At the time of their inception, the original four countries were thought to be the world's fastest-growing economies. In 2001, according to dw.com, the original four had "sustained rates of high economic growth." However, importantly, "only China has achieved sustained and extensive growth since then."
One of the significant initiatives put forward by BRICS nations is a push for de-dollarization because they want to decrease their reliance on the US financial system. To that end, one of the key initiatives discussed by BRICS nations has been the call for Middle Eastern countries to stop using the US dollar for oil payments and return to the use of local currencies. De-dollarization is not without its challenges. The US dollar has, in many ways, helped emerging markets, allowing them to "access cheaper financing and reduce their exposure to exchange rate risks." Another strategy would be to agree upon a new digital reserve currency.
On the other hand, according to an April 22, 2024 article from Eurasia Review, the BRICS alliance asserts that "The dominance of the US dollar in the global economy has had adverse effects on emerging markets, especially when the dollar is strong. A robust dollar can result in heightened economic instability in emerging markets due to exchange rate depreciation, restricted credit availability, and decreased capital inflows. The impact of a strong dollar is more severe in emerging markets compared to advanced economies, as these nations have limited flexibility in monetary policy and may lack the necessary resources to counteract the negative consequences of a strong dollar."
There are also strategic reasons for the move away from the US dollar. The shift would "diminish the effectiveness of US sanctions regimes, which serve as a crucial foreign policy tool in combating terrorist networks, rogue regimes, and criminal networks." The most significant recent example of US-condoned sanctions was in February 2022, when the US and its allies and partners isolated Russia from the Western financial system. The economic sanctions included the SWIFT system for international bank payments, impacting Russia's ability to move money and navigate the world's markets.
It is no easy task to fully de-dollarize because the dollar is so deeply rooted in the workings of world trade. De-dollarization would mean "countless exporters, importers, borrowers, lenders, and currency traders worldwide independently opting to utilize other currencies." The BRICS alliance represents a spectrum of "diverse nations with varying economic, political, and geographic disparities, making consensus-based decision-making a formidable task."
In its efforts to change the global economic order, BRICS established two financial institutions: a "mini-IMF" and a mini-World Bank. The former is the Contingent Reserve Arrangement (CRA), which was agreed to at the BRICS summit in 2014 to "support members struggling with payments." However, according to The Economist, "It is an untested series of swap lines for central banks to get hard currency if they have balance-of-payments problems."
The "mini-bank" is the New Development Bank, launched in 2015 as an alternative to the World Bank. Three new members have joined NBD in the past three years: Bangladesh, Egypt, and the UAE. Uruguay has also indicated an intention to join the BRICS NDB. States are not required to be members of BRICS to join NDB. The principles and core values of NDB are typical of a worldview more commonly seen on the political Left. These tenets are decentralization, interoperability, justice, inclusiveness, responsibility, efficiency, security, transparency, and sustainability.
Realistically, the NDB's lending power is dwarfed by the World Bank Group, which is "one-third of what WBG committed in 2021 alone." The NDB issues most of its loans in dollars or euros. The bank is heavily involved in the "global transformative climate action" agenda. Accordingly, the focus of NDB projects is on clean energy, the environment, social infrastructure, transport infrastructure, water and sanitation, and digital infrastructure. BRICS bank is actively seeking new members. In 2021, the UAE, Uruguay, Bangladesh, and Egypt bought shares. Other countries, including Saudi Arabia, Algeria, Argentina, Mexico, and Nigeria, have indicated they may join.
The NDB has been slow to fulfill its charter. According to The Economist, "total lending since 2015 is a third of what the World Bank Group committed in 2021 alone." It is also not as accountable as the World Bank. Ironically, despite its stated mission to abandon the dollar, NDB still "mostly issues loans in US dollars or euros." While BRICS often criticizes the World Bank and IMF as lopsided in its decision-making power, the original five members still retain 55% of voting rights at NDB. Challenges also abound concerning decision-making because the member countries' cultural underpinnings and political structure vary wildly. Politically, China and Russia are far from champions of liberty, and the other countries, such as Brazil, India, and South Africa, can be loosely construed as "raucous, if flawed, democracies."
BRICS is a relatively informal bloc with no charter or formal membership criteria, which is another reason it is not yet a serious or imminent threat to the global economic order. The economic differences among the bloc's members tend to erode its economic and political strength. As a result, BRICS has struggled to change the "global economic order meaningfully." The Economist article explains the challenges of a common reserve currency:
"All of this complicates the bloc's attempt to change the global economic order. A common BRICS reserve currency—something Mr. Putin claimed the bloc was working on a year ago—would collapse on first contact with reality; no member would give up the power held by their central bank. Members regularly guard their own power at economic institutions. South Africa's efforts to have more African representation on the IMF board have been rejected. China has around 40% of the voting rights at the CRA, in line with its capital contribution, and insisted on a limit to what any country can receive in the absence of an IMF programme."
While there is much to criticize, BRICS' share of the world GDP has increased "from 8% in 2001 to 26% today." In contrast, "the G7's share has fallen from 65% to 45% during the same period."
The 15th Annual BRICS Summit held in South Africa in August 2023 promoted a transformation of the original bloc from BRICS to BRICS+, announcing the addition of six new member countries: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). However, only four (Egypt, Ethiopia, Iran, and the United Arab Emirates) officially joined in January 2024. Saudi Arabia is still considering joining. Argentina's newly elected Right-leaning President, Javier Milei, reversed his predecessor's plans and declined to join. He stated his intention was to align with the West in his letter to BRICS countries in December 2023.
The Council of Councils issued several memos written by various authors who commented on the BRICS+ current state of affairs. The memos characterize the expansion of BRICS to BRICS+ as "a symptom of a deeper malaise" attributable to the "West's proclivity to deploy unilateral financial sanctions, abuse international payments mechanisms, renege on climate finance commitments, and accord scant respect to food security and health imperatives of the Global South during the pandemic." Still, the consensus seems to be that BRICS+ will continue to struggle because of its lack of cohesion among its member countries and imbalances of power, both political and economic. Cohesion among the member nations may, at this point, be found only in their being able to agree on what they oppose. BRICS+ will continue the tradition of being "a loose grouping heterogeneous in its membership but with high aspirational dimensions seeking to expand its practical capabilities for other countries around the globe."
Given its numerous challenges, it is unclear whether BRICS+ will be able to compete with existing economic structures and power structures, at least in the short term. This is particularly true because it is in the throes of a considerable identity crisis with the potential addition of two powerful US allies, Saudi Arabia and the UAE. Jefferson Ng, Associate Research Fellow at the S. Rajaratnam School of International Studies in Singapore, points out that "the incorporation of US allies such as the United Arab Emirates and Saudi Arabia alongside countries ambivalent or opposed to the United States could frustrate efforts at deepening cooperation between member-states. Members would need to decide if BRICS is to be a bloc of emerging economies seeking to promote their interests in a multipolar world order or adopt a more explicitly anti-West orientation, the latter of which is preferred by China and Russia."
