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Why the BRICs are crashing together

Today's Financial News - Posted October 3, 2008

The BRIC countries are all in trouble. But why are four very different economies (in Brazil, Russia, India and China) reacting to the current market in the same way? Andrew Gordon has the answer.

by Andrew Gordon, Investor’s Daily Edge

Baltimore — (TFN): BRIC (Brazil-Russia-India-China) countries make a funny group.

It’s not easy talking about them as a group. You have a badly managed commodity exporting country (Russia) … a well-managed farm product-exporting country whose cagy leader is losing his reforming zeal (Brazil) … a high-tech economy very dependent on business from the U.S. (India) … and a fast-expanding country where inefficiency still abounds (China).

China is the biggest and most important of them all. It wants to sustain double-digit economic growth. And if it can’t, you can kiss global growth good-bye.

They got grouped together not because of what they all had in common but the vast promise they all share. Even on that basis their commonality is suspect. Brazil is far ahead of the pack in its economic development. That may make for slower growth. But its middle class is much bigger (in relative terms) than the other BRIC countries.

Now, unfortunately, they have another thing in common. Their equity markets are all tanking together.

So, why are these vastly different economies suffering equity meltdowns of 30-60 percent? Read on to learn the answer.

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