The MINTs: a breath of fresh air | Commercial awareness on The Gateway

The MINTs: a breath of fresh air

Will Hodges explains why these four MINT countries are being tipped to boost the global economy

BRIC. Four little letters that have brought countless joy to economists and investors alike since the term (used to refer collectively to Brazil, Russia, India and China) was coined by Jim O'Neill, the British-born former chairman of Goldman Sachs's asset management business, who recognised these countries' potential to beat their way to the top of the world economic order.

11 years on and there is a new acronym in town. O'Neill has identified the MINTs - Mexico, Indonesia, Nigeria and Turkey - as the next major global investment opportunity.

What's all the fuss about?

Emerging markets offer far higher potential for growth than the US or European states. The economy of the eurozone region is projected to expand just 1 per cent this year, while the MINTs are collectively forecast to expand by an average of 4.9 per cent. Meanwhile the BRICs are no longer the goldmines for investors they once were. China's economy is starting to slow, while Russia and Brazil are expected to see growth of just 2 and 2.2 per cent respectively.

The potential long-term progression of the MINT economies is especially tantalising. Africa's second largest economy, Nigeria is currently 39th in the global economic rankings. By 2050, the country is forecast to have risen to 13th place, overtaking a host of European states, including Italy and Switzerland. The economies of Mexico and Indonesia will have risen to become the eighth and ninth largest in the world over the same period, overtaking those of the UK, France and Germany.

Global gateways

According to O'Neill, what sets the MINTs apart as a long-term investment opportunity is their advantageous geographical position and specific regional influence.

With a population of nearly 80 million, Turkey has long been recognised as a regional powerhouse, not only in south-east Europe, but also in central Asia. As a predominantly Muslim country, western investors are also increasingly viewing the country as an intermediary between Europe and the Middle East.

Meanwhile Mexico, which belongs to the North American Free Trade Agreement (NAFTA), is well-placed as the gateway for Canada and the US to the Latin American market. Likewise, Indonesia and Nigeria both play important roles as the dominant economies in south-east Asia and west Africa respectively.

A calculated risk

While the development of the financial and political infrastucture of the BRICs over the past few years has made investing in them a much more straightforward process, the likes of Nigeria and Indonesia still represent a relatively hostile environment for foreign investors.

A quick glance of the international press shows the scale of the problems each of these countries have faced over the past few years. For example, Mexico's government has been forced to contend with an escalating drug trafficking problem and violent crime outbreak in the north of the country, while Nigeria continues to find itself plagued by rampant political corruption and extreme income inequality. In Turkey, increasing political instability provoked a wave of student demonstrations across the country in 2013.

Balancing these risks with the potential spoils on offer from the MINTs will be one of the most testing jobs for global investors over the next few years.

Meet the MINTs

Mexico

While blessed with ample natural resources and a population of 114 million, Mexico has often been overshadowed by its richer, more powerful neighbours the US and Brazil.

Recent developments though have led the rest of the world to sit up and start taking notice. The country's export sector has started to flourish again with sales totaling $349.7 billion (£211.0 billion) in 2011, an annual increase of 17.2 per cent.

Meanwhile, more relaxed lending by banks, coupled with lower levels of inflation in recent years, has given ordinary people money to spend on houses, cars and other high-value items.

  • Current GDP $1.23 trillion (£741 billion)
  • GDP growth forecast for 2014 3 per cent

Indonesia

Indonesia is the largest of the MINT countries but was hit hard by the Asian financial crisis in 1997, an event saw the country lose its investment grade rating and undergo a costly bailout of its banking sector to the tune of $50 billion (£30 billion). Since then, a huge workforce and low wage levels have helped Indonesia challenge China as a low-cost manufacturing base for products in demand by North American and European markets.

The country also boasts abundant natural resources and is a major producer of coal, gas, bauxite and other minerals, as well as rubber and timber.

  • Current GDP $895 billion (£540 billion)
  • GDP growth forecast for 2014 5.5 per cent

Nigeria

Boasting a population of 175 million and the world's 10th largest oil reserves, Nigeria should be one of the richest countries on Earth. The fact that it's not owes a lot to economic mismanagement and rampant political corruption.

The tide appears to be turning however, with the economy on track to overtake South Africa as the continent's largest this year. This acceleration is due in large part to the increase in oil prices during the past few years, which has provided a boost to the country's export revenues, while economic reforms carried out by the current government have helped to stimulate new business.

  • Current GDP $451 billion (£272 billion)
  • GDP growth forecast for 2014 7.4 per cent

Turkey

Turkey's young people have been a key factor in the country's economic rise over the past decade. The average age of Turkey's population is 29 (the European Union average is 39), and more than half of Turkish people are under 25. This means that Turkey has one of the youngest, and therefore most economically valuable, workforces in Europe.

Turkey is on track to be accepted into the EU within the coming decade, a development that appeared laughable when the government first made the application to join the union in 1987, such was the perilous state of the country's finances.

  • Current GDP $1.37 trillion (£826 billion)
  • GDP growth forecast for 2014 3.5 per cent

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