Ultimate Resource On BRICS Including How It Became A Rival To G-7-Led World Order

How BRICS Became A Real Club And Why Others Are Joining. Ultimate Resource On BRICS Including How It Became A Rival To G-7-Led World Order

Updated: 5-28-2023

The BRICS group of emerging market nations — Brazil, Russia, India, China and South Africa — has gone from a slogan dreamed up at an investment bank two decades ago to a real-world club that controls a multilateral lender.

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Now it is expanding its ranks, inviting Saudi Arabia, Iran, Egypt, the United Arab Emirates, Argentina and Ethiopia to join in 2024. The enlargement will pair some of the world’s largest energy producers with the developing world’s biggest consumers, potentially enhancing its economic clout.

The expansion also gives the bloc, which is likely to be renamed BRICS+, more scope to challenge the dollar’s dominance in oil and gas trading by switching to other currencies.

1. How Did BRICS Get Started?

“BRIC” was coined in 2001 by economist Jim O’Neill, then at Goldman Sachs Group Inc., to draw attention to strong growth rates in Brazil, Russia, India and China. It was intended as an optimistic thesis for investors amid market pessimism following the terrorist attacks in the US on Sept. 11 that year.

The four nations took the idea and ran with it. Their rapid growth at the time meant they had shared interests and common challenges.

They were already cooperating in forums like the World Trade Organization and felt their influence in a US-dominated world order would be greater if their voices were combined. The first meeting of BRIC foreign ministers was organized by Russia on the sidelines of the United Nations General Assembly in 2006.

The group held its first leaders’ summit in 2009. South Africa was invited to join at the end of 2010, extending membership to another continent and adding another letter to the original acronym. The latest expansion was agreed to in August at a summit in Johannesburg.

2. What Does BRICS Do?

The biggest concrete achievements have been financial. The countries agreed to pool $100 billion of foreign currency, which they can lend to each other during emergencies. That liquidity facility became operational in 2016.

They founded the New Development Bank — a World Bank-inspired institution that has approved almost $33 billion of loans mainly for water, transport and other infrastructure projects since it began operations in 2015.

(South Africa borrowed $1 billion in 2020 to fight the Covid-19 pandemic.) The group is exploring how to increase trade in their own currencies but hasn’t announced any concrete steps. Suggestions that the bloc adopt a common currency haven’t gained traction.

3. How Have Trade Relations Changed?

Trade between the bloc’s five existing members surged 56% to $422 billion over the five years from 2017 through 2022. Economically, Brazil and Russia’s natural resources and farm products make them natural partners for Chinese demand.

India and China have weaker trade connections with each other, partly due to political rivalries and an acrimonious border dispute.

Diverging interests on major political and security issues, including relations with the US, and their different governing systems and ideologies have made it hard for them to agree on how to tackle a number of pressing global issues, such as climate change.

4. Who’s In Charge?

China’s gross domestic product is more than twice the size of the four existing members combined. In theory, that should give it the most sway. In practice, India, which recently surpassed China in population, has been a counterweight.

BRICS hasn’t formally endorsed China’s big development push called the Belt and Road Initiative, partly because India objects to Belt and Road infrastructure projects in disputed territory held by Pakistan, its neighbor and arch rival.

The New Development Bank has no dominant shareholder: Beijing agreed to the equal holdings advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and now, Brazil’s former president, Dilma Rousseff.

5. Is Russia Still A Member Despite Its Invasion Of Ukraine?

Yes. The other BRICS countries have adopted a broadly neutral stance toward the war, viewing it as more of a regional issue than a global crisis.

However, the war has changed Russia’s relations with BRICS institutions. The New Development Bank quickly froze Russian projects and Moscow hasn’t been able to access dollars via the BRICS shared foreign currency system.

Essentially, with US sanctions piling up, other BRICS countries prioritized ongoing access to the dollar-based financial system over helping Russia.

Putin participated in the Johannesburg summit by video conference, sparing the South African government from having to decide whether to execute an arrest warrant for alleged war crimes issued by the International Criminal Court.

6. How Does BRICS Differ From Other Multilateral Groups?

Generally speaking, BRICS is similar to clubs such as the Group of 20 in promoting a move toward a more “multipolar” world and away from the post-Cold War dominance of the US, as exercised through structures like the International Monetary Fund and the World Bank.

Other groupings arguably gaining influence as part of the trend include OPEC, the Shanghai Cooperation Organization, the Southern Common Market (Mercosur), and the African Union.

Another term, the “Global South,” isn’t a club at all but is a concept that’s gained currency in recent years when referring to relatively poor countries that are also described as developing or emerging. It’s typically contrasted with a “Global North” composed of the US, Europe and some wealthy countries in Asia and the Pacific. But the relationship between the two concepts isn’t straightforward.

For example, the European Union, firmly part of the Global North, could gain more influence in a multipolar world. China considers itself a developing country, although its status as the world’s second-largest economy with a large middle class makes that classification an awkward fit.

The Group of Seven developed nations and the EU invited Brazil, India and Indonesia to attend its leaders’ summit this year, in what officials said was an attempt to reach out to the Global South.

7. How Will Expansion Change Things?

To be seen. The push was largely driven by China, which has sought to increase its global clout, but had the backing of Russia and South Africa. India was concerned a bigger BRICS would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West.

South African President Cyril Ramaphosa, who hosted the August summit, said a consensus was reached on expansion and more phases would follow, but didn’t elaborate.

According to Bloomberg Economics, an expanded BRICS would also mean more say for the alliance in world affairs and may lead to a different type of global economy. That’s because in comparison to the G-7, the BRICS are less market-oriented.

What Bloomberg Economics Says…

“The original BRIC members had two things in common: large economies, and high potential growth rates. The expanded BRICS-11 is a less coherent group — some are going through crises, others are thriving. This could signal an expansion of the agenda beyond economics.”

— Ziad Daoud, Chief Emerging Market Economist

8. Are There Still BRICS Funds Or Is The Concept Dead As An Investment Strategy?

There’s still intense interest in emerging markets among investors. But while a nice idea two decades ago, BRICS is largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories.

Except for India, the BRICS have underperformed their emerging-market peers over the last five years, according to Bloomberg Intelligence.

US-led sanctions have put Russia off limits for most foreign investors, and some sectors in China — especially technology companies — have also been sanctioned or face potential investment bans. China also is a maturing economy, increasingly separated from other emerging markets and facing a structural slowdown.

Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago, while South Africa’s has been subjected to years of rolling power blackouts because the state utility can’t produce enough electricity to meet demand.

India is still a growth story that investment banks now compare with China 10 or 15 years ago, though it’s unclear if it can follow China’s manufacturing-led model.

Updated: 6-1-2023

BRICS Nations Say New Currency May Offer Shield From Sanctions

* Foreign Ministers Of Bloc Discussed Boosting Shared Influence

* Member Russia Has Been Hit By Sanctions Over Ukraine Invasion

BRICS nations asked the bloc’s specially created bank to provide guidance on a how a potential new shared currency might work, including how it could shield other member countries from the impact of sanctions such as those imposed on Russia.

The foreign ministers of Brazil, Russia, India, China and South Africa convened in Cape Town earlier Thursday to discuss how the bloc can win greater global influence and to challenge the US. While they didn’t reach firm conclusions, the use of alternative currencies was among the prominent talking points.

The BRICS are looking to “ensure that we do not become victims to sanctions that have secondary effects on countries that have no involvement in issues that have led to those unilateral sanctions,” Naledi Pandor, South Africa’s minister of international relations, told reporters after the meeting.

While she didn’t mention Russia directly, the country has been hit by widespread sanctions from Western powers over President Vladimir Putin’s invasion of Ukraine.

Proposals are being considered by officials at the New Development Bank, the Shanghai-based lender created by BRICS nations, and the bloc “will be guided to them as to what the future models might be,” Pandor said, without providing further details.
Expansion Plans

The BRICS ministers were joined by counterparts from countries including Saudi Arabia, the United Arab Emirates, Egypt and Kazakhstan. Also on the agenda was expansion, with more than 20 countries aspiring to join.

Asked about a meeting held with a Saudi Arabian delegation, Russian Foreign Minister Sergei Lavrov said only that the issue of the kingdom joining was discussed, amid broader talks about how the bloc should expand its membership.

“With regard to the issue of BRICS, it is still being shaped, it is still evolving,” he said.

BRICS, which invited South Africa to join in 2010, has failed to punch its weight as a group. That’s despite its members representing more than 42% of the world’s population and accounting for 23% of global gross domestic product and 18% of trade, giving credence to demands for more sway.

The prospect of adding more members was first raised at last year’s summit in China and 13 nations have formally asked to join, with at least seven others expressing interest.

The gathering is a precursor to an Aug. 22-24 summit of BRICS heads of state currently scheduled for Johannesburg. South Africa is considering switching the venue to another nation, according to people familiar with the matter, a move that would resolve its dilemma over whether to execute an International Criminal Court arrest warrant for Putin if he travels to the country.

Updated: 8-7-2023

The Global South Breaks Away From The US-Led World Order

Brazil, India, Indonesia, South Africa and others stay neutral when asked to choose sides amid the West’s tensions with Russia and China.

Let Trade Run Free. Tie your currency to the US dollar. Align your foreign policy with America’s. The US and its Western partners wrote these economic rules, a cornerstone of the world order prevailing since World War II.

Now developing countries, often called the Global South, are quietly revising them.

The Global South sees a chance to chart its own future. Nirupama Menon Rao, a former Indian foreign secretary, points to her country’s spreading of digital payments to developing nations.

“India’s outreach to countries in the Global South has been successful,” the onetime ambassador to the US told Bloomberg Television in June.

Developing nations are demanding control of their resources, reordering a relationship from colonial times, in part by insisting on factories in their own countries.

Joining Namibia and Zimbabwe, Ghana is preparing to ban exports of lithium—essential for electric vehicles. Indonesia prohibited the export of nickel ores.

Argentina, Brazil, Chile and Indonesia are welcoming investments in EV battery plants from China rather than the US. “We can’t keep begging and begging from you,” Luhut Panjaitan, an Indonesian investment minister, said in May. “You may be angry at us for trading with other countries, but we have to survive.”

While visiting China in April, Brazilian President Luiz Inácio Lula da Silva asked “who decided that the dollar” should be all-powerful.

The Bank of Thailand is talking up fresh plans to diversify its basket of currencies, which it uses to establish the value of the baht, so it’s less tied to the dollar.

Indonesia is shoring up local currency markets, as regional neighbors set up digital payment systems, reducing the need for the dollar in day-to-day purchases. Africa is discussing a common currency.

Adding a geopolitical component, countries are no longer picking sides in fights between the West and Russia or the US and China. Thirty-two countries abstained from a United Nations resolution in February demanding that Russia withdraw from Ukraine.

“The great powers’ behavior has soured many in the Global South”

Leaders such as Bangladeshi Prime Minister Sheikh Hasina and Philippine Finance Secretary Benjamin Diokno sound like they’re reading from a script when they explain their neutrality with variations of the words “we’re a friend to all.”

In June, when a Chinese vessel antagonized an American warship in the Taiwan Strait, Asian defense ministers at a summit in Singapore just emphasized avoiding conflict.

South Africa is denying a US ambassador’s claim that it’s supplying arms to Russia for its war against Ukraine. Vietnam has kept quiet about Ukraine. The reason: its onetime security partnership with Russia, which dates to the Vietnam War.

India is buying Russian oil in defiance of US-led sanctions. “Energy is not about altruism or philanthropy,” oil minister Hardeep Singh Puri told Bloomberg TV in February.

The great powers’ behavior has soured many in the Global South: the debt-ceiling debacle and further political disarray in the US, China’s saber-rattling and Brexit in the UK. Pew Research Center survey results show unfavorable views of China reaching historical highs.

But the US has failed to capitalize on Chinese President Xi Jinping’s declining popularity.

“Xi Jinping has been God’s gift to US alliance-building in Asia,” says Ashley Tellis, a former senior State Department official now at the Carnegie Endowment for International Peace.

The US has hardly offered a compelling alternative, according to former US Trade Representative Michael Froman. “They haven’t yet seen what our vision is for the future,” he told Bloomberg’s Stephanomics podcast in June.

In response, the Global South has decided to come up with a vision of its own. —With Haslinda Amin and Claire Jiao

Updated: 8-18-2023

BRICS Is Broken And Should Be Scrapped

The artificial transcontinental alliance is past its sell-by date.

The Summit Of The Subpar Superpowers

Certainly, artificiality has always hovered over the so-called BRICS summits that have taken place since 2009. The acronym — Brazil, Russia, India, China and South Africa — was a Goldman Sachs marketing ploy that, with investor enthusiasm, blossomed into a transcontinental collusion of emerging market economies in opposition to the West.

But collusion is too strong a word for what’s turned out to be lots of photo-ops. And the summit this time around has almost all members hobbling toward the Aug. 22 meeting in Johannesburg. Not a good look.

Indeed, Russian President Vladimir Putin will only be there via videoconference. He’s avoiding an international warrant for his arrest. Worse, his country may soon become a submerging market if one is to judge from the ruble, which has lost half its value in a year’s time.

As guest columnist Alexandra Prokopenko writes, the only reason the Russian economy is growing is because of Putin’s invasion of Ukraine — “military Keynesianism,” as she puts it, as the Kremlin pours more and more of its budget into arms production and related industries.

“When the war ends,” she says, “the sudden switch in demand from the inflated defense sector back to the civilian sector will be a powerful shock that will be impossible to absorb painlessly. As we know from history, it also proved impossible for Russia’s predecessor, the Soviet Union.”

China’s President Xi Jinping, unlike his Russian ally (or is it dependent?), will be in South Africa in person next week. But his presence is not going to camouflage the economic and financial headaches of the People’s Republic — analyzed with pitiless precision by Shuli Ren.

Host South Africa has lost its stature as its continent’s country with economic and political mojo.

India’s Prime Minister Narendra Modi has just beat back a no confidence vote stemming from how his government has dealt with months of civil unrest in the northeast.

Mihir Sharma observes that a raft of new legislation will only promote the kind of ethnic chauvinism that exacerbated the violence there.

Only Brazil is enjoying good economic news, despite its political transition from the rightwing populism of Jair Bolsonaro to the revived socialism of Luiz Inácio Lula da Silva.

The big trouble with the BRICS is that China (with its still enormous economic clout) dominates the group — and Beijing wants to turn it into another global forum to echo its denunciations of the US and EU.

Hence, Beijing’s attempts to expand the membership to bring in sympathetic nations (e.g. Saudi Arabia). Brazil and India have resisted, preserving their own influence in the association. But why preserve influence in a China-dominated vessel that’s sprouting so many leaks?

If investors want EM excitement, maybe there’s another marketable acronym now that BRICS is past its sell-by date. Consider something called MITKIT, a regional Asian entity whose total weighting in the MSCI Emerging Markets Index — 46% — would be larger than China’s 31.4%.

Indeed, China would be a geopolitical reason for Malaysia, India, Thailand, Korea, Indonesia and Taiwan to band together. Oh wait … Taiwan? Never mind.

Updated: 8-20-2023

The BRICS Are Neither The Anti-West Nor A Bloc

Brazil, Russia, India, China and South Africa can keep holding summits. Geopolitically, that still won’t make them a thing.

The US and its Western allies should take the pomp and posturing at this week’s BRICS summit in Johannesburg with a shaker’s worth of salt.

Sure, that “bloc” — comprising Brazil, Russia, India, China and South Africa — represents more than 40% of the world’s population, and other countries in the Global South may yet join.

The BRICS also like to present themselves as a sort of non- or anti-West geopolitical alternative to US hegemony. But they’re not, and never will be.

For starters, it’s always a stretch when you launch something — a policy, institution, group or club — just because somebody came up with a great acronym. And that’s exactly how BRIC (later BRICS) began.

Jim O’Neill coined the term in 2001 when he was an economist at Goldman Sachs and needed a snappy moniker for several markets that looked promising for investors but otherwise had nothing obvious in common.

The BRICS adopted the label because it fit two trends: the acronym vogue but also the fad for blocs. The latter, I think, came out of the progression from a bipolar world during the Cold War to a unipolar moment of US hegemony and the presumptive return to multipolarity since then. In this more complicated world, countries assume they should belong to some sort of coalition, maybe several.

Today there’s a bewildering array of blocs to choose from. Just take Africa. The continent has (I won’t spell out the abbreviations) an AMU, Comesa, CEN SAD, EAC, Eccas, Ecowas and a few more, not to mention the African Union.

That word “union,” in fact, is especially popular for blocs because it stipulates unity where there usually is none.

That’s true even for the European Union, which comes closest to being a true bloc, in the sense of confederation. In trade and regulation, the EU is a world power.

In everything else, though, it’s a chaos club of nations that can’t agree on much, and that certainly couldn’t stand up to the world’s major powers in a pinch.

The rest of the world’s blocs have much less to offer. Latin America, for example, makes a sporting effort, with a SICA, Caricom, Mercosur and what not. And whenever one fizzles out, such as USAN (the Union of South American Nations), another takes its place, currently Prosur, the Forum for the Progress of South America. Don’t hold your breath.

Among all these aspiring confederates, the BRICS arguably have the least in common, aside from a dislike of US clout in global finance, economics and geopolitics.

They consist of three democracies in different stages of backsliding and two increasingly repressive autocracies. One pair, China and India, is as likely to fight each other as to cooperate.

That’s quite different from, say, the G-7 (Group of Seven), a club of rich liberal democracies with a shared sense of custodianship for the world economy.

One thing all blocs, unions and forums excel at is generating paperwork. The EU clinches the title in this category, with either ten or eleven presidencies, depending on the count. But even lesser blocs boast their secretariats, rotating chairs and associated other bureaucracies.

The BRICS, for example, launched the New Development Bank, a lender meant to duplicate the World Bank (again, because the latter is in Washington).

When blocs reach for loftier goals, though, they involuntarily become fodder for satirists. The BRICS have floated the idea of a joint currency — the better to topple the hated US dollar from its global perch.

But only one bloc, the EU, has ever achieved monetary union, and even that at the cost of recurring near-death experiences. The notion that the BRICS would pool their money, central banks, fiscal and monetary policy is, as O’Neill the nomenclator puts it, “ridiculous.”

In reality, each of the five BRICS is in it for different reasons. Take China. It wants to displace the US as a hegemon and keeps seeding blocs it thinks it can dominate for that purpose.

Those include the Belt and Road Initiative, a trans-continental infrastructure program, the Shanghai Cooperation Organization, a Eurasian grouping, and the tellingly named 16+1 (formerly 17+1), a format in which China allegedly cooperates with Central and Eastern European countries.

As the Europeans in that club have figured out, though, the +1 really just wanted to boss around the 16.

Given the aims of the C in BRICS, neither the B, R, I or S nor other countries that have expressed an interest in joining, such as Indonesia, can really be enthusiastic about becoming Beijing’s vassals just to teach Washington a lesson.

That’s one reason why the forum will struggle to project soft power, much less hard.

Another reason is the company it’s forced to keep. It never helps a club when one member can’t show up because the International Criminal Court has a warrant out for their arrest.

In this case, that’s Russian President Vladimir Putin, facing war crimes charges for allegedly deporting children from occupied areas of Ukraine, who’ll participate via video link to avoid being handcuffed on arrival in Johannesburg.

How the hosts curate that delicate situation, and whether everyone in the room keeps a straight face, including Putin’s foreign minister, will be worth watching. But a new world order will be nowhere to be seen.

Updated: 8-21-2023

Growing BRICS Alliance To Rival G-7-Led World Order

New World Order

The grouping of Brazil, Russia, India, China and South Africa, whose original acronym BRIC was coined by former Goldman Sachs chief economist Jim O’Neill in 2001, is mounting what could be its second most serious attempt to rival the Group of Seven since its formation in 2009-10.

More than 40 heads of state and government from the Global South, many of whom have for years denounced the Western-led international order for sidelining them, will gather in South Africa’s commercial capital of Johannesburg for the 15th annual leaders’ summit of the BRICS alliance starting Tuesday.

Almost two dozen Global South nations have formally requested to join the bloc, and several others have expressed interest. The group hasn’t had any new admissions since South Africa in 2010.

“An expanded BRICS will represent a diverse group of nations with different political systems that share a common desire to have a more balanced global order,” said South Africa’s President Cyril Ramaphosa.

It could generate about half of global output by 2040 if aspiring members such as Indonesia, the world’s largest producer of palm oil, and Saudi Arabia, the biggest exporter of oil, join, Bloomberg Economics estimates show, bolstering the alliance’s global clout.

The G-7, by comparison, would provide about a quarter of global gross domestic product, effectively a reversal of their respective shares of output compared to 15 years ago.

An enlarged BRICS would also account for almost half the global population, up from 42% currently, according to Anil Sooklal, South Africa’s ambassador to the bloc.

The expansion, largely driven by Chinese President Xi Jinping, which has the backing of Russia and South Africa, has met with both unease and optimism, as Bloomberg’s Simone Preissler Iglesias, S’thembile Cele and Sudhi Ranjan Sen write here.

Unease that a bigger BRICS will become a mouthpiece for China and weaken other members’ status. Optimism that it will provide a voice for emerging countries amid a fractured and increasingly polarized world where Russia’s war in Ukraine and US trade tensions with Beijing are among the biggest flash points.

It’s also led to skepticism on whether an expanded and far more heterogeneous BRICS would be able to translate economic and demographic might into a political force challenging the G-7.

The club’s politically disparate members are facing deep challenges at home and have repeatedly failed to forge a united position on global issues from the war in Ukraine to climate to trade.

Brics Nations At Odds Over Adding To Their Number

Debate about whether and how to expand is likely to feature prominently during group’s summit.

JOHANNESBURG—China and Russia are pushing to expand membership in the Brics bloc of emerging economies to counterbalance Western influence, while others in the group are reluctant to admit new entrants, such as Iran and Cuba, for fear of alienating Washington.

The debate among the Brics nations—Brazil, Russia, India, China and South Africa—about whether and how to expand will likely feature prominently during the group’s first in-person leaders’ summit since the pandemic.

The presidents of Brazil, China and South Africa, as well as the Indian prime minister, are set to attend the gathering here starting Tuesday.

Russian President Vladimir Putin was originally slated to attend, but a warrant for his arrest by the International Criminal Court for alleged war crimes in Ukraine would have obliged South Africa, an ICC member, to arrest him had he shown up.

Russian Foreign Minister Sergei Lavrov will attend instead. Putin is expected to address the summit virtually.

Bracketed together originally by the clip of their economic growth, the Brics nations now account for more than a quarter of the global economy and some 42% of the world’s population.

But the group’s size is matched by the scale of its disunity on political and security issues—including relations with the U.S. The five countries also represent vastly different governing systems and ideologies.

Any expansion could multiply those differences.

Widening the membership would likely give China another mechanism for exercising leadership of the developing world, especially if the group trends more authoritarian.

Russia, which has been isolated by much of the rest of the globe over the war in Ukraine, is also supportive of growing the club, in particular to include African nations as it develops new markets and allies on the continent to lessen the impact of Western sanctions.

“China and Russia view this as an alternative pole in the world order,” said Priyal Singh, a senior researcher at the Institute for Security Studies, a think tank in Pretoria, South Africa.

Other members, including Brazil and India, are taking a more hesitant approach to adding to the Brics number.

Analysts say New Delhi and Brasília would prefer careful deliberations before the induction of new members, and share concerns that an expanded group could become too antagonistic toward the West and destabilize the bloc.

“Their primary motive for working with Beijing and Moscow is not necessarily that they agree with Beijing and Moscow,” Singh said. “[They] are simply trying to pursue their own sense of strategic autonomy on the world stage.”

South Africa, the host of this year’s summit, publicly supports an expansion of Brics, but as the group’s smallest member by far, analysts expect it to drag its feet over adding more members, especially from Africa, for fear of diluting its overall standing and importance in the club.

If the current members can’t agree on a way forward, the Brics’ ability to channel discontent and opposition toward the U.S. and its allies through a bloc aspiring to rival the Group of Seven major economies may be hampered.

More than 20 nations have formally expressed interest in joining the Brics, while another 20 or so have done so informally, according to Anil Sooklal, South Africa’s ambassador to the bloc.

Aspirants include the United Arab Emirates, Saudi Arabia, Argentina, Iran, Nigeria and Cuba, Naledi Pandor, South Africa’s minister of international relations, said.

Analysts say prospective members are largely interested in the group’s political influence and economic clout, including access to the New Development Bank, a multilateral development bank established by the Brics countries in 2014 as an alternative to traditional Western finance institutions like the World Bank and the International Monetary Fund.

The New Development Bank has approved more than $30 billion in loans for development and infrastructure projects in Brics countries and other emerging-market nations.

The bank has faced headwinds since the war in Ukraine with trouble raising dollar funds to repay its debts, The Wall Street Journal reported in June.

Brics members have been internally discussing the guiding principles, criteria and procedures for expansion of the bloc since last year.

Chinese leader Xi Jinping has been promoting the expansion of Brics to enlarge the bloc since 2017 and reiterated that call in a speech to the virtual leaders’ summit last year, saying, “Fresh blood will inject new vitality into Brics cooperation and increase the representativeness and influence of Brics.”

Ahead of the Johannesburg summit, Beijing has continued to promote that cause.

“China welcomes and looks forward to like-minded partners joining the Brics family at an early date,” China’s ambassador to South Africa, Chen Xiaodong, wrote Monday in the People’s Daily, the official mouthpiece of China’s Communist Party.

Brazil and India, on the other hand, are likely to tamp down that enthusiasm.

India doesn’t want “a China-driven opening of floodgates that creates a numerical majority under Chinese influence and ends up hijacking Brics,” said Sreeram Chaulia, professor and dean at India’s Jindal School of International Affairs.

“Until now, Brics has been a democratic institution where all member states have equal say and share in decision-making. A China-driven expansion of Brics risks its basic democratic structure.”

BRICS Expansion Wins Backing From South Africa’s Ramaphosa

* More Than 20 Nations Have Applied To Join Bloc, President Says

* UN Secretary-General To Attend Emerging-Market Powers Summit

South African President Cyril Ramaphosa expressed support for an expansion of the BRICS group of emerging market powers, which will gather for its annual summit in Johannesburg this week.

“An expanded BRICS will represent a diverse group of nations which share a common desire to have a more balanced world order,” Ramaphosa said in a televised address to the nation on Sunday.

The summit will be attended by United Nations Secretary-General Antonio Guterres and more than 30 African heads of state, as well as others from the Global South.

The leaders of BRICS — Brazil, Russia, India, China and South Africa — are due to hold three days of talks starting Aug. 22, with a possible expansion high on the agenda. More than 20 nations have formally applied to join, Ramaphosa said.

Chinese President Xi Jinping, in an op-ed published in several South African media outlets on Monday, said his country and South Africa, as “natural members” of the Global South, should push for developing countries to have more sway in international affairs.

India, however, wants the process to be gradual, and is concerned the group would become a mouthpiece for China — with which the country is opposed on a number of major issues.

“We will urge the international community to refocus on development issues, promote a greater role by the BRICS cooperation mechanism in global governance, and make the voice of BRICS stronger,” Xi said.

Formed officially in 2009-10, BRICS has struggled to have the kind of geopolitical influence that matches its collective economic reach.

The bloc’s current members represent more than 42% of the world’s population and account for 23% of global gross domestic product and 18% of trade.

Ramaphosa reiterated that South Africa’s foreign policy will be driven by its national interest and that it favors a negotiated settlement to Russia’s invasion of Ukraine and other conflicts.

“While some of our detractors prefer overt support for their political and ideological choices, we will not be drawn into a contest between global powers,” he said. “Our country strives to work with all countries for global peace and development.”

Other Speech Highlights:

* The BRICS summit will be preceded by a state visit to South Africa by Chinese Premier Xi Jinping, during which several agreements will be signed.

* South Africa wants to build a partnership between BRICS and Africa to to bolster trade and investment.

* A European Union-South Africa summit will be held in South Africa later this year.

* South Africa will assume the presidency of the Group of 20 nations in 2025.

* South Africa has invited more than 30 African trade ministers and senior US administration and congressional representatives to the the African Growth and Opportunity Act forum scheduled for November

A BRICS Common Currency Is Still A Pipe Dream

Big emerging markets strutting is one thing. A remotely credible challenge to the dollar is another.

Paul O’Neill, a former US Treasury secretary, said that if America ever dropped the strong-dollar policy, he would hire a brass band at Yankee Stadium to mark the proclamation. O’Neill had reservations about the mantra, but ultimately fell into line.

The musicians didn’t make it to rehearsal on his watch and Washington’s support for greenback primacy lived on, with the odd tweak every now and then.

Challenges to the dollar’s vital role in the world economic and financial system are often said to be, if not imminent, then over the horizon. But somehow they never quite materialize.

Don’t expect any of the current noise about movement toward a currency shared by the BRICS nations — Brazil, Russia, India, China and South Africa — to amount to much.

If any of these were to be the foundation of a single unit of exchange, it would likely be China. Precedent isn’t encouraging: Seven years after the International Monetary Fund added the yuan to its basket of reserve currencies, it accounts for a very minute share of the global cache.

Nor should we be too impressed by the New Development Bank, a lender created by the quintet to become a counterweight to the IMF or World Bank, part of a journey by the Global South to some wonderland with minimal Western influence.

Emerging markets chafe that an American gets to lead the World Bank and a European helms the IMF. The US is, after all, the biggest stakeholder in both.

Clickbait headlines aside, such initiatives say more about who is advancing them than the shortcomings of the greenback. Potshots that appeal to domestic audiences are no substitute for economic leadership. None of the pretenders appears remotely ready.

South Africa, the host of this week’s summit for BRICS leaders, has done its best in recent days to hose down some of the speculation about FX singularity. That’s a long way off, officials say.

The talks will focus on issues including the establishment of a common payments system, South Africa’s envoy to the group said last week.

What is likely is the formation of a technical committee to start considering a potential joint currency. This takes some of the heat out of the notion of a plot to dethrone the dollar.

Why did the idea get so far? It’s a distraction from difficulties faced by some of the five. Russia is isolated from respectable salons, and is raising interest rates to stem the ruble’s collapse while simultaneously financing its war against Ukraine.

China’s economy is slackening after decades of meteoric growth. South African leaders are contending with their failure to live up to the early promise of the post-Apartheid years.

Among the ballyhooed threats to the dollar that petered out: the collapse of the gold standard, the advent of floating exchange rates, the US current account deficit, budget shortfalls, the global financial crisis, China’s dizzying rise after Deng Xiaoping’s reforms.

The euro held some promise, but a sovereign debt crisis in the early 2010s stalled that ascent.

The metrics are familiar, yet compelling enough to repeat. The greenback comprises just under 60% of global currency reserves, according to the IMF. That’s down from around 70% in 2000, but still well above any competitor.

The euro is next, with about 20%, followed by the yen and the British pound. The yuan has 2.6% of the total. In terms of trading, the dollar appears almost untouchable, accounting for one side of 88% of all transactions in the $7.5 trillion-a-day foreign-exchange market.

Emerging-market central bankers tend to get defensive on this subject. They are often asked about their intentions in the context of what the Federal Reserve is doing.

They rightly insist that they don’t have to simply follow the Fed’s lead. But don’t miss the essential point: Their actions do reflect the broad trajectory of US rates, if not the precise timing.

Moreover, these bankers are often drawn into a perspective on the Fed at their monthly press conferences and seem very well informed. I’m waiting for a similar dissertation on the People’s Bank of China.

Lesetja Kganyago, governor of the South African Reserve Bank, has correctly identified management of any currency as a definitive issue. Some monetary authority, somewhere, would have to call the shots.

There was much horse trading about where the European Central Bank would be headquartered, who would lead it and how would it be run.

At the time, many leaders feared German dominance. The bank is headquartered in Frankfurt, but a German has yet to run the ECB. Two of its four presidents have been French.

For the BRICS, which don’t share the European Union’s sense of purpose in pursuing integration, the hurdles are legion. But will it be a no-show forever? As natural as the ECB and euro now look, the path was far from smooth and only really got a head of steam once the Berlin Wall came down and Germany reunited.

Nor was the Fed always a sure thing. A central bank that resembled those in Europe was long anathema to large sections of the American political class.

The idea of an institution dominated by Wall Street and East Coast business elites met fierce resistance from heartland populists, as Roger Lowenstein wrote in his 2015 book America’s Bank, which chronicled the creation of the Fed.

Yet America needed a currency, and an institution backing it, that reflected the country’s growing commercial heft. Ultimately, it came together in 1913 as a messy compromise.

Even today, differences arise between the district Fed banks and the Washington-based Board of Governors.

BRIC, the acronym devised in 2001 by Jim O’Neill, the former chief economist at Goldman Sachs, captured the mood of the time. China was going great guns after entry to the World Trade Organization.

India’s ascent was underway after a financial crisis a decade earlier led to an opening up. Russian President Vladimir Putin was putting the economic collapse of the late 1990s behind him.

The US slipped into recession, followed by a sluggish recovery, with confidence fragile after the Sept. 11 terrorist attacks. (South Africa was added to the group later.)

Too bad the countries themselves let it go to their heads.

Updated: 8-22-2023

Xi Skips Speech Defending China Economy At BRICS Business Forum

* Chinese President Attends Leaders’ Dinner In Johannesburg

* Xi Has Only Made One Other International Visit This Year

President Xi Jinping failed to attend a business forum in South Africa where he was expected to deliver a speech defending China’s economy and its support for emerging markets, as fears mount that the Asian nation’s struggles could cause global turbulence.

According to a public schedule, the Chinese leader was set to address the BRICS Business Forum on Tuesday, after meeting with South African President Cyril Ramaphosa earlier that day.

Instead, delegates were greeted on stage by Commerce Minister Wang Wentao, who read the speech without giving an explanation for Xi’s absence.

“The Chinese economy has strong resilience, tremendous potential and great vitality. The fundamentals sustaining China’s long-term growth will remain unchanged,” according to the remarks read by Wang. “The giant ship of the Chinese economy will continue to cleave waves and sail ahead.”

“The people of South Africa salute you, President Xi Jinping”

WATCH: President Ramaphosa confers the order of South Africa to his Chinese counterpart for services to the nation

Latest updates from the BRICS summit: https://t.co/qn3sXOeJqK pic.twitter.com/rflnNykVMV

— Bloomberg Africa (@BloombergAfrica) August 22, 2023

Hours later, Xi attended a dinner with the leaders of South Africa, Brazil and India, and Russia’s foreign minister, who are in Johannesburg for the annual BRICS summit of emerging market powers.

Xi’s decision to skip delivering a bullish economic message in person comes as his nation face intense global scrutiny over its struggles with falling prices, a faltering property market and soaring local government debt.

President Joe Biden has labeled those economic woes a “ticking time bomb” for the world, while Treasury Secretary Janet Yellen called them a “risk factor” for the US.

As China confronts those concerns, the South Africa summit will bring Xi into the orbit of leaders he hasn’t seen in months, including a bilateral meeting with India’s Prime Minister Narendra Modi that is expected to take place on the sidelines of the summit.

“It’s clear that Xi Jinping places a higher priority on political issues, security issues, than he does on business and the economy,” said Drew Thompson, a former Pentagon official and businessman in China who is now a senior fellow at the Lee Kuan Yew School of Public Policy in Singapore.

“So if he is in a position where he has to prioritize and skip one meeting, it would not surprise me that he favors the political and security topics over the economic ones.”

China is unlikely to clarify the reasons for Xi’s decision: The nation rarely answers questions on the movements of its leaders or clarifies their health status. When Qin Gang was removed from his post as foreign minister this year, no explanation was provided.

That highlighted a lack of transparency from the Chinese government that has spooked investors in recent months, as data that was once publicly available becomes harder to find.

President Xi Jinping delivered an address at the closing ceremony of the #BRICS Business Forum 2023. President Xi said changes in the world, in our times and in history are unfolding in ways like never before, bringing human society to a critical juncture.

pic.twitter.com/upDbRSlkjl

— Hua Chunying 华春莹 (@SpokespersonCHN) August 22, 2023

Xi’s speech would have been his first public remarks delivered abroad this year. Prior to South Africa, the Chinese leader had spent just two days overseas in 2023, when he visited Russia.

The trip to South Africa gives Xi an opportunity to court countries from the Global South, after a trilateral summit held by President Joe Biden with the leaders of South Korea and Japan last week left the Chinese leader looking increasingly isolated in his backyard.

During a state visit with Ramaphosa earlier Tuesday, Xi called on the two men to boost their combined influence on international affairs in the Global South. The leaders also pledged cooperation in electricity, new energy and scientific and technological innovation.

“We support substantive progress in the G20 and support South Africa employing a greater role,” Xi said at a joint press conference in Pretoria, adding that China will continue to encourage its companies to invest and operate in South Africa.

Beijing has been pushing to expand the five-nation group that also includes Brazil, Russia and India, with more than 20 nations reported to have applied to join, including Saudi Arabia, Indonesia and Egypt.

While South Africa and Russia back the addition of new members, India is wary of the group becoming a mouthpiece for China, and Brazil is worried about alienating the West.

State Media

If forum delegates in South Africa were left wondering where Xi was, Chinese-language state media reports Wednesday made no mention of his absence, instead saying he delivered the speech without referencing Wang — although the official Xinhua News Agency’s English report noted the remarks were read on his behalf.

While Chinese politicians do sometimes read out messages from Xi at events — Vice Premier Ding Xuexiang delivered one at the China Development Forum in March, for example — normally that takes place when the Chinese leader isn’t physically in attendance.

The speech, part of which was written in the first person, said China was focused on achieving “high-quality development,” a phrase used to signal Beijing’s pivot from debt-fueled growth, touted the nation’s “super-size market” as a unique advantage, and stressed that barriers to foreign investment would ease.

The text also laid out China’s commitment to an “independent foreign policy of peace” and criticized “hegemonic” acts of other nations in a veiled swipe at the US, areas normally outside the purview of the commerce minister.

China’s Assistant Minister of Foreign Affairs Hua Chunying also neglected to mention Xi had enlisted a messenger when she posted a picture of the forum’s closing ceremony on X, the site previously known as Twitter, with a caption saying the Chinese leader had “delivered an address.”

“Xi said changes in our world, in our history and in our times are unfolding in ways like never before,” she wrote, next to the picture of the stage that only showed silhouettes.

Gold-backed BRICS Currency Will Be ‘Very Hard’ To Deliver: Lyn Alden

A common currency would be challenging for Brazil, Russia, India, China and South Africa to initiate and maintain, but it could have an impact on Bitcoin, investment strategist Lyn Alden says.

Macroeconomist Lyn Alden has cast doubt on a proposal that would see five countries work together to develop a common BRICS currency — arguing it will likely struggle to get off the ground and fail to dethrone the United States dollar.

In an interview with Cointelegraph just days before the BRICS annual summit in South Africa, Alden explained that it would be “very hard” for BRICS members — Brazil, Russia, India, China and South Africa — to form a gold-backed currency for widespread use.

Russian President Vladimir Putin first announced that BRICS proposal to create an international reserve currency at the BRICS summit in 2022 to rival the U.S. dollar as the global reserve standard. This proposal was later confirmed to come in the form of a gold-backed currency.

However, Alden argued the model is flawed.

“Backing a fractional-reserve banking system with gold only works temporarily, because the currency units multiply more quickly than the gold does,” she said.

Instead, Alden sees a more likely outcome would be that BRICS nations lessen its reliance on the USD for cross-border payments by increasingly using their own currencies for trade — particularly the Chinese yuan.

The BRICS hold G7 currencies as their reserves, and not the other way around. And yet, the BRICS just flipped the G7 in economic size.

Reserve practices don’t change overnight, but this is a very different environment than 10+ years ago. https://t.co/khoH1Cbvp8

— Lyn Alden (@LynAldenContact) April 11, 2023

Alden’s comments follow a similar sentiment by former Goldman Sachs economist Jim O’Neil, who dismissed the common currency notion as “ridiculous” in a Aug. 15 interview with the Australian Financial Review.

“They’re going to create a BRICS central bank? How would you do that? It’s embarrassing almost,” O’Neil said, explaining that it simply wouldn’t be feasible.

On Aug. 21, India’s foreign secretary, Vinay Mohan Kwatra, also downplayed the possibility of BRICS forming a common currency, stating that the member states have become increasingly focused on boosting trade using their own national currencies.

Emissaries from the nations are due to appear at the 15th BRICS annual summit held in South Africa on Aug. 22-24, which will cover issues relating to the formation of a common currency, BRICS Development Bank, international trade and the Russia-Ukraine conflict.

U.S. Dollar Dominance Could Impact Bitcoin

Meanwhile, Alden added that potential moves to eat into U.S. dollars’ dominance could, in a roundabout way, cause headwinds for Bitcoin.

“This attempt at de-dollarization is likely to contribute to structurally less foreign demand for U.S. Treasuries, higher Treasury yields, and the requirement for the U.S. Federal Reserve to eventually finance a larger share of U.S. government deficits as a result.”

If U.S. Treasury yields increase — due to a mass de-dollarization event or not — this could cause Bitcoin’s price to face headwinds as risk assets tend to underperform under those conditions, she explained.

On the other hand, Alden also believes that the price of Bitcoin may increase if the Federal Reserve needs to bail out more banks to keep them afloat:

“In the longer-term, when the Fed has to provide a liquidity backstop for the Treasury market, that would likely be very good for bitcoin, similar to how bitcoin shot up when the Fed had to intervene in the U.S. banking system back in March 2023.”

A liquidity backstop typically occurs when a bank’s own liquid assets are no longer sufficient to meet its financial obligations, so the central bank provides them with emergency liquidity.

Xi Urges South Africa To Work With China To Boost BRICS’ Clout

Chinese President Xi Jinping called on South Africa to join him in boosting the countries’ combined influence on international affairs in the Global South.

“We support substantive progress in the G20 and support South Africa employing a greater role,” he told reporters at a joint press conference with South African President Cyril Ramaphosa in Pretoria, a prelude to this week’s BRICS summit starting on Tuesday.

“We are global partners that should uphold justice.”

“The people of South Africa salute you, President Xi Jinping”

WATCH: President Ramaphosa confers the order of South Africa to his Chinese counterpart for services to the nation

Latest updates from the BRICS summit: https://t.co/qn3sXOeJqK pic.twitter.com/rflnNykVMV

— Bloomberg Africa (@BloombergAfrica) August 22, 2023

China and South Africa have thrown their weight behind the expansion of the BRICS bloc ahead of its annual meeting in Johannesburg, an attempt to extend the group’s clout on the world stage and challenge the US-led status quo.

Beijing has been pushing for adding to the five-nation group that also includes Brazil, Russia and India. Ramaphosa publicly gave his backing to the plan in a televised address to the nation on Sunday.

More than 20 nations have formally applied to join, he said. These are reported to include Saudi Arabia, Indonesia and Egypt.

The Chinese leader has been courting countries from the Global South as tensions with the US and its Western allies mount. In an op-ed published in several South African media outlets on Monday, Xi said China and South Africa should “fear no hegemony” and “work together to appeal for greater voice and influence” of the developing nations.

“We will urge the international community to refocus on development issues, promote a greater role by the BRICS cooperation mechanism in global governance, and make the voice of BRICS stronger,” Xi wrote, noting that more countries are “knocking on the door of BRICS.”

Russian President Vladimir Putin, who will participate remotely in the summit as he faces a war-crimes arrest warrant from the International Criminal Court, has also supported the expansion.

However, India is wary that expanding BRICS will transform the group into a mouthpiece for China, while Brazil is worried about alienating the West, Bloomberg has reported.

At the joint briefing Tuesday, Xi also said China and South Africa will deepen bilateral cooperation in electricity, new energy and scientific and technological innovation. China will continue to encourage its companies to invest and operate in South Africa, Xi said.

The trip marks only Xi’s second abroad visit this year, as the leader has preferred to stay home facing mounting problems.

He spent just two days outside China — in a short visit to Russia — in 2023, the fewest in any first half of a year since he took power more than a decade ago, excluding the Covid-19 pandemic.

China is South Africa’s largest trading partner, accounting for $56.3 billion between the two nations in 2022, including exports to the Asian country of $32.5 billion, according to data compiled by Bloomberg.

South Africa has in turn looked to China to secure a pipeline for solar components to help ease a debilitating power crisis.

Updated: 8-24-2023

Iran, Saudi Arabia, Others Invited To Join Brics Group

Expansion is a victory for Russia and China who want to bolster the bloc against competition from the West.

JOHANNESBURG—The Brics group of emerging nations has invited six additional countries to join the bloc in an effort to grow its global importance and ability to challenge the West on key political and economic issues.

Saudi Arabia, Egypt, Argentina, Iran, Ethiopia and the United Arab Emirates have been invited to join Brics, which currently comprises Brazil, Russia, India, China and South Africa, the bloc’s leaders said on Thursday, the final day of a summit in Johannesburg.

The expansion of Brics is a victory for Chinese President Xi Jinping and Russia’s Vladimir Putin, who had pushed to grow the bloc in the face of intensifying geopolitical and economic competition with the West.

They argued that a bigger club would give the developing world a stronger voice that is more equal to its size.

“Let us work together to write a new chapter of emerging-market countries… working together for development,” Xi said in translated remarks at a news conference at the end of the summit.

Xi has been wooing developing nations at the summit this week, as Beijing looks to shore up friendships among African nations, as well as countries in Latin America and parts of Asia that are traditionally suspicious of U.S. power.

Joining the summit by video link, Putin also welcomed the addition of new members and said they would help galvanize the bloc. “We all stand for the building of a new multipolar world order, one that is truly balanced,” said Putin.

The Russian president has boosted efforts to court developing nations as Russia seeks to expand into new markets and make new allies to lessen the impact of Western sanctions over the war in Ukraine.

Putin couldn’t attend the summit in person, as the host, South Africa, would have been obliged to arrest him under a warrant for his arrest issued in March by the International Criminal Court for alleged war crimes in Ukraine.

He made no mention in his remarks of Yevgeny Prigozhin, the owner of the Wagner paramilitary group, who died in a plane crash on Wednesday.

Brazil and India had advocated for a more gradual expansion of Brics amid concerns that the group could become too far aligned against the West, morphing into an autocratic version of the Group of Seven major economies.

It appears that Brics is headed in that direction, with just one of the six newly-admitted nations—Argentina—ranked as “free” in Freedom House’s widely used global freedom index, with a score of 85 out of 100. The other five countries are all designated “not free,” with scores ranging from eight to 21.

Still, Brazil and India voiced their support for the expansion at the summit on Thursday. “India has always believed that the addition of new members would further strengthen Brics as an organization,” Prime Minister Narendra Modi said.

Bracketed together originally by the clip of their economic growth, the current Brics nations account for more than a quarter of the global economy and some 42% of the world’s population.

The Brics leaders said the admission of six new members was a first step and further nations would be invited to join in the future. More than 20 countries, including Nigeria, Indonesia, Venezuela and Argentina, had formally expressed interest in joining the bloc ahead of the summit. The first six new members will join at the start of next year.

Analysts said the addition of new countries could further undermine coherence and decision-making in the bloc, whose current members already represent vastly different economic and governance systems and ideologies and who have taken divergent approaches to their relationship with the U.S.

“It’s quite an odd choice of countries,” said Priyal Singh, a senior researcher at the Institute for Security Studies, a think tank in Pretoria, South Africa. Singh pointed to fraught relations between Saudi Arabia and Iran as well as between Egypt and Ethiopia.

“The Middle East and North Africa now really do hold a lot of sway over the group as of next year,” he added.

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