Readers’ Questions Answered Part III
It’s been a while since I responded to questions from readers so here are a few of my comments.
I read with interest your blog on Greece. The panic has now spread to Portugal and Spain. What are your comments here? How do you think Greece will pull through? Even though Greece isn’t an emerging market, reports like this are certainly affecting the emerging markets.
– George, United States
I believe that it will be necessary for the Greek government to restructure its entire debt. That will be the first step. The next step should be to trim the size of government employees and eliminate the many laws and regulations that might be an inducement for potential kickbacks. Subsequently, I believe it will be necessary to raise the salaries of the remaining Greek civil servants to ensure that they remain honest and impartial, and to institute severe penalties for corruption, particularly in the tax collection offices. Swift reduction in every direction is essential. I believe that after this crisis and a series of drastic measures are taken, Greece will recover and take its place as the vibrant, exciting country that it was.
In general, global markets tend to react to headlines in the short-term. However, at the end of the day, each country and each company has its own set of dynamics and fundamentals. Research is about identifying the differences among them. Those key differentiating factors are often the basis for success in the long-run.
If Romania is a good opportunity, what about Poland?
– Stella, Poland
Poland is one of the key economies in Europe and enjoys many advantages. Franklin Templeton has a large number of employees in Poland assisting in our technology, marketing and other back office operations because of the high caliber of the local workforce. We also have an emerging markets research office there, in addition to our other business operations. The Smolensk air crash, which killed a number of senior political, military and cultural figures, was a tragedy for the nation. Nevertheless, my view is that political stability will not be affected – a testament to the strength of the country’s political structure. Poland survived the global crisis fairly well and is expecting a 2.7% GDP growth this year. We have a number of investments in Poland and intend to continue investing there.
I have been following the economy of Colombia lately. What is your opinion of Colombia as an up-and-coming investment market?
– John, United States
We like the reforms that have taken place in Colombia. There is an on-going economic recovery in the country although the fiscal deficit will be somewhat of a drag on growth. President Alvaro Uribe remains popular as a result of his strong security policies, and while he cannot have a third term this May, Uribe’s successor will probably continue his policies. Interest rates are also falling, which is positive for the economy. Another positive factor is that Colombia has a well-educated population with high literacy rates.
Have you visited Nigeria before or have you done any analysis of the country in your blog?
– Chigozie, Nigeria
Our analysts have visited Nigeria, and we have done extensive analysis of that country. As a result, we have made a number of investments in the Nigerian financials sector in particular for some of our portfolios.
Nigerian president Umaru Yar’Adua’s passing away on May 5th did not come as a surprise as he had been ill for several months. The current President, Goodluck Jonathan, had been carrying out state affairs as Acting President in Yar’Adua’s absence. Jonathan had dissolved Yar’Adua’s cabinet and appointed his own in March 2010, affirming his authority. He has stated that his administration will focus on anti-corruption, reform of the electoral system and electricity infrastructure – all positive signals for the Nigerian economy and political stability going forward.
The market impact of this event is expected to be neutral, as Jonathan has effectively been in charge of the country since February 2010, with this latest change just another step forward in the whole process.
As one of the largest countries on the African continent and with substantial natural resources, I believe Nigeria may grow in importance and become a key investment destination.
 Source: IMF, WEO, as of April 2010.