There is a variety of economic and political alliances in the world whose activity is aimed at bringing power and stability to their members as well as strengthening the world’s economy in general. One of such blocs is
BRICS. Its members are Brazil, Russia, India, China, and South Africa. Each of these countries has a different history and level of development. Still, all of them are united by the rich natural and human resources and the desire to strengthen the world’s economic situation. BRICS nations are diverse, and it may seem that they cannot cooperate due to several differences. However, their diversification is what makes the alliance so powerful. The question to be answered in the paper is, can BRICS countries make a change that the world needs so much by bringing together their resources and possibilities?
Overview of the Economy of BRICS Countries
Despite some minor threats and problems, the BRICS nations have a huge potential in modern economic affairs. Out of all the BRICS countries, India has the best potential for growth (Esposito, 2016). Since exports for its development less control it, it is less impacted by market volatility (Esposito, 2016). India’s share of goods and services export in the growth domestic product (GDP) was 23.2% in 2014, whereas the number for South Africa was 31.3% and for Russia – 30% (Esposito, 2016). BRICS countries have different performances in various spheres such as social development, basic human needs, social progress index, and literacy level.
The country has some problems due to a political crisis and a decrease in commodity prices (“Brazil,” 2017). High inflation rates, growing budget deficits, and political downturn have caused a weakening in investor and consumer trust. However, despite these factors, the economy of Brazil is generally on the way of positive development (“Brazil economic outlook,” 2017).
The largest rainforest governs the country’s economy in the world and basin of the Amazon River. The population exceeds 200 million and is mostly accumulated in the coastal areas that provide direct access to the Atlantic Ocean (“Brazil,” 2017). The tax rate on personal income in the country is 27.5%, and the standard corporate rate reaches 15%. However, other kinds of taxes, such as the financial transactions one, raise the effective rate to 34% (“Brazil,” 2017). The overall tax burden in Brazil amounts to 32.8% of domestic income. In 2017, government spending reached 39.5% of GDP in comparison with the previous two years. The budget deficits balanced 6.4% of GDP. Brazil’s public debt is 73.7% of GDP (“Brazil,” 2017).
The country’s regulations are not considered efficient enough (“Brazil,” 2017). There are too much bureaucracy and awkwardness in the ways of setting up new businesses. Employment growth is weakened due to outdated and inflexible labor laws. The non-wage cost of hiring an employee is oppressive, which limits the possibilities of employers. However, the new government’s regulations are aimed at following more authoritative policies and surpassing the growth in budget expenditure. Moreover, it is expected that the automatic indexation of privileges will be decreased (“Brazil,” 2017).
Brazil’s economy is moderately dependent on trade. The total value of imports and exports corresponds to 27% of GDP. The commonly applied tariff degree is 7.8% (“Brazil,” 2017). The country’s financial sector is varied and ambitious.
This BRICS country experienced two hard years of decline, but in 2016, it started to recover (“Russia economic report,” 2017). Along with the strengthening of global trade and growth at the end of last year, the Russian economy began getting better after the troublesome period associated with low oil prices and several economic sanctions. The most beneficial factor was the stabilization of commodity prices and a considerable adjustment of prices. Thus, tradable sectors turned out to be the major triggers of economic progress. Non-tradable sectors had some positive changes as well. As a result, the level of contraction was decreased in comparison with 2015 (“Russia economic report,” 2017).
In the current year, the country expects to recover considerably due to the acceleration in commodity exporters and persistent solid growth. With the help of macroeconomic stability and growing prices on oil, Russia is planning to reach a moderate growth rate within the next three years (“Russia economic report,” 2017).
In comparison with other exporters of oil, Russia had a good adaptation. While oil prices dropped by 77% in the period between June 2014 and January 2016, many exporters of energy experiences severe losses. Still, the reaction to the situation was different across the nations exporting oil. Russia organized the growth adjustment sooner than many other oil-exporting countries. The nation was able to react to the influence of economic sanctions and the high level of inflation connected with the initiation of a floating regime of the exchange rate (“Russia economic report,” 2017).
Notwithstanding the negative conditions and limited access to the world’s capital markets, Russia’s payment balance continued to be steady. Net capital discharge reduced, and comparatively tight monetary tactics raised interest in ruble resources and limited net capital discharge (“Russia economic report,” 2017). The level of unemployment fell, inflation decreased, and the real-wage growth proceeded. The country’s financial and economic prospects are advancing. Russia anticipates having the poverty rate lowered due to decreased inflation and improvements in private profits and expenditures.
This country is considered to have the world’s fastest-growing economy (“Goods and services tax,” 2017). To make its state of development even more secure, the new goods and services tax (GST) regime is going to be implemented. Within the last three years, India’s economy produced impressive results. The country’s Home Minister, Rajnath Singh, has recently expressed a resolution that after the new GST program is launched in July, the country’s accomplishments will get even higher (“Goods and services tax,” 2017). The government has already introduced several adjustments that are working in people’s interests, which raises the country’s image in the world economy market.
India’s economy balances between the poverty and wealth of diverse population groups (“India,” 2017). The country is striving to find equity and organize inclusive development for every citizen.
Real proper power is commonly well implemented in metropolitan regions, whereas titling is ambiguous in several rural and urban districts. India had to initiate legislation that would fight corruption, but there is no proof of this legislation being reinforced in a productive way (“India,” 2017).
The country’s highest individual income tax amounts to 30.9%, encompassing the tax on education. The highest corporate tax equals 34.6%. The general tax burden comprises 16.6% of the whole domestic income (“India,” 2017). Within the last three years, government spending has reached 27.4% of GDP, and budget deficits have equaled 7.3% of GDP. What concerns the public debt, it amounts to 67.2% of GDP (“India,” 2017).
Trade occupies a significant position in the country’s economy. The added export and import value is 49% of GDP. The commonly applied tariff rate amounts to 6.2% (“India,” 2017). Foreign investments in India’s economy are shielded, but ownership constraints in some of the economic zones have been limited. The impact of state-owned businesses is adverse (“India,” 2017). Despite some progress and innovations, state-own enterprises control the capital markets and bank system (“India,” 2017).
The economic progress of this country has been remarkable over the past few decades due to China’s growing integration into the global market and the government’s great encouragement of economic endeavors (“China economic outlook,” 2017). Still, along with great social and economic progress, the new economic model caused a lot of challenges. Harsh economic imbalances, growing environmental problems, increasing economic inequalities, and an aging population are the core threats presented to the new administration of China (“China economic outlook,” 2017). It is necessary to overcome these problems so that the country could reach sustainable development in the nearest future.
China’s economy is generally “unfree” with a little power for reform (“China,” 2017, para. 1). Despite a theoretical acceptance of new approaches to investment and trade, bureaucratic obstacles and opposition to accept fixed interests in the state zone present a considerable obstruction to a more flexible economic growth. While the government was fighting with economic decline, it simultaneously reinforced the expansionary financial projects (“China,” 2017). The country’s economic activity is threatened by the political impact of Communist party regulations.
The highest personal income tax rate in China is 45%, whereas the highest corporate tax rate is 25% (“China,” 2017). Other kinds of taxes incorporate a real estate tax and a value-added tax. The general tax burden amounts to 18.7% of total domestic income. Government spending has reached 30% of GDP within the last three years. China’s budget deficits have equaled 1.5% of GDP. Public debt is 43.9% of GDP (“China,” 2017).
In comparison with other BRICS members, China’s economy is only slightly dependent on trade. The total value of imports and exports is 41% of GDP. The regular applied tariff rate equals 3.2% (“China,” 2017). Because of the adverse impact of state-owned businesses on the economy, China’s development is not ultimate. The government keeps control over the majority of the country’s banks, which makes them get involved in a growing number of unproductive loans (“China,” 2017).
The economy of this country is currently in a declining position (“South Africa economic outlook,” 2017). Economic activity is low and faces the danger of technical collapse. South Africa is struggling to overcome difficulties. The manufacturing process has grown stronger, and retail sales reported a stable growth in March 2017 (“South Africa economic outlook,” 2017). However, several factors limit the country’s potential. Constant uncertainties concerning the core government regulations present new challenges to private investments and an increase of the productive infrastructure (“South Africa,” 2017). Growing public debt, unproductive state-owned businesses, and spending burdens are responsible for the growing fiscal vulnerability of South Africa.
The highest personal income tax has grown up to 41%. The highest corporate tax is 28% (“South Africa,” 2017). Other types of taxes are a capital gains tax and a value-added tax. The general tax burden amounts to 22.6% of total domestic income. Government expenditures have grown to 32.4% of GDP within the last three years. South African budget deficits have reached 4.0% of GDP. Public debt amounts to 50.1% of GDP (“South Africa,” 2017).
Growth in the transformation of South Africa’s economy has been rather restricted and irregular. Thus, there is a need for administrative adjustments that would enable more dynamic progress in the private sector. Currently, the government has prohibited price controls on almost all goods, leaving only a few items controlled: utilities, petroleum and its products, and coal (“South Africa,” 2017).
Unlike China, South Africa feels a great need in international trade. The total amount of import and export reaches 63% of GDP. The typically applied tariff rate equals 3.9%. A large number of state-owned businesses undermine the economy of South Africa. Recent attempts to abolish foreign ownership of land and promote appropriation indispose foreign investors (“South Africa,” 2017). However, the South African financial sector is one of the biggest ones among the developing markets, and it incorporates appealing bond and banking markets.
Causes of the Growing Significance of BRICS Nations in World Business Affairs
The importance of BRICS nations is a generally acknowledged fact. These countries are considered to be the core drivers of the world economic growth in the time when the majority of developed western economies are forced to deal with austerity (Lavelle, 2012). The most crucial strength of the BRICS is that each of the nations belonging to the bloc has an outstanding history of growth. While each of the nations has its difficulties, the overall opinion is that all of them have passed a lot of challenges on the way to reaching the present level.
Another benefit of BRICS is the permanent internal purchasing interest within the economy of each of the countries. The next positive factor is that BRICS members have a natural inclination to trade their products in national currencies (Lavelle, 2012). These countries have a strong determination to stop being dependent on the dollar. The crisis associated with the American debt and the ongoing use of quantitative facilitation of the Federal Reserve undermine the prospects of the dollar, and the BRICS nations are doing their best to become independent from it.
The BRICS’ growing significance is also associated with their capability to act both separately and collectively and produce equally good results (Lavelle, 2012). All of the nations belonging to the alliance have considerable space for structuring and restructuring their economies, which leads to better competitive possibilities. Moreover, such a tendency enables the BRICS countries to fight against poverty.
BRICS summits are rather significant for the world’s economy because they provide an exceptional opportunity for the non-OECD (Organisation for Economic Cooperation and Development) leaders to talk over the global economic risks and arrange a plan of fighting these challenges (Guriev, 2015).
Internal and External Factors Impacting the Organizational Performance of BRICS
For each of the BRICS countries, some internal and external forces influence their economies’ productivity. For Brazil, the major internal strength is its natural resources (Khan, Barua, & Bhuiya, 2015). The country is one of the biggest oil suppliers in the world. Another asset of this nation is that it makes great investments in infrastructure and sustainable development. The external force impacting the Brazilian economy is the capital inflow. A negative external factor is that the rule of law is ineffective and frequently subject to demoralizing impact (“Brazil,” 2017).
Russia’s natural resources increase the country’s performance level (Khan et al., 2015). Its geographic and demographic peculiarities are also favorable for foreign investments.
What concerns India, its biggest internal and external force is its large population (Khan et al., 2015). Because of it, enterprises are given a huge market along with a great number of people to employ. Another favorable internal factor in India is concerned with its productive investment sectors and policies.
The most crucial external factor facilitating China’s performance is its positive disposition towards foreign investments (Khan et al., 2015). Internal factors include increasing the coastal regions and having a very strong economy. Also, China has a huge amount of natural resources, which increases its chances of good performance in the global economy market.
South Africa’s most significant external factor is its Green Field investment that is rather appealing to foreign investments. Another advantageous issue is that the country’s governmental regulations, such as import control, lowered taxes, and vast privatization, create favorable conditions for investments (Khan et al., 2015).
Apart from the positive factors influencing BRICS’ performance, there are also some negative ones. The major adverse issue is associated with social and political tension in some of the BRICS nations (Khan et al., 2015). Also, the issue of corruption, dictatorship, and bureaucracy influence the chances of BRICS nations for advancement in a negative way.
BRICS Economies as Related to the Value of Responsible Stewardship
Responsible stewardship is defined as the determination of using one’s resources to optimize the quality of life of as many people as possible. In this context, BRICS economies are entirely dedicated to the mentioned value. Responsible stewardship is at the core of BRICS’ activity. The majority of the nations belonging to the bloc has an abundant amount of natural resources. Due to their economic strategies aimed at organizing international cooperation, BRICS members are doing everything possible to reach an ongoing sustainable development and benefit the world’s population. Such politics indicates a high correspondence with the core value of responsible stewardship.
The nations belonging to BRICS have different past and present. What they are trying to reach is the common future, both for themselves and the world economy. Brazil, Russia, India, China, and South Africa did not come together as an alliance merely to form one more alliance that would defend its rights. BRICS is endeavoring to reach more than that. With the help of their natural resources and a variety of internal and external factors facilitating their performance, these nations hope to make a change for the world.
The economies of some of BRICS countries may be weak, but they are on the way of continuous improvement. The fact that these nations came together with a common purpose means something rather significant. The present-day financial and economic situation in the world is facing a lot of changes as it has lost its vigor and needs new ideas. The BRICS’ role in this process is to embrace these adjustments and change themselves and the whole world economy for better.
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