International Business Challenge: Does Adding South Africa Finally Make the BRIC Countries Relevant?
Frank, William P., Journal of International Business Research
Beginning in 2001 when Goldman Sachs executive Jim O'Neill coined the acronym BRIC countries for a group consisting of Brazil, Russia, India and China, predictions, projections and estimates have been written about their prodigious economic power. The group itself has begun to believe in the projections and in 2009 started to hold its own summits to counter the G8 and G20 meetings, of which they are members. What they seem to be missing is relevance or to put it another way "Why won't anyone listen to us?"
BRIC was an acronym coined by Jim O'Neil in a 2001 Goldman Sachs's Global Economic Paper No: 66, "Building Better Global Economic Brics". He predicted, soberly, that "over the next 10 years, the weight of the Brics and especially China in the world GDP will grow"--and warned, perhaps a little less soberly, that "in line with these prospects, world policymaking forums should be reorganized" to give more power to the group he had now dubbed Brics (Tett, 2010)
The term caught on not only with Goldman Sachs clients, but with others as well and Briclife as it is known inside Goldman Sachs began. In his initial paper O'Neill and his team projected that based on current statistical evidence "That the BRICs and especially China in the world GDP will grow, raising important issues about the global economic impact of fiscal and monetary policy in the BRICs."(Goldman Sachs, 2001)
It was not until October, 2003 that O'Neill and his Goldman Sachs team in their Global Economic Paper No: 99, "Dreaming with BRICs: The Path to 2050" came out with their now often quoted projection about results in 2050. In this paper they point out that over the next 50 years, Brazil, Russia, India and China--the BRIC economies--could become a much larger force in the world economy (Goldman Sachs, 2003).
In Global Economic Paper No: 99 Jim O'Neill clearly stated that while the world has changed a lot over the last 50 years the changes over the next 50 years could be just as dramatic. Using a reasonably conservative model he makes some projections which now, ten years later, we can verify or cast aside. We have more historical data now to guide us as we try to decide if the newly expanded BRIC group of nations is becoming more relevant or remaining just an easily remembered acronym.
To establish a historical perspective for the BRIC group we have the following facts. At the end of 2000, GDP in US$ on a PPP basis in Brazil, Russia, India and China (BRIC) was about 23.3% of world GDP (Goldman Sachs, 2001).
With the addition of South Africa to the group in 2011 they now represent 40% of the world's population and 25% of the world's GDP (Globalization, 2011). This remarkable growth in slightly more than 10 supports the Goldman Sachs projections and reinforces the O'Neill idea that these countries continue to be poised for their predicted long-term growth.
From Jim O'Neill and his team in 2003 came the following projections:
* In less than 40 years the BRICs' economies together could be larger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6. Currently they are worth less than15%.
* In US dollar terms, China could overtake Germany in the next four years, Japan by 2015 and the US by 2039. India's economy could be larger than all but the US and China in 30 years. Russia would overtake Germany, France, Italy and the UK.
* Of the current G6 (US, Japan, Germany, France, Italy, UK) only the US and Japan may be among the six largest economies in US dollar terms in 2050 (Goldman Sachs, 2003).
Based on the projections from Goldman Sachs done more than eight years ago, which do not include the recently added nation of South Africa, it is appropriate to review the content of this paper to see how the projections actually track against real performance. …