Brazil, Russia, India And China - BRIC

AAA

DEFINITION of 'Brazil, Russia, India And China - BRIC'

The BRIC thesis posits that China and India will, by 2050, become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity, and promising economies in which to invest.

 

VIDEO

Loading the player...

BREAKING DOWN 'Brazil, Russia, India And China - BRIC'

BRIC is an acronym for the economies of Brazil, Russia, India and China combined, originally projected to be the fastest growing market economies by Jim O'Neill of Goldman Sachs first in 2001, but most prominently in a follow up paper published in 2003. It has been speculated that by 2050 these four economies would be wealthier than most of the current major economic powers.

The Goldman Sachs thesis doesn’t argue that these countries are a political alliance (like the European Union) or a formal trading association - but states instead they have the potential to form a powerful economic bloc. The countries haven’t announced any formal trade agreement between them, but leaders of the four countries have attended summits together, and acted in concert with each others interests. BRIC or ‘Big Four’ is now also used as a more generic marketing term to refer to these four emerging economies. Columbia University has established the BRICLab, where foreign, domestic, and financial policies of BRIC members are examined.

Introduction and Early Writing on BRIC 

2001:

In 2001 Jim O’Niell wrote a report, published by Goldman Sachs noting that Brazil, Russia, India and China’s GDP was set to rise 1.7% in the next year, and then be in a position to continue to grow. In the paper Building Better Economic BRICs O’Niell runs through four scenarios on measuring and projecting GDP adjusted for PPP. In all those scenarios, the nominal GDP assumption for the BRICs rises from the 2001 measurement of 8% in USD, to 14.2%. While weighted heavily by China, the other countries grow relative to G7 countries

2003:

Dominic Wilson and Roopa Purushothaman wrote a report "Dreaming with BRICs: The Path to 2050," once again published by Goldman Sachs making the claim that by 2050 BRIC could grow to a size larger than the G6, and that it’s quite possible that the largest economies in the world by GDP may not be the richest. This set of projections are based on the assumption that policies and institutions are established to help support economic growth, which as the report states, is by no means a guarantee. Given the amount of projected growth – by Wilson and Purushothaman’s measurements up to 300% – even falling somewhat short of the potential growth of any or all members of the BRIC group would still entail a large amount of potential growth. The report shows a projected per capita income for BRIC countries in 2050 that would be lower than G6 countries with the exception of Russia. 

2004:

The Goldman Sachs global economics exam publish, Growth and Development: The Path to 2050, a 158 page report going highlighting challenges and opportunities for BRIC countries. 

Roughly outlined, the report highlights India’s inefficient energy grid and consumption, projects possible growth the number of people living in BRIC countries earning more than $3,000 a year up to 800 million people within a decade. Additionally the report looks at the lack of a substantial presence in global capital markets, and notes the large populations of while per capita income levels will remain lower than industrialized economies, the aggregate wealth of the BRIC countries will exceed that of the G6 partly due to the large populations of the countries.

2007:

"BRICs and Beyond" is published by Goldman Sachs, a nearly 300 page report looking again at BRIC growth potential, environmental impact of the growing economies, and sustainability of growth. The report also looks at the Next 11, or N-11, (a term for eleven emerging economies) in relationship to the BRIC nations, and ascendency of new global markets.

BRIC Summits and Political Cooperation

While BRIC has no publicly disclosed formal quadrilateral trade agreement, the heads of state of the BRICS countries have met regularly since 2009 at a yearly summit. The first summit was held in the Russian city of Yekaterinburg in 2009, presidents Luiz Inácio Lula da Silva of Brazil, Hu Jintao of China, Dmitry Medvedev of Russia, and Prime Minister Manmohan Sing of India were all in attendance. 

South Africa entered a bid to join the BRIC group in August of 2010 and was eventually invited in December of that same year, and attended the April 2011 summit in the Chinese city of Sanya, effectively changing the name of the group to BRICS. 

Criticism of BRICs

While a lot has been made about the enormous potential growth of the BRIC nations, O’Neils thesis has been challenged over the years as the economic and geopolitical climate has shifted.  A couple fundamental criticisms of the the investment concept include the idea perceived by some as implicit in the argument for continuous growth by raw material providers that natural resources are limitless. Those critiquing the model of growth say that it ignores the finite nature of fossil fuel, uranium, and other resources

It’s been argued by Deutsche Bank Research and editorials written in Foreign Policy Magazine that China outstrips the other BRIC members economies by a huge amount, making up 70% GDP growth of the group countries, putting the country in a seemingly different category than other members of BRIC.

Still others have cited human rights issues in China and Russia, as well as Russia’s annexation of Crimea and direct or indirect support of Russian separatist fighters in Ukraine as reason to doubt a fundamental tenants of the BRIC thesis. An editorial written for Reuters and published in 2014 categorized Russia’s belligerency as evidence that globalization is not inevitable, nor is it irreversible. 

Criticism aside, as of 2013 combined GDP has outpaced Goldman Sachs expectations by nearly half. The original BRIC theory will continue to evolve as time goes on as some projections fall short and others meet their mark. 

RELATED TERMS
  1. EAGLES

    An acronym introduced by Spanish bank BBVA in 2010 to describe ...
  2. Asian Century

    The dominant role that could be played by Asia in the 21st century, ...
  3. Tatra Tiger

    A nickname or colloquial term for the central European nation ...
  4. Taiwan, Israel, Chile and Korea ...

    An investment theme focusing on four economies that rank between ...
  5. Brazil, Russia, India, China And ...

    An acronym for the combined economies of Brazil, Russia, India, ...
  6. CIVETS (Colombia, Indonesia, Vietnam, ...

    An acronym given to the countries Colombia, Indonesia, Vietnam, ...
Related Articles
  1. Active Trading Fundamentals

    The Biggest Private Equity Firms in New York City

    Discover the top four largest private equity firms, including Goldman Sachs, headquartered in New York City, as ranked by total assets raised since 2010.
  2. Economics

    The Emergence of Brazil, Russia, India and China

    Brazil, Russia, India and China are referred to by the acronym BRIC.
  3. Mutual Funds & ETFs

    Go International With Foreign Index Funds

    As global trade continues to expand and the world's economies grow, spice up your portfolio with these exciting opportunities.
  4. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  5. Fundamental Analysis

    Can Global Investors Profit From GDP Watching?

    GDP growth is not necessarily a solid indicator of stock market returns in emerging markets. Find out what to watch instead.
  6. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  7. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  8. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  9. Active Trading Fundamentals

    The Top 5 Impact Investing Firms

    Learn what impact investing is and obtain information on some of the top impact investing firms ranked by total assets under management.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
RELATED FAQS
  1. Who are Daimler / Mercedes' (DAI) main suppliers?

    Daimler and Mercedes-Benz have a network of over 100 suppliers. Some of their principal suppliers include Thyssenkrupp, Eagle ... Read Full Answer >>
  2. What emerging markets are best positioned to benefit from growth in the food and ...

    The emerging market economies in which analysts expect to see the highest growth rates for companies in the food and beverage ... Read Full Answer >>
  3. What impact will growth in the emerging markets have on automotive sector?

    Continuing economic growth in the emerging market economies should have a very positive impact on the automotive industry ... Read Full Answer >>
  4. Is the banking sector appropriate for a growth investor?

    Bank stocks are appropriate for serious consideration by growth investors. Overall, the financial sector is one of the highest ... Read Full Answer >>
  5. What companies are positioned to grow from the popularity of ETFs?

    Some of the companies best-positioned to benefit from the explosion in the popularity of exchange-traded funds (ETFs) are ... Read Full Answer >>
  6. What percentage of the global economy is comprised of the oil & gas drilling sector?

    According to market research by IBISWorld, a leading business intelligence firm, the total revenues for the oil and gas drilling ... Read Full Answer >>
  7. Which emerging markets should an investor consider for exposure to the metals and ...

    An investor should consider the emerging market countries with the largest mining operations for exposure to the metals and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!