Monday, October 17, 2016

The BRICS Block of Nations




The prime minister of India (middle) and the presidents of Brazil, Russia, China and
South Africa (left to right) on the summit of BRICS nations, 15th Oct. 2016. Xin Hua


At a summit this weekend in Goa, India, the BRICS nations - Brazil, Russia, India, China and South Africa - were looking for ways to boost trade between their developing economies, representing nearly half of the world's population.

As all BRICS nations are facing similar challenges in lifting large populations of poor and protecting their environments, national economies have been slowing.

Brazil is Latin America's largest economy ($1.35 trillion) and which is predicted to contract about 3 percent this year after a similar development in 2015. Unemployment and inflation are both hovering around 10 percent. Some states including Rio de Janeiro are so broke they haven't paid public workers in months.

Brazil's recovery is crucial to South America's economic future. But the country of 206 million people relies heavily on prices of oil, soy and other commodities, which have plunged.

A disastrous political development and unpopular reforms announced by the new government of Brazil have added to create a difficult situation.

As tensions with the U.S.A. have escalated over the bombing of civilians in Aleppo, Syria, Russia is strengthening its links with China and officially supports Beijing's South China Sea policy.

Western sanctions and an oil price slump have hit Russia's $1.13 trillion economy hard. Shrinking of Russia's GDP in 2015, a weak recovery in 2016 and predictions of only modest growth in 2017 are describing the current situation.

Putin is due to meet with India's Prime Minister Narendra Modi on the sidelines of the BRICS summit on Saturday, where they are expected to discuss Syria and Afghanistan. The two also aim to expand nuclear ties, with Russia building several reactors in India. After decades of close Cold War-era relations between New Delhi and Moscow, Russia has been annoyed by Modi's effort to build closer economic and defense ties with Washington.

Bilateral trade between Russia and India fell more than 14 percent from $10 billion in 2014, a decline Russia has blamed on the global oil market turmoil.

India's prime minister Narendra Modi chose climate change, infrastructure and sustainable development as the BRICS summit's main goals. India's $2.38 trillion economy is growing 7.5 percent annually, fastest of the five countries. But it also has the world's highest number of people in poverty, with more than half of its 1.3 billion population living on less than $3.10 a day.

China's economy is growing at its slowest pace in 25 years, but it is still the world's second largest after the U.S.A. and amounting to $11.4 trillion.

In a speech just held at the BRICS summit, China's president Xi Jin Ping already warned of a further economic slow-down.

That's why Xi Jinping is looking to expand access for Chinese goods to foreign markets. Last week, Chinese state media argued strongly for the BRICS to adopt a free-trade agreement. While the Chinese government has made no such proposal formally, its Commerce Ministry has said it is keen on the idea.

The other BRICS nations, already burdened by cheap Chinese imports and huge trade deficits with Beijing, are likely to oppose.

China, a nation of 1.38 billion people, will also likely be seeking support in Goa for a proposed trade route through Central Asia and Russia to Europe, and for a sea route traversing the Indian Ocean. Chinese Foreign Minister Li Baodong this week called that "One Belt, One Road" initiative a national priority.

South Africa's economy, the smallest of all BRICS nations, was estimated at $327 billion in 2015. With an unemployment of 23% among its 55 million population and a credit ranking near junk status, that country is no real match for other major developing nations like China and India.

Furthermore, the country's finance minister is facing corruption charges which makes South Africa's economic situation even more difficult.

South Africa, however, remains an interesting partner when it comes to its vast mineral wealth that could meet the increasing needs of China and India.

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The Last Caliph


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