December 2nd, 2010
02:03 AM GMT
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Inflation has been far from our minds when following the BRIC economies on World Business today.  However, the sell-off in emerging market equities that followed Chinese inflation data last month is a reminder that inflation remains a risk in the world’s hottest emerging markets known as BRIC.

China has announced a two year high in its year-on-year increase in consumer prices, at 4.4 percent.  India’s inflation is running at 8.6 percent, 7.5 percent in Russia, and 5.2 percent in Brazil.  Brazil’s consumer prices rose 5.5 percent in November, the biggest jump in 20 months, and that’s with the central bank’s overnight lending rate at 10.75 percent, up from 8.75 percent.

Here’s the concern:  If the BRIC economies try to control rising inflation by hiking rates and slowing growth, who will carry the economic growth banner for the rest of the world?  Will these economies sputter?

In addition, it is often the poor who suffer with inflation in emerging markets because they spend a large portion of their income on food.  Food inflation is high in the BRIC block, for example, 10.1 percent in China, and 15.7 percent in India.

Brazil, Thailand, and Taiwan are among countries that are trying to tame inflation through capital controls, and economists say there is increasing pressure for more measures.

Russia may be a notable exception.  It’s struggling compared with the other BRICs, so much so, that social media is awash with suggestions that Indonesia or South Africa replace the “R” in the acronym.

So we’d have BIIC?

Or BICSA?

Not so fast says David Spegel, global head of Emerging Markets with ING.  “Russia is the only major energy exporter among the BRICs,” he says. It’s a large equity market, “and Russia has the largest market for external bonds (US$211bn)…  so for financial markets it would be difficult to extract.”

Spegel says don’t expect a re-branding of BRIC any time soon.  And let’s keep our eyes on inflation and capital controls in the block.



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soundoff (8 Responses)
  1. Andan

    It is nice to play with letters, BRIC, BIIC, BICSA. Hungarian love this game. However, inflation levels of 4-10 % in economically expanding countries is not the tragic element. Tragic is that people in some of these countries have no safe harbor where they can save what they have.

    December 2, 2010 at 10:40 am |
  2. Rahoof

    Among the BRICs India have the highest poverty rate .. But the food inflation as well as consumer price also high in India ... Seems India Government have less control on market ... looks like some corporates running the show

    December 2, 2010 at 1:45 pm |
  3. Fabio

    Before BRIC breaks, Europe will...

    Asia is shifting the global economy from Europe. In the beginning of the 20th century Europe had a virtual monopoly of industries. In 100 years this is shifting to Asia, first Japan, then the Asian Tigers, now China, India, and Russia in Eurasia. Brazil is having some good time but the global economic locomotive tends to be Asia. While a baby born in rich Luxemburg is in international debt of US$ 4,000,000 and I have no idea about how they will pay this, Asian nations are not so in debt and soon European economies, maybe in the 2020s, will be left behind. New century, new history.

    December 2, 2010 at 8:28 pm |
  4. Fabio

    Just to add something still related to my previous comment, in the past 110 years, Brazil grew at a 5% rate yearly on average, even though in the 1980s and 1990s its economy was virtually stopped, when the entire South America had problems probably related to the 1970s crisis. So what is happening is Brazil today is not new in its history, although it's new compared to the previous 30 years. The really new scenarium is Asia ruling the world more and more from the economic viewpoint, and this continuous growth will probably go on until something inexpectable happens, such as a global war, for example, that could change completely the balance of power.

    December 2, 2010 at 8:34 pm |
  5. george ferreira

    Brasil's inflation is already running rampant..The people of this country don't knwo that yet because ot the vendor financing options existente in the market. I consider Brasil to be one of the most expensive places right now with few exceptions. If this country can not sustain growth and if Brasil's economy stalls, then the shit will hit the fan. It's horrendous the prices of food and clothing in Brasil.

    December 3, 2010 at 12:44 am |
  6. Alberjan Pinto

    Every relationship takes time and effort to be built. Similarly, the BRIC nations too have come a long way since their importance began to be felt worldwide. They have not only improved relations with other countries of the world, they have also built good diplomatic and economic relations within themselves, creating for themselves a niche in world affairs.
    China and India, being close neighbours, are trading more than ever before. Also, all the BRICs have taken the global economic crisis, as a means to make better their relationships with the poorer developing world. For instance, all the four BRICs have significantly increased their contributions, financially, to the African continent. According to research done by the Overseas Development Institute (ODI), the BRICs have invested huge amounts, in the form of foreign direct investment (FDI), as well as loans, to countries in Africa.
    India has provided loans of more than $200 million to the African countries since 2009. China has invested almost $4000 million as foreign direct investment. Russia too has contributed more than $3000 million as FDI. And Brazil has invested around $4000 million in Africa. Through these enormous financial backing, the BRICs are not just providing assistant to these countries, but are also showing their capacity to give financial help to the developing world. Through this, they have improved their relations with the poorer economies.

    December 3, 2010 at 1:06 am |
  7. José Henrique

    The official inflation in Brazil is 4.4%, according to the Central Bank.

    December 3, 2010 at 2:16 pm |
  8. bingo madangle

    We all are going to die!!

    December 4, 2010 at 10:42 am |

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