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46991946-BRIC

46991946-BRIC

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BRIC

In economics, BRIC (typically rendered as "the BRICs" or "the BRIC countries" or known as the "Big Four") is a grouping acronym that refers to the countries of Brazil, Russia, India, and China that are deemed to all be at a similar stage of newly advanced economic development. Despite lagging behind the other members in terms of economic growth, China formally invited South Africa to join the BRICs in 2010, and so the acronym changes from "the BRICs" to "the BRICS". South Africa thus became the first African country to be admitted to BRICS. The acronym was coined by Jim O'Neill in a 2001 paper entitled "The World Needs Better Economic BRICs". The acronym has come into widespread use as a symbol of the shift in global economic power away from the developed G7 economies toward the developing world. According to a paper published in 2005, Mexico and South Korea are the only other countries comparable to the BRICs, but their economies were excluded initially because they were considered already more developed as they are already members of the OECD. Goldman Sachs argued that, since they are developing rapidly, by 2050 the combined economies of the BRICs could eclipse the combined economies of the current richest countries of the world. The four countries, combined, currently account for more than a quarter of the world's land area and more than 40% of the world's population. Goldman Sachs did not argue that the BRICs would organize themselves into an economic bloc, or a formal trading association, as the European Union has done. However, there are some indications that the "four BRIC countries have been seeking to form a 'political club' or 'alliance'", and thereby converting "their growing economic power into greater geopolitical clout". On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg, and issued a declaration calling for the establishment of an equitable, democratic and multipolar world order. Since then they have met in Brasília in 2010 and will meet in China in 2011. The BRIC thesis Goldman Sachs argues that the economic potential of Brazil, Russia, India, and China is such that they could become among the four most dominant economies by the year 2050. The thesis was proposed by Jim O'Neill, global economist at Goldman Sachs. These countries encompass over 25% of the world's land coverage and 40% of the world's population and hold a combined GDP (PPP) of 18.486 trillion dollars. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets. However, it is not the intent of Goldman Sachs to argue that these four countries are a political alliance (such as the European Union) or any formal trading association, like ASEAN. Nevertheless, they have taken steps to increase their political cooperation, mainly as a way of influencing the United States position on major trade accords, or, through the implicit threat of political cooperation, as a way of extracting political concessions from the United States, such as the proposed nuclear cooperation with India. (2003) Dreaming with BRICs: The Path to 2050 Here's what Goldman Sachs had to say in its original report (defended in the paper Dreaming with BRICs: The Path to 2050) "Dreaming with BRICS: The Path to 2050," published in 2003: China's economy will surpass Germany in the next few years, Japan by 2015, and the United States by 2041. India's growth rate will be the highest²not China's -- and it will overtake Japan (today the world's second-largest economy) by 2032. BRICs¶ currencies could appreciate by 300% over the next 50 years, providing a big tailwind for investors in BRIC assets. Taken together, the BRICs could be larger than the United States and the developed economies of Europe within 40 years. By 2025, BRICs will bring another 200 million people with incomes above $15,000 into the world's economy. That's equal to the combined populations of Germany, France and the United Kingdom. However, Goldman Sachs has now become more bullish on the BRICs since it published its original report. The size of China's economy overtook Germany's economy in 2007, a year earlier than expected, and has over taken Japan's in July 2010. Goldman Sachs now believes that the Chinese economy will overtake the United States by 2027. The latest prediction after Global Financial Crisis occur, November 2010: Standard Chartered Plc. says, China will overtake the US to become the world's largest economy by 2020. And then China's economy will be twice as large as the US by 2030 and account for 24 percent of global output, up from 9 percent in 2010. And with India accounting for 10 of the 30 fastest-growing urban areas in the world and 700 million people moving to cities by 2050, its influence on the world economy will be bigger and quicker than was implied in 2003. The BRIC thesis recognizes that Brazil, Russia, India and China have changed their political systems to embrace global capitalism. Goldman Sachs predicts that China and India, respectively, will become the dominant global suppliers of manufactured goods and services, while Brazil and Russia will become similarly dominant as suppliers of raw materials. It should be noted that of the four countries, Brazil remains the only nation that has the capacity to continue all elements, meaning manufacturing, services, and resource supplying simultaneously. Cooperation is thus hypothesized to be a logical next step among the BRICs because Brazil and Russia together form the logical

Following the end of the Cold War or even before. the BRICs have the potential to form a powerful economic bloc to the exclusion of the modern-day states currently of "Group of Eight" status. despite their divergent economic bases. technology. the report said. Thus. This phenomenon. It reveals updated projection figures attributed to the rising growth trends in India over the last four years. China might surpass the US in equity market capitalization terms by 2030 and become the single largest equity market in the world. (2010) EM Equity in Two Decades: A Changing Landscape According to a new report from Goldman Sachs. and domestic entrepreneurship. According to the report. This predicts a massive rise in the size of the middle class in these nations. A Goldman Sachs paper published later in December 2005 explained why Mexico was not included in the original BRICs. too. Yet despite the balance of growth. The BRIC numbers The Economist publishes an annual table of social and economic national statistics in its Pocket World in Figures. Goldman Sachs assert that "India's influence on the world economy will be bigger and quicker than implied in our previously published BRICs research". This indicates that a huge pickup in demand will not be restricted to basic goods but impact higher-priced goods as well. India's GDP per capita in US$ terms will quadruple". while economic arguments can be made for linking Mexico into the BRIC thesis. Goldman Sachs estimates that by 2025 the income per capita in the six most populous EU countries will exceed $35. we estimate a massive 700 million people will move to cities by 2050. In 2025. Goldman Sachs predicts that "from 2007 to 2020. which makes it relatively easy for their aggregate wealth to eclipse the G6. domestic consumption. the four BRICs may account for 41% of the world's market capitalization by 2030. these countries have simultaneously stressed education. The report also emphasizes the enormous populations that exist within the BRIC nations. more inflows into foreign direct investment. Extrapolating the global rankings from their 2008 Edition for the BRIC countries and economies in relation to various categories provides an interesting touchstone in relation to the economic underpinnings of the BRIC thesis. while per-capita income levels remain far below the norm of today's industrialized countries." In the revised 2007 figures. and that the Indian economy will surpass the United States (in US$) by 2043. "India has 10 of the 30 fastest-growing urban areas in the world and. the case for including South Korea looks considerably weaker. and services. for example. Goldman Sachs' thesis thus documents how commodities. based on increased and sustaining growth. the number of people with an annual income over a threshold of $3.000. it is calculated that the number of people in BRIC nations earning over $15. whereas only about 500 million people in the BRIC economies will have similar income levels.000. the economic indicators are remarkably similar in global rankings between the different economies. and expansion that is happening in the country. far cheaper automobiles and other manufactured goods affordable to the consumers within the BRICs in lieu of the luxury models that currently bring the most income to automobile manufacturers. work. Developed economies of the world have already taken serious note of this fact. the average wealth level of individuals in the more advanced economies will continue to far outstrip the BRIC economic average. In order to compete. Together. and companies have diffused outward from the United States across the world. US GDP might be only slightly larger than China's GDP. The report also highlights India's great inefficiency in energy use and mentions the dramatic under-representation of these economies in the global capital markets. foreign investment. It also suggests that. will affect world markets as multinational corporations will attempt to take advantage of the enormous potential markets in the BRICs by producing. the governments comprising BRIC all initiated economic or political reforms to allow their countries to enter the world economy. which will lead to the prosperity of the growing middle-class. real estate.commodity suppliers to India and China. Brazil is dominant in soy and iron ore while Russia has enormous supplies of oil and natural gas. will double in number within three years and reach 800 million people within a decade. They noted significant areas of research and development. By 2020. based on current trends. (2007) Second Follow-up report This report compiled by lead authors Tushar Poddar and Eva Yi gives insight into "India's Rising Growth Potential". It states that the four nations as a group will overtake the G7 in 2032. This will have significant implications for demand for urban infrastructure. first China and then a decade later India will begin to dominate the world economy. India and China have already started making their presence felt in the service and manufacturing sector respectively in the global arena. swinging so decisively towards the BRIC economies. . The report states that in BRIC nations.000 may reach over 200 million. It also illustrates how. (2004) Follow-up report The Goldman Sachs global economics team released a follow-up report to its initial BRIC study in 2004.

with Luiz Inácio Lula da Silva. South Africa will attend the summit in 2011 in Beijing. The foreign ministers of the BRIC countries had met previously on May 16. such as those members of BRIC. Brazil offered $10 billion to the International Monetary Fund. stable and predictable'. 2008 also in Yekaterinburg. could be better involved in global affairs in the future. however. It was the first time that the country had ever made such a loan. There was also discussion surrounding how developing nations.Statistics Painting BRIC by numbers Categories Area Population Population growth rate Labour force GDP (nominal) GDP (PPP) GDP (nominal) per capita GDP (PPP) per capita GDP (real) growth rate Human Development Index Exports Imports Current account balance Received FDI Foreign exchange reserves External debt Public debt Electricity consumption Number of mobile phones Number of internet users Motor vehicle production Military expenditures Active troops Rail network Road network The image cann Brazil The image cann Russia The image cann India 5th 5th 107th 5th 8th 9th 60th 75th 113st 75th 23rd 24th 47th 11th 7th 28th 47th 9th 5th 5th 6th 12th 14th 10th 4th 1st 9th 221st 7th 12th 7th 59th 51st 206th 71st 12th 14th 5th 12th 3rd 24th 122nd 4th 4th 8th 19th 5th 5th 2nd 8th 7th 2nd 90th 2nd 11th 4th 139th 128th 6th 134th 18th 15th 169th 29th 5th 26th 29th 5th 2nd 4th 7th 10th 3rd 4th 3rd China 3rd 1st 156th 1st 2nd 2nd 98th 97th 3rd 92nd 1st 2nd 1st 5th 1st 23rd 98th 2nd 1st 1st 1st 2nd 1st 3rd 2nd The image cann BRIC summits The BRIC countries met for their first official summit on 16 June 2009. in Yekaterinburg. 2010 Q1 2011 Host country Russia Brazil China The image cann The image cann The image cann Host leader Dmitry Medvedev Luiz Inácio Lula da Silva Hu Jintao Location held Yekaterinburg Brasília Beijing Criticism A criticism is that the BRIC projections are based on the assumptions that resources are limitless and endlessly available when needed. and Hu Jintao. The core focus of the summit was related to improving the current global economic situation and discussing how the four countries can better work together in the future. The statement that was released stopped short of making a direct attack on the perceived 'dominance' of the US dollar. something which the Russians have been critical of. Russia. Russia. all attending. the respective leaders of Brazil. In reality. Manmohan Singh. and uranium might soon experience a peak in production before enough renewable energy can be developed and commercialized.1 billion and Russia planned to invest $10 billion. many important resources currently necessary to sustain economic growth. In the aftermath of the summit the BRIC nations suggested that there was a need for a new global reserve currency that is 'diversified. China also announced plans to invest a total of $50. Brazil had previously received loans from the IMF and this announcement was treated as a significant demonstration of how Brazil's economic position had changed. The economic emergence of the BRICs will have . which may be renamed as BRICS. which might result in slower economic growth than anticipated. such as oil. natural gas. India and China. 2009 April 16. it still led to a fall in the value of the dollar against other major currencies. coal. One week prior to the summit. other fossil fuels. thus throwing off the projections and their dates. as well as a more general push to reform financial institutions. Summit 1st 2nd 3rd Date June 16. Dmitry Medvedev. after receiving a formal invitation from China in 2010.

the BRICs are just the BRI. Human rights issues do not inform the foreign policies of these two countries to the same extent as they do the policies of other large states such as Japan. This impedes progress by limiting government finances. India. which China has been growing faster than in a similar period of development. "Without China. but some commentators state that China's and Russia's large-scale disregard for human rights and democracy could be a problem in the future. but two are huge exporters of natural resources (Brazil and Russia). has further aggravated any economic ties. Indeed. and consistent international trade surpluses . partner in the G2 (imagine the coverage a G2 meeting gets vs. there is a finite limit to how much the BRICs can develop before exceeding the ability of the global economy to supply. as reflected in its expanding capital markets. civil unrest. these gains have largely been the result of the strength of emerging markets generally." Deutsche Bank Research said in a report that "economically. which predicts growth falling far below normal development. a bland. increasing social unrest. There is also the possibility of conflict over Taiwan in the case of China and smaller democracies that lie in the vicinity of these two authoritarian giants will no doubt be affected by human rights issues being relegated to a lower global priority. economic." It added that China's economy is larger than that of the three other BRIC economies (Brazil. Moreover. This may have implications for those countries' future. There are many uncertainties and assumptions in the BRIC thesis that could mean that any or all of these four countries will not live up to their promise. Brazil's and China's populations will begin to decline in several decades with their demographic windows closing in several decades as well. The preeminence of China and India as major manufacturing countries with unrealised potential has been widely recognised. Whilst they accept there has been spectacular growth of the BRIC economies. but it had until recently consistently failed to achieve investor expectations. in its special report on Brazil. Academics and experts have suggested that China is in a league of its own compared to the other BRIC countries. There is also the issue of population growth. They have effective veto power over any BRIC initiatives because without them. Other critics suggest that BRIC is nothing more than a neat acronym for the four largest emerging market economies. given current technology. mostly over the longheld dispute over Kashmir.unpredictable consequences for the global environment. As David Rothkopf wrote in Foreign Policy. Two are manufacturing based economies and big importers (China and India). It is also noticed that BRIC countries have undermined qualitative factors that is reflected in deterioration in Doing Business ranking 2010 and other several human indexes. for there might be a decrease in the overall labor force and a negative change in the proportion of workers to retirees. expressed the following view: "In some ways Brazil is the steadiest of the BRICs. The BRIC countries have enormous populations of extremely impoverished people. CEMENT (Countries in Emerging Markets Excluded by New Terminology). Henry Kissinger has stated that the BRIC nations have no hope of acting together as a coherent bloc in world affairs. This contradicts the rapid economic growth that has already taken place in the country and the experience of countries like South Korea catching up with western GDP per capita. Russia and India) combined. The population of Russia is beginning to shrink fast. Brazil's economic potential has been anticipated for decades. critics have suggested a correlating term.S. Only in recent years has the country established a framework of political. and social policies that allowed it to resume consistent growth. there was a nuclear standoff between Pakistan and India. The Economist. In 1998. China's exports and its official forex reserve holdings are more than twice as large as those of the other BRICs combined. a G8 meeting) and the E2 (no climate deal without them) and so on. soft cheese that is primarily known for the whine that goes with it. and that any cooperation will be the result of forces acting on the individual nations. and limiting potential domestic economic demand. India's relations with its neighbor Pakistan have always been tense. In a not-so-subtle dig critical of the term as nothing more than a shorthand for emerging markets generally. Factors such as international conflict. Another criticism is the understatement of GDP growth in China over the next 45 years. China is the muscle of the group and the Chinese know it. financially and politically. and that strength comes through having BRICs and CEMENT. unwise political policy. but in economic and political terms nothing else (apart from the fact that they are all big emerging markets) links the four. Unlike China and Russia it is a full-blooded democracy. unlike India it has no serious disputes with its neighbors. lowest unemployment rates in decades. The result has been solid and paced economic development that rival its early 70's "miracle years". They are the U. They are the biggest potential market. which measures factors such as protection of property rights and free trade ranks Brazil ("moderately free") above the other BRICs ("mostly unfree").that led to the accumulation of reserves and liquidation of foreign debt (earning the country a coveted investment grade by the S&P and Fitch Ratings in 2008). China overshadows and will continue to overshadow the other BRICs. Border conflicts with Pakistan. Finally. It is the only BRIC without a nuclear bomb. . who cares really? They are the one with the big reserves. outbreaks of disease and terrorism are all factors that are difficult to predict and that could have an effect on the destiny of any country." The Heritage Foundation's "Economic Freedom Index". proponents of a set carrying capacity for the Earth may argue that. the EU states and the USA.

While Mexico doesn't enjoy the celebrity status of rival Brazil. is among the few stocks traded over the counter in the U. While few market hands see red flags in the emerging world. dollars over the past three years. But while the Big Four. relatively few shares based in the developing world are listed in the U.it's up only 21% in U. has just begun to pull out of a tailspin. Turkey's banks are profiting handsomely from an explosion of corporate and consumer lending.and Poland is at the top of that list. In other words. investing in emerging markets poses unique challenges. even within emerging markets it is important to diversify beyond a few core holdings. While the country has long been viewed as a one-trick pony for precious-metals stocks. a strong currency has dimmed prospects for commodity and other export plays. some of which target specific regions or countries. An alternative: emerging-market mutual or exchange-traded funds (ETFs). dollars -.S. these so-called Asian Tigers have consistently underperformed their global peers. the MSCI South Africa Index (ERZA). Mexico is enjoying record foreign currency reserves and an investment-grade debt rating.S. But even after a wrenching correction in the wake of the 1997 financial crisis. They may not have the buzz of billion-plus population markets. or traded as American depositary receipts (ADRs). is also one of the few Egyptian shares available as an ADR. more domestic outfits. South Africa. Those with ADRs traded over-the-counter include shoe distributor Edgars Consolidated Stores Ltd. (ECSJY) and bank ABSA Group Ltd. which has been among the best performers -." says Emery Brewer. developed nations can't match the growth of emerging economies. fast-track reform agendas. in many cases. including Wal-Mart de México (WMMVY). and investor-friendly climates.up 640% in U. Russia. though. a leading commercial bank and a favorite of stockpickers. South Korea. most of these countries are prospering chiefly on domestic demand from surging consumer spending. fastest-growing economies of the Third World are Brazil. but their growth is impressive -. Brazil's fragile political situation and Moscow's penchant for interfering in business are also growing concerns.S. That can make it hard to buy dollar-priced stocks. from the Baltic to the Balkans. South Africa has also surprised on the upside largely because of the spending restraint exercised by its government. Check out the iShares MSCI Emerging Markets Index Fund (EEM ) or the Vanguard Emerging Markets VIPERs ETF (VWO ). Money managers are especially keen on stocks in the residential construction business as more and more Mexicans qualify for loans to build their own homes. South Korea. success could breed the kind of complacency that got the Tigers into trouble in the 1990s. Even so. also known as BRICs. a leading Polish newspaper and radio concern. The country is home to a thriving manufacturing base serving both Western Europe and the Middle East. Another popular African stock market is Egypt's. Turkey is eager to join the European Union and is pushing economic reforms. is likewise blossoming thanks to reforms put in place after the collapse of the Iron Curtain. With its last financial crisis more than 10 years behind it. The iShares MSCI South Korea Index Fund (EWY) is also worth considering. Southeast Asia led the pack.and their stocks. have attracted the most investor attention in recent years.S. which are benefiting from an advertising boom and have "great growth potential. especially those in line with Securities & Exchange Commission reporting guidelines. There is also an iShares ETF. (ABSWY). MORE RISK Bric or non-bric. may be poised for growth. Instead. Agora (AGORY). Some pros are wary of India's frothy equity market and mainland China's disclosure-poor companies. While a laggard this year -. Mexico.Contemporary Issues related with BRIC Emerging Markets: Beyond The Big Four The biggest. Among the stars: Polish media companies. . What's more. the smart money is looking for opportunities in domestic-oriented sectors such as retailers and consumer banks. it is undergoing something of an economic renaissance. These include NYSE-listed Desarrolladora Homex (HXM ) and cement maker Cemex (CX).Poland serves as a cheaper proxy for Western Europe since its fortunes are closely linked to those of Germany. and China. such as OTC-traded Kookmin Bank (KB) and Korea Electric Power (KEP). there are also opportunities in less prominent but more promising emerging markets such as Egypt. India. the Prague-based portfolio manager of the Driehaus Emerging Markets Growth (DREGX) Fund. The six leading non-BRICs are notable for their strong growth profiles. choices include iShares S&P Latin America 40 Index Fund (ILF ) or MSCI Mexico Index Fund (EWW). thanks to much-improved fiscal discipline. The nation also boasts a younger workforce than most of nearby Eastern Europe. During the last big bull market for emerging markets a decade ago. Commercial International Bank. can offer superior value. Eastern Europe. Poland. the Continent's largest economy. Unlike the largely export-dependent BRICs. That's due both to the stepped-up pace of economic reforms in the country and an influx of petrodollars from Gulf States awash in cash from higher oil prices. Those with OTC ADRs include Akbank (AKBTY). For direct exposure south of the border. While powerhouses such as Hyundai and Samsung Group are must-haves. The countries closest to adopting the euro as their currency are favored -. The lack of liquidity in these markets can be brutal to shareholders since investors in a rush to sell can send prices tumbling. and Turkey. It even boasts several companies listed on the New York Stock Exchange or NASDAQ and dozens of others that trade over the counter.

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