BRIC

The general consensus is that the term was first prominently used in a Goldman Sachs report from 2003. .BRIC ‡ What Does Brazil. India And China BRIC Mean? An acronym for the economies of Brazil. Russia. India and China combined. Russia. which speculated that by 2050 these four economies would be wealthier than most of the current major economic powers.

What is in the report? ‡ The BRIC thesis posits that China and India will become the world's dominant suppliers of manufactured goods and services. ‡ It's important to note that the Goldman Sachs thesis isn't that these countries are a political alliance (like the European Union) or a formal trading association . Due to lower labor and production costs. BRIC is now also used as a more generic marketing term to refer to these four emerging economies. while Brazil and Russia will become similarly dominant as suppliers of raw materials. respectively. many companies also cite BRIC as a source of foreign expansion opportunity .but they have the potential to form a powerful economic bloc.

U. ‡ By 2025 they could account for over half the size of the G6.The Goldman Sachs report on BRICs ‡ Over the next 50 years.5% a year). Japan. The BRICs' real exchange rates could appreciate by up to 300% over the next 50 years (an average of 2. India and China-the BRICs economies-could become a much larger force in the world economy. That means that the US dollar could move downwards from RS 43 to a rupee to around Rs 15 . only the US and Japan may be among the six largest economies in US dollar terms in 2050. Of the current G6. Brazil. If things go right.K. ‡ The results are startling. in less than 40 years. Currently they are worth less than 15%. with the balance through currency appreciation. Russia. ‡ About two-thirds of the increase in US dollar GDP from the BRICs should come from higher real growth. the BRICs economies together could be larger than theG6 (US. Germany France and Canada) in US dollar terms.

The relative importance of the BRICs as an engine of new demand growth and spending power may shift more dramatically and quickly than expected. Each of the BRICs faces significant challenges in keeping development on track. and four times higher by 2050. This means that there is a good chance that our projections are not met. either through bad policy or bad luck. the G6 and more than twice as much in dollar terms as it is now. Higher growth in these economies could offset the impact of graying (old age) populations and slower growth in the advanced economies. By 2025 the annual increase in US dollar spending from the BRICs could be twice that of the G6. But if the BRICs come anywhere close to meeting the projections set out here. the implications for the pattern of growth and economic activity could be large. the annual increase in US dollar spending from the BRICs could be greater than that from. ‡ ‡ . ‡ As early as 2009.Cont. (Look out for companies that benefit from an increase in spending power) The key assumption underlying the projections is that the BRICs maintain policies and develop institutions that are supportive of growth.

The largest economies in the world (by GDP) may no longer be the richest (by income per capita). ‡ The list of the world's ten largest economies may look quite different in 2050. ‡ As today's advanced economies share in global output starts getting smaller. This would generate major exchange rate changes. This could be an important determinant of demand and pricing patterns for a range of commodities. BRIC countries could experience greater capital inflows.‡ Higher growth may lead to higher returns and increased demand for capital. as local spending patterns change. ‡ Rising incomes may also see these economies move towards growth for different kinds of products. Being invested in and involved in the right markets-particularly the right emerging markets-may become an increasingly important strategic choice. the accompanying shifts in spending could provide significant opportunities for global companies. The weight of the BRICs in investment portfolios could rise sharply. .

Projected US$ GDP Levels 2003 US Brazil $ billion 2000 762 2010 2020 2030 2040 2050 668 1333 2189 3740 6074 China 1078 2998 7070 14312 26439 44453 India 469 929 2104 4935 12367 27803 Russia 391 847 1741 2980 4467 5870 .

France in 2024. Russia and China is expected to slow significantly over the next 50 years.1% growth rate projected for 2003. Still. China : China's GDP growth rate falls to 5% in 2020 from its 8.5%. But strong convergence rates work to Russia's benefit and by 2050. India's GDP outstrips that of Japan by 2032.UK in 2027 and Germany in 2028. UK and Germany by 2036.‡ ‡ ‡ ‡ Brazil: Over the next 50 years. France by 2031. and comparable to the G6. Even so.Russia's economy overtakes Italy in 2018. the country's GDP per capita is by far the highest in the group. India. Brazil. . India's growth rate remains above 5% throughout the period. India's income per capita will be significantly lower than any of the countries we look at. growth slows to around 3. Brazil's GDP growth rate averages 3.6%. high investment rates. While growth in the G6. Russia: Russia's growth projections are hampered by a shrinking population (an assumption that may be too negative). By the mid-2040s. a large labor force and steady convergence would mean China becomes the world's largest economy by 2041. India has the potential to raise its US dollar income per capita in 2050 to 35 times current levels. With the only population out of the BRICS that continues to grow throughout the next 50 years. The size of Brazil's economy overtakes Italy by 2025.

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. but still remains far behind developed country norms. While recent large-scale plans from the BRIC governments are encouraging in this regard.STATUS UPDATE 2011 ‡ Infrastructure in the BRICs has improved notably in recent years. they will need to do more to attract private investment as well. ‡ Infrastructure investment will need to accelerate in the years ahead to prevent it from constraining future growth rates in the BRICs.

‡ China and India have experienced the fastest infrastructure growth rates nearly across the board. Russia has much more advanced infrastructure in place than the others due to heavy investment during the Soviet era. the most rapid progress in all four of the BRICs has come in telecommunications.Cont. albeit from low levels. particularly in mobiles and internet. In terms of specific sectors. but much of this has begun to fall into disrepair due to insufficient investment in maintenance. . Brazil¶s infrastructure is relatively underdeveloped and has not seen the same high growth rates.

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