In 2001, Goldman Sachs grouped the BRIC countries — Brazil, Russia, India and China — into that acronym because they were at a similar stage of economic development. On Tuesday, the American multinational news corporation Bloomberg named China as the only BRIC nation ranked among all top global emerging markets. We asked Ravi Ramamurti, Distinguished Professor of International Business and director of the Center for Emerging Markets at Northeastern, to identify what’s next for these four countries, how they’ve made a global impact and which BRIC nation to look out for in 2012.
Are these countries’ economies still comparable to one another? As their economies continue to develop, will a new “Big Four” emerge to replace them?
Goldman Sachs clumped the BRIC countries together for only one reason — they were the four largest emerging economies, and by 2050 they would be among the world’s six largest economies (G6), leaping ahead of France, Germany, Italy and the UK. That aside, the BRICs are a pretty heterogeneous bunch. For instance, Brazil and Russia are eight times as rich as India. China and India each have a population that is more than six times that of Brazil or Russia. China’s GDP is greater than that of the other three BRICs combined. Russia’s growth is driven by the export of natural resources, while China and India depend heavily on imported natural resources, and so on.
By 2012, only China had actually made it to the G6; indeed, last year it overtook Japan for the number two spot and is projected by 2025 to overtake the United States for the top spot. Brazil may break into the G6 in the next two to three years, India in about a decade and Russia thereafter. Russia is most susceptible to getting knocked off the G6, because its population is projected to fall by 30 percent over the next few decades. If that happens, the country most likely to replace Russia is Mexico, Indonesia or Turkey.
How have the BRIC countries become prominent players in the global marketplace? What opportunities do they offer to global companies? What obstacles must these countries overcome to flourish?
The BRICs are in the news because they are growing at 6 to 10 percent per year, compared to the 1 to 3 percent rate of Europe, Japan and the U.S. They now account for two-thirds of world growth and have become the world’s growth engines. Together, the BRICs have 3 billion people, which makes for a lot of new customers for U.S. firms and a large new pool of talent.
Emerging economies are also spurring new kinds of innovation, particularly in making products incredibly cheap and simple to use. But every BRIC country has its Achilles’ heel. China’s big vulnerability is its political system, based on one-party rule. India’s includes its poor infrastructure and tension with neighbors. Brazil suffers from very high inequality of income, and Russia from weak institutions and an overdependence on natural resources. In other words, the BRICs will thrive, but it won’t be smooth sailing all the way.
Which BRIC nation should we watch most closely in 2012?
Growth has slowed in every one of the BRICs, following financial crises in the U.S. and Europe. Getting back to the pre-2008 rates of growth will not be easy, not the least because of political distractions, such as the upcoming presidential election in Russia, or the corruption scandals in India. But the country to watch in 2012 is China, because it has to make at least three important transitions this year. It has to change its strategy from export-driven growth to domestically driven growth. It has to find a way to placate a restive population looking for greater freedoms and transparency. And, most important, it has to make the decennial transition of power, from President Hu Jintao to Xi Jinping. Unless all these transitions occur smoothly, China could be in uncharted waters.