BRIC is an acronym for the combined developing economies of Brazil, Russia, India and China. When the term was first coined and the alliance was formed, worldwide economic experts did not attribute much importance to the coalition. Nobody suspected that it represented a serious coordination of economic efforts and the establishment of an official trade union that is comparable to the European Union.
Over time, the international community has slowly started to recognize that the BRICS countries do represent a significant economic union that has the potential to strengthen the participating entities’ geopolitical influence. The first meeting of foreign ministers of the BRICS countries took place in 2008 in Japan as part of the 61st session of the UN. For the first time, the BRIC leaders (without South Africa at that point) shook hands at the 34th summit of G8; then, on June 16, 2009, a full-format meeting was held in Yekaterinburg (Russia).
One main feature of the BRICS countries is they all have large developing economies. They also have a lot of key resources and high potential.
Brazil is the seventh world economy. It offers excellent agricultural products and has a chance of replicating the success demonstrated by other great powers.
Russia currently features in fifth-sixth place among world economies in terms of size of GDP. It also has the largest territory in the world, is a major nuclear power, and is rich in precious minerals.
India is the third world economy. It is home to vast low-cost intellectual resources, nuclear power, and a population of over one billion people. Again, the scale and size of the country gives it the potential to become a great power.
China is the world’s number one economy, the world’s main exporter, has the largest foreign exchange reserves, the largest population, significant political power and nuclear power.
South Africa is the 25-29th largest global economy. It is widely regarded as the main power of Africa and is rich in valuable natural resources.
One of the main problems of the BRICS is that each of the countries involved have very large populations. This results in low wages and, consequently, slow economic growth.
The main strategic goal of the association between the BRIC’s countries is to transform economic potential into political influence in a bid to challenge the leadership positions of Western economic elites. If this happens, the economic governance model of the entire world will change, and the need for elites may diminish.
The Economical Prospects of the BRICS
In the past few years, developing countries have played a transformational role in the world economy; however, today, the situation has significantly changed, and there is now an opportunity for things to go completely in the opposite direction. Financial instability has led to the outflow of investment capital from the BRICS countries, a reduction in the prices of popular raw materials, a reduction in the exports of major emerging markets, and a significant increase in the loan debts of BRIC enterprises.
According to expert estimates, internal problems have also undermined the positions of the BRICS countries. The economic problems of Brazil are concentrated around weak market conditions amid the prolonged social and political crisis. Chinese GDP growth is rapidly shrinking, and the local stock exchange is collapsing. South Africa and Russia are widely considered to be the most vulnerable states in the association.
The main problem for the BRICS countries is the significant influence of the political will of the leaders in terms of economic decision making.
Causes of the Crisis
Against the background of capital flight towards the markets of developed countries, the prices of stock have diminished, and foreign exchange indices have also fallen against those of developing economies. American money is rapidly leaving the once-promising BRICs markets. First of all, this is associated with plans of the US Federal Reserve System to raise the level of interest rates. Against the background of the events, the US dollar grew by 20% against the currencies of developing countries. The dollar continued to rise over the course of the last three years and reached its peak in the last decade.
At the same time, the loan debts of the enterprises of developing countries increased. Today, this figure is estimated at 80% of the total GDP of these countries. Even in the severe crisis of 2008, this value did not exceed 60%. Against the backdrop of falling export rates, the reduction in the profits of BRICs enterprises has reduced, and the revenues of the state treasury and private households, retail trade and overall economic growth have declined.
Political Prospects of the BRICS
Some analysts claim that Russia wants to enlist the support of the BRICS members in its opposition to a bloc of Western States. However, India and Brazil strongly oppose such a scenario. The last summit of the alliance of developing countries revealed that many of the BRICs members differ in terms of their goals and expectations. The establishment of the coalition ten years ago provided developing countries with a chance to challenge the hegemony of the Western bloc. However, at the last meeting in Ufa (Russia), all five members were like characters from the famous fable of Krylov. Each with his own interest. As such, today, the BRICS has become very fragmented, and this fact casts serious doubt on the future of the association.
South Africa, India and Brazil are chaotic democracies. They are still very far from the rule of law. Russia and China are classic autocracies. Russia has caused significant damage to the economic stability of the bloc because of its active involvement in the Ukrainian conflict. The result threatens the security of the European system. Ambitions of Chinese leaders have led to a rivalry between China and USA in the Pacific region. Meanwhile, Brazil is climbing down and refuses to become a nuclear power.
The Times writes that, today, BRICS is gradually turning into an alliance that is heavily focused on China. China’s GDP is more than 50% of the total GDP of the BRICS countries. Therefore, the role of Beijing in the BRICS is increasing at a significant rate. Despite the crisis in the economies of the BRICS countries, the association has good prospects. The main challenge involves surviving unstable times. Despite the fact that the BRICS leaders are currently concentrating on their very own domestic financial and political problems, new opportunities for economic growth and development could represent a valid means of reuniting the states.
Today, the BRICS eke out a living from good personal relations between the leaders of the member states. Especially warm and friendly relations have been established between the leader of South Africa, Jacob Zuma, and Russian President Vladimir Putin. However, personal feelings have not yet manifested themselves in significant progress in economic and political cooperation between the two countries. In 2014, a trade turnover between South Africa and the BRICS countries was 376 billion dollars, 222 billion dollars of which were contracts with China. At the same time, trade with Russia amounted to only 12.5 billion dollars (according to the Johannesburg Standard Bank).