Is the House of BRICS Crashing Down?
Way back in 2001, Jim O’Neil coined the term “the BRIC countries.” These countries were to be the building blocks of the “post-American world.” Businessmen and investors flocked to these locations to see what the future held.
Fast forward to 11 years later and the story is a very different one. Uncertainty now resonates throughout the BRIC (BRICS if you want to include South Africa) countries due to an increasingly slow growth rate, coupled with widespread corruption, political failure and currency woes. This paints a familiar picture to some who witnessed the former “American Killers” such as Europe (1960), Japan (1970) and the Asian Tigers (1990) unable to sustain steady growth during those times.
The growth rate for many of the BRICS is still above 5%, which is attractive for many investors. This rate pales in comparison to the 10% growth rate that once was in China, Brazil and India for the past 10 years. This is occurring due to the major importers, mainly Europe and USA, still feeling the effects of the global recession. The corruption and political woes in the BRIC countries does not help the slowing buying power of the USA and Europe either. Business investors tend to shy away from countries where the presidential aide was recently found guilty of corruption (Brazil) and where power can go out with a snap of a finger due to the fragility of the infrastructure (India).
To be fair, all of these obstacles can be overcome. However, these obstacles seem almost insurmountable for the BRICS. A country cannot become a true world leader if it does not have a sound political structure with a dependable currency to match.