Sunday, April 18, 2010

How influential are BRIC countries as a group?

Sources:
Economist.com: The trillion-dollar club
FT.com: Brics balance shared interests with rivalries; Bric countries call for greater clout
IIFL.com: Joint Statement of the BRIC Summit

Last week, the leaders of Brazil, Russia, India and China ("BRIC") met in Brazil for the "BRIC Summit". They emphasized that BRIC countries needed to have a greater voice in creating a new international order, calling for voting power reforms at the World Bank and quota reforms at the IMF. This was the second time that BRIC leaders gathered together after their first meeting in Russia last year, and questions arise as to the role of BRICs as a group.

The Economist points out several reasons why the BRICs matter. The annual GDP of each of them exceeds $1 trillion. BRICs together own up to 40 percent of the world's foreign-exchange reserves. Given the importance of BRICs in the world economy, they have been given more opportunities to participate in deciding international economic issues through the G20. Also, BRICs themselves have incentives to act as a group. For example, China wants to increase its influence while keeping a low profile. By acting as a group, China can pursue its national interests "behind a multilateral fa├žade."

However, many view that the role of the BRICs may be limited. BRIC countries lack "coherence" and seem to be more like rivals than partners pursuing common interests. Their political systems vary. The income levels in each country differ widely. China and Russia are permanent members of the UN Security Council while Brazil and India are not. Despite the differences, however, BRIC countries can at least raise their voices on the issues like the reform of IMF governance more effectively by acting together without sacrificing their own interests, according to the Economist. Jim O'Neill of Goldman Sachs who coined the term, "BRIC", says that the BRIC countries are a "good mechanism for pressing rich countries to change their role in managing the global economy more radically."

Questions:
Last month, Organizaiton for Economic Co-operation and Development ("OECD") published a paper, "Economic Policy Reforms: Going for Growth 2010." In the paper, OECD used the term, BIICS (Brazil, China, India, Indonesia, South Africa) rather than BRIC, and said that BIICS have been an important engine for growth. According to the Economist, Russia looks "odd" to be in the group with other three countries. What do you think about replacing Russia with Indonesia or other countries?

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