LoisBouzas
Madmaxista
La segunda entrada de mi blog, espero críticas para mejorarlo:
I decided to write this post after listen this podcast of the BBC:
[audio
I am going to underline the principal ideas of the podcast, and then give my point of view:
At the beginning, the speaker said, that Ethiopia is one of the poorest countries in the world, one third of the population live with less than $1 per day. But the economy has a strong growth of 10% per year, and it seems to be sustainable. One difference with the rest of African´s countries is that our country has lack of natural resources.
After the introduction, we have an interview of an Ethiopian business man, his principal ideas are:
There is a lot of troubles at the time to raise funds to create a business.
If a business is successful it will obtain a profit around 30% per year (not bad).
But if you have the money, why not invest in Ethiopia? The principal reasons are the difficulties to enter in this market, because the government only allow you to invest in big projects. In words of the business man “The Barriers for foreign investors are good because if the barriers would not exist, ethiopian people may not compete”. About this, I think that not allow competence in all the market results in distorsion in the prices and decrease the competitivness of the ethiopian companies. Due to this, the ethiopian society is loosing as consumer and, also, as player in the trade international market.
Furthermore, in the opinion of the ethiopian, the market must be peine when the Ethiopian business men will be ready and they can take loans WITHOUT collaterals. I don´t think that they are going to be ready, because without competition in their country, they are not going to know how to compete in the international market. Additionally, this man doesn´t want risk, because without collaterals, If his company has a bankrupcy, he won´t have any obligation with the bank. This is not the occidental way of doing business
The last idea of this conversation, is that the inflation is around 30% each year. An important fact that I am going to bear in mind in the conclusion.
After this conversation, It is time for another interview with an investment fund´s CEO, that has $100 million aimed to invest in ethiopian economy.
From the woman´s point of view, the reasons for invest in this country are:
Ethiopia has the second largest population in Africa.
Strong growth of the GDP each year.
The opportunities are growing in some sectors like agriculture and its distribution chain.
Moreover, she said that the private sector is growing since 1991 because the government was a comunist dictatorship. This growth of the private sector provides business opportunities and is the base of a middle class, that requires consumer goods and services. (It is an opportunity)
Another business opportunity: The government plans look for improve the infraestructures and projects are being assigned to private companies. It is a good chance for companies like Abertis or Norberto Odebrecht.
Last issue to be touched is the corruption. According to the CEO, It is the least corrupt country in Africa. Corruption is the least of her worries and she never gave a bribe. I think that her opinion is influenced for her work because in the ranking of Transparency International, Ethiopia is in the 113 position, while other countries , like Botswanna (30th in the rank, the same position as Spain), Namibia (58th), South Africa (69th)… , are better positionated in Africa.
Trinc with the programme, we find the last interview to the Chief Economist of the UN Africa:
He said that the forecast of Ethiopia is a growth of the GDP between 10% and 12% but Africa has another interesting countries like Ghana, Liberia or Angola with a predicted growth of 8%.
The idea of a growing middle class is again mentioned, and for him it is due to the growth of the GDP, that provokes an income increase, that stimulates the demand of consume goods. Furthermore, he gives an example between the cars that you could see in african countries´ streets 10 years ago and now.
The last idea, that close the podcast, is that the poverty circle is being broken by the develop of the human capital, because of this, he is very optimistic with the future of the region. Also we have another fact for the hope, each day there is less african countries with dictatorships.
Now is time for my opinion:
Ethiopia has a strong dependence of the agriculture with employs the 85% of the active population and represents the 50% of the GDP.Its principal problem are that suffers frequent drought and poor cultivation practices. Additionally the state owns all the lands and has agreements with the farmers, but they can´t use the lands as collaterals so raising fund is extremely difficult to raise funds. Moreover, the commercial bank prime lending is 15% (rank 53th between 262 countries).
The cancellation of the debt in 2005 by the IMF is one important fact that increased the fortress of the economy, On one hand, it gives an opportunity to the country but on the other hand you should be careful if you invest in Ethiopian debt. Now the debt to GDP is only 31,2% (estimations for 2012).
Its per capita income is one of the lowest of the world, in 2011 it was only $1100, that is a problem if you want to comercialize consumer good with middle price, at least, the income is increasing each year.
And to finalize with data, maybe the most important weaknesses point is the inflation, because since 2000, the highest inflation was in 2009 (36.40%) and the lowest one was a deflation of -7.224% in 2002. A country with this inflation differential can´t provide stability to its economy, what discourages investment, consumption and economic growth slows. This year, the IMF called Ethiopia raise interest rates due to inflation is near to 25%.
To sum up, in my opinion, to invest in Ethiopia is a high risk decision, however the figures tell that Ethopia has an important future, and is called to be a leader economy in its region. The opportunities are in the more dinamyc sectors of its economy like the trade with coffe or gold and maybe there is a market niche for consumption goods with a really low price, if you want to reach all the population, you have to compete in rotation and if you are successful, you will obtain a return around 30% of your investment. But you should have in mind the monetary risk, because its currency was depreciated a 6,5% this year.
Answering the title question, It is an opportunity, with high risks and high returns.
Tienes que estar registrado para ver este contenido
I decided to write this post after listen this podcast of the BBC:
[audio
Tienes que estar registrado para ver este contenido
I am going to underline the principal ideas of the podcast, and then give my point of view:
At the beginning, the speaker said, that Ethiopia is one of the poorest countries in the world, one third of the population live with less than $1 per day. But the economy has a strong growth of 10% per year, and it seems to be sustainable. One difference with the rest of African´s countries is that our country has lack of natural resources.
After the introduction, we have an interview of an Ethiopian business man, his principal ideas are:
There is a lot of troubles at the time to raise funds to create a business.
If a business is successful it will obtain a profit around 30% per year (not bad).
But if you have the money, why not invest in Ethiopia? The principal reasons are the difficulties to enter in this market, because the government only allow you to invest in big projects. In words of the business man “The Barriers for foreign investors are good because if the barriers would not exist, ethiopian people may not compete”. About this, I think that not allow competence in all the market results in distorsion in the prices and decrease the competitivness of the ethiopian companies. Due to this, the ethiopian society is loosing as consumer and, also, as player in the trade international market.
Furthermore, in the opinion of the ethiopian, the market must be peine when the Ethiopian business men will be ready and they can take loans WITHOUT collaterals. I don´t think that they are going to be ready, because without competition in their country, they are not going to know how to compete in the international market. Additionally, this man doesn´t want risk, because without collaterals, If his company has a bankrupcy, he won´t have any obligation with the bank. This is not the occidental way of doing business
The last idea of this conversation, is that the inflation is around 30% each year. An important fact that I am going to bear in mind in the conclusion.
After this conversation, It is time for another interview with an investment fund´s CEO, that has $100 million aimed to invest in ethiopian economy.
From the woman´s point of view, the reasons for invest in this country are:
Ethiopia has the second largest population in Africa.
Strong growth of the GDP each year.
The opportunities are growing in some sectors like agriculture and its distribution chain.
Moreover, she said that the private sector is growing since 1991 because the government was a comunist dictatorship. This growth of the private sector provides business opportunities and is the base of a middle class, that requires consumer goods and services. (It is an opportunity)
Another business opportunity: The government plans look for improve the infraestructures and projects are being assigned to private companies. It is a good chance for companies like Abertis or Norberto Odebrecht.
Last issue to be touched is the corruption. According to the CEO, It is the least corrupt country in Africa. Corruption is the least of her worries and she never gave a bribe. I think that her opinion is influenced for her work because in the ranking of Transparency International, Ethiopia is in the 113 position, while other countries , like Botswanna (30th in the rank, the same position as Spain), Namibia (58th), South Africa (69th)… , are better positionated in Africa.
Trinc with the programme, we find the last interview to the Chief Economist of the UN Africa:
He said that the forecast of Ethiopia is a growth of the GDP between 10% and 12% but Africa has another interesting countries like Ghana, Liberia or Angola with a predicted growth of 8%.
The idea of a growing middle class is again mentioned, and for him it is due to the growth of the GDP, that provokes an income increase, that stimulates the demand of consume goods. Furthermore, he gives an example between the cars that you could see in african countries´ streets 10 years ago and now.
The last idea, that close the podcast, is that the poverty circle is being broken by the develop of the human capital, because of this, he is very optimistic with the future of the region. Also we have another fact for the hope, each day there is less african countries with dictatorships.
Now is time for my opinion:
Ethiopia has a strong dependence of the agriculture with employs the 85% of the active population and represents the 50% of the GDP.Its principal problem are that suffers frequent drought and poor cultivation practices. Additionally the state owns all the lands and has agreements with the farmers, but they can´t use the lands as collaterals so raising fund is extremely difficult to raise funds. Moreover, the commercial bank prime lending is 15% (rank 53th between 262 countries).
The cancellation of the debt in 2005 by the IMF is one important fact that increased the fortress of the economy, On one hand, it gives an opportunity to the country but on the other hand you should be careful if you invest in Ethiopian debt. Now the debt to GDP is only 31,2% (estimations for 2012).
Its per capita income is one of the lowest of the world, in 2011 it was only $1100, that is a problem if you want to comercialize consumer good with middle price, at least, the income is increasing each year.
And to finalize with data, maybe the most important weaknesses point is the inflation, because since 2000, the highest inflation was in 2009 (36.40%) and the lowest one was a deflation of -7.224% in 2002. A country with this inflation differential can´t provide stability to its economy, what discourages investment, consumption and economic growth slows. This year, the IMF called Ethiopia raise interest rates due to inflation is near to 25%.
To sum up, in my opinion, to invest in Ethiopia is a high risk decision, however the figures tell that Ethopia has an important future, and is called to be a leader economy in its region. The opportunities are in the more dinamyc sectors of its economy like the trade with coffe or gold and maybe there is a market niche for consumption goods with a really low price, if you want to reach all the population, you have to compete in rotation and if you are successful, you will obtain a return around 30% of your investment. But you should have in mind the monetary risk, because its currency was depreciated a 6,5% this year.
Answering the title question, It is an opportunity, with high risks and high returns.
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