Country Risk

In 2001, Goldman Sachs bundled Brazil, Russia, India, and China together into an emerging market basket in deference to the four countries' size and economic potential. For most of the decade, despite significant differences in relative economic performance, the BRIC acronym has stuck. This is unsurprising in light of the benign global economic environment over the past ten years, during which growth in the BRIC countries far exceeded historical averages and portfolio inflows into all four economies soared. For various reasons including resistance against recent global crisis, not least its strong public finances, relatively less exposed financial system, low levels of private sector leverage, and potential to raise consumption's share in GDP are of the opinion that of all four BRICs, China is probably best positioned to have more foreign investment, in particular fiscal stimulus, to withstand externally driven crisis and other financial and systematic risks. Due to the collapse in its terms of trade, the falloff in financial account inflows, the distress in its banking system and the absence of excess capacity on the supply side, Russia has access to fewer endogenous cures to the external gloom, although amid all the current difficulties.

This report will be developed by comparing all four countries to each other and by contrasting relatively similar economies such as Russia and Brazil, China and India. We picked the case of recent global crisis to understand each countries overall withstand power against external or/and internal crisis

Brazil

While in our view the near-term outlook for growth in Brazil has soured, what is comforting is that both Brazil's public and private sectors has stronger balance sheets than in the past. For Russia's general government, this is even more strikingly the case. Whereas Brazil's net general government debt has only declined by 3% of GDP since 2001 versus the remarkable

52% of GDP drop for Russia, this apparent stability of general government debt levels in Brazil's case masks, in our opinion, a shift away from external and towards local currency funding at increasingly longer-dated maturities. From 2001 to 2008, foreign currency debt's share in Brazilian general government liabilities fell from one-third to one-eighth of the stock. Over the same period, the average maturity of Brazil's increasingly private sector-dominated gross external debt stock improved from 4.5 years to over 8 years. In our opinion, such positive developments in Brazil's government and private sector repayment schedule owe a lot to the increasing faith of international investors in the country's policy-making and other institutions, including those charged with the enforcement of contracts and property rights. On the contrary, the data on average maturity of Russia's stock of gross external debt shows no meaningful lengthening