Magazine article Foreign Policy

'There's No Such Thing as a Failed State': The Father of Emerging Markets Says We Shouldn't Give Up on the World's Somallas and Zimbabwes

Magazine article Foreign Policy

'There's No Such Thing as a Failed State': The Father of Emerging Markets Says We Shouldn't Give Up on the World's Somallas and Zimbabwes

Article excerpt

MARX MOBIUS is the kind of guru to whom other gurus turn for advice. With his signature white suits and gleaming, clean-shaven pate, he very much looks the part too. Executive chairman of Templeton Emerging Markets Group, managing some $45 billion and 18 overseas offices, the half-German, half-Puerto Rican Mobius is a legendarily farsighted investor who sees opportunities around every corner, often in places that aren't for the squeamish. After four decades at the top of his field, his name is on pretty much every list of people who matter in global finance. There's even a comic book on his life that has been translated into six languages: Mark Mobius: An Illustrated Biography of the Father of Emerging Markets Funds. FOREIGN POLICY spoke with him about Chinas forays into Africa, how to make money in failed states, and why no country is too hopeless. Here are the edited excerpts:

Is Africa a basket case or an opportunity? I would say it's both.

In many cases it's the basket case and it's the next best thing, so what's happened is the change in attitudes, the change in perception. But on the ground, of course, things are still not hunky-dory.

Probably the defining variable is what is happening in other emerging markets. China, Brazil, Russia, India--these countries now are getting to a point where they have excess reserves. They have money to put into other parts of the world. And of course they have been putting money into America, into Europe, but they also are now going into Africa. On the one side they need the natural resources--China. On the other side they see an opportunity to make money and make better returns.

The range of what's possible in these countries is quite tremendous simply because they are building from such a low base. In the last 10 years, for example, six of the fastest-growing nations of the world were in Africa. But also it's the fact that the printing presses are working overtime in America, in Japan, and even in Europe. There's a lot of money to be invested, and a lot of that is because of the fears of inflation finding its way into equities. So you have a very unusual situation where pension funds are really buffering because investments like U.S. Treasury bills are paying such a low interest rate--which leads them into emerging markets and frontier markets, with frontier meaning Africa, Central Asia, far Eastern Europe.

The African countries most on my mind right now are South Africa, Nigeria, and Egypt. They're important markets, and they're getting their act together. I know many people don't have nice things to say about Egypt these days, but at the end of the day they will get their act together and they will continue to work.

We were in Rwanda about six months ago, and we were all really shocked at all of the infrastructure, at least in the capital, and the degree of governance, the way law and order was in that country. There are such huge differences in Africa from one country to another: differences in temperament, differences in behavior, and so forth. And Rwanda is a great example of a country that's really got itself in order and is a reminder that, again it has this background, this image of the genocide and all the rest of it. …

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