BRICS leaders gather at Rio de Janeiro

According to Reuters, leaders of the growing BRICS group of developing nations were set to gather in Rio de Janeiro on Sunday, calling for reform of traditional Western institutions while presenting the bloc as a defender of multilateralism in an increasingly fractured world.

With forums such as the G7 and G20 groups of major economies hamstrung by divisions and the disruptive "America First" approach of US President Donald Trump, expansion of the BRICS has opened new space for diplomatic coordination.

"In the face of the resurgence of protectionism, it is up to emerging nations to defend the multilateral trade regime and reform the international financial architecture," Brazilian President Luiz Inacio Lula da Silva told a BRICS business forum on Saturday.

BRICS nations now represent over half the world's population and 40% of its economic output.

The BRICS group gathered leaders from Brazil, Russia, India and China at its first summit in 2009. The bloc later added South Africa and last year included Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates as full members. This is the first leaders' summit to include Indonesia.

"The vacuum left by others ends up being filled almost instantly by the BRICS," said a Brazilian diplomat who asked not to be named. Although the G7 still concentrates vast power, the source added, "It doesn't have the predominance it once did."

However, there are questions about the shared goals of an increasingly heterogenous BRICS group, which has grown to include regional rivals along with major emerging economies.

Stealing some thunder from this year's summit, Chinese President Xi Jinping chose to send his prime minister in his place. Russian President Vladimir Putin is attending online due to an arrest warrant from the International Criminal Court.

Still, many heads of state will gather for discussions at Rio's Museum of Modern Art on Sunday and Monday, including Indian Prime Minister Narendra Modi and South African President Cyril Ramaphosa.

Over 30 nations have expressed interest in participating in the BRICS, either as full members or partners.

Brazil, which also hosts the United Nations climate summit in November, has seized on both gatherings to highlight how seriously developing nations are tackling climate change, while Trump has slammed the brakes on US climate initiatives.

Both China and the UAE signaled in meetings with Brazilian Finance Minister Fernando Haddad in Rio that they plan to invest in a proposed Tropical Forests Forever Facility.

Expansion of the BRICS has added diplomatic weight to the gathering, which aspires to speak for developing nations across the Global South, strengthening calls for reforming global institutions such as the United Nations Security Council and the International Monetary Fund.

The growth of the bloc has also increased the challenges to reaching consensus on contentious geopolitical issues.

Ahead of the summit, negotiators struggled to find shared language for a joint statement about the bombardment of Gaza, the Israel-Iran conflict and a proposed reform of the Security Council.

To overcome differences among African nations regarding the continent's proposed representative to a reformed Security Council, the group agreed to endorse seats for Brazil and India while leaving open which country should represent Africa's interests, a person familiar with the talks told Reuters.

The BRICS will also continue their thinly veiled criticism of Trump's US tariff policy. At an April ministerial meeting, the bloc expressed concern about "unjustified unilateral protectionist measures, including the indiscriminate increase of reciprocal tariffs."

 

Can BRICS currency be adopted?

Brazilian President called on Wednesday for the BRICS nations to create a common currency for trade and investment between each other, as a means of reducing their vulnerability to dollar exchange rate fluctuations. Luiz Inacio Lula da Silva made the proposal at a BRICS summit in Johannesburg.

Officials and economists have pointed out the difficulties involved in such a project, given the economic, political and geographic disparities between Brazil, Russia, India, China and South Africa.

Brazilian president doesn't believe nations that don't use the dollar should be forced to trade in the currency, and he has also advocated for a common currency in the Mercosur bloc of South American countries.

A BRICS currency increases our payment options and reduces our vulnerabilities, he told the summit's opening plenary session.

South African officials had said a BRICS currency was not on the agenda for the summit.

I n July, India's foreign minister said, "There is no idea of a BRICS currency". Its foreign secretary said before departing for the summit that boosting trade in national currencies would be discussed.

Russian President Vladimir Putin said the gathering, which he attended via video link, would discuss switching trade between member countries away from the dollar to national currencies.

China has not commented on the idea. President Xi Jinping spoke at the summit of promoting the reform of the international financial and monetary system.

Building a BRICS currency would be a political project, South African central bank governor Lesetja Kganyago told a radio station in July.

"If you want it, you'll have to get a banking union, you'll have to get a fiscal union, you've got to get macroeconomic convergence," Kganyago said.

"Importantly, you need a disciplining mechanism for the countries that fall out of line with it... Plus they will need a common central bank... where does it get located?"

Trade imbalances are also a problem, Herbert Poenisch, a senior fellow at Zhejiang University, wrote in a blog for think-tank OMFIF.

All BRICS member countries have China as their main trading partner and little trade with each other.

BRICS leaders have said they want to use their national currencies more instead of the dollar, which strengthened sharply last year as the Federal Reserve raised interest rates and Russia invaded Ukraine, making dollar debt and many imports more expensive.

Russia's sanctions-imposed exile from global financial systems last year also fuelled speculation that non-western allies would shift away from the dollar.

"The objective, irreversible process of de-dollarisation of our economic ties is gaining momentum," Putin told the summit on Tuesday.

The greenback's share of official foreign exchange reserves fell to a 20-year low of 58% in the final quarter of 2022, and 47% when adjusted for exchange rate changes, according to International Monetary Fund data.

The dollar still dominates global trade. It is on one side of almost 90% of global foreign exchange transactions, according to Bank of International Settlements Data.

De-dollarizing would need countless exporters and importers, as well as borrowers, lenders and currency traders across the world, to independently decide to use other currencies.