What Is BRICS?

What Is BRICS?

Let me explain BRICS directly to you: it's an acronym standing for Brazil, Russia, India, China, and South Africa, forming a partnership that began with the term coined in 2001 by Goldman Sachs economist Jim O'Neill—though South Africa wasn't included initially. He predicted that by 2050, these four BRIC economies would dominate the global economy, and South Africa joined in 2010.

As an organization, BRICS works to strengthen economic cooperation among its members and boost their global economic and political influence.

Key Takeaways

You should know that BRICS represents Brazil, Russia, India, China, and South Africa. The term BRIC was created by economist Jim O'Neill in 2001, forecasting these economies would lead global growth by 2050. These nations provided expansion opportunities for companies and high returns for investors. The group aims to enhance economic ties and contrast with Western powers. In 2024, Saudi Arabia, Iran, Ethiopia, the United Arab Emirates, and Egypt became members.

Understanding BRICS

Brazil, Russia, India, China, and South Africa have been among the fastest-growing emerging economies for years, driven by low labor costs, favorable demographics, and abundant natural resources during a global commodities boom.

The group shares priorities like addressing regional issues such as the Iranian nuclear program and conflicts in Libya, Syria, and Afghanistan, handling financial reforms at the World Bank and IMF, and setting up the BRICS Interbank Cooperation Mechanism.

Goldman Sachs didn't envision these countries forming a political alliance like the EU or a trading bloc like the EAEU. Instead, they saw potential for a powerful economic bloc, though optimistic and reliant on policy assumptions. Economic power was expected to translate to political influence, with leaders attending summits and aligning interests.

Fast Fact

Here's a key point: according to BRICS, their nations' GDP makes up 31.5% of global GDP in 2023, compared to 30.7% for the G7.

History of BRICS

BRICS positions itself as a counter to the Western-led global order, with members using it to increase their worldwide influence. However, disagreements on issues like transparency and balance could limit the group's progress.

How It Works

The group functions as an informal confederation, meeting annually at summits where members and heads of state focus on building economic cooperation. The chairmanship rotates yearly among member nations' heads of state. Informal meetings started in 2006, with the first official summit on June 16, 2009, in Yekaterinburg, Russia.

Due to their economic strength and the desire to reduce Western dependence, BRICS reports over 40 countries interested in joining. At the 2023 summit, invitations were extended, and full membership was granted to Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates on January 1, 2024.

Other Key Developments

One major step is the New Development Bank, established in 2015 to fund infrastructure and sustainable development in emerging markets and developing countries. Another is the BRICS Parliamentary Forum, which strengthens contacts among parliamentary leaders, handles inter-parliamentary exchanges, and develops new cooperation mechanisms.

Important Note

The BRICS idea of a non-Western order became standard thinking in the 2000s, but skeptics argued it was just Goldman Sachs hype for their investment fund.

Goldman Sachs' BRIC Thesis

In 2001, Goldman's O'Neill noted that while global GDP would rise 1.7% in 2002, BRIC nations would grow faster than the G7—Canada, France, Germany, Italy, Japan, the UK, and the US. His paper 'Building Better Economic BRICs' outlined their potential.

In 2003, colleagues Wilson and Purushothaman's report 'Dreaming with BRICs: The Path to 2050' predicted the BRIC group would surpass the G6 by 2050, reshaping global economies where the largest wouldn't necessarily be the richest per capita.

The 2007 report 'BRICs and Beyond' examined growth potential, environmental impacts, sustainability, and introduced the Next 11 emerging economies in relation to BRICs and new global markets.

Closure of Goldman's BRICS Fund

After the 2007-2008 financial crisis and the 2014 oil price drop, BRICS growth slowed. By 2015, these economies weren't as appealing for investment, leading to fund closures or mergers. Goldman Sachs merged its BRICS fund with its Emerging Markets Equity Fund, having lost 88% from its 2010 peak. In an SEC filing, they noted no expected asset growth, and per Bloomberg, the fund lost 21% over five years.

How Many Members Are in BRICS?

BRICS members are Brazil, Russia, India, China, South Africa, Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates.

What Is BRICS and Its Purpose?

BRICS originated as a Goldman Sachs grouping of fast-growing emerging markets poised to dominate by 2050. Now, it's an informal organization promoting economic ties among members.

Is BRICS a Threat to the US Dollar?

BRICS could challenge the dollar by introducing a replacement currency, but achieving that requires a stable, well-backed alternative from an economy rivaling the US.

The Bottom Line

BRICS encompasses emerging markets like Brazil, Russia, India, China, South Africa, and recent additions, focusing on deeper ties, economic expansion, and trade. They counter Western influence and build mutual dependence for greater global sway.