From BRIC to BRICS

On June 16, 2009, the leaders of the BRIC countries - namely Brazil, Russia, India and China - held their first summit in Yekaterinburg, Russia. The countries also known as the "Big Four" have always stressed their similarities and the strength of their combined economic power.

But Tobias Geyer, expert for emerging markets at Ökoworld, a German investment fund, says the BRIC countries don’t have much in common. "The countries are affected by different developments," Geyer explains. "The only common denominator is their high growth rates. And of course the countries are huge."

Around 40 percent of the world’s population is living in one of the BRIC states. Brazil, Russia, India and China generate a quarter of the world’s economic output. The BRIC nations boast annual growth rates ranging from four to ten percent.

Same but different

But there are major differences among them that might overshadow the BRIC success story. Markus Jäger who is working for Deutsche Bank Research says that Brazil and Russia are depending more on exports of natural resources than India and China. On the other hand, both India and China are depending on imports of resources. "In China’s case, the economic growth is mainly generated by exports of industrial goods," Jäger elaborates. "India is also exporting a lot, especially in the service sector like IT, but there the growth is also maintained by domestic demand."

The BRIC countries also show diverse demographic developments. The trend in Russia is negative, says Markus Jäger from DB Research. Russia’s workforce is older with a lack of young workers. China might face similar problems in the future because of its one-child policy. But in Brazil and India, the middle class is growing rapidly. The young population is not only producing but also actively consuming goods.

Conflicts could also arise because of the way the state is controlling the economy. This directly affects cooperation between the BRIC states, says Markus Jäger. "From an economic point of view, there are some conflicts between the four countries," he says. "Brazil has problems because of its strong currency. They have been complaining that ‘China’s yuan is undervalued’, and have been in touch with the US on this." He adds, that although the BRIC states issue joint communiques and always emphasize their common position, but there are a lot of conflicting economic interests.

Not 'Big Four' anymore

The conflicts might even increase after South Africa has joined the club, turning BRIC into BRICS. But does South Africa really fit in? The country is growing by three percent annually, and with ‘only’ 50 million its population is dwarfed by the other BRIC countries.

Many South Africans are wary. What if South Africa’s joining the Big Four is only going to be used as an access point to the whole continent to fulfill the BRIC nations' hunger for natural resources? Even South Africa’s vice minister for economic development Enoch Godongwana seems skeptical. He says it remains to be seen whether joining BRIC will "advance African interests or will it undermine them."

Author: Jutta Wasserrab/zer
Editor: Thomas Bärthlein