BRIC to become BIC?

bric061609.jpgThis week Russia is hosting the first summit of BRIC nations in Yekaterinburg, which is the third summit in a row in under a week – all of which do not include any participation of North American or Western European countries.  It appears that Russia living up to its promises to built a “new global architecture” of multilateralism. 

We think that this is a positive trend, and that the world can only benefit from the foundation of greater rule-based international institutions, especially among non-traditional powers.  We also think that it would be even better if Russia and its new rising star partners had a clearer idea of what they wanted to accomplish, but the fact that these meetings are happening is indisputably important and noteworthy.

For example, President Dmitry Medvedev (who appears to be getting pushed aside this one photo), has called out for the creation of a “fairer global economic order.”  That sounds awesome – sign me up – but I do wonder what steps that may include.  Aha, it means substituting the dollar as a global reserve currency (check out a vigorous series of debates on this subject kicked off by our guest editor and former currency strategist, El Maestro.)

Some people are extremely enthusiasticabout the new alliances among emerging economies – though there is adetectable tone of resentment in seeing this as a well deserved snubfor the evil empire in Washington.  Naturally, there are someskeptics.  We’ve seen some financial analysts remark that they expectRussia to be the only BRIC economy which will not grow this year (whileChina will post high growth and India and Brazil modest growth, RussianGDP is expected to contract by 6.5% or so), while otherprognostications show the BIC economies featuring numerous upsides the Russians are lacking (though on the democracy front, China certainly has nothing to brag about over Russia).  The bond defaults and telephone state theft aren’t really helping things either.

Atleast one guy from the conservative RAND corporation thinks that theBRIC group of economies should be reduced to just the BIC – though Ithink this outlook is premature and motivated just as much wishfulpolitical projection as the Michael Hudson piece I linked to above. Russia is going to have the worst 2009 out of the lot, but by sheersize of its consumer market it is not going to disappear from theworld’s top economies any time soon.

From Andrew S. Weiss, published over on Foreign Policy:

And they are far from a group of equals. While the Russians tend torelish any opportunity to tweak Washington, the others actually wantcloser ties with the Obama administration. Hu Jintao, preoccupied bythe global economic crisis and urgent threats to China’s domesticstability and economic vitality, will hardly be in the mood forgeopolitical grandstanding. (It was China, after all, that blocked anyendorsement of Russia’s invasion of Georgia at last August’s ShanghaiCooperation Organization summit in Dushanbe, Tajikistan.) BrazilianPresident Luiz Inácio Lula da Silva and Indian Prime Minister ManmohanSingh have their own clear priorities: keeping economic growth ontrack, easing the social impact of the crisis, and acceleratingdomestic reforms. They’re not interested in causing trouble.

Moreand more, Russia looks like the BRIC countries’ odd man out — and it’snot only because the Russian economy is in much worse shape than theothers. (The IMF projects a 6.5 percent drop in GDP in 2009.) A bigpart of the problem is Russia’s growing complacency in the face of itsworst economic crisis since August 1998. Now that crude oil is backabove $70 per barrel, hopes for long overdue structural reforms arefading.