In 2001, economist Jim O’Neill invented the acronym BRIC, which stands for Brazil, Russia, India and China. These are countries with emerging economies, with vast amounts of natural resources and millions of inhabitants. Today, they already represent 45% of the world’s population. In the last ten years, they have accounted for more than 50% of world economic growth, but they only have 15% of the voting rights in the World Bank and the IMF.
The BRICS are not an homogeneous group but, after a shaky start, the different countries began to cooperate. They added South Africa’s S in 2011, and although the BRICS are also suffering from the impacts of the Ukraine conflict and other global crises, they maintain growth expectations. We are now witnessing a new international configuration, with the re-establishment of diplomatic relations between Iran and Saudi Arabia, and new accessions of important countries to the BRICS.
The new formula proposed by China last year is the BRICS+, with countries such as Algeria, Saudi Arabia, the United Arab Emirates, Iran, Egypt, Argentina, Mexico and Nigeria. With these additions, the GDP of the BRICS+ would increase to 30% of the world’s GDP. They are also called the Next Eleven (N-11) and include Bangladesh, South Korea, the Philippines, Indonesia, Pakistan, Turkey and Vietnam. The idea is to support multilateralism and create cooperation mechanisms such as the New Development Bank or the Reserve Fund.
Until now, the leading role in investment and consumption was played by the US and Europe, with 40% of the world’s GDP and less than a billion inhabitants. However, emerging countries have increased their share of world trade, questioning and challenging the current architecture of international relations and raising problems hitherto ignored by developed countries, such as the imbalance in the world economy.
The New Development Bank (NDB), based in Shanghai and created with the contribution of the central banks of the BRICS, was born as an alternative to the traditional international financial organisations. Its goals are escaping the hegemony of the dollar by promoting the use of national currencies, stimulating countries’ internal demand, trade and investment, or trying to avoid financial speculation in currencies. The credits would be used to build infrastructures and reduce the risk of inflation.
Until now, the international financial system has been controlled by a small group of countries that also have the most voting and decision-making power in multilateral bodies. This BRICS consensus is the largest financial agreement since the creation of the Bretton Woods institutions in 1944, a historic breakthrough if the BRICS maintain transparency of purpose and helps reform the system for the benefit of all.
The financial stability of the BRICS is a positive element for the global economy, and with these steps, emerging countries take responsibility for their own development and have the resources to finance it.
This demonstrates the importance of capital market intermediation and liquid assets such as derivatives, rather than a process of allocating savings to development finance projects. It should not be forgotten that infrastructure spending is an essential pillar for enhancing economic, social and environmental development, expanding access to services for the most vulnerable, and reducing inequality.
The BRICS were originally seen as a simple mechanism to put pressure on rich countries and participate in the management of the global economy. The pupil becomes the master, and we will see if cooperation and new combinations of emerging powers can play a role on the world stage and are able to offer alternatives. The brand has caught on, becoming synonymous with change, markets and growth, but they must prove that they are a coherent group and can work as a team.
The BRICS’ strategy is to promote co-development, based on respect for the sovereign choice of each nation’s political and economic system, taking into account its history and culture. But, realistically, each country defends its own interests because in the practice of international and especially economic relations, there is no fraternity or sentiment, only interests.