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BRICS

Tipology : Encyclopedia
Category: Fintech

Abstract
BRICS stands for the emerging countries Brazil, Russia, India, China and since 2011 South Africa, which today represent the real locomotive of world economic development. Only a few years ago, the economies of these countries were considered marginal, now they are characterised by high growth rates of Gross Domestic Product (GDP), large shares of international trade, and resources and availability of production factors that can influence the world's economic and power balances with their growth. These economies are characterised by a common economic history (see Goldstein, 2011) to be found in a phase of specialisation in the production of primary goods (1870-1913); industrialisation by import substitution (1945-1980); the process of liberalisation (1991-1992) and the predominant role of the state as the engine of development. The BRICS does not represent an international organisation, but is rather an instrument of cooperation between its member major powers. The BRICS countries meet annually in meetings where they discuss multilateral cooperation agreements, strategic partnership, the use of foreign exchange reserves and, at the latest conference in Durban, South Africa, the creation of a BRICS Development Bank similar to the World Bank.

Origins and evolutions
The term referring to emerging countries was first used in 2001, by Jim O'Neill in the Goldman Sachs Investment Bank report entitled "Building Better Global Economics BRICs", to describe the economies of Brazil, Russia, India and China (BRIC). Later, with the accession of South Africa in 2011, the term officially became BRICS. The American economist was looking for a new banking marketing idea that would encourage investors to pay more and more attention to the new emerging powers. The paper suggested that the economies of the BRICS countries would dominate the world economy in the next century and that the future of globalisation would increasingly depend on the emergence of non-Western countries. The 2001 paper outlined the economic development prospects of the emerging powers and the construction of a new system of growth outside the West that would be able to influence future trends in the world economy. After 2001, the term became part of international relations, identifying a group of emerging countries that meet periodically to discuss economic and political issues.
The first conference with a BRICS perspective took place in Russia in July 2009, at the level of the Heads of State of Brazil, Russia, India and China. The following year, the Heads of State meeting was held in Brazil, leading up to the 2013 meeting in Durban, South Africa in March 2013. Many topics were addressed during the meetings, such as the enlargement of the World Trade Organisation - WTO to Russia (which took place in December 2012), the de-dollarisation of intra-BRICS economic relations (see swap agreements between China and Brazil in 2012), coordination in the international forums of the G20 and the UN, reform of the global financial system and the accession of other countries to the BRICS. The most important outcomes of the last meeting in Durban in 2013 concern the formation of a new BRICS Business Council and a Development Bank. The key objectives of these two institutions are to strengthen trade relations, promote technology transfer and cooperation in banking, the green economy, manufacturing and industrialisation.
As far as enlargement is concerned, South Africa's accession in 2011 represents an evolution in the meaning and image of the BRICS, as South Africa is not an emerging economy like Brazil, Russia, India and China. The reason for the enlargement to South Africa is the strong interest that the BRICS powers, especially China, have in the African continent.

The BRICS in the global economy
The sum of the BRICS countries' GDP in 1992 corresponded to about 5.4% of the world economy, whereas today this is about 18%. The BRICS countries have in common an average growth rate that in past years has been higher than that of the more advanced countries; according to Goldman Sachs they will reach 40% in 2050. The five countries also have in common a favourable demographic situation (together, the BRICS account for about 40% of the world's population), international capital and foreign direct investment (FDI), significant endowments of productive factors, and a reallocation of resources from low-yield sectors (agriculture) to more dynamic sectors (industry and services).
Brazil, Russia and South Africa, characterised by great wealth of raw materials, are the main oil and gas exporting countries in the world. India and China, characterised by the development of manufacturing industry, are the main exporters of cheap goods to the industrialised West.

Brazil
Brazil ranks as the sixth largest economy in the world. It is one of the most important producers of steel and oil. The main sectors of the economy are agribusiness, oil, telecommunications and automotive. Trade agreements with China have provided Brazil with an economically reliable partner, a surplus balance of payments and an increase in consumption that has developed an important domestic market. The causes of the current economic growth date back to the 1990s, when the foreign debt - GDP ratio was reduced to 20%, thanks to a currency devaluation that attracted a lot of foreign capital to the country. The Real, Brazil's official currency, has strengthened its valuation against the dollar in recent years.

Tab. 1 Brazil Growth rate as a percentage of GDP (2008-12)