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Why invest in Eastern Europe?
The failure of communism led to the fall of the Berlin
Wall in 1989, the collapse of the Soviet Union in 1991
and the need to rebuild economies previously driven
by military spending. With the end of the Cold War
came new economic, political and social challenges
for Europe’s former communist nations. The countries
that most readily adopted the legal and financial
systems of Western capitalism have proven to be the
most successful.
Economic reform continues its steady push forward.
Broad privatization has put thousands of companies
once owned by the state in the hands of private
investors, who now have a direct stake in the success
of these companies. The region has experienced
periods of high inflation and devaluation of currencies
associated with the transition to free market economies.
These turbulent periods should come under control
as policies mandated by the International Monetary
Fund are enforced. As in the U.S., the baby boom that
followed World War II has significantly increased
Eastern Europe’s labor force. These countries have been
forced to turn to capitalism as the only way to improve
economic performance sufficiently to absorb this excess
labor. While some long for the security of the bygone
communist era, free enterprise has taken hold as the
only workable solution for Eastern Europe. The transition
has not been without difficulty, and investors should
expect continuing volatility in this market as the free
enterprise system matures.
Not part of prospectus
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