BRICS Summit 2012: A long Journey to cover; Overview, Outcomes and Expectations

BRICS summit logo
BRICS Summit 2012 Logo

Leaders from Brazil, Russia, India, China and South Africa met on Thursday, Mar 29, 2012 in Delhi for the fourth annual Summit. Earlier known as BRIC before the addition of South Africa, BRICS is the group of emerging economies around the world, who are exploring new ways of collaboration, collective economic growth and developing common ground on foreign policy.

Sao Paulo at night
Sao Paulo, Brazil
All five economies maintain a great potential to become a superpower, but most of them are dependent on western economies. Any ups and down in the western markets leave their impact on these markets.
Moscow at night
Moscow, Russia

The summit stressed on linking economies, as in trading in local currencies as well as linking stock exchanges of the member countries. The leaders also stressed on setting up of an international bank on par with Asian Development Bank, IMF and World Bank. It would fund various development projects in member countries and other emerging economies and may act as a relief provider for first time buyer mortgages in case of real financial crisis and disaster. The goal of the bank will also include lending, in the long term, if there comes a global financial crises such as the Eurozone crisis and issuing convertible debt, which could be bought by the central banks of all the member nations. Hence it will be acting as a vessel for risk-sharing.

Mumbai at night
Mumbai, India
Shanghai at night
Shanghai, China

The idea of setting up such bank was put forward by India, which received a good response from the member countries as well as from the countries who were observing the event carefully. Analyst John Mashaka called India’s move “long overdue”, and said that setting up a bank was a means of “pulling out of the western-dominated World Bank and the International Monetary Fund.” Assistant professor at the Institute of African Studies (China) Yuhua Xiao noted that setting up the bank showed signs of growing self-assertiveness and inter-dependence among developing economies. Dr. Alexandra A Arkhangelskaya noted that creating such a bank would effectively “shift the weight of economic power”, and could also be very beneficial to non-BRICS nations.

Johannesburg at night
Johannesburg, South Africa

The nations also signed an agreement to extend credit facilities in their local currencies, a step to reduce the role of dollar between them. As of now, if Russia wants to trade with India, Russia will convert Rubles to Dollars send it to India, and then India will convert Dollars to Rupees. Completely removing the intermediate step of converting to and from dollar is not so easy, but if removed, the trade between the two countries will become independent of what the value of dollar is, which is highly unstable.

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Also the nations will be launching a benchmark equity index derivatives that would allow investor of one member country to bet on the performance of stock exchanges of other member countries without currency risk.

Accounted 50% of global economic growth in last decade, BRICS accounts for 26% of global landmass, 42% of the global population and 40% of global GDP.

Below is the tabulation of the countries and their economy in therms of GDP (PPP). The data is taken from CIA World Factbook GDP PPP data update of 2011. PPP is one of the scale to measure difference between two economies. Using a PPP basis is arguably more useful when comparing generalized differences in total economic output between countries because PPP takes into account the relative costs and the inflation rates of the countries, rather than using just exchange rates, which may distort the real differences in income. The table shows BRICS as a single entity is more powerful than European Union. The data for GDP at purchasing power parity (PPP) has also been re based using the new International Comparison Program (ICP) price surveys and extrapolated to 2007. Final figures are estimates in billions of international dollars.

Rank Country GDP (PPP) $Billion Year
BRICS 20,975 2011 est.
 European Union 15,390 2011 est.
1  United States 15,040 2011 est.
2  China 11,300 2011 est.
3  India 4,463 2011 est.
4  Japan 4,389 2011 est.
5  Germany 3,085 2011 est.
6  Russia 2,373 2011 est.
7  Brazil 2,284 2011 est.
8  United Kingdom 2,250 2011 est.
9  France 2,214 2011 est.
10  Italy 1,826 2011 est.

Another method of measuring economy is GDP (nominal) based on official exchange rates. The list below includes mostly 2011 estimates from the CIA World Factbook. The table shows BRICS as the third largest economy after EU and US.

Rank Country GDP nominal $Billion Year
 European Union 17,720,000 2011 est.
1  United States 17,720,000 2011 est.
BRICS 13,766,000 2011 est.
2  China 6,988,000 2011 est.
3  Japan 5,866,000 2011 est.
4  Germany  3,739,000 2011 est.
5   France 2,919,000 2011 est.
6  Brazil  2,407,000 2011 est.
7  United Kingdom 2,370,000 2011 est.
8  Italy 2,135,000 2011 est.
9  Russia 1,995,000 2011 est.
10  India 1,954,000 2011 est.

The performance of the BRICS nations on the international platform has been brilliant, despite the fact all these countries come from different continents, having different government, political and economical structure. How far this concept of BRICS will sustain no body knows, but if it works then it will bring a great change in the current world, a change for good.

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The countries have been working together to find some common ground and fortunately their thoughts match on the issues of West Asia, North Africa and Afghanistan. All five countries called for the international community to continue development projects in Afghanistan for 10 years after America led international forces will withdraw from the nation by the end of 2014.

BRICS nations together have strongly condemned the Western world’s politics on Iran to make other countries stick to the restrictions imposed by them on trade ties.  China’s Trade Minister Chen Deming said that the “rise [in the price] of crude oil has impacted all countries. The Iran issue has become an issue for all. We need to continue with normal relations with Iran, but, at the same time, we respect UN resolution. We hope that unilateral movement by one country will not affect other countries.”  The group warned against any military intervention in Syria by the West or by Israel in Iran. They added that a war with Iran would have “disastrous consequences.”

Landmass of BRICS vs EU, Click to Enlarge

Out of five BRICS nations, three of them have remained or are super power. India before 14th century, Russia in the 20th century and China almost in 21st century. No matter these countries possess power and wealth, but they may not share good relations with each other. Brazil and South Africa being geographically isolated from these nations share good relations with all. The best example is China and India,  both of them have faced each other in the war in 1965 and China is still occupying a large part of North India and claims some part of Indian territory in North East India. China was also about to open the front in Indo Pakistani war in 1971 but didn’t do so, fearing Pro Indian Soviet Union might take action against them. Russia and China have also shared cold relations following the illegal migration of Chinese in Russia’s far east and border dispute which was recently resolved.

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Russia and India have been sharing good relations from the Soviet times. India also shares good relations with South Africa, one of the major reason being Mahatma Gandhi, whose work in South Africa promoted equality between blacks and whites. In South Africa, Mahatma Gandhi is equally respected as in India. Brazil has also been close to all the countries.

Leaving aside all these solid claims about BRICS, there are critics as well who discuss why BRICS might fail with some genuine facts. One of the reason is all these countries come from different continents, different social, economical and political systems and some of these countries do not share good relations as well as common ground.

One of the best example of this claim is that after the declaration of setting up of an International bank, these countries fear that China will be the most benefited country out of all and will enjoy the most.

However, just after the summit was over, India and China declared that they will keep their border issue aside for now and will take more steps to increase trade between the two neighbors. Indian government also expressed their interest in inviting Chinese investment in India’s manufacturing sector. Both the countries have together declared this year as Indo Chinese year of friendship and cooperation.

After the summit, Brazil and India also took the opportunity of exploring their way of cooperation. The two countries signed six pacts in areas ranging from closer cooperation in science and biotechnology to cultural exchanges. Under a signature, Brazilian initiative Science Without Borders, the two sides inked a pact that envisages placement of Brazilian students and young researchers in India. It will be funded by Brazil.

US State Department spokesman Mark Toner said, “We reviewed the leaders’ Delhi declaration and believe that their efforts to engage in global multilateral institutions productively can only strengthen the international system. United States welcomed the efforts by the so-called BRICS — Brazil, Russia, India, China and South Africa — to support the recovery of the global economy as well as “

Russian by roots, global citizen by choice. In love with India and Indian culture, love to report everything from politics to military news. Against the controlled media.