The Political and Economic Risk of Investing in BRIC Countries

282 views 3 pages ~ 639 words
Get a Custom Essay Writer Just For You!

Experts in this subject field are ready to write an original essay following your instructions to the dot!

Hire a Writer

The BRIC countries refer to a group of developing countries with an excellent demographic nature that offers a promising emerging market. The BRIC countries include South Africa, China, India, Russia, and Brazil. The economy of the BRIC countries is promising with a high potential for growth, and these economies have been ranked as the most significant economies in the world, and the most influential world economies in the 21st century (Fasano, & Galloppo, 2015). These economies contribute over 25 percent of the global gross domestic product (GDP). However, these countries are facing political and economic risks which have a high impact on the market growth.

Political and economic risk a corporation may face when investing in a BRIC country

Political risk refers to the problems faced by corporations, and government because of change in political decisions, conditions or event which alter the economic value and ability of business to achieve their set objectives. The political risk such as political interference, political violence, and sovereign non-payment has to lead to a weaker business environment for operations in BRIC countries (Fasano, & Galloppo, 2015).

Political violence which interferes with a country’s economic system. China has faced increased political violence that has made a severe impact on economic growth. Political violence influences the economic policies of a state, and this leads to economic sluggishness. Some of the strategies that may negatively affect business include, tariffs, trade quota, and other trade barriers that may limit trade. Further, terrorism and territorial disputes and ethnic conflict may add to political violence. 

  Political interference from the government that may affect trade and business performance. For instance, the government may increase tax for the foreign investors and firms operating in their country, and this may substantially impact on business profitability. Moreover, a corporation may face corruption while investing in a BRIC country where some business may have favorable terms. Due to political interference, strikes have been witnessed in South Africa which have an enormous impact on the countries economy and investments (Fasano, & Galloppo, 2015).  

Investors hold sovereign risk when investing in a foreign country that arises when a foreign state fails to comply with the payment agreement made. Noncompliant results in sovereign debts that influence business operations.

Economic risks arise due to changes in government regulations and exchange rates in a foreign country hence affecting the investors. The fluctuation in the rate of an exchange influences the market. The volatile nature of the domestic price of trade expose risk to investors and hence impacting sales and revenues earning for the companies. Further, changes in the interest rates present dangers to corporations operating in a foreign nation.

Cultural factors that may impact on the role of a corporation’s manager in these nations 

Cultural backgrounds differ from one manager to another and culture impacts both on personality difference as well as business difference. Culture influences the negotiation process of the managers, and due to cultural differences, each manager has his viewpoint (Avdasheva, 2018). Depending on the culture, a contract can be sealed in a written agreement or verbal agreement and hence the need to adopt the lifestyle of the region. Moreover, culture impacts on the mode of communication, and this explains why some managers such as Americans value direct contact with a high emphasis on gestures. Nevertheless, culture influence managers value and sensitivity to time. For instance, when dealing with German delegates punctuality must be upheld (Avdasheva, 2018).   

In conclusion, investing in BRIC countries exposes the investor to political and economic risks which must be analyzed before investment. Further, a manager in a new region needs to adapt to the cultural differences in the new business environment. Otherwise, they will be frustrated.


Avdasheva, S., & Radchenko, T. (2018). Remedies in BRICS Countries. Oxford Scholarship Online. doi:10.1093/oso/9780198810674.003.0009

Fasano, A., & Galloppo, G. (2015). Active Investing in BRIC Countries. Procedia - Social and Behavioral Sciences, 213, 448-454. doi:10.1016/j.sbspro.2015.11.432

October 30, 2023


Subject area:


Number of pages


Number of words




Writer #



Expertise Globalization
Verified writer

SandyVC has helped me with a case study on special children for my reflective essay. She is a true mind-reader who just knows what to write when you share a little bit. Just share your thoughts and she will catch up right away.

Hire Writer

This sample could have been used by your fellow student... Get your own unique essay on any topic and submit it by the deadline.

Eliminate the stress of Research and Writing!

Hire one of our experts to create a completely original paper even in 3 hours!

Hire a Pro