BRICS COUNTRIES

GLOBALIZATION AND COMPETITIVENESS

Author: Julio César Botero Robayo/ Translation and update: Johana Paola Hoyos
 INDEX

1. BRICS Countries
1.1. Brazil
1.2. Russia
1.3. India
1.4. China
1.5. South Africa

2 POLITÉCNICO GRANCOLOMBIANO
THEMATIC DEVELOPMENT

1. BRICS Countries
Emerging economies, known as the BRICS have given a new meaning to globalization and competitiveness.

BRICS brings together five major emerging economies, comprising 43% of the world population, having
37% of the world GDP and 17% share in the world trade.

The acronym BRIC was first used in 2001 by Goldman Sachs in their Global Economics Paper, "The World
Needs Better Economic BRICs" on the basis of econometric analyses projecting that the economies of
Brazil, Russia, India and China would individually and collectively occupy far greater economic space and
would be amongst the world’s largest economies in the next 50 years.

Figure 1. BRICS

Source: Yulia Terentyeva (s.f)

As a formal grouping, BRIC started after the meeting of the Leaders of Russia, India and China in St.
Petersburg on the margins of G8 Outreach Summit in 2006. The grouping was formalized during the first
meeting of BRIC Foreign Ministers on the margins of UNGA in New York in 2006. The first BRIC Summit
was held in Yekaterinburg, Russia, on 16 June 2009.

It was agreed to expand BRIC into BRICS with the inclusion of South Africa at the BRIC Foreign Ministers’
meeting in New York in September 2010. Accordingly, South Africa attended the third BRICS Summit in
Sonya, China on 14 April 2011. (BRICS, 2016)

In 2015, BRICS countries accounted for a total nominal GDP of 16.92 trillion, equivalent to 23.1% of world
GDP. Their territories are home to 3.073 billion inhabitants (53.4% of the population). Its exports

GLOBALIZATION AND COMPETITIVENESS 3

 amounted, in 2014, US $ 3.48 trillion. Imports in that same year amounted to US $ 3.03 trillion. Since 2001,
the BRICS have more than doubled their share of world exports. In that year, the group represented 8.1%
of world's total exports; in 2015, they accounted for 19.1% of that total.

Between 2006 and 2015, intra-BRICS trade increased 163%, from US $ 93 to 244 billion. In the same period,
Brazil's exports to other BRICS countries increased 202%, from US $ 14.25 to 43.05 billion. Imports have
increased by 249%, from US $ 10.84 to US $ 37.87 billion. In 2015, Brazil recorded a positive trade balance
of US $ 5.1 billion with the BRICS. (BRICS, 2016)

1.1. BRAZIL

Figure 1. Brazil

Source: Cssanddesign (s.f)

The inclusion of Brazil within groups of BRIC was questioned when it first came out that name in 2001. At
that time, Brazil was in a period of low economic growth, and in the midst of a crisis as a result of the Asian
crisis and the situation in Argentina. However, if one takes into account the level of growth and the huge
advances in macroeconomic terms of the last 10 years, Brazil may be included in the group of new
emerging powers.

Brazil is the world's seventh largest economy. After a period of strong growth, the Brazilian economy
started exhibiting signs of a slowdown in 2011, because of price stagnation for raw material exports, a
drop in domestic demand caused by high levels of household debt and a decline in investment. Due to a
drop in household consumption, industrial activity and investment, the country has been in recession since
2014 (-3.5% in 2015).

The economic dimension of Brazil worldwide is highlighted by international financial groups, which see it
as a destination for their investment funds. Brazil has just over 200 million people and a growing middle

4 POLITÉCNICO GRANCOLOMBIANO
class and lower middle that means a boom in domestic consumption. Added to this, it has large companies
with strong state presence that mark the commercial dynamics in important sectors within South America,
such as Petrobras.

The country continues to face difficult social problems and has one of the highest levels of inequality in
the world. There are high disparities between the regions, and there has been a rise in the rates of
delinquency and criminal violence. The unemployment rate increased to 7.5% in 2015, and informal
employment remains high.

1.2. RUSSIA
Since the fall of the Soviet Union in 1991, Russia has undergone dramatic changes, both political and socio-
economic structural. It is already known the change in the political system, a model of single party under
the Communist regime, to an alleged multiparty democracy today. Both the one, the model former single
party, as the current system have important questions. Since the breakup of the communist political
system, the Russian political leadership was characterized by high levels of corruption. Added to this, there
was the centralization of power in the president, Vladimir Putin, the strong man of Russian politics today.
It is a constant in the parliamentary elections in the last decade the prohibition of certain parties and
candidates, focusing on those with clear opposition to government policies.

Figure 2. Russia

Source: Cssanddesign (s.f)

In 2015, Russia plunged deeper into the crisis that began in 2014. The country's reserves melted, the
budget deficit deepened and the volatility of the ruble increased due to the introduction of a floating
exchange rate system in late 2014, forcing the Central Bank to intervene. Inflation continued to rise and
the credit crisis affected more than seventy Russian banks. The fall in oil prices had a negative impact on
hydrocarbon revenues, while non-oil revenues were impacted by the sluggish economy and the Western

GLOBALIZATION AND COMPETITIVENESS 5

 sanctions, which continue to penalize the Russian economy. The 2016 budget of the order of RUB 16,000
billion focuses on the welfare system, defense and security.

The unemployment rate, which rose as an effect of the 2008 financial crisis, Decreased in 2014 (6%), but
actual wages Have fallen. However, social Inequalities REMAIN strong, Particularly Between cities and rural
areas big. Only 1% of the population owns 71% of private assets. DESPITE the appearance of an urban
middle class, the poverty rate remains at 14%. A protest movement coming from the middle classes has-
been demanding the end to corruption and nepotism. (Santandertrade, 2016)

1.3. INDIA

Figure 3. India

Source: Cssanddesign (s.f)

If 1978 represented the year of the most important reforms to China, in India occurred in 1992, with the
package of liberalization of the economy, called LPG (Liberalization, Privatization and Globalization). The
main protagonist of the implementation of these economic measures was finance minister at the time,
Manmohan Singh, India's case is paradigmatic. The news that promote this country tend to be the same
as a new emerging world economic power, as a "big market" but obviated mention the large
socioeconomic problems that lives most of this country. In addition to the presentation of "emerging
economy" India is presented as the largest democracy in the world, therefore as an example of how
developing countries can grow from liberal political and economic models.

After a satisfactory fiscal year 2014 - 2015, the growth rate of India rose significantly (7.3% of GDP) during
the subsequent year. According to forecasts, this trend will strengthen in 2016-2017, making the Indian
economy the most dynamic in the world. However, these figures should be approached with some caution,
insofar as India's new method of calculating GDP is likely to inflate its performance. Nevertheless, in the
global economic downturn, the Indian economy has fared better than other emerging countries.

6 POLITÉCNICO GRANCOLOMBIANO
However, India is still a poor country: it continues to suffer from a low GDP per capita, almost 25% of the
population still lives below the poverty line and the country's inequalities are very strong. Half of the
children under five years of age suffer from malnutrition. Unemployment affects around 7% of the
workforce. (Santandertrade, 2016)

1.4. CHINA

Figure 4. China

Source: Cssanddesign (s.f)

The economic power of China is already a current data of any analysis of international economic policy.
Since the opening of the free market and reforms introduced by Deng Xiaoping back in 1978, China has
had an impressive transformation. Just mention the 'hard' data this transformation enough to understand
why China is planted strong at the international level. Since 1979, China's GDP has grown at an annual
average of 9.8%, while per capita income has increased fivefold, and since then, about 500 million people
overcome poverty in that country.

China is the second largest global economy, the largest exporter and has the largest exchange reserves in
the world. The global recession of 2009 interrupted the steady growth momentum and revealed the limits
of an export-based growth strategy. Due to the global economic slowdown and the decline in trade,
China's growth fell to under 7% in 2015, its lowest rate in 25 years.

China still has many challenges to face, an ageing population and shrinking workforce, the lack of openness
of its political system and issues of competitiveness in an economy dependent on high capital spending
and the expansion of credit. A large gap remains between the living standard of the cities and the
countryside, between urban zones on the Chinese coast and the interior and western parts of the country,
as well as between the urban middle classes and those who have not been able to profit from the growth
of recent decades. These inequalities are becoming increasingly worrisome for both Chinese authorities

GLOBALIZATION AND COMPETITIVENESS 7

 and investors. Although poverty has largely decreased in China, almost 10% of the population, i.e. more
than 120 million people, continue to live on less than USD 1 per day.

1.5. SOUTH AFRICA

South Africa, which is home to 75% of the biggest African companies, experienced sustained growth in the
2000s. However, its economy was severely hit by the international economic crisis. In 2015, growth was
maintained at its 2014 rate (1.4%). South Africa remains the most heavily industrialized African country.
However, the economy has not been able to expand quickly enough to absorb the inflow of new workers.
The economy relies heavily on the mining sector, as well as the dynamic agricultural and financial sectors.
In 2015, the country suffered greatly from the decline in the global prices of oil and the drop in Chinese
demand. If this trend continues, many jobs and exports will be at risk.

Figure 5. South Africa

Source: Cssanddesign (s.f)

President Jacob Zuma replaced the Finance Minister with a person who lacked political experience. As a
result, the national currency, the rand, dropped significantly and several rating agencies downgraded the
country's sovereign rating. To calm discontent, the Government has been steadily increasing social
benefits, so that nearly a third of the population is now receiving benefits. In 2015, a universal health
coverage bill was approved. The educational system and infrastructure remain underdeveloped.

Unemployment affects 25-40% of South Africa's workforce, depending on the source. A relatively large
number of South Africans suffer from AIDS (six million are HIV positive); on the other hand, the distribution
of retroviral drugs has been gradually improving, which has led to a drop in the AIDS mortality rate. A
significant proportion of the population lives on less than EUR 1 per day. South Africa is the most unequal

8 POLITÉCNICO GRANCOLOMBIANO
country in the world, according to some measures. In April 2015, there were riots against foreigners, who
are accused of taking jobs from South Africans. (Santandertrade, 2016)

GLOBALIZATION AND COMPETITIVENESS 9

 GLOSSARY

TERM DEFINITION
Anti-dumping duty.

ADD Tariff levied on dumped imports. The threat of an anti-dumping duty can deter
imports, even when it has not been used, and anti-dumping law is therefore a form
of nontariff barrier.

BUDGET
The negative of the budget surplus; thus the excess of expenditure over income.
DEFICIT

1. Originally this term was applied to countries that had recently ceased to be part of
the Soviet Union and its satellites, and thus emerging from centrally planned
communist economies. The term drew attention to their transition to becoming
EMERGING market economies.
ECONOMY 2. Rather quickly, perhaps acknowledging the importance of central planning and the
failure of markets in many other countries, the term has expanded to encompass also
developing countries, not necessarily ever communist, as they expanded the role of
markets.

1. Term coined in the early 1980s by World Bank economist Antoine van Agtmael to
describe "economies with low-to-middle per capita income" (according to Financial
EMERGING Times Oct 20, 2006).
MARKET
2. Same as emerging economy.

3. The securities market of an emerging economy.

CARICOM Caribbean Community and Common Market

Any provision of the tax code, such as a tax credit or tax deduction, that reduces the
TAX BREAK amount of tax that a firm or individual will pay, perhaps in return for behavior that
the government wishes to encourage.

10 POLITÉCNICO GRANCOLOMBIANO
BIBLIOGRAPHY

BRICS. (2016, August 18). BRICS. Retrieved from http://brics2016.gov.in/content/innerpage/about-

usphp.php

BRICS. (2016, September 12). BRICS. Retrieved from Economic Data and Trade Statistics:
http://brics.itamaraty.gov.br/about-brics/economic-data

Dobrusin, Bruno. (2011)Los BRIC. ¿Ingenio de marketing o nueva arquitectura económica? Buenos Aires:
Secretaría de Relaciones Internacionales, Central de Trabajadores de la Argentina,

Santandertrade. (2016, September 12). Retrieved from https://en.portal.santandertrade.com/analyse-

markets/russia/economic-political-outline

Figures

Yulia Terentyeva (s.f) icono de la unión con todos los países BRICS participaiting en el mapa mundial
[Vectores] Recuperado de
http://es.123rf.com/search.php?word=42030220&srch_lang=es&imgtype=&Submit=+&t_word=&t_lang
=es&orderby=0&mediapopup=42030220

Cssanddesign (s.f) Brasil infografía [Vectores] Recuperado de

http://es.123rf.com/search.php?word=infographic+brazil&imgtype=0&t_word=infographic+brazil&t_lan
g=es&oriSearch=brasil+infografia&srch_lang=es&sti=li5k09jv78ftzmwyx4|&mediapopup=38923400

Cssanddesign (s.f) Infografía Rusia, datos estadísticos, información Rusia, ilustración vectorial [Vectores]
Recuperado de

http://es.123rf.com/search.php?word=infographic+brazil&imgtype=0&t_word=infographic+brazil&t_lan
g=es&oriSearch=brasil+infografia&srch_lang=es&sti=li5k09jv78ftzmwyx4|&mediapopup=38630814

Cssanddesign (s.f) [Vectores] India infografías, datos estadísticos, información de la India Recuperado de

http://es.123rf.com/search.php?word=infographic+brazil&imgtype=0&t_word=infographic+brazil&t_lan
g=es&oriSearch=brasil+infografia&srch_lang=es&sti=li5k09jv78ftzmwyx4|&mediapopup=38630811

GLOBALIZATION AND COMPETITIVENESS 11

 Cssanddesign (s.f) Infografía de China, los datos estadísticos, la información de China, ilustración vectorial
[Vectores] Recuperado de

http://es.123rf.com/search.php?word=infographic+brazil&imgtype=0&t_word=infographic+brazil&t_lan
g=es&oriSearch=brasil+infografia&srch_lang=es&sti=li5k09jv78ftzmwyx4|&mediapopup=38630883

Cssanddesign (s.f) Infografía Sudáfrica, datos estadísticos, información Sudáfrica, ilustración vectorial
[Vectores] Recuperado de

http://es.123rf.com/search.php?word=infographic+brazil&imgtype=0&t_word=infographic+brazil&t_lan
g=es&oriSearch=brasil+infografia&srch_lang=es&sti=li5k09jv78ftzmwyx4|&mediapopup=39756655

Complementary sources

BRICS Leaders' Declarations and Action Plans

http://brics.itamaraty.gov.br/declarations-action-plans-and-communiques/listadecplan

12 POLITÉCNICO GRANCOLOMBIANO