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How did BRICS originate?
Formed in 2008 during the financial crisis, BRICS is an organization uniting 5 countries including:
- Brazil
- Russia
- India
- China
- South Africa (Joined in 2010)
The Group’s leaders meet annually, but there is a push for more concrete objectives, primarily to diminish Western influence.
BRICS represents a significant global presence, encompassing:
- 1/4 of the world’s land
- 42% of the world’s population
- A member of BRICS accounts for 17% of the world’s trade
Objective
Aiming to reduce reliance on Western-dominated systems, BRICS aims to unite fast-growing economies to challenge the heavy western influence in global trade, finance technology and military strength.
De-dollarization
Approximately 80% of the world’s trade is conducted in US dollars. Central banks hold Forex reserves, 59% being in US dollars. In December 2022, BRICS started shifting away from US dollar-dominated trade. The Silicon Valley Collapse in 2023, sparked echoes of the 2008 crisis, strengthening BRICS aspirations to build an independent currency. As of 2023, BRICS nations including India, Russia, and China have increased their gold reserves. With India bringing in 3 tons, Russia 31 tons and China bringing in a significant 102 tons.
The Foundation of BRICS Currency
Taking inspiration and lessons from the European Monetary System, BRICS nations will need to account for the time and patience required for a monetary system to create a huge impact in the global trade. The Euro, after its launch in 1999, remained an “invisible currency” for 3 years, until it started getting some recognition. With the world having evolved and developed a lot in past two decades, digital finance is on the go for a change, a change that could bring nations together.
Benefits of BRICS currency
- Reduced reliance on US dollars;
- Protection from sanctions;
- Increased trade in local currencies;
- Economic stability.
The US tariffs indirectly fueled the need of a BRICS currency due to:-
- Reinforcement of Economic Sovereignty goals;
- Push towards de-dollarization;
- Accelerating Institutional Innovation.
Despite the need and advantages of developing a new currency especially that of BRICS, several challenges lie ahead before BRICS currency could play a vital role in the global economies:-
- Diverse economic structures;
- Different Finance policies;
- Geopolitical Diversity;
- Limited Intra-BRICS Trade Volume;
- Technical and Legal Complexity.
In a nutshell, the BRICS currency proposal is a manifestation of growing desire to break free from the US dollar and reshape world finance. The idea is promising, but it will need the surmounting of internal conflicts and the creation of solid financial collaboration.