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BRICs 101. Who 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
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BRICs 101 Who 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.
THE BRICs Who 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 • “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
THE BRICs Where they’re 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 • 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 • 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 • 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 • 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 BRICs Why they matter
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.