After BRIC comes "MIST"

As can be clearly seen from the diagram above (courtesy of the Reserve Bank of Brazil and BRIC+ Study Tours) the four BRIC countries, together with the USA, comprise the five most influential economies in the world today based on three traditional economic drivers:

The total Area of their country (in square kilometers)

  • Russia - 17.1 million
  • USA   - 9.8 million
  • China - 9.6 million
  • Brazil - 8.5 million
  • India - 3.3 million

Their large Populations

  • China - 1.3 billion
  • India - 1.1 billion
  • USA - 310 million
  • Brazil - 192 million
  • Russia - 142 million

The availability of Capital (as measured by the size of their GDP)

  • USA - US$14.72 trillion
  • China - US$5.89 trillion
  • Brazil - US$2.09 trillion
  • India - US$1.65 trillion
  • Russia - US$1.51 trillion

Based on these three economic factors, the fours BRICs, together with the USA, stand far ahead of all of the other economies in the world which explains why, as a group, they are so important and influential from both an investment, business and, more recently, a geo-political perspective. It is very important to keep this in mind when reacting to shorter term perspectives and commentary from the media, market analysts and economic pundits!

In January this year, the Leaders of the four BRIC countries (who now meet at least once a year as a Leaders group, and maintain a regular dialogue on global economic policy) decided to invite South Africa to join their annual Leadership Forum and to participate in other BRIC Forums (for example, a study commissioned by BRIC finance ministers and central bank governors would now include inputs from South Africa as well). This announcement caused economic commentators, bloggers and others to start speculating about whether “BRIC” should now be referred to as “BRICS” and whether in fact South Africa deserved a place at the table alongside these four large emerging economic super-powers.

Jim O’Neill, now chairman of Goldman Sachs Asset Management and creator of the ‘BRIC’ acronym in 2001, was clearly surprised by this announcement and was quoted as saying the following:
”While this is clearly good news for South Africa, it is not entirely obvious to me why the BRIC countries should have agreed. South Africa rightly sees itself as a leading emerging nation, and that explains their motive. Furthermore, their historic trade ties with Brazil and India would justify South Africa wanting to be part of any ‘club’ that relates to trade relations between them. Of course, the rapid growth in trade between China and Africa, South Africa included, can explain much of their motive also. When I created the acronym, I had not expected that a political club of the leaders of the BRIC countries would be formed as a result. In that regard, the purposes of the two might be regarded differently and more so after this news. As far as the economics are concerned, South Africa is one of the more wealthy nations in Africa, and is currently the largest in US$ terms at around $350bn. However, this is quite small, not only by BRIC standards, but compared to some others. For example, Russia is around $1,600bn, nearly five times larger than South Africa, and India is currently similar in size to Russia. Brazil is currently closer to $2bn in size, while China is considerably larger at around $5,500bn. Importantly, there are a number of other economies from the so-called emerging world that are bigger than South Africa. This would include Indonesia (approximately $700bn), Mexico ($1,050bn), Turkey ($725bn) and South Korea ($1,000bn). These four nations, along with each of the BRIC economies, are all 1% or more of global GDP, and what we would increasingly think of as ‘growth economies’. It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries”

As a result of the above, Jim O’Neill proposed a new grouping of emerging countries which has evolved into a new acronym, “MIST”, and has caused even more debate about the pecking order of the world’s new economic super-powers and who we should be looking out for as the next emerging nations.

It is interesting to compare each of the four "MISTs" against the four BRICs on each of the three traditional economic drivers shown above:

The total Area of their country (in square kilometers)

  • Mexico - 1.97 million
  • Indonesia - 1.92 million
  • South Korea - 0.98 million
  • Turkey - 0.78 million

Their large Populations

  • Indonesia - 240 million
  • Mexico - 112 million
  • Turkey - 75 million
  • South Korea - 48 million

The availability of Capital (as measured by the size of their GDP)

  • Mexico - US$1.36 trillion
  • South Korea - US$1 trillion
  • Turkey - US$731 billion
  • Indonesia - US$707 billion

As can be seen from the above, the “MIST” grouping sits far behind the BRICs in terms of their economic influence, wealth, size and populations. Of course, this doesn’t mean that they are any less important or relevant in terms of their trade, investment and/or business opportunities. It just means that they are smaller, less influential and contribute less to global GDP growth.

So what should we make of all this?

My view, for what its worth, is that it’s very distracting to get caught up in all of the short term speculation, gossip and commentary about different acronyms, groupings and all the various labels given to emerging, submerging, frontier, developing and developed markets. As can be seen from the above, the four BRIC countries are the largest, wealthiest and most populated countries in the world, they have no debt, their economic growth rates are higher than in the old G7 countries, they have lifted millions of people out of poverty, and they are now making a substantial and growing contribution to global growth, consumption and productivity. It is hard to imagine that this won’t continue for the next 50 years or more, possibly the whole of this century, and whilst there will no doubt be shocks, slowdowns and challenges along the way, there can be little doubt that we have now entered a new chapter in economic history in which the BRIC countries, led by China and India, will play the dominant role.

Is this an opportunity or a threat? You tell me!

(PS My thanks to the Economic Research team at Goldman Sachs for their contribution to this article)