Countries that will survive the next 40 years

Ask an expat why they came to their country of residence and you probably won’t get a coherent answer. As people, we like to have reasons for the things we do, but it’s hard to conceptualize a country that we’ve never been to, and dizzying if we stare at a map and try to come up with reasonable rank-ordered list of preferences (see choice overload references in previous post). And so picking a place is usually like ordering food off a foreign-language menu – point and pray you don’t get weird shit.

This works great if you’re twenty something and mobile. If one place doesn’t work out, you can go to another, and, if you’re reasonably hardy and social, you can make a nice one-year stay for yourself in most places. I’ve been thinking about the question of where you would move if you had a 30-40 year time horizon in mind, something in the vein of a nice, stable, semi-retired lifestyle supported by some sort of an a moderate income stream from the West. Hardly a new thought: one look at escapeartist.com and its obvious that there is a market for retired people hoping to avoid a dull, depressing climb into the coffin in some faceless American suburb by jetting off to a gated community in a country with a comparative advantage in beaches. I’ve heard rumors of large welfare-state countries paying their pensioners some extra cash to move abroad, to avoid their health-care costs, though haven’t been able to substantiate that on the internet.

Costa Rica seems to be a favorite, as does Thailand and Caribbean islands, but this has to be largely an issue of inertia – people go where access is easy and where other people are going – rather than a solid calculation about where the country will be in 40 years. Take the Caribbean islands for instance – small, densely populated, not especially fertile for basic foods and a lack of natural resources. It’s far from everyone’s minds, but Haiti was one of the countries hit hardest by food riots during the commodity crunch earlier last year, and it’s no surprise – not being able to grow their own food, they’re at the mercy of international food prices more than most other countries, and when the next crisis comes around, there may not be enough tourism revenue to keep enough mouths fed to keep some of the poorer nations stable. It’s not guaranteed, but why risk it? Lots of places were groovy before they sucked, at least for the demographic that Western retirees would form (Iran under the Shah, Lebanon before 1975, anywhere in Africa before decolonization), and while much of that is not predictable, there are a number of global challenges that countries will face that are.

We tried our best to stare at a map and come up with that elusive rank-ordered list of what countries offer the most stability over the next 40 years. In the end, the retirement element is just a for fun add-in. Really, this is a question of what countries are best equipped to handle the global economy and avoid destructive political and economic upheaval in the next 40 years. Here are some of our assumptions:

  • Oil and gas prices will keep rising. There will not be a breakthrough in fission technology or something else like that, oil will not run out, but it will become very expensive to power anything without some already existing renewable resources (hydropower, wind, solar)
  • Extraction of those renewable resources will become more efficient and economical, benefiting countries that have access to big rivers, lots of wind (coastline), sun, etc.
  • Food and shipping prices will increase along with oil prices.
  • Global warming is real and will cause the sea level rises and climate changes that the current scientific majority expects.
  • All of these things will happen to the point where people are seriously affected, but not to the point of destroying the current global order of free-ish trade (expect in food, where we assume countries will put up export taxes if domestic food prices start to rise) and relative peace. Poor people in emerging markets will bear the brunt of the problems, which will not be felt so acutely by people living in already rich countries.

So what are the criteria that we’re looking for? Basically, we want a developing country that seems most likely to keep a stable government and a stable economy, and in the next third of a century, stability will be determined by a combination of current stability and expected ability to deal with commodity price shocks. To keep it interesting, we’ll look at the best countries within certain ranges of current development, based on Human Development Index rankings.

And the winner is………

Kazakhstan: Weren’t expecting that, were you? Kazakhstan falls somewhere between Benin and dry cleaners on the scale of how often something comes up in the news (here’s some perspective. Google Kazakhstan. 25 million hits. Benin. 87 million. Kyrgyzstan. 83 million. Guyana. 86 million. “Central African Republic”. 54 million. And this is after a major motion picture had its name in its extended title. Point made.)  Most people who have seen Borat probably assume it’s a made-up place. What the hell does Kazakhstan have going for it? A lot, actually.

  • Oil and gas, a lot of it. While much of the world’s oil producers have already peaked, Kazakhstan’s exploitation is just starting to ramp up as it looks to become a top 10 oil producer in the middle of the next decade. There’s a ton of uranium and other minerals to boot.
  • Food. Kazakhstan is the sixth largest wheat producer in the world, and makes a bunch of apples and stuff. Sure, much of the land is heavily polluted from Soviet practices, and exploitation is pretty inefficient, but it will probably have more than enough food to feed itself if that’s what it comes to. There’s also no lack of water. That’s mostly because of the next point:
  • Low population. 15 million people is a pittance, especially considering the size of the place. Only 11 countries have a smaller population density. Even if there were to be some serious problems in the country, you could easily find a corner of steppe where no one would find you (on the other hand, it also has the biggest wild wolf population in the world, so keep a gun).
  • A stable, if unimpressive, government. The same guy has been in power since 1989. His name is Nursultan, which is pretty awesome. On the other hand, he has killed some journalists, which is a little less awesome. Foreign policy has been pretty balanced, which is an accomplishment given competing Russian, Chinese and American interests, and economic liberalization has also been steady. This is by far Kazakhstan’s biggest question mark, but for a country just ahead of Ecuador in HDI and behind such luminaries as Albania and Belarus, the relative stability of the past 20 years makes me bullish. Anyway, as long as oil prices stay high, it can’t be that hard to make 15 million people sedate (it’s only twice as much as the number of people in prison in the US, after all).

Too good to be true? Some problems:

  • The cities are wastelands worthy of a David Lynch movie, and the steppe is a little underwhelming unless you’re a sucker for consistency. On the other hand, it’s stability you’re paying for, so shut up and eat your borsch. Anyway, if these pictures show anything, it isn’t all that bad.
  • A half Eastern Orthodox half Muslim population isn’t exactly the foundation for a happy home. On the one hand, radical Islam has not made the inroads into Kazakhstan as it has in Tajikistan, or even Uzbekistan. On the other hand, you’re right near the border, and on a major drug transshipment route, so there’s the risk.
  • Part of being a big, thinly populated country with a lot of goodies means that other countries might get envious. Both China and Russia could take Kazakhstan in a couple of weeks if they so chose, with Russia probably having an easier time. But then if Kazakhstan is being invaded, the world probably isn’t that great of a place any more in general.
  • None of your friends will visit you, or probably even acknowledge that you exist. If you return to the US, people will all talk like Borat in front of you.

Kazakhstan falls at the bottom end of the “high” HDI countries. If we look at the lower half of “high” HDI countries (between Poland and Bosnia), and choose two more countries, we get two runners up.

 

Uruguay: Another country that doesn’t get much press (unless its 1950, and they spank Brazil, in Brazil, at football), Uruguay is a much safer bet than Kazakhstan politically but lacks a bit on the commodities end of things. Pros:

  • Ever since the Argentine financial collapse, Montevideo has consistently ranked among the cheapest places to live for expats. There’s a lot of land, it’s cheap, laws are friendly for buying. There’s no risk of petrodollar inflation or Dutch disease, which Kazakhstan does face.
  • The biggest export is food. It helps to like beef and basic grains, but Uruguay will pretty much always be able to feed itself, and thus you, if you live there.
  • Water. Uruguay, Argentina and Paraguay have some of the biggest water resources on the planet. If water is the next oil, you’re covered. Connected to that…
  • Hydropower, easily enough to provide for the energy consumption of 3.5 million people.
  • A pretty good government, the least corrupt in South America, with reasonable elections, not much history of unrest and none of the same drama as Argentina. Having an ethnically homogenous population certainly helps.
  • Placed between two powerful neighbors – this could be a problem if one of them gets uppity, but generally speaking, no one wants to have problems on their border, so Brazil or Argentina will probably keep order in the event of serious domestic problems in Uruguay. Furthermore, Brazil might provide concessionary oil prices to maintain a sphere of influence. Finally, it’s good to have options to run away to (a privilege Kazakhstan doesn’t enjoy).
  • The beach.

Cons:

  • Total oil dependence.
  • Might be the one country flatter than Kazakhstan.

All things added up, Uruguay is a better choice than Kazakhstan, though also 24 slots higher in HDI, so its hard to say which is better value. Uruguay doesn’t have the eco-appeal or constant warmth of a place like Costa Rica or other parts of Central America, but is much better primed to handle commodity price shocks, is probably cheaper and is hours away from a real city in Buenos Aires.

 

Southern Brazil: Not going to go much into detail on this one, it’s pretty much like Uruguay in the sense that its food and hydropower rich. The nice thing about living in Brazil is that it isn’t too reliant on oil imports, and will be less so if the deep sea drilling operations that Petrobras is setting up in Tupi work out. The crappy thing about living in Brazil is that income inequality is enormous and the racial mix leads to beautiful people but also quite a few tensions. I’m not sure what the risk of serious political upheaval is, but crime, racial animosity and drug issues are usually at your front door. That’s the reason why I put Southern Brazil rather than Brazil itself. Santa Catarina and Rio Grande do Sul are both much more ethnically homogenous provinces, in the European direction, and a number of places in the South have done some very progressive work in terms of improving income disparities (which were better to begin with), providing microcredit, etc. Santa Catarina has the lowest Gini coefficient and illiteracy rates in Brazil. Unlike mega-plantation north and middle Brazil, the South was settled later and built around homesteads less reliant slave labor, and as such have a much more Uruguay-Argentina feel to them.

 

What about countries starting off a little bit worse off? Obviously, there’s a reason they’re poor, so there’s going to be one risk or another, but it’s still interesting to look at. From the list of “medium” HDI countries (between Turkey and Senegal) we see two strong possible regions – north and western South America and Southeast Asia.

 

Colombia: Outside of the original 4 Mercosur members, Latin America is a bit of a shitshow. Your choice is between largely lawful states with populist, expropriating leaders (Bolivia and Morales, Venezuela and Chavez) and countries with more reasonable governments and big drug-fueled problems with insurgencies (Colombia’s problems are well-documented, but apparently cocaine money is bringing the Shining Path back to relevance in Peru). Venezuela has enough oil to meet all its domestic demand and then some, while Bolivia is sitting on tons of natural gas. Colombia’s proven oil reserves can meet domestic demand for 10-15 years or so, though with new extraction technology that number may go up. Peru doesn’t have much going for other than a comparatively stable domestic political situation, though the new drug violence could put an end to that. Meanwhile, Venezuela is heavily dependent on food imports. Peru doesn’t mark high in that regard either, with Colombia probably having the most agricultural self-sufficiency potential.

In the end, I’d go with the 2002 murder capital of the world. Being kidnapped isn’t great, and at this particular moment, Bolivia is a safer bet, but Colombia has a lot of potential for one reason. The insurgency problem that it faces can be boiled down to a purely economic equation. The socialist rhetoric that started FARC way back when is a thing of the past. Right now, the guerillas can make a lot of money from drugs, and keep people honest through a little bit of extortion on the side, and they’re perfectly happy doing just that. Growing up in the late 1990s and early 2000s, I, and I imagine many people in my generation, probably see the drug wars as some permanent institution, when in fact they’re not. Drug wars come and drug wars go. The 90s were a good time for drug wars because we didn’t have much else to fight. The past 8 years drug wars were fun because America was run by cultural reactionaries.

Times change. California is pondering releasing drug and other non-violent criminals and reducing sentences to keep themselves salient. Other states will probably consider similar measures. I don’t think cocaine will be legalized in the next forty years, but prices will likely fall due to less stringent enforcement. At that point, look at it as a battle between commodities. The Colombian government has oil and food, those prices are going up. The rebels have cocaine, that price is hopefully going down. As long as the Colombian government can keep itself together during the current recession, they should be able to come out our 40 year tunnel on top.

 

Yemen: Just kidding. No, really, never go to Yemen. If we ever do a post on places that won’t survive in the next 40 (hell, 10) years, that’s probably your winner.

 

Cambodia: Southeast Asia is a popular place for expats and investors, the former who enjoy the cheap prices, good weather, great food and (unfortunately) lax attitude to prostitution, and the latter who like the cheap labor and relative political stability. There are a few more reasons to be excited. Ignoring Laos, which can’t even produce its own handicrafts and will probably be purchased by China and turned into a disposable chopstick factory in the next decade, Vietnam and Thailand are the 5th and 6th biggest rice producers in the world, respectively, and the 2nd and 1st biggest exporters, while Cambodia has steadily grown into the 9th biggest producer in 2007, with more increases from efficiency gains likely on the way. In other words, these countries can feed themselves.

Oil is a trickier issue. Thailand has some, but if all its proven reserves went into domestic consumption, they wouldn’t last two years. More is being discovered, and they’re “helping” Burma exploit their reserves, but probably not enough for self sufficiency (BMI forecasts they will account for 3.48% of demand but only 2.84% of supply in Asia-Pacific in 2013). Vietnam has more oil, and the South China Sea probably a little less explored, but its proven reserves meet only 6 years worth of demand. Cambodia, meanwhile, has snuck under the radar a little bit, but a recent discovery of between 700 million and 2 billion of unexploited offshore reserves would, at current consumption levels, account for over 500 years of consumption.

Finally, as far as international alignments go, Cambodia is in a somewhat more favorable situation than Vietnam. China and Vietnam don’t get along, while China has in the past supported Cambodia in its antagonism with Vietnam. A Vietnamese tour guide once explained to me: “When middle brother hit little brother, big brother helps little brother.” Furthermore, since Cambodia will have plenty of excess oil, expect China to be extra cosy. Considering this, and the fact that Cambodia is a good amount cheaper, more open to foreign investment, has better levels of spoken English (anecdotally, at least) and a non-tonal language, Cambodia seems like a pretty good choice.

 

What about the really poor countries (HDI <.5, between Nigeria and Sierra Leone)? There’s not a whole lot of winners in this category. Nigeria is a classic example of a country that oil has destroyed. The Central African Republic is a case of where public health advances have created a large population that probably will never be able to feed itself without international aid. Land overuse and climate change probably has the same implications for a lot of West Africa. But we’re picking favorites, so let it roll:

 

East Timor: It helps to be a failure surrounded by successes. Don’t look now, but Indonesia has had one of the most peaceful transitions from dictatorship to democracy ever, considering how much the chips were stacked against it, and managed a negotiated settled with an armed revolutionary group. Meanwhile, Australia doesn’t have much to do with its army except send it into Pacific Island nations. There’s violence, but there’s also oil, and Australia cares about protecting its investments in the Timor Gap, so some semblance of stability should exist, especially if Indonesia continues to develop.

 

Ethiopia: Famine jokes aside, it’s been estimated that 70% of Ethiopia’s land is cultivatable, while only 11% of it actually is. After years of trying to tap that potential, Ethiopia still relies on food handouts, mostly because it can’t figure out a land privatization and redistribution system that works. Will the next forty years be more successful than the last forty? Saudi investors are trying, but it’s hard to tell if Ethiopia itself will be able to get its act together enough to benefit itself, but when your neighbors on the HDI scale are Mali and Chad, it’s a bonus just to have that kind of potential.

 

Liberia: 4th from the bottom on the HDI scale, this one’s a favorite of development economists for coming out of civil war and Charles Taylor’s shadow and electing the first female African head of state, a Kennedy School Graduate, no less. The country is an economic disaster, although recent the recent lifting on timber and diamond export bans has helped. The one positive? Liberia is Africa’s largest rubber producer. Rubber prices follow oil prices. If we’re assuming oil prices rise, rubber prices will too, and Liberia will hopefully get enough funds, that the government will hopefully efficiently manage, to buy enough food to keep people happy. It’s a lot of hopefullys, but you’re not the second poorest country in the world for nothing.

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This is a group blog. JSC5 currently writes from the US. JSC7 writes from behind the Great Firewall of China.

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