"The Toolbox to the BRIC" Coface Australia


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The BRIC countries (Brazil, Russia, India and China) with their booming economies and rapidly growing middle class consumers, offer unprecedented and exciting new opportunities for Australian exporters. However, as with any emerging market, they come with risks, challenges and problems which will be unfamiliar and sometimes daunting to companies of all sizes and experience.

So, how much do you know about the BRIC countries and their influence on the Australian economy? What are the opportunities? How do you identify and manage the risks? To hear from leading experts on the relevant issues, who can share their on the ground experiences, stories and case studies, come along to learn more about doing business in the BRICs.

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"The Toolbox to the BRIC" Coface Australia

  1. 1. The toolbox to the BRIC 30 05 2012 In collaboration with:
  2. 2. Coface Australia 30 05 2012Alex Hall, S i CAl H ll Senior Customer Relationship Manager, Coface Australia R l i hi M C f A li
  3. 3. Agenda g Coface, who we are C f h Country Risk according to Coface Coface risk overview: BRIC countries How to minimize risks and trade safely3 www.coface.com.au
  4. 4. Who is Coface? ● Coface is the 3rd largest credit insurer worldwide, offering companies around the globe solutions for trade receivables management. ● Direct subsidiaries in 66 countries and able to provide credit insurance and credit management services in 95 countries via CreditAlliance network. ● Each quarter, Coface publishes its assessments of country risk for 157 countries, based on its unique knowledge of companies payment behavior and on the expertise of its 250 underwriters. ● Common risk system -‘Atlas’, a unique worldwide database which flags payment incidents in 370 billion euros of trade flows. ● 39 000 clients i credit insurance worldwide 39, li t in dit i ld id ● The manager of the French government export guarantees.4
  5. 5. Coface in Australia ● 2000 Coface entered the Australian market through a managing agent that underwrote Coface policies on behalf of Coface SA ● 2004 Coface Services Australia was launched. ● 2008 Coface Australia started operating as an APRA authorised local branch, subject p g , j to Australian regulatory rules. ● 2008 A Credit Alliance agreement was signed in 2008 with Veda Advantage, our key information supplier and Easy Number partner. partner ● 2010 New strategy: Coface Australia focus on its core business Trade Credit Insurance and maintain relating business lines (Debt Collection and Business Information) mainly for internal needs within the organisation. I f ti ) i l f i t l d ithi th i ti ● Direct presence in Australia: Sydney (h d office) and M lb S d (head ffi ) d Melbourne5
  6. 6. Coface global offer in credit insuranceAvailability in 95 markets 50 countries Coface offers credit insurance directly 45 countries Coface offers credit insurance by using partners to front policies6 www.coface.com.au
  7. 7. Coface global offer in credit insuranceAvailability in 95 countries Europe Europe Middle East Africa Americas Asia-Pacific West-North-South Central-East / CIS North Africa Belgium B l i Austria A ti Algeria Al i Benin B i Argentina A ti Australia A t li Cyprus Bulgaria Bahrain Burkina Faso Brazil Bangladesh Denmark Czech Republic Egypt Cameroon Canada Brunei Finland Estonia Iran Chad Chile China France Hungary Israel Djibouti Colombia Hong Kong Germany G Kazakhstan K kh t Jordan J d Gabon G b Ecuador E d India I di Greece Latvia Kuwait Gambia Mexico Indonesia Ireland Lithuania Lebanon Guinea Panama Japan Italy Poland Libya Mali Paraguay Malaysia Liechtenstein Romania Morocco Nigeria Peru New Zealand Luxemburg Russia Mauritania Senegal United States Pakistan Malta Slovakia Niger South Africa Uruguay Philippines Netherlands Slovenia Qatar Sudan Venezuela Singapore Norway Saudi Arabia Uganda South Korea Portugal Syria Taiwan Spain S i Tunisia T i i Thailand Th il d Sweden UAE Vietnam Switzerland Yemen Turkey United KingdomBold: Coface direct presence7 www.coface.com.au
  8. 8. Coface Country Ratings: BRIC ● The BRIC countries include: - BRAZIL - RUSSIA - INDIA - CHINA8 www.coface.com.au
  9. 9. Merchandise trade levels by BRIC country AUSTRALIA Imports volume Imports Exports volume Exports (AU$million) growth (%) (AU$million) growth (%)Brazil 758 20.40% 1,574 70.80%Russia 370 2.90% 854 45.30%India 2,083 12.90% 15,742 -2.70%China 41,109 13% 64,835 39.40%TOTAL volume of BRICtrade levels 44,320 44 320 83,005 83 005Percentage of BRIC tradelevels (%) 20.20% 33.72%TOTAL volume of tradelevels (world) 218,968 218 968 7.40% 7 40% 246,713 246 713 17.30% 17 30% Source: Department of Foreign Affairs and Trade 2010/2011 9 www.coface.com.au
  10. 10. Country Risk according to Coface ● Country Risk measures the influence of a country macroeconomic and institutional evolution on companies credit risk ● Country risk assessment  Assesses the average risk of payment defaults by companies in a given country  To rate countries, Coface combines economic and political prospects of the country, Coface payment experience and business climate assessment  This rating has 7 grades: A1, A2, A3, A4, B, C, D ● Business climate assessment  Assesses overall business environment and more precisely whether corporate information is available and reliable and whether the legal system provides fair and efficient creditor protection p  This rating has 7 grades: A1, A2, A3, A4, B, C, D10 Coface Country Risk Conference 2011
  11. 11. BRICs: Risk Assessment Business Country Risk Climate January January January January January March September January June 2011 2007 2008 2009 2010 2011 2011 2011 2012Brazil A4 A4 A4 A4 A3 A3 A3 A3 A3 A4Russia B B B C B B B B B BIndiaI di A3 A3 A3 A3 A3 A3 A3 A3 A3 A4China A3 A3 A3 A3 A3 A3 A3 A3 A3 B11 www.coface.com.au
  12. 12. BRAZIL Risk Assessment: A3 ● STRENGTHS - Scale and potential of the domestic market p - Abundant natural resources - Significant manufacturing industry - Primary budget surplus y g p - Considerable currency reserves (12 months of imports) ● WEAKNESSES - Dependence on raw materials and foreign capital - Deficient infrastructures (energy, transport) - Lack of skilled labour - Shortfall in household savings rate and high cost of credit - High taxes primarily devoted to operating expenditures - Corruption and crime flourishing on inequalities12 www.coface.com.au
  13. 13. Brazil: Overheating is over, not the temptation of protectionism……. p 100 80 60 40 20 0 -20 -40 2007 2008 2009 2010 2011p 2012p Portfolio investments (Bns $) Net foreign direct investments (Bns $) Current account balance (Bns $)13 www.coface.com.au
  14. 14. RUSSIA Risk Assessment: B ● STRENGTHS - Abundant natural resources (oil, gas, metals…) ( ,g , ) - Skilled labour force - Low public debt and sizeable currency reserves - Confirmed regional and energy power g gy p ● WEAKNESSES - Accentuation of the rentier nature of the economy - Poor competitiveness of the industrial sector - Fragile private banking sector - Poor infrastructure base - Population decline - Continuing shortcomings in the business climate14 www.coface.com.au
  15. 15. Russia: Consumers and credit are back! Consumption and Unemployment Banking Credit Growth Unemployment rate Annual nominal growth Credit to 80% (%) 14 Private Consumption growth (%, 20 corporates Crédit to 12 15 60% Household 10 10 40% 8 5 20% 6 0 4 0% 2 -5 -20% déc-07 juin-08 déc-08 juin-09 déc-09 juin-10 déc-10 juin-11 0 -10 10 1996 1998 2000 2002 2004 2006 2008 2010 201215 www.coface.com.au
  16. 16. INDIA Risk Assessment: A3 ● STRENGTHS - Diversified drivers of growth g - Solid fundamentals: high savings and investment rates - Competitive private sector in industry and services - Moderate foreign debt and satisfactory foreign exchange g y g g reserve ● WEAKNESSES - Lack of infrastructures and deficient educational system - Skilled labour wage rise threatening to erode competitive advantage - Increasing private corporate debt - Weak public finances - Persistent uncertainties over the Kashmir question16 www.coface.com.au
  17. 17. India: Financial weaknesses0% 12% GDP Growth (%) RH scale-1% Current account balance / GDP (%) LH scale 10%-2% 8%-3% 6%-4% 4% 100%-5% 2% 76% 74% 80% 73% 73%-6% 0% 69% 68% 68% 2006/07 2007/08 2008/09 2009/10 2010/11e 2011/12p 2012/13p 60% Public debt service / revenue (%) Public debt / GDP (%) 40% 20% 34.6% 35.4% 37.1% 35.6% 32.2% 34.4% 34.5% 0% 2006/07 2007/08 2008/09 2009/10 2010/11e 2011/12p 2012/13p 17 www.coface.com.au
  18. 18. CHINA Risk Assessment: A3● STRENGTHS- External accounts benefitting from competitiveness and industrial diversification- Ri k of foreign over-indebtedness li it d thanks to the high level of foreign exchange Risk f f i i d bt d limited th k t th hi h l l f f i h reserves and to the current account surplus- Sovereign risk contained: public debt mostly domestic and denominated in local currency- Infrastructure development spurred by the stimulus package- Very high corporate savings rate that funds most investments● WEAKNESSES- Growing social tensions linked to mounting inequalities- Aging of the population and gradual drying up of the pool of abundant cheap labour- Overcapacity in industry and trade- Weakness of Chinese banks due to credit dynamism and uncertainty as to the level of non-performing loans- Environmental problems 18 www.coface.com.au
  19. 19. Will 2012 be a Chinese business-friendly year? Main risks for Chinese businesses in 2012 35% Tighter monetary policy and access to credit 30% Higher commodity price and rising inflation 30.1% Intensified domestic competition Increasing wages & salary demand 25% 26.6% Large & rapid yuan appreciation Others 20% 20.1% 15% 15.9% 10% 5% 6.4% 0.9% 0%19 www.coface.com.au
  20. 20. BRICs: Growth is under control BRICs: GDP growth (%) 8 China 9.2 10.4 7 India 6.9 8.5 3.5 Russia 3.7 2012f f 4 2011e 2010 3.2 Brazil Bra il 2.8 28 7.5 0 2 4 6 8 10 1220 www.coface.com.au
  21. 21. How to minimize risks and trade safely ● INFORM: Know who you are dealing with ● INSURE your customers through Trade Credit Protection  Effective control of bad debts  Balance sheet protection and cash flow relieve  Alternative to LCs  Trade safely in existing and new markets  Secure increase levels of finance ● MANAGE your debts effectively:  Directly  Outsource to b2b debt recovery agency  Coface TCI includes debt collection services as part of the policy21 www.coface.com.au
  22. 22. Info available: www.coface.com.au22 www.coface.com.au
  23. 23. Coface Country Risk Handbook Economic review and 2012 outlook for 157 countries ● Coface assessments ● 2012 outlook ● Economic indicators for each country ● Payment incident trends monitored by Coface ● Payment methods and collection practices P t th d d ll ti ti23 www.coface.com.au
  24. 24. Coface Australia Sydney (Head Office) Phone: +61 (0)2 8235 8600 E-mail: info@coface.com.au Address: Level 10, York Street Thank You! Sydney NSW 2000 y y Melbourne Phone: +61 (0)3 9691 7600 Sydney E-mail: info@coface.com.au Melbourne Address: Level 18, 600 Bourke Street Melbourne VIC 3000 www.coface.com.au24 www.coface.com.au
  25. 25. The toolbox to the BRIC 30 05 2012 In collaboration with: