Emerging Markets Roundup: Russia

ROUNDUP: RUSSIA

 

By Kim Iskyan

 

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World Cup fever in Russia

Global football organization FIFA awarded Russia the right to host the World Cup tournament in 2018, triggering jubilation throughout the country. The Russian government estimated that building 13 new stadiums for the event, along with massive expansion of transportation and tourism infrastructure—spurring demand for construction, building materials and steel for years to come—will cost some $10 billion. But private forecasts suggest total expenditures will be closer to $60 billion. Costs will be shared by state and regional governments as well as wealthy oligarchs who will be strongly encouraged to help out.


In early December, Pepsi-Co announced it would acquire a majority stake in Russian juice, dairy and baby food producer Wimm-Bill-Dann for $3.8 billion, marking the largest foreign acquisition in Russia on record outside of the natural resources sector. The deal, which will allow Pepsi to leapfrog Coca-Cola in the fast-growing Russian beverage market, will close in coming weeks following domestic regulator approval.


On the heels of that deal, Russia's largest supermarket operator, X5, announced that it would acquire a smaller, privately held chain, Kopeyka, at a cost of $1.65 billion. The deal, a significant step in the slow consolidation of Russia's food retailers, put to rest months of speculation that Wal-Mart would enter the market through a purchase of Kopeyka.


During his annual address about the state of Russia in late November, president Dmitry Medvedev focused primarily on child welfare and demographic issues. The speech did nothing to clarify the looming uncertainty of whether Medvedev will run for another term in presidential elections in early 2012. A subsequent survey of potential voters suggested that if Putin were to stay out of the race, Medvedev would easily win the presidency.


Russia appears increasingly likely to join the World Trade Organization in 2011, after the early-December signing of an agreement with the European Union. The key remaining hurdle will be to address pending issues with the WTO's membership.

 

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