1 . Trade Developments: The BRICS Nations Way

Brazil, Russia, India, China and South Africa are injecting new resources, momentum and innovation into efforts to improve health in the world’s poorest countries, according to a report released on the eve of the 2012 BRICS Summit.

Always wonder why the BRICS nation’s terminology was coined. Some say because these are collectively becoming the super powers of the world. We think it is so because of the similarity in the growth pace of these five super powers many a times termed as the third world countries. Similarity may be hard to find otherwise however Chinese, Brazilian, South African, Russian and Indian are the world’s fastest growing emerging economies- Brazil, Russia, India and China. The artificial grouping called BRICS: the acronym was coined by Goldman Sachs economist Jim O'Neill in 2001, speculated that by 2050 these four economies would be wealthier than most of the current major economic powers.

Leaders of these countries regularly meet having in mind a theme of discussion to foster better security measures, stability and growth. Stressed by territorial disputes, power postures and simmering strategic undercurrents, it is surprising that economic relationships have not come further upfront in the BRICS agenda for talks.

BRICS nations meet for their annual summit to discuss areas of pressing concern, some currently being European sovereign debt crisis, concerns over the impact of rising crude oil prices in the wake of sanctions being imposed by Europe and the US on supplying nation Iran,

BRICS countries have been left with few other options. One avenue is utilization of foreign exchange reserves, which all BRICS countries have in ample quantity, for infrastructure development in BRICS and other developing countries. But routing foreign exchange reserves through multilateral financial institutions will not give these countries enough say over utilization because their voting power still remains small.

2 . Trade & Growth

India's international trade grew by 94 per cent during 2006-07 and 2010-11. Much of this growth came from trade with its new BRICS partners. Trade with China and South Africa, soared by 130 and 125 per cent. Meanwhile trade with traditional long-standing partners such as Germany, the US and the UK moderated to 57, 44 and 25 per cent.

From the look of it, this shift from traditional export destinations to BRICS nations and other emerging countries is expected to become more pronounced in the years to come.

Among the BRICS countries India and China are most promising economies, we say. China is cited as the world's manufacturing hub and fastest-growing consumer market, while India is known as the foremost business-processing and IT services hub with long-term market potential.

The South African government will take some steps in the BRICS Summit to challenge the US dollar's supremacy in the world financial structure, especially in the trade and investment in the emerging markets. Using the Chinese currency instead of the US dollars will benefit African businesses to do business with other BRICS memberships by lowering dealing cost in Africa and hence lowering the trade barriers.

3 . Economic Alliance

Later in the year 2011, South Africa also joined the multilateral grouping and BRICS evolved at the Sanya Summit in China. The International Monetary Fund (IMF) has pointed out that Brazil, Russia, India and China together accounted for 40 per cent of the world’s population spread over three continents, constituting over 25 per cent of the global Gross Domestic Product. The multilateral agency also predicted that this grouping of BRICS would emerge as the highest economic bloc by the middle of this century.

It would be a Herculean task to bridge these undisputed differences and create a bonding – brick by brick for these nations among each other. But the challenges are many; it is not just the temporal and spatial distances that separate these nations but also diversity in race, geography as well as natural and human resources. However, the economic bonding was a natural process, a monetary evolution as global capital sought out the most conducive and remunerative centers for investment.

We can came to the conclusion that foreign direct investments play a key role in the development of an emerging economy – because the very essence of economic development ensured rapid and efficient transfer and adoption of best practices across borders.

4 . Global Economic Blizzard

With the accelerated inflow of capital generated increased production of goods and services and international trade flourished. But the onset of global economic slowdown in 2008 proved a dampener, as demand from developed world slowed down, forcing BRICS nations to look around for new export destinations hence the context and nature of international trade had begun to change.

However, BRICS countries have certainly not been wholly immune to the economic decline of the US, whose sub-prime mortgage crises triggered the turmoil in global financial markets. As a result, the IMF anticipated a modest moderation of BRICS amazing growth. But unlike the US and many other developed countries Brazil, Russia, India, South Africa and China appear better positioned to withstand the global economic storm. While the world economy was moderating and international trade was slowing down, BRICS countries began laying a new agenda for growth.

And they had a head-start over the nearest competition. According to the IMF, BRIC accounted for 46.3 per cent of the global GDP growth during 2000-08, during economic meltdown times. Whereas, the G7 countries i.e. France, Germany, Italy, Japan, United Kingdom, United States and was later joined by Canada, contributed just 19.8 per cent. And part of this growth trigger came from increased international trade.

5 . Healthcare & Challenges

As emerging economies, there are several common health challenges that confront many of these countries. BRICS governments are increasingly investing in R&D for health. While the solutions to health problems are often complex, investing in R&D is a clear step in the right direction.

By leveraging their resources and respective expertise, the BRICS could have a tremendous impact on health challenges in less-developed countries.

Some potential areas of collaboration include TB innovation, non-communicable diseases, polio eradication, disease surveillance and access to vaccines.

6 . Goods & Services

The study based on the annual frequency data for a 35-year period from 1975 to 2009 also found “enormous increase in foreign direct investment across countries and was one of the clearest signs of globalization of the world economy over the past 20 years .”

Massive changes occurred post globalization in terms of geopolitics and strategic alignments during the last two decades, among emerging economies of Brazil, Russia, India and China have acquitted an increasingly important role in the world, as producers of goods and services.

All these four countries, had some common characteristics like that of large population, huge consumer market, fast economic growth, big land size all of which made them the global target for capital, from investors across the world.

According to World Bank Database, between 2000 and 2008, FDIs net inflow grew from $77.47 billion to $309.16 billion representing a compounded annual growth rate of 18.88 per cent. China, by far the leading market destination for FDI, received $147.79 billion inflows in 2008 whereas Russia, Brazil and India attracted $75, $45.05 and $41.31 billion respectively. By 2020, the four BRICS economies will be responsible for almost 50% of the increase in global GDP.

The BRICS thesis posits that China and India will become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. It's important to note that the Goldman Sachs thesis isn't that these countries are a political alliance (like the European Union) or a formal trading association - but they have the potential to form a powerful economic bloc. BRICS is now also used as a more generic marketing term to refer to these four emerging economies. 

Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity.

The BRICS thesis says that China and India will become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Goldman Sachs thesis isn't that these countries are a political alliance (like the European Union) or a formal trading association - but they have the potential to form a powerful economic bloc.
Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity.

7 . Plan For The Future

On one hand special trade openness and emerging economy of BRICS, is a attractive destination for many looking to diversify their business across strong consumer driven markets while on the send hand geographical position and cheap labor costs are making Brazil a major destination for foreign direct investments. Same is the case with Russia, its abundant resource of oil and gas are attracting hydrocarbon related FDI’s and becoming the central hub for oil and gas import to Europe.

We think that whenever leaders of the BRICS meet for discussions over economic circumstances that united them, they have a huge onerous task ahead, of helping the world come out of economic recession and helping foster better relations among themselves. The world is accumulating risks on economy and trade side this calls for a closer need to work together.

Think we have missed any major insights in this article? Get thee to the comments and let us know.