BRICS Nations

Presented By:

Priyanka Mangla
MBA - IB

ASPECTS COVERED
Origin of BRIC Entry of South Africa Importance of BRICS Summits Interdependence Projections 2050 Implications on International Business Problems Conclusion

Emerging markets will be not only a source of significant revenue growth for companies but also a source of talent, true innovation and ground-breaking approaches to business, which they will leverage on a global scale.
Emmanuelle Roman, Global Consumer Products Markets Leader, Ernst & Young

"understanding the pressures, the contexts, and the opportunities will be vital, if we are to navigate these turbulent seas"

economic potential of Brazil, Russia, India and China is such that they could become among the four most dominant economies by the year 2050

Professor Sir Leszek Borysiewicz Vice-Chancellor, University of Cambridge

Goldman Sachs

BRIC

A grouping acronym that refers to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development

Coined by Goldman Sachs global economist Jim O'Neill in a 2001 paper entitled "Building Better Global Economic BRICs"
Symbol of the shift in global economic power away from the developed G7 economies towards the developing world

Emerging economies' was coined at a time when these economies contributed one-third of global GDP; now, they contribute more than half, and indeed they have contributed four-fifths of real growth in GDP in the last five years.

The apparent shift in the centre of gravity, which seems to be moving away from the West and the 'Old World'. (US and Europe)
These countries have very different political systems, economies, and national goals, and are located in very different parts of the world. Yet the five emerging economies pride themselves on forming the first important non-Western global initiative.

SOUTH AFRICA

In 2010, South Africa began efforts to join the BRIC grouping, and the process for its formal admission began in August of that year. South Africa officially became a member nation on December 24, 2010, after being formally invited by the BRIC countries to join the group. The group was renamed BRICS with the "S" standing for South Africa to reflect the group's expanded membership. In April 2011, South African President Jacob Zuma attended the 2011 BRICS summit in Sanya, China, as a full member. The BRICS Forum, an independent international organisation encouraging commercial, political and cultural cooperation between the BRICS nations, was formed in 2011.

GDP (PPP) (USD bn) Total : $21,025 billion

GDP (nominal) (USD bn) Total : $13,654 billion

Area (km square) Total : 39,739,375 km2

Population Total : 2.93 billion

People's Republic of China India

11,316

6,988

9,640,821

1.34 billion

4,469

1,843

3,287,240

1.21 billion

Russia

2,376

1,884

17,075,400

142 million

Brazil

2,309

2,517

8,514,877

190 million

South Africa

555

422

1,221,037

49 million

BRAZIL

RUSSIA

INDIA

CHINA

SOUTH AFRICA

WHY ARE THE BRIC COUNTRIES IMPORTANT?

Fast growing economies with the biggest source of labor They will soon change the consumption and production pattern in the world economy As their influence on the global economy grows so do the risks for the sustainable world development Their role in the global policy is increasing as well the geopolitical importance for their regions and the world

SUMMITS

First Summit Yekaterinburg, Russia (June 2009) Leaders stressed the need to
intensify cooperation on economic matters, to seek speedy implementation of G-20 decisions of interest to developing countries, and reform of global governance and the international financial system.

The Summit adopted Joint Statement of BRIC Leaders and a Joint Statement on Global Food Security.

Second BRIC Summit Brasilia (April 2010 ) Leaders reiterated the need for closer cooperation, reform of international financial institutions and protecting the interests of the developing countries.

A Memorandum of Cooperation was signed among BRIC Development Banks.

A BRIC Statistical publication was also released.

SUMMITS

Third BRICS Summit - Sanya, China (April 2011) First after inclusion of South Africa in BRICS. The theme of the Summit was Broad Vision and Shared Prosperity. Fourth BRICS Summit - New Delhi (March 28-29, 2012)
Theme of Partnership for Stability, Security and Growth Leaders had proposed to

"We wish to see these countries living in peace and regain stability and prosperity as respected members of the global community

trade among themselves in their local currencies, made significant progress on the setting up of the new development bank, expressed their concern at the slow pace of quota and governance reforms in IMF, and decided to abide by UN sanctions and not the unilateral ones imposed by the US and European countries on Iran and Syria

INCREASING INTERDEPENDENCE

BRAZIL

Brazil's has traditionally exported commodities and minerals to the US and Europe, but Chinese demand is changing the equation for Brazil's agriculture. China is also hungry for Brazil's other commodities, such as iron ore to manufacture steel, which is being used in its huge construction boom. Beyond commodities, Brazil has also found a market in Asia for some of its manufactured goods. Brazilian President Dilma Rouseff has signed a deal in China for Embraer, the third largest maker of commercial aircrafts in the world, to sell planes to Chinese airlines, cashing in on the mainland's fast expanding air travel market.

RUSSIA

Oil produced in Siberia has helped make Russia the world's largest producer of commodities While China may be the world's biggest consumer, Russia is the largest global producer of many commodities.

Russia has traditionally been - and continues to be - a large natural resource exporter.
Trade with Asia has increased at the expense of business with the US and former Soviet Union countries. Asia's economic growth, and the push within Russia to develop trade ties outside its traditional partners in Europe, have now made China Russia's largest trade partner, ahead of Germany.

INDIA

India is a global leader as a provider of services, practically inventing the outsourcing industry. Unlike Brazil and Russia, which have built their economies on commodities exports, India has developed its people. Along with computer services, the medical-care industry has taken huge strides. But it has failed to become a mass manufacturer like the other Bric countries, and as a result still imports much of its manufactured goods from China.

CHINA

To date, the scale of Chinas economy and pace of its development has out-distanced those of its BRIC peers. China alone contributed more than half of the BRIC countries share and greater than 15 percent of the growth in world economic output China has been very pragmatic in reaching out across the board, all the way to Africa and Latin America. China has reinvented itself and is now a mass producer of hi-tech products, including semi-conductors and solar panels. It also still continues to be a large producer of low-cost, high-value industries, like garments and textiles. The four Bric countries are united in their hunger for raw material to feed their rapid growth. China has led the way in looking for resources around the globe but has been followed by Brazil, Russia and India

BRICS FUTURE EXPECTATIONS & IMPLICATIONS ON BUSINESS

As early as 2003, Goldman Sachs forecasted that China and India would become the first and third largest economies by 2050, with Brazil and Russia capturing the fifth and sixth spots.

GDP (US $billion)

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2005 2010 2015 2020 2025 BRICs G6

BRICs half as large as the G7

BRICs overtake the G7

2030

2035

2040

2045

2050

BRICs have a large US$ GDP than the G7 in less than 40 years The BRICs are likely to maintain their comparative advantages in the long term

Source: Goldman Sachs

GROWING BRIC MIDDLE CLASS

The rapid economic growth and demographics of China and India are expected to give rise to a large middle class whose consumption would help drive the BRICs economic development and expansion of the global economy.

GROWING BRIC MIDDLE CLASS

SCIENCE AND TECHNOLOGY IN THE BRICS

The BRIC countries of China, India and Brazil account for much of the dramatic increase in science research investments and scientific publications. Since 2002, global spending on science R&D has increased by 45 percent to more than $1,000 billion (one trillion) U.S. dollars. Chinas development planning has targeted a number of scientific fields and related industries, including clean energy, green transportation and rare earths, among others. Since 1999, Chinas spending on science R&D has grown 20 percent annually to more than $100 billion. By 2020, China plans to invest 2.5 percent of GDP in science research.

BEYOND BRICS

Many analysts and commentators have suggested expanding the original group of four BRIC nations to include other emerging markets. Goldman Sachs identified another group of economically dynamic and promising developing countries creatively labeled the Next 11 in its 2005 Economics Paper How Solid are the BRICs? The Next 11 consists of a broader group of emerging markets with the potential to play significant roles in the global economy, including: Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam.

PROBLEMS

The shorthand acronyms mask a tremendous diversity of context and of financial health, and they do not often act in concert with their best interests. Brazil and India have expressed concern about China flooding their markets with cheap goods, sparking a debate about the value of the yuan. Most analysts agree that giving these four countries an acronym does not mean they will act as one on the global stage. Even though the BRIC countries are decreasing their dependence on developed economies, on a global stage they still need to work with the major industrialised nations.

CONCLUSION

In the coming years, we will witness the phenomenon of global expansion of the countries belonging to BRIC and by 2035 these countries together will exceed the G7 group in their overall share of GDP (O'Neill, 2009). But it will be important to explore and to use these markets at their fair value potential. At the same time, it is equally important not to over-assess this potential and to take account of the dangers caused by excessive consumption.

We should bear in mind the fact that these economies are still too poor and too dependent on exports to serve as real buffer for the global economy in the coming years. More the environmental, energy and food issues with which these countries will confront should not be underestimated.

In the short term, strong overall macroeconomic fundamentals sustained in China, India and Russia and improvements reached in Brazil. This will continue to attract substantial flows of foreign investment, further boosting potentials for the future output growth. Risks related to global economic imbalances will continue to weight on the outlook for BRIC countries and especially Brazil. Country specific risks and challenges include:
Russia - sustained upward pressure on the exchange rate and inflation; potential fiscal easing. China - potential for increased protectionism at Chinese exports. India - high level of off-budget subsidies for petroleum products. Brazil - expansionary fiscal policy.

The BRICs are likely to maintain their comparative advantages in the long term. This will help to ensure relatively high growth rates and therefore increasing share of these economies in the world market.

But the sustainability of high growth will depend on the several crucial factors:
sound and stable macroeconomic and development policies; development of strong and capable institutions (including political); human development (improved healthcare and education); increasing degree of openness.

BIBLIOGRAPHY

http://www.bbc.co.uk/news/business-13046521 http://www.thepicky.com/investing/brazil-russia-india-and-china-briclarger-economy-by-2050/ http://www.eurasiareview.com/23032012-brics-countries-the-imaginaryalliance-analysis/ http://www.theaustralian.com.au/news/world/cracks-in-the-brics/storye6frg6ux-1226308532634 http://www.globalsherpa.org/bric-countries-brics http://en.wikipedia.org/wiki/BRIC http://www.mea.gov.in/mystart.php?id=100219025 http://www.economist.com/node/18560195 http://www.proinno-europe.eu/events/emerging-economies-briccountries-and-innovation http://www.theatlantic.com/international/archive/2011/05/a-bricbreakdown-explaining-the-emerging-economies-growth/239061/ http://www.cibam.jbs.cam.ac.uk/symposia/2011/downloads/110708_brics beyond_report.pdf

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