The Future BRICS
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The Future BRICS A Synergistic Economic Alliance or Business as Usual? Rich Marino
Rich Marino 2014 Softcover reprint of the hardcover 1st edition 2014 978-1-137-39643-3 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2014 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-48463-8 ISBN 978-1-137-39644-0 (ebook) DOI 10.1057/9781137396440 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. Typeset by MPS Limited, Chennai, India.
Contents List of Tables and Figures Acknowledgements vi ix Part I BRICS Forum: an Overview 1 Introduction 3 2 The BRICS Forum: an Overview 19 Part II Basel Accords 3 Basel III in Conjunction with Nation-Specific Regulatory Measures 37 Part III BRICS Macroeconomics 4 Macroeconomics of Brazil 2013 14 57 5 Macroeconomics of Russia 2013 14 72 6 Macroeconomics of India 2013 14 87 7 Macroeconomics of China 2013 14 101 8 Macroeconomics of South Africa 2013 14 116 9 BRICS Countries: Yesterday, Today and Tomorrow 131 Part IV Conclusions 10 Conclusions 151 Notes 196 Index 208 v
List of Tables and Figures Tables 1.1 Growth post-crisis has been much weaker than pre-crisis: BRICS without China 7 3.1 Basel III minimum capital ratios and phase-in plans 39 3.2 Pre-crisis and current levels of bank capital 43 3.3 Remaining increases in bank capital ratios 44 3.4 An increase in bank lending spreads relative to a one percentage point increase in bank capital 46 5.1 Russia s percentage growth rates 1995 2012 81 7.1 China: imports and exports of base metals in August 2013 107 9.1 Emerging and frontier markets China trade 2000 1 and 2010 11 135 9.2 A partial list of nations included in the World Bank s Doing Business reports 139 9.3 Doing Business 2014: BRICS nations rankings for each measure 140 9.4 Ownership of China s commercial banks 146 10.1 Examples of the impact of Chinese trade on other nations 158 10.2 India China bilateral trade 159 10.3 South African trade with China by type of product 164 10.4 Percentage of Chinese imports relative to total South African imports (WTO weights) 166 10.5 Comparison of import unit values of key products imported from China in 2010 168 10.6 Chinese competition and producer price inflation in South Africa 170 10.7 Industries in which loss to Chinese imports 2001 10 represented more than 10% of 2001 production 171 vi
List of Tables and Figures vii 10.8 China: changes in employment, 1992 2001 and 2001 10 172 10.9 Estimated job losses in South Africa resulting from increased Chinese import penetration, 2001 10 173 10.10 Regression results for employment and wage models 174 10.11 Simulated impact of Chinese competition on employment: selected industries 175 10.12 BRICS trade profile (merchandise) 2011 181 10.13 BRICS trade profile (services) 2011 181 10.14 Sector analysis: agriculture 186 10.15 Sector analysis: industry 186 10.16 Sector analysis: services 187 10.17 Tariff profiles 187 10.18 Service sector commitments under GATS 188 10.19 Economic indicators for the BRICS, 2010 190 10.20 Trade indicators for the BRICS 190 10.21 BRICS share of world exports and imports of goods and services, selected years 191 10.22 Share of BRICS economies in global FDI flows, selected years 191 Figures 4.1 Brazil: GDP growth 60 4.2 Capital flows 66 5.1 Value of Russia s infrastructure projects, planned and under construction 83 6.1 Mumbai Sensex 30 days July August 2013 96 6.2 Emerging market private capital inflows, net 100 7.1 China GDP g rowth 103 7.2 China imports 111 7.3 China exports 111 8.1 South Africa: nonresidents purchases/sales of bonds $ billion, cumulative year to date 119 8.2 South African inflation rate 123
viii List of Tables and Figures 8.3 Global GDP growth: emerging market economies and advanced economies (percent average annualized) 124 8.4 South Africa: current account deficit 125 8.5 South Africa: exports 127 8.6 South Africa: imports 128 10.1 Brazilian exports to China 152 10.2 Brazilian imports from China 152 10.3 Brazil China trade 2007 12 154 10.4 Russia: quarterly imports 156 10.5 Russia: quarterly exports 156 10.6 China South African bilateral trade balance by weighted WTO end-use classification 163 10.7 Price per unit of Chinese imports relative to imports from other countries, 2003 9 168 10.8 BRICS nations GDP 179 10.9 Trade between Brazil and the other BRICS nations 182 10.10 Trade between Russia and the other BRICS nations 182 10.11 Trade between India and the other BRICS nations 183 10.12 Trade between China and the other BRICS nations 183 10.13 Trade between South Africa and the other BRICS nations 184 10.14 Exports of goods and services by the BRICS economies 2000 10 (US$ million) 192 10.15 FDI inflows in the BRICS economies 2000 10 (US$ million) 192
Acknowledgements Without question, no manuscript can become a book without the support, encouragement and professional input of others. With that in mind, I would like to thank my editor Aimee Dibbens, my copyeditor Keith Povey, Gemma d Arcy Hughes and all of the Palgrave Macmillan production team. In support of my research findings, I would like to thank Maya Revzina of the World Bank, Enestor Da Rosa Dos Santos Junior of BBVA Research, Robin Koepke, Kristen Silverberg and Leah Davis of the Institute of International Finance a nd the Bank for International Settlements Basel Committee on Banking Supervision. June 2014 Rich Marino ix