How BRIC Countries and ETFs May Help Your Portfolio

April 6th at 3:00pm by Tom Lydon

ETF BRIC By diversifying a portfolio, a potential investor could hold some emerging-market exchange traded funds (ETFs) from the BRIC countries.

The BRIC countries, or Brazil, Russia, India and China, may be the ones to recover faster and experience sustained growth, writes John F. Wasik for Bloomberg.

But the outlook for Russia is a little iffy. Russia’s economy will contract this year as a result of loan problems, unemployment and low oil prices. But how much it will contract is a matter of debate between Russia’s own government and the World Bank’s estimates. In the World Bank’s report on Russia, it is estimated that Russia will have a 4.5% contraction for 2009, a drastic change from its previously projected 3% growth back in November. The Russian government is forecasting a 2.2% contraction in GDP for the year.

India, China and Brazil hold the untapped potential in population growth and human capital. These countries are also unlikely to heavily borrow from foreign countries to fix banking and housing market; thus, they won’t be burdened by the effects of inflation and debt.

China’s economy is currently being helped by the government’s $585 billion stimulus and it is estimated that the economy will grow 8% this year. China will also eventually start to shift from its reliance on exports and focus on domestic demand.

Last year, Brazil posted a growth of 5% and it will stand to benefit from trade with China when the downturn subsides. There is also a $31 billion government stimulus plan that will further benefit Brazil’s economy.