The Development Potential in Investment Cooperation within BRICS

BRICS association has led to significant development of trade and investment flows between member states and showed a significant impact on countries` economic growth. Not only is investment activity one of the best indicators of a country’s economic development prospects, but it also ensures the prerequisite for the efficient participation in global value chains. Nonetheless, albeit the BRICS group encapsulates substantial growth potential, the quantitative studies on the potential for restructuring the investment flow within the group seem to be scarce. This study aims at providing an economic analysis of the effectiveness of investment cooperation between the BRICS member states depending on the time of the interaction commencement. The theoretical analysis reveals industries that are the most attractive for foreign direct investment, whereas the modern portfolio theory and the financial model of the real option are used to determine the optimal time for embarking on the investment cooperation given the change in the volume of current investment flow. The results of the study stipulate that an increase in direct investment within the group may become the basis for the effective inclusion of the BRICS member-countries in the value chains from the bottom to the upper links. However, the strategy of deepening Russia’s investment cooperation with BRICS partners should not become a key goal of state policy. The outcomes of this study may be of interest for Russian experts and economists as the BRICS states have significant potential for both intensive and extensive economic growth and are becoming promising partners for investment cooperation. In-depth analysis may contribute to addressing certain research issues in the field of quantitative finance and international economy. Keywords: international investment cooperation, BRICS, real options method.