Posted by: changholt | October 9, 2012

So what’s a BRIC and why you should care?

So what’s a BRIC and why you should care?

We all need to understand these fast growing economies. They should be the future market you want to sell your product and services too. BRIC stands for Brazil, Russia, India and China, four countries seen as fastest growing economies in the world. They are all large countries, with large population who traditionally have had low GDP per capita.

The idea is that these economies will eventually become the four largest economies in the world, as early as 2050. Let’s assume they all continue to embrace capitalism and eventually democracy (a far stretch in China’s case).

How will they surpass the traditional economic powers? Many believe that China and India will get their growth from manufacturing and services while Russia and Brasil will be raw material supplier for the world (China – Manufacturing, India – Services, Russia – Raw Materials, and Brazil – Agriculture).

Since each has their own individual core capability, the term BRIC was originally descriptive and not thought of as a trade bloc (like the European Union) or an association like the OPEC, but things are starting to change. In mid June of this year the BRIC nations held their first summit. One of the hot topics on the table was the “weak US dollar”. Although never directly referred to this during the conference all of the leaders and their respective entourages have continually griped about the US dollars insanity, the point that several of the countries have sold their US dollars in exchange for bonds supplied by the International Monetary Fund. A strong sign that they want to continue their growth, be more relevant in world economic decisions, and see less US dollar dominated monetary system.

All four countries are heavily invested in the US Dollar, and feel the US is just printing money, devaluing their financial holdings. They account for 15 per cent of the $60.7 trillion global economy. Although I feel the US dollar will remain the standard for international monetary system many others are calling for change.

Both Brazil and Russia have been outspoken about current monetary system. It will continue to be a concern we will hear repeatedly as long as the BRICs are frustrated by a weaker dollar, and by their inability to switch their US dollar reserves out of it on any substantial scale. However, Chinese President Hu Jintao has remained silent on their currency ideas, even though they are the largest holder of US dollar foreign reserves. This is either a sign that the largest player in the BRIC alliance is pulling strings behind the scenes or there is dissention in the BRIC ranks. Only time will tell which way this relationship will develop.

Now that you know we understand what a BRIC is and what they are doing today the question is what are they doing tomorrow? Will the change the world economic and/or order? Will they change the monetary system? It future Blogs we’ll talk about monetary issues and next emerging markets we should consider entering and their inherent risks and opportunities.


Responses

  1. great aticle, congrats ! I wanna ask you something about emerging countries: do you think Brics are mature markets already and that big opportunities on the future will be related to CIVETS countries ? thanks!!


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