Following the recent move by Goldman Sachs in closing its BRICS fund, the future of this economic A-team seems uncertain. What does the future hold for the BRICS? And can we still expect a credible alternative to the Western-created IMF and World Bank to emerge?
Face: [the team’s plane is starting to malfunction] Uh, Murdock, what’s going to happen?
Murdock: Looks like we’re going to crash.’
Face: No, what’s *really* going to happen?
Murdock: Looks like we’re going to crash and die.
Could we be seeing a similar script unfolding for the international economic A-team? Well, according to Goldman Sachs, yes.
It comes as little surprise to some institutional investors that Goldman decided to pull the plug on their depreciating investment product.
Assets under management have dwindled to approximately $100 million, from a peak of $800 million at the end of 2010. However, it does seem ironic that the institution that first gave life to the idea of the BRICs (later turned BRICS to accommodate South Africa) has now decided to kill its own creation.
But in the game of international finance economic, Darwinism is the name of the game.
In 2001 Lord Jim O’Neill, the then chief economist at Goldman Sachs, noted that the real GDP among Brazil, Russia, India, and China had surpassed that of the G7 group of mature economies.
This informal association of nations, he stated, were the ‘strategic pillars’ of a supposedly entirely new international system. And thus voil ! A new investment angle opened up to the world.
This awkward arranged marriage served as a powerful inspiration not only for investors who rushed to place their bets on big emerging markets, but also for political scientists and academics who sought to understand how this new goliath will operate as a political entity. They were not disappointed.
Listen to: Stratfor’s Reva Bhalla: BRICS in Trouble; Russia a “Huge Concern”
Brazil, Russia, India, and China make up half the world population, one-fifth of the world’s GDP, and one-quarter of the world’s land mass, so yes, a force to be reckoned with it is.
In 2006 this partnership was solidified following a series of meetings on the side-lines of a UN General Assembly summit in New York.
South Africa joined the party in 2010 following a political move to include an African nation as the group couldn’t possibly represent the idea of emerging economies without an African representative.
Nigeria and South Africa were shortlisted with South Africa winning out as it fit the acronym.
This post was published at FinancialSense on 11/30/2015.