What is BRICS
A partnership for economic cooperation and global influence.
BRICS
What is BRICS? It is the a consortium, originally composed of Brazil, Russia, India, China, and South Africa, has firmly established itself as a prominent force in the global economy. With their collective economic weight and potential, these nations have sparked discussions and led to the anticipation of a transformative evolution in the consortium, set to take place in 2024. In this eagerly anticipated evolution, the BRICS consortium is poised to expand its membership by welcoming five additional nations into its fold: Saudi Arabia, Iran, Ethiopia, Egypt, and the United Arab Emirates. This forthcoming enlargement is expected to have far-reaching implications and will undoubtedly redefine the contours of global economic collaboration.
Implications for the Global Community
The rise of the BRICS has significant implications for the global community. Some of the key implications include:
- Shift in Global Power Dynamics: The BRICS nations are increasingly playing a more prominent role in global affairs, which is shifting the balance of power away from the traditional Western powers.
- New Global Governance: The BRICS nations are promoting a new model of global governance that is more inclusive and representative of the emerging economies.
- Increased Economic Cooperation: The BRICS nations are promoting increased economic cooperation and trade among themselves, which is expected to boost economic growth and development.
BRICS: A New Era of Global Cooperation
The emergence of BRICS marks a significant shift in the global balance of power, as emerging economies take center stage. This new era of cooperation offers several benefits:
- Diversification of Global Governance: The bloc provides an alternative to the traditional Western-dominated international system, promoting a more diverse and representative global governance structure.
- Economic Growth: The bloc economies are driving global economic growth, with a combined GDP of over $16 trillion, accounting for nearly 25% of the world’s total GDP.
- Innovation and Technology: Investment in innovation and technology, driving advancements in areas such as renewable energy, biotechnology, and artificial intelligence.
- Global Problem-Solving: A platform for collective problem-solving, enabling the group to address global challenges more effectively and efficiently
The BRICS nations, encompassing all five initial member states, are integral members of the G20, collectively boasting a formidable nominal GDP of US$28 trillion, representing approximately 27% of the gross world product. These nations exhibit an even more impressive total GDP (PPP) of around US$57 trillion, which accounts for 33% of the global GDP (PPP), complemented by a substantial US$4.5 trillion in combined foreign reserves, as reported in 2018. BRICS countries prioritize bilateral relations shaped by principles of non-interference, equality, and mutual benefit.
Of the global population
Of the world’s oil production
Of the world’s rare earth mineral reserves
Of global GDP PPP
World’s land surface
The consortium, has been gaining significance as a potential geopolitical rival to the traditional dominance of the G7. This rise is multi-faceted, influenced by various economic, political, and strategic factors that contribute to the shifting global balance of power. BRICS nations offer vast markets for raw materials, manufacturing, and services. Their economic growth has led to a burgeoning middle class, further expanding these markets. This potential for growth attracts investments and creates opportunities for intra-BRICS trade relations that challenge the traditional economic order dominated by the G7.
The establishment of the New Development Bank (NDB) by the BRICS countries is a direct counter to the World Bank and the International Monetary Fund, traditionally dominated by G7 countries. The NDB aims to finance infrastructure and sustainable development in BRICS countries and other emerging economies, reducing their reliance on Western-led financial institutions.
This chart shows that the initial 5 BRICS nations have a slightly larger economic footprint than the G7 group. Despite the G7 being a group of the world’s largest and most developed economies.
The BRICS countries represent a substantial share of the world’s population and economic output. With over 3 billion people, these nations have a considerable demographic advantage. Their combined GDP accounts for a significant portion of global GDP growth.
From a fiscal standpoint, the inclusion of new members is anticipated to contribute an additional $2.6 trillion to the Gross Domestic Product (GDP). This culminating in a combined BRICS economy valued at $28.5 trillion. This accounts for 28.1% of the worldwide economic production. Despite this considerable aggregation of economic power, the G7 nations maintain a dominant position in the global economy, representing 43.2% of the world’s GDP.
Nonetheless, should the economic projections hold true, the relative scale and influence of the G7 economies are expected to diminish over the forthcoming years. In contrast, a substantial expansion is anticipated within several of the BRICS nations. This growth is particularly noteworthy for new member states such as Egypt and Ethiopia, which are projected to experience increases in their GDP by 635% and 1,170%, respectively, by the year 2050.
Trading Perspective: Benefits and Challenges
The BRICS has several benefits for global trade:
- Increased Trade Volumes: The member states have been increasing their trade volumes with each other, which has led to a significant increase in global trade.
- Diversification of Trade Partners: Diversification of their trade partners, which has reduced their dependence on traditional trade partners.
- Increased Investment: The member nations have been increasing their investment in each other, which has led to increased economic cooperation.
However, the BRICS also faces several challenges:
- Currency Fluctuations: The member nations have been experiencing currency fluctuations, which has made it difficult to predict trade volumes.
- Trade Barriers: The member nations have been facing trade barriers, such as tariffs and non-tariff barriers, which have made it difficult to increase trade volumes.
- Infrastructure Development: The member nations have been facing infrastructure development challenges, which has made it difficult to increase trade volumes.
Implications for Global Trade
The BRICS has significant implications for global trade:
- Shift in Global Trade Patterns: The BRICS has led to a shift in global trade patterns, with the member nations increasing their trade with each other.
- Increased Competition: The BRICS has increased competition in global trade, with the member nations competing with each other for trade and investment.
- New Trade Agreements: The BRICS has led to the creation of new trade agreements, such as the BRICS Trade Agreement, which aims to promote trade and investment among the member nations.
The BRICS has emerged as a significant player in international trade, with a growing presence in global markets. While the BRICS faces challenges, it also has significant opportunities for growth and development. By promoting intra-BRICS trade, diversifying its trade portfolio, and investing in infrastructure development, the BRICS can strengthen its position in the global economy.
From an analytical standpoint, the enlarged consortium now represents over 43% of the world’s oil production, effectively doubling its output and extending its strategic influence in the Middle East with the inclusion of Saudi Arabia, Iran, and the United Arab Emirates. Moreover, this group is responsible for a quarter of the world’s exports. The original BRIC nations—Brazil, Russia, India, and China—hold sway over 72.5% of the planet’s rare earth mineral reserves. Notably, China was responsible for producing 85% of the world’s refined rare earths in 2020. These minerals are vital for the manufacture of a vast array of products, from advanced military equipment to consumer goods such as electric vehicles, circuit boards, semiconductors, and smartphones. With the burgeoning global middle class, which is projected to see 59% of its new members emerge from China, India, Brazil, and Egypt by 2024, the demand for rare earths is surging as they are integral to the production chain of widely consumed goods.
The expanded BRICS configuration, now encompassing 45% of the global population, is poised to continue its ascent in both economic and geostrategic significance, shifting the economic epicenter toward the Global South.
Yet, the BRICS’ objectives extend beyond economic concerns, as they aim to use their collective economic heft to pursue broader political goals. Challenging what they perceive as impediments to the advancement of emerging and developing nations caused by a Western-centric economic and political framework, the BRICS are taking deliberate steps to recalibrate and challenge the prevailing global order and its institutions.
In a notable move to lessen reliance on the World Bank and International Monetary Fund—entities traditionally dominated by European and American leadership and often criticized for opacity and stringent policy conditions—the BRICS founded the New Development Bank in 2015. This institution aims to gather resources for infrastructure and sustainable development initiatives. With an initial authorized capital of $100 billion, the bank had allocated $32.8 billion to 96 sanctioned projects by 2022. These projects have contributed to the construction and enhancement of 15,700 kilometers of roadways, 850 bridges, and 260 kilometers of rail transit systems.
By fostering growth and development under more advantageous terms and reducing dependency on Western-centric institutions, the BRICS are sending a definitive statement regarding the evolving dynamics of global power.
Diplomatic Perspective
The BRICS has been successful in fostering a sense of unity and cooperation among its member states. This has been achieved through a range of diplomatic initiatives, including:
- Summits and Meetings: Regular summits and meetings between the BRICS leaders have facilitated open dialogue and cooperation on various issues, including trade, security, and development.
- Multilateralism: Promotion of multilateralism, emphasizing the importance of international law and the United Nations (UN) in addressing global challenges.
- Regional Cooperation: Strong regional cooperation, with a focus on economic integration, infrastructure development, and people-to-people exchanges.
- Global Governance: The reform of global governance institutions, such as the International Monetary Fund (IMF) and the World Bank, to make them more representative and responsive to the needs of emerging economies.
Influence on the Global Arena
The BRICS has had a significant impact on the global arena, shaping the international landscape in several ways:
- Economic Powerhouse: The BRICS has become a significant economic force, with a combined GDP of over $16 trillion, accounting for nearly 25% of the world’s total GDP.
- Global Governance: The BRICS has challenged the dominance of Western powers, pushing for a more equitable and representative global governance system.
- Multilateralism: The BRICS has promoted multilateralism, emphasizing the importance of international cooperation and the UN in addressing global challenges.
- Regional Integration: Facilitation of regional integration, promoting economic cooperation and infrastructure development in its member states.
The BRICS has emerged as a significant player in global diplomacy, promoting economic cooperation, strengthening diplomatic ties, and enhancing global governance. As the global landscape continues to evolve, and will play a crucial role in shaping the future of international relations. As the bloc continues to grow and develop, it is essential to address the challenges and opportunities that lie ahead, ensuring that the BRICS remains a force for positive change in the global arena.
Moreover, the US dollar’s position in the international financial system appears to be secure, as evidenced by data from the Bank for International Settlements which indicates that the US dollar is involved in nearly 90% of all foreign exchange transactions. Furthermore, the status of the dollar as the predominant global reserve currency since 1944, constituting 60% of global foreign exchange reserves, in contrast to the Chinese renminbi’s 3%, underscores its dominance. The dollar’s liquidity, widespread acceptance as a medium of exchange, and relative freedom from capital controls further solidify its position, a set of characteristics not uniformly present in the currencies of China, Russia, India, and South Africa. Consequently, while there may be an incremental shift towards utilizing local currencies in bilateral trade among BRICS nations, thereby mitigating some foreign exchange risk, the notion of the US dollar’s decline and the advent of a BRICS common currency appears to be exaggerated.
In summation, despite the BRICS’ enlargement enhancing their collective economic influence and strategic breadth, the group is confronted with a myriad of internal and geopolitical hurdles. These challenges are likely to constrain further integration and, by extension, the BRICS’ potential to significantly alter the global balance of power.
International relations:
From an international relations standpoint, the convening of the BRICS summit on an annual basis provides a strategic platform for the member nations to engage in dialogue regarding concerns that are deemed pertinent to the economies of emerging markets. This act serves as a symbolic gesture toward Western nations, particularly those within the G7, challenging the notion that they hold a monopoly over the direction of the global economic and financial discourse—a status quo that has traditionally benefited their market-oriented economies and financial infrastructures.
Although there is a consensus among some members of BRICS to seek reforms within the global financial architecture and to reduce the hegemony of the US dollar, the path to achieving such objectives remains ambiguous. The theoretical advantages of establishing a unified BRICS currency, including decreased susceptibility to the volatility of the US dollar, are counterbalanced by the considerable time and economic alignment required to realize such an initiative—a common currency necessitates a level of macroeconomic alignment that is currently not present among the BRICS nations.
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