BRICS held its 15th heads of state and government summit in the South African city of Johannesburg from August 22 to 24. On the agenda was the alliance's expansion, with the inclusion of new countries in the New Development Bank (NDB) and the revival of the idea of creating a common currency.
Established in 2015 by the BRICS countries, the NDB is a multilateral development bank aimed at mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing countries.
In an interview with Fortune magazine in early August, Jim O'Neill, former Chief Economist at Goldman Sachs, expressed his skepticism about the creation of a BRICS currency, "Are you going to create a BRICS central bank? How would you do that?" The top economist said he believed despite the size of the nine-member organization, it would be more plausible to expand the use of the BRICS members' national currencies to make international trade viable with less use of the U.S. dollar than to create a new instrument.
Current analysis suggests that the status quo, namely, the U.S. dollar dominating world trade, will prevail for the next 10 years, with the dollar accounting for more than half of the reserve and reference assets for commercial and financial contracts.
Since the beginning of this century, the U.S. currency has already lost 10 percentage points in the portfolios of central banks around the world, according to a recent study published by the International Monetary Fund. This diversification movement will continue in the next decade, if the plans of the central banks consulted in the 2023 Global Public Investor report materialize. The report is published annually by the Official Monetary and Financial Institutions Forum, an independent think tank concerned with central banking, economic policy and public investment.
Western analysts are usually quick to criticize the rise of China and other rising powers, and in doing so diminish the legitimacy of different views of the present and future of global society. They also tend to overestimate the achievements of the West over the past 200 years. After all, the material progress of industrial capitalism has not led to prosperity or "perpetual peace" for all.
Criticism of American hegemony, neo-liberalism and the use of the U.S. dollar and its related institutions as a geopolitical weapon is legitimate. It is rather strange that the desire of emerging and developing countries to break the shackles that imprison many peoples and limit the possibilities of building less unjust and more prosperous societies is not considered more than natural by the U.S. establishment, its financiers, academics and analysts.
Of course we should not underestimate the challenges facing the countries of the Global South, a term that refers to various countries around the world sometimes described as "developing," "less developed" or "underdeveloped." Many of these countries are in the Southern Hemisphere, largely in Africa, Asia and Latin America.
There is, in fact, a movement toward the diversification of reserve assets on the part of the monetary authorities and the expansion in the use of emerging currencies, such as China's renminbi (RMB), in international payments.
Such processes may gain additional momentum with the inclusion of more countries in BRICS, the expansion of the scope of partnerships between emerging powers and other countries of the Global South, and ongoing technological and institutional innovations, such as China's digital RMB and the Cross-Border Interbank Payment System, a Chinese payment system that offers clearing and settlement services for its participants in cross-border RMB payments and trade.
BRICS has the potential to forge a path that strengthens their individual economies and contributes to a more just and inclusive global system. The path ahead may be fraught with challenges, but the potential benefits for the Global South are great.
The author is an associate researcher at the Brazilian Foreign Policy Observatory
Copyedited by Elsbeth van Paridon
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