Brazil, Russia, India, China and South Africa (BRICS)

What are Brazil, Russia, India, China and South Africa (BRICS)?

Brazil, Russia, India, China and South Africa (BRICS) is an acronym for the combined economies of Brazil, Russia, India, China and South Africa . Goldman Sachs economists originally coined the term BRIC (excluding South Africa) in 2003. Analysts have speculated that, by 2050, these four economies will be the most dominant. South Africa was added to the list on April 13, 2020 by creating “BRICS”.

Understanding Brazil, Russia, India, China and South Africa (BRICS)

In 2020, five countries were among the fastest growing emerging markets. It is important to note that Goldman Sachs’ thesis is not that these countries are a political alliance (like the European Union) or a formal trade association. Instead, they have the potential to form a powerful economic block. BRICS leaders regularly attend summits together and often act in concert with their respective interests.

Due to lower labor and production costs, many companies also cite the BRICS as a source of overseas expansion opportunities.

Key points to remember

  • Initially called BRIC, it evoked the idea that China and India would become, by 2050, the main world suppliers of manufactured goods and services. Brazil and Russia would also be dominant as suppliers of raw materials.
  • BRIC expanded to include South Africa as the fifth nation in 2020.
  • The BRICS provided a source of overseas expansion opportunities for businesses and an investment route for institutional investors seeking high returns.
  • Now BRICS is used more generically as a marketing term.

Early development of the BRIC thesis at Goldman Sachs

In 2001, Goldman Sachs Asset Management President Jim O’Neill noted that if global GDP were to increase by 1.7% in 2002, the BRIC countries should grow faster than the G7, the world’s seven largest economies. advanced. At the time, the G7 included Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In O’Neill’s document “Building Better Economic BRICs”, he described four scenarios for measuring and modeling GDP. These have been adjusted according to purchasing power parity (PPP). In O’Neill’s scenarios, the nominal GDP assumption for the BRICs goes from the 2001 measure of 8% in USD to 14.2% – or, when converted to PPP rates, from 23, 3% to 27.0%.

In 2003, Dominic Wilson and Roopa Purushothaman continued with their report “Dreaming with BRICs: The Path to 2050”. This was again published by Goldman Sachs. Wilson and Purushothaman claimed that by 2050 the BRIC cluster could reach a size larger than the G7 (in USD) and the world’s largest economies would therefore be radically different in four decades: the world’s largest economic powers will not would be the richest, according to per capita income.

In 2007, another report, “BRIC and Beyond” was published, which focused on the growth potential of the BRICs, as well as the environmental impact of these growing economies and the sustainability of their growth. The report considered a Next 11, or N-11 (a term for eleven emerging economies), in relation to the BRIC countries, as well as the general ascendancy of new global markets.

BRICS Fund closed

After several years of impressive growth figures, the BRICS economies slowed down after 2020, as aftershocks from the 2008 financial crisis dampened spending in the Western economies. The BRICS acronym no longer looked like an attractive investment platform, and funds for these savings were closed or merged with other investment vehicles.

Goldman Sachs merged its BRICS investment fund, which focused on generating returns from these savings, with the larger Emerging Markets Equity Fund. The fund had lost 88% of its assets from the 2020 peak. In a SEC filing, Goldman Sachs said it did not expect “significant asset growth for the foreseeable future” in the BRICS fund. According to a Bloomberg report, the fund had lost 21% in five years.

BRIC is now used as a more generic marketing term. For example, Columbia University created the BRICLab, where students examine the foreign, national and financial policies of BRIC members.

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