History, present and future of BRIC countries

History, present and future of BRIC countries INTRODUCTION Our topic for research is BRIC issues, so firstly we must know what is BRIC. BRIC is a related acronym that refers to the economies of Brazil, Russia, India and China. This idea was incorporated by Brazilian president Luis Inacio Lula da Silva in June 2007. The basic reason for these four countries to come together was their common dissatisfaction the prevailing global economic and political order largely dominated by the US and her western allies. They have not been given the importance that these countries should have got in relation to their size and share in the economy. Its only the G-8 countries that decide for the future rules of global world order. So this was the reason for formation of the BRIC countries. The BRIC countries are also referred to as the big four as all of them are deemed to be at similar stage of economic development. The acronym was coined by Jim ONeill in a 2001 paper entitled The World Needs Better Economic BRICs. The following is the position of BRIC nations in relation to the world: Countries Share of world nominal GDP (%) Share of world military spending (%) Share of world population (%) Share of world landmass (%) Average share (%) http://upload.wikimedia.org/wikipedia/commons/thumb/0/05/Flag_of_Brazil.svg/22px-Flag_of_Brazil.svg.png  Brazil 3.3 1.7 2.8 5.6 3.4 http://upload.wikimedia.org/wikipedia/commons/thumb/f/fa/Flag_of_the_People%27s_Republic_of_China.svg/22px-Flag_of_the_People%27s_Republic_of_China.svg.png  China 9.3 6.6 19.5 6.2 10.4 http://upload.wikimedia.org/wikipedia/commons/thumb/4/41/Flag_of_India.svg/22px-Flag_of_India.svg.png  India 2.3 2.4 17.3 1.9 6.0 http://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Flag_of_Russia.svg/22px-Flag_of_Russia.svg.png  Russia 2.4 3.5 2.1 10.9 4.7 According to Goldman Sachs, by 2050 the combined economies of the BRIC countries would eclipse the combined economies of the current richest countries in the world. The BRIC countries combined currently account for more than quarter of worlds land and more than 40% of worlds population. The economic potential of Brazil, Russia, India and China is such that they can become the top four dominant countries of the world by the year 2050. The following leaders were present at the summit: http://upload.wikimedia.org/wikipedia/commons/thumb/3/3c/Lula_-_foto_oficial05012007_edit.jpg/80px-Lula_-_foto_oficial05012007_edit.jpg BrazilBrazil Luiz Inà ¡cio Lula da Silva, President http://upload.wikimedia.org/wikipedia/commons/thumb/e/e9/Dmitry_Medvedev_official_large_photo_-5.jpg/86px-Dmitry_Medvedev_official_large_photo_-5.jpg RussiaRussia Dmitry Medvedev, President http://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Manmohansingh04052007.jpg/78px-Manmohansingh04052007.jpg IndiaIndia Manmohan Singh, Prime Minister http://upload.wikimedia.org/wikipedia/commons/thumb/c/c4/Hu_Jintao_%28Cropped%29.png/107px-Hu_Jintao_%28Cropped%29.png Peoples Republic of ChinaChina Hu Jintao, President BRIC countries hold a combined GDP (PPP) of 15.435 trillion dollars. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets. In a paper Dreaming with BRICS: The Path to 2050, published in 2003, the following was estimated: Chinas economy will surpass the economy of Germany in the next few years, of Japan by 2015, and of the United States of America by 2041. The growth rate of India will be the highest and it will overtake Japan by 2032. BRICs currencies can appreciate by 300% over the next 50 years. Taken together, the BRIC countries can be larger than United States and the developed economies within 40 years. By the year 2025. The BRIC countries will bring about 200 million people with incomes above $15000 in the worlds economy. It is equal to the combined populations of Germany, France and United Kingdom. But according to the reports the economy of china overtook the economy of Germany in the year 2007 instead of the prediction of 2008 and Japan in the July 2010. ISSUES RELATING TO BRIC COUNTIES The first official BRIC summit was held on 16 June 2009, in Yekaterinburg, Russia. Luiz Inà ¡cio Lula da Silva, Dmitry Medvedev, Manmohan Singh, and Hu Jintao, the respective leaders of Brazil, Russia, India and China, all attended this summit. The main focus of this summit was to improve the current global economic situation and discussing how these four countries could work together in the future for the development of the world economy. They also discussed how these countries could be better involved in global affairs in the future. They also suggested that there was a need for a new global reserve currency that is diversified, stable and predictable. This statement was a kind of an attack on the dominance of the US dollar. The foreign ministers of all these countries had earlier also met on May 16, 2008 in Yakaterinburg. One week before their first official summit, Brazil had offered $10 billion dollars to the International Monetary Fund (IMF) which was the first time that the country had ever made such a loan. This loan showed how the economy of Brazil is growing and that it is in a good state now. China has also planned to invest a total of $50.1 billion and Russia planned to invest $10 billion. The following the major issues discussed by BRIC: Coping with the current international financial crisis: Discussions were held on issues such as the worlds reserve currency and some countries will try and adopt local currencies as settlement currency for bilateral trade so that they can overcome the impact of international financial crisis and facilitate trade contacts with other countries. The BRIC countries discussed ways to overcome the financial crisis that many parts of the world were facing as a result of the crisis that started in U.S. Coping with global climate change: Another important BRIC issue is to cope with global climate change. This is a very important issue because we need to ensure that the world becomes a better planet to live in. The concept of sustainable development was stressed in solving this problem. Sustainable development means that the resources should be used efficiently and effectively such that it is not only useful to the present generations but also available for the future generations. They also discussed that environmental issues should not be made an excuse to restrain the economic and social development of emerging economies. Environmental degradation should not hinder economic growth. The colloquium on Climate Change Law and Governance in South Asia, aims to inspire legal discussion within and between the BRICs countries. It is being jointly organized by the Environment Ministry of Government of India and the Geneva-based International Union for the Conservation of Nature (IUCN). Development of second and third generation renewable energies The development of second and third generation renewable energies is a subject of common interest for all the countries. They also hope that more and more countries of the world will participate in the development and utilization of renewable sources of energy so as to facilitate economic development. World peace and security: World peace and security is a universal issue concerning the human race. Without peace and security economic growth and development cannot happen. The emerging markets should play a greater role among international multilateral institutions to improve the efficiency, vitality of international multilateral mechanism. Such countries can play a positive role to preserve the sovereignty of all countries as well as maintain world peace. BRIC cooperation will enhance the voice of developing nations: BRIC countries share common interests and concerns in international affairs and should consolidate cooperation. It is necessary for the BRIC countries to strengthen dialogue, coordination and cooperation to enhance the overall voice and influence of emerging markets and developing countries, and promote world peace, stability and universal development. BRIC countries demand more say in financial system reform: The BRIC countries have welcomed the expansion of the Balse committee that standard accounting bodies need to be set up. The BRIC ministers agreed that stabilization of international financial system through liquidity support and recapitalization is a priority. They are also taking measures to promote domestic demand in their national economies. The BRIC countries to play roles as new donors to Africa: Africa has plenty to gain from the growing involvement of China and other BRIC nations in trade and investment on the continent Need for changes in global institutions, including the International Monetary Fund (IMF) and the World Bank: The BRIC countries have realized the need for change in global institutions including the International Monetary Fund and the World Bank. There is also a need to update regulation of financial markets to avoid another global crisis. On matters relating to the IMF, the countries have agreed to aim at achieving a significant 7% shift in Quota shares in favour of EMDCs and New arrangement to borrow. For the World Bank, the nations discussed ways and means of enhancing the voice participation of developing countries and agreed to aim for a shift of a 6% of parity. They also supported an increase in capital for both the World Bank and its private lending arm, the International Finance Corporation (IFC). Challenges in setting conditions for sustained growth: Brazil is the only nation where the growth rates have been less than expected. This is because Brazil is much less open to trade and it has lower investment and savings. The public and foreign debt is also very high. Unless these obstacles are removed, Brazil is unlikely to achieve the targets set for it. Environmental constraints: Environmental degradation is a critical risk to the economic rise of the BRIC nations. Global warming can have a bad impact on the rural incomes. Also urbanization and industrialization puts a lot of pressure on the environment. Many major cities like Shanghai, Mumbai, Rio de Janeiro are vulnerable to rising sea levels. Resources issue: Russia and Brazil are resource rich nations but china and India have to depend a lot upon imports to fuel their growth. If commodity prices rise, it will have a lot of effect on their imports and hence their growth. If technology advances and reduces dependence on conventional energy sources, Russia and Brazil will face reduced prospects for growth. Demographics: The population of India is increasing at a very high rate while the population of Russia is at decline. Brazil and China have declining populations (in case of China due to one family one child policy). Population decline could be a significant constraint for Russia and China, though China could avoid this by relaxing the rules a bit. Structural constraints: All the BRIC countries have structural issues which need to be addressed. India needs significant economic reforms. Brazil saves and invests too little. Each country should invest at least that much to ensure that it has infrastructure to maintain growth. Iran: Brazil has expressed affinity with China towards the Iranian nuclear issue. Development: China has showed willingness to be a positive partner in global development saying The scale and complexity of the challenges that we face in the course of development are unmatched anywhere else in the world and have been rarely seen in human history. China is willing to be dedicated to peace and cooperation and is willing to make greater contribution to mankind. The above were most of the major BRIC issues which we have tried to explain through our research.