Who are the BRICS?

The BRICS countries, five nations grouped together because of their burgeoning economies, are in the spotlight this week as their leaders meet in China. Made up of Brazil, Russia, India, China and, as of this week, South Africa, the BRICS countries are grouped together because while they are not yet economic powerhouses, they have the potential to become the world’s most dominant economies in the next few decades.

Brazil

A man walks past a signage decoration for the BRICS summit outside Sheraton Hotel, the venue for the third BRICS summit in Sanya, Hainan province, on April 14. Trade ministers of the five BRIC nations - Brazil, Russia, India, China and new member South Africa - gave no sign on Wednesday of being ready to make concessions to break a deadlock in decade-old talks to free up global commerce. (Jason Lee/Reuters)

Although not as talked about as India and China, there’s been no shortage of interest in Brazil’s $2.1 trillion economy. Although it exhibited slightly negative growth in 2009 (still far better than many other economies, whose negative growth was much greater), Brazil’s economy bounced back forcefully in 2010, showing 7.5 percent economic growth. It is the eighth-largest economy in the world, and economists project it will reach the No. 5 spot in the next few years. Years of growth have brought a majority of Brazilians into the middle class.

Brazil’s industrial and agricultural sectors drive much of that growth. Agriculture and agribusiness make up about 25 percent of the country’s gross domestic product and 36 percent of Brazilian exports, while the industrial sector – auto manufacturing, textiles, and machinery, to name a few – drives about a third of the country’s GDP. A privatization campaign and favorable trade policies have made Brazil a huge beneficiary of foreign investment.

Source: US State Department

Russia

Russia’s transition in the 1990s from a centrally planned economy to a free market was not smooth. Inadequate fiscal reforms and borrowing led to a financial crisis in 1998 that wiped out much of the foreign investment it gained. The situation was exacerbated by dropping prices for its major exports (oil and minerals) and spillover from the Asian financial crisis.

The country bounced back quickly, registering about 7 percent growth for the next several years – until the global financial crisis, which hit Russia hard once again and prompted a stock market collapse. In 2009, economic growth was a whopping negative 7.9 percent. Today, a rapid turnaround has brought growth back up to 3.8 percent in 2010.

Russia’s economy, the world’s tenth largest, is driven by oil and natural gas exports, as well as timber, furs, minerals, and metals.

Source: US State Department

India

The second most populous country in the world is another one of the world’s emerging economic powerhouses. India is the 12th-largest economy, with a gross domestic product of $1.21 trillion and a growth rate of 6.5 percent in 2009. However, this growth has not been evenly distributed – 700 million Indians live on $2 or less a day and the middle class, while growing, is still only 50 million of its 1.17 billion people. The middle class is expected to expand ten-fold by 2025.

India’s attempts at economic reforms – tariff reductions, financial modernization, and stronger intellectual property rights, to name a few – have been sporadic. Corruption is still a big problem, as are excessive bureaucracy, investment controls, and economic policies that undermine efforts at economic liberalization.

The services industry accounts for 54 percent of GDP, while industry makes up 29 percent and agriculture 18 percent. Outsourcing to India has become common practice in the US. The software sector in particular is booming, generating $35 billion in exports in 2009. The US is India’s largest investment partner.

Source: US State Department

China

The world’s most populous country recently surpassed Japan as the second-largest economy. Only the US (China’s top trading partner) still comes out ahead of China’s gross domestic product, which totaled $4.814 trillion in 2009 and grew at a rate of 8.7 percent.

China’s economic reforms over the past two decades led to the world’s most drastic reduction in poverty and a corresponding income increase. However, regulation has often not been able to keep pace with the country’s economic growth, leading businesses to cut corners in ways that endanger consumer safety.

Agriculture contributes 11 percent of China’s GDP and industry makes up 48.6 percent in areas such as mining and ore processing, coal, machinery, textiles, and petroleum. Despite its growth, the state-owned sector still makes up about 40 percent of GDP.

Source: US State Department

South Africa

South Africa only officially became a part of this cozy economic group this week. Although its geographic and population sizes are dwarfed by its four counterparts, South Africa has assiduously positioned itself as the gateway to investment on the Africa continent, making it a crucial economic power as investment in Africa, particularly by China, booms.

South Africa’s $287 billion economy doesn’t even break into the world’s top 20 economies and in 2009 it was still experiencing negative economic growth as a result of the global financial crisis. But the BRIC countries know that if they want to tap Africa’s potential, they need to go through South Africa.

South Africa’s economy is still quite divided, a remnant of divides originating in the apartheid era. It has a robust formal market economy that operates alongside an informal economy resembling those in much of the developing world. Unequal distribution of wealth is still widespread.

Source: US State Department