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BRIC is Now BRICS


South Africa has now been formally accepted into the BRIC (Brazil, Russia, India, China) economic alliance. The term BRIC was coined by Goldman Sachs in 2001 to describe the growing influence of large resource-rich emerging economies, which between 2000 and 2008 have accounted for half of global economic growth. The BRIC countries are not formally linked but have held summits and taken steps to boost financial cooperation and investment opportunities among them. There seems to be an unstated agenda of building a strong economic alliance to counterbalance the economic strength of the US and the European Union. Especially given the Americans’ belligerent approach to resource acquisition (via military domination), as we enter a period of relative resource scarcity.

According to China’s state news agency Xinhua, BRIC has accepted South Africa as a full member of the group. South African President Jacob Zuma was informed in a letter from Chinese President Hu Jintao in a letter of invitation to attend the third BRIC leaders’ summit, to be held in April 2011 in Beijing.

BRIC Ignored by Mainstream Media

BRIC receives very little attention in the mainstream media – except for the discussion they had at their summit in 2009 about launching their own currency to compete with the dollar and the euro. All four BRIC countries have fairly large US currency reserves (oil can only be purchased in US dollars). All are very keen to diversity these holdings, owing to continuing US debt problems, which have caused the US dollar to lose 30% of its value related to other currencies over the last decade. China has now publicly announced its willingness to back the euro by buying debt (i.e. making loans) to financially troubled EU countries, such as Greece, Spain and Italy, who are unable to afford the high interest rates Goldman Sachs and other bond holders want to charge them.

 

The S&P BRIC-40 Stock Index

BRIC receives much more attention in the financial press. In fact there is a Standard and Poor BRIC-40 stock index (see http://www2.standardandpoors.com/spf/pdf/index/BRIC40_faq.pdf). The BRIC-40 index is a “basket” of stocks of the 40 largest and “most liquid” companies in Brazil, Russian, India, and China. All companies are expected to exhibit substantial growth in the coming decade, in parallel with economic growth in their parent countries.

Many financial analysts are “bullish” on the BRIC-40, in contrast to Wall Street stocks, despite enormous Wall Street profits this year. Most companies achieved these profits by laying off workers and reducing their labor costs. However instead of investing the profits in expansion and future growth, many have used it to buy back shares to inflate their stock price (see (see http://www.washingtonpost.com/wp-dyn/content/article/2010/10/06/AR2010100606772.html). This lack of future orientation has serious implications for future profits – as there is little scope to lay off even more workers in coming years.

Wall Street analysts are scratching their heads why BRIC would want to invite South Africa to join them. The South African economy is less than ¼ the size of the economy of Russia, BRIC’s smallest partner. I think they seriously underestimate the political influence, as the most developed African country, over the rest of the continent.

List of BRIC Resources By Country:

Brazil: aluminum, gold, iron ore, manganese (ingredient in steel, nickel, rock phosphate (essential in agriculture and increasingly scarce), platinum (essential in catalytic converters, neurosurgical and dental equipment, computers and cancer drugs), tin, uranium, petroleum, timber, diamonds.

Russia: has the world’s largest mineral and energy supply and is known as an “energy superpower”, containing 22% of the world’s oil, 16% of the world’s coal, and 40% of the world’s natural gas. Other resources include timber, iron ore, nickel, potassium (essential for agriculture), lead, petroleum, zinc, aluminum, tin, platinum, titanium, copper, tungsten phosphates and mercury are the most popular natural resources that Russia provides. Russia has the largest reserves of fresh water in the world.

India: coal (third-largest reserves in the world), iron ore, manganese, mica, aluminum, titanium, chromite, natural gas, diamonds, petroleum, limestone and thorium.

China: the largest producer of gold and one of the largest producers of rare minerals, such as antimony, zinc and tungsten, in the whole world. Also coal, iron ore, magnetite, petroleum, aluminum, natural gas, mercury, tin, lead, manganese, molybdenum, vanadium and uranium.

South Africa: gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, uranium, gem diamonds, platinum, copper, vanadium, salt, and natural gas.

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