The globally anticipated 15th BRICS Summit is finally upon us. Followers of the BRICS economic group foresee this summit as a pivotal moment that could reshape the world’s economic and power dynamics with respect to geopolitics and the cross-border trade landscape.
Before delving into the expectations of the summit, here’s a primer on what BRICS is.
What’s the fuss about BRICS?
Various economic groups have existed, aiming to coordinate policies and establish institutions to benefit their members. Among these groups are the G20, comprised of 19 countries and the European Union, and the G7, consisting of 7 affluent nations representing the global north.
- One notable drawback of these groups is their exclusive nature, leaving emerging economies and Least Developed Countries with limited representation and influence in policy coordination.
- The G7 has been arguably the most influential group, with the United States at its core, thanks to the U.S. dollar’s designation as the global reserve currency. Consequently, the world has relied heavily on the USD for international trade and negotiations.
- The United States has often leveraged this dominance to further its interests, leading to actions such as freezing cash reserves and imposing sanctions on countries with conflicting agendas.
But traditional economic groups are gradually diminishing in significance due to evolving global realities. Emerging economies like China, India, Brazil, Russia, and South Africa are progressively gaining prominence in the global economy.
- Recognizing their importance, these economies coordinated to create an economic group — the BRICS, focusing on giving representation and addressing challenges peculiar to its members.
- BRICS, an acronym for Brazil, Russia, India, China, and South Africa, has evolved into a formidable geopolitical entity since 2009, holding regular summits and coordinating economic policies.
BRICS countries account for over a quarter of the world’s GDP, 27% of the world’s land surface, and about 42% of the global population.
- Many argue that the BRICS group has the potential to rival the influence of the G7, evidenced by its initiatives in financial reserves, development economics, currencies, and payments.
The 2023 BRICS Summit, scheduled for Aug. 22 to Aug. 24 in Johannesburg, South Africa, has a lot on the agenda.
- Reports indicate that China and Russia are advocating for expanding the bloc’s membership. Several high-profile countries, including Bangladesh, Saudi Arabia, UAE, and Indonesia, have received invitations. Over 40 countries have expressed interest in joining the growing economic alliance.
- France, on the other end, is fighting to get a slice of the action, with President Emmanuel Macron interested in attending. No, he didn’t get an invite.
Here are a few things to look out for during the summit:
BRICS single currency
The BRICS countries and hopefuls have cited access to foreign exchange as a critical challenge in their trade with the rest of the world. International trade is almost entirely facilitated in USD, which can be challenging to access in cases of sanctions or macroeconomic developments. This costs countries some significant revenues.
- In a bid to decouple their economic activities from being reliant on the USD, the group launched the BRICS Interbank Cooperation Mechanism to facilitate cross-border payments between member countries in local currencies.
- There have been reports of the bloc taking things to the next level with a BRICS currency. This is something to look out for at the 2023 summit. Unlike the USD, several reports have captured that the BRICS currency will not be fiat. That is, it will be backed by precious metals and other assets.
- However, as Assistant Adjunct Professor Mihaela Papa wrote in The Conversation, “A BRICS version of the Euro is unlikely for now; none of the countries involved show any desire to discontinue its local currency. Rather, the goal appears to be to create an efficient integrated payment system for cross-border transactions as the first step and then introduce a new currency.”
BRICS bank (New Development Bank)
Economic development, another priority of the bloc, will form one of the subjects of discussion during the summit. The group seeks to foster economic growth through strategic resource deployment from the New Development Bank headquartered in Shanghai. This initiative is aimed at addressing poverty and providing support to developing countries.
- Ma Zhaoxu, the Chinese foreign minister, declared his belief in the activities of the BRICS institution to enable development initiatives for developing countries and help them win the fight against poverty.
- In his words, “I believe the enlargement of the BRICS will be beneficial to the BRICS countries, developing countries, increase representation, and gather the power of the BRICS to serve the interest of the developing countries and emerging market economies, as well as the international development cause.”
Update on new members
According to the South African Foreign Minister, Naledi Pandor, BRICS’ institutional framework for inducting new heads of state into the economic bloc was announced to be ready for official use during the summit.
- As a result, the expansion agenda of the BRICS economic bloc is expected to deepen. So far, Bangladesh and Egypt appear to be some of the few countries whose membership status will be confirmed during the upcoming summit.
The African initiative
The 15th edition of the summit is themed “BRICS and Africa,” an indication of the willingness of the bloc’s members to compete for trade in Africa. Notably, China and Russia have upped their interest in Africa in recent years.
- For their part, African nations are increasingly vocal, seeking multinational agreements recognizing their global contributions and enabling better negotiation of foreign policies and trade.
- South African President Cyril Ramophosa said in an address to other leaders at a roundtable in Paris during the Summit for a New Climate Financing Pact:
“Africa should not be treated as a continent that needs generosity; we want to be treated as equals. Even in the multilateral institutions, we want to be treated as equals. And if our equity is at the low levels, there must be ways to address it.”
- Kenyan President Williams Ruto, in his address to other leaders during the Summit for a New Climate Financing Pact in Paris on June 22, said:
“We need a new financial architecture where governance and power are not in the hands of a few people. We want another organization of equals where everyone has a say because they contribute to global resources.”
The potential outcomes of the upcoming BRICS summit remain uncertain, but high expectations surround the resolutions that will emerge. Increasing alliances with developing countries could strengthen the group’s global influence.