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Cpeterside@aol.com New York, NY, USA

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RISE OF BRIC NATIONS:
...WHAT IT MEANS FOR AFRICAN COUNTRIES IN THE GLOBAL ECONOMY

…Myth or Reality

f you haven’t heard of the acronym BRIC, you are quite excused. Before you know, it would get more popular and become part of business lexicon. I was quite fascinated the first time I came across the abbreviation and decided to dig deeper. Realistically, the BRIC fever is a significant phenomenon of our time.

Economists from the London office of Investment Banking Group, Goldman Sachs in a research report coined BRIC to signify the rising economic powers namely – Brazil, Russian, India, and China. According to their report, this foursome has made such remarkable economic progress in the last two decades that they threaten the global hegemony of current world powers.

You could wish away this analysis as another intellectual prognostication, but for me it raises serious questions about the rapid gravitational shift in global geopolitics. Historically, if you studied the United States during the late 19th/early 20th Century (years after the abolition of slavery and end of civil war), you could have noticed the remarkable strides in industry (light bulb, telephone/telegraph, railway, steam engine, automobile etc). These inventions were rapidly adopted in all facets of life and that heralded the emergence of a new economic power. A similar situation is true today with the so-called BRIC and the facts speak for themselves.

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…Paradigm Shift
By size, the quartet accounts for 41% of the world’s inhabitants, occupying nearly a third of earth’s landmass and posses humongous natural resources. If you thought those numbers mean nothing consider something else; except the US most of the Western world has a declining population and dwindling work force. In affluent countries like Italy, Japan, UK, and Spain – the fast-aging society and longer life-expectancy will cause serious quagmire down the road. Increasingly countries with educated people, willing to work more for fewer wages and deliver the same or even lower output could tip the scale in their favor. All four countries in question have such work-force in abundance. There are a myriad of socio-political issues confronting them, but the potency of these countries transcends merely the labor market and natural resources into value-added productivity through utilization of technological tools that are easily accessible and cheaper to acquire. As free trade and globalization erodes barriers and diminishes competitive advantage of industrialized nations (such as financial wealth, developed infrastructure, high productivity and bargaining power), opportunities are gradually shifting to these erstwhile-impoverished countries.

Business executives consider this a true paradigm shift in our universe never seem since the rise of US during the early part of the 20th century or Japan after the second world war. Estimates (that are debatable) suggest that at the current rate of growth China and India will be the two largest economies within 50 years. The four countries under review on aggregate have amassed an external reserve in excess of $1 trillion – China alone controls $700 billion of that. These are proceeds from not only export of raw materials and cheap consumer products, but industrial goods shipped to the US, Western Europe and Japan. Meanwhile America’s largest export to China is now soybeans as its trade deficit spirals out of control approaching $60 billion. Japanese economy has remained comatose for over 10 years.

…Re-alignment of Forces
Elimination of textile quotas early in 2005, is already offering a big boost to Chinese exports at the expense of the US and Western Europe. According to estimates, China will in time account for 70% of world textile production. Brazil’s capacity to export raw materials, industrial goods and consumer products is being enhanced by robust domestic economy and strong demand from abroad. India is the destination for 70% of global technology outsourcing according to industry reports.

Market data show that the surge in oil prices and other natural resources is sustained by growing appetite by China and India whose production facilities have been humming non-stone. Russia with a massive oil reserve surpassed only by Saudi Arabia is generating substantial export earnings and flexing its muscle. For the first time, Russia staged a joint military rehearsal with China in the Pacific Ocean to the consternation of US and Western countries. No one should doubt the economic resilience of the US and Western Europe, except that it rests on multinational corporations that are moving production, capital and jobs around the world willy-nilly. More capital is sure to bolster the BRIC nations and re-align income and life-standard globally. Growing economic prowess by these new players will lead them to clamor for better recognition in international forums like the United Nations (UN) and World Trade Organization (WTO). In global trade talks exporters from poor countries are now teaming up with India, China and Brazil to argue against agricultural subsidies in European Union and US.

…Leveling Playing Field
Rise of BRIC nations is dispelling the myth about archaic political doctrines and development models. The countries in question cut across all ideological spectrum and continent (except Africa). They all seem to agree on one thing - that the "market" is king. Another common denominator is size and natural resources, but today what counts is how countries deploy their human and material resources.

You can identify amongst them, developing countries (all but Russia), former colonies (India and Brazil), former/current communist countries (Russia and China respectively) and of course poor or debt-ridden countries (all but Russia). Their experience could serve as a road map for most developing countries in Africa and other places.

In my opinion, every country has a chance of “leapfrogging their way out of backwardness”, if they can get their acts together and remain persistent in building enabling framework, create a predictable political climate under a strong and visionary leadership, pursue smart economic policies and allow competition to thrive in the marketplace.

…Leapfrogging From Backwardness
I truly believe that we now live in a new world, where the power of information will play a major role in the advancement of BRIC countries or other less developed countries. Cyberspace is transforming the face of society. Thanks to satellite, television signal is penetrating all nooks and corner of Africa, Asia and Latin America, as Internet access accelerates information flows freely and enlightens people. Mobile telephony is impacting productivity in Africa in a magnitude that aid and debt relief would never address. By utilizing new energy-sources to decentralize power supply from the national grid, enormous economy of scale could be unleashed in rural communities.

In the modern workplace, words like outsourcing, open-source, networking, offshoring and the likes are defining the future of business. It is quite early in that cycle, discerning leaders in Africa could step into the fray and still catch up. In his new book titled “the world is flat”, famed New York Times columnist – Thomas Friedman, argues that technology is leveling the playing field in a whole new way since this millennium.

Consequently, wages have come under pressure in affluent societies as employers move jobs/production from high-cost centers to low cost markets, nay India, China and Russia. That is an irreversible consequence of globalization. Rather than fight the force of progress, critics suggest that if advanced countries must survive the onslaught, they need to move up the productivity value chain to technologically sophisticated areas like genome science, stem-cell research and service sector.

…Wake-Up Call
For African countries this wave presents a rare opportunity to fill the void that will open up as societies and markets re-position. These times are quite exciting, but the next decade and beyond will define the kind of world that will emerge. African policy makers have a lot to contend with, but nothing compares to the abject poverty that over 70% of the population continues to survive in as the world advances.

It often makes you wonder which world African politicians exist. Rampant ineptitude and complacency is so mind burgling. Blatant looting continues to pose serious challenges for meaningful change. The choice is clear - unless the leaders understand this change process and take action, African countries will have a slim chance of ever shaking-off the human tragedy that threatens the fabric of their societies.

Chamberlain is the Founder & President of New Era Capital Corp. and MyCompleteFinance.com, a New York based financial services group. He was previously a Financial Advisor in the Global Private Client Group, of Merrill Lynch.