The Rise and Fall of the BRICS

BRIC, a popular acronym coined by Goldman Sachs economist Jim O’Neill- for Brazil, Russia, India and China, refers to the set of countries expected to overtake the economic duopoly of USA and Europe (consisting of the United Kingdom, France, Germany and a few others) by the turn of the century.

The BRIC’s were predicted to overtake these countries by the year 2050, for which the headway began in the 1990’s, going as far back to the 80’s when China began to emerge as a leading economic power. China saw a stabilized growth close to 15 percent in the 90’s, while the other countries picked up their pace.

India’s steady 7 percent and Brazil’s 5 percent growth rates gave much promise for these countries. Russia’s growth was sluggish, but slowly crept upwards by the 2000’s, so much so that it matched India’s growth rate. By this time, all four countries had high growth rates and held a lot of promise for investors.

The main reasons as to why these countries were envisaged to be the next global forces were their enormous reserves of natural resources, land, as well as manpower.

China and India have the largest population, and together, all four countries make up 40 percent of the world populace. The labor forces of all four are in the top 10 of the world’s highest, and potential to expand this labor force has increased, thanks to the positive effects of their rapid rise.

Education has vastly improved their potential. China and India are both large importers and exporters while Brazil and Russia export a bulk of their oil and other raw materials, which contributes to their bulging Gross Domestic Product, and adds to their foreign reserves, thus leading to greater international stature, especially in China’s case.

All this is not considering their natural resources. Brazil has discovered quantities of shale oil reserves, and their own agricultural plantations put them as one of the top in agricultural productivity, which applies to India as well. India’s service sector has bulged up, with the middle class occupying posts once held by westerners. Coupled with China’s manufacturing prowess, and Russia’s expertise in oil and gas, it can be clearly seen why these countries were seen to be the forerunners of the 21st century.

All four countries stand in the top 10, in terms of GDP (as per Purchasing Power Parity), with China in 2nd place, India in 3rd, Russia in 11th, and Brazil in 7th place. This does speak volumes, as they outrank most of the rich countries in Europe and elsewhere.

This spurt had started in 2003, after the end of the Thailand crisis, where they emerged largely unscathed, and what followed brought about the BRIC phenomenon. China resumed its double-digit growth as in the 90’s and 80’s, India’s growth grew to over 8 percent, Brazil and Russia turned to their forte, mining and oil, which brought about close to 5 percent growth rates. This positive inclination continued till 2008, when the banking crisis hit almost all countries.

True, most of the four countries did not get afflicted much, except for China, which was notoriously dependent on the USA as an export market.  But China, a quintessential powerhouse, did come back strongly, and experienced steady growth rates on the road to recovery. Russia, Brazil and India were not hit so hard, due to their lack of trading with the United States, or, in Russia’s case, a balancing fund that slashed debts.

Increasingly, this positive trend has started to go backwards. China’s growth has fallen to 8 percent, India’s is falling to 6%, and Brazil is averaging at about 3 to 4 percent. This can be mainly seen in a downward shift from the onset of 2011, and culminating to the said figures in 2012.

Russia has kept up a stable rate at 4 percent, but this too seems quite miniscule when compared to the high rates of 6, and even 7 percent of yesteryear. It would be seen as a “burnout”, as no country, even more, a group of countries could maintain such rates.

The rising credit (debt) of all four countries, and many others, along with the Euro crisis, can be seen as a factor causing this in recent times.  However, increasing political tension, as well as corruption and poverty, which leads to a wealth of manpower untapped, is a serious detrimental factor for India.

China’s growth rates have also led to inflation, poor living conditions, and lack of human rights that together stint its growth. Certain incidents, such as a current account surplus, reducing the value of its currency, and increasing exports, hamper international relations, and a consequent rise in prices would lead to reduced exports and Gross Domestic Product.

Many have also vouched for the inclusion of other countries, with China personally inviting South Africa to one of the BRIC conferences. South Korea and Mexico, though South Korea is already seen as highly developed. Also, China is seen to be the poster boy for this group, without which the other three would be just developing economies, which leads to many other criticisms of the amalgam.

Nevertheless, these four countries still have a chance, and although previously stated heights may not be achieved, or at the least, may be achieved even later than 2050, they do have enormous stature, and the wealth of resources present in all the four can bring about a positive turnaround.

Varun Srivatsan

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