Once the shining beacons of the global economy, Brazil, Russia, India, China and South Africa are now faltering financially. DW's specialists give their opinion on the situation in each of the respective countries.
Among the BRICS, the flight of capital has hit Brazil the hardest: The Brazilian currency, the real, has devalued about 20 percent against the US dollar since the beginning of this year. German economist Federico Foders said that "now, Brazilian capital as well is fleeing from inflation, weak growth and social unrest."
Popular protests rocked the country during the Confederation Cup soccer tournament this past June. Brazilians are demanding action on corruption, poor infrastructure, neglected educational reforms and inadequate health care. The Brazilian population has yet to see the benefits of strong economic performance over the past years.
These deficiencies, along with the fear of political instability, are also what are driving away investors. This becomes apparent upon examining growth rates: after growth of 0.9 percent last year, experts expect growth of only 0.3 percent this year. Decreasing demand for raw materials from China - Brazil's most important trade partner - explains only part of this, as Brazil saw record exports in March 2012. (Jan Walter, Brazil Editor)
Russia: blocked reforms
No other BRICS state is as dependent on the export of raw materials as Russia. Energy exports fueled an economic boom during the first decade of this century, with spiking global oil and gas prices bestowing noticeable prosperity on the Russian people. Increased consumer spending became a second driver of economic growth.
But now, the potential of both of these economic engines seems to have been exhausted. Credit-driven consumption is sputtering, industry has stagnated - and a weak ruble isn't helping the situation. Russian companies don't seem to be able to bring many new products to the world market.
Analysts believe that Russia needs modernization, fundamental structural adjustments and consistent support for the middle class - which would require political and institutional reforms, as well. But Russian President Vladimir Putin is standing in the way of this. Russia is being "too centrally and dictatorially ruled," summarized Jim O'Neill, inventor of the term "BRIC," in an interview with financial daily Handelsblatt. (Andrey Gurkov, Russia Editor)
India: deficit worries
As the third-largest economy in Asia, India is especially hard hit by the flight of capital from international investors. Since April of this year, the Indian rupee has devalued 20 percent against the US dollar. Yet India continues to import more than it sells abroad, thus remaining dependent on foreign capital. Above all, oil and coal imports feeding the electrical network put pressure on the trade deficit. Although India could mine its own coal, the sector is riddled with corruption and inefficiency.
India's growth and its feeble industrial sector aren't enough to support any sort of noteworthy export economy. In addition, corruption and a sprawling bureaucracy scare away potential investors. Regardless, experts like Friedolin Strack of the Asia-Pacific Committee of German Business see opportunities in these problems: "That's the jolt and the chance that India needs. Through this, the politics of muddling through could find its end." (Hans Spross, Asia Editor)
China: a special case
It's not known if China is suffering from a massive outflow of foreign capital. And it's not possible to use the exchange rate of the country's currency to judge what the pressures on capital are, as the yuan is still not freely traded. Whenthe other BRICS countries complained years ago about high capital inflows and upward pressure on their currencies, Beijing stayed quite silent. Only the Americans complained that Beijing was artificially keeping its currency far too low in order to continue exporting.
That exports are too one-sided is no surprise to the rulers in Beijing. For that reason they've been trying for years to boost domestic consumption. The third plenary session of the Central Committee of the Communist Party of China is coming up in October, at which the economic reform plans of the new government are likely to be presented. The government is expected to rely more on domestic consumption and greater business freedom in order to maintain economic growth. In particular, experts expect to see a particular focus on the promotion of small and medium-sized private enterprises. (Mathias Hein, China Editor)
South Africa: Strike willingness scares off investors
It's winter in South Africa. Each year around this time, union strikes paralyze entire economic sectors and government departments. The result is salary increases, job losses, the government increases its deficit, inflation rises even more. Unions begin to complain - and the ritual begins again. In good years and in bad years.
For some time, though, the bad years have outweighed the good. Economic growth - 0.9 percent in the last quarter - lags behind the African average and far behind the country's own goals. There have been hardly any new jobs: investors are scared off by the South African willingness to strike, including the propensity for violence, not to mention the country's complicated regulations. The government of Jacob Zuma is seen as unpredictable and unprincipled.
And should the US decide to increase interest rates, institutional investors will begin shifting even more of their money. South African Finance Minister Pravin Gordhan is seething. He has demanded that the G-20, the group of 20 major industrial and emerging economies, must proceed "aggressively" and with "radical action" against massive capital outflow. But his appeal sounded rather helpless. (Claus Stäcker, Africa Editor)