Eurasia Group founder and emerging markets guru Ian Bremmer has come around to the view that the BRICS construct is nothing more than a bunch of countries “united by a catchy acronym” and little else. His op-ed piece in last Friday’s New York Times notes that Brazil, Russia, India, and China “have formalized their club and extended their reach by inviting South Africa to join” – a development that occurred in December of 2010 and asks, “But do their meetings and joint statements really allow them to punch above their individual weight? What do these countries share beyond a common interest in bolstering their global clout?” Several hundred words later he concludes that these five countries “will sometimes use their collective weight to obstruct U.S. and European plans. But the BRICs have too little in common abroad and too much at stake at home to play a single coherent role on the global stage.” Has he been reading my blog?
I write this from Jakarta, Indonesia’s throbbing capital city of 10-million people. Indonesia, which with over 240 million inhabitants is the world’s fourth-largest country, is a vast archipelago of more than 18,000 islands, stretching some 3,200 miles from the northern tip of Sumatra in the west to the middle of the island of New Guinea in the east, whose economy is growing faster than that of any of the BRICS save China. If the Indonesians gave much thought to the BRICS – and there is no evidence they do – they might be bemused by the inclusion of South Africa, a country with one-fifth its population and half its GDP. As would, no doubt, the Mexicans, twice as many in number as the South Africans and with an economy three times bigger.
I am not trying to pick on South Africa, where I lived for seven years and for which I have very fond memories. And indeed, although South Africa stands out for its small size relative to the other BRICS countries, it otherwise has no more or less in common with the others than any of them have with one another.
As Bremmer points out, echoing my own writing on the topic, there is a whole raft of political, macroeconomic, and commercial reasons to consider the BRICS, with or without the inclusion of South Africa, a meaningless construct, as I also consider the newer CIVETS group, a term variously attributed to Robert Ward of the Economist Intelligence Unit and Michael Geoghegan, former CEO of HSBC, to refer to Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, a group of countries that The Guardian has referred to breathlessly as “countries bearing the world’s hopes for growth.” And what do these countries have in common? Not much it seems, other than “young populations [and] economies…perceived to have relatively sophisticated financial systems and to not be overly reliant on any one sector.” I can accept this, though with the caveat that there is a world of difference between the sophistication of Vietnam’s financial system, dominated by dodgy state-owned banks with large portfolios of non-performing loans and with a total stock market capitalization of 14.8% of GDP, and South Africa’s highly developed banking sector and stock market capitalization of 210% of GDP. And although there are reasons to be bullish about each of these economies, the economic trajectory of Turkey, with a per capita GDP of more than $10,000 and a high degree of trade integration with the European Union, is bound to be very different from that of Vietnam, with a per capita income of only $1,400.
I have previously suggested that rather than coming up with a new acronym every time someone thinks to add or drop a country from a given group we should just refer to the BEEs – Big Emerging Economies – and we could call their most dynamic members the Killer BEEs. Unaccountably, it has yet to catch on.
I can’t complain too much: as long as people keep on writing about BRICS and CIVETS I can keep on sniping at them. But if one of the benefits of investing in emerging and frontier economies is their relative lack of correlation with more mature economies and also with one another, the more we try to force them into an ill-fitting straightjacket (including BRICS and CIVETS funds) the less we may benefit in future from that very lack of correlation we seek. Why don’t we stop substituting catchy acronyms for careful analysis and pay attention to what distinguishes the investment case for each of these economies rather than how they may superficially resemble one another.
12-14-2012 1:38 PM