BRICS Expansion to 11 Nations, 37% of Global GDP Offers ‘Big Boost’ for Multilateralism
© AP Photo / Kin Cheung A woman walks by a money exchange shop decorated with different countries currency banknotes at Central, a business district in Hong Kong, Aug. 6, 2019.
© AP Photo / Kin Cheung
The massive new expansion of the BRICS economic bloc offers substantial opportunities, including for trade in non-dollar currencies between a vast swath of humanity and even greater investment opportunities using institutions outside of the US or Europe, an expert told Sputnik.
Amid the BRICS summit in Johannesburg, South African President Cyril Ramaphosa announced that the economic bloc of emerging industrial nations was more than doubling its membership, adding six new nations: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). Russian Foreign Minister Sergey Lavrov clarified, however, that the bloc would not change its name, in order to show continuity.
As a result, BRICS will now account for 37% of the world’s gross domestic product (GDP) and almost half of the world’s population.
In its declaration from the summit, BRICS said it aims to increase the representation of poorer nations at the United Nations and called for increasing the use of local currencies in international trade and financial transactions between BRICS members and their trading partners, posing a further challenge to the position of the US dollar as the presumed de facto currency of international trade.
Sputnik spoke with Ashraf Patel, Senior Research Associate with the Institute for Global Dialogue and Member of the South Africa BRICS Think Tank Network, about the momentous change and what it will mean for the global economy.
“Yes, as you can imagine, this is big news. It's a huge development for BRICS and BRICS +, and the expansion. So it is significant in a sense that it takes the BRICS to a new region, which is not in Africa or the Middle East. And that is a significant region for the bridge between the different regions, and also the growth of Ethiopia as a key member. You must remember Ethiopia hosts the African Union and it is significant that now Ethiopia is a member of BRICS. And then of course Argentina, being a big player in Latin America. So this is big news and positive news for BRICS expansion.”
Patel noted that despite making its second-ever membership expansion after adding South Africa in 2010, and having received a number of applications from other nations not yet admitted to the bloc, BRICS has not yet drawn up a formal list of membership criteria. However, because BRICS makes decisions based on consensus, reaching a unanimous decision to admit a country as a member has served as the de facto criterion.
“The criteria have been in development for the last year and the BRICS model is around consensus. And for a long time, at least 3 to 4 members have been supporting true consensus on all these new members, and so we took some kind of persuasion in the last few weeks to get all countries to agree by way of consensus,” he said.
“Criteria is mainly around a number of factors: economics, trade. And I would imagine a country like Saudi Arabia and the UAE have got significant resources - capital - and then they would inject that into institutions like the BRICS Development Bank. So, that increases the pool of resources for funding. So, yes, it's a big development. The criteria is not fully known. It is also not very complicated. And that is the positive nature of BRICS.”
Patel said the vast expansion of BRICS offers both “huge challenges” as well as “huge opportunities.”
“Number one: remember, it's about economies of scale. It's about large populations, and large populations translate into significant markets. It also means that through institutions, maybe like BRICS currency or regional currency format, and then a new development bank, it increases cooperation, it makes it easier for companies in BRICS nations to facilitate trade. And that's important. So it is a positive development purely from a number of viewpoints, a regional footprint, but significantly, population. It's about large populations that makes large markets viable. So these are big boosters.”
“These are important developments. National currency-to-currency, for instance, China and Brazil are looking already at the currency in yuan. And that's a model, and this starting with that in commodities, because they are big commodity traders. I would imagine the different regions could start with country-to-country, bilateral, and then regional commodities. So as a step-up, it would get into a phase-by-phase process leading up to a more common-base currency in the near future.”
“So yes, it's a big boost. With new members, it means they would need to follow the BRICS norm and the BRICS norms are very unique. And over the next few years, these new nations would get into the value of norms in understanding the norms and the models, and then that would increase trade. So in a world where we need multilateralism, this is a big boost for the world order.”