BRICS is a grouping of the world economies of Brazil, Russia, India, China, and South Africa, formed by the 2010 addition of South Africa to the predecessor BRIC. The nations encompass about 27% of the world’s land surface. Brazil, Russia, India, and China are among the world´s ten largest countries by population, area, and GDP.
Originally, the group was identified only for the purpose of highlighting investment opportunities and was not a formal intergovernmental organization. Since 2009, they have increasingly formed a more cohesive geopolitical bloc, with their governments meeting annually at formal summits and coordinating multilateral policies.
Lula: BRICS is vulnerable
Almost since his appointment, Brazilian President Luiz Inacio Lula da Silva has called for a single currency in which trade could be handled, trying to move away from the US dollar. During the summit, he wrote on the platform on Twitter (X): “Decarbonisation of our economies must go hand in hand with decent jobs, industrialization, green infrastructure, and public services for all. Through the New Development Bank, we will face these challenges. Creating a currency for transactions between the BRICS countries reduces our vulnerability.” The New Development Bank (NDB), established in 2015, is operated by the five BRICS states. The bank, having its seat in South Africa, has an initial authorised capital of USD 100 billion and an initial subscribed capital of USD 50 billion. The bank’s primary focus on lending is infrastructure projects, with authorised lending of up to $34 billion annually.
The insufficient Alternatives
According to a research paper by the South Centre, an intergovernmental organisation of developing countries based in Geneva, only the establishment of the euro in 1999 could be considered a serious competition to the US dollar. “But the 2011 Eurozone debt crisis and the structural problems of the monetary union have weakened the euro’s position and made it a distant second international reserve currency to the dollar”, writes Yuefen Li, author of the paper. The Chinese renminbi, despite its impressive progress in internationalisation, still lacks deep financial markets, liquidity, and a wide network.
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As for Yuefen Li, the most important challenge to de-dollarization is that there is no clear alternative single currency that can meet the criteria for being the world’s leading reserve currency and be a store of value, a medium of exchange, and a means of payment. Another important reason is geoeconomics. Yuefen Li quotes Christine Lagarde, Chief of the European Central Bank, who said in April 2023 that “50–60% of foreign-held US short-term assets are in the hands of governments with strong ties to the United States, meaning they are unlikely to be divested for geopolitical reasons”.
