An investment bank economist first grouped the nations of Brazil, Russia, India and China together based on two shared characteristics: large populations and rapid economic growth. The so-called BRIC nations had little else in common -- they covered the full scale of democratization, with varying degrees of financial transparency and vastly different economies. Yet after Goldman Sachs' 2001 report that coined the acromym was released, the BRIC nations became inexorably linked, at least in the collective mind of the investment community. Last week, the BRIC nations took their union out of the realm of analyst reports and formed a political alliance to challenge the dominance of the economic institutions created in the aftermath of WWII. The one-day summit in the Ural Mountains city of Yekaterinburg brought together ministers from the second-largest food producer (Brazil), biggest energy exporter (Russia), the largest democracy (India), and the most populous country (China). Together the BRIC nations represent 40 percent of the world's population, and more than 10 percent of global GDP. The agenda for the meeting sought to turn their combined economic power into political clout, and covered issues from the global food crisis to U.N. reform. The joint communiqué released at the conclusion of the summit outlined vastly different positions than those of the G-8, International Monetary Fund, and World Bank. The BRIC ministers urged a "more democratic international system founded on the rule of law and multilateral diplomacy," or a system where emerging markets have a greater role and the dominant powers are contained by the same rules as everybody else. Still, more than the formal agenda of their initial summit, it is the geopolitical clout that the BRIC nations would wield as a block that could become a significant factor in international relations in the coming years. A History of BRICs Jim O'Neill, Goldman Sachs' chief global economist, coined the BRIC acronym in the 2001 report, "Building Better Global Economic BRICs," which looked at the next 10 years of economic growth in Brazil, Russia, India, and China. After successive financial crashes had tarnished the image of emerging markets in the eyes of Western investors, O'Neill's report was at least in part a marketing tool for the bank. But it also made a substantive argument that the growth of the world's largest emerging markets would alter the global financial landscape in the coming decade. It concluded "world policymaking forums should be reorganized and in particular, the G-7 should be adjusted to incorporate BRIC representatives." Follow up reports, most notably the 2003 "Dreaming with BRICs: The Path to 2050," offered a more methodically rigorous look at how the BRIC economies would reshape the global economy and extended the bank's earlier forecast timeline. By 2050, "the largest economies in the world (by GDP) may no longer be the richest (by income per capita)," the bank argued. As the concept gained ground in the investment community, the BRIC leaders sought ways to turn this attention into political influence. Russia, India, and China began meeting on the sidelines of multilateral meetings in 2002, and held their first stand-alone RIC meeting, or "troika," in 2004. Central Asian issues dominated these meetings, and very little was accomplished, but the agenda gradually expanded into global affairs. The RIC nations met for their fourth summit the day before Brazil's foreign minister arrived in Russia last week and released a statement that criticized Kosovo's declaration of independence and called for a diplomatic resolution to Iran's nuclear problem, amongst other issues. The RIC countries are looking to include Brazil in future meetings and to use the BRIC grouping to bolster the geopolitical clout of emerging markets. Last year, the BRIC nations accounted for about 12 percent of the world's GDP, up from 8 percent in 2000. If Goldman Sachs' forecasts are accurate, the BRIC economies could be half the size of the G-6 by 2025, and surpass them by 2045. Yet this growing influence is not reflected in the leadership structure of the IMF or World Bank, and while Russia is now part of the G-8, it is under constant pressure of being kicked out. Throwing BRICs at the International Order Foreign Minister Sergei Lavrov addressed a press conference after the BRIC meeting with language that recalled past Russian statements arguing for a multipolar world. "We are the world's fastest growing economies, we have many common interests in the globalized world and share many views on how to build a more democratic, fair and stable world." Brazilian Foreign Minister Celso Amorim told Bloomberg news that the BRIC nations are "taking awareness of our own influence in world affairs" and "changing the way the world order is organized." Indian Foreign Minister Pranab Mukherjee argued that the large emerging market economies "have prevented the world from facing a worsening situation. This is a different situation from the past, when there was a global slowdown." Mukherjee continued, "In this area, it is clear BRIC can increasingly play a key role." By joining forces, the BRIC nations will be in a position to push for reforms at the IMF, World Bank, WTO, and U.N. that favor emerging markets and reflect the general drift of economic power away from the U.S. and Europe. However, if their demands are not met, the BRIC summit could evolve into a multilateral organization able to challenge the dominance of the existing world policy forums. Each of the BRIC nations has pushed for reforms on its own, with varying degrees of success. Brazil challenged U.S. cotton subsidies at the WTO and won its case, but Russia's political disputes have prevented it from being accepted into the WTO. Brazil, India, and China each saw an increase in their voting shares at the IMF in April, but the U.S. and European nations will still be able to use their combined vote to ensure the organization is headed by a European. Russia formally joined with the G-7 nations in 1997 to form the G-8, a privilege still denied to China even though its economy may have already surpassed Germany to become the third largest in the world. Still, vast internal differences may prevent the BRIC forum from becoming a coherent organization. Brazil and India are thriving democracies, while Russia is slipping backwards and China maintains a single-party system. Commodities dominate the economies of Brazil and Russia, while the thirst for commodities is driving the foreign policies of India and China. Also, regional disputes have limited the effectiveness of the past RIC summits, and expanding the group to include Brazil may not alleviate the problems. These tensions were shown in the first summit when China killed Russia's bid to insert into the joint communiqué a statement of support for India's and Brazil's bids for U.N. Security Council seats. Yet the BRIC nations see their interests in general alignment and have scheduled future summits and a process for lower-level communications. The group plans to hold a follow-up meeting at the U.N. this September and another stand-alone meeting in India next year. Adam Wolfe is a senior analyst at the Power and Interest News Report. He blogs at On Political Risk. Photo: Ministers from Brazil, Russia, India and China in Yekaterinburg, Russia, May 16 (Russian foreign ministry photo) |
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