BRICS that could be bigger
- June 3, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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BRICS that could be bigger
Subject : International Relations
Section: International groupings
Context:
- The grouping of Brazil, Russia, India, China and South Africa is considering whether to add new members and to look seriously at a common currency. Both proposals involve making complex choices.
What is BRICS ?
- BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
- The BRICS Leaders’ Summit is convened annually.
- BRICS does not exist in the form of organization, but it is an annual summit between the supreme leaders of five nations.
- The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
- Together, BRICS accounts for about 40% of the world’s population and about 30% of the GDP (Gross Domestic Product), making it a critical economic engine.
- The acronym “BRICS” was initially formulated in 2001 by economist Jim O’Neill, of Goldman Sachs, in a report on growth prospects for the economies of Brazil, Russia, India and China – which together represented a significant share of the world’s production and population.
- The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
- South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.
- During the Sixth BRICS Summit in Fortaleza (2014) the leaders signed the Agreement establishing the New Development Bank (NDB), headquartered in Shanghai.
- The Fortaleza Declaration stressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development thus contributing to sustainable and balanced growth.
- South Africa, which is in the chair this year, is hosting a Friends of BRICS meeting, with 15 foreign ministers from Africa and the Global South.
Looking for multipolarity
- As many as 19 countries are said to be in the queue to join BRICS. Among the countries that have been mentioned frequently since last year: Argentina, Nicaragua, Mexico, Uruguay, Venezuela from Latin America; Nigeria, Algeria, Egypt, Senegal, Morocco from Africa; Saudi Arabia, the UAE, Türkiye, Syria, Iran from West Asia; Kazakhstan from Central Asia; Bangladesh and Afghanistan from South Asia; and Indonesia and Thailand from South- east Asia.
- By admitting some key countries in the list, BRICS could lay claim to representing more than half the world’s population. Significantly, the list includes big oil producers Saudi, Iran, the UAE, Nigeria, and Venezuela.
China in BRICS
- The idea of BRICS came between 2001 and 2003 from then Goldman Sachs chief economist Jim O’Neill, who projected that the four emerging markets of Brazil, Russia, India, and China would be the future economic powerhouses of the world, with South Africa being added later.
- While the economic performance of BRICS has been mixed, the war in Ukraine — which has brought the West together on the one hand and strengthened the China-Russia partnership on the other — has turned it into an aspiring bloc that appears to be challenging the western geopolitical view.
- China is driving the expansion of the group.
India in BRICS
- If India’s presence at the G7 summit in Hiroshima, where Prime Minister Narendra Modi also participated in an informal Quad summit, was seen as a sign of New Delhi’s US tilt, the importance it attaches to the “anti- West” BRICS is an apparent contradiction — much like the several others it has negotiated through the last year. The Indian view is that it is a “non- western” group.
Common currency:
- The idea of a common currency was proposed by Russia’s President Vladimir Putin at the Beijing BRICS summit last year. The idea got a cautious reception, with the leaders deciding to set up a committee to study its viability.
- The last year of war has seen economies around the world feel the impact of the sanc- tions on Russia, the resultant spike in energy prices, combined with the rising value of the dollar. An insulation from the dollar is a tempting proposal, but not all members believe that it is an idea whose time has come.
- There are complications, such as the setting up of a common central bank of member countries that have different economic and political systems and are located on different continents.
- An option is for members to trade with each other in their respective currencies — but as the India-Russia example has shown, this is not easy either. Moscow wants payments in dollars because it does not import enough from India to use rupee payments. Negotiations are stuck.
- China has hit out against the “hegemony of the US dollar” as the source of all instability in the world, and is already trying to push the yuan as a trading currency in Central Asia. But there is no evidence that it is ready to dump the dollar yet.