Natural Resources and Illicit Financial Flows from BRICS Countries

Natural resources wealth constitutes a fundamental pillar of economic development in BRICS countries which seek to swiftly catch-up the advanced economies. However, this catching-up process is coupled with an increase in capital flight. This paper aims at investigating the determinants of capital flight in BRICS countries over the period 2001–2017, while putting a greater emphasis on the role of natural resources. The econometric analysis reveals that natural resources exert a positive effect on capital flight, suggesting that natural resource rents fuel capital flight in BRICS countries. Empirical results show also that capital flight is determined by macroeconomic and institutional factors as well. However, the disaggregated analysis by natural resource components show some disparities that cannot be overlooked. Despite the large benefits of natural resources wealth, curbing the capital flight waves remains a key challenge that faces the BRICS grouping in order to ensure that profits are maximized for the good of countries.