Are the BRICS collapsing? – CGTN

Editor’s Note: Ken Moak has taught economic theory, public policy and globalization at the university level for 33 years. The article reflects the views of the author, and not necessarily the views of CGTN.

As India and Brazil become increasingly antagonistic towards China, one can be forgiven for suggesting that the BRICS club of large emerging economies could collapse. You cannot expect a divided house to stand.

In 2001, Jim O’Neill, the executive of Goldman Sachs, coined the acronym BRIC (Brazil, Russia, India and China), suggesting that the four major developing economies would one day replace the G7 countries (comprising the (United Kingdom, Germany, Japan, France, Italy and Canada) as the world’s largest economic club.

At that time, the BRIC had over 40% of the world’s population and 20% of its GDP in terms of purchasing power parity (PPP). Their countries’ average growth rate was nearly five percent, more than double that of the under two percent of the G7.

China, Brazil, India and Russia formalized the BRIC in 2006 and held its first meeting in 2009. South Africa was invited by China to join in 2010, expanding it. to five continents and renaming it BRICS.

Since then, the BRICS have come a long way, overtaking the G7 in PPP terms with a combined GDP of $ 37 trillion compared to that of the G7 countries’ $ 34 trillion in 2019. Along the way, the five economies have instituted the new Development Bank and the Contingency Reserve Arrangement, respectively a development bank and a fund to help countries overcome short-term exchange rate problems.

China played an important role in making the BRICS what they are today. Its 2008 stimulus package had a significant impact on Brazil, Russia and, to a lesser extent, India. China has bought large amounts of resources from Brazil and Russia and some from India to build infrastructure and implement other economic and job-creating projects.

Economic and trade relations have since developed with massive Chinese investments in the resource and infrastructure sectors through the Belt and Road Initiative. For example, trade with China has improved economic growth and improved the livelihoods of people in India. Consumer goods made in China, such as smartphones and televisions, were affordable and in high demand, attracting new businesses.

One could therefore argue that the BRICS is a “marriage made in heaven” because members can help each other realize their economic potential. The economies are highly complementary, with Russia, India, South Africa and Brazil fueling and sustaining China’s comparative manufacturing advantage through their massive endowments of oil, gas, iron ore and other resources.

Paranagua Container Terminal (TCP) in Paranagua, Brazil, Aug. 27, 2018. / Xinhua

Paranagua Container Terminal (TCP) in Paranagua, Brazil, Aug. 27, 2018. / Xinhua

China has the resources and expertise to build the infrastructure networks of its four partners and invest in their industries. And with their huge combined population of nearly three billion, inter-BRICS trade would bring enormous economies of scale, competitiveness, and long-term sustainable economic growth.

However, India and Brazil viewing China as a “threat” rather than an “opportunity” would risk the BRICS collapsing. Indian Prime Minister Narendra Modi has distanced himself from the regional comprehensive economic partnership mainly because India fears that China will “harm its manufacture”, while the anti-Chinese sentiment of Brazilian President Jair Bolsonaro rests largely on the ‘ideology.

Bolsonaro ran on an anti-China platform, accusing China of trying to “own” his country. Although relaxed after the election because China is Brazil’s biggest or biggest client and investor, its anti-Chinese sentiments remain intact.

Bolsonaro has blocked Chinese tech companies Huawei and ZTE from participating in the rollout of 5G in the country and has vowed not to purchase SinoVac’s COVID-19 vaccine. The refusal to buy the Chinese vaccine has been contested by the country’s vice president and other politicians.

Modi’s anti-China stance was largely driven by rising anti-China sentiments, the COVID-19 pandemic, and a weak economy. The Reserve Bank of India estimated that Modi’s misguided “demonetization” policy in 2016 of removing large bills from circulation cost 1.5 million jobs and reduced GDP by nearly $ 10 million. ‘a percentage point. The outbreak of the COVID-19 pandemic has prompted the Reserve Bank to project that the Indian economy will contract by 11% in 2020.

Additionally, deciding to partner with the United States by joining the Quadrilateral Security Arrangement (QUAD) and signing a defense pact with America, Modi hopes it would better serve India’s national interests.

However, playing the “China card” could backfire on Modi and Bolsonaro. Help from developed countries, including the United States, might not be available because they have their own problems.

Europe is struggling to stem a second wave of COVID-19, forcing the continent’s major economies into further lockdowns. The number of daily COVID-19 infections in the United States remains out of control, pushing its economy further down. The same is true in Australia and Japan.

In short, China’s “decoupling” could “freeze” their economies, possibly costing Modi and Bolsonaro their jobs in the next election. But Modi and Bolsonaro are populist politicians who want a good legacy, putting national interests above their own. Because of this, the BRICS could live another day. The BRICS summit on November 17 may shed more light on the matter.

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