BRICs Essay ⋆ Business Essay Examples ⋆ EssayEmpire

“The BRICs” refers to Brazil, Russia, India, and China, and specifically to their fast-growing but still developing economies (and, by implication, their similar goals and the mutual benefits to be had from an alliance). The term was coined by Jim O’Neill, head of global economic research at finance corporation Goldman Sachs, and has been rapidly adopted by other parties, to the extent that financial news sources use it with minimal or no explanation, and a 2008 summit between representatives of the four nations was called the BRIC Summit. As O’Neill pointed out, and as Goldman Sachs economists and others have expanded on since, these four economies are not simply rapidly developing. They are rapidly developing and have a great deal of demonstrable potential. One quarter of the world’s land and a staggering two-fifths of its population is accounted for by the BRICs.

The BRIC thesis has been a long-term prediction from the start, and its first formal defense was in the 2003 paper “Dreaming with BRICs: The Path to 2050.” O’Neill’s argument is that these four economies have the capability of being among the dominant economic powers—and collectively, the dominant power—by the year 2050. Specifically, the Goldman Sachs prediction is that by that year, raw materials will be dominated by Russia (particularly petroleum products) and Brazil (particularly soy and iron), and manufactured goods by China and India. This provides a practical reason for cooperation among the BRICs, especially in trade.

The Goldman Sachs scenario postulates a 2050 in which BRIC citizens (apart from Russians) are poorer on average than those of other industrialized nations, but in which the BRIC countries account for the largest share of the global economy and wealth. Commodity prices will change as the global consumer base changes. BRIC currencies will appreciate by 300 percent. Follow-up reports from Goldman Sachs have amplified, rather than contradicted, these predictions. While the predictions are based on economic potential, they do not represent a “best case scenario.” They assume the continued adoption of policies that encourage growth, but nothing miraculous or extraordinary—just steady growth as the BRIC countries, having recently adopted favorable capitalist policies, expand their economies to fill the space available to them.

In the wake of the Goldman Sachs conjectures and their popularization, the BRIC term has been adopted by many investment firms and analysts who favor investing in emerging markets. If those countries are expected to rapidly expand, after all, they would seem to offer great investment opportunities. The applications of the conjectures to investing strategies are not immediately apparent, however.

There is a tendency to use the term as shorthand for emerging markets in general, especially in investment contexts. Sometimes this is explained narratively, with the four nations taken as symbolizing developing regions of the world—Latin America, Eastern Europe, South Asia, and East Asia—sometimes the cache of the word, the brand name appeal, is simply used in order to introduce a similar theory about emerging markets. At the same time, the term is sometimes attacked for glossing over the differences among the BRIC nations. Brazil, for instance, is an established full democracy with no recent history of serious disputes with its neighbors. (The Economist has called it “the only BRIC without a nuclear bomb.”) Russia and China are diminishing in population, while Brazil and India are growing.

Very similar to the BRIC nations are Mexico and Korea, both of which are experiencing economic growth comparable to Brazil’s, and have become more devotedly capitalist in the recent past. An early Goldman Sachs BRIC paper explained the exclusion of the two countries as owing to Korea’s current political situation—the division between North and South—and the fact that Mexico is already a major economy. But the countries do have BRIC-like potential in the coming decades. Mexico’s middle class is growing at a significant rate, while its impoverished class declines, and infrastructure is quickly modernizing. Korea is widely considered likely to reunify before 2050, and has tremendous economic potential if it does so and retains favorable policies. Unlike Brazil, India, and China, Mexico and Korea (unified or just South Korea) are likely to have per capita incomes comparable to the United States and other leading economic powers.

Bibliography:

Arindam Banerjee, ed., Capital Markets in the BRIC Economies (Icfai University Press, 2007);
Marc Kobayashi-Hillary, Building a Future with BRICs: The Next Decade for Offshoring (Springer, 2007);
Stefano Pelle, Understanding Emerging Markets: Building Business Bric by Brick (Sage, 2007);
Dominic Wilson and Roopa Purushothaman, “Dreaming With BRICs: The Path to 2050,” Goldman Sachs Global Economic Paper no. 99, www2.goldmansachs.com (cited March 2009).

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