Jim O’Neill, who coined the BRIC phrase (Brazil, Russia, India, China – he steadfastly refuses to add SA), is now being asked whether slow growth from the South American country should lead to its exclusion from the anagram. Not just yet, says the former Goldman Sachs chief economist. From a broader perspective, though, the only solid result of an attempted union by the five BRICS countries is a proposed Development Bank – and piles of vague press releases generated after annual get-togethers. With Russia’s leader a global polecat and Brazil’s President deeply involved in the greatest corporate scandal to ever hit the world, the future of the loose political union is being raised by more than just O’Neill’s questioners. – AH
By Tariq Panja
(Bloomberg) — Brazil still deserves a place among the BRIC group of emerging economies even as growth has slowed for several years, according to Jim O’Neill, the former Goldman Sachs Group Inc. chief economist who coined the acronym.
“Three years, which is how long Brazil has disappointed, is not really the basis for making such a conclusion,” he said when asked whether it’s time to remove Brazil from the group also made up of Russia, India and China. “If Brazil and Russia carry on in the same way, of course they won’t warrant being regarded as a BRIC” toward the end of the decade, he said.
President Dilma Rousseff pledges to boost investor confidence by shrinking the deficit and slowing above-target inflation through spending caps and interest rate increases. While analysts surveyed by the central bank forecast the measures will cause growth to slow for a second straight year in 2015, they expect the economy to start picking up in 2016.
Brazil’s expansion in 2016 still would fall short of India and China, whose economies each will climb more than 6 percent, according to the median estimate of analysts surveyed by Bloomberg. Russia’s gross domestic product will climb less than 1 percent next year after contracting in 2015, the survey shows.
Countries such as Brazil are suffering from a drop in commodity prices, which has uncovered “bad behavioral habits” such as state interference in the economy and reduced independence of the central bank, led under Rousseff by Alexandre Tombini, said O’Neill, a Bloomberg View columnist and former chairman of Goldman Sachs Asset Management International.
‘The Problem’
“I teach some of the Brazilian policy makers, like my mate Tombini at the central bank, and I say to them you guys are more Chinese than the Chinese,” O’Neill said by telephone. “The Chinese don’t want to be Chinese any more, but you guys believe the state should be used for everything. And that’s the problem.”
The presidential press office didn’t respond to an e-mail sent after business hours seeking comment on the state’s role in the economy and central bank autonomy.
Policy makers in Brazil need to create a sovereign wealth fund to accumulate reserves when the price of commodities such as iron ore and soy are high, O’Neill said. They also should boost productivity among non-commodity industries, perhaps tapping the sovereign fund to invest in innovation, he said.
O’Neill said there’s long been skepticism about Brazil’s economy, adding that during a trip to the South American nation in 2003 people accused him of grouping it with Russia, India and China simply to make the acronym sound good.
“That’s partly why it was so easy for everybody to fall in love with it when they saw Brazil was getting all this growth,” he said. “It’s why it’s also been so easy for people to be disappointed” when Brazil’s economy slows, he said.
