Stratfor’s George Friedman: Long Turkey, Short China

December 16, 2009 But if you take a country like Mexico and to some extent
, it’s just racked with violence and drugs. Isn’t that a problem for investors?

Friedman: No, that’s beneficial.
has $25 billion to $40 billion in cash pouring into the country each year. And narcotics isn’t like any other industry. The profit margins on drugs are about 90 percent. In the auto industry, $40 billion in revenues may translate into $3 billion in profits. In this industry, $40 billion translates into $35 billion in profits.

One of the huge advantages of
is this massive inflow of American dollars at low cost. One of the prices they pay is instability of the borderland. But that problem doesn’t stretch into the heartland, and that’s what’s important.

As in every country in the early stage of investment, one of the things you expect is serious social instability. Western investors want a country with tremendous growth potential, low risks and tremendous social stability. Good luck.

The price you pay for getting into these countries is understanding the social risks and the political complexity and mastering them. If you only want to look at the balance sheet of corporations, don’t go here.

Investors have a real opportunity in these countries, but they have to find a way to mitigate risks that are not economic.
is the perfect case in point. There are huge opportunities. You just have to know what street to walk down.



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