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Economics: What’s New From The 2023 Brics Summit?

Striding Towards a Multipolar Order

The first expansion of the membership of BRICS, which occurred at this summit, could pave the way for dozens of interested countries to join, as well as contributing to BRICS becoming a viable counterbalance to the West. However, many members don’t want it to become an anti-Western pact, but rather primarily a force that will contribute to the creation of a fairer world order and the reform of global institutions

It was back in 2001 that Jim O’Neill, a renowned economist of investment bank Goldman Sachs, coined the acronym “BRIC”, for Brazil, Russia, India and China. These four are all large, middle-income countries that are also characterised by their fast-growing economies. He predicted that they would become the world’s leading economies by 2050. It was five years later, in 2006, that these four countries decided to join forces to form the BRICS group. They were joined by South Africa in 2010, and BRICS was thus born. The BRICS countries have a combined population of 3.24 billion, or 40 per cent of the world’s total population, and collective GDP of $26 trillion, which is almost a third of the world economy. In terms of purchasing power parity, the five BRICS member countries’ contribution to the global GDP has already surpassed that of the G7 – the group of the seven most advanced and wealthiest countries. However, BRICS countries control only around 15 per cent of the voting rights at the IMF, the world’s chief financial institution. BRICS emerged as part of efforts to identify new ways of reforming international financial institutions like the IMF and the World Bank, to create a “stronger voice and better representation” of developing economies.

The BRICS countries established the New Development Bank (NDB) in 2014, with funds of 100 billion dollars, in order for developing countries to be able to borrow money for progress and development without conditions.

It should be noted that BRICS is a conglomerate of diverse countries in both the political and economic sense, which will require lots of time and compromises in order to form stronger links. 

Greatly hampering institutional links between these countries are the major disparities in the extent and level of their development and stability. Each of the BRICS countries is a major nation in its own region, and China has become a “big player”. The BRICS countries are also divided when it comes to their relations with Western countries. Russia perceives BRICS as forming part of its own fight against the West, as an aid in circumventing the sanctions imposed on it following the invasion of Ukraine. After Western countries imposed sanctions that banned imports of Russian oil, India and China became its biggest consumers. However, other BRICS countries don’t want it to become an explicitly anti-Western pact. South Africa, Brazil and India don’t want a divided world, as confronting the West would have a negative impact on their security and progress.

This year’s 15 BRICS summit took place in Johannesburg, South Africa, from 22 to 24 August. Leaders of more than 60 countries were invited to attend the Summit, while 23 countries submitted applications to join. The main discussions revolved around expansion of the bloc’s membership and further de-dollarisation, i.e., the gradual abandoning of the U.S. dollar in international trade and increasing trade in local currencies. As stated previously, BRICS doesn’t want to compete with the West, but rather is striving to find its own place on the global market.

The idea of leading Russian and Brazilian politicians to create a common currency for the BRICS bloc, which was proposed last year, was not discussed at the Johannesburg summit

The five existing members were first tasked with determining the criteria to be met by candidate countries in order to join the economic bloc, and BRICS is based on a consensus model (with decisions brought only provided all five countries agree). Documents have also been adopted that set guidelines, principles and processes for the consideration of countries wishing to become BRICS members.

Members welcomed the idea of expanding BRICS, with at least 23 countries having already submitted membership applications and another 40-plus being told that they are also welcome to join, in an effort to advance their joint development.

The last day of the summit saw the adopting of the Johannesburg Declaration, which summarises the conclusions of the 15 BRICS summit. The new declaration is entitled “Johannesburg II”. Existing BRICS members agreed on the expansion of the bloc to include Saudi Arabia, Argentina, Iran, the United Arab Emirates, Egypt and Ethiopia, all of which will be admitted as members as of 1st January, 2024.

This enlargement, which aims to boost the bloc’s influence, could also pave the way for dozens of other interested countries seeking to join BRICS, which would bolster efforts to develop BRICS into a viable counterbalance to the West. The admission of new members is the first phase of expansion from the original five countries.

The Johannesburg summit included the establishing of a broad plan to move away from use of the U.S. dollar as the world’s main reserve currency for trade among BRICS countries, in favour of local currencies. The dominance of the U.S. currency is one of many problems in the developing world, where many don’t believe that their interests are being served by international institutions like the UN, IMF and World Bank. BRICS countries have repeatedly called for the creation of a fairer world order and for the reform of global institutions. It should also be stated that the expressed intention of the BRICS group regarding the dollar will not cause this currency to collapse overnight.

According to the calculations of the U.S. Federal Reserve, 96 per cent of trade conducted in America from 1999 to 2019 was invoiced in dollars, while in Asian trade that total was 74 per cent. Beyond Europe, 79 per cent of all trade was conducted in dollars, all of which serves to highlight the U.S. currency’s status as the de facto world currency.

Members are focused on the creation of a model to secure mutual trade, joint economic projects and investments beyond the confines of the system controlled by the U.S. and its Western allies

Participants in the summit emphasised the need to use national currencies in invoicing. It was estimated that we have entered a global juncture that favours the use of local currencies, alternative financial procedures and alternative payment systems. It was with this in mind that BRICS leaders tasked the finance ministers of their countries with working on these issues. They will establish a group by the next summit, which is to be held in Kazan (Russia) and will consider “the issue of form ing an alternative payment system”. BRICS is prepared to seek opportunities to improve stability and reliability, as well as fair and equitable relations, in the global financial architecture.

Leading Russian and Brazilian politicians last year proposed the creation of a common currency for the BRICS bloc, as a way of countering the U.S. dollar’s dominance in international trade and finance. However, the possibility of creating a BRICS single currency was not discussed at the Johannesburg summit. All attention of members is currently being directed towards finding ways to secure mutual trade, joint economic projects and investments in a way that does not depend on the system controlled by the U.S. and its Western allies.

It is believed that the U.S. dollar, despite having already weakened, will remain important to global payments. The dollar’s role as the world reserve currency will decrease gradually, but it is expected to remain the currency of the collective West in the process of moving from a unipolar to a multipolar order and reducing the role of Western currencies. Across the rest of the world and the “Global South”, the diversification of regional currencies will strengthen, with increased use of national currencies as a means of payment and settlement between individual countries.

Main points of the BRICS Johannesburg II Declaration

– BRICS will strengthen cooperation on food security between member countries and beyond;
– BRICS leaders expressed concern over the use of unilateral sanctions and their negative consequences for developing countries;
– BRICS member countries consider the UN as the cornerstone of the international system;
– BRICS emphasises the African initiative to resolve the ongoing conflict in Ukraine;
– BRICS member countries are committed to strengthening their macroeconomic coordination and deepening their economic cooperation;
– BRICS member countries call for UN reform and increasing the representation of developing countries in the UN Security Council;
– BRICS is committed to the peaceful resolution of conflicts in Niger, Libya and Sudan, on the basis of the UN and the African Union;
– BRICS member countries support the desire of Brazil, India and South Africa to play a greater role in the work of the UNSC;
– BRICS member countries express their concern over conflicts around the world and insist on peaceful resolution through dialogue;
– BRICS member countries oppose trade barriers imposed by developed countries under the pretext of combating climate change;
– BRICS leaders advocate the use of national currencies in trade and financial transactions between the countries of the association;
– BRICS member countries favour the strengthening of mechanisms aimed at preventing the proliferation of weapons of mass destruction;
– BRICS member countries welcome mediation proposals aimed at peacefully resolving the conflict in Ukraine;
– BRICS member countries are committed to resolving the conflict over the Iranian nuclear programme through diplomatic channels;
– BRICS member countries support the development of an international convention against the use of Information and Communications
Technology (ICT) in criminal activities;
– BRICS member countries call for the expansion of the representation of developing countries in international organisations
and multilateral forums;
– BRICS leaders stress the importance of the G20 as a leading multilateral forum;
– BRICS member countries agree to work on increasing their mutual tourist flows;
– BRICS member countries consider that the unbalanced economic recovery after the pandemic is only increasing global inequality;
– BRICS supports the African Union Agenda 2063, including the introduction of the African Continental Free Trade Area.

Dr Dejan Jovović is a scientific advisor, international finance expert and full member of the Scientific Society of Economists in Serbia (NDES)

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