Priyanka Mangla - BRICS Nation

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Presented By:

Priyanka Mangla

MBA - IB

BRICS Nations


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ASPECTS COVERED

Origin of BRIC

Entry of South Africa

Importance of BRICS

Summits Interdependence

Projections 2050

Implications on International Business

Problems

Conclusion


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BRIC

A grouping acronym that refers to the countries ofBrazil, Russia, India and China, which are alldeemed to be at a similar stage of newly advancedeconomic development

Coined by Goldman Sachs global economist JimO'Neill in a 2001 paper entitled "Building BetterGlobal Economic BRICs"

Symbol of the shift in global economic power awayfrom the developed G7 economies towards thedeveloping world


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Emerging economies' was coined at a time when theseeconomies contributed one-third of global GDP; now,they contribute more than half, and indeed they havecontributed four-fifths of real growth in GDP in the lastfive years.

The apparent shift in the centre of gravity, which seemsto be moving away from the West and the 'Old World'.(US and Europe)

These countries have very different political systems,economies, and national goals, and are located in verydifferent parts of the world. Yet the five emergingeconomies pride themselves on forming the firstimportant non-Western global initiative.


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SOUTHAFRICA

In 2010, South Africa began efforts to join the BRIC grouping, andthe process for its formal admission began in August of that year.

South Africa officially became a member nation on December 24,2010, after being formally invited by the BRIC countries to join the

group.

The group was renamed BRICS with the "S" standing for SouthAfrica to reflect the group's expanded membership.

In April 2011, South African President Jacob Zuma attended the2011 BRICS summit in Sanya, China, as a full member. TheBRICS Forum, an independent international organisationencouraging commercial, political and cultural cooperationbetween the BRICS nations, was formed in 2011.


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GDP (PPP)(USD bn)Total : $21,025billion

GDP (nominal)(USD bn)Total : $13,654billion

Area (kmsquare)Total :39,739,375 km2

PopulationTotal : 2.93billion

People'sRepublic ofChina

11,316 6,988 9,640,821 1.34 billion

India 4,469 1,843 3,287,240 1.21 billion

Russia 2,376 1,884 17,075,400 142 million

Brazil 2,309 2,517 8,514,877 190 million

South Africa 555 422 1,221,037 49 million


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BRAZIL


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RUSSIA


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INDIA


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CHINA


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SOUTHAFRICA


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WHYARETHE BRIC COUNTRIESIMPORTANT? Fast growing economies with the biggest source of

labor

They will soon change the consumption andproduction pattern in the world economy

As their influence on the global economy grows sodo the risks for the sustainable world development

Their role in the global policy is increasing as wellthe geopolitical importance for their regions andthe world


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First Summit Yekaterinburg, Russia (June 2009)

Leaders stressed the need to intensify cooperation on economic matters,

to seek speedy implementation of G-20 decisions of interest todeveloping countries, and

reform of global governance and the international financial system.

The Summit adopted Joint Statement of BRIC Leaders and a Joint

Statement on Global Food Security.

Second BRIC Summit Brasilia (April 2010 )

Leaders reiterated the need for closer cooperation, reform ofinternational financial institutions and protecting the interests of thedeveloping countries. A Memorandum of Cooperation was signed among BRIC

Development Banks.

A BRIC Statistical publication was also released.

SUMMITS


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Third BRICS Summit - Sanya, China(April 2011)

First after inclusion of South Africa in BRICS.The theme of the Summit was Broad Visionand Shared Prosperity.

Fourth BRICS Summit - New Delhi (March

28-29, 2012)Theme of Partnership for Stability, Securityand Growth

Leaders had proposed to trade among themselves in their local

currencies,

made significant progress on the setting up ofthe new development bank,

expressed their concern at the slow pace ofquota and governance reforms in IMF, and

decided to abide by UN sanctions and not theunilateral ones imposed by the US and

European countries on Iran and Syria

SUMMITS"We wish to see

these countries livingin peace and regain

stability andprosperity asrespected members ofthe global community


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INCREASINGINTERDEPENDENCE


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BRAZIL

Brazil's has traditionally exported commodities and minerals tothe US and Europe, but Chinese demand is changing theequation for Brazil's agriculture.

China is also hungry for Brazil's other commodities, such as

iron ore to manufacture steel, which is being used in its hugeconstruction boom.

Beyond commodities, Brazil has also found a market in Asiafor some of its manufactured goods.

Brazilian President Dilma Rouseff has signed a deal in Chinafor Embraer, the third largest maker of commercial aircrafts inthe world, to sell planes to Chinese airlines, cashing in on themainland's fast expanding air travel market.


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RUSSIA

Oil produced in Siberia has helped make Russia the world'slargest producer of commodities

While China may be the world's biggest consumer, Russia isthe largest global producer of many commodities.

Russia has traditionally been - and continues to be - a largenatural resource exporter.

Trade with Asia has increased at the expense of business with

the US and former Soviet Union countries.

Asia's economic growth, and the push within Russia todevelop trade ties outside its traditional partners in Europe,have now made China Russia's largest trade partner, aheadof Germany.


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INDIA

India is a global leader as a provider of services, practicallyinventing the outsourcing industry.

Unlike Brazil and Russia, which have built their economies

on commodities exports, India has developed its people.

Along with computer services, the medical-care industry hastaken huge strides.

But it has failed to become a mass manufacturer like theother Bric countries, and as a result still imports much of itsmanufactured goods from China.


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CHINA

To date, the scale of Chinas economy and pace of its development has

out-distanced those of its BRIC peers. China alone contributed morethan half of the BRIC countries share and greater than 15 percent of the

growth in world economic output

China has been very pragmatic in reaching out across the board, all theway to Africa and Latin America. China has reinvented itself and is now amass producer of hi-tech products, including semi-conductors and solarpanels.

It also still continues to be a large producer of low-cost, high-valueindustries, like garments and textiles.

The four Bric countries are united in their hunger for raw material to feedtheir rapid growth. China has led the way in looking for resources around

the globe but has been followed by Brazil, Russia and India


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BRICS FUTUREEXPECTATIONS

& IMPLICATIONSON BUSINESS


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As early as 2003, Goldman Sachs forecasted

that China and India would become the firstand third largest economies by 2050, withBrazil and Russia capturing the fifth and sixthspots.


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BRICs have a large US$ GDP than the G7 in less than 40 years

The BRICs are likely to maintain their comparative advantages in the long term

Source: Goldman Sachs

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

BRICs G6

GDP (US $billion)

BRICs half aslarge as theG7

BRICsovertake theG7


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GROWING BRIC MIDDLE CLASS

The rapid

economic growthand demographicsof China and Indiaare expected togive rise to a largemiddle class

whoseconsumptionwould help drivethe BRICs

economicdevelopment and

expansion of theglobal economy.


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GROWING BRIC MIDDLE CLASS


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SCIENCEAND TECHNOLOGYINTHE BRICS

The BRIC countries of China, India and Brazil accountfor much of the dramatic increase in science researchinvestments and scientific publications.

Since 2002, global spending on science R&D has

increased by 45 percent to more than $1,000 billion (onetrillion) U.S. dollars.

Chinas development planning has targeted a number ofscientific fields and related industries, including clean

energy, green transportation and rare earths, amongothers. Since 1999, Chinas spending on science R&Dhas grown 20 percent annually to more than $100billion. By 2020, China plans to invest 2.5 percent ofGDP in science research.


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BEYONDBRICS

Many analysts and commentators have suggestedexpanding the original group of four BRIC nations toinclude other emerging markets.

Goldman Sachs identified another group ofeconomically dynamic and promising developingcountries creatively labeled the Next 11 in its 2005Economics Paper How Solid are the BRICs?

The Next 11 consists of a broader group of emergingmarkets with the potential to play significant roles in theglobal economy, including: Bangladesh, Egypt,Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan,Philippines, Turkey and Vietnam.


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PROBLEMS

The shorthand acronyms mask a tremendous diversityof context and of financial health, and they do not oftenact in concert with their best interests.

Brazil and India have expressed concern about China

flooding their markets with cheap goods, sparking adebate about the value of the yuan.

Most analysts agree that giving these four countries anacronym does not mean they will act as one on the

global stage.

Even though the BRIC countries are decreasing theirdependence on developed economies, on a globalstage they still need to work with the major industrialisednations.


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CONCLUSION


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In the coming years, we will witness the phenomenon ofglobal expansion of the countries belonging to BRIC and by2035 these countries together will exceed the G7 group intheir overall share of GDP (O'Neill, 2009). But it will beimportant to explore and to use these markets at their fair

value potential.

At the same time, it is equally important not to over-assessthis potential and to take account of the dangers caused byexcessive consumption.

We should bear in mind the fact that these economies are stilltoo poor and too dependent on exports to serve as real bufferfor the global economy in the coming years. More theenvironmental, energy and food issues with which thesecountries will confront should not be underestimated.


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In the short term, strong overall macroeconomic fundamentalssustained in China, India and Russia and improvementsreached in Brazil. This will continue to attract substantial flowsof foreign investment, further boosting potentials for the futureoutput growth.

Risks related to global economic imbalances will continue toweight on the outlook for BRIC countries and especially Brazil.

Country specific risks and challenges include: Russia - sustained upward pressure on the exchange rate and

inflation;potential fiscal easing. China - potential for increased protectionism at Chinese exports. India - high level of off-budget subsidies for petroleum products. Brazil - expansionary fiscal policy.


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BIBLIOGRAPHY

http://www.bbc.co.uk/news/business-13046521 http://www.thepicky.com/investing/brazil-russia-india-and-china-bric-

larger-economy-by-2050/

http://www.eurasiareview.com/23032012-brics-countries-the-imaginary-alliance-analysis/

http://www.theaustralian.com.au/news/world/cracks-in-the-brics/story-

e6frg6ux-1226308532634 http://www.globalsherpa.org/bric-countries-brics

http://en.wikipedia.org/wiki/BRIC

http://www.mea.gov.in/mystart.php?id=100219025

http://www.economist.com/node/18560195

http://www.proinno-europe.eu/events/emerging-economies-bric-

countries-and-innovation http://www.theatlantic.com/international/archive/2011/05/a-bric-

breakdown-explaining-the-emerging-economies-growth/239061/

http://www.cibam.jbs.cam.ac.uk/symposia/2011/downloads/110708_bricsbeyond_report.pdf


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THANKYOU

Priyanka Mangla - BRICS Nation

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