Goldman drops Brics

“Growth markets” is the latest addition to the Goldman Sachs lexicon as it seeks to redefine the world of emerging markets. Since it comes from the man who coined the term Bric, it should be taken seriously. But it doesn’t quite have the same ring about it, does it?

As Jennifer Hughes reported on Monday, Jim O’Neill, chairman of Goldman Sachs Asset Management, plans to add Mexico, South Korea, Turkey and Indonesia to a new grouping along with Brazil, Russia, India and China and call them all “growth markets”.

Brics was unashamedly a marketing ploy, but the nine-year-old term has stuck and spawned government summits, investment funds, business strategies and a queue of countries desperate to join the club. China has issued a formal invitation to South Africa to attend this year’s Bric leaders’ meeting.

With Indonesia, Turkey, Bangladesh and other countries attracting investor interest, there are good reasons for a broader term than Brics. But can “growth markets” do the same for today’s more diverse countries that Brics did nine years ago?

It will struggle. It is being launched into a crowded world, with others competing to create acronyms. HSBC has Civets – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Spain’s BBVA has Eagles – emerging and growth-leading economies. The bank suggests that, far from trying to include South Africa in their ranks, the Brics should go for Indonesia.

If they insist on an African co-member, Egypt would be the best bet as it is set to overtake South Africa as the largest economy on the continent in 2013.

This proliferation of candidates shows how much harder it now is to define membership of a selected group of emerging markets.

Further, the words “growth markets” are a hostage to fortune. While most likely members of Mr O’Neill’s proposed “growth markets” group will grow faster most years than non-members, there will be times when they suffer slowdowns or even recessions. They won’t look like growth markets then, even with Mr O’Neill’s label.

The same caveat applies to “The seven per cent club” – a grouping suggested by Standard Chartered Bank for countries with regular gross domestic product growth of 7 per cent a year and more.

However, Mr O’Neill is correct on one point: the phrase “emerging markets” is, after 30 years, destined for the dustbin of history. It may be already redundant, as he says, but if it is not, it soon will be.

After 20 years of emerging, China’s economy is, for example, no longer emerging in any normal sense of the word. If China needs a new definition, then what about South Korea, an emerging economy for about 50 years?

“Growth markets” doesn’t do it. But it is time for a rethink.