BRICs 101 Who they are, where theyre going & why they matter

Introduction BRICs are news-makers The fourth BRIC(S) summit was held in March 2012, in New Delhi From the summit came BRICS bank This presentation will focus on some basic information on the various BRIC countries, what their future looks like and why BRICs are such newsmakers.

South Africa, a BRIC?

Who they are

A background to BRICs Term coined by ONeill in 2001 Not homogenous at all Powerful group of emerging economies (White, 2012) 40% of world population 70% of global GDP growth Combined GDP of $14 trillion Policymakers latched on to the BRICs idea and held their first summit in 2009

BRICs in the news

India test-launches Agni-V long range missile - BBC News High end Chinese brands coming soon –China Daily Brazil, the next Fukushima? - CNN Brazil set to cut forest protection - Nature Russian manufacturing grows at fastest pace since March Bloomberg China, Russia sign strategic trade deal – Asia Times Meat consumption in China now double that in the United States. – Earth Policy Institute

Chinese vs. US meat consumption

BRICs at a glance

Where theyre going

Brazil

Large and well-developed agricultural, mining, manufacturing, and service sectors Since 2003: macroeconomic stability Two quarters of recession 2010: GDP growth reached 7.5%

Brazil Worlds sixth largest economy in terms of GDP High level of income equality declining An attractive destination for foreign investors (CIA, 2012) Challenges: Ease of doing business Diversification Infrastructure

Russia

From centrally planned to more market-based, globally integrated. Economic reforms (1990s): privatisation, but SOEs in energy and defense-related sectors. Heavy state interference in private sector.

Russia Russia is commodity-driven: 2011: surpassed Saudi Arabia to become worlds leading oil producer Second-largest producer of natural gas World's largest natural gas reserves Second-largest global coal reserves Eighth-largest crude oil reserves Vulnerable to boom and bust cycles

Russia Very hard hit by 2008 credit crunch Growth rebounded in late 2009 Growth further encouraged by high oil prices in 2011 Budget deficit reduced, along with unemployment and inflation Growth challenges: corruption, access to capital, infrastructure, workforce (CIA, 2012)

India

From autarky to open-market economy Diverse economy Services: major source of economic growth >50% of output But only 33% of labour force IT services is an especially competitive sector

India Promising growth (ONeill, 2007): Increased productivity Openness Financial deepening Infrastructure investment But challenges remain: Incomplete reforms Ease of doing business Environmental degradation Education Poverty & inequality.

China

Increasingly market-oriented economy, playing a major global role Currently the world's largest exporter. GDP second only to that of the USA. State-owned enterprises still play an important role (CIA, 2012) Strategic planners Five Year Plans

China Good growth: Human capital Gradual path to openness Reform of SOEs Economic challenges: Stimulating domestic demand Sustaining adequate job growth Reducing corruption Environment Ageing population

China Demographics (ONeil, 2009) An increasingly ageing population (One-child policy) Uneven development: coastal provinces more developed than interior (hukou system) Revision of the one-child policy Slower labour force growth, could be offset by urbanisation & human capital advances Ageing population could benefit saving & certain sectors Pensions Unmarried males

China Revision of the hukou system Migration should be facilitated to allocate resources more efficiently Other costs of migration: unemployment, job hunting, living conditions

Why they matter

The world in US Japan Germany UK France China Italy Canada Brazil Mexico Spain 2010 US China Japan Germany France UK Brazil Italy India Canada Russia 2050 China US India Japan Germany UK Brazil Mexico France Canada Italy

Other emerging markets to watch The Next Eleven (N-11) Will BRICS stay BRICS? BIICs BRINCS Do the summits matter? The conclusion: The world is changing, and BRICS (for now) are important drivers of that change.