Through the ages, international expansion has always beckoned as a way to escape domestic 
constraints and seeking greater opportunity. Today, the last great frontier is an array of very 
large emerging markets rapidly scaling up to full industrial and post-industrial development. 
But which horse (or horses) to saddle up?

The main growth opportunities are identified as countries with very large populations and already
growing rapidly, but with their full blossoming still ahead of them.

Four have been identified as such, and given the acronym BRIC (Brazil, Russia, India, China) by 
investment bank Goldman Sachs. Representing 40% of the world’s population and growing rapidly at
4% (Brazil), 5% (Russia), 7% (India) and 9% (China), with per capita incomes varying from $700 
(India), $1500 (China), $4000 (Brazil) to $5000 (Russia), these countries are the big consumer 
markets of the next generation. Their growing economic weight will give them new clout, changing
relative global economic and political (and military) weight as the years go by.

Of these four, China is by far the bigger entity, with the largest population (at least 
1.3 billion), the largest GDP (some $1.8 trillion) and the fastest average growth rate (over 
9% for nearly three decades). 

So everyone eyes the Chinese market, either to sell into or buy from, with many international 
companies considering going local, though the obstacles to doing business can be formidable, and
actually turning a profit while protecting one’s intellectual capital harder still.

China’s links with South Africa are rapidly expanding, with its manufactured exports to us so 
far doubling every two years, but with her imports from us growing decidedly more slowly. Yet 
China still accounts for only 7.5% of our total import bill.

The other three horses are more enigmatic, appearing to South Africans as still relatively vague
shadows in the global background, though already more visible in their own right on the global 
stage. 

Whereas in 2004 South African imports from China amounted to R23bn (7.5% of our total), we 
imported only R6.4bn from Brazil, R4.5bn from India and R0.3bn from Russia, with the growth in 
our trade with the latter three future behemoths still very pedestrian.

Yet this doesn’t mean these countries are equally uninteresting or irrelevant to us. China with 
its huge population, fast growth and rapid trade expansion may be the sexiest by far, but these 
other three are globally already very much in the foreground and identified as future greats in 
their own right. 

But will they all end up as equally potent greats, or should one differentiate their potentials,
with some of the first rank and others potentially of much lesser rank, and approached 
accordingly? 

Their equivalence today is marked by their GDP (about $700bn in each case), with two being 
nuclear powers (Russia and India) and Brazil having ambitions on this score. All three are going
to be important political players on the global stage in their own right, and in alliances with 
other emerging powers (China included). 

The differences between them are marked. India has a population of 1 billion (still growing by 
over 20 million annually). In contrast, Russia has only 140 million (falling by 0.6 million 
annually). Brazil has 180 million (still growing by 2.3 million annually).

Russia is effectively a rich commodity platform, mainly energy (oil, gas, coal), precious and 
base metals. 

Brazil has also a rich commodity base (mainly agriculture and oil), and a well-developed 
industrial sector. 

India is still heavily agriculture-based, with its industrialization relatively hobbled by a 
culture of (over) regulation. Its services sectors constitute a larger share of GDP than in the 
others.

India has the advantage of being English-speaking, with a well-educated (though small) elite, 
making it a favourite destination for outsourcing. Brazil is still strongly focused on the 
American market. Russia is a buffer state, bordering Europe (an old adversary) in the west, 
China in the east, and Islam in the south. It is embroiled in a war of attrition on its southern
fringe, may in the future face the largest land claim in history from China (concerning Siberia),
and historically has uneasily competed with Western powers (and Japan). So in addition to China,
which of these horses would one to saddle up, by increasing two-way trade or by entering on the 
ground? 

From a South African perspective, trade with Russia is probably most problematic, given its 
structural make-up (primarily offering commodities, while being able to source its imports on 
quality and price terms in either Europe or Asia). 

Brazil and India have manufactured products to offer us, but both maintain intimidating import 
tariffs against our industrial exports. Neither Russia nor Brazil may want to import commodities
from us on any scale (except perhaps specialized). India, however, may be another major future 
commodity importer and as such of interest to us (and to Brazil and Russia). 

In other words, on a first scan Russia appears uninteresting as a trade proposition, Brazil is 
an industrial competitor and threat, while India offers more two-way trade advantages (much more
alike to China). 

Other characteristics, however, should be taken into account. Brazil and Russia are already most
urbanized today (75%-80%), still slightly further increasing this over the coming generation. Big
parts of Russia and Brazil’s populations already have income exceeding $3000. At this level 
middle class conditions start to form, marked by increased consumption of luxuries, with demand 
for many consumer durables beginning to take off. 

On current projections, Brazil’s middle class will increase from 30% today (55 million) to 50% 
in 2015 (100 million) and to 75% in 2025 (175 million). Russia is already at the 50% mark 
(70 million) and is expected to go to 85% in 2015 (110 million), maturing at over 95% by 2025 
(125 million). 

On a slightly more ambitious scale, those with an income over $15 000 are designated upper 
middle-income class, with even more elevated consumer tastes. Whereas Brazil is still small 
today (only 2% or 4 million), it is projected to grow to 7% in 2015 (15 million) and to 15% in 
2025 (35 million). Russia is projected to progress the fastest, from only 2% today (3 million) 
to 15% (20 million) in 2015 to 45% in 2025 (60 million). 

Therefore, for anyone selling to middle class or upper middle class consumers, the Brazilian and
Russian home markets may be interesting over the coming decade or two, given the rapid expansion
in their relative sizes on large overall populations.

If trade barriers can’t be overcome in competition with local producers (or aggressive low-cost 
global suppliers such as China, but also others), the most obvious temptation would be to jump 
these barriers and start local operations.

The main attraction would be the absolutely large and fast growing consumer markets. The 
negatives may be the local language, culture, business practice, regulation and legal climate, 
but especially the fact that one isn’t alone in identifying these strategic opportunities. All 
around the world there are thousands of businesses, like many South African ones eyeing these 
same characteristics and presumably getting tempted by going global.

India doesn’t share these Brazilian and Russian features. Its urban population is still small, 
only 25% of the total and projected to grow to 35% in 2025. In absolute terms, however, this 
urbanised Indian population (250 million today, growing to 400 million in 2025) matches the size
of the COMBINED Brazilian and Russian urbanites of 250 million today, and comfortably outranking
its 300 million in 2025. 

As to the quality of that Indian urbanized class, today less than 1% of India’s population has 
an income of $3000, growing to 5% in 2015 and to 30% in 2025. On a first reading that doesn’t 
appear as impressive as Brazil and Russia. But when applied to its very large population size, 
a different picture emerges – only a few million today growing to over 50 million in 2015 and 
to an expected 400 million in 2025. 

Thus the Indian middle class still heavily underperforms the COMBINED Brazil and Russia positions
of 125 million today and the 210 million in 2015, but then by 2025 comfortably outranks their
300 million. Brazil and Russia’s middle classes are already big today, but their composition will
mature much faster, on a critical population mass simply much smaller than India’s.

Of course, nothing beats China on this particular score, going from a current middle class at 
$3000 income of 7% (90 million) to a projected 50% in 2015 (700 million) to 85% in 2025 
(1200 million). 

Clearly, the championship stakes are between China and India, with Brazil and Russia second 
rankers only. But even that isn’t quite the full story. As already pointed out, in absolute 
terms both Brazil and Russia are already very attractive large middle class consumer markets 
which will still nearly triple in size (and much more in depth) over the next generation. To be 
a global second ranker is only a relative term. 

Furthermore, China isn’t necessarily going to remain in pole position, with India the perennial 
runner-up. China’s population policy is preventing rapid further growth, and ageing will fairly 
soon cause its population to peak and thereafter to fall off. In contrast, India has a younger 
population still growing fast, and apparently destined to overtake China in absolute numbers 
(if pandemics such as HIV/Aids don’t change the respective dynamics). 

Though India’s GDP is growing slower than China’s, it may keep on growing fast for longer, in 
the process ultimately equaling, if not overtaking, China in GDP size (as is shortly going to 
happen to Japan). Therefore, over this century as a whole, the ultimate growth story may well 
be India, provided it can meet the challenge of further adapting its social and economic 
policies (a challenge facing all countries). 

On an overall GDP basis, China is projected to go from some $1.8 trillion today to $45 trillion 
in 2050. India will go from $0.7 trillion today to nearly $30 trillion in 2050. In contrast, 
Brazil and Russia are expected to progress from $0.7 trillion today to $6 trillion in 2050, with
Brazil by then leading Russia by a nose.

Clearly, though, India is going to outperform both Brazil and Russia by a factor of five each 
during the next generation while closing the relative gap with China by at least half. In a 
second generation from now, India on current projections will ultimately overtake China, possibly
even handsomely. 

So by the end of the 21st century we are likely to have a global line-up, which today is perhaps
still largely counter-intuitive, with India in lead position and China the runner-up (rather 
than the other way round), America in third position, and Europe in fourth (unless already 
overtaken by other regional groupings). By then, the considerably shrunken Japanese and Russian 
populations probably will have caused their rankings to decline.

Summing up, two-way trade opportunities at present are greatest with China, but also increasingly
with India. Brazil constitutes a direct competitive threat, while Russia seems mostly isolated 
from our vantage point. 

Brazil and Russia may be countries which one may want to enter with local operations, when 
allowing that the absolute size and growth of their middle classes and upper middle classes will
be most impressive over the next decade or two. 

However, nothing compares with the scale advantages offered by China for the time being, or with
India eventually. Their absolute middle class (and eventually upper middle class) numbers are so
much more staggering. 

As to a choice between the two Asian behemoths, local operations are obviously also propositions,
but all the qualifications apply: legal, regulatory, business practice, in addition to all the 
world impatiently wanting to enter the same space at ground level, for the elevator ride of a 
lifetime.

South Africa has today a mostly stagnant population of 45 million, of which some 30% (or 
13 million) middle class. These numbers should over the next two decades or so grow to 
50 million, 60% and 30 million respectively. On its own, this represents an attractive market. 
Relative to these other global growth markets, we will steadily pale into insignificance – a 
great jewel of the south and on the African continent perhaps, but relatively insignificant 
next to global behemoths coming potentially into being in other regions. 

Cees Bruggemans is Chief Economist of First National Bank. Register for his free e-mail articles on www.fnb.co.za/economics 
Source: Weekly Comment by Dr Cees Bruggemans, Chief Economist First National Bank  
20 September 20051