BRICs begin to crumble

When we look at the BRICs it is quite clear that they have been very successful in terms of their development and growth but why? What makes these five countries' development so special in comparison to all the other emerging economies? Something I have found personally is that they each offer something unique but the timing of their growth and development is key to their success. If we take China as an example. As technological advances began they entered the market offering an abundance of labour at low costs. Lets face the facts here. In business money talks and the majority if not all businesses are not going to turn down an opportunity to reduce costs and China was the solution. The same with India, who could provide cheap workers in abundance to produce clothing, an opportunity that the world's biggest clothing brands could not resist. It was quite simple, as long as there is demand these countries would benefit and have continued to do so, hence they are now admired for their successful development and growth. However what is going to happen when countries like America pull out and the FDI is no longer flowing in?

Well that idea has become a very close reality to the BRICs, who have put together a reserve fund totalling $100billion in response to America deciding to regain it's costs from their Bond-buying programme. The bond-buying programme was introduced by America after the financial crisis. In May this year the Chairman of the US Federal Reserve, Ben Bernanke announced that America wanted to start recouping some of the $85billion a month it payed out to emerging economies as well as BRICs, in the form of bonds, after the financial crisis. Furthermore, the recovery of the American economy along with this announcement have resulted in many American investors pulling away from the BRIC countries and taking their money out with them. However this has led to the weakening of these currencies which they fear will affect their growth. The Indian Rupee weakened by 24%, South Africa's rand 17%, the Russian rouble 8% and the Brazilian real 15% with only the Chinese Yuan strengthening slightly since May.

Nothing last forever unfortunately for the BRICs. However they have taken action together as a collective group in order to maintain their continued development and growth, with or without the US. This $100billion reserve fund will be used by the BRICs in an attempt to remove any volatility in their currencies. Russia will contribute $41billion to the fund with China, India and Brazil putting in $18billion each and $5billion from South Africa. When the BRICs met earlier this year to form this fund they stated the main purpose of it would be to fund infrastructure and development projects in order to continue their development.