How BRICS Became So Much More Than Just a Slogan

(Photo credit: Bloomberg)

Source: Bloomberg

The BRICS group of emerging-market nations — the acronym stands for Brazil, Russia, India, China and South Africa — has gone from a slogan dreamed up at an investment bank two decades ago to a real-world club that controls a multilateral lender. It doubled in size in 2024, pairing several major energy producers with some of the biggest consumers among developing countries and potentially enhancing the group’s economic clout in a US-dominated world.

1. Who are the new members of BRICS?

The BRICS group expanded on Jan. 1 to include Iran, the United Arab Emirates, Ethiopia and Egypt. Saudi Arabia was also announced as a new member, though the kingdom later said it was still studying the invitation. Argentina was invited too, but President Javier Milei, who took office on Dec. 10, decided against joining. He had indicated during his campaign that he would steer his country’s foreign policy away from China and Brazil, saying, “Our geopolitical alignment is with the United States and Israel. We are not going to ally with communists.” A further expansion is on the cards after Malaysia and Thailand announced plans to join.

2. What is the impetus for expansion?

The push has been driven largely by China, now the world’s pre-eminent industrial power, which is trying to boost its global clout by courting nations traditionally allied with the US. South Africa and Russia have backed the expansion. India was initially hesitant because it was concerned that a bigger BRICS would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West — although both governments eventually agreed to an enlargement. For new members, BRICS offers the potential for easier access to financing from its wealthier members, and a political venue independent of Washington’s influence. The bloc “represents a south-south cooperative framework which Thailand has long desired to be a part of,” said Thai Foreign Minister Maris Sangiampongsa.

3. What does a larger BRICS mean for the world?

Adding major fossil-fuel producers may give the bloc more scope to challenge the dollar’s dominance in oil and gas trading by switching to other currencies, a concept referred to as dedollarization. However, expansion is “more about politics and less about economics,” according to analysts at Bloomberg Economics. The enlarged alliance may become a stronger counterweight to the so-called Group of Seven — the US, Canada, France, Germany, Italy, Japan and the UK. Beijing is trying to build an alternative world order by pulling southern hemisphere nations into its economic orbit in a challenge to US hegemony. Russian President Vladimir Putin, isolated by the US and its allies over his war in Ukraine, is also keen to see Washington’s global influence recede. Other groupings that are already promoting a move toward a more “multipolar” world — and away from the post-Cold War dominance of the US — include OPEC, the Shanghai Cooperation Organization, the Southern Common Market (Mercosur), and the African Union.

4. What does BRICS do?

The biggest achievements of the group have been financial. The countries agreed to pool $100 billion of foreign-currency reserves, which they can lend to each other during emergencies. That liquidity facility became operational in 2016. They founded the New Development Bank — a World Bank-inspired institution that has approved almost $33 billion of loans — mainly for water, transport and other infrastructure projects — since it began operations in 2015. (South Africa borrowed $1 billion in 2020 to fight the Covid-19 pandemic.) By comparison, the World Bank committed $72.8 billion to partner countries in fiscal 2023.

5. How have trade relations changed?

Trade among the bloc’s first five members surged 56% to $422 billion between 2017 and 2022. Economically, the natural resources and farm products of Brazil and Russia make them natural partners for Chinese demand. India and China have weaker trade connections with each other, partly due to their geopolitical rivalry and an acrimonious border dispute.

6. How did BRICS get started?

“BRIC” was coined in 2001 by economist Jim O’Neill, then at Goldman Sachs Group Inc., to draw attention to strong economic growth rates in Brazil, Russia, India and China. The term was intended as an optimistic scenario for investors amid market pessimism following the terrorist attacks in the US on Sept. 11 that year. The four nations took the concept and ran with it. Their rapid growth at the time meant they had shared interests and challenges, and combining their voices could increase their influence. The first meeting of BRIC foreign ministers was organized by Russia on the sidelines of the United Nations General Assembly in 2006. The group held its first leaders’ summit in 2009. South Africa was invited to join in 2010, adding another continent and the letter “S.”

7. Who’s in charge?

For most of the time BRICS has existed, China’s gross domestic product has been more than twice the size of the four existing members combined. In theory, that should give it the most sway. In practice, India, which recently surpassed China in population, has been a counterweight. BRICS hasn’t formally endorsed China’s big push to build infrastructure abroad, called the Belt and Road Initiative. That’s partly because India objects to such projects in disputed territory held by Pakistan, its neighbor and archrival. The New Development Bank has no dominant shareholder: Beijing agreed to the equal holdings for each member advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and two Brazilians, most recently former President Dilma Rousseff.

8. Has Russia’s invasion of Ukraine affected the group?

The other BRICS countries have adopted a broadly neutral stance toward the war, viewing it as more of a regional issue than a global crisis. However, the war changed Russia’s relations with BRICS institutions. The New Development Bank quickly froze Russian projects, and Moscow hasn’t been able to access dollars via the BRICS shared foreign-currency system. Essentially, with US sanctions piling up, other BRICS countries prioritized ongoing access to the dollar-based financial system over helping Russia.

9. Are investors still interested in BRICS?

There’s still intense interest in emerging markets. But BRICS is largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories. US-led sanctions have put Russia off limits for most foreign investors, and some sectors in China — especially technology companies — have also been sanctioned or face potential investment bans. China also is a maturing economy, increasingly separated from other emerging markets and facing a structural slowdown. Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago. South Africa’s has been subjected to years of rolling power blackouts, because the state utility can’t produce enough electricity to meet demand, as well as logistics snarls. India is still a growth story that investment banks compare with China 10 or 15 years ago, though it’s unclear if it can follow China’s manufacturing-led model.