OPINION – BRICS+ Building up a Formidable Bloc, Brick by Brick!

By José Luís de Sales Marques

Economist

BRICS, an intergovernmental organisation institutionalised in 2009 amidst the storm of the 2008 global financial crisis, has a remarkable, yet recent, history. What started as an acronym, coined by Goldman Sachs economist Jim O’Neill in 2001 to designate a group of economies with great growth potential in the 21st century—Brazil, India, China, and Russia—has turned into a bloc in less than two decades. Many observers predict it will soon be an alternative to the G7, the club of the seven most important developed economies. BRICS, with the extra (S) coming from South Africa joining the bloc in 2011, was prompted by the need felt by its members to find alternative financial resources away from traditional lenders and aid providers, whose loans and aid packages usually come with unwelcome financial and political conditions. Soon, the group was also voicing the concerns of the Global South, mostly former colonies, calling for much fairer representation in the governing bodies of the Bretton Woods system, which they felt were incapable or unwilling to provide proper solutions for developing economies, particularly in times of crisis.

Although many observers have, over time, decreed that BRICS was in demise or ultimately dead, its members have continued to further their cooperation over the last decade, building multilateral institutions, such as the New Development Bank (NDB) in June 2016, with the aim to “mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, and to complement existing international financial institutions.” The NDB is headquartered in Shanghai, with an initial authorised capital of $100 billion. The five founding members have a subscribed capital of 18.98% each, while the non-founding members—Bangladesh, Egypt, and the United Arab Emirates—share a combined 5.12%. It is currently chaired by Dilma Rousseff, former President of Brazil. The bloc also works to enlarge cooperation to new issue areas through platforms of variable geometry, such as BASIC, which deals with climate and is comprised of Brazil, South Africa, India, and China. Needless to say, BRICS members are also part of the AIIB (Asian Infrastructure Investment Bank) and several other multilateral institutions, including the World Bank, International Monetary Fund (IMF), and the World Trade Organization (WTO), where they coordinate their positions and call for reforms. BRICS has a rotating leadership of one year for each member state, decides by consensus, and has no formal secretariat. Due to this fact, it operates in a mode that does not generate high-profile press and media presence. Therefore, its recent developments have produced quite a sensation, namely BRICS expansion, its own payment system, and the idea of a BRICS currency.

At the 15th BRICS Summit that took place in August 2023 in Johannesburg, South Africa, BRICS leaders agreed to admit Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates as new members, effective January 1, 2024. Since then, Argentina was pulled out of its commitment by Javier Milei soon after taking office, but the other new members have become effective, raising the bloc into a ten-member club. The new composition of the association now covers almost all regions of the world, offering its membership and partners new economic, trade, and investment opportunities. BRICS+, as the newly enlarged bloc is now designated, comprises 3.37 billion people, or 41.13% of the world’s population, and 35.6% of global GDP, forming a super economic group with increasing geopolitical influence in areas where their interests converge. The seeming weakness of BRICS+—its political diversity and divergent traditional alliances (India is, for example, a member of QUAD, the quadrilateral security dialogue led by the US)—is also its strength, since whatever they jointly agree upon means serious business! Moreover, member-states perceive that the world is shifting towards a post-liberal order, and the Global South must find solutions of their own and hedge against the current drive by the US and its closer allies to decouple, de-risk, and de-globalise, which will ultimately lead to the progressive de-dollarization of the world economy.

Macau has to keep a close eye on BRICS+ near and future developments, as it presents this MSAR with extra opportunities for internationalisation. It is a huge potential market for tourism and trade, and its Portuguese-speaking connection could even be useful and maximised if other Portuguese-speaking countries such as Angola and Mozambique decide to apply and are accepted to become another BRIC in the bloc.

In a joint statement made in Novgorod, Russian Federation (the current Chair), on June 10, 2024, the Ministers of Foreign Affairs of the bloc committed to strengthening the BRICS Strategic Partnership across three pillars of cooperation: politics and security, economy and finance, and culture and people-to-people exchanges. Moreover, they reaffirmed their commitment to the multilateral system and the United Nations’ role as the cornerstone of the international system while advocating comprehensive reform, including of its Security Council, to enhance its effectiveness and efficiency and make it more representative of developing countries. They also support the G20 as the premier forum for global economic cooperation, comprising both developing and developed economies. The consecutive presidencies of this forum by India, Brazil, and South Africa in the triennium 2023-2025 have managed to include in the agenda issues such as fighting hunger, poverty, and inequality, sustainable development in its three dimensions, and global governance reform. Among several other declaratory intentions covering all major worldwide issues, the ministers “underscored the importance of the enhanced use of local currencies in trade and financial transactions between the BRICS countries,” recalling the task assigned at Johannesburg to the Finance Ministers and Central Bank Governors of the BRICS countries to consider the issue of local currencies, payment instruments, and platforms and to report back to the BRICS Leaders.

Under Russia’s presidency, much has been said and speculated around these topics. Talks of a BRICS currency and payment instruments and platforms have flooded social media, but much of what is being said lacks clarity and fails to withstand serious scrutiny. To start with, a BRICS currency is not something attainable in the short term, or even in the long run, unless some extremely innovative solution is found! One just has to look at the EURO experience to realise that. Going back to economic theory, BRICS economies certainly do not constitute an “optimum currency area.” Even more challenging than having a currency is making it functional and workable in all dimensions, which would require supranational mechanisms typical of a high degree of integration with shared sovereignty—a model that BRICS is not, and whose member states are definitely not inclined to adopt. On the other hand, laying down a joint payment mechanism seems more plausible and desirable for the current presidency by Russia, which was forcefully disconnected from the US-controlled SWIFT (Society for Worldwide Interbank Financial Telecommunication) system after the start of the Ukraine war and subsequent impositions of international sanctions. The establishment of such a payment platform will be a key feature on the agenda of the forthcoming Kazan Summit, scheduled to take place in October 2024 in the Republic of Tatarstan, Russian Federation. According to Russian expert Viktoria Panova, “active efforts are underway to create a financial payment mechanism that would make cooperation between BRICS countries easier, maintaining their sovereign trade and economic exchanges.”

How will the system work? Will payments be conducted in the national currencies of BRICS countries, while the NDB acts as a platform for integration, conversion, and clearing? Will there be a unit of account based on a basket of BRICS currencies that will be used as a reference for the system? How will BRICS members interact with the NDB? Will the new system involve blockchain technology? There are many questions and much speculation around this topic. Whichever the outcome, if the system succeeds, it will certainly leave a distinctive mark on world trade and finance and will lead to the progressive de-dollarization of the world economy.

In the meantime, international media have also reported that more than 30 countries have expressed interest in joining BRICS+. Malaysia is the latest in Asia to do so. There are no specific criteria for membership; the condition is that current members approve new ones unanimously. Since the numbers have increased so substantially, Russia decided to suspend further considerations, which was explained by Russian Foreign Minister Sergey Lavrov as “the modalities of ascension have to be collectively discussed in subsequent summits in the future.” It might also be a measure of caution to prevent a sudden influx of new countries from jeopardising the economic and geopolitical goals of the founding members and turning the bloc into a real mess.

Macau has to keep a close eye on BRICS+ near and future developments, as it presents this MSAR with extra opportunities for internationalisation. It is a huge potential market for tourism and trade, and its Portuguese-speaking connection could even be useful and maximised if other Portuguese-speaking countries such as Angola and Mozambique decide to apply and are accepted to become another BRIC in the bloc.