A new economic order: The BRICS alliance

19 April 2012

The BRIC acronym was introduced by J O’Neill (Goldman Sachs) in 2001. He spoke about a collection of four emerging countries that shared a similar market size, level of economic development, GDP growth and large populations. They also had a potential political-economic atmosphere conducive for sustainable growth. The perception was that, if this growth was maintained through 2050, these countries could become a global economic powerhouse.
Already they collectively represented 40% of the world population, 25% of the global land area and nearly 20% of the total 2001 GDP. In 2011, their share was 30% of the global GDP. The original ‘BRIC’ countries identified were Brazil, Russia, India and China. The original intention was not meant to describe a trading bloc, formal political pact or free trade agreement. It was presented as four emerging countries that shared a common group of characteristics and together represented a unique economic model.
The concept did not receive much attention until after the deep economic recession of 2008-2009. By the 2010 third quarter, the BRIC economies took on new significance as they had ‘sailed’ through the recession, almost as if it never happened. GDP growth was strong and sustained, as predicted; thus supporting the concept of this new economic model. Meanwhile the industrialised economic power house nations (USA and Europe) suffered deeply. Thus the idea around the BRIC concept was recognised as something unique and important.
During 2010, South Africa began discussions with the four BRIC countries about joining the alliance. A formal invitation was made by China and agreed by the others. South Africa officially became the fifth member on April 14, 2011, thus changing the acronym to ‘BRICS’. Their demographic details are shown in Table 1.
Global Economic Effect
What began as a hypothetical economic model has become a reality by 2012. The five countries are a formal alliance holding regular annual meetings. The last was in China. This evolved one step further by establishing trade agreements between them. Each country has an agenda and this alliance solved many issues facing each of them in different ways.
Russia gains access to new export markets for its oil and gas and new sources for raw material and agriculture imports. Brazil can export its food products to China and others and has land available to set up manufacturing bases to get closer to markets in North America. China gained easier access to India’s markets, has a built-in market for its exports and can import agricultural products. India has a well developed information technology expertise and can readily market its services to the other members as well as serve as a manufacturing technology base. South Africa doesn’t quite fit the model but could stand to gain the most. It is a gateway to Africa and has become a model for other African countries. It also has large mineral reserves useful to China.
Perhaps the most significant factor of this alliance is the opportunity to trade in non-US$/E currencies, a concern common with other developing countries. It is a major issue for the BRICS to make the alliance work. Each country, when taken individually, offers a variety of challenges to trade with the developed nations of the world.
This alliance now provides a significant potential market for exclusive trade between the BRICS countries. Each geographic location is strategically aligned (see figure 1), allowing them to also engage in their own regional trading pacts, which further enhances their value as an alliance partner. They can offer easier access to otherwise difficult to reach markets.
The BRICS country members are in the early stage of adhesive and sealant industry market expansion. A key indicator of the industry size and growth potential is measured as pounds or kilograms of adhesive consumption per capita. The market for each of the BRICS countries is shown in the 2011 market data in Table 2. The per capita consumption in the USA, for comparative purposes, is 21lb/9.5kg/capita.
The BRICS’ total 2011 formulated product market size, shown in figure 2, represents 24% of the global 2011 adhesive and sealant demand (lb, kg). Excluded are cementitious adhesives, plywood, particle board, MDF binders and carpet backing adhesives. It is estimated that, by 2050, the BRICS’ share of the global market could reach 40% or more.
A possible scenario of growth for adhesive and sealant demand within the BRICS from 2010 to 2050 is shown next in figure 3. This actually represents a conservative approach by keeping the demand within the projected GDP growth levels for 2025 and beyond. The data is based on the Goldman-Sachs economic models for economic growth.
Adhesive and Sealant Industry Opportunity
Adhesive and sealant industry formulators have an opportunity to develop a presence within the BRICS, if not already there. The economies are open to foreign investment and delaying may be too late. The BRICS are working toward developing a new order of business methodology and BRICS’ market participation can be a good hedge against future market downturns!
Since the BRICS formed their alliance, intra-trade between them has increased 15 times and is now accelerating at a rate of 28%/yr. Bilateral investment has increased significantly. This has been showing in greater consumer demand and improvements in infrastructure development.
A publication, spelling out their latest initiatives, was issued in July 2011. It is named the TERN Newsletter. It contains the new actions and initiatives set during their last economic meeting held last November in Shanghai.
The BRICS have established a new economic order and are playing out the predictions made by the Goldman-Sachs models produced in 2001.


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