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7/31/2019 Export Mgmt BRIC FinalAG
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Prepared By: Abhishek Gautam 192001
Nitin Saha 192023
Pradeep Kumar 192024
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A grouping acronym referring to the countries of Brazil, Russia, India, China & SouthAfrica
Term ―BRIC‖ was first prominently used in a Goldman Sachs report from 2003
prepared by Jim O‘Neill ,Chairman of Goldman Sachs Asset Management
South Africa was the last member to join in Dec‘2010 and thus the acronym changed
from BRIC to BRICS in 2011.
These countries aren‘t a political alliance - but they have the potential to form a
powerful economic bloc
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These five countries are among the biggest and fastest
growing emerging markets
Annual global sales of chemical double over the period 2000
to 2009, OECD‗s share decreased from 77% to 63% and the
share of the BRICS countries increased from 13% to 28%.
Already BRICS accounts for:
o 45 per cent of the world's population,
o 30 per cent of Worlds land area,
o 25 per cent of global GDP (in PPP);$ 14 trillion
o More than 50% of all Forex & Gold Reserves
According to IMF estimates, in 2012, the BRIC countries
will account for 56% of world economic growth, while the
G7 countries (U.S., Japan, Germany, UK, France, Italy and
Canada) should be responsible for only 9% growth
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Summit Participants Date Host country Host leader Location
1st BRIC June 16, 2009 Russia Dmitry
Medvedev Yekaterinburg
2nd BRIC April 16, 2010 Brazil Luiz InácioLula da Silva Brasília
3rd BRICS April 14, 2011 China Hu Jintao Sanya
4th BRICSMarch 29,
2012India
Manmohan
Singh New Delhi
5th BRICS 2013 South Africa Jacob Zuma TBA
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Held in Yekaterinburg on June 16,2009
Focus was on improving global economic situations andreforming financial institutions
How BRIC members could be more involved in global affairs
Announced the need of Global Reserve Currency
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Discussions on Iran & Nuclear weapons
Furtherance of BRIC economics as an international body
Reform of Financial Institutions
Issues related to global economic situations at that time
Global governance
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Talks on Anti-terror law and terrorism
Pledged cooperation amongst themselves for increasing trade
Announced decision to cease mutual trade payment in USDand give credit to one another
Expressed misgivings about NATO airstrikes during the Libyacivil war and urged an end to the then two month conflict
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The Leaders considered the possibility of setting up a new BRICS-
led Development Bank for mobilizing resources for infrastructure
and sustainable development projects in BRICS
2 agreement : Attempt to replace USD as the main unit of trade
(1)Master agreement on Extending Credit Facility in Local Currencies;
(2)BRICS Multilateral Letter of Credit Facility signed by BRICS
EXIM/Development Banks
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Economy of Republic of India (as per Calender year 2011)
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Particulars Figures
Land Size (1000km sq) 3,287,263
Economy Size $1.676 trillion nominal,$4.457 trillion PPP
GDP Growth 6.5%
Inflation 7.55%
Unemployment 9.8%
Exports $303.7 billion
Imports $488.6 billion
Foreign Reserves $295.8 billion
Credit rating BBB-
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India exports were worth 25.68 Billion USD in May of 2012
Exports amount to 22% of India‘s GDP.
Gems and jewelry constitute the single largest export item, accounting for16 percent of exports.
India is also leading exporter of textile goods, engineering goods,chemicals, leather manufactures and services.
India is well-positioned to surpass Japan as the Third largest Economy of the World in 2012
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Economy Federative Republic of Brazil (as per Calender year 2011)
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Particulars Figures
Land Size (1000km sq) 8,514,877
Economy Size $2.517 trillion nominal,$2.309 trillion PPP
GDP Growth 2.7%
Inflation 5.24%
Unemployment 5.7%
Exports $256 billion
Imports $226.2 billion
Foreign Reserves $365 billion
Credit rating A-
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Breeding and cultivation of plants contributes 27%of GDP
Brazil Exports 19.4 billion USD in month of June 2012
Export oriented country, exports contribute 14% of GDP
Contribute 25% of world Food market
One of the leaders in Coffee and Orange Juice exports
Main world producer of Ethanol from sugarcane
It also occupies world leading position in exports of soy products,chicken, beef, corn rice, pork etc.
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Agriculture is a major sector of the Brazilian economy, and is key for economic
growth and foreign exchange.
Agriculture accounts for about 6% of GDP (25% when including agribusiness)
and 36% of Brazilian exports.
Brazil enjoyed a positive agricultural trade balance of $55 billion in 2009.
Brazil is the world's largest producer of sugarcane, coffee, tropical fruits, frozen
concentrated orange juice (FCOJ), and has the world's largest commercial cattle
herd (50% larger than that of the U.S.) at 170 million animals.
Brazil is also an important producer of soybeans (second to the United States),corn, cotton, cocoa, tobacco, and forest products.
The remainder of agricultural output is in the livestock sector, mainly the
production of beef and poultry (second to the United States), pork, milk, and
seafood.
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A growing population, rising Incomes and a wealth of natural resources are all
hallmarks of emerging economies, among the BRICs, only Brazil can boast all three.
2011 saw more offshore oil discoveries and preparations start for the 2014
World Cup of soccer and the 2016 Olympics.
GDP growth slowed to about half the breakneck 7.5% pace of 2010- still double the
OECD average
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Historical: India opened its diplomatic mission in Rio de Janeiro in 1948,
which later moved to Brasilia in 1971.
The Indian Consulate General in Sao Paulo, the industrial and commercial
hub of Brazil, was opened in 1996.
India‘s first Cultural Centre in Latin America opened in Sao Paulo in May
2011.
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Bilateral trade reached an unprecedented figure of US dollar 9.2 billion in2011 (India‘s imports: US$ 3.2 billion; India‘s exports: US$ 6.0 billion)
India‘s exports registered a growth of 43% in 2011 over 2010.
India‘s main exports to Brazil : Diesel oil, coke of coal, lignite or peat,equipments related to wind energy, engineering and electrical equipment,cotton and polyester yarns, naphtha, pigments, medicines and chemicals.
India‘s main imports from Brazil : Crude oil, copper sulphates, soya oil,raw sugar, denatured alcohol, other minerals of copper and its
concentrates, asbestos, valves, motor pumps, airplanes, wheat, preciousand semi-precious stones, etc.
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India and Brazil have formed a bilateral Trade MonitoringMechanism(TMM) for periodic consultations
India signed a framework agreement with MERCOSUR inJune 2003.
The India Mercosur PTA entered into force on 1st June 2009
450 items from each side will have duty reductions of 10% to100%.
Efforts are underway to broaden and deepen the India-Mercosur PTA and to link it, under IBSA to SACU as well.
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Economy of Russian Federation (as per Calendar year 2011)
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Particulars Figures
Land Size (1000km sq) 17,075,400
Economy Size $1.885 trillion nominal,$2.373 trillion PPP
GDP Growth 4.3%
Inflation 3.7%
Unemployment 6.3%
Exports $498.7 billion
Imports $310.1 billion
Foreign Reserves $513 billion
Credit rating BBB
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Russia exports were worth 46 Billion USD in April of 2012.
Metals and energy make up more than 80 percent of Russia's
exports.
The country is the world‘s largest oil producer and the biggestexporter of natural gas, nickel and palladium
The Russian fishing industry is the world's fourth-largest.
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Bilateral ties with Russia are a key pillar of India's foreignpolicy.
Trade in 2009 USD 7.46 billion,2010 USD 8.535 billion,2011 USD 9.5 billion
Projected 20 billion by 2015
In 2010Russian exports to India amounted to USD 6.392 billionImports from India to Russia amounted to USD 2.142 billion.
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Indo-Russian Forum on Trade and Investment (estd in 2007)
India-Russia CEO‘s Council (established in February 2008
India-Russia Business Council ( 2007)
The India-Russia Trade, Investment and Technology PromotionCouncil (2007)
Objective of these forums to promote direct bilateral B2B contacts.
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Economy of Republic of South Africa (as per Calender year 2011)
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Particulars Figures
Land Size (1000km sq) 1,221,037
Economy Size $422 billion nominal,$555 billion PPP
GDP Growth 3.1%
Inflation 5%
Unemployment 23.9%
Exports $94.21 billion
Imports $92.86 billion
Foreign Reserves $50.26 billion
Credit rating BBB+
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South Africa exports were worth 62.79 Billion ZAR in May of 2012.
Historically, from 1990 until 2012, South Africa Exports averaged
23494.2 Million ZAR reaching an all time high of 68457.0 Million ZAR in
November of 2011 and a record low of 3544.0 Million ZAR in June of
1991.
South Africa has rich mineral resources.
It is the world's largest producer and exporter of gold and platinum and
also exports a significant amount of coal. Another major export is
diamonds.
South Africa's major exports partners include United Kingdom, UnitedStates, Germany, Italy, Belgium, China, and Japan.
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Multilateral Cooperation
India and South Africa have a common approach on many global issuesincluding UNSC reform, the future of multilateralism, climate change, South-
South Cooperation and multilateral trade negotiations. India has strongly supported the objectives of the New Partnership for Africa's
Development (NEPAD), A sum of US$ 200million has been committed for thispurpose to be utilized through credit lines, grants etc.
Under this support major projects in Angola, Senegal and Mali have already
been undertaken.
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Bilateral trade has trebled from US$ 2.5 billion in 2003-2004 to US$ 7.5 billion in
2008-2009
Target is 15 billion by 2014
Exports from India:
Vehicles, pharmaceuticals, chemicals, textiles, rice etc.
Imports from South Africa:
Gold, steam coal, copper ores & concentrates, phosphoric acid, manganese ore,aluminum ingots & other minerals
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India-South Africa CEOs‘ Forum
An India Business Forum (IBF) in South Africa
The presence of Indian banks(SBI, EXIM etc) has also
promoted economic interaction.
The International Marketing Council (IMC) of South Africa
has an office in Mumbai.
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Economy of People‘s Republic of China (PRC) (as per Calender year 2011) Well-positioned to surpass U.S as the Largest Economy of the World in next 5
years
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Particulars Figures Ranking
Land Size (1000km sq) 9,596,961 IIIrd
Economy Size $7.74 trillion nominal,$12.46 Trillion PPP
IInd
GDP Growth 9.5% Ist
Inflation 5.4% -
Unemployment 4.2% -
Exports $1.897 trillion Ist
Imports $1.664 trillion IInd
Foreign Reserves $3.2 trillion Ist
Credit rating AA- Stable
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Quality of Geovernmental Leadership :China‘s leadership – its development oriented
ideology,its ability to promote capable individuals, and its system of collaborative policy
review-deserves the first place as the reason for China‘s Economic success.
Cheap Labour : Incredibly large population of relatively well educated workers has kept
labour supply abundant and wages low.
More competitive products : Technological products are often refinements of imported-pre
existing technologies ; the ―import/assimilate/re-innovate‖ model has proven to be a
successful strategy
Investment in Science & Technology : China spent over $70 billion on R&D
Even during th economic downturn .Patent applications jumped over 15% in last 3 years.
Holistic Sustainable Growth : Growth comes from both huge State investment inInfrastructure and Heavy Industry and Private Sector expansion in light industry instead of
just exports.
Long-term planning & Successful Execution : Government have included aggressive
targets for economic growth, innovation & sustainability backed up with the ability to follow
through with necessary funds to achieve these goals.
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Lack of Original Innovation : ―Import/assimilate/re-innovate model‖ does not foster
climate of original innovation.
Lacks High Standards & Integrity: Many institutes of higher education receiving govt
grants for R&D experience alarmingly high rates of academic dishonesty leads to govt waste
,fraud ,and abuse in R&D spending
Cheap Labour Advantage running out sooner than expected: As citizens become
wealthier ,fewer workers remain in the country side as a new source of cheap labour ,worker
are already becoming more vocal in their demand for higher wages and better benefits.
Moreover, an ageing population of workers mainly because of ―one-child‖ policy.
Malinvestment decisions :High speculative real estate developments result in creation of
―ghost cities‖.Estimates show that China,growing at the rate of 20 cities per year,has enoughexcess houses for 64 million people.As Population growth begins to taper off, there is
practically no demand for those.
Corrupt & Poor Provincial governments: Substantial authority to its provincial and local
governments over meeting national economic and environmental standards has been
regularly misused. This leads improper usage of State funds .
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Improving Economic Freedom
Wind & Solar Energy
Improving relations with US ,Europe & South Asia
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Academic & Scientific Misconduct
Strikes against MNC’s
Allegations of Currency manipulation
Aging population
Polluted water supply
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China exports were worth 181.1 Billion USD in May of 2012.
Historically, from 1990 until 2012, China Exports averaged 47.8 Billion USD
reaching an all time high of 175.1 Billion USD in July of 2011 and a record low of
2.8 Billion USD in January of 1990.
Export growth has continued to be a major component supporting China's rapid
economic growth. Exports of goods and services constitute 39.7% of its GDP.
China major exports are: office machines & data processing equipment,
telecommunications equipment, electrical machinery, apparel & clothing, textiles,
chemicals (fertilizers),iron & steel ,optical & medical equipments
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9-fold growth in the Chinese chemical industry during 2000 – 2010 from $104.8
billion in 2000 compared to $903.4 billion in 2010.
China‘s largest exports markets are European Union, United States, Hong Kong,Japan and South Korea.
China is the largest single producer and user of the major inorganic chemicals used
to produce agricultural inputs: sulphur and sulphuric acid (used to produce
phosphate fertilizer materials); ammonia (used to produce nitrogen fertilizer) and
phosphoric acid (used to produce phosphate fertilizers) acid (used to produce
phosphate fertilizers).
China is both the largest producer and the consumer of Urea(Nitrogen based
fertilizer)
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Concept given by Brown (1949) and Kojima(1962)
Bilateral trade between two countries in relation to value of world trade and its sharein it.
Value lies between‖ 0 ―to ―infinity‖
―0‖ referrers to ―no trade‖
―1‖ means trade between countries has no geographic bias
―0<Ti<1‖ trade between partners in less intensive
Ti>1 trade between partners is more intensive
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The WB is an international institution that provides loans to developing countries
for capital programs.
It has 188 countries as members
Official Goal is ―Reduction of Poverty‖
Objectives :commitment to promote foreign investment, international trade and
facilitate capital investment Based in Washington D.C, the WB is traditionally headed by a citizen of the USA
Key area of work are :
Eradicate Extreme Poverty and Hunger
Achieve Universal Primary Education
Promote Gender Equality Reduce Child Mortality
Improve Maternal Health
Combat HIV/AIDS, Malaria, and Other Diseases
Ensure Environmental Sustainability
Develop a Global Partnership for Development
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Name Dates Nationality Eugene Meyer 1946 – 1946 United States John J. McCloy 1947 – 1949 United States Eugene R. Black, Sr. 1949 – 1963 United States George Woods 1963 – 1968 United States Robert McNamara 1968 – 1981 United States Alden W. Clausen 1981 – 1986 United States Barber Conable 1986 – 1991 United States Lewis T. Preston 1991 – 1995 United States Sir James Wolfensohn 1995 – 2005 United States
Australia[ Paul Wolfowitz 2005 – 2007 United States Robert Zoellick 2007 – 2012 United States Jim Yong Kim 2012 – present Korea Republic
United States
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IMF with its Head Quarters in Washington D.C pursue the following objectives :
Promote International economic cooperation
International trade
Employment
Exchange rate stability,by providing financial resources to meet Balance of Payments needs
Historically, IMF ‗s Managing Director has been a European
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Dates Name Nationality May 6, 1946 – May 5, 1951 Camille Gutt Belgium August 3, 1951 – October 3, 1956 Ivar Rooth Sweden November 21, 1956 – May 5, 1963 Per Jacobsson Sweden September 1, 1963 – August 31, 1973 Pierre-Paul Schweitzer France September 1, 1973 – June 16, 1978 Johannes Witteveen Netherlands June 17, 1978 – January 15, 1987 Jacques de Larosière France January 16, 1987 – February 14, 2000 Michel Camdessus France May 1, 2000 – March 4, 2004 Horst Köhler Germany June 7, 2004 – October 31, 2007 Rodrigo Rato Spain November 1, 2007 – May 18, 2011 Dominique Strauss-Kahn France July 5, 2011 – Christine Lagarde France
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Voting Share Chairs
US Other
Developed
Total
Developed
Total
Borrowers
US Other Non-
Borrowers(developed)
Total
Developed
Total
Borrowing
World
Bank
15.85 44.8 61.8 38.2 1 13 14 10
IMF 17.3 49.7 67.0 33.0 1 12 13 11
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Composition of the World Bank Board and IMF :Borrowers are a clear
minority, both in voting share and Chairs.
The President or the MD has never come from a borrowing country.
United States has veto power, it can prevent the World Bank fromtaking action against its interests
The dynamics are such that‖ In the World Bank & IMF , if the borrowers
are against something, it can happen‖.
Decisions may no be balanced, with not a genuine search for consensus
between borrowers and lenders.
Borrowers play a small role in its governance, seems clearly inappropriate,
given the fact that non-borrowers (especially US) exercise influence out of
proportion to their current costs.
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BRICS may have a Common Development Bank on lines of Multilateral
lending agency. The Finance Ministers of the countries are examining the
proposal and report back by next Summit.
BRICS Development Bank on the lines of the World Bank would allow the
member countries to pool resources for infrastructure development and could
also be used to lend during the difficult global environment
Alternative Global Reserve Currencies :South Africa‘s Rand, Brazil‘s Real,
China‘s Renminbi, Russia‘s Rouble and India‘s Rupee as the five majorcurrencies of global trade.
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By 2050 the combined value of the Real, Rouble, Rupee, Renminbi and Rand (or R5) is
expected to eclipse that of the richest countries today.
In 2011 ,BRIC nations issued a statement declaring that the tradition of appointing aEuropean as managing director undermined the legitimacy of the IMF and called for the
appointment to be merit-based
During the BRICS meet in India , the heads of state from BRICS nations expressed
frustration at the slow pace of reform at the Washington-based multilateral lender
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BRICS nations stressed that the ongoing effort to increase the lending capacity of the IMF
will only be successful if there is confidence that the entire membership of the institution is
truly committed to implement the 2010 reform faithfully. In 2010,the Fund‘s shareholders
agreed to shift more of its voting weight towards emerging markets nations, but the US has
not passed enabling legislation.
Possible decision to link markets and establish financial integration of the BRICS economies
from 230 billion, which is projected to increase to $500 billion in 2015, through extending
credit in local currencies and benchmark equity index derivatives that will allow investments
without currency risks while cross-linking the stock exchanges. By eliminating the
intermediate step of converting to and from the dollar, the BRICS bloc effectively reduce
their reliance on the US Dollar
By making clear that issues like Syria, Iran and Palestine-Israel dispute be resolved within
the UN framework, the BRICS leaders have moved from plain rhetoric to specific areas, and
have also given a message to those countries which tend to act unilaterally outside the UN
framework. It's a huge development,"
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Saudi Arabia and China have entered into an agreement to build a mega oil refinery worth
8.5 Billion last week, who knows how long the dollar will remain the "Petro dollar".
Iran stopped trading oil for Dollar in March 2012
India has agreed to pay the price of crude oil it imports from Iran in gold, which makes it the
first country to drop the US dollar for purchasing the Iranian oil
Australia (a stanch U.S. ally) has made an agreement with China on March 23 2012, to trade
in the Chinese Yuan and not the U.S. dollars for $30 billion over 3 years time
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Americans have been sheltered from inflation, unlike the rest of the world, due to the dollar
being the reserve currency
The propping up of the stock market and the manipulation of metals through throwing newly
printed money, and what ever it has taken, by the Federal Reserve will be uncovered at some
point when inflation hits the U.S. that is uncontrolled.
As countries around the world stop using the dollar and the Federal Reserve can't hide all the
printing and funneled money to falsely prop up markets and give money to Wall Street to
manipulate metals, situations can/will get ugly in the U.S.
Faster the countries around the world drop the dollar and enact their trade agreementsbetween their own currencies and the Chinese yuan (or BRIC currencies),sooner US would
face Hyper Inflation and the blame would squarely be on the Federal Reserve & the Federal
US govt for non-stopping printing of Dollars.
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The BRICS countries are indeed moving towards creating a full-fledged political and
economic bloc. It is interesting that they are doing it in the same sequence as the European
community: first they determined the economic mechanisms and then immediately raised
political issues.
A new international lender, for instance, the BRICS Bank, could rival the World Bank, which
focus on lending to poor nations to help speed their development and reduce poverty. It's
unclear if it could also participate in bailing out countries in crisis — a function that's largely
the domain of the IMF.
If they can pool their resources and coordinate their aid strategies, then they will be far more
powerful.
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By floating a bank, they are strategizing and clearly playing for the long run.
What the five BRICS nations have in common is a focus on eradicating poverty, securing
food and energy, developing infrastructure and gaining new technologies. They may also talk about a common position on climate change. All of the BRICS want to bolster high-tech
sectors and affordable health care.
The creation of a supranational BRICS development bank and a mechanism for mutual
crediting will have a far-reaching impact on the global financial system. In fact, it will be a
powerful and almost autonomous structure that may accumulate investment resources fromworld markets and redirect them into development projects in the BRICS countries. And
what‘s more, these will be projects that the BRICS countries themselves consider promising,
thus making all the BRICS economies more competitive without any damage to one another.
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Unlike the U.S. and European countries that underpin the IMF and World Bank, the BRICS
include diverse political systems, from authoritarian Russia and China to the South African,
Indian and Brazilian democracies.
It is also not clear how the BRICS would manage a multilateral bank. China, with bulgingforeign currency reserves of $3.2 trillion, might want to permanently lead the bank, which
India and Russia would not likely accept.
Rarely do they show a common stance on global issues, whether it be Iran sanctions or calls
for Syria's government to end violence against democracy protesters.
Such differences would complicate investment decisions that carry foreign policy
consequences. China tends to bypass organizations and give directly to governments,
favoring those that support its line against freedom for Tibet.
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The group was unable to agree in 2011 on a new leader for the International Monetary Fund
Large anti-China protests during President Hu Jintao's visit, after a Tibetan exile lit himself
on fire and ran shouting through a New Delhi demonstration . There have been 30 such self
immolations the past year in ethnic Tibetan areas of China.
In 2012, the BRICS failed to coalesce around one of the two non-US candidates seeking the
presidency the World Bank.
"It's a complicated venture which will have a hard time getting off the ground and match the
expertise of the World Bank," Zoellick said.
"What do they talk at these summits? It's just a talk shop and a photo op," an Americandiplomat had said, making no effort to hide biting sarcasm.
As per an article in the New York Times, it argued that the focus of the new bank was
misplaced. "It is the fundamental incompatibility of the BRICS nations , not their lack of
organisation, which prevents this collection of emerging economies from acting as a
meaningful force on the world stage,"
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Honourable PM of India, Mr Manmohan Singh, says the BRICS "present an
opportunity as new growth poles in a multi-polar world.“
"One's global identity, one's footprint in the world, is set by the power of its
example,"
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Multilateral Trading System
Rules
Economic
Development
Serious
Injury
Safeguard Measure for
Protections to
Domestic industries
Counter vailingduties
Anti dumpingduties
Meeting Threats of Unfair
Trade Competition
Protection through import tariffs only
Reduction in import tariffs & binding
Against further increase
MFN principle
National Treatment rule