"The BRICS Are in a Class by Themselves."
Yes and no. There is no question that the BRICS -- Brazil, Russia, India, China, and the group's newest member, South Africa -- are big. They matter. In terms of population, landmass, and economic size, their pure dimensions are impressive and clearly stand out from those of other countries. Together, they make up 40 percent of the world's population, 25 percent of the world's landmass, and about 20 percent of global GDP. They already control some 43 percent of global foreign exchange reserves, and their share keeps rising.
Jim O'Neill of Goldman Sachs put the spotlight on the rise of the original four of these big new economic powers when he gave them the name BRICs in 2001, and their collective growth began to soar. But in reality their economic success had been a long time coming. Twenty years before that, when I was at the World Bank's International Finance Corp. (IFC), we were identifying the opportunity to rebrand these countries, which, despite their enormous economic potential, were still lumped together with the world's perennial basket cases as "underdeveloped countries" stuck in the "Third World." At the time, Third World stock markets were simply off the radar screen of most international investors, even though they were starting to grow; I gave them the name "emerging markets." Local investors were already quite active in Malaysia, Thailand, South Korea, Taiwan, Mexico, and elsewhere, as homegrown companies became larger and more export-competitive while market regulation became more sophisticated. But until the IFC built its Emerging Markets Database and index in 1981, there was no way to measure stock performance for a representative group of these markets, a disabling disadvantage when stacked against other international indices, which were skewed in favor of developed countries such as Germany, Japan, and Australia. This brand-new research on markets and companies provided investors with the confidence to launch diversified emerging-market funds following the success of individual country funds in markets such as Mexico and South Korea.
The BRICs, however, took much longer to get ready for prime time. Until the beginning of the 1990s, Russia was still behind the Iron Curtain, China was recovering from the Cultural Revolution and the Tiananmen Square unrest, India remained a bureaucratic nightmare, and Brazil experienced bouts of hyperinflation combined with a decade of lost growth. These countries had largely muddled along outside the global market economy; their economic policies had often been nothing short of disastrous; and their stock markets were nonexistent, bureaucratic, or supervolatile. Each needed to experience deep, life-threatening crises that would catapult them onto a different road of development. Once they did, they tapped into their vast economic potential. Their total GDP of close to $14 trillion now nearly equals that of the United States and is even bigger on a purchasing power parity basis.
Here's the problem, however, with asking whether the BRICS "matter": Big is not the same as cohesive. The BRICS are part of the G-20, but not a true power bloc or economic unit within or outside it. None is fully accepted as "the" leader even within its own region. China's rise is resented in Japan and distrusted throughout Southeast Asia. India and China watch each other jealously. Brazil is a major supplier of commodities to China and has relied on it for its economic success, but the two powers compete for resources in Africa. Russia and China may have found common cause on Syria, but they compete elsewhere. And though intra-BRIC commerce is growing rapidly, the countries have not yet signed a single free trade agreement with each other. Then there's South Africa, which formally joined this loose political grouping in 2010. But being a member of the BRICS doesn't make it an equal: South Africa doesn't have the population, the growth, or the long-term economic potential of the other four. Indonesia, Mexico, and Turkey would have been other logical contenders -- or South Korea and Taiwan, for that matter, which have comparable GDPs but much smaller populations than the original BRICs.
The BRICS are also nowhere near economically cohesive. Russia and Brazil are way ahead in per capita income, beating China and India by a huge amount -- nearly $13,000 compared with China's $5,414 and India's $1,389, according to 2011 IMF data. And their growth trajectories have been very different. What's more, the BRICS face stiff competition from other emerging powerhouses in the developing world. While China and India seemed to have a competitive edge for a while due to their low labor costs, countries like Mexico and Thailand are now back on the competitive map. And while growth in the BRICS seems to be slowing, many African countries are receiving more foreign investment, may be more politically stable, and are at long last moving away from slow or no growth toward much more robust economies.