What Is BRICS?
BRICS is an acronym for Brazil, Russia, India, China, and South Africa, a bloc of countries that formed a partnership following the creation of the term in 2001 by Goldman Sachs economist Jim O'Neill (but it didn't include South Africa at the time). He believed that by 2050 the four BRIC economies would come to dominate the global economy. South Africa was added to the list in 2010.
The BRICS countries operate as an organization that seeks to further economic cooperation amongst member nations and increase their economic and political standing in the world.
Key Takeaways
- BRICS is an acronym for Brazil, Russia, India, China, and South Africa.
- Economist Jim O'Neill created the term BRIC in 2001 (for Brazil, Russia, India, and China) with the belief that these economies would dominate global growth by 2050.
- The BRICS nations offered a source of foreign expansion for firms and strong returns for institutional investors.
- The organization seeks to deepen economic cooperation between the member countries and stand in contrast to the Western sphere of power.
- Saudi Arabia, Iran, Ethiopia, the United Arab Emirates, and Egypt joined BRICS in 2024.
Understanding BRICS
Brazil, Russia, India, China, and South Africa ranked among the world's fastest-growing emerging market economies for years. This was thanks to low labor costs, favorable demographics, and abundant natural resources at a time of a global commodities boom.
The group has a set of joint priorities including:
- Working to resolve regional problems, such as the Iranian nuclear program and conflicts in Libya, Syria, and Afghanistan
- Tackling financial and economic issues like reforms at the World Bank and International Monetary Fund (IMF)
- Establishing the BRICS Interbank Cooperation Mechanism
The Goldman Sachs thesis didn't suggest that these countries would become a political alliance like the European Union (EU) or even a formal trading association like the Eurasian Economic Union (EAEU).
Instead, the investment banking firm believed that these countries had the potential to form a powerful economic bloc, even as it acknowledged that its forecasts were optimistic and dependent on significant policy assumptions.
Still, the implication was that economic power would bring political power, and indeed leaders from BRICS countries regularly attended summits together and often acted in concert with each others’ interests.
According to BRICS, the GDP of their nations accounts for 31.5% of global GDP as of 2023, compared to the 30.7% of the G7 nations.
History of BRICS
BRICS sees itself as countering the traditional Western-led global order, with some member states viewing the organization as a way to boost their influence around the world.
Still, the nations may disagree on fundamental factors, such as transparency and a balanced approach, which may hinder the growth of the group.
How It Works
The group operates as an informal confederation of nations that meets annually at the BRICS convention. There, members and heads of state seek to build economic cooperation between the nations.
The head of state of a member nation acts as the chairman of the group, rotating once a year. Informal meetings began in 2006 but the group's first official meeting was on June 16, 2009, in Yekaterinburg, Russia.
Because of their economic power and the appeal of disentangling from the West to a degree, BRICS claims that over 40 countries seek to join the group. It announced that it invited additional countries to join the group at its 2023 summit. Full membership was granted to Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates on Jan. 1, 2024.
Other Key Developments
- The growth of the New Development Bank, an institution established in 2015 to provide emerging markets and developing countries with funding for infrastructure and sustainable development projects.
- The establishment of the BRICS Parliamentary Forum, which is designed to "strengthen and promote contacts at the leadership level of chambers, committees and groups of parliamentarians." This body is responsible for inter-parliamentary exchanges and consultations along with the development of new mechanisms for inter-parliamentary cooperation.
The BRICS thesis of a non-Western global order became conventional market wisdom in the aughts. But there were always skeptics, including some who claimed the term was Goldman marketing hype for its BRICS-focused investment fund.
Goldman Sachs' BRIC Thesis
In 2001, Goldman Sach's O’Neill noted that while global gross domestic product (GDP) was set to rise 1.7% in 2002, BRIC nations were forecasted to grow more quickly than the Group of Seven (G7). The G7 are the world's seven most advanced global economies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the U.S.
In the paper "Building Better Economic BRICs," O'Neill outlined his view of the potential of the BRIC nations.
In 2003, O'Neill's Goldman colleagues Dominic Wilson and Roopa Purushothaman followed up with their report "Dreaming with BRICs: The Path to 2050.”
The two authors claimed that by 2050, the BRIC cluster could grow to a size larger than the G6 (France, Germany, Italy, Japan, the U.S, and the U.K.), and the world’s largest economies would therefore look drastically different in four decades. That is, the largest global economic powers no longer would be the richest according to income per capita.
In 2007, Goldman published another report, "BRICs and Beyond," that focused on BRIC's growth potential, the environmental impact of these growing economies, and the sustainability of their rise.
The report also outlined a Next 11,a term for 11 emerging economies,in relationship to the BRIC nations, as well as the ascendancy of new global markets.
Closure of Goldman's BRICS Fund
Growth in the BRICS economies slowed down after the global financial crisis of 2007-2008 and the oil price collapse that began in 2014.
By 2015, the BRICS acronym no longer looked like an attractive investment venue, and funds aimed at these economies either shut down or merged with other investment vehicles.
Goldman Sachs merged its BRICS investment fund, which was focused on generating returns from these economies, with its broader Emerging Markets Equity Fund. The fund lost 88% of its assets from a 2010 peak.
In a filing with the Securities and Exchange Commission (SEC), Goldman Sachs stated that it did not expect "significant asset growth in the foreseeable future" in the BRICS fund. Per a Bloomberg report, the fund lost 21% in five years.
How Many Members Are in BRICS?
The BRICS nations are Brazil, Russia, India, China, South Africa, Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates.
What Is BRICS and Its Purpose?
BRICS was created by Goldman Sachs as an analytical grouping of emerging market countries that experienced strong economic growth and were poised to dominate the world economy by 2050. These countries now operate as an informal organization that seeks to further economic ties with each other.
Is BRICS a Threat to the US Dollar?
BRICS could threaten the dollar globally by replacing it with another currency or creating its own. However, replacing a currency that is as stable and backed as the U.S. dollar is no small task, as it would need to be equally valued as the dollar. That currency would need to be backed by a very strong economy that rivals or outperforms the U.S.
The Bottom Line
BRICS refers to certain emerging market countries—Brazil, Russia, India, China, and South Africa (and the list of countries joining the bloc is growing)—that seek to establish deeper ties between member nations and cooperate on economic expansion, including trade. The countries act as a counterbalance to traditional Western influence. They seek to depend on each other to build a growing influence in the world.
