BRICS Summit: a new economic pole is consolidated

August 22, 2023

The new BRICS summit could mark a turning point in international economic and political relations.

The BRICS meeting, which begins August 22 in Johannesburg and is attended by more than 34 countries, will discuss the incorporation of new members and define the group’s position on the international financial architecture, the dangers of war and multipolarity.

Because of its economic importance, demographics, economic growth and prominence in world affairs, the meeting will be of potentially lasting significance.

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BRICS: A partnership with enormous weight in the world economy

The so-called BRICS group (Brazil, Russia, India, China and South Africa), which has been talked about since 2001, was only formed as such in 2006, and brings together 5 of the world’s most important economies.

China competes with the United States to be the world’s largest economy. India, Russia and Brazil are among the top 10, and South Africa is in 30th place.

According to the World Bank and calculated by purchasing power parity, the combined Gross Domestic Product (GDP) of the BRICS is more than USD $51 trillion, a sum equal to the combined GDP of the United States and the European Union.

India’s economy ranks third in the world, while Russia, Brazil, India and China are among the 10 largest countries in terms of area and population. In 20 years, the BRICS went from having 5% to 20% of the world’s GDP, according to the International Monetary Fund.

Since 2009, the BRICS have organized fourteen summits. The last one was held in China in 2022. In such a short time, the group has achieved a strong identity on core issues, such as reform of the international financial system, the role of the United Nations and world peace, several of which represent a challenge to the post-war economic architecture and the international policy of NATO.

Proposals for an alternative financial architecture

In 2013, at the 5th BRICS summit, the idea of a BRICS bank, The New BRICS Development Bank, emerged. With an allocated capital of $100 billion, this bank began operations in April 2016, when it approved the first credits. Recently, Dilma Rousseff, former president of Brazil, was appointed as its director.

A little later, the Asian Infrastructure Investment Bank was created, with a capital of US$100 billion, which is about five times greater than the equity of the IDB, twelve times that of the Latin American Development Bank, three times that of Brazil’s BNDES and two and a half times the equity of the World Bank.

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If we add to this the fact that they have a growth rate higher than the world average, according to International Wealth, and that China has four of the six largest banks in the world in terms of market capitalization, we can appreciate the important weight of this group in the financial arena.

What the BRICS have to offer

To a large extent, these countries still have national development projects, are not members of the OECD and defend the active role of the state. They also protect their domestic market with what has been called neo-protectionism or intelligent protectionism, which is nothing more than a mix of macroeconomic, technological and cultural policies to prevent their nations from dissolving in the whirlwind of globalization.

In their founding documents and in the declarations of their protagonists, these banks – and the BRICS in general – criticize US hegemony, the World Bank system and the earmarking of credits for growth.

Thus, a point of identity in the BRICS is the criticism of the World Bank, the IMF and the dominance of the dollar as an international currency. It could also be argued that they attach greater importance to securing trade flows than to signing free trade agreements, which include other issues such as investment, intellectual property or government procurement, whose disputes are heard in institutions attached to the World Bank, such as ICSID.

In short, the BRICS question what is known as global economic governance, but some of them at the same time demand greater participation in the decisions of the traditional institutions and establish mechanisms for cooperation with them.

They also state that they will allocate their resources to development, very much focused on the construction of infrastructure and filling gaps in the availability of investment resources, although it remains to be established whether the conditions and amounts in the allocation of resources will really be different.

The BRICS alternative to the International Monetary Fund was the creation of the $100 billion Common Fund of Monetary Reserves, conceived as an emergency fund in case of crisis.

They have also strengthened their bilateral trade, which so far accounts for only 10% of the bloc’s trade, but represents 20% of world trade, according to the World Trade Organization.

The trend is to increase trade in their respective national currencies. In fact, at the meeting to be held from August 22 to 24, they are considering adopting a currency other than the dollar for their exchanges.

Geopolitical vision and BRICS alliances

The BRICS have surrounded themselves with a whole system of alliances and political and cooperation agreements that broaden their influence, which is sometimes underestimated by the Western media.

An example of this is the Shanghai Cooperation Organization, comprising Russia, China, four countries of the former Soviet Union and recently India and Pakistan, which includes economic and security cooperation.

There is also the South Asian Association for Regional Cooperation, with Bhutan, Nepal and Bangladesh, more within the Indian sphere of influence.

China is larger than the other four BRICS economies combined and accounts for 55% of the total of this group, according to the World Bank. The China Development Bank already makes more loans than the World Bank and the Asian giant accumulates the largest amount of foreign exchange reserves in the world, with USD $3.4 trillion in 2022 (World Bank).

The South African government announced that twenty-two countries have expressed interest in joining the group, including Argentina, Iran, Saudi Arabia, Bangladesh, Algeria and Egypt, among others.

The BRICS Summit will have an important economic and geopolitical significance and may be a turning point in the international situation.