The US, Germany, Poland and Mexico are among next year’s Best Countries for Business. Rotterdam Week in cooperation with Atlantico Business Development (an international consultancy based in Rotterdam) has selected the best 15 markets of 2014/15 for your direct investment or for exporting your products.
This is the first edition of a series of articles we intend to publish yearly: a list of next year’s best countries for your business. It is not a prediction nor a forecast, but an assessment of where you could best do business in the year to follow. It is not a guide for speculating on financial markets, but rather for direct investment or for selling your products and services. What you won’t find here is a list of the countries with the highest growth rates.
Yes, high growth may mean high yield for your business, but fast growth usually takes place in a high risk environment. And the last we at Rotterdam Week would advise you to do is to take high risks. But – like everybody else – we do like growing markets, if only they thrive in a political environment that is as safe as possible, given the location and situation of a country. You don’t want your investment going up in flames in a riot or revolution within a year or three, nor do you establish a trustworthy business relation as an exporter overnight. Building a solid business relations takes time, often years. It also takes a stable environment, lots of travel and money, money you want to see spent well.
We at Rotterdam Week are continuously looking for well governed, stable and mostly democratic countries with free, market friendly and growing economies, whether they are so called emerging or established countries. In order to be interesting for investment or for exports, those countries should have a reasonable market size, a growing middle class and a generally reasonable GDP per capita. And if we can’t find what we are looking for in size than it might just be location that matters, for instance if the country is a fantastic business hub or otherwise performs a special role in world markets.
Most of the countries we selected are either a member of the OECD or on their way of becoming one. By making this choice we are aware that we exclude most Middle East (inherently unstable), as well as most African and many Asian countries, among them countries that have been applauded recently for their high growth. But please do note that we don’t say you shouldn’t do business there. Those countries just do not fit our personal assessment.
We selected our top 15 Best Countries for Business based mainly on projected GDP growth for 2014/15, the scale of their middle class, their GDP per capita, population size, trade relations, investments and trade connections to leading countries like the US and Germany. Negative criteria are: high levels of corruption, complex business cultures that take you a lifetime to understand, authoritarian governments, or any big political risks looming over the future of the country. We ranked them according to attractiveness of their markets, meaning the wealth and size of their populations, or the size of their middle classes. So some larger countries are ranked lower than smaller ones.
The country data, like GDP growth, population and income per capita we use are drawn from the EIU’s The World in 2014 publication or the OECD’s Economic Outlook.
BRICs lost their shine
The BRICs have had their share of world fame for the last years, but they have lost most of their shine. China, yes, is very big and some companies may certainly need to be there. But its business culture, its unsustainable economics and investment levels, the dominance of the state, the risks of your patents being pirated and several other factors make sure it is not on our list. And now the Fed has started a modest tapering policy, lots of equity will flow straight back from the BRICs into the US (and from there to Europe). In 2013 we already got a preview of what tapering might cause, when rumours of the Fed’s tapering already created a small stampede. The tapering story reveals that the BRICs high rolling period was partially driven by the temporary unattractiveness of the First World. But there is more. Individuals and private companies from the BRICs hardly ever invest in each other countries. They still prefer to buy a house or open a business in Miami, New York to London, instead of Shanghai, Mumbai or São Paulo. Why is that?
The rise of the Latin Pacific
Most countries on our list are in “the West”, one half bordering the Atlantic, the other half the Pacific. Our list reflects the rise of the Latin Pacific: the fast growing companies on the Western side of Latin America, like Mexico, Panama, Colombia, Chile and Peru. Others can be found in Northern and Central Europe. Some big European economies do not make it to our list, like France, set for slowdown under its Socialist government. Spain, Ireland and Portugal, not yet on our list, should definitely be watched and they may be included next time as these countries have made serious efforts of tackling their problems, unlike Greece.
What to think of Africa?
And what about booming Africa, you say? Africa is a highly fragmented patchwork of a market and by no means a single one. It has seen incredible high growth recently among its many countries and as a continent it will no doubt continue to grow. But this high growth goes hand in hand with high political risks, little reform and instability. Most African capitals boast growing middle classes now, but average income is still very low. The most stable and market oriented African countries can only be found on the fringes of the continent.
Now check out Rotterdam Week’s 15 Best Countries for Business in 2014:
1. The United States of America
Yes, the US are back on top of the world, just in case you missed that. With an expected GDP growth of between 2,9% and 3,4% in 2014 and 2015 (OECD), the US are the clear winner for the next two years. Many developments second that conclusion: re-shoring (bringing factories back from China), shale gas (adding huge investments as well as energy independence), the Fed’s tapering (bringing in lots of equity in 2014), a bolstering housing and jobs market and the expansion of the Panama Canal (developing trade as well as ports in the South). The US have also been working on various trade deals and remain committed to more. NAFTA (meaning excellent trade relations with Canada and Mexico) is one such deal and a Pacific trade agreement is coming up. Talks have started that should lead to an even bigger Atlantic trade deal (with the EU). An average growth rate of 3% is a lot of extra bucks, folks. And what a market the US already contains: the population is nearing 320 million with a GDP per head of 55.000 USD. The US are the place to be in 2014. So, if you haven’t done so yet, rediscover America!
Though its 1,7% GDP growth in 2014 and 2% in 2015 may seem rather modest, the powerhouse of Europe is well placed for continuous growth and its economy is the strongest and healthiest in the EU. With its 82 million inhabitants with a 43.000 per capita GDP, Germany is definitely the most attractive and reliable market in Europe. An excellent German city for business the coming years will be Frankfurt, the financial centre of the EU. With the added weight of the European Central Bank the city’s role as the financial capital of the EU will be enhanced. Uniquely in Europe, Frankfurt is also a city that actually grows, with 7000 people per year. Frankfurt’s excellent central location and links (high speed rail and one of the biggest airports of EU), makes it a winner.
With growth rates between 3,8% and 4,2% over the next two years, Mexico is a great market. No less than 118 million Mexicans share a GDP per capita of almost 12.000 USD. Its excellent trade relations with the US and its maquiladora manufacturing facilities on the border, anchor its sustained growth for the long run. Mexico is also profiting from the trend of “near shoring” (US companies moving their production facilities from China to just across the border with Mexico). The country itself is a huge market, with enough spending power and many internationalising companies. Like the US, it has access to both the Atlantic and Pacific. Though the government’s reform attempts have their ups and downs, the IMF sees the Mexican economy on the right track.
4. United Kingdom
The UK are definitely in the vanguard of EU growth markets in the next two years with a 2,4%-2,5% GDP growth. With 64 million people and a per capita income of almost 40.000 USD it’s a country to include on any list. There are some worries about a possible bubble and the country is still schizophrenic about its relations with the rest of Europe. Besides the never ending doubts about EU membership there is the Scottish referendum coming up in 2014 (though secession seems unlikely). London is still one of the most attractive business capitals of the world.
Brazil’s economy will be growing with 2,2%-2,5% for the next two years. Though the population is nearing the 200 million mark, Brazil is still a relatively poor country with a GDP per capita of under 11.000 USD. As we reported earlier in 2013, do not get too excited about Brazil’s new C-class, as this development was mainly funnelled by cheap credits and government benefits. Instead look at the present size of the A and B social classes (the latter being the traditional middle class), that together already boast some 30 million members. This year Rio, São Paulo and several other main cities are best avoided, especially during the soccer world cup. Instead go off the beaten track for your Brazil business. Aim for smaller, lesser known business cities, like Campinas, Joinville, Londrina and Uberlandia, where you will be most welcome.
Poland is among Europe’s fastest growing economies and it is certainly the biggest of the fast growers. With 2,7% to 3,3% GDP growth in 2014 and 2015, this neighbour of Germany has a large enough population of 39 million people with a per capita income of almost 14.000 USD. As a member of the EU, external stability as well as continued investment in infrastructure and connections to the rest of the continent are guaranteed. Your business should be safe there.
With 2,3%-2,6% GDP growth in the next years, Canada is a rich middle class market, with a per capita GDP of almost 53.000 USD and 36 million people The country has excellent trade relations with the US and Mexico and it recently forged a trade deal with the EU, the world’s largest marketplace. The country has access to both the Pacific and Atlantic economic basins.
Though situated far from world markets, Australia is slowly becoming one of those markets instead, besides being a supplier of commodities to China. With a 2,6%-3,1% GDP growth rate, almost 24 million people and a per capita GDP of over 60.000 USD, it’s becoming more and more attractive. Also think of it as a steady base for your Asian, Pacific or Indian Ocean business operations. Not yet on many businesses map is the city of Darwin, the provincial capital of the Northern Territory. It was recently selected as a base for the US Marine Corps for their operations in the region. But what the military can, you can do too. Darwin, though still small, is one of Australia’s fastest growing cities and it with its growing connections to Asia, it is as close as you can get to many world markets, while being in a stable environment.
9. South Africa
The only African country on our list is South Africa. With a 3,0%-3,7% growth rate for the next two years, it’s definitely not among the continent fast growers, but it is still the best developed market, one of the most market friendly ones and certainly among the most democratic (though there is a worrying level of corruption and security is still a big issue in some areas of the country). South Africa is looking forward to an exciting political year with voters clearly on the move. The country’s 53 million people own an average of over 7100 USD per head of GDP, but the middle class is growing towards the ten million people mark, which is quite an achievement.
One of the star performers of recent years is Colombia. With a 4,5% average growth rate for the next few years, with a population of 50 million and a per capita income of over 8000 USD this country is becoming a very interesting market. If the peace talks with the FARC guerrilla army succeed, more investments may follow. Besides the bustling capital of Bogotá, the area around the port city of Barranquilla and stunning tourist hotspot Cartagena is one of the most promising regions of Latin America. Trade relations with the US are excellent and the country sits on both the Pacific and Atlantic oceans.
OK, this is one of our smallest nations on the list, but not without reason. With 2,8%-3,1% it is Europe fastest growing economy. With just over 5 million people Norway may seem a very small market, but it’s an incredibly wealthy one, with a GDP per capita of no less than 104.000 USD. Norway is also an interesting foreign investor with its sovereign wealth fund and its many international companies like Norwegian, Statoil and others. Norway is no EU member but do not get too excited with that: the country has silently adopted basically all relevant EU regulations and “acquis communautaire”.
Few business missions go there, but Peru is one of Latin America’s fastest growing economies. With a 5,5% GDP growth for 2014 and 32 million people earning an average of 7000 USD per head, Peru is not among the biggest Latin American players. But this emerging economy is closer to world markets and has a slightly greater potential that its richer (but less populated and more peripheral) neighbour Chile.
With a growth rate of 4,5%-4,9% over the next two years, with 18 million people that own an average 16.000 USD of the country’s GDP, this stable democracy and market-oriented economy is poised to join the league of First World countries. As a Pacific country Chile is also a close trading ally of the United States, the world’s leader for many years to come.
In case you thought we forgot about Asia, what do you think of the Philippines? With 6,7% GDP growth it is the continent’s fastest growing economy in 2014. For an Asian country it is as close to Western business culture as you can get, with its Spanish and US influences and mainly Christian population. The country is well situated between China, Japan and Korea on the one side and the US and the rising Latin Pacific on the other. Apart from the occasional natural disaster (that also create business opportunities during reconstruction phases), this could be Asia’s next long term winner. The 108 million strong Philippines still have a relatively low income though, at just 2800 USD per head.
The last country on our list is the smallest one. Panama is the fastest growing economy in the Americas, with a 7% GDP growth predicted for 2014. Panama is not a big market in its own right, but the country is the ideal business hub in the Americas, with its newly expanded Canal, very attractive tax regime, its central location, its many airline connections (thanks to its flagship airline Copa), safety and good quality of living.
You may wonder what’s in this story for Rotterdam, our home region. Well, Germany, the UK and the US, the region’s biggest investors and trading partners are all bouncing back. Even if the Netherlands themselves are slowly creeping out of recession, Rotterdam has a lot to offer for a next period of growth: cheap office space, excellent logistics and connections, a world class port (the biggest on the Atlantic), a highly international business environment (constantly looking for opportunities worldwide) and a growing regional airport are among the assets that may facilitate a new leap forward for the Rotterdam region.
Want to do business with any of the above conntries? Contact Atlantico Business Development in Rotterdam.