Analysis in brief: Recently, the economic group BRICS expanded its membership. The organisation that seeks to boost the voice of countries in the Global South in world affairs has its political agenda but is primarily driven by economic concerns, as was evident at its recent 2023 summit in Johannesburg. While achievements are far more difficult to accomplish than the rhetorical expression of desire to be economically independent from the Global North, they are obtainable.
BRICS expansion driven by investment ambition
In 2001, an economist with the investment firm Goldman Sachs coined the word BRIC for the four countries he believed would dominate world trade by 2050: Brazil, Russia, India and China. These countries were so enamoured by the prospect of such an outcome that they banded together in an organisation by that name in 2009, which became BRICS in 2010 with the addition of South Africa. The goal was to give the Global South the name, voice and respect that the Global North has always enjoyed in its dominance of world affairs, in particular world economic developments. Not a formal international body like the European Union or the African Union, BRICS is designed as a means to boost member states’ trade and investment opportunities.
This goal has been as successful as member states’ economies allowed. As of 2023, the year that Johannesburg hosted the 15th annual BRICS Summit, China’s economy has slowed and is expected to contract further through 2025. Russia is fighting an imperialistic war with Ukraine, for which it has been hit with international economic sanctions. Economic growth in South Africa is weak, and inflation has reduced household spending power. Only India has enjoyed economic growth, robustly so, this past year. That is enough for BRICS to have a list of more than twenty countries that wish to join. All are from what is geopolitically, if not geographically, considered the Global South, and all see BRICS as a means to boost their economic growth through trade and investment within the group of nations.
Most of the countries eager to enter BRICS are burdened by acute economic problems and are looking for a lifeline. Among ther newly-admitted countries, Argentina is suffering from a seemingly runaway inflation rate that has deterred investment and, like another newcomer Iran, which is subject to international sanctions for its government’s misdeeds, is desperate for new capital. New member Egypt is reeling from one of its worst economic crises in years, while another new member Ethiopia is entrenched in an expensive civil war that has throttled new investment until peace is re established. New Middle East members Saudi Arabia and the United Arab Emirates (UAE) desire investment to pivot their economies away from oil. Ironically, Saudi Arabia and the UAE are being welcomed into BRICS precisely because of their oil, which the organisation’s three original members (Brazil, India and particularly China) covet because Saudi and Emiratis oil is not subject to international sanctions, unlike the oil of another original organisation member, Russia.
Image courtesy: Council on Foreign Relations
Reason for organisational shifts from resentment to opportunity
Rather than any idealistic vision of a united Global South, resentment of the Global North’s dominance in world affairs brought BRICS into being. This sentiment is behind the BRICS expansion drive. The organisation loathes the continuing power of the US dollar and the concomitant power of the International Monetary Fund. Argentina wants to free itself of the Fund’s oversight of its economy and sees BRICS’ loans as a means to its liberation. Nigeria has seen the collapse of its import industry because of the naira’s devaluation against the US dollar, in which imports are priced. Uganda’s new law that allows the state to kill homosexuals prompted the World Bank to cease loaning money to Kampala. Egypt has long played East against West, expecting Saudi Arabia to be a new source of investment once they both become BRICS members.
There is some evidence that BRICS membership will benefit newly joining countries. The expanded organisation would comprise 29% of world trade, up from 26% represented by the current membership. Intra-BRICS trade alone will loosen dependence on the Global North. Such intra-organisational trade will also foster innovation in products and services that appeal to consumers in the Global South, whose market choices are now largely determined by northern companies, in the same way that Africans responded to Nollywood films because of their local content.
Image courtesy: Saudi Central Bank
BRICS prosperity tied to BRICS currency
When BRICS was created, the ideal sought was intra-BRICS trade conducted in national currencies. However, because the value of so many national currencies is tied to the US dollar, this has led to a new idea: an entirely new BRICS currency. The notion is not unrealistic. In recent years, more trade has been conducted in the euro and China’s yuan compared to the dollar, although the US currency remained dominant. However, China has refused to allow its currency to be fairly priced, and 24 years after the euro came into being, it is a weak understudy to the US dollar. Three times as many foreign exchange transactions are made using the US dollar than the euro.
A BRICS currency would be long in introduction, acceptance and popular usage. However, key to BRICS’ future is long-term planning, patience and even forbearing. First, at a meeting of BRICS country finance ministers in June 2023, and then, at the heads of states’ summit two months later, complaints were laid against the US dollar and the need for alternative ways to trade and raise capital discussed. Conspicuously absent was any remedy, such as a timetable for the introduction of a BRICS currency. The BRICS Bank, now called the New Development Bank, was established in Brazil in 2014 and presumably would be the issuing institution for any BRICS currency. What seems missing is the political will by the original member states, all of whom cherish their own long-established national currencies, to take the plunge and commence the process that would ultimately fund the investments and trade sought by the new membership.
The critical points:
- BRICS welcomes new members and has a long list of prospective members who are driven to join by their desire for investment and trade
- As a means to raise the importance of the Global South in world affairs dominated by the Global North, BRICS has pursued an economic agenda
- A BRICS currency may seem to economists as a necessity to cut dependence on the US dollar, but the long process to create such a currency awaits commitment from member states