March 29th, 2012
08:02 AM GMT
(CNN) – It’s been a bad year to be a BRIC.
As the leaders of the BRICs – Brazil, Russia, India, China – gather in India for the summit Thursday, there is a nagging reality weighing on the world’s fastest growing emerging economies – they’re not growing as fast any more.
Brazil has seen its once blistering economy slow to an estimated 2.7% this year. Russia’s recovery from the global recession has been slow compared with other developing economies, the World Bank said in a report this week. Growth in India has steadily fallen as the nation lurches from scandal to scandal, most recently a report that alleges the government lost $211 billion in coal mining contracts.
Even the economic juggernaut of China has been slowing down, with Beijing dropping its projected growth this year to 7.5% which, if realized, would be the lowest growth rate since 1990, according to World Bank statistics.
What’s going on with the BRICs?
The reasons are as diverse as the nations themselves, a group cobbled together for economic rather then political reasons. Brazil, Russia, India and China became the ‘BRICs’ in a 2001 by Goldman Sachs in a report looking at the developing nations which may in time challenge the collective economic might of the G7.
The BRICS have become shorthand for, as CNN’s Fareed Zakaria has put it, “the rise of the rest” – the extraordinary economic rise of developing markets as the Cold War gave way to globalization in the 1990s. (The BRICS, which started summit-level meetings four years ago, added South Africa to the summit last year to politically acknowledge the developing power of Africa, a continent absent in the original quartet.)
But whereas the G7 powers – the U.S., Germany, Italy, Japan and the UK – share common post-World War II political, economic and democratic ideals, the BRICS have little in common besides strong post-Cold War growth and large populations.
Brazil’s growth last year was hampered in part by its strong currency which cut profits. (It’s not for nothing that the term “currency wars” was coined by Brazilian Finance Minister Guido Mantega in 2010 – an issue that has often put it at odds with fellow BRIC, China, over complaints Beijing undervalues its currency.)
Despite high oil prices, resource-rich Russia faces slower growth due to an aging – and unproductive – workforce and lack of corporate investment, a World Bank report said on Tuesday.
Growth in India has slowed below 7%, raising criticism that the bureaucratic democracy needs an overhaul to fight endemic corruption and open the economy to more foreign investment. “What India has failed to do is to live up to rising expectations,” Goldman Sachs’ Jim O’Neill, who first coined the term “BRICs”, told Bloomberg. “The occasional stated desires for 10-percent-plus growth cannot be met without much bigger reforms.”
But the BRICS are trying to answer the complaint the group is an acronym in search of meaning. On Thursday, the leaders are expected to sign a letter of memorandum toward starting a BRICS development bank which, like the World Bank, would give assistance to developing countries.
Such a move could give the BRICS political clout missing from an otherwise catchy slogan. As it stands, the BRICS meet seems more marketing than a meaningful, unified force in the business world.
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