Who is stronger?

Who is stronger?

Can the bloc, also seen as a counterbalance to the G7 group of the world's most developed countries, agree on an alternative to the US dollar, as reported by RTS?

A question that keeps the leftist leader of Brazil awake at night. Why do all countries have to trade in dollars? BRICS members have already exceeded a quarter of their mutual trade in national currencies. And their goal is for this to reach a third in the next three years.

"It's much cheaper to trade in some other currencies, and that's why we've seen a trend of trading in yuan, rubles, rupees, and other national currencies. Not all these countries are BRICS members; some are members of the Shanghai Cooperation Organization or ASEAN, which have also decided not to trade in dollars, euros, or yen in the future," explains Prof. Dragana Mitrović from the Faculty of Political Sciences.

However, more than 80 percent of international transactions and over half of the foreign exchange reserves are still in dollars. That's why the dominance of the dollar is unquestionable for U.S. Treasury Secretary Janet Yellen. Many would question it – Russia due to sanctions, China due to Washington's economic nationalism. Others, because they await any increase in the U.S. Federal Reserve's benchmark interest rates with unease.

Professor Mitrović, however, believes that another currency won't replace the dollar because, as she says, the mentioned countries don't have a common monetary policy and alignment of legal and economic policies.

"But work is being done on a digital or settlement currency, and there are proposals for it to be backed by gold," says Mitrović.

The golden parachute is what the New Development Bank of BRICS offers to many debt-ridden countries in the global South. And for more favorable loans and financial injections, it doesn't impose conditions. Unlike the IMF or the World Bank, BRICS aims at a financial system led by the West but doesn't challenge it; instead, it offers alternatives.

"The countries that are part of the G7 are much more closely aligned with each other, similar to NATO or the EU. But we can see that G7 countries, despite being developed and having a high income, are experiencing low rates of economic growth, while on the other hand, developing countries, even if they aren't wealthy, are developing faster. This raises the question of whether they will at some point manage to reach the income levels of developed countries like Germany, Canada, and the USA," says economist Mihajlo Gajić.

In addition to the economy, politics also plays an important role.

With a similar share of the global GDP, around a third, but with G7 member states constituting about 10 percent of the world's population, and BRICS countries accounting for over 40 percent of the global population. This club would include about forty countries, of which 22 have submitted official requests.

"On one hand, you can participate in the markets of China or India, which are markets with billions of people. Alongside these economic reasons, political factors are crucial in an increasingly polarized world. In BRICS, you will find a counterbalance to Western narratives. But let's not forget that China is the powerhouse of that club, accounting for about 90 percent of the total power of that club," says Stefan Vladisavljević from the BFPE Foundation.

"For two decades, we have witnessed the rise of the global South, but the majority of that prosperity has been recorded in China, making it a kind of force that exerts influence in that domain. Although it might appear to us as a replacement for Western investments, all these countries are not severing ties with Western economies," says Gajić.

At the Summit in Johannesburg, Russia will be represented by its foreign affairs chief, due to the International Criminal Court's arrest warrant for the Russian president. BRICS members, as well as those aspiring to join, have mostly refrained from condemning the Russian attack on Ukraine. In an African peace initiative, there is even mention lifting the arrest warrant for Vladimir Putin.

"While China sees the expansion as an opportunity to enhance the legitimacy and significance of the platform itself, for India, it is important that they represent their interests within the platform. Therefore, new members would need to be those advocating for maintaining the platform on important principles for India," says Vladisavljević.

The seed of BRICS was sown within the investment bank "Goldman Sachs" – in a report from 2001, the acronym of emerging economies appeared, those that would dominate the global economy by 2050."