In times of economic crisis the world’s attention turns towards the fourth BRICS Summit, to be held in New Delhi on 28-29 March. The head of states of the five economic giants are expected to discuss political, economic and social issues of mutual and international interest under the theme “BRICS Partnership for Global Stability, Security and Prosperity”.
While Europe rises from ashes, Brazil, Russia, India and China, joined by South Africa for the second time, form the quintuplet backing world’s economy. Goldman Sachs’ Jim O’Neill, coined the term BRIC 10 years ago when releasing “Building Better Global Economic BRICs”, sketching out the ‘Big Four’ economies. The term BRICS arose out of the inclusion of South Africa into the BRIC group in 2010.
BRIC countries have vastly divergent levels of development, economic and political systems, and foreign policy priorities, but are bunched together as they are both the fastest growing and largest emerging market economies. Despite the global economic crisis, each of these countries is affirming itself in the global economic framework. For more mature economies such as in the US and Europe it is more difficult than ever to match the pace of their economic growth.
The BRIC(k)S of a changing world?
In 2011 China revealed its 12th Five-Year Plan in an attempt to balance its economy by shifting emphasis from investment towards consumption. China has a distinctive approach to economic governance that has often raised skepticism and perplexities among the EU. Projects like “Understanding China” coordinated by EUROCHAMBRES and co-funded by the European Commission, have been developed to improve the knowledge on China in European businesses and to decipher the key of its success.
If China colonizes the market with its products, Brazil has moderately free markets and an inward-orientated economy. In 2011, the country’s economy grew by 2.7 per cent, a big drop from the 7.5 per cent growth seen the previous year. The global crisis prevailed, leaving Brazil with high domestic inflation, but the country still remains the largest Latin American economy and has overtaken the UK as the sixth-biggest economy in the world.
“It is not important to be the world’s sixth-biggest economy, but to be among the most dynamic economies, and with sustainable growth,” Brazilian Finance Minister Guido Mantega said. With its immense industrial production and natural resources combined with effective government measures, Brazil is gradually consolidating its economic power.
On the other side of the globe, Russia’s economy is expecting to grow by 3.2 per cent in 2012 – half the pace of China or Brazil according to the International Monetary Fund. Russia is the world’s largest oil and gas exporter, but the current economic crisis could lead to a fall in demand and affect Russia’s economy similarly to what happened in 2009, when the worst recession in the Russian history was observed.
Protests following the presidential election held on 4 March 2012 left an apparently socially unstable country. Russian Prime Minister Vladimir Putin received 63.64 per cent of the vote, thus winning a record third term in the Kremlin. After the results were published 20,000 people hit the streets of Moscow roaring “Russia without Putin!”, wearing white ribbons with words such as “For a Putin-less Russia” all around the capital city. Allegedly fraudulent parliamentary elections backdrop Russia’s globally integrated economy.
Russia is not the only country suffering. In India years of government drift have meant a loss of propulsion on reforms, and some investors are starting to loose faith as Indian economic growth slows down. Richard Lley, chief Asia economist with BNP Paribas says that “9-10% growth is now history and India should brace itself for a 6.5% GCP growth in the current fiscal”.
South Africa’s trade with fellow BRICS increased by 108 per cent from 2007 to 2011, compared with a 12 per cent growth in trade with the European Union over the same period. As Africa’s largest economy, South Africa has companies operating in more than half of the African continent. By becoming a member of BRIC, agendas related to Africa will be discussed on the international arena reshaping world’s economy.
In his book “The Growth Map”, Jim O’Neil writes that the aggregate GDP of the BRIC countries (before South Africa joined in late 2010) has close to quadrupled since 2001, from around three trillion USD to between 11-12 trillion USD in 2010 . “The world would have to pay attention,” it is with these words that the senior Goldman Sachs economist leaves us wondering about the changing economic and power dynamics of the world.