brics 101 who they are, where theyre going & why they matter

BRICs 101Who they are, where they’re 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?

THE BRICsWho they are

A background to BRICs

•Term coined by O’Neill 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

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 2011” - 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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-10

-5

0

5

10

15

20

BRIC growth: 2000-2010

China India Russian Federation Brazil World

BRICs at a glance

China

Brazil

India

Russian Federation

World

0 1000 2000 3000 4000 5000 6000 7000

GDP per capita2010

BRICs at a glance

China Brazil India Russian Federation0

200

400

600

800

1000

1200

1400

1600

BRIC populations2010

THE BRICs Where they’re going

Brazil

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

•World’s 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

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

world’s 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

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 (O’Neill, 2007):

▫ Increased productivity Openness Financial deepening Infrastructure investment

• But challenges remain:▫ Incomplete reforms▫Ease of doing business▫Environmental degradation▫Education▫Poverty & inequality.

China

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 (O’Neil, 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

THE BRICsWhy they matter

The world in 20502000

• 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.