InsightsBuilding BRICS

Building BRICS

The BRICS summit in Johannesburg is almost upon us and the issues of growth and expansion are on everyone’s lips. Will the group seek to extend its membership and could it really rival the G7 as an international bloc?

For decades, the northern hemisphere has dominated the international agenda, however, the emergence of the ‘Global South’ is causing some to believe that a shift in the focus of world power may be looming. If such a change really is afoot, its implications would be significant and wide-reaching, turning the worlds of geopolitics and business literally upside down. 

China is rapidly becoming a dominant world power, seeking to capitalise on the relative decline of the US. Concurrently, BRICS (Brazil, Russia, India, China and South Africa) is becoming more influential and powerful than ever before. Some economists even predict that within the next decade, BRICS could overtake the G7 in global growth. Furthermore, with many other nations such as Argentina, Saudi Arabia and UAE expressing interest in joining the group, its significance cannot be overlooked. As the latest BRICS summit is upon us, this article dives into the BRICS framework including its formulation, structure and membership, and considers the power and influence of the group on the world stage.  

The term “BRIC” originated in 2001 when Jim O’Neill, a British economist at Goldman Sachs, coined it to describe a group of economically emerging southern hemisphere nations, outside the membership of northern hemisphere dominated groups such as the G7. Its official inception as a group came in 2009 when the full BRICS acronym was completed with South Africa’s membership in 2010.  

BRICS nations were once considered as the downtrodden outcasts of the international community with their economies stuck at the riskier end of the spectrum: with great potential but great volatility. Not anymore. Recent years have seen such a shift from north to south, especially in the manufacturing industry, that ‘security of supply’ and ’nearshoring’ initiatives are top of most governments’ agendas in the north. 

The continued success of BRICS is not guaranteed as its critics are keen to highlight; there are potential challenges ahead through differences in political regimes, commodity import-export profiles, nuclear capabilities and border disputes. Despite this, the group has endured for over two decades and its 15th summit will take place in Johannesburg this year from 22nd – 24th August.  

Building blocs 

Brazil is the only Latin American (“LatAm”) representative in BRICS. Whilst not blessed with the vast population of China and India, Brazil is no slouch. The country has seen advancements across its manufacturing, infrastructure and energy sectors, making it a key player in the rapidly developing economic success of its region.  

Brazil has leveraged successfully its abundant natural resources and consequently its energy sector is an example to the world with over 80% of its total installed capacity coming from renewable sources. The country is developing rapidly, and many analysts predict that it will become a globally important supplier of raw materials that are crucial to the world’s growth. For countries such as China and India with massive infrastructure projects and energy needs, Brazil’s supply of natural resources is crucial. With low labour and production costs across BRICS, in general, raw material production is a key area of dominance for the group.

Russia is a founding member of BRICS and an industrial and energy powerhouse but its recent history has been dominated by its invasion of Ukraine and the previous military build-up and aggression in the region, making it a difficult issue for BRICS to navigate. The conflict in Ukraine has had a severe negative impact on Russia’s economy, which was already stagnating with a declining population, weakening its growth and relevance within BRICS. Furthermore, international sanctions against Russia and its leadership have caused complications for other BRICS countries. 

The invasion of Ukraine has presented “an acute dilemma to all other [BRICS] members,” says Lord Sedwill, former UK National Security Adviser and Cabinet Secretary, who “neither want to align with the [alliance supporting Ukraine] nor find themselves appearing to endorse a war of aggression”. This dilemma has been evident with President Xi and Prime Minister Modi both warning Putin against escalation in Ukraine and the ramifications of the conflict.  

With the next BRICS summit being held in South Africa, President Putin found himself facing a dilemma; if he attended the summit, South Africa, as a member of the International Criminal Court (“ICC”), would be obliged to arrest him under an international arrest warrant. Therefore, to avoid potential conflict and damage to the BRICS group, it has recently been mutually agreed that Putin will not attend the summit, instead Russia will be represented by Sergey Lavrov, Minister of Foreign Affairs.   

India, another founding member of BRICS since its inception in 2009, has seen unprecedented growth over recent decades underpinned by a booming population and strong manufacturing, information technology, generic pharmaceuticals and services industries. The country sticks largely to its own foreign policy, especially in its relations and influence in Southeast Asia, but it has been a key initiator and contributor to various BRICS programmes, including the New Development Bank, BRICS Business Council as well as agricultural research aimed at tackling hunger, malnutrition and poverty. When combined with its position as arguably the most politically and economically stable member of BRICS, India’s relevance is clear. 

China is undeniably a dominant member within BRICS, with growth in almost all aspects of its economy and population, surpassing most other countries worldwide. However, China also presents a dilemma for other BRICS members who are concerned about being forced to choose between China and the US and are “determined to maintain strong economic and stable political relations with both,” comments Lord Sedwill. Over the last decade, China has put far more effort into the cultivation of these relationships than the US and as such interest in BRICS has grown rapidly. Despite some recent macroeconomic challenges, China’s future seems bright as the world’s second largest economy and a global leader in many industries, as reported in the Australian Strategic Policy Institute’s 2023 review. 

The last letter of the BRICS acronym, only appearing in 2010, stands for the Republic of South Africa – the club’s newest member. Infrastructure development has been key to South Africa’s growth and being a member of BRICS has enabled partnerships with important countries that lead these sectors. As part of BRICS, South Africa offers valuable access to the African continent, providing many investment opportunities as well as enabling a more widespread avenue for the emerging global order that BRICS represents. This new order seeks to move away from the traditional reliance on the US dollar and the dominance of Western powers.  

South Africa opens its doors to investment and access to Africa, allowing other members to invest in this developing region with an ‘expert’ in the area and that ‘expert’ happens to be an ally within BRICS. This year, South Africa and its President, Cyril Ramaphosa, assume the Chair of BRICS, not only hosting the summit in August but also overseeing the potential enlargement of the group, should the members choose that path. As a result, South Africa is in a prime position to steer BRICS into the future and shape the direction of the group’s expansion. 

In recent years, BRICS has become much more than a framework for simple agreements or collaboration, rather transforming into an economic bloc with aspirations to rival the G7. This transformation has been driven, in part, by the establishment of the New Development Bank, originally known as the BRICS bank. The bank was designed and created to serve the needs of the BRICS nations and has close ties to these countries, with its President being a former president of Brazil, Dilma Rousseff. Rather worryingly, Rouseff was removed from office on charges of corruption with her premiership marred with financial malfeasance. 

To the future 

BRICS nations are growing and developing at an incredible rate, extrapolation of this growth and influence suggests that a shift in the balance of power towards the group is almost inevitable, potentially spelling an end to US hegemony. This could happen sooner than many think, with Bloomberg analysis of IMF data suggesting BRICS will contribute 35% to global growth compared to the G7’s 27.8% by 2028.

This trend is being fuelled by the growing perception that the US dollar is unreliable and is being ‘weaponised’ through the growing use of economic sanctions. The threat of such sanctions has driven a realisation that foreign trade based on the dollar is less attractive than trade based on one’s own currency. Brazil’s President Lula has even called on BRICS member states to stop dollar based foreign trade pointing to BRICS resilience against recent energy crises due to close ties with Russia and the booming energy sector and renewable energy development in Brazil. Overall, these developments underscore the growing influence and strength of BRICS on the global stage, as well as the emerging challenges to the longstanding dominance of the G7 and the US dollar in international trade and finance. 

From understanding the very essence and structure of BRICS, we can go on to establish an idea of what the future of the group might entail as well as its relative influence and global authority. Given the remarkable growth of BRICS, it is unsurprising that many other nations have expressed interest in joining the group, with Argentina being at the front of the queue. It formalised its application to join in 2022, with predictions that it will move closer to becoming a member within the next 12 months. The country’s abundant natural resources and investment opportunities, particularly for countries like China, make its inclusion highly likely.  

However, there are certain caveats to consider regarding Argentina’s potential membership. Joining BRICS could strain the country’s relations with the West. Indeed, the strengthening of relationships between the Global South, China and Russia is already a cause of concern for G7 nations. According to a Defence and Security Analyst in London, “US and European government advisors are advocating any means to stop China amassing influence in South America. This has even led to the US approving the sale of [38 former Danish F-16] fighter aircraft to Argentina to stop them from acquiring [Chengdu JF-17 Thunder Block III] aircraft from China.”  

Separately, there is internal disagreement within BRICS over the issue of expansion. The topic is set to be hotly debated at the upcoming summit, with China and Russia pro ‘BRICS Plus’ while Brazil and India are wary about diluting the group by allowing smaller powers to join that are seeking access to Beijing, which could strengthen China’s influence and diminish their own within the group.  

For nations not wanting to join as fully paid-up members, the New Development Bank has been an avenue to keep up and invest in the growth of BRICS. Countries such as Egypt, Bangladesh and Saudi Arabia have acquired equity in the bank, formerly known as the “BRICS bank”, to align themselves with the progress and development of BRICS. 

Is bigger better?  

Next week’s summit in Johannesburg promises to be a defining moment for BRICS and potential enlargement of the group’s membership is a major topic.  

South Africa, as both the host and the current chair of the group, holds significant influence in mediating between the pro-enlargement stance of China and Russia, and the counter position of Brazil and India. To complicate matters, South Africa’s membership of the ICC has prevented Putin from attending.  

As for the outcome, China’s economic and political dominance over the group, coupled with its huge investments across most other member states, lends credence to the pro-enlargement perspective endorsed by the nation. While India is also a major player, Brazil certainly does not possess the same weight. A former British diplomat was certain BRICS would vote to expand, “next week’s summit will start the process of enlargement for a rival bloc by BRICS to G7, the EU and other trading groups.” 

Reportedly, over 40 nations have submitted interest to BRICS and 22 have formally applied for membership, including all the developing economies of the Global South. According to Anil Sooklal, South Africa’s ambassador to the group, “the potential for investment and enlargement of the power and influence of the group might be stronger than the calls to remain a group of 5.” Pair this with the group’s ideals when they first formed in 2009, those of inclusiveness, openness and pragmatic cooperation, and it would seem that expansion is inevitable. 

BRICS has already shown itself to be more than a label for ‘emerging nations’ and has clear aspirations to rival the G7 for future economic and political dominance. If expansion is decided upon, this dominance will only grow, boosting China’s position and ending the American-led hegemony of recent years. 

While expansion seems like the obvious and probable outcome of the Johannesburg summit, promising growth for member nations, the extent and timeline of this growth remains uncertain. Nevertheless, BRICS, as a collective of ‘emerging nations’, continues its trajectory of emergence and development and will likely surpass the G7 at some point in the future. However, according to Lord Sedwill, the presence of various uncertainties, not least Russia’s current complexities, could hinder this advancement. This poses a challenge to BRICS and the forthcoming summit will be of considerable interest in observing how these challenges and opportunities evolve.  

 

About the Author

Jack Beaver
Jack Beaver
Jack is a summer intern at Deheza and current undergraduate student studying Politics and International Relations at Oxford Brookes University. Looking to specialise in contemporary security studies and counter-terrorism; Latin America and Contemporary Russian politics.
Important Notice
While the information in this article has been prepared in good faith, no representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or liability is or will be accepted by Deheza Limited or by its officers, employees or agents in relation to the adequacy, accuracy, completeness or reasonableness of this article, or of any other information (whether written or oral), notice or document supplied or otherwise made available in connection with this article. All and any such responsibility and liability is expressly disclaimed.
This article has been delivered to interested parties for information only. Deheza Limited gives no undertaking to provide the recipient with access to any additional information or to update this article or any additional information, or to correct any inaccuracies in it which may become apparent.

Most recent in Insights

Chile’s green hydrogen odyssey: promises, pitfalls and politics

What are the critical risks for investors?

Making a Meal-ei of it?

Argentina’s economic outlook.

The Extinct Peruvian Miracle

Peru's economic crossroads.

Argentina votes Milei

Light at the end of a very long tunnel?

Climate Justice: Not Just a Slogan

Climate challenges in LatAm and the Caribbean and a call for equitable solutions.

Dollar deliberations

Dollarisation back on the agenda in Argentina following Javier Milei's early success in the recent presidential primary election.

Santiago Peña’s Path to Leadership and the Road Ahead

Paraguay’s new president faces challenges: his ability to maintain independence, gather party support and implement reforms will shape the country’s future.

Dollar scarcity in Argentina and Brazil

Could the possibility of a “currency union” between Argentina and Brazil solve the shortage of dollars affecting both countries or trigger a severe recession?

Macro risks in Latin America

Latin America is trapped in a cage of external and regional risks.

Latin America’s changing relationship with Public-private partnerships

Public-private-partnerships may be falling out of fashion but the remain an essential tool for Latin America.