China is the world’s second-largest economy and is fast catching up on the US amid a trade war, while Russia is, well, still Russia. So, as the BRICS meet up, we ask what is the point of this oddly divergent group.
Cooperation among the five BRICS (Brazil, Russia, India, China, and South Africa) has set an example of a new type of international relations, Chinese State Councilor and Foreign Minister Wang Yi said recently.
The BRICS meet this week in Brasilia under the banner of “Economic Growth for an Innovative Future,” with a focus on strengthening cooperation in science, technology and innovation, enhancing cooperation in the digital economy, more cooperation in the fight against transnational crime, money laundering and drug trafficking.
Wang went on to say that the BRICS had served as a stabilizer in international volatility and an example of a new type of international relations. “The BRICS should continue to promote multilateralism, take the lead in safeguarding the international system with the UN as its core and uphold the purposes and principles of the UN Charter.”
The acronym BRIC (then excluding South Africa) was created by Goldman Sachs’ analyst Jim O’Neill in 2001 for the emerging powers he believed would be, alongside the US, the five biggest economies of the world in the 21st century. Nobel Prize laureate Michael Spence soon after predicted the BRICS would replace the US and Europe as the key engines of the world economy. In a decade, Spence predicted, the BRICS’ share of global GDP would exceed 50%.
Read more: Russia’s comeback in Africa
Lacking access to the top jobs in international financial and development institutions, the BRICS set up the New Development Bank (NDB) in 2014 to finance infrastructure projects in the developing world. The institution was intended to rival the US- and Europe-dominated IMF and World Bank and were explicitly aimed to break the West’s hold on finance and development. The bank had a total authorized capital of $100 billion (€91 billion) and was open to all members of the UN.
Four years after starting operations, it had a $10.2 billion loan book and is one of the word’s biggest multilateral development banks. Since then, the bank has lent over $5 billion in 21 projects. The BRICS at the same time created a Contingency Reserve Arrangement which would be accessed by BRICS members in need of funds.
BRICS makes little sense today, S&P Global Ratings said in an emailed note in late October. It said the BRICS had lost relevance due to their diverging long-term economic trajectory. The economic performance of China and India over the past two decades contrasts with poor results in Brazil, Russia and South Africa, whose shares of global output have shrunk since 2000. India and China have exceeded the rating firm’s growth predictions since the turn of the century. Russia and South Africa have failed to meet them since about 2005, Brazil since 2010.
“The diverging long-term economic trajectory of the five countries weakens the analytical value of viewing the BRICS as a coherent economic grouping,” O’Neill wrote recenly. “I myself have occasionally joked that perhaps I should have called the acronym ‘IC’ based on the clear disappointment of the Brazilian and Russian economies in the current decade since 2011, where both have clearly significantly under-performed compared with what the 2050 scenario path laid out.”
The five countries’ economic models and policies are also divergent, as are their credit ratings. China’s has gone up four rungs on the S&P ladder to A+, while the others have never got that high: Russia and India are five steps below and South Africa and Brazil seven and eight below respectively.
Facts and figures
South Africa was the last to enter the bloc and is the smallest of the countries with a population of about 50 million, compared to the 143 million of Russia, the 1.2 billion of India, the 1.34 billion in China and the estimated 210 million in Brazil.
BRICS together represent 42% of the global population, 23% of GDP, 30% of the territory and 18% of trade. Combined, they are bigger than the eurozone and unless China slows dramatically, the collective size of the BRICS countries will soon be as big as the US. Over the past decade, the combined BRICS’ GDP has grown 179% and total trade of the member nations has risen 94%. From 2008 to 2017, the world’s average growth rate was around 1%, but that of BRICS nations was about 8%.
What’s it for?
“The significant question will be: How and to what extent will the BRICS take the next step in underwriting the rules of the game in an international order that is seeking leadership and direction?” Sanusha Naidu, senior researcher, University of South Africa, asked this year.
The first official summit in 2009, held in Yekaterinburg, Russia, came up with a short declaration containing 15 commitments, according to the BRICS Research Group, based at the University of Toronto and the Russian Presidential Academy of National Economy and Public Administration. According to the BRICS Research Group’s analysis, they show a surprisingly high rate of compliance: 77% on average, The Economist calculated. China keeps its word the most; South Africa the least, the weekly reported.
The BRICS have retained a certain credibility as “middle power,” but in 2019, with Brazilian president Jair Bolsonaro’s new rightwing agenda coming into focus, the situation appears fluid. His Finance Minister Paulo Guedes was named chair of NDB in April.
But one should also bear in mind that three of the five leaders head very authoritarian states, some of those most keen on an alternative to the global dominance of the US: Xi Jinping, Vladimir Putin, Jair Bolsonaro and Narendra Modi.