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Economist Giacomo Vaciago “Is Still Betting on China”

Genoa - “There are significant differences between the BRIC countries. The term was coined in 2001 by the Goldman Sachs economist Jim O’Neill, but nowadays the term can be misleading”

Genoa - “There are significant differences between the BRIC countries. The term was coined in 2001 by the Goldman Sachs economist Jim O’Neill, but nowadays the term can be misleading”. According to economist Giacomo Vaciago, the term, “BRIC”, may never have meant much, since the four countries have very different economies as a result of their “profoundly different ruling classes”. “There are one hundred emerging countries in the world. The four largest (Brazil, Russia, India and China) have little or nothing in common”, says Vaciago.

Let’s begin with the period in which these countries embraced change and set out on the road to economic development.
“First out of the gate was China, which at the end of the 1970s adopted a socialist market economy. This was before the fall of the Berlin Wall and the end of the Soviet Union. Then there was Russia, which started out later, and finally came Brazil. India, which is also called an emerging economy, is really still a tribal country. It is very large, and has billionaires who will put their money anywhere in Europe, rather than invest in India. An example is the Tata Group. Rich Indians will invest anywhere but in India, which is quite a conundrum”.
What’s more, the four BRIC economies developed in very different ways in 2013.
“In fact, China did rather well, while India had a tremendous number of financial problems. Brazil is struggling with many serious issues, and its economy stopped growing at midyear and has not yet picked back up. Russia continues to export oil, leaving much of the country underdeveloped. It is the only industrialized country in the world which exports more raw materials than it imports”.
Will these four economies show equally different results in 2014?
“I continue to be optimistic about China, while India for me is one big question mark, and Brazil must put its house in order after its excesses and abuses. As far as Russia is concerned, we hope that Putin will continue to accept the industrial integration with Western Europe (as an ally to Italy and other countries), which in some former satellite states has already been going on for some time. Hungary, Poland, Slovakia and the Czech Republic have already joined the German supply chain, which - even if Putin pretends not to notice - reaches all the way to Bologna with Ducati”.
Is it really the differences between the ruling classes of each BRIC country that make their politico-economic development so different?
“Absolutely. China has inherited a huge bureaucratic structure that is loyal to its bosses and totally professional. There are hundreds of millions of managers in China, all at the orders of Beijing. This is the great strength of the People’s Republic of China. It has a ruling class similar to what exists in France in terms of discipline, loyalty, education, and efficiency. India remains a country in transition. There are villages where different dialects are spoken, New Delhi doesn’t truly govern India and has a very weak ruling class, there are no great universities, and the Indian elite send their children to study in London. Brazil still has incredible problems in both urban and rural areas, and does not have a strong and trustworthy administrative system. Finally, the Russian ruling class raises another question mark. It includes all kinds of people, the best and the worst that the country has to offer, because it is quite politicized (like the Italian ruling class). The truth is that all the BRIC countries have problems with corruption, and each is dealing with these in its own way”.
Which of these countries will have the greatest influence on Italy in the coming years? “Italy is traditionally pro-Russian, our relationship with Russia has always been strong, whether the Russian regime was politically of the left or of the right. Moscow was the most important BRIC for Italy, until some time ago. Enrico Mattei as head of the Italian State oil company ENI, and Gianni Agnelli as president of FIAT were quite at home in Moscow. Even now, FIAT’s facilities in Turin are located on a street called “Corso Unione Sovietica”, and it’s no coincidence. But more recently, all sorts of things have happened. Italian companies now go to China and to Brazil more than they go to Moscow, although the two governments (Italy and Russia) remain in close dialogue”.
Is the issue of scale still the biggest structural problem for Italian companies that want to go international?
“Yes, they are too small. Italian companies supply German companies, and expand into China in pursuit of German products. The world has changed, and we must realize what’s going on. Merkel visits China twice a year, but Italy hardly ever makes an official visit. Carlo Azeglio Ciampi went as President of Italy with Confindustria, the Italian Employers’ Federation... Italy has not handled internationalization well. We should have made our own territory into a launching pad to send our companies abroad, but instead they have been left behind by a changing world. Today exports are not sufficient - we should be exporting whole factories, becoming a multinational society, and finding partners in the markets where we plan to work and sell our products”.

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