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Thinking beyond china and india

January 23, 2006

Goldman Sachs first created the term BRIC in 2001. Now the phrase, which stands for Brazil, Russia, India and China is now starting to get significant play. This phrase appeared in a forecast that predicted China would soon overtake the economies of Britain and Germany, move past Japan in 2015 and by 2040 pass the United States to become the biggest economy in the world.

BRIC countries account for 2.7 billion of the world’s total of 6.5 billion and by the middle of the next decade 800 million of these people will be living on annual incomes of $3,000 or more. Brazil and Russia have substantial populations, but also have growing economies with a key lead industry. Brazil makes it onto the list because of its rapidly growing importance as a global agricultural player and Russia because of its vast energy reserves.

Expect to see the term BRIC to crop up with increasing regularity, there are also likely to be a plethora of BRIC investment funds before too long.

However, the success of the BRIC is by no means guaranteed, a recent survey by the CFA institute of investment professionals in BRIC markets, identified some concerns. Political risks, corporate governance and local economic issues top list of concerns. Russia rated highest in political risk at 74% and China and Russia’s corporate governance systems came in for significant criticism.

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