Skip to content

BRICS Now and in the Foreseeable Future

    The US dollar's dominance may be coming to an end (Photo by Adam Nir on Unsplash / from lowyinstitute.org)
    The US dollar’s dominance may be coming to an end (Photo by Adam Nir on Unsplash / from lowyinstitute.org)

    In an August post on the rise of BRICS (Brazil, Russia, India, China, and South Africa) as a catalyst for de-dollarization, Aljazeera posed a crucial question, “What are the risks that we are facing by engaging with one currency globally that may be utilised for political purposes?” I  believe that nations, including ASEAN, are currently pondering the gravity of the answers to this. It may also be the premise for many questioning the organization’s purpose and intentions.

    South Africa’s BRICS ambassador, Anil Sooklal, told Aljazeera that “BRICS is not anti-West.” And yet, ongoing and future plans for and by the group seem to exclude the US and other advanced economies (take the Belt-and-Road Initiative, for example).

    Lord Jim O’Neill (British economist who originally coined the term BRIC in 2001) does not deem this current tangent as any better in addressing today’s global challenges, for the reason that BRICS is only two-member strong despite its expanded roster of emerging economies. Much like how the US dominates the Group of Seven (G7) bloc, only China and India are economically competitive within BRICS — hence, the imbalance in dynamics for both blocs.

    China, a BRICS member, has been actively promoting its national currency, the Chinese yuan, to compete with the US dollar, the euro, the pound and other local currencies. (cryptodnes.bg)
    China, a BRICS member, has been actively promoting its national currency, the Chinese yuan, to compete with the US dollar, the euro, the pound and other local currencies. (cryptodnes.bg)

    Honestly, I can agree with his sentiment. Unless all member states within these groups put aside their differences, help strengthen each other’s economies, and truly pursue shared, equally beneficial goals, none of their initiatives would steer the framework for global economic governance in the right direction.

    There is also the intricacies of creating a shared currency from scratch — although this wasn’t initially on the group’s agenda. Boosting the strength of local currencies was what was part of the discussions during the summit in Johannesburg. It was not until after this meeting that Brazilian President Luiz Inacio Lula da Silva called out to other BRICS’ heads of state and made such a proposal.

    In the past two decades, financial and economic analysts and experts have expounded on the requisites to making a shared BRICS currency possible and the difficulty associated with achieving these. Even if these were met, there are still issues with reserve parity and liquidity that could make or break this new currency.

    De-dollarization is a work in progress and still an uphill climb despite recent drastic developments. Many roadblocks have yet to be overcome, like reserve bias,  petrodollar reference, trade imbalances, monetary policy complexities, and the convertibility of local currencies (to name a few). China and Singapore have made headway by dumping billions of dollars and procuring massive reserves of gold to strengthen their respective currencies. However, these actions are not feasible for every country that would want to break away from the US dollar hegemony.

    All things considered, it may be high time for a multipolar society — and revamping the dynamics of the global economic landscape is one of the ways to get there. For smaller nations like the ASEAN, we can only hope that these coveted changes do serve the greater good and do not end up being the same old ‘war’ where we just serve a different master.

    Leave a Reply

    Your email address will not be published. Required fields are marked *