Turkey’s inclusion in the MINT countries makes for unflattering comparisons

Originally appeared on Bosphorus Consulting on 05 February 2014

The BRIC countries grouping has well and truly entered the popular financial lexicon and now we have the MINT countries: Mexico, Indonesia, Nigeria and Turkey. These countries have been identified by Jim O’Neill, the man who coined the term “BRIC,” as all being advantageously located for trade, showing good prospects for GDP growth and basically being a good place to invest. However, this grouping has not been received with as much warmth as the BRIC countries, with doubts being cast on whether some, or all, of them are actually sound investments.

Turkey, in particular, is the only one of the countries that is not a commodity producer, and Turkey’s capital outflow is often identified as an obstacle to growth. Moreover, a report by the BBC (“The BRIC countries: Next economic giants?” 6 January 2014) notes that, while Indonesia maintains a balance between local and Western practices, Turkey has not yet managed to do so, or at least not to the same degree. Thus, Turkish businesses suffer from not being able to rely on their country having an international investor-friendly image to the same extent as Mexico, Indonesia, and Nigeria.

Chris Wright, writing for Forbes (“After The BRICs Are The MINTs, But Can You Make Any Money From Them?” 6 January 2014), questions the MINT grouping, claiming that Turkey and Indonesia are the “darling markets of about two years ago.” While noting that Mexico and Indonesia have good prospects, the publication quotes a recent IMF report, saying that Turkey “can only sustain high growth at the expense of growing external imbalances” and claims that some analysts believe Turkey will soon experience a meltdown. Sven Richter, head of frontier markets at Renaissance Asset Managers, concerning the MINT countries, states: “We like Nigeria for the first quarter of 2014. We’re not at all sure about Turkey.” (CNBC Africa “Fancy a MINT?” 17 January 2014)

Sam Vecht, joint manager of BlackRock Frontiers Investment Trust, says he is “not a fan of the ‘MINT’ concept as the countries have little in common other than that they are spread around the world a bit and have not been a great investment” (Thisismoney “BlackRock Frontiers Investment Trust: Mexico, Indonesia, Nigeria and Turkey WON’T make a Mint, says fan of frontier economies,” 11 January 2014). NewsAsia (“‘MINT’ nations: The economies of Nigeria and Turkey at a glance,” 25 January 2014), in a report comparing Nigeria and Turkey, notes that the latter was the worst-performing currency against the USD in the last month.

NewsAsia also notes, as addressed by Bosphorus Consulting in previous blog posts, that Turkey’s heavy reliance on foreign funds make it particularly susceptible to US Fed tapering, unlike Nigeria, which, as Roger Bootle, writing for The Telegraph, points out (“The MINTs are very different and might not all see stellar growth,” 29 January 2014) has a current account deficit of about half that of Turkey’s. Bootle is particularly concerned about Turkey’s vulnerability in this regard, even more so than for Indonesia. Bootle questions the validity of the MINT grouping, stating that while it is normal for countries at Nigeria and Indonesia’s state of development to grow at 6% a year, for countries like Turkey it is almost unheard of because they are more established and, therefore, such growth would be unsustainable. Moreover, while Nigeria and Indonesia have considerable scope for “catch-up” growth as a driving force, this is much less the case for Turkey, where income levels are higher.

Turkey is experiencing its most severe period of political instability of the last decade, according to The Guardian (“Turkey’s economic success threatened by political instability,” 9 January 2014) expressing concerns over the country’s economy. While The Spectator (“Bye-bye Bric, hello Mint — are Mexico, Indonesia, Nigeria and Turkey really the new boom economies?” 11 January 2014), also taking a somewhat negative stance on the idea of the MINT countries, points out Mexico’s ongoing country-wide violence as a negative factor. In fact, one thing all four countries do have in common is internal security problems, albeit ranging in their seriousness, something which may prove to be off-putting for investors.

Overall, Turkey appears a lot less of a sure investment than the other countries in the grouping and its inclusion may lead to unflattering comparisons. So, while Turkey’s inclusion in the MINT grouping may attract it some attention on the global financial stage, companies will still have a lot of work to do to turn that attention into solid investment.

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