Brazil, Russia, India, China and South Africa (BRICS)
BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. Originally the first four were grouped as “BRIC” (or “the BRICs”), before the induction of South Africa in 2010. The BRICS members are known for their significant influence on regional affairs; all are members of G20. Since 2009, the BRICS nations have met annually at formal summits. China hosted the 9th BRICS summit in Xiamen on September 2017, while South Africa will do so for the 10th BRICS summit in July 2018. The term does not include countries such as South Korea, Mexico and Turkey for which other acronyms and group associations were later created.
In 2015, the five BRICS countries represent over 3.1 billion people, or about 41% of the world population; four out of five members (excluding South Africa at #24) are in the top 10 of the world by population. As of 2018, these five nations have a combined nominal GDP of US$18.6 trillion, about 23.2% of the gross world product, combined GDP (PPP) of around US$40.55 trillion (32% of World’s GDP PPP) and an estimated US$4.46 trillion in combined foreign reserves. Overall the BRICS are forecasted to expand 4.6% in 2016, from an estimated growth of 3.9% in 2015. The World Bank expects BRICS growth to pick up to 5.3% in 2017. The BRICS have received both praise and criticism from numerous commentators. Bilateral relations among BRICS nations have mainly been conducted on the basis of non-interference, equality, and mutual benefit.
The term “BRIC” was coined in 2001 by then-chairman of Goldman Sachs Asset Management, Jim O’Neill, in his publication Building Better Global Economic BRICs. The foreign ministers of the initial four BRIC states (Brazil, Russia, India, and China) met in New York City in September 2006 at the margins of the General Debate of the UN General Assembly, beginning a series of high-level meetings. A full-scale diplomatic meeting was held in Yekaterinburg, Russia, on 16 June 2009.
First BRIC summit The BRIC grouping’s first formal summit, also held in Yekaterinburg, commenced on 16 June 2009, with Luiz Inácio Lula da Silva, Dmitry Medvedev, Manmohan Singh, and Hu Jintao, the respective leaders of Brazil, Russia, India and China, all attending. The summit’s focus was on means of improving the global economic situation and reforming financial institutions, and discussed how the four countries could better co-operate in the future. There was further discussion of ways that developing countries, such as 3/4 of the BRIC members, could become more involved in global affairs. In the aftermath of the Yekaterinburg summit, the BRIC nations announced the need for a new global reserve currency, which would have to be “diverse, stable and predictable”. Although the statement that was released did not directly criticise the perceived “dominance” of the US dollar – something that Russia had criticised in the past – it did spark a fall in the value of the dollar against other major currencies.
The BRICS Forum, an independent international organisation encouraging commercial, political and cultural cooperation between the BRICS nations, was formed in 2011. In June 2012, the BRICS nations pledged $75 billion to boost the lending power of the International Monetary Fund (IMF). However, this loan was conditional on IMF voting reforms. In late March 2013, during the fifth BRICS summit in Durban, South Africa, the member countries agreed to create a global financial institution which they intended to rival the western-dominated IMF and World Bank. After the summit, the BRICS stated that they planned to finalise the arrangements for this New Development Bank by 2014. However, disputes relating to burden sharing and location slowed down the agreements.
At the BRICS leaders meeting in St Petersburg in September 2013, China committed $41 billion towards the pool; Brazil, India and Russia $18 billion each; and South Africa $5 billion. China, holder of the world’s largest foreign exchange reserves and who is to contribute the bulk of the currency pool, wants a greater managing role, said one BRICS official. China also wants to be the location of the reserve. “Brazil and India want the initial capital to be shared equally. We know that China wants more,” said a Brazilian official. “However, we are still negotiating, there are no tensions arising yet.” On 11 October 2013, Russia’s Finance Minister Anton Siluanov said that a decision on creating a $100 billion fund designated to steady currency markets would be taken in early 2014. The Brazilian finance minister, Guido Mantega stated that the fund would be created by March 2014. However, by April 2014, the currency reserve pool and development bank had yet to be set up, and the date was rescheduled to 2015. One driver for the BRICS development bank is that the existing institutions primarily benefit extra-BRICS corporations, and the political significance is notable because it allows BRICS member states “to promote their interests abroad… and can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues.”
New Development Bank
The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank operated by the BRICS states. The bank’s primary focus of lending will be infrastructure projects with authorized lending of up to $34 billion annually. South Africa will be the African Headquarters of the Bank named the “New Development Bank Africa Regional Centre”. The bank will have starting capital of $50 billion, with capital increased to $100 billion over time. Brazil, Russia, India, China and South Africa will initially contribute $10 billion each to bring the total to $50 billion.
The BRICS Contingent Reserve Arrangement (CRA) is a framework for providing protection against global liquidity pressures. This includes currency issues where members’ national currencies are being adversely affected by global financial pressures. It is found that emerging economies that experienced rapid economic liberalization went through increased economic volatility, bringing uncertain macroeconomic environment. The CRA is generally seen as a competitor to the International Monetary Fund (IMF) and along with the New Development Bank is viewed as an example of increasing South-South cooperation. It was established in 2015 by the BRICS countries. The legal basis is formed by the Treaty for the Establishment of a BRICS Contingent Reserve Arrangement, signed at Fortaleza, Brazil on 15 July 2014. With its inaugural meetings of the BRICS CRA Governing Council and Standing Committee, held on September 4, 2015, in Ankara, Turkey it entered into force upon ratification by all BRICS states, announced at the 7th BRICS summit in July 2015.
BRICS payment system
At the 2015 BRICS summit in Russia, ministers from BRICS nations, initiated consultations for a payment system that would be an alternative to the SWIFT system. Russian Deputy Foreign Minister Sergey Ryabkov stated in an interview, “The finance ministers and executives of the BRICS central banks are negotiating … setting up payment systems and moving on to settlements in national currencies. SWIFT or not, in any case we’re talking about … a transnational multilateral payment system that would provide greater independence, would create a definite guarantee for BRICS.
The Central Bank of Russia (CBR) also started consultations with BRICS nations for a payment system that would be an alternative to the SWIFT system. The main benefits highlighted were backup and redundancy in case there were disruptions to the SWIFT system. The Deputy Governor of the Central Bank of the Russia, Olga Skorobogatova stated in an interview, “The only topic that may be of interest to all of us within BRICS is to consider and talk over the possibility of setting up a system that would apply to the BRICS countries, used as a backup.”
China has also initiated development of their own payment system called CIPS that would be an alternative to the SWIFT system. The Cross-Border Inter-Bank Payments System (CIPS) is a planned alternative payments system to SWIFT which would provide a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.