain robust top line growth, you’re feeling a little less good about yourself than you were a year ago.  

The lesson to be learned here is diversify, diversify, diversify.  If you're going to make gambles on risky markets, make sure you've got enough business being driven by your safer, more traditional markets to keep you afloat if the unthinkable does happen!