What is BRICS?

2318 reads · Last updated: December 5, 2024

The term BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The coin was initially created as BRIC (without South Africa) by Goldman Sachs economist Jim O'Neill in 2001, claiming that by 2050 the four BRIC economies would come to dominate the global economy. South Africa was added to the list in 2010. The BRICS countries operate as a loose organization that seeks to further economic cooperation amongst member nations and increase their economic and political standing in the world.

Definition

BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The term was originally coined by Goldman Sachs economist Jim O'Neill in 2001, initially as BRIC (excluding South Africa), claiming that by 2050, the four BRIC economies would dominate the global economy. South Africa joined the list in 2010. BRICS operates as a loose organization aimed at promoting economic cooperation among its member countries and enhancing their economic and political status in the world.

Origin

The concept of BRICS originated in 2001 when Goldman Sachs economist Jim O'Neill first introduced the term BRIC to refer to the emerging market economies of Brazil, Russia, India, and China. In 2010, South Africa joined the group, becoming part of BRICS. The formation of this group was intended to enhance the influence of these countries in the global economy through cooperation and collaboration.

Categories and Features

The main feature of BRICS is that its member countries are all emerging market economies with rapid economic growth potential and abundant natural resources. They play a significant role in the global economy, particularly in driving global economic growth and promoting multilateral trade. BRICS cooperation focuses mainly on economic, political, and cultural exchanges, aiming to enhance their international influence through collective strength.

Case Studies

A typical case is the establishment of the BRICS Development Bank, which aims to provide funding for infrastructure and sustainable development projects in member countries. Another example is the cooperation among BRICS countries in the United Nations and other international organizations to promote a common economic and political agenda.

Common Issues

Investors might ask how BRICS economic cooperation affects global markets. A common misconception is that BRICS is a tightly-knit economic alliance, whereas it is actually a loose cooperative organization that achieves common goals mainly through dialogue and consultation.

Suggested for You

Pooled Funds

Pooled funds are funds in a portfolio from many individual investors that are aggregated for the purposes of investment. Mutual funds, hedge funds, exchange traded funds, pension funds, and unit investment trusts are all examples of professionally managed pooled funds. Investors in pooled funds benefit from economies of scale, which allow for lower trading costs per dollar of investment, and diversification.

Giffen Good

A Giffen good is a low income, non-luxury product that defies standard economic and consumer demand theory. Demand for Giffen goods rises when the price rises and falls when the price falls. In econometrics, this results in an upward-sloping demand curve, contrary to the fundamental laws of demand which create a downward sloping demand curve. The term "Giffen goods" was coined in the late 1800s, named after noted Scottish economist, statistician, and journalist Sir Robert Giffen. The concept of Giffen goods focuses on a low income, non-luxury products that have very few close substitutes. Giffen goods can be compared to Veblen goods which similarly defy standard economic and consumer demand theory but focus on luxury goods.Examples of Giffen goods can include bread, rice, and wheat. These goods are commonly essentials with few near-dimensional substitutes at the same price levels.

Base Effect

The Base Effect refers to the significant impact on year-over-year data comparisons due to changes in the base period's value. This effect is common in economic data analysis, especially in indicators like inflation rates and GDP growth rates. When the base period value is high, even a substantial increase in the current period's value may result in a seemingly small year-over-year growth rate; conversely, when the base period value is low, even a modest increase in the current period's value may appear as a large year-over-year growth rate. For instance, if the inflation rate was unusually low in a particular month last year, this year's inflation rate for the same month might show a high year-over-year increase even with a slight rise. This phenomenon must be considered when analyzing economic data to avoid misleading conclusions.

Gini Index

The Gini index, or Gini co-efficient, measures income distribution across a population. Developed by Italian statistician Corrado Gini in 1912, it often serves as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population.The co-efficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values greater than 1 are theoretically possible due to negative income or wealth.

Fund Flow

Fund Flow refers to the movement of money into and out of financial instruments, asset classes, or markets over a specific period. It reflects investor behavior and market trends. Fund flow can be divided into fund inflow and fund outflow: fund inflow indicates that investors are putting money into a particular asset or market, while fund outflow indicates that investors are withdrawing money from it. By analyzing fund flows, investors can understand the direction of money, gauge market sentiment, and make informed investment decisions. For example, significant fund inflows into a market or asset class may indicate investor optimism, while outflows may suggest pessimism. Analyzing fund flows is crucial for studying and forecasting financial markets.

Underlying Security

An Underlying Security refers to the asset or security on which a financial derivative (such as options, futures, swaps, etc.) is based. It forms the foundation of the derivative's value. For example, the underlying security of a stock option is a specific stock, and the underlying security of an index future is a specific stock index. Underlying securities can include various asset types, such as stocks, bonds, commodities, currencies, interest rates, and market indices. Investors trade derivatives based on the underlying securities to achieve purposes like hedging, speculation, or arbitrage. Understanding the characteristics and market performance of the underlying security is crucial for the effective use of derivatives.