Rise of the Rest

More wealth and power are moving abroad

  • Share
  • Read Later

7.5% Brazil's GDP growth in 2010

$11 TRILLION GDP of China, Brazil, Russia and India

With all the focus on Japan and the Middle East in recent weeks, an important economic milestone has gone relatively unnoticed: Brazil has surpassed France and the United Kingdom to become the world's fifth largest economy, worth about $2.2 trillion in 2010. Brazil is the second emerging-market nation to join the top five; last year China surpassed Japan to take the No. 2 slot, right behind the U.S. The result of this hypergrowth is that Goldman Sachs is now predicting that the largest developing economies--Brazil, Russia, India and China (a.k.a. the BRICs)--will overtake the G7 in size by 2018. That's much sooner than Goldman's original prediction of 2040, made just 10 years ago.

What does it mean for companies, consumers and investors? For starters, a new emerging-market middle class has become the prime target for Western firms selling everything from luxury goods to cars. (China now buys more automobiles than the U.S., and Brazil is one of the world's largest consumers of beauty products.) It also means that prices we pay for products like flat-screen TVs and shoes could rise as wages go up in China and other parts of the developing world that make such goods. Finally, investors will have to look beyond the BRICs for double-digit GDP growth. As these markets mature, their overall growth will slow. Hence the new popularity of less exploited "frontier" markets in places like Africa.