BRICS: Emerging Economies on the world stage
The term “BRICS” was coined in 2001 by economist Jim O’Neill in his publication “Building Better Global Economic BRICs”.
Brazil, Russia, India, China and South Africa (BRICS) are leading emerging economies and political powers at the regional and international levels. The original categorisation of the BRIC countries by Jim O’Neill included only Brazil, Russia, India and China. The four countries grouping BRIC turned into BRICS formally when South Africa joined the group in April 2011. Now the five countries will jointly deliberate upon regional and international issues and will try to evolve strategies to meet the challenges confronting the world at large.
Objectives of BRICS
It is the overarching objective and strong-shared desire for peace, security, development and cooperation that brought together the BRICS countries with a total population of nearly 3 billion from different continents. BRICS aims at contributing significantly to the development of humanity and establishing a more equitable and fair world. In its declaration in 2011, BRICS claimed to represent common goals of all Low Income Countries and Middle Income Countries and emphasized the necessity to fight poverty.
The growth projections of the BRICS countries in the table and the graph speak for themselves.
These five countries with their 3 billion people who are the backbone of their economic might, have a total estimated GDP of nearly US$14 trillion and around US$4 trillion of foreign exchange reserves. Post-global recession studies have shown that the economies of these five countries helped the world to come out of the economic depression faster than otherwise would have been possible.
The fact that emerging and developing countries have the necessary savings and foreign exchange reserves to finance a new development bank that could contribute to finance makes a clear case for an institution to be created. In this context, in March 2013 leaders of the BRICS countries approved the creation of a new Development Bank (NDB) to finance investment in infrastructure and more sustainable development in BRICS and other emerging and developing countries.
The creation of the BRICS bank came after there had been failed efforts to change the structure of the International Monetary Fund and the World Bank. Each of the five BRICS countries will contribute an equal US$10 billion share to the NDB’s US$50 billion capital base, despite big differences in the countries’ population sizes and economic weights.
The BRICS bank is scheduled to start lending in 2016. In order to be a platform for the poorer nations, the BRICS bank will open its membership to other countries other than the five BRICS members. The New Development Bank will challenge the role of the World Bank in the current international system.
Challenges for BRICS
In the wake of the global financial crises, which had a major impact on the world economy and the economic recovery prospects of developed countries, the BRICS countries faced a great challenge. However, they are adjusting their development strategies in order to achieve rapid and sustainable economic development.
Even though they have become an important force on the world economic stage, they have the following challenges:
* unsustainable economic development models
* the negative impact of unfamiliar challenges
* the pressure of economic transformation and upgrading
* external strategic pressure / internal political uncertainty
The internal and external environmental changes have caused large emerging economies to pay more attention to the urgent and difficult task of transformation. There is a general increase in the inflation rate of the BRICS countries. In recent years, the overall rate of inflation of BRICS countries has increased year-on-year. In 2012, the exchange rate of the Russian Rouble to the US dollar appreciated by 5% and Renminbi appreciated by 5%. However, the Brazilian Real, the Indian Rupee and South Africa Rand all faced serious devaluation as the countries saw a decline in the growth of foreign investment and capital flight.
In spite of the slowdown projected for the BRICS, these economies continue to grow at high rates relative to advanced economies. Investments in infrastructure, education and health are among the key structural challenges in order to sustain economic growth as the size of the middle class grows. It is observed that the BRICS countries have emerged as major recipients of Foreign Direct Investment (FDI) and important outward investors (as mentioned earlier). According to a report in 2014 published by UNCTAD, the BRICS countries have attracted nearly USD304 billion of FDI of the global investment. The report also forecast this trend to intensify in the coming years, despite the concerns regarding their economic prospects.
Future of BRICS
As part of generation Y, I hope to see the BRICS countries leading the world economy and being at the centre stage of major developments. If we believe in the phenomenon of natural cycle, it would be reasonable to say that the BRICS countries indeed have a long way to go but they are on the ascending slope of their expansion curve. However, it remains to be seen if this global leadership will also be followed by a just and fair economic growth, taking on board social and environmental issues for a sustained development of the planet.
Source: IMF World Economic Outlook Data October 2014, United Nations Conference on Trade and Development 2014, Financial Press 2014
Undergraduate Yr 2, Desautels School of Management
McGill University – Canada
International Monetary Fund – World Economic outlook data, 2014:
Central Intelligence Agency –World Factbook
* Published in print edition on 7 November 2014