The Strategist

From an economic dream team to a political project: The journey of BRIC to BRICS+

From its inception in 2001, the BRIC acronym - representing Brazil, Russia, India, and China - showcased the rising economic and political influence of major emerging markets. Coined by Jim O’Neill, this term emphasised the potential of these nations to reshape global policy, a notion further substantiated by subsequent research predicting that the BRIC economies might surpass established Western economies. This grouping, which expanded to include South Africa by 2010, forming BRICS, symbolised not just economic promise but also a political challenge to the Western-dominated world order. The continued evolution of this group, underlined by their expansion into BRICS+ with new members like Egypt and Saudi Arabia, represents a strategic pivot towards fostering a multipolar world where emerging economies gain a louder voice in international forums traditionally dominated by Western powers.

Date
Auteur
Sebastian Petric, LGT Senior FX Strategist
Temps de lecture
10 minutes
BRICS
© Shutterstock

Brazil, Russia, India, and China form the acronym BRIC; this term was coined by Jim O’Neill in 2001 in a Goldman Sachs research report. Indeed, the repercussions of the research piece were massive, with the term "BRIC" being related to the most important emerging markets in many ways. The report particularly pointed to the global economic impact of the rise of China and advised the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) to consider the increased economic and political importance of the BRIC countries. The global economic and political policy coordination was set to change drastically as of the beginning of the 2000s.

The rise of BRIC

In 2003, the first long-term projections were published about the BRIC countries in a Goldman Sachs research report by Dominic Wilson and Roopa Purushothaman. The report projected that the BRIC economies would overtake the most advanced economies in the upcoming decades. The two researchers used demographic projections and a model of capital accumulation, as well as productivity growth, to come up with their forecasts. There was one caveat, however: the crucial assumption for their projections was that the BRIC countries would continue with their pro-growth policies and build up institutions that supported this.

It goes without saying that long-term projections are surrounded by a great deal of uncertainty. For example, predictions about the economies of the Union of Soviet Socialist Republics (USSR) taking over the United States turned out to be completely wrong. Nevertheless, as emerging economies develop, they have the potential to catch up with more advanced economies via relatively faster capital accumulation and the implementation of already existing technologies.

From BRIC to BRICS, and beyond

No country from the African continent was initially included in the acronym BRIC. Wilson and Purushothaman (2003) noted in their research report that South Africa had been excluded because the country was projected to be much smaller relative to the other BRIC economies. Only in 2010, when China invited South Africa to join the BRIC economies, the acronym BRICS was formed.

A few years on, O’Neill et al. (2005) published a report in which they named additional eleven developing countries with a high potential to play a major role in the global economy Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. As mentioned above, the emerging market story is not only about the successful growth trajectory of these countries, but also about their capacity to challenge major economies in terms of influence on the world stage.

The key selection criterion for the so-called "N-11" was that they should have a relatively large population and the capability to turn their potential into a success story. Besides that, these countries are a diverse collection of nations with different regional representation, at different stages of economic and capital market development, and with different experiences of integration into global politics and economics.

BRICS+ adds new political dimension

In an announcement in 2023, the BRICS unveiled plans to expand its membership, welcoming various new nations into its fold starting from the beginning of next year. The newcomers initially include Argentina (later withdrew the bid to join BRICS+), Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.

The BRICS summit held in Johannesburg showcased the economic might of the existing five members, representing meanwhile a quarter of the global economy and holding a significant share of global GDP on a purchasing power parity (PPP) basis. The group aspires to challenge the Western-dominated geopolitical landscape and create a platform where the interests of developing economies are better represented on the international stage.

One of the key issues driving this expansion is the perception among emerging markets that they are underrepresented in global institutions such as the IMF, World Bank, and notably, the UN Security Council, where Africa and the Middle East have no permanent members. Russia and China, in particular, have led the call for a shift from a unipolar world led by the US to a multipolar world emphasizing equality among nations.

Despite differing perspectives, South Africa, as the host of the BRICS summit, emphasised that BRICS+ is not hostile to the West and aims to adapt to changing times. The group seeks to bring a different angle to the global power structure amid increasing polarisation, driven not only by recent events like Russia's invasion of Ukraine but also by long-standing trade tensions between the US and China, along with China's assertive actions in Southeast Asia.

The inclusion of Iran and the UAE in BRICS+ brings another political dimension to the economic institution, given their roles in OPEC+. This inclusion increases the group's influence over essential raw materials. Russia, with its historical Middle East ties and China's growing engagement in the region, stands as a mediator and power broker.

As the BRICS+ evolves, it presents a unique challenge and opportunity for nations that find themselves in the middle ground between powerful nations. The world watches as these dynamics shape the future of global geopolitics and economic alliances, with BRICS+ poised to play a more significant role on the international stage. While the US downplays BRICS as a geopolitical rival, it acknowledges the importance of maintaining positive relations with key BRICS nations while addressing challenges posed by Russia and China.

As of January 1, 2024, BRICS+ welcomed five new member states: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. Indeed, the group aims to challenge Western dominance and better represent the interests of developing economies on the global stage. Without doubt, the West will have to consider the viewpoints of this emerging powers by putting themselves in their shoes.
 

References

O’Neill, J. (2001). "Building Better Global Economic BRICs", Goldman Sachs Global Economics Paper, 30 November.

O’Neill, J., Wilson, D., Purushothaman, R., & Stupnytska, A. (2005). "How Solid are the BRICs?" Goldman Sachs Global Economics Paper, 1 December.

South African Government (2010). "Minister Nkoana-Mashabane on South Africa’s full membership of BRICS" [online], 24 December, available at: https://www.gov.za/minister-nkoana-mashabane-south-africa%E2%80%99s-full-membership-brics [accessed: May 2024].

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