The BRICS group of emerging countries—Brazil, Russia, India, China, and South Africa—will meet for their annual summit starting August 22 in Johannesburg.
This 2023 summit has gained prominence amid expectations that the grouping could add new members as China and Russia seek to increase their political influence with tensions with the US and its allies running high.
How did BRICS come about?
It started as an acronym BRIC, coined in 2001 by economist Jim O’Neill at the US investment bank Goldman Sachs, to group together four of the largest and fastest-growing economies at the time. O’Neill stressed how the four economies—Brazil, Russia, India, and China—could collectively become a global economic force in the coming decade.
Investors took the cue and so did the policymakers in those countries. Keeping aside their political and social differences, the developing countries felt they were bound by a shared urge to restructure the US-led global political economic and financial systems to be “fair, balanced, and representative”.
The BRIC leaders held their first annual meeting in 2009 in Russia’s Yekaterinburg. A year later, they invited South Africa to join the political club, and an ‘S’ was added to the BRIC acronym.
Why does it matter?
The BRICS members represent over 42 per cent of the world’s population and account for nearly a quarter of global gross domestic product (GDP) and 18 per cent of trade.
The grouping is hailed by some as a counterweight to Western economic and political forums and institutions like the G7 and the World Bank. They believe the bloc could use its political influence and economic clout to prompt much-needed reforms at the likes of the World Bank and the International Monetary Fund to represent the realities of a more multipolar world.
What has BRICS achieved so far?
The BRICS has struggled to live up to its potential to offer an alternative to traditional financial and political systems.
Among its notable achievements has been the establishment of the New Development Bank or the BRICS bank, a multilateral development bank with $50 billion (€45.6 billion) in subscribed capital to fund infrastructure and climate-related projects in developing countries. The bank, which includes BRICS members as well as Bangladesh, Egypt, and the United Arab Emirates among its shareholders, has so far approved more than $30 billion in loans since its inception in 2015. By comparison, the World Bank committed more than $100 billion in 2022 alone.
The BRICS have also created a $100 billion Contingency Reserve Arrangement, a foreign currency liquidity facility that the members can tap into during global financial turmoil.
The bloc is said to be pushing for the creation of a common currency in a bid to challenge the dollar’s dominance. A BRICS currency is not expected to come to fruition any time soon. As a result, the bloc is currently focusing on deepening the use of local currencies in trade between members.
“Beyond creating the BRICS Bank…it is difficult to see what the group has done other than meet annually,” Jim O’Neill opined in a 2021 article.
The grouping’s limited success can be explained by the often diverging and competing interests of its members, especially those of China and India, which share a disputed border and have seen ties deteriorate in recent years.
How have trade and investments fared among BRICS members?
The BRICS have seen their economic influence grow over the past two decades, thanks largely to years of roaring growth in China, the world’s second-largest economy by GDP notwithstanding its current slowdown, and to the rise of India, which has emerged as the fifth largest economy and is currently the fastest-growing major economy.
The economies of Russia and Brazil have failed to keep up their momentum and have fallen back to where they were in 2001 in terms of their share of global GDP. The South African economy has also struggled to shift gears since joining the BRICS.
While the BRICS is now a major force in international trade, trading among its members has remained relatively low in the absence of any bloc-wide free trade agreement.
On the investments front, the bloc has seen annual foreign direct investment (FDI) inflows more than quadruple from 2001 to 2021. Intra-BRICS investment, however, remains subdued, representing a share of less than 5 per cent of their combined inward FDI stock in 2020.
Why are other countries interested in joining BRICS?
The expansion of BRICS is among the key topics at the annual summit in South Africa. Twenty-three countries have formally applied to become full-time BRICS members, including Saudi Arabia, Iran, United Arab Emirates, Argentina, Indonesia, Egypt, and Ethiopia.
China has pushed for BRICS expansion to increase its political clout amid growing rivalry with the US. For Russia, it is about seeking new allies at a time it is subject to Western sanctions over its war in Ukraine. Brazil and India have long opposed rapid expansion of the bloc, with New Delhi wary of growing Chinese influence in the club as a result.
While BRICS has struggled to meet its economic potential, it is projecting itself as a geopolitical alternative to a US-led world order, positioning itself as the representative of the Global South. New members are eager to capitalise on the BRICS influence and economic clout.