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Business Forecast or Why Mundo Loves Russia

The Real Russia is opposite to what you will find in Hollywood movies. The west wants you to view Russia badly although they hide the fact that many public enterprises and even Sberbank are owned by foreigners.

Perhaps you are surprised by what we tell you in this article about Russia? Possibly this picture does not match what you had heard about this country? The truth is that today's Russia differs considerably from the stereotypes that it used to have. In fact, positive changes in the country continue to develop. An international entrepreneur has recently declared that Russia grows five times quicker than other countries on a yearly basis.

Now we will see in detail some myths and prejudices that Russia, its market and its economy are usually associated with.

Are you under the impression that the Russian economy depends on external factors, and for this reason you consider it is not worth investing in?

This is false!

The state of the national economy was for a long time dependent on oil prices. In the midst of the 2008 crisis, Russia gradually began to avoid the recommendations of international financial structures and to pursue an independent financial policy. The American businessmen recognized at the time that the Russian authorities' actions were not clear to them, but they were admirable. The country successfully overcame the 2008 crisis and was able to create a financial cushion that would guarantee its sustainability.

Do you believe that the Russian economy is isolated and subject to sanctions, and therefore, investing in this country is risky?

It is not true!

The independence of Russia's financial policy manifested itself during 2014, when US President Barack Obama tried to "break the Russian economy into pieces". Russia managed to stand up to US and European sanctions in the context of a sharp drop in world energy prices. Despite the real isolation of world financial markets, direct sanctions against industry and individual entrepreneurs, and the reduction in foreign trade by 44.5% (45.9% of exports and 42.1% of imports), the Russian authorities managed to maintain macroeconomic stability and prevent a decline in the population's standard of living.

The result of this stress test conducted under the "perfect storm" conditions were positive, the Russian economy and financial system demonstrated remarkable security and development potential.

By 2017, economic growth started again in Russia. Not at very high levels, but steadily. As of 2019, the population's real income began to rise again. By the end of 2019, growth in the Russian economy was projected at about 1.5%. While some countries supported measures and sanctions against Russia, trade between these countries and Russia continued to increase. The same was true for those countries that received reprisals for the support they gave to Russia. It should be noted that Russia has returned to a regular commercial turnover level with the United States, having already reached 92% in 2018 of the level reached in 2013.

Russia has managed to rebuild and even create industries that have become its new economic engines, along with the diversification of energy trade in favor of China and South Korea. In 2008, the Russian food market was highly dependent on supplies from imports. Shortly after that, the country developed its agriculture and food production.

In 2018, Russia reached the world's leading position to import wheat and in the next few years is expected to share the leading position in the world grain market with the USA. When it comes to food production, Russia was not only able to ensure its domestic market, but also to become an organic and quality food exporter whose main consumer is China.

Although in the past Russia's national goals were to win international music and sports competitions, now the country's long-standing desire is to achieve similar success in cheese production so that it can compete with Swiss and French cheese makers, in an area where quality production has never been undertaken before.

Russia's military success in defeating the ISIS terrorist state has become such effective publicity for Russian high-tech weapons that the acquisition of obsolete air defense and aviation systems for the Russian army has become a dream for many countries, including some of those belonging to NATO.

Russia's economic recovery from this perfect storm (2008 crisis), happened within a situation where the Russian authorities not only did not withdraw from their geopolitical positions, which led them into conflict with the United States and the EU, but also increased their interest and their global presence. Today, this area includes not only countries of the former USSR, but also the Arabian Peninsula and North Africa. This role of providing security in these regions has led to a reorientation of investment flows.

While the main investors in the Russian economy were previously EU countries, today the partnership with Qatar, the United Arab Emirates and Saudi Arabia has started to take on an increasingly important role. Economic relations with Turkey have been restored and acquired greater dynamism. Meanwhile, as President Putin and his counterpart Xi Jinping pointed out, relations between China and Russia since 2019 have become a positive alliance, generating a beneficial impact on trade and investment.

The potential for sanctions against Russia is almost exhausted, so one can say that the country's economy has successfully adapted to the sanction’s regime. In a world that is becoming less global, where trade wars begin and close allies such as the US and the EU apply tariffs and sanctions against each other, Russia’s resistance experience to foreign economic and political pressure becomes a significant advantage for its economic system.

What does the Russian economy offer today?

In terms of GDP by purchasing power parity, Russia occupies the 6th place in the world after China, the United States, India, Japan and Germany, and its differences from these countries are rapidly decreasing. Russia’s state budget shows a positive balance, having gold and foreign exchange reserves that together exceed the public debt and all foreign loans of Russian corporations, as well as the foreign trade operating debt.

Beyond the accumulated reserves, the Russian government manages a welfare fund, whose funds can be used to ensure social stability and the implementation of major structural projects. This fund is fed by unplanned budget revenues primarily from energy exports. Annual inflation in Russia remains below 4 %, with a falling potential of around 2 %. Forecasts for the economic growth are between 1.5 and 2.5 %, rising up to 3 %.

The relatively low level of the population's real income is balanced by Russia's traditional financial caution: the level of Russian household debt is significantly lower than in the US and Europe, which has a positive effect on the population's purchasing power.

Despite the high tactical volatility of the Russian currency, after the late 2014 devaluation, its average annual rate is stable, strengthening by 10% in 2019. The Ministry of Economy's most negative forecast would mark a reverse reduction of the ruble, never exceeding 10%, over the next five years.

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Investments in Russia can be very profitable, but they carry a great risk due to a low level of security.

Absolutely false!

Both statements could have been true last century and even during the first decade of the current century. Nowadays, this situation has radically changed. This is because of the generational change in the Russian business environment which occurred in the context of a serious crisis in the global financial and economic system. The first generation of Russian entrepreneurs created an economy based on private property from scratch.

This generation is now starting to move away from business, passing on their collected fortunes to young people. This was a generation distinguished by its willingness to take high risks in exchange for high returns. Their perception of the world was that Russia, which lacked strong institutions to protect property, was a place to make money. However, they were looking for a safe hub in Europe and the United States where to keep their capital. They preferred to protect themselves with foreign investor status, hiding behind complex anonymity schemes in offshore jurisdictions.

Perhaps that generation' of entrepreneurs were not particularly known for their professionalism; they often made mistakes, but they were capable of generating original ideas and carrying them out. They were brilliant and extraordinary people who, because of their inexhaustible energy and their disregard for laws and regulations, sometimes represented an increased risk factor in their country. Nevertheless, the vision of creating a peaceful port in Western countries did not materialize.

And the reason for this was not Russia's strained relations with the United States and the EU, but the emerging general intolerance of the right to privacy, the nihilistic attitude to private property and the open disposal of capital. Using noble pretexts such as the fight against corruption, money laundering and the fight against the financing of terrorism, these trends have become a large-scale offensive against entrepreneurial freedom in the so-called civilized world.

This generation of Russian entrepreneurs has enough influence and an impressive capital that has begun to return to the country, allowing the construction of this safe hub not abroad, but in Russia this time.

In contrast, the new generation of entrepreneurs has been trained by young professionals who tend not to take risks but to rely on their knowledge and skills; not to create high-yield combinations, but to multiply already established assets and capital, to commit to evolutionary development and to a high level of security of their finances and assets. There has been a trend in Russia for companies, administrations and authorities to create institutions that ensure the preservation and development of capital under low-risk conditions, as well as a friendly environment for its development.

In terms of safety and convenience of services, Russia offers a number of significant advantages compared to other countries. This can be attributed to the above-mentioned efforts, which also provide an attractive return on investment. Such advantages apply to investment vehicles as well as to direct investment and the tax environment, which you can read more about in the tax section.

Despite its financial self-sufficiency, Russia, in line with its historical tradition, warmly welcomes foreign investment, both on the stock markets and in direct investment in the actual economy sector. Russia has had a law on the protection of foreign investment since 1999, which guarantees the withdrawal of the revenues generated by Russia's investment activities.

The same rights apply to Russian, foreign and foreign-owned companies, and a series of benefits and guarantees protect the foreign investor from any adverse changes in legislation. All this offers foreign investors a much comfortable business environment, even more so than for Russian businessmen. Furthermore, there are other forms to promote investment that depend on the business type and scope. The big investors who create companies in Russia can rely on the coordination and support of the Russian Federation´s government.

The Russian economy produces only oil and gas, and access to these sectors is limited.

False!

An important aspect of investment in Russia is that it is a technically and scientifically developed country, and even a world leader in several areas. There are so many sectors that can be targeted for investment that the most ambitious interests and preferences can be satisfied.

Are you passionate about high technology and innovation? If so, you'll be familiar with the names PayPal, Evernote, Google, Telegram, Viber, Dr.Web or RAR. Their creators include natives of the former USSR. Many Russian programmers work in Silicon Valley, but you can be sure that the true IT geniuses of the future are still learning in Russian schools and universities, waiting for their future investment mentors.

Perhaps they will be the next team to change the world by creating unique 3D printing technology for high-rise buildings or any other innovation. Do you consider yourself too conservative to make high-risk investments in the innovation sector? If so, you can invest in gold mined near the Arctic Circle, Siberian diamonds or oil from the Arctic shelf.

Are you inspired by a rural lifestyle or do you consider ecology to be your mission? Then you can enjoy the vineyards in the Caucasus mountains, the grazing of horses in the Russian steppes, or the rich herds in the high mountain pastures. Or, if you are not that romantic, you can simply invest in a farm property which operates in a market of 150 million consumers.

Are you a city person who loves socializing? You can become the focal point of attention by opening a restaurant in Moscow offering the traditional cuisine of your country - but why only Moscow? Open them all over Russia.

Moreover, you can own all of Russia's wealth at the same time and risk almost nothing by investing in government bonds.

As you can see, Russia has something for everyone.

If you believe that Russia is an inactive location for business, then you couldn't be more wrong! We have shown extensively that in Russia there are possibilities to invest in the most diverse sectors, that foreign investment is warmly received, highly protected and has many benefits, and we have proven that the country, rich in intellectual potential, is full of talented and hard-working young people.

The highly technological, cultural and human standard of Russia is rarely found elsewhere. There must be a reason for this.

Read of the wonders and opportunities that the largest country in the world has to offer.

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