By Pallavi Malhotra:
West, the superior other side of the globe, is no longer considered the same. With the changing global trends, the future super powers are much talked about. Brazil, Russia, India, and China, BRIC, as they are collectively called, have shown evidence that they are not called the future ‘super powers’ for no reason.
The BRIC strategy was inspired by a paper published by Goldman Sachs Group Inc. in 2003. Titled ‘Dreaming with BRICs: The Path to 2050′ the report predicted that in less than 40 years, the combined economies of these high-growth countries would be larger than that of the top six nations today in U.S. dollar terms.
Presently, the BRIC countries are better off compared to the already industrialized nations that have trouble facing economic crisis, and have a low rate of economic growth. Industrialized countries are still trying to curb their unemployment rate, while the BRIC nations are zooming past at a rate of about 7-10% economic growth per annum. Investors are running towards BRIC nations to take advantage of better opportunities, lower prices, and higher profits. For instance, Volvo has highly invested in China and other BRIC nations, in order to capitalize on the huge market opportunity and growth potential.
Statistically, it is believed that investments in these countries is beneficial as the GDP of these countries would surpass that of US and other developed economies in only about 4-5 years. Though these countries have exceptional scope for growth, it should also be considered that economies can take a turn for the worse any time. Drastic decline in economies of these countries is improbable, but improbability does not mean impossibility. Fortunes of these economies may fluctuate. Considering that China has an unstable political situation, it can cause negative economic implications. CSI 300 index of China has been growing steadily, which means that if Chinese economy gets hit, it will take down the world economy along with it.
Also, these days, the efficiency of BRIC nations has reduced compared to their performance last year. According to Economic Times, the reason for this is that shares of companies from the world’s biggest developing economies are increasingly featuring in global fund portfolios. This competition is a probable reason for the underperformance of BRIC, compared to its peers, this year. To add to this, a person wrote as a comment to an article on BRIC economy, “BRICS are very faddish. I sold latex over 50 and it dropped to 11 and now is above 30. Brazil has done well this year and the gentlemen writing this article thinks it will do well next year. I would remind investors that BRIC’s are an area where it is important “not to forget to sell.”
However, looking at the current trends, it is unquestionable that the BRIC nations will be the force behind new global economy. Owing to their growing educated population, lack of major debts, and abundance of resources, these nations are sure to enjoy high economic returns, and thereby will earn huge profits to the investors. Thus, investments in these nations are definitely recommended, though not glut investments, as caution never harms. It seems that East will soon be the new West.