For much of the early 2000s, Brazil, Russia, India, and China (the Brics) were seen not just as “the engine of new demand growth and spending power,” as Goldman Sachs researchers put it in 2003, but also as the likely begetters of a new international order, in which the US – and the west more generally – would play a much less significant role.
Today, the idea that the Brics could lead the way to this new order seems more distant than ever. Read more
That export performance of the Brics has been disappointing in recent years is well known. What hasn’t been appreciated is the extraordinary lengths the governments of Brazil, Russia, India, China and South Africa have gone to boost their exports. Indeed, once such initiatives are taken into account, recent export performance is cast in a worse light, raising the question—is the Brics competitiveness problem worse than previously thought?
At the end of May 2015, the OECD published data on the first quarter’s exports and imports of leading trading nations, including those for Brics. This data showed that in US dollar terms the total value of each Brics nation’s exports was falling. Worse, the exports of Brazil, India, Russia, and South Africa have essentially stagnated over the past four years or deteriorated significantly. China’s exports appear to have plateaued at the end of 2014 (see Figure 1). Read more
The leaders of the Brics – Brazil, Russia, India, China and South Africa – held their seventh annual summit amid deep scepticism about their once-promising growth story. While Russia may have been the host of the show, the real engine behind the summit, and the changes taking place across the emerging world, is China.
Right now, the Brics face serious cyclical and structural challenges and India seems to be the only bright spot in the club. Russia, Brazil and South Africa are either in recession or dangerously close to it. China is struggling to maintain its growth momentum as it tries to rebalance its economy. All need to implement deep and difficult structural reforms if they want to increase their long term growth potential and live up to the Brics dream as it was envisioned in the early 2000s. Read more
The Bric countries – minus India – embellished their growing reputation as laggards in the emerging market (EM) universe in January as manufacturing activity in Russia and China declined and Brazil turned in another subdued performance, data published on Tuesday shows.
The result is that, as a bloc, the Bric countries (Brazil, Russia, India and China) are diverging from the rest of the EM universe in manufacturing output and the trajectory of GDP growth. Other EM countries, meanwhile, are reaping the benefit of positive global demand and assuming a role as the key engines of developing world growth. Read more
If there’s one subject on which policymakers around the world seem to agree, it’s that foreign direct investment is a Good Thing.
The annual tables of inward foreign direct investment (FDI) are treated by governments of rich and poor economies alike much as football fans treat rankings in the English Premier League, crowed over by countries in the leading pack and quietly forgotten by those in the relegation zone.
There is no doubt that FDI can do a lot of good: it can add to an economy’s productive capacity and import not just capital but technology, production skills and better management. China, which not only welcomed FDI but witnessed intense competition between different provinces to attract it, stands as a shining example. Read more
By Jim O’Neill, Bruegel
Is it all over for the rise of the BRIC grouping (Brazil, Russia, India and China)?
On one level, this seems like a rather odd time to be asking such a question, especially when the political leaders of the BRICS countries (the four named above plus South Africa) have recently agreed to set up a joint development bank to be headquartered in Shanghai. So, the BRICS name is certainly here to stay, and in terms of global governance, their influence is likely to rise as a group because of the bank. Read more
By Ousmène Jacques Mandeng, Pramerica Investment Management
Leaders of Brazil, Russia, India, China and South Africa are expected to ratify an agreement this week that would establish a Brics bank at the Brics summit in Fortaleza, Brazil.
Development finance is already crowded. Apart from the multilateral and regional institutions, there are several such sub-regional institutions as the Caribbean Development Bank, the Islamic Development Bank and myriad national development banks like China Development Bank and Brazilian Development Bank (BNDES). BNDES is now much bigger than the World Bank in terms of gross disbursements; it even has branches in South Africa, the UK and Uruguay.
Overlap and duplication, conflicts between national, regional and multilateral interests are frequent and unavoidable – making the case for another development bank underwhelming. Read more
By Manjeet Kripalani, Indian Council on Global Relations
When Narendra Modi, prime minister, meets the leaders of the BRICS nations in Fortaleza in Brazil this week, the main topic of discussion will be the mandate of the BRICS development bank – and its location.
Shanghai, and more recently Delhi and Johannesburg have thrown their names into the ring of cities vying to host the bank’s headquarters. But China is a closed state and has ambitions to dominate BRICS. Johannesburg is too small, a fledgling in the world of finance.
The most appropriate and natural choice for locating the bank is Mumbai. There are several reasons why. Read more
If you’re an emerging market and there’s a geoeconomic grouping you’re looking for, you’ve got a few to choose from. In Asia there is Asean - ten countries in search of common ground. In Latin America there is Mercosur - five countries in search of common tariffs. And from the Atlantic west to the Black Sea there is Asia-Pacific Economic Co-operation – four adjectives in search of a noun.
But none of these has the distinction of having been a marketing campaign by Goldman Sachs got out of control. The Brics nations, apparently noticing a small clearing in the densely-thicketed field of international relations, seized on the designation to set up their own diplomatic process. The sixth leaders’ summit will take place next week in Fortaleza, Brazil, with the host nation hopefully performing better than at its other major international gathering.
As a coordinated entity, the BRICS grouping of emerging markets has produced little except inspiring the name of a widely-read blog.
Next month, the five governments – Brazil, Russia, India, China and South Africa – are planning to erect an actual edifice amid the swirling mists of rhetoric with the launch of a development bank dedicated to filling some of the gigantic hole in the financing of infrastructure and growth in fast-growing emerging economies.
The BRICS are seeking to avoid some of what they say are the faults of the World Bank and regional development banks – too much rich country dominance and too many conditions attached to lending. But that leaves the exact function and operation of the BRICS bank open to a great deal of political jockeying and uncertainties over how it is run.
By Stephany Griffith-Jones, Columbia University
Leaders of the BRICS (Brazil, Russia, India, China and South Africa) nations are committed to the creation of a new Development Bank for infrastructure and sustainable development. Details of the bank’s operations are expected at the forthcoming BRICS summit to be held in Brazil this July.
The bank is set to play an important role in helping to meet needs for an estimated US$1tn or more in annual investments in infrastructure and sustainable development. The future growth prospects of the BRICS countries will depend in large measure on these investments materialising.
What are the likely challenges this institution will face as it moves from the design to the operational stage? Read more
Indicators designed by the OECD to give a six-month lead in identifying shifts in the business cycles of key economies are showing an increasingly gloomy outlook for all four of the Bric counties – Brazil, China, Russia and India.
The most negative outlook is for India, followed by Brazil and China – while Russia’s performance may only be starting to slow, according to the Composite Leading Indicators (CLI) compiled by the Organisation of Economic Co-operation and Development. Read more
By Michael Power of Investec Asset Management
The Brics acronym has captured investors’ imagination like few others. But has it really helped us understand the intrinsic nature of the risks and rewards in the emerging market (EM) asset class, thereby allowing us to profit from investing in it? I have long had my doubts and recent turmoil in the asset class has only confirmed them. So is there a better way of understanding this asset class? My conclusion is that we should move away from the prism of Brics – and indeed some of the other acronyms now flavouring this alphabet soup – and instead think of EMs in terms of blocs.
There is a pressing need to do this: the paradox of investing in EMs is that whilst the structural case for doing so is overwhelming, it remains an asset class that is still both cyclically risky and very volatile. This suggests the right question to ask is no longer “whether” to invest in EMs, but “how”. And in answering this “how”, we must above all acknowledge that not all EMs were born alike. Read more
Emerging market equities look cheap. Andrew Pease, global head of investment strategy at Russell Investments, tells John Authers why it might be unwise to buy until after the Federal Reserve has started to taper off its bond purchases.
Move over BRIC, here comes…MINT?!
Jim O’Neill, the former Goldman Sachs economist who coined and popularised the BRIC concept as an investment thesis, caused quite a stir this week when he talked up the prospects of the “MINT” economies. Read more
By Marcus Svedberg of East Capital
As financial markets started to price in tapering over the summer, it became popular to “RIP the Bric” story in what turned out to be an almost comical coincidence with the departure of the acronym’s founder.
But the financial death of Brazil, Russia, India, China and (sometimes also) South Africa was, of course, exaggerated. Read more
The IMF’s latest World Economic Outlook makes pretty grim reading for emerging markets. The Fund has cut half a percentage point from its projection for overall EM growth for 2013, and 0.4 percentage points off its 2014 forecast – they are now 4.5 and 5.1 per cent, respectively.
And it’s not all China. The big downward revisions for 2013 are India (-1.8 percentage points), Mexico (-1.7), and Russia (-1.0). But the real meat of the IMF’s report is a big section entitled “What Explains the Slowdown in the BRICS?”. The answer isn’t very pretty. Read more
How gloomy should we be feeling about emerging markets? According to HSBC’s Emerging Markets Index, very. The index – a weighted composite of purchasing managers’ indices from 16 countries – has dipped into negative territory for the first time since the crisis of 2008-09.
Worse, the deterioration was increasingly broad-based across the emerging world. But there were some bright spots amid the gloom – reminding us to be careful when thinking about the emerging markets as if they were one homogeneous group. Read more
By Sammy Suzuki of AllianceBernstein
For more than a decade, Brazil, Russia, India and China have dominated conversations about emerging market investments.
But as the BRICs-driven commodities boom wanes, it may be time for investors to rethink their approach to emerging market investing. Read more
By George Hoguet, Global Investment Strategist, State Street Global Advisors
The achievements of the recent Brics summit deserve another look.
Global investors should welcome the proposed $100bn Contingent Reserve Arrangement and the planned Development Bank backed last month by the leaders of Brazil, Russia, India, China and South Africa. The Brics shareholders have yet to work out the details of these institutions, but the political resolve is clearly in place. Read more