Over the last few days, I have read tons of articles about the famous group called BRICS, which until recently only included five countries (Brazil, Russia, India, China and South Africa), and its announcement of expansion. The announcement, of course, comes with not little controversial responses from the West, which points at the new membership of six states that are not precisely recognised for their respect to human rights: protests in Iran over the last year have killed at least 527 people, including 71 children, at the hands of police officers; Ethiopian authorities have starved the people of Tigray while also disappearing ethnic Trigrayans, this in the context of the civil war still ongoing; “a series of attacks by the Saudi and United Arab Emirates-led coalition in Yemen killed at least 80 people in January”; President al-Sisi’s government has not eased its nationwide repression in Egypt and, although it does not relegate entirely from liberal values (such as freedom of belief, expression or association), Argentina’s rampant inflation is as of today over 100 percent.
The group’s expansion reflects a trend in global demand, specially in the Global South, the countries of which feel unrepresented and look for an alternative to the hegemony of the USA and the G7 in its counter wait, the BRICS. Over 40 countries had expressed interest in joining before the annual meeting in Johannesburg, held between the 22nd and the 24th of August, and around half of them had formally applied. On one side, there are now more assertive middle powers that are getting richer and that want to play a major role in global affairs, and on the other, it is in the best interest of Russia and China to expand their sphere of influence. While Russia seeks to break its West-imposed isolation, it is hard not to see China as the group’s de facto force, in its magnitude and power, which even translates in the decision of who to incorporate. Iran still has the second-largest oil reserve in the world; the countries of the Gulf are big hydrocarbon exporters and Egypt has a key geopolitical position in the Mediterranean. Xi Jiping, president of the People's Republic of China, was very much enthusiastic about the expansion in what he called “a new chapter of solidarity and cooperation”.
But China’s clear leadership also forces us to read between lines and ask ourselves their intentions, because within the context of the “biggest expansion in history”, China is being cautious when it comes to solidarity and cooperation. An example of this is the case of the publicly stated wish for BRICS members to trade with non-dollar currencies. Lula da Silva proposed a BRICS common currency at the summit and many were reluctant to the idea. A BRICS currency "increases our payment options and reduces our vulnerabilities," he told the summit's opening plenary session. The intuitive to-go-place is the Yuan, because all of these countries trade a lot with China and little between them. But does China truly want a monetary and trading union or does it prefer to take other strategic steps? According to Jim O’Neill, the man who came up with the BRIC acronym (without the ’S’ because SouthAfrica still had not joined), if their intentions were to really substitute as soon as possible the role of the United States and the IMF and the World Bank in the financial architecture then they would have invited Indonesia and Nigeria, two emerging strong nations. Why did they not do it?
O’ Neill’s says China does not want to accelerate the pace of trading with the Yuan within the context of a BRICS economic union because it would pose an uncomfortable situation for them, which is, having to control something they cannot, this is, exchange rates. “How quickly do the Chinese want to take risks in order to allow trade flow freely in regions where they cannot control it and something can go wrong? What does the Asian crisis of 1997 tell them?”. Then there is also the role of the New Development Bank, which is likely to be crucial to foster economic cooperation among the BRICS states. "It will be 30% of what they lend that will be in local and digital currencies and with no conditions attached”, said Bruegel, the Belgian think tank. Countries like Argentina might benefit a lot from these types of policies. But, naturally, questions arise within the economic union scenario which is how will exchange rates be structured among BRICS members and between them and other trading blocs? What about current account disequilibria? “De-dollarisation would need countless exporters and importers, as well as borrowers, lenders and currency traders across the world, to independently decide to use other currencies”, Reuters says.
Even though the BRICS is not such a strong union today, perhaps some day it will be. Evidence shows that if you are in the West you can no longer ignore it. Solely on the basis that China and India are members, the 2nd and the 5th largest economies in the world respectively. The former is expected to surpass the USA’s within the next decade (unless no major catastrophes happen) and, in the same time-span, the latter will have the biggest population on earth. However, as long as the dollar still dominates global trade and countries still choose to trade with it, the idea of a BRICS common currency remains unsound and unattractive for other non-aligned countries. This does not mean that we should not carefully observe China’s activity, which is very keen on letting the world know that they have the capacity to carry on with its problems..
Finally, as long as there is competition between the two big guys, we could see it as something healthier for the world than a one-nation-led order. Competitiveness, of course, that should happen in the friendliest way possible.