The Evolution of BRICS
What is happening?
Jim O’Neill, during his time as chief economist at Goldman Sachs in 2001, first coined the acronym “BRIC” to refer to Brazil, Russia, India, and China – emerging economies whose growth, he argued, would drive global markets in the coming decades.1 In the paper titled “Building Better Global Economic BRICs,” he wrote that for economic governance to reflect this coming reality, the Group of Seven (G7) needs to be restructured to incorporate the four countries in supranational policymaking.2 Recognizing the potential of BRIC, analysts at the time estimated that the Chinese economy would be as large as that of the United States by 2039, and that India would surpass Japan to become the world’s third-largest economy.3
In a span of years, BRIC, originally an informal grouping, evolved into a more serious multilateral partnership. In 2009, the first BRIC summit was held in Yekaterinburg, Russia’s fourth-largest city and one of its industrial centers.4 The summit was attended by the heads of state of the four countries, who published a Joint Statement emphasizing the importance of representing developing countries in international financial institutions.5 In 2011, South Africa joined the group.6 Although the exclusion of larger emerging markets, such as Mexico and Turkiye, surprised some, South Africa’s membership represented a diverse dimension within the group, which had until then strayed from the African context.7
Throughout the 2000s and the early 2010s, BRICS was viewed as a novel grouping outside of familiar Western paradigms, with the potential to overtake the Global North in economic influence. This impression was primarily motivated by the group’s fiscal performance. At the turn of the century, BRICS countries were experiencing significant growth, fueled by favorable global conditions, waves of national reforms, and large investments in domestic infrastructure. China alone witnessed 13% annual gross domestic product (GDP) growth between 2000 and 2008,8 with GDP hitting $4.4 trillion at the end of this period.9 In 2010, the country became the second-largest economy in the world after the United States.10 India and Brazil were not far behind China. The former saw average growth double between the 1990s and 2000s, reaching 5.8%.11 In Brazil, the commodities boom brought growth to 7.5% in 2010, the country’s highest in twenty-five years.12 Likewise, Russia’s GDP growth jumped to 10% in 2000, signaling its economic recovery following the 1997 Asian financial crisis.13 Between 1999 and 2008, the country saw an annual average growth of 7%, solidifying predictions about Russia’s steadily strengthening role in global markets.14 Although South Africa’s economy, size, and population were, and still are, limited compared to other members of BRICS, the country played a key role in consolidating South-South relations, in addition to facilitating wider access into Africa as a whole.15
International interest surrounding the potential and rise of BRICS was also a result of its collective industrial, geographic, and demographic conditions. Manufacturing capabilities, abundant natural resources, and substantial manpower of members were cited as key assets. Together, BRICS countries cover more than 25% of the world’s land area,16 and over 40% of the global population.17 Both China and India have populations of over 1.4 billion each.18 Brazil, Russia, and South Africa combined bring in another half a billion people.19 Demographics, especially in regards to growing youth populations in member states, also play a central role. The demographic dividend is particularly visible in the case of India, where the working-age population comprises 67% of the populace.20 This advantage partly explains China and India’s dominance in manpower-dependent industries. China’s lead in exporting manufacturing goods has led to it being referred to as “the world’s factory,”21 toppling all competition in the share of global output for sixteen of the twenty-two UN-tracked manufacturing categories.22 For the rest of the categories, China’s output comes second.23 As for India, the country is one of the largest exporters of information technology and business process outsourcing (BPO), making it a major services provider.24 Russia and Brazil are two of the most resource-rich states. Russia holds the world’s largest natural gas reserves.25 Brazil, for its part, is a top producer and supplier of food for global markets, primarily through providing beef, soybeans, bananas, and sugar.26 The country rests on large reserves of iron ore and oil as well, which makes it a primary supplier of raw materials for industrial purposes on an international scale.27 China has been the largest recipient of Brazil’s iron exports in 2021, as the former’s manufacturing activities are dependent on iron ore.28 This further exemplifies the present indispensable trade relations between BRICS members.
As is evident, the potential of BRICS to grow as a global economic powerhouse had largely seemed to be a straightforward conclusion. However, especially in the second half of the 2010s, the group’s unequal economic trajectories, combined with its failure to institutionalize its grouping to a considerable extent, have led to a loss of confidence in the prospects of its effective supranational governance structure. As a result, many have begun to question whether BRICS can act as a cohesive unit on the global stage, and effectively coordinate feasible policy solutions to transboundary issues. As talks of a common BRICS currency have been featured heavily in headlines in recent months, the bloc’s positioning as a dependable multilateral economic alternative is getting increasingly significant.
Why is it happening?
Despite the lack of consensus surrounding the bloc’s trajectory over the years, BRICS has put forward a number of key initiatives. Today, the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA) function as a testament to the group’s expanding roles. The New Development Bank was created to finance infrastructure and sustainable development projects in emerging economies and developing countries, with an initial capital investment of $50 billion by BRICS nations.29 Unlike other multilateral development banks, like the World Bank, the shares of NDB’s member states are distributed equally, and decisions are made unanimously.30 Designed to forego loan conditions and long waiting times that traditionally characterize development financing, the bank has approved more than $29 billion in loans to developing economies between 2017 and 2021 alone, primarily for infrastructure projects.31 Additionally, the Contingent Reserve Arrangement was set up as a $100 billion fund to combat balance of payment issues for BRICS nations, providing liquidity assistance during times of capital volatility.32 The fund was conceived as an alternative to the International Monetary Fund (IMF).33 The NDB and the CRA were therefore viewed as counterweights to Western-centric international financial institutions.34
In addition to these developments, Russia called for integrating the payment systems of the BRICS countries last year, partially to bypass the SWIFT system from which the country has been excluded.35 The group also announced it has begun working on a new reserve currency, based on the Indian Rupee, the Chinese RMB Yuan, the Brazilian Real, and the South African Rand, to combat the U.S. Dollar’s hegemony over the world economy.36 Most recently in March 2023, Pavel Knyazev, Ambassador-at-Large of the Russian Foreign Ministry and Sous-Sherpa of Russia in BRICS, discussed the ongoing plans for the new currency, announcing that the countries are in talks about the “possibility and prospects of setting up a common single currency based on a basket of currencies of the BRICS countries.”37
Although recent criticism has brought up the uneven growth trajectories of BRICS members in the past decade, the group has nonetheless made significant progress in meeting critical targets. In 2023, BRICS countries have overtaken the Group of Seven (G7) in fiscal terms, surpassing the United States, the United Kingdom, Germany, France, Japan, Italy, and Canada.38 BRICS now makes up 31.5% of the global GDP, while the share of G7 nations has fallen to 30%.39 At the same time, the shared vision of BRICS for better managing global financial arrangements is getting clearer. BRICS countries have taken a collective stance on issues such as trade policy, with China proposing a free trade bloc between the five countries to “tap [into BRICS’] trade potential.”40 At the 14th BRICS summit last year, the countries have also officially broached the topic of bringing other members into the group.41 The countries’ growing economic clout, combined with their increasingly aligned views on the future of a multipolar world order, suggests that BRICS could play an integral role in advancing the interests of developing countries, and shaping a more diverse global and economic landscape.
What is being done about it?
The group’s existing initiatives have attracted the interest of a number of nations that are also seeking alternatives to Western-oriented economic solutions. In recent years, the New Development Bank saw investments from a number of countries, including Egypt and Bangladesh, both of which have become member states in the bank. Uruguay is a prospective member as well, whose full accession awaits the deposit of its committed investment.42 Although the countries’ contributions fall well below the $10 billion seed investment made by each BRICS nation, the move is nonetheless indicative of a growing appetite for development finance models that are governed by diverse perspectives. Following the confirmation of Egypt’s membership in 2021, Arindam Bagchi, spokesperson for India’s Ministry of External Affairs, said that the New Development Bank’s expansion enables it to “position itself as a premier development institution for emerging economies.”43
In addition to being involved in its initiatives, several nations are also seeking to join BRICS as member states. Last month, Dr. Naledi Pandor, South Africa’s Minister of International Relations and Cooperation, stated that twelve nations had explicitly expressed their interest, including Saudi Arabia, Algeria, Argentina, Mexico, and Nigeria.44 Earlier this year, Saudi Arabia officially applied to join the bloc.45 Joining BRICS would be a significant step for Saudi Arabia’s recent efforts to diversify its economy. In this pursuit, the country has signed trade agreements with BRICS countries, further increasing their economic and diplomatic engagement. Most recently, Saudi Arabia and China announced at the China-Arab States Summit, which took place in December 2022, that $50 billion in investments between the countries have been agreed upon.46 Last month, Saudi Arabia was also granted “dialogue partner” status in the Shanghai Cooperation Organization, the Beijing-led Asian economic bloc that also includes India as a member.47 These developments signal Saudi Arabia’s close ties with influential BRICS nations, which point to the increasing possibility of Saudi Arabia formally joining the group.
Turkiye, Egypt, and Tunisia have also expressed interest in becoming BRICS members in the past few years. The countries have been looking for new economic partnerships as they seek to reduce their reliance on Western markets. As a guest at the 10th BRICS meeting in Johannesburg in 2018, Turkish President Recep Tayyip Erdogan underlined his hope that the member states “would take the necessary steps to let [Turkiye] in and [the country] could take [its] place in BRICS.”48 He added that Turkiye saw the group as an opportunity to advance economic investments and financial development assistance, and that his country also sought to improve energy-related cooperation with BRICS countries.49 For its part, Egypt has also taken substantial steps in advancing economic partnerships with key members of BRICS, including the start of negotiations to sign a free trade agreement with the Eurasian Economic Union (EAEU), which includes Russia.50 In the same year, a spokesperson for Tunisia’s President Kais Saied described BRICS as a “political, economic and financial alternative that will enable Tunisia to open up to the new world.”51
A similar pivot is starting to take shape in Latin America, especially with Argentina, which has been plagued by incredibly high inflation rates and debt burden from the past few decades. In 2018, Argentina’s then-President Mauricio Macri expressed the need for closer economic cooperation between Argentina and BRICS member states.52 In August 2022, the country participated in the virtual BRICS summit hosted by China, reinforcing expectations that Argentina may be invited to join BRICS in the near future.53 A potential expansion into South America through Argentina would parallel the group’s expansion into the African continent through South Africa. These developments further cement the role of BRICS as a viable substitute to existing economic governance models.
What is next?
Current BRICS countries have reacted differently to the prospect of new members joining the group. China, South Africa, and Russia have been supportive of new members, while India has been more cautious, maintaining that a concrete process and clear guidelines for the admission of new members would be preferable.54 Brazil has also voiced similar reservations at times, with observers pointing out that the country considers the group to be “geographically tilted toward” broader Asia.55
Overall, the rise of BRICS represents a complex and multifaceted phenomenon. New members would mean that the group can have access to increased economic resources ready to be mobilized, as well as representing greater strength in numbers. An expanded BRICS would also bring the organization more widely recognized legitimacy, and strengthen the perception that it is a valuable group to be part of for future member states. At the same time, the addition of new members could result in conflicting interests and priorities, making it difficult for the group to reach consensus on key issues, and core differences in opinion could harm the bloc’s ability to swiftly respond to pressing development challenges. It could also lead to a dilution of the group’s identity, and thus a weakening of its ability to act as a cohesive unit. Existing BRICS nations need to carefully consider the implications of expansion, and to ensure that any new members are integrated in a way that preserves the unity and effectiveness of the group.
In the coming years, the advantages of the evolution of BRICS, including collective economic growth and regional integration, will no doubt have a ripple effect on the reality of international norms and relations. In the more short term, all eyes will be on the upcoming BRICS summit, set to be held in South Africa in August 2023, which will either reinforce traditional dynamics within the group, or introduce new configurations that will determine the trajectory of its multilateral arrangement. Expansion plans are expected to be discussed, as well as practical next steps for the proposed BRICS currency. Considering the ongoing reconfiguration of global political power, an expanded BRICS could set aside criticism about the countries’ disparate economic trajectories, and instead, position the bloc as a political partnership that ensures productive alliances and fosters greater solidarity with the Global South. The move to dethrone the U.S. dollar as the default reserve currency is also emblematic of the BRICS nations’ resistance to existing hegemonies. With plans for expansion and the creation of a new currency, the evolution of BRICS is far from complete, as the group gears to adopt a more dominant role in effective and more representative economic global governance.
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