BRIC: The official leader of the poor?

The picture on the left gives a stark reality of how the world is changing. Just ten to twenty years ago we were more likely to have seen a Western face under the yellow hat. The political formation of the BRIC countries aims to gain influence in parts of the developing world. This post highlights the BRIC ambition is not only to adquire natural resources but emerge as the leader and voice of the developing world.

In June 2009, the first official BRIC summit was held between the four countries. With the next summit due to be held next year in New Delhi, India, one wonders what is the real political significance behind these meetings?

I came across an interesting read called BRICs World by Mariano Turzi. The book highlights the changing influence, both economically and politically, the new formal BRIC block is having in the world.

Turzi argues that world power can no longer be deemed as uni-polar (with sole American dominance), but can be defined as uni-multi polar. Under this new structure, the Americans retain a stagnant Economic and Military dominance while the BRIC countries create a growing multi-polar system beneath. Within this system, the BRIC countries co-operate with each other and the entire developing world to gain more influence and representation. The BRICs seek to take advantage of soft-power (a way to absorb and assimilate weaker countries to get what it wants) as opposed to hard-power (the use of coercion and payment).

BRIC Summit

Let’s consider the three main agenda points within the BRIC summit:

a) Increasing pressure on the monetary system to replace the Dollar as the global currency reserve – taking power away from America.

b) Actively cooperate to pressurize a reform in voting rights within the IMF and the World Bank

c) A reform in the Security Council of the United Nations – giving India and Brazil permanent seats which would give them power of Veto and a stronger voice in all military conflicts.

It’s certain that the BRIC block has used pressurizing tactics to advance the changes it wants to see in the world. For example, in the G-20 summit in Pittsburgh in April 2009, the four countries of BRIC decided not to provide funds to recapitailize the World Bank and IMF if these organizations didn’t comply in changing their voting rights. Currently although China’s economy represents more than double than the economy of Belgium and The Netherlands, it has less voting rights in the IMF than both of the European countries combined.

Soft-Power

The BRIC countries are working together to gain influence in other developing countries. They are now starting to form associations and increase trade with neighbouring countries. The graph below (Source: The Economist) shows us how South-South cooperation (South representing developing countries) revolves around the BRIC countries:

These associations may lead to increased trade as well as political ties. Currently, China is promoting the idea of signing a free trade agreement between the member states of the Shanghai Co-operation Organisation. This would clearly benefit China’s inland regions. The trade volume between the province of Xinjiang, China and SCO member countries reached $14.2 billion in 2010. (83 percent of Xinjiang’s total foreign trade volume that year).

Apart from co-operation, competition is also being created with the emergence of the new BRIC politcal associations. The ISBA treaty signed by Brazil, India and South Africa is an interesting example of this. The clear exclusion of China and Russia has prompted them to influence the addition of South Africa to the BRIC summit in 2010 - ensuring in this way, they do not to lose out to Brazil and India on key economic and political decisions in the region.

Africa and the BRICs

For many however, the addition of South Africa to the formal BRIC summit comes as a big surprise. The economy of Russia and India are four times as large and China, 16 times as large. The introduction of South Africa is clearly not on economic merit. Its economy is surpassed by other candidates such as South Korea and Mexico, Turkey and Indonesia. Turzi argues the main motivation behind the introduction is clearly political as well as economical. Let’s have a look at some of the reasons:

A) The BRIC countries hope that South Africa will help to serve as a doorway to forge political and economic ties with other African nations.

B) South Africa as a dominant political force in Africa, will help to persuade fellow African nations in favour of the BRICs cause (For example when voting for or against an International treaty on Climate change)

C) Africa is a key supplier of natural resources, essential minerals and future markets for Brazilian, Indian and Chinese companies

D) By 2050, it is estimated that the combined GDP of the African Economies will surpass a trillion dollars.

Increase in trade: BRICS-Africa

The BRIC countries today represent more than 30% of the GDP in countries such as Angola, Benin, Democratic Republic of the Congo and Togo. The graph below (Source:OECD) shows how the BRICs share of African exports has evolved (Increasing from 6% in 2004 to 14% in 2010) and how trade between Africa and the West is decreasing at the same time:

It will be interesting to see what further political ties are made between BRIC and the rest of the emerging markets world. New political alliances between the South-South regions, as we have seen in Africa, will undoubtably create new trade opportunities. Do you have any ideas of how this new phenomena of world trade will evolve? Please share your thoughts in the comments section

About Amol Ved

I am British-Indian and hold a undergraduate degree in Economics and Mathematics from the London School of Economics and a master degree in International Economic Relations from Argentina. I have investment banking experience with JP Morgan Chase and am able to communicate in five of the world’s widely spoken languages: English, Spanish, Chinese – Mandarin, Hindi and Portuguese.

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  1. [...] The Bank will help the Brics to increase their Political influence in regions such as Africa and other parts of the world. The following article written by my colleague Amol highlights the influence of BRIC power. [...]