SAO PAULO – Brazil, Russia, India, and China recently held their second annual summit in Brasilia. Journalists continue to lavish attention on these so-called “BRIC” countries, but I remain skeptical of the concept.
Goldman Sachs coined the term in 2001 to call attention to profitable opportunities in what it considered “emerging markets.” The BRICs’ share of world GDP rose from 16% in 2000 to 22% in 2008. Collectively they did better than average in the subsequent global recession. Together, they account for 42% of world population and one-third of global economic growth in the past ten years. Putting aside the United States (which ranks third in population), annual economic growth in the other four most populous countries – China, India, Indonesia, and Brazil – was above 5-6 % in 2000-2009.
Obviously, that is good news for the world economy, but an economic term has taken on a political life of its own, despite the fact that Russia fits poorly in the category. As the Beijing Review commented, “when Goldman Sachs created the acronym BRIC in 2001, neither the economists nor the rest of the world imagined that Brazil, Russia, India, and China would finally sit together to build up a substantial platform one day.” In June 2009, the foreign ministers of the four countries met for the first time in Yekaterinburg, Russia, to transform a catchy acronym into an international political force.
The BRICs hold $2.8 trillion or 42% of global foreign reserves (though most of that is Chinese.) So, in Yekaterinburg, Russian President Dmitri Medvedev declared that “there can be no successful global currency system if the financial instruments that are used are denominated in only one currency.” After China eclipsed the US as Brazil’s largest trading partner, China and Brazil announced plans to settle trade in their national currencies rather than dollars. Although Russia accounts for only 5% of China’s trade, the two countries announced a similar agreement.