BRAZIL AND ITS BRIC PARTNERS: CHALLENGES AND PROSPECTS BRIC during the current financial crisis and

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  • Boletim do NEASIA – CEAM/UnB – N 76 – 07 de junho de 2010

    Anexo 76-04

    BRAZIL AND ITS BRIC PARTNERS: CHALLENGES AND PROSPECTS

    Lytton L. Guimaraes, Ph.D.

    The BRIC Countries

    The acronym “BRIC” refers to the emerging economies of Brazil, Russia, India, and China. It was first used in 2001 by Jim ONeal, of Golman Sachs, who proposed that by the year 2050 these four countries combined economies would surpass the richest economies of the world.1 The BRICs as a group account for more than 25 percent of the world's land area, more than 40 percent of the worlds population, and their combined GDP (PPP) account for more than 15 trillion dollars. In addition, the economies of some of them have grown faster than those of developed countries. A paper by WILSON & PURUSHOTHAMAN (2003), ONeals associates at Goldman Sachs, shows that over the “next 50 years, Brazil, Russia, India and China – the BRICs economies—could become a much larger force in the world economy”. The authors mapped out GDP growth, income per capita and currency movements in the four economies until 2050, and concluded that, “if things go right, in less than 40 years, the BRICs economies together could be larger than the G6 [the G7 minus Canada] in US dollar terms”. The authors suggest further that in about four decades the “largest economies in the world (by GDP) may no longer be the richest (by income per capita)…”.

    Several follow up studies on the BRICs have been published in recent years, by Goldman Sachs economists as well as by other authors.2 Some of the studies reflect optimism with respect to the future role attributed to the BRIC countries by Jim ONeill and his associates at the Golden Sachs Financial Workbench (http://www.gs.com); others have expressed reservations with respect to the group as whole, or with respect to Brazils future economic performance and whether it should or should not remain a BRIC member; and more recently some observers have raised similar doubts with respect to Russias economic future and its membership in the group as well (COOPER, 2006a, 2006b).

     An earlier version of this paper was prepared for presentation at the International Conference “The positive role of the BRIC during the current financial crisis and thereafter”, organized by the Macau Association to Promote Exchange between Asia Pacific and Latin America (MAPEAL), held in Macau from 25 to 28 November 2009.  Coordinator of the Asian Studies Group, Center for Advanced Multidisciplinary Studies, University of Brasilia. 1 O'NEILL, , Jim. "Building Better Global Economic BRICs," Goldman Sachs Global Economics Paper No. 66, November 30, 2001 2 See, for example, ONEILL et al. (2005), COOPER (2006a, 2006b), ONEILL (2007), RENARD (2009).

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    07 de Junho de 2010

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    With this paper we intend to review some of the main characteristics of the BRIC countries, describe and examine, on a comparative basis, their role at the regional and international levels, and identify challenges and prospects facing them individually and as a group. The paper is organized as follows: first we will examine briefly the political history of each of the four countries; then concise description of selected indicators of their socioeconomic conditions will be presented; the process we are calling diplomacy at the highest level will follow, that is, the efforts of mutual approximation made by heads of state and government of the four countries during the last decades, especially since the end of the Cold War; the last two parts of the paper are dedicated to each countrys challenges and prospects, and some concluding remarks.

    A Brief Political History

    A comparison of the four BRIC countries shows that they exhibit some similarities but also many differences. A brief historical description of each of the four countries will contribute to a better understanding of their similarities, differences and contrasting profiles.

    Brazil. It is generally agreed upon that the first Europeans to arrive in Brazil were the Portuguese Admiral Pedro Alvarez Cabral and his royal fleet. They were on their way to India but were carried away from the African coast by currents and winds and arrived at present- day Bahia on 22 April 1500. The new territories were largely neglected until the brazil wood tree, whose trunk produces a red dye and which gave its name to the country, was discovered and exported to Europe until it was practically wiped out; then the production of sugar (from sugar cane) with African slaves became the main source of the economy. The interior of the colony was settled by pioneers in search of gold and precious stones. Attracted by its natural wealth the French established a colony in what is today the city of Rio de Janeiro. Expelled in 1567 they established another colony ((1612-1614) in present-day Sao Luis, capital of the state of Maranho, but again were expelled. The Dutch settled in the Northeast—today Recife and Olinda, but withdrew in 1661 after years of fight.3

    In 1808, fleeing from Napoleons invasion, the Portuguese courts moved to Rio de Janeiro. In 1815 king Joo VI created the United Kingdom of Portugal, Brazil and Algarve; when he returned to Portugal (1821) his son Pedro stayed in Brazil as a regent. The following year he proclaimed Brazils independence from Portugal and was crowned Pedro I of Brazil. In 1831 he returned to Portugal and left his five year-old son as heir to the throne. Crowned in 1840 as Pedro II his reign lasted until 1889, when a military coup instituted the republic.

    For the next four decades Brazil remained relatively stable politically, until 1930 when a revolutionary movement installed Getulio Vargas as acting president. In 1934 Vargas was elected by the Congress for a four year term, but in 1937 he imposed a new constitution and remained as a dictator until 1945, when Eurico Gaspar Dutra was elected. In 1950 Vargas returned as president elected by popular vote, and in 1954 amidst a political crisis and pressure to resign he committed suicide. Juscelino Kubitcheck, elected president in 1956, started an ambitious program of industrialization and development and moved the Capital from Rio de Janeiro to Braslia. Janio Quadros, a former governor of the state of Sao Paulo, was elected in 1960 with the promise of fighting corruption, controlling inflation, and promoting development, but he resigned seven months after taking office. The military brass opposed to vice-president, Joao Goulart, being sworn in as president. A parliamentary system was adopted, with executive powers vested in a prime minister and his cabinet. Later on, as

    3 This brief political history of Brazil is based mainly on the following sources: CODATO (2005), SCHNEIDER (1991), FAUSTO (1999).

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    the outcome of a national plebiscite, the presidential system was restored with Goulart as president (head of state and government). However, as a reaction to Goularts political and economic initiatives—considered leftist--, high inflation and instability, in March 1964 the military took over the government and ruled the country for almost 22 years.

    Civilian administration was restored in 1985 with the election by the Congress of Tancredo Neves, governor of Minas Gerais, as president. But he died before inauguration, and Jos Sarney, the vice-president was sworn in as president. As part of the transition process, the Congress enacted a new constitution, while the country went through a period of economic instability, hyperinflation, and default of foreign debt. Fernando Collor de Mello, elected president in December 1989 by popular vote, imposed a drastic anti-inflation program that resulted in one of Brazils worst recessions. In September 1992 Collor was impeached by the Chamber of Deputies and resigned the following December before the Senate voted on his impeachment. Vice-president Itamar Franco was sworn in as his successor. During the first semester of 1994, the government instituted a stabilization plan (Real Plan) which involved a new fiscal strategy, monetary reform and a new currency—the real, and opening the economy. The plan was successful.

    Fernando Henrique Cardoso, a well known scholar, former senator, minister of foreign affairs and finance minister during Francos government, was elected president in October 1994 and re-elected four years later. He intensified privatization of state controlled companies, opened further the economy, promoted foreign investments, maintained economic and political stability, and created important social programs. On 1 January 2003 Luis Inacio Lula da Silva, a former metallurgic worker and labor union leader, became the new President of Brazil; in 2006 he was re-elected until 31 December 2010. He expanded social programs and followed with the main economic policies of the previous government. Although belonging to opposite parties both presidents have contributed to Brazilian political and economic stability and have elevated the country to a higher international status.

    Russia. In the early part of 9th century (A.D.) Rurik, leader of a Scandinavian tribe, occupied the city of Novgorod. Oleg, his successor, conquered Kiev and established the Kievan Rus kingdom. Olegs grandson, Vladimir I, expanded the kingdom, became an allied o