Economy 101: BRICS: Strengths, Weaknesses, and Future Challenges14 min read

Malaysia is not a full member of BRICS. On October 24, 2024, Malaysia was officially added to a group of 13 BRICS partner countries, giving it trade access with other partner countries within the bloc. This is in addition to the various economic pacts within ASEAN and ASEAN with other countries. Image source: Free Malaysia Today

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The Origins of BRICS

The BRICS grouping, comprising Brazil, Russia, India, China, and South Africa, traces its origins back to a concept introduced by economist Jim O’Neill in 2001. Originally termed “BRIC,” the idea was to identify a group of emerging markets that would play a significant role in the global economy in the 21st century. O’Neill highlighted the potential of these countries due to their vast populations, rapid economic growth, and increasing influence on international trade dynamics. The recognition of these nations as pivotal players laid the groundwork for what would eventually become a formal alliance.

The first official BRIC summit was held in Yekaterinburg, Russia, in 2009, marking a crucial milestone in the evolution of this coalition. At this summit, leaders agreed to expand their collaboration beyond merely economic discussions to include political dialogue, cultural exchange, and collaborative initiatives on global issues. The inclusion of South Africa in 2010 transformed the group into “BRICS,” enhancing its representation and influence within Africa and beyond.

Brazil

Brazil, the largest economy in South America, is notable for its vast natural resources and agricultural output. With a GDP of approximately $2 trillion, Brazil’s economy is diversified, encompassing agriculture, mining, manufacturing, and services. Its market size is substantial, providing significant opportunities for investment and trade both within the BRICS framework and globally. Brazil’s unique economic characteristics include its status as a major exporter of commodities, notably soybeans, iron ore, and coffee, which play a critical role in its economic standing.

Russia

Russia holds great economic significance within BRICS due to its vast energy resources, especially oil and natural gas, which are crucial to its GDP of around $1.7 trillion. The country’s geopolitical influence is augmented by its vast market size and its role as a major energy supplier to Europe and Asia. Additionally, Russia’s strengths lie in its advanced technology and military capabilities. However, challenges such as economic sanctions and reliance on energy exports can impact the overall economic health of the group.

India

India’s rapid economic growth has marked it as one of the world’s largest economies, with a GDP exceeding $3 trillion. The country boasts a large consumer market, driven by a young population and increasing urbanization. Significant sectors include information technology, pharmaceuticals, and textiles. India’s contribution to BRICS is characterized not only by its economic size but also by its potential for innovation and entrepreneurship, further solidifying its role as a critical member of the group.

China

As the second-largest economy in the world, China has a formidable GDP of approximately $17 trillion. Its export-oriented economy, characterized by manufacturing and technology, positions it as a global economic powerhouse. China’s significant market size enhances its influence within BRICS, and its Belt and Road Initiative further demonstrates its commitment to strengthening economic ties within the group and beyond. Moreover, China’s growing middle class presents opportunities for expansive consumer markets.

South Africa

South Africa is the only African member of BRICS, with a GDP of about $350 billion. The country plays a pivotal role as a gateway to the African continent, leveraging its resources, including gold, platinum, and diamonds. South Africa’s economy is diversified, with key sectors such as mining, manufacturing, and finance. The nation contributes to BRICS by fostering economic collaboration and representing African interests, aiming to enhance development across the continent.

The graph shows that the BRICS countries have increased their share of global GDP at purchasing power parity (PPP) from 16.9% in 1995 to 32.1% in 2023, while the G7 countries’ share has decreased from 44.9% to 29.9% over the same period. This trend suggests a shift in global economic power from the traditional developed economies to the emerging economies of the BRICS group. Image source: Statista

Economic Strengths of BRICS Members

The BRICS coalition, comprising Brazil, Russia, India, China, and South Africa, presents a diverse array of economic strengths that significantly influence its position in the global economy. Each member contributes unique resources and capabilities, fostering a robust collective that can adapt to various challenges and opportunities.

Brazil

Brazil’s economy is bolstered by its extensive agricultural sector, which ranks among the top producers of commodities such as soybeans, coffee, and beef. This agricultural strength not only supports domestic needs but also positions Brazil as a leading exporter, significantly enhancing its economic influence on a global scale. The agribusiness sector contributes substantially to Brazil’s GDP, illustrating the importance of agriculture within the BRICS framework.

Russia

Turning to Russia, the vast natural resources constitute the backbone of its economy. The nation is rich in fossil fuels, including oil and natural gas, which are critical commodities in international markets. The energy sector not only fuels domestic growth but also drives export revenues, making Russia a key player in global energy supply chains. This resource wealth gives Russia considerable leverage in trade and international relations.

India

India’s emergence as a technological powerhouse is another notable strength within the BRICS consortium. The technology sector, particularly in IT and software services, has rapidly advanced, with Indian firms catering to both domestic and international markets. This growth in technology fosters innovation and positions India as a crucial player in the global digital economy.

China

China stands out with its manufacturing capabilities, known as the “world’s factory.” The country excels in producing a vast range of goods, which has propelled it to become the second-largest economy globally. The manufacturing sector not only supports domestic consumption but also facilitates significant exports, thus contributing to the overall economic vitality of the BRICS group.

South Africa

Lastly, South Africa’s economy is characterized by its mineral wealth. As a leading producer of platinum, gold, and chromium, South Africa plays an essential role in the global mining industry. This wealth of minerals supports both the national economy and offers opportunities for international trade within the context of BRICS.

The BRICS founding members—Brazil, Russia, India, China, and South Africa—face several weaknesses that limit their collective impact. The dominance of China’s economy often overshadows the group’s unity, making it more of a “China-with-partners” arrangement rather than a union of equals. Additionally, the BRICS nations have diverse economic structures and priorities, leading to a lack of mutual economic interests and synergies. Cultural differences and varying stages of economic development further complicate cohesive policy-making. Image: The Rakyat Post

Economic Weaknesses of BRICS Members

The BRICS nations, comprising Brazil, Russia, India, China, and South Africa, face significant economic weaknesses and challenges that hinder their potential as a cohesive bloc. Each member country exhibits unique vulnerabilities that affect the collective strength of BRICS.

Brazil

Brazil faces several economic challenges, including high inflation, a large budget deficit, and a complex tax system. Additionally, the country’s economy is heavily reliant on commodities, making it vulnerable to global price fluctuations. Infrastructure bottlenecks and a lack of competitiveness also hinder economic growth.

Russia

Russia’s economy is heavily reliant on the export of energy resources, which makes it vulnerable to fluctuations in global energy prices and demand. ¹ The country also faces challenges such as corruption, an aging population, and a lack of diversification in its economy. These factors contribute to Russia’s relative economic weakness compared to other BRICS nations like China and India, which have experienced more robust economic growth in recent decades.

India

India faces several economic challenges. These include a narrow tax base, significant tax evasion, high fiscal deficits, and a widening current account deficit. Additionally, the pace of job creation has been poor despite economic growth, and the education system struggles to provide adequate skills development.

China

China’s soaring debt levels present a formidable challenge. The rapid accumulation of debt, particularly in the corporate sector, raises concerns regarding financial stability. This high leverage could threaten the economic gains achieved over the past few decades, creating uncertainty for both domestic and international stakeholders.

South Africa

South Africa struggles with high unemployment rates, which have broad social and economic implications. The lack of job opportunities stifles consumer spending and economic growth, resulting in a less robust economy within the BRICS framework. The combination of these challenges reveals how the weaknesses of individual BRICS members can affect the group’s overall effectiveness and potential for future collaboration.

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Video narration: BRICS held a summit in Kazan, Russia in October 2024, where 13 new “partner nations” were accepted. This followed the 2023 meeting in Johannesburg, South Africa, where several members were invited to join. Ben Norton analyzes the historic events, and shows how the Global South is building a more multipolar world.

BRICS Partnerships

Another significant aspect of BRICS partnerships lies in its collaborations with other emerging economies. Over the years, BRICS has sought to engage with various nations and organizations, including the African Union, ASEAN, and the Shanghai Cooperation Organization. Such partnerships facilitate knowledge sharing, technology transfer, and investment opportunities, thereby helping to build a more inclusive global economy.

Advantages For BRICS Members

The advantages of being in BRICS compared to other pacts are numerous and multifaceted, offering member countries significant economic, political, and geopolitical benefits.

Economic Advantages:

• Market Access: BRICS nations represent a vast consumer market with a combined population of over 3 billion people. Membership provides access to these lucrative markets, facilitating trade and investment opportunities.
• Resource Sharing: BRICS countries possess diverse natural resources, including energy, minerals, and agricultural products. Collaboration within the bloc can foster resource sharing, ensuring mutual benefit and reducing reliance on external suppliers.
• Financial Cooperation: The establishment of the New Development Bank (NDB) provides an alternative source of financing for infrastructure and development projects, reducing dependence on traditional Western-dominated institutions like the World Bank and IMF.
• Technological Collaboration: BRICS nations are actively engaged in technological advancements, particularly in areas like renewable energy, artificial intelligence, and space exploration. Cooperation in these fields can accelerate innovation and promote economic growth.

Political and Geopolitical Advantages:

• Multilateralism: BRICS membership provides a platform for collective action and a stronger voice in global affairs. This can be particularly beneficial for smaller or developing nations seeking to address global challenges and influence international decision-making.
• Counterbalancing Power: BRICS nations can act as a counterbalance to the dominance of Western-led institutions and promote a more equitable and multipolar world order.
• South-South Cooperation: BRICS fosters cooperation among developing countries, promoting economic and social development through knowledge sharing and capacity building.
• Political Stability: BRICS membership can enhance political stability by fostering dialogue and cooperation among member nations, reducing the risk of regional conflicts and promoting peaceful resolution of disputes.

In conclusion, BRICS membership offers significant advantages for member countries, providing access to vast markets, promoting economic cooperation, and enhancing their political influence on the global stage. While challenges remain, the growing economic and political clout of BRICS suggests a promising future for this influential bloc.

Final Say

As the global landscape continues to evolve, the future of BRICS presents a unique opportunity for growth and collaboration among its member states. The bloc, comprising Brazil, Russia, India, China, and South Africa, has shown resilience and adaptability in the face of shifting geopolitical dynamics. The potential expansion of BRICS to include new member states raises significant discussions regarding its influence on global governance and economic stability. Countries expressing interest in joining the alliance could enhance its bargaining power in international negotiations, broadening its impact on critical global issues.

Future summits are pivotal for shaping the trajectory of BRICS. During these gatherings, member countries will likely discuss strategic initiatives that cater to their collective interests, focusing on economic partnerships, trade facilitation, and mutual investment opportunities. Such collaborations are essential as they can bolster the bloc’s economic resilience and fortify its position as a counterbalance to Western-dominated institutions. Nonetheless, the inclusion of new members also introduces complexities related to differing economic backgrounds and political agendas, thus prompting the need for effective mechanisms to ensure cohesion within the group.

Moreover, the ongoing global economic uncertainties pose both challenges and opportunities for BRICS. Economic fluctuations, supply chain disruptions, and geopolitical tensions may compel member states to reevaluate their strategies and cooperation. In this context, BRICS could leverage its collective strengths to foster regional stability, enhance trade agreements, and develop new frameworks for investment. While an optimistic view of the bloc’s future highlights the potential for significant growth and collaboration, a cautious perspective emphasizes the challenges of maintaining unity amid diverse interests and external pressures.