Give credit to the South Africans for organizing a smooth, efficient three-day meeting overcoming logistical challenges to accommodate dozens of delegations. The format was brilliant—a seminar of business chieftains while leaders chatted informally at a pre-plenary “retreat”. The meeting glided to conclusion with participants seated in front of the media as the host read out the short summit declaration followed by each leader making brief remarks without taking questions. Finally, non-member leaders eager to join addressed the media.
Now comes the hard part, advancing the agenda of 11 disparate lands whose only shared objective is reforming global institutions to diminish the power of America, Europe and Japan.
BRICS Plus Six becomes a more significant political grouping with the addition of oil rich Iran, Saudi Arabia and UAE. By adding heavily populated, Red Sea hugging Egypt and Ethiopia, BRICS will account for a third of global GDP and 47% of world’s population.
But if the BRICS are to gain clout they must learn from errors that reduced the once influential Non-Aligned Movement and the 1960s vintage Group of 77 to irrelevance. They might ponder the following:
• Groups Are Useful – Nations Like Being in Them. Even the five BRICS participate in multiple fora. All are members of the Group of 20 created after the 2008 global financial crisis and whose current chairman, India, hosts this year’s summit in New Delhi September 9and 10. Similarly, India and Russia are part of the Chinese-led Shanghai Cooperation Organization. Brazil and South Africa are important members of regional economic/political groups. Presumably, members are aware that consensus and common purpose are harder to achieve if there are too many members.
• Build on Assets and Achievements. Having had annual meetings for 15 years, BRICS countries have tangible accomplishments. Ten years ago they created the New Development Bank in Shanghai that imposes few conditionalities and plans to make loans in local currencies. With the injection of money from cash rich Saudi and UAE, the NDB could achieve its goal of being a meaningful alternative to the World Bank and regional lenders. The BRICS five will likely hold firm on their 55% share of NDB votes.
The BRICS five also created a Contingent Reserve Arrangement (CRA) that can provide bridge financing to members with short-term balance of payments problems. Some members see this as a potential alternative to conditional loans from the International Monetary Fund.
Among the assets of BRICS are having fast-growing India and China as members. These countries alone account for a huge chunk of world population and GDP. A further asset is being a club where so many applicants are knocking on the door. BRICS Plus Six is the flavor of the day, the new kid on the block. Over two-dozen developing lands wish to join. President Xi, who promoted this “first phase” expansion, spoke of the “new vigor” brought from new members.
At post-summit press briefings an oft repeated phrase was ‘inclusive multilateralism’. President Lula of Brazil predicted the BRICS will be ‘the driving force of a new international order.”
What is this new international order? It surely includes advocacy for adding an African nation to the United Nations Security Council. U.N. Secretary General Antonio Guterres embraced the need for reform observing that almost all sub-Saharan African countries were not yet independent when the U.N. was created.
As to the IMF and World Bank, the Joburg summit bristled with complaints of unfair western dominance. Europe, America and Japan have 54% of weighted IMF votes while China and India collectively account for less than 9%.
• Avoid Competition with G7 and G20. Clearly, BRICS Plus Six can be a useful counterweight to the G7 and G20, but in no way can it replace them as steering groups for the global economy.
Quite sensibly the Johannesburg summit downplayed talk of creating an alternative to the dollar in international trade. The only new currency that has gained global stature is the European Union euro and its creation was very technical and required an entire decade to implement. Jim O’Neill, who coined the BRIC acronym in 2001, rightly observes that India and China seldom agree on anything. There is little probability this group of discordant nations would create a common currency.
However, not surprisingly since Russia is the target of punishing financial sanctions for its war in Ukraine, President Vladimir Putin via video link called for “de-dollarization,” a process he said is irreversible.
For BRICS the only dollar alternative is the Chinese RMB, which while growing, accounts for only three percent of global transactions. Expanded RMB usage awaits full convertibility, a process that is only now beginning. RMB usage within the BRICS is rising and Saudi Arabia is considering accepting RMB for oil exports to China.
The G7 of Europe, the US, Canada and Japan was a French, West German creation in 1975 highlighting the need for policy coordination among industrialized democracies to assure global economic stability. Prior to the G7’s creation the French favored a gold-based system. During the financial crisis of 2008/9 the Americans and Europeans added major emerging market countries—including all of the BRICS—into the expanded forum known as the G20.
• Dangers and Opportunities. It is assumed that China seeks to lead developing countries drive for inclusion and equity. China’s unquestioned rise, both economically and militarily, provides a strong basis for leadership. But it may come to pass that democratic India, Brazil and South Africa will be uncomfortable being led by an authoritarian, non-transparent, communist China.
Meanwhile there is ample opportunity for innovation and experimentation. Look for BRICS to challenge western hegemony in advancing the use of digital currencies, promoting use of the RMB, and alternatives to the European-based SWIFT system of international payments.
One thing is sure. For the BRICS to become a serious force for change its lagging members must race ahead economically to match the rapid growth rates that China and India have achieved over the past decade.
Barry D. Wood has reported from most G7/G8/G20 summits since the 1980s and from the BRICS summit in Durban in 2013.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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