U.S. Vice President Joe Biden, well-known for his tendency to speak his mind, caused a political row last month when he suggested that Russia's best days were behind her. The furor over his comments put a spotlight on Russia's anemic economy, overdependence on commodities and its worrying demographic trends. The perception of Russia as the weakest member of the BRIC countries was reinforced when the Russian government announced recently that foreign investment in the country plummeted by 45% in the first half of 2009. Output is still falling, and the Russian economy is expected to contract 6.8% this year, a much worse result than the 2.8% decline in the U.S. and the surprisingly robust figures being posted by its 'BRIC' peers: Brazil, India and China.
The term 'BRIC' was coined by Goldman Sachs economist Jim O'Neill when he argued that these four largest emerging economies could become the dominant economic powers of the world by the middle of this century, eclipsing the economies of the Group of 7 industrialized democracies. The four nations have large populations and dominant positions in manufacturing (China), services (India) and raw materials (Brazil and Russia). Yet each of them has its problems. Corruption, persistent poverty and a groaning infrastructure are issues that afflict each of the BRIC nations to some extent. These are all obstacles that are worth overcoming, but only if there is a potential reward in the form of access to a vibrant, growing economy and consumer market. The difficulty of doing business in Russia, along with the more recent decline in economic opportunities has understandably caused many companies to prioritize the other 'BRIC' countries in their strategic growth plans.
Categorizations, such as the 'BRIC' countries, can be useful indicators of market size and economic power, but such designations cannot replace thorough due diligence regarding barriers to entry and other areas of business risk. The 'BRIC' club also eliminates some very interesting and sizable markets such as Mexico which trails close behind India in terms of GDP and provides nearly 10 times India's average per capita income. Firms would do well to consider a wide range of countries for revenue growth and determine a nation’s relevance to their own business strategies on a case-by-case basis.