BRICS; irrelevant or irresistible

The fifteenth annual BRICS summit, attended by Brazil, Russia, India, China, and South Africa, took place in Johannesburg last week, with members committing to expansion, in a significant development, that will have a major impact on the global economy.

The addition of six new members, including Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the UAE, would boost BRICS’ gross domestic product rise to 36% of global GDP at purchasing power parity and 46% of the world’s population. 

China has boosted the standing of the BRICS group and propelled its share of global gross domestic product to a level that could soon rival that of the Group of Seven (G7) comprising Canada, France, Germany, Italy, Japan, the UK and the US.

While China’s economy may be challenged currently, economist predict that India is ready to pick up the slack and could boost the BRICS’ share of global GDP to more than 40% by 2040, compared with 32% last year, which far outstrips the G7’s predicted share of 21%.

BRICS expansion could be a positive development, that could have a major impact on the global economy, but the group will face significant challenges. As it grows in size and influence, direct government intervention by BRICS members is likely to play a more prevalent role in global trade flows.

The inclusion of Saudi Arabia, the world’s largest oil exporter, alongside several of the largest energy producers, together with the developing world’s biggest consumers, will give the bloc immense economic clout and with most of the world’s energy trade taking place in dollars, the expansion could also enhance its ability to push more trade to alternative currencies.

BRICS’ members make heavy use of subsidies and offer state funds to local companies much more often than the rest of the world, which is a critical consideration because not every developing country can replicate this heavily subsidy-driven policy model.

They rely on export bans at least half as much as other nations, preferring opaque licensing restrictions, export taxes and tax-based export incentives. At the same time, BRICS nations impose fewer barriers to trade, like increased import tariffs, quotas and licenses than other nations.

These economic policy areas will be crucial considerations for governments thinking of launching free trade agreement talks with the BRICS nations, and the implications for the global economy are huge.

If you are considering alternative sourcing strategies, we can offer local assistance, with our local contacts and, with our proprietary technology, provide vendor management, together with full supply chain visibility.

We have network partners across Asia and EMEA, to simplify trade with the bloc, while our fixed price and long-term capacity agreements with partner carriers will provide resilient and reliable supply chain solutions.

Our cloud-based supply chain management platform, MVT, simplifies global trading expansion, by making every milestone, event and participant transparent and controllable, down to individual SKU level.

To discuss how our experience, network and technology could support your global sourcing and trading, EMAIL Elliot Carlile.