By Jahedul Islam
The term BRICS refers to an acronym formed by the initial letters of Brazil, Russia, India, China, and South Africa. The term gained popularity after a study published by Goldman Sachs in 2003. Initially, the BRICs represented four nations—Brazil, Russia, India, and China—that were predicted to experience rapid growth due to their vast territories, large populations, and abundant natural resources. Later, South Africa joined the group, resulting in the term BRICS.
Until about a decade ago, the global economy was more or less dominated by the United States, Europe, and Japan. However, the emergence of a new system comprising the U.S., the European Union, and BRICS might not be far off.
According to the Wilson Center, the BRICS alliance has actively sought to expand its sphere of influence. To this end, the coalition established the New Development Bank, pooling $50 billion from each of the BRICS member nations and funds from other countries like Egypt, the United Arab Emirates, Uruguay, and Bangladesh. This move came after the World Bank and the International Monetary Fund failed to implement governance reforms demanded by BRICS members and others. Moreover, Russia is leading efforts to create a new global trading currency for BRICS member countries.
The BRICS established the New Development Bank (NDB), formerly known as the BRICS Development Bank. According to the NDB Agreement, the bank is mandated to finance public or private projects through loans, guarantees, equity participation, and other financial instruments. Additionally, the NDB will collaborate with other financial institutions and international organizations while providing technical support for funded projects.
However, it is noteworthy to highlight that the BRICS bank has run into a bit of a problem. Namely, while it was launched to ween countries off of U.S. dollars, it does need U.S. dollars to function. According to reporting by the Wall Street Journal and Insider, “A development bank established by the BRICS bloc of nations to reduce reliance on U.S. dollar loans is having trouble finding dollars to repay its own debts…Based in Shanghai, the New Development Bank has largely ceased issuing new loans, the report said. The institution came about eight years ago through the collective effort of the BRICS: Brazil, Russia, India, China, and South Africa. It was meant to establish an alternative to U.S.-dominated, dollar-based financial institutions like the International Monetary Fund and dovetailed with Beijing’s efforts to erode the greenback’s status. Its lending was aggressive, and committed loans climbed from $1 billion in 2017 to $30 billion in 2022.”
During the BRICS Summit to be held later this year in Johannesburg, the member nations are expected to explore the feasibility of a new single currency. According to Joseph W. Sullivan, a former senior advisor to the White House, a currency issued by the BRICS would be unique as it would consist of nations that are Western-led international rivals. Collectively, the BRICS nations now surpass not only the United States but also the entire G-7 in terms of GDP. Sullivan argues that the geographic diversity of the BRICS members provides a wider range of goods and services, positioning them well to achieve a level of self-sufficiency in international trade that other currency unions, such as the Eurozone, have struggled to attain.
Currently, the G7 comprises the United States, the European Union, Canada, France, Germany, Italy, Japan, and the United Kingdom. China, France, Russia, the United Kingdom, and the United States are often referred to as great powers due to their political and economic dominance on the global stage. These five countries hold permanent seats on the UN Security Council.
Chinese President Xi Jinping warns that some nations are pursuing ultimate security by strengthening military alliances and engaging in acts of self-reliance disregarding other nations’ rights and interests. If this risky momentum continues, the world will become more uncertain and unsettling.
Bangladesh, Egypt, and the UAE have joined the BRICS bank, and more nations are expected to follow suit. Furthermore, the BRICS alliance is expanding its reach. Eight additional countries, including Bangladesh, Saudi Arabia, the United Arab Emirates, and Indonesia have been invited to join in the future. This expansion will provide additional funding opportunities for participating nations.
The potential inclusion of Mexico, a major trading partner of the United States, could cause some discomfort in Washington. This move would be seen as a direct challenge to Mexico’s ties with the U.S. and would raise questions about Washington’s ability to engage in fair and equitable trade with economies, especially those near its border.
By some estimates, the G7’s share of global GDP has declined to 30%, while that of the current BRICS nations has increased to 31.5%. It is projected that by 2030, the BRICS will contribute over 50% of the world’s GDP, and the proposed expansion will likely expedite that goal. In 2015, China’s GDP surpassed that of the United States when comparing economies based on purchasing power parity. The Global South seems ready to bring about a fresh revolution in the geopolitics of Western hegemony.
Jahedul Islam is a writer and researcher in public health. He holds undergraduate and graduate degrees in anthropology from the University of Chittagong and is currently pursuing a postgraduate diploma in Project Management (PGDPM) from the Academy of Business Professionals (ABP). He is a research assistant at Brac University's James P. Grant School of Public Health.
This article originally International Policy Digest