Cracked BRICs

SourcE: WIKIMEDIA COMMONS

SourcE: WIKIMEDIA COMMONS

In 2001, Jim O’Neil, the chief economist of Goldman Sachs coined the term BRIC – standing for Brazil, Russia, India, China. These four countries, with large populations and undersized economies, represented future economic engines that could overpower the many of the advanced Group of Seven (G7) countries. During the first decade of the 2000s, this economic bloc sustained large growth rates as their economies grew to fit landmass, population size, and resource levels.

With the popularity of BRIC, other acronyms became popular to represent emerging market growth, such as MINT (Mexico, Indonesia, Nigeria, Turkey) and Next Eleven, or N-11 (including Bangladesh, Egypt, Iran, Pakistan Philippines, and Vietnam).

Since the start of the 2010s, the BRICs have not performed as well as they did in the previous decade. An alphabet soup of acronyms representing countries with large populations can no longer represent a mass pull upwards for economic growth. The current situation of the four BRICs represent that each individual emerging market has an idiosyncratic political and economic risks unrelated to one another.  Below, I break down each BRIC.

Brazil

In 2010, Brazil reported 7.5% growth – an astounding, out-of-the-norm number for almost all nations. Since then, President Dilma Rousseff has overseen Brazil’s largest recession in twenty-five years.  This recession, coupled with a widespread corruption scandal involving Rousseff’s Workers Party and state-run oil company Petrobras has made the president highly unpopular with both Brazilians and international investors. Millions of protestors have come to the streets to advocate for her impeachment and members of the Brazilian Congress voted on March 18th to begin impeachment proceedings for Rousseff. Things have become so dire for Rousseff that the Brazilian real gained 9 percent in reaction to news of Rousseff’s impending impeachment.

Russia

Vladimir Putin’s geopolitical ambitions and slumped oil prices have pushed Russia into recession. In March 2014, Russia annexed the Ukrainian region of Crimea. As a result, the United States and the European Union imposed harsh sanctions on the nation – blacklisting top Russian officials and firms accused of supporting Ukrainian separatists. This has limited access to capital for major Russian banks, energy, and defense firms and led to a flood of foreign investment leaving the nation. Furthermore, oil –which Russia relies on for nearly a fifth of its GDP -- since 2014, has dropped in value by more than seventy percent. As a result, the Russian economy shrank by 3.7 percent in 2015.

India

India is the only BRIC that still shows the rocket-fueled growth associated with the entire BRIC bloc. India experienced 7.6 percent growth in 2015 – a higher level than that of China, the traditional growth superstar.  There are two trains of thought to explain India’s extraordinary growth. The first reasons that low oil prices allowed the oil-importing, traditionally low-growth nation to shrink its deficits and offset inflation. The second reason is that Prime Minister Narendra Modi’s policies of economic liberalization have increased international confidence in the nation. Whether it’s either or or a combination of the two, India’s growth demonstrates that growth factors are not inherent to emerging markets per se, but rather that the specific politics of a nation can inform economic growth. Moreover, India’s high growth rate demonstrates that factors that can so largely positively impact one BRIC’s economy can have no effect on or negatively impact other BRIC economies.

China

Looking at recent headlines, it can be easy to assume that China’s economic situation is  the same as Brazil’s or Russia’s. These headlines include “Why China’s Economy Will Be So Hard to Fix”, and “Will the crisis in China sink the US economy?”. These dramatic headlines were created in response to a growth rate of 6.9% in 2015. Despite having a growth rate considered miraculous in most other nations, this number does ring a few alarms. Much investment in China in recent years has come due to the promises of double-digit growth. As China transitions from being an industrial manufacturing-based economy to a skills and service-based middle-income economy and as its large population rapidly ages, China will potentially not see the heavy growth of the past twenty-five years again.

Today, two BRICs show negative growth, one BRIC shows slowing growth, and the final BRIC shows extraordinary growth. When grouped together as a single entity, there appears to be a randomness to the collective output of these nations. However, when analyzed individually, it’s revealed that each country’s economy is influenced by unique sets of factors, often unaffiliated or negatively affiliated with the other countries. Being a highly-populated nation with a low-income economy does not guarantee growth. Rather, factors such as resources, relations with other in nations, and good governance all contribute to an economy’s trajectory.

- Harris Mateen

 

 

Comment

Harris Mateen

Harris Mateen is a senior from Laguna Niguel, California majoring in International Relations and Public Policy. He is currently an intern at the Eurasia Group, the world's leading global political risk research and consulting firm. In the past, he has interned at the Orange County, California Public Defender's Office and the U.S. Attorney's Office in Manhattan. Harris is interested in conflict studies, the effects of political events on global markets, and international law. He enjoys all board games.   

Water Conflict Will Plague the 21st Century

This week, up to 10 million residents of New Delhi lost access to water after protestors in a caste conflict blocked a key canal into the city. The ability of a small group to paralyze a metropolis’s access to water reflects the increasing role this resource plays in 21st century conflicts.  

Many of today’s major conflicts can be traced to water scarcity. These conflicts include:

  • Syria – Devastating droughts in 2006 caused as many as 1.5 million farmers to migrate into the major cities.  In 2011, many of these migrants, with no economic prospects in either the city or the countryside, fueled the pro-democracy protests that triggered the Syrian Civil War.
  • Nigeria – Lake Chad, in northern Nigeria, once provided ample land for farming and grazing. A series of droughts and poor irrigation management has caused the Lake to lose 90 percent of its original size. This depletion has led to conflicts between Muslim cattle-herders and Christian farmers that struggle over the scarce amount of land left in Northern Nigeria and over land in denser rural areas south of Lake Chad. Boko Haram – the world’s deadliest terrorist organization – has exploited this crisis by attacking vulnerable areas around the depleted Lake Chad and using Christian farmers’ attacks on Muslim cattle-herders as justification for  barbaric violence.
  • Yemen – In this Arabian Peninsula nation undergoing a sectarian-fueled civil war, 50 percent of the population struggles to obtain clean water.  Faulty irrigation techniques have forced the nation to rely on depleting groundwater preserves. The depletion of groundwater reserves in regions dominated by followers of a Yemeni Shiite-movement called the Houthis forced many Houthis to migrate from their farmland into the major cities. These same Houthis, unable to find employment in the cities, have now toppled the Yemeni president and are fighting a civil war over control of the nation.

Rapid urbanization allows water to be used as a weapon of war. As seen by the New Delhi canal crisis, water supply can be weaponized best in urban environments with weak infrastructure. This tactic has been used heavily in Syria’s largest city, Aleppo, which is divided between regime forces, rebel militias, and ISIS. These different entities all control the water supply into Aleppo at different locations and have actively pursued methods to deprive rival entities access to water. A December 2015 bombing of an Aleppo water treatment plant that deprived 3.5 million residents access to water is credited with helping the Assad regime gain traction in its ongoing advance on Aleppo.

Photo: Wikimedia Commons

Photo: Wikimedia Commons

In Somalia’s civil war, the Somali army has gained back much of the territory lost to terrorist organization, al-Shabaab. Despite losing this territory, al-Shabaab still manages to remain a menace on the Somali population by burying boreholes that provide water to liberated cities. Somalis in these areas must rely on humanitarian airdrops or venture to the militant-controlled wells, where they may be killed or forcibly recruited.

Water scarcity magnifies the risk of future conflict in many areas already prone to violence. The Tigris and Euphrates river basin -- known as the Mesopotamian cradle of civilization -- provides water and fertile land to Turkey, Syria, Iraq, Iran, Jordan, and Saudi Arabia. The rivers start in Eastern Turkey, flow through a small portion of Syria, before cutting through the center of Iraq into the Persian Gulf. These two rivers provide Iraq with 98 percent of its freshwater supply. Among the most vital elements of Iraq’s conflict with ISIS are major dams on both the Tigris and Euphrates Rivers. With control over enough of these dams, ISIS (or any other organization, for that matter), can cut off Iraq’s capital, Baghdad, crippling the Iraqi state further.

However, ISIS is not the only threat that Iraq faces in coming years. After the fall of Saddam Hussein’s regime, the Iraqi government has governed a fragile state -- failing to overcome sectarian tensions between Sunni and Shiite Muslims and ethnic tensions between Kurds and Arabs. On the other hand, in Turkey, President Recep Tayyip Erdogan has ruled over an increasingly aggressive country willing to assert itself as a regional power. Turkey currently is constructing a $35.5 billion dam and irrigation system, which will create a total of 22 dams on the Tigris and Euphrates river system. The dams already built cut Iraq’s water supply by 50 percent in the first half of 2015. While ISIS is a formidable and frightening foe, it recently lost ground to the Iraqi army in major strongholds such as Ramadi and Fallujah. With international support, the Iraqi army should be able to eliminate ISIS as an existential threat. What remains to be seen, however, is how Iraq will handle Turkey’s water hoarding once it is not as distracted.

In 11 countries, over one-fifth of urban populations do not have access to improved water sources, which include public taps, boreholes, or piped connection. These areas include South Sudan and Equatorial Guinea -- both nations in which urban water access can fuel conflict. In South Sudan, currently going through a civil war just five years after independence, locals must rely on either international aid organizations or al-Shabaab-esque warlords for water. Equatorial Guinea, on the other hand, is a politically stable nation under the 37-year authoritarian rule of Teodoro Obiang Ngueme Mbasogo. However, if and when Mbasogo leaves office -- through illness or a coup -- control over the water in Equatorial Guinea will prolong the natural course of regime change and bring severe instability to the formerly repressive, yet stable nation.

In 1995, the World Bank Vice President Ismail Serageldin declared that “if the wars of this century were fought over oil, the wars of the next century will be fought over water.” Fifteen years into the next century, signs show that, unfortunately, Serageldin has been proven right.

- Harris Mateen 

 

 

Comment

Harris Mateen

Harris Mateen is a senior from Laguna Niguel, California majoring in International Relations and Public Policy. He is currently an intern at the Eurasia Group, the world's leading global political risk research and consulting firm. In the past, he has interned at the Orange County, California Public Defender's Office and the U.S. Attorney's Office in Manhattan. Harris is interested in conflict studies, the effects of political events on global markets, and international law. He enjoys all board games.