By FT Reporters - Published: June 15 2009
The Bric summit, which convenes for the first time on Tuesday in Yekaterinburg, Russia, is almost certainly the first multilateral nation bloc to be created by an investment bank’s research analysts and their sales team.
Jim O’Neill, Goldman Sachs chief economist, coined the acronym in 2001 to describe the largest of the world’s developing economies – Brazil, Russia, India and China – and explain how they were going to shape globalisation in the next 50 years, when he predicted they would come to dominate the global economy.
Chief among his findings was that by the start of this century, the global economy could no longer be summarised simply with reference to the large advanced economies. Nor could global policy issues, such as currencies, trade imbalances or climate change, continue to be stitched up in deals done by the the Group of Eight – the US, Japan, Germany, the UK, France, Italy, Canada and Russia.
The rise of the Bric economies is demonstrated by the doubling of their share of world output: which was more than 15 per cent in 2008 compared with 7.5 per cent a decade earlier at market exchange rates. Their shares of global population and land mass are even higher, leading Mr O’Neill to say more recently that he coined the Bric acronym as the countries are now “part of the brick of the modern world economy”.
But it is debatable whether the Brics have anything more in common than their size and economic potential. The structures of the four economies are very different, with Brazil specialising in agriculture, Russia in commodities, India in services and China in manufacturing. Their experience of the global recession has been equally variable.
For all the differences, the Russian foreign ministry hoped the summit would still “make a substantial impact on the international discussion about ways to contain the consequences of the global economic crisis”.
All four agree that the US should not be so dominant in the world economy. “The cohesive factor is a common interest in promoting changes in the global landscape,” says Roberto Jaguaribe, Brazil’s chief negotiator for the meeting. “The Bric grouping creates a space that promotes the relevance of each of its members.”
David Zweig, director of the Centre on China’s Transnational Relations at the Hong Kong University of Science and Technology, says: “China wants to undermine US hegemony in the world by creating some sort of serious multilateral power that can challenge US dominance . . . China also wants to pull India away from the US sphere of influence.”
In this respect they will demand greater influence over the International Monetary Fund in the forthcoming negotiation over voting shares.
“We are asking to increase the voice and representation of emerging economies” in international financial institutions such as the IMF, He Yafei, one of China’s vice-foreign ministers, said at a briefing last week.
But it is the tensions between the Brics countries, which are almost certain to be swept under the carpet, that are likely to prevent substantive agreements arising from the summit.
Trade disputes have been common among the four. Brazil has had disputes over market access with both Russia and China and its strategy of seeking full liberalisation of agricultural trade in the Doha trade talks has come up against India’s insistence on protection for its rice farmers.
Indian and China covet Russia’s natural resources, particularly its oil and gas. As an old friend of Moscow, New Delhi has had some limited success in accessing Russian energy reserves but China has greater spending power.
Politics, too, separates the Brics as much as it unites them. India, China and Russia are all in the same neighbourhood and are all nuclear powers while Brazil, not a nuclear power, is on another continent and has almost no trade with Russia and little with India.
Meanwhile, much of the highly militarised border between China and India is still disputed and the two sides have fought a number of wars over this territory. China and Russia have fought a couple of border wars as recently as the late 1960s and have struggled for decades to get along.
Chinese academics and policymakers, as well as the general public, believe China has far outstripped the other members of this artificial country bloc.
“Bric has no future . . . I believe it will remain an informal club in form and essence,” says Yevgeny Yasin, the head of research at the Russian Higher School of Economics.