Friday, November 18, 2011

Challenges and Trends in Infrastructure Investing in Emerging Markets

This past week, I attended three (3) SAIS events.  They were all very interesting in their own peculiar way.

1.      “Challenges and Trends in Infrastructure Investing in Emerging Markets (Brazil)”
-          Mr. Benjamin Sessions, Managing Director of Global Environment Fund and a SAIS graduate.

2.      “Prudent Development: Realizing the Potential of North America’s Abundant Gas and Oil Reserves”
-          Mr. Jan W. Mares, Senior Policy Advisor for Resources for the Future and former U.S. Assistant Secretary of Commerce for Import Administrations.

3.      “Borderless Economics: Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalism”
-          Mr. Robert Guest, Global Business editor of the “The Economist” and the author of “Borderless Economics: Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalism”.

The one thing that stuck out to me was you must do your due diligence before making any financial investment.  For this blog, I will only discuss the main take away from the “Challenges and Trends in Infrastructure Investing in Emerging Markets” discussion.

Mr. Sessions gave countless examples of when his company was receiving yearly 25% ROI financial investments in Brazil but due to Brazilian government pressures the firms ROI was reduced to 8%.   Mr. Sessions was hit with a real dilemma; he promised his investors he would make over 20% on the ROI, now he was only making 8%.  Mr. Sessions mentioned that when his company first started doing business in Brazil, the government helped foster business relationships within the country.  Now, because Brazil is getting a lot of foreign investors, and there is a new president in Brazil, the business environment has changed.  Mr. Sessions stressed you must continuously do your due diligence to understand both the macroeconomic and micro-economic factors in the region you are working in.  Global Environment Fund is looking to do business in other countries in South America (i.e., Chile, Peru, and Argentina) where business investments are more attractive.

Ben Brock

1 comment:

  1. Ben, thanks for this blog. That situation is also what I want to address. Guess what? The same thing happend in China in the 1980s. At first, the government attracted foreign investors to come by providing priorities. But when they got enough capital, they kicked those investors out. As a foreign investor in emerging markets, you might take forever to understand the government regulation of this country. They are changing their their regulation and rules all the time, cuz they donnot have a mature market. This makes your investment more risky even in fundamental industry.
    A better choice, I think, is doing some arbitrage in the emerging market. Their are more arbitrage opportunities in emerging financial market. A good stretagy is to capture those opportunities with large amount of capital and quantitative method.