All along there have been challenges facing the world's economy which became a concern to the investors therefore it led them to the introduction of BRIC. There was an urgent need to intervene for the reducing rates of internal economic growth, decrease in domestic demand and declining markets. They wanted to look for new ways for investing their finances to guarantee an excellent return on investment and the security of their capital. The BRIC is an abbreviation of four countries. These countries are Brazil, Russia, India and China. The four countries are united together because of an economic movement and that is the reason for the word BRIC. It explains their economic empowerment.
The term was used for the first time in a report in 2003 known as Goldman Sachs report. This report made a vision that by the year 2050 the BRIC economies would be at a higher level of richness than most of the current wealthier economic powers.
The BRIC economies suggest that the world's dominant suppliers of the already manufactured goods and services will be China and India. The other two countries, that is, Brazil and Russia will also become the world's dominant suppliers of raw materials. These ideas show that the BRIC have the highest potential to produce the most powerful economical impact (Borodina & Shvyrkov, 233).The BRIC is described by many companies as the source of foreign expansion opportunity due to lower labor and production costs experienced in many worlds' economy.
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The aim of the BRIC is that they should maintain their policies set aside to them and for the sake of helpful growth they should develop institutions. For the attainment of this goal, each of the BRIC will have to encounter a lot of challenges but they need to endure and persevere in order to keep the growth.
Higher growth in these countries will lead to higher returns and higher level of demand for capital and will make them adorable in terms of investments. It was started that they could a significant determinant of demand and pricing patterns for a range of merchandise due to their rising incomes which may look at these economies which is growing gradually for different kinds of products and as local spending patterns change (Mullerat, 420). The change in spending patterns could provide vital opportunities for global companies since today's highly developed economies has lessen the world's economy.
In terms of currency, the BRIC countries are trying to promote each other. Internationally, and in joint trades, Russia and China are in quest for supporting the utilization of each other's currency in order to bring down or terminate the supremacy of the euro and dollar.
A data compiled by Bloomberg shows that the sale of currencies will become the first in the Chinese currency for Russian company and also for any upcoming market merchant outside Asian region. The rising exchange rates could help in the contribution of the rise of the US dollar in the BRIC which will lead to the development of the economy of the world. China can manage to multiply its currency value many times if they maintain their pace of development. Russia and China for the first twenty years, have been experiencing lower educational performance and poor infrastructure but these issues have been addressed for the purpose of economic growth and maintenance of the same speed between the four countries.
The BRIC has given some assumptions about the four countries. It has stated that in the next 50 years, there is an expected decrease in growth rate, which will average 3.6% in the overall percentage, hence rise in the economy which will lead it to overtake countries like Italy, France, United Kingdom, and Germany. In China the growth rate will as well slow down from 8.1% as it was in the year 2003 to 5% in the year 2020. This noticeable decrease will be an impact again which will lead to 3.5% in the mid 2040s. Therefore, there would be high rates of investments, an outsized labor force and stability in terms of economic growth. So, in the next years China would become the world's largest economy. On the other hand, as growth rate is expected to decrease in Brazil, Russia and China over the next fifty years, India growth rate will continue to be above 5%.
The population will continue to rise entirely. It has the prospective to move up its US dollar income per capita to 35 times the current levels in 2050 though it will be lower than the other three countries. The most gradually developed country among the BRIC will be Russia because there is likely to be a decrease in population. Its economy will defeat that one of Italy, Germany, United Kingdom and France.
These are visions shows how there is a faster growth of economies in the world today due to the influence of the BRIC countries. As Goldman Sachs economist Jim O'Neill initiated the phrase back in 2003, it has now been used widely as a significant shift of the economic empowerment globally. BRIC is seen as the future economic development of the world due to their cooperation in deciding that they should hold their own kind of enterprise. They are also largely expanded in terms of land size and population which are more than 25% of the world's land mass and a 40% of the world's population respectively.
The BRICs are growing by investing. On one hand, today the world's highest saving rates are found in China and on the other hand, Brazil and Russia have great foreign currency assets. They are giving out the greatest economic growth including sustainable rate of economic activity, which is highly projected to last for many years to come. Due to the high rate of return on investment, most of the investors in the global market have been interested and been involved in the BRIC countries. These investors have also tried to apply what they have seen in these countries in order to improve their own performance for those whose origin is not BRIC. They have diverted from Western countries to BRIC nations which make the four countries more aggressive and ensuring both accountability and transparency.
One of the commodities the BRIC countries are trading is with the world demand for steel, the long term prospects for trading in zinc since almost half the demand for zinc comes from galvanizing steel. Zinc is used as a corrosion resistance barrier in vehicles in the automotive industry and also used for roofing and weather proofing in the construction and engineering industry. 15% of zinc is also used as an alloy and a major element of brass (Simon, 322).
There is a high demand for this commodity in the emerging markets, especially BRIC, which has brought a challenge to the suppliers in maintenance of consumption rate which is drastically increasing. This zinc metal is secluded, concentrated and smelted to 98% purity from a mixture of ores of lead, silver, and zinc. After this purification process, it can now be used to galvanize and do some other works designed to do.
The World Bureau of Metal Statistics (WBMS) describes that the BRIC, to be specific China, has made a great contribution of approximately 38% to the world production of zinc hence increase in production over the ten years to 2006.
With the continuous economic development within the BRIC nations, there will be an increase in both the demand and supply of this zinc metal. We hope it to continue fulfilling world's needs in automotive, engineering and construction industries. China is growing in urbanization and infrastructure which means that there will be great financial prize for zinc.
The second commodity being traded in BRIC countries is sugar which is expected to make a reflective impact to world sugar markets. Sugar is extracted from sugarcane which is mainly grown in the humid and sub-tropical areas of the southern hemisphere by over 100 countries worldwide. Its growth is effective in places where there is sufficient rainfall.
A small percentage of sugar is also extracted from sugar beet which grows better in areas experiencing high temperatures like the northern hemisphere and a higher production cost is experienced than that of sugarcane. Sugar prices may shoot up due to bad weather conditions, crop invasion by pests such as sugarcane borer, termites, moths and ants. The sugarcanes are normally taken to the factories for processing where they are broken down into very small pieces and are mixed with water in order to make a liquid. Solid residues are left behind which is used as an energy source. Concentrated syrup is from which brown crystals are created when the cane liquid is processed. From there, the sugar crystals are purified by forming profound syrup, followed by a separation of impurities. Sugar dispensation consists of milling and refinement (Roett, 105).
Brazil is known to be the highest producer and exporter of sugar in the whole world. There is a high demand for sugar since it is widely used in a range of fruit and vegetable formulations, in the fermentation of bread, as a jam preservative as well as a source of ethanol. The sugar prices as seen in between 2004and 2006 have doubled.
It has been a critical issue to balance between supply and demand of sugar. Although it is a concern nothing has been done about it since the demand is anticipated to rise in the developing Asian countries, predominantly China. This increase in demand has resulted from the increased influence of the BRIC countries. Among other countries, India is known to be the leading consumer of sugar in the world and making use of it for ethanol as a substitute fuel. As written by Jim Rogers who is the author of a book named, "Hot Commodities" India is followed by China which is said to be the third biggest users and producers of sugar, with its per capita sugar consumption increasing from a the bottom line of around 7kg per annum as compared to that one of United States of 45kg. he continues to say that Brazil has prepared itself in order to avoid the excessive consumption of sugar by using the prospective overindulgence supply of its sugarcane crop to produce ethanol which is a substitute fuel to petroleum. There is a flow in demand for sugar in China due to the rise of crude oil prices which came as a result of use of sugar to produce ethanol. Brazil is now exporting both sugar and ethanol to many countries such as Japan, USA, and Sweden among others which has contributed the economic development of the BRIC nations.
There are other trade commodities such wheat, corn, soya beans, rice and coffee. As felt by the world, the food prices are rising day after day. This growth also affects coffee as a trading commodity (Miller & McBrewster, 87). The suppliers make a lot of profit from it. In fact it has been the most dynamically traded produce after crude oil. Coffee is grown in areas where there is a sufficient level of rainfall although; the harvest is determined by weather changes like freezing, drought and heavy rainfall.
A population growth is experienced in China and other Asian nations, as we had earlier on discussed, therefore, there will be an increase in the test for coffee hence high rate of consumption is likely to be noticed.Wheat is also another kind of commodities traded in BRIC nations. Wheat is produced in China, India and Russia. It is the second most produced cereal in the world after corn.
The world has increased its demand for oilseed crops for bio ethanol. The well known source of oil which is a very important trading commodity is soybean. The investors in soybean make great profits and the consumer follows it in order of their own purposes such as a major source of protein in the diet and is usually crushed into a meal for livestock. Soybean is produced in Brazil, China and India (Pelle, 98).
The BRIC nations have experienced various political consequences. Sometimes the government may fail to meet the needs of the people which may lead to the existence of various problems. Political consequences may be positive or negative depending on how policies governing a certain country are or will be implemented. So, the outcome depends on the successes and failures of the BRIC .
There is an idea of government failure when the interventions are unproductive and instead produces great and more troubles and therefore will take the economy behind. For example a country like Russia, its power has been declining year after year. It lost its empire and since then there has not been democracy. This factor has led the neighboring countries to disbelieve the country hence its economy has become uncompetitive yet it has an abundance of raw materials to supply and export.
Political self-interest leads to inequitable supply of resources in various regions of the country. This happens in instances like making decisions on where to build new schools, roads, hospitals, water towers and other constructions. The people who normally make these decisions are political leaders. Also, in many countries political leaders do not pay taxes yet they are well paid by the citizens. The act brings the economy of the country down and the citizens are pressed down.
There is political stability in Brazil manages its resources effectively and equity in the distribution. It has had a leader who has been generally good in the side of the economy. The country does not tolerate corruption and any proven guilty is sucked.
China has not had political freedom but the ruling communist party has given its subjects freedom which was opening the world's economy. The country is very tough on issues of corruption and the president is anticipated to promote younger people in his regime who can move worldwide more openly for the improvement of their country's economic growth which will help them improve their living standard. The country has also experienced a politico-economic system which being built according to the prosperity of the population growth. China's ministry of labor by now has told local governments not to add minimum earnings in order to keep away from putting any extra force on companies.
The BRIC countries have familiarized with more less the same political consequences because they have always worked together in their economic development. The have tried their best to ensure that there is security within their trading areas and more so in their home country, that is, both social and political security, maintaining a good relationship with other people. They have also established some national policies and interests governing the trade. This helps them get rid of disputes that may occur in the borders.
In conclusion, there is a need for adequate communication and understanding between the countries, put up some strategies for security purposes like employing more military personnel, eradicate corruption and there should be a severe penalty for whoever found indulging in it, and have democracy in the choosing of political leaders basing on their capabilities and potentialities. Above all, cooperation is required for an effective, dramatic growth of the BRIC countries economy.