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What is BRICS and the history behind it

October 23, 2023

10 min

What is BRICS and the history behind it

Over the past 20 years, Brazil, China, India and Russia have become increasingly influential in the international economy and politics, partly due to their convergence. Let us explore what BRICS is and what it means for the current world order.

BRICS: meaning and origin of the term

This acronym first appeared in 2001 in the article ‘Building Better Economic BRICs’ by Jim O’Neill, an economist at Goldman Sachs

What is O’Neill’s BRICs? The letters stood for Brazil, China, India and Russia. What these governments had in common at the time were their emerging economies: they were the fastest growing countries in the world. 

Not only that, the characteristics that favoured this type of growth were also found in most of the BRICS: cheap labour, high population density, and abundant natural resources.

The thesis of O’Neill’s publication was that the Five would grow faster than the Group of Seven, the world’s most advanced economies: Canada, France, Germany, Italy, the United Kingdom, the United States and Japan.

Later, in 2003, his colleagues Roopa Purushothaman and Dominic Wilson presented a report entitled ‘Dreaming with BRICs: The Path to 2050’. Both argued that by 2050 these countries would become more important than the G7, changing the face of world economies in four decades.

The BRICS were thus not born as an alliance, but it was clear to Goldman Sachs that they could become a powerful economic bloc. Indeed, in 2013, they accounted for around 27% of global GDP in terms of purchasing power. The five countries have a total population of 2.88 billion, or about 42% of the entire global population, and cover 26% of the planet’s total land area.

Based on these assumptions, Goldman Sachs had set up an investment fund dedicated to the BRICs, giving investors the opportunity to earn on the growth of the five countries.

Goldman’s thesis and this fund were to give new hope to investors in a post-9/11 pessimistic market.

However, after the global financial crisis, growth also began to slow for the BRICS, until it completely lost its attractiveness as an investment around 2015. Since the all-time high in 2010, the fund had lost 88%, so it was closed and merged with the emerging markets fund.

But when we speak of this acronym, we no longer think of investments. Let us therefore examine what BRICS is in international politics.

The birth of the group

The BRICS already collaborated in forums such as the World Trade Organisation, but only became an alliance after the idea published by Goldman Sachs. Thus Vladimir Putin called the first ministerial meeting of the five countries in 2006. The meeting was symbolically held near a UN General Assembly in New York on 20 September.

The event was repeated twice more in 2008, and a first agreement was formalised in 2009. The declaration signed in Yekaterinburg established cooperation between the countries, including a detailed outline of how they could jointly tackle the global financial crisis. 

Then, at the end of 2010, South Africa was invited to join the BRICs, adding a letter to the acronym. Since then, the countries have been meeting informally every year, under the chairmanship of a different head of government each time.

So what are the BRICS today? If we want to look at the deeper meaning, they are the seeds of an alternative world order to the one dominated by the United States and Europe. Basically, the group is a way for members to increase their influence on the world. 

According to them, more than 40 governments want to join in, and they have invited others during the 2023 summit. Full membership will be granted to Argentina, Ethiopia, Iran, Saudi Arabia, Egypt and the United Arab Emirates from 1 January 2024.

This expansion will bring together the world’s largest energy producers and the largest consumers in the developing world. This will give them a real chance to challenge the dominance of the dollar in the oil and gas trade.

The push was largely driven by China, which sought to increase its global weight, but was supported by Russia and South Africa. India feared that a larger BRICS would turn the group into a mouthpiece of the Dragon, while Brazil was concerned about alienating the West. 

An expansion of the BRICS would also mean more say for the alliance in world affairs and could lead to a different kind of global economy. In fact, compared to the G7, they are less market-oriented.

According to Bloomberg, “The original BRIC members had two things in common: large economies, and high potential growth rates. The expanded BRICS-11 is a less coherent group — some are going through crises, others are thriving. This could signal an expansion of the agenda beyond economics.”.

Now that it is clear what the BRICS is, what have these countries actually done together and what are their intentions for the future? 

BRICS achievements and goals

Let us now get to the heart of the matter by clarifying what BRICS through their actions. In the period between 2009 and 2014, the members actively collaborated mainly on economic and financial issues. This collaboration involved important reforms within the international financial institutions, such as the World Bank and the International Monetary Fund. The aim was to strengthen the IMF’s capacity to cope with various economic crises by mobilising appropriate resources.

In addition, the Interbank Cooperation Mechanism, which provides for the extension of credit in local currency, and the Exchanges Alliance were established. Under this agreement, the BRICS countries agreed to make available a fund of USD 100 billion in foreign currency, which they could lend to each other in case of need. This liquidity mechanism became operational in 2016. 

Parallel to these initiatives, the New Development Bank was established, an institution modelled on the World Bank, which the countries intend to develop in the coming years. Since the start of its operations in 2015, this new bank has approved financing totalling almost USD 33 billion, mainly concentrated in projects related to water supply, transport and other infrastructure. For example, $1 billion was granted to South Africa in 2020 to combat the Covid-19 pandemic.

The New Development Bank does not have a dominant shareholder: Beijing accepted the equal shareholding requested by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and now by the former president of Brazil, Dilma Rousseff. 

The BRICS have also examined the possibility of increasing trade among themselves using each other’s currencies, but have not yet taken concrete steps in this direction. Although suggestions have been made regarding the adoption of a common currency, there are no concrete proposals so far.

From a trade perspective, BRICS members experienced a 56% growth in trade between 2017 and 2022. This was largely fuelled by natural resources and agricultural products supplied by Brazil and Russia, which have proven to be ideal partners to meet growing Chinese demand. However, it is important to note that trade relations between India and China have been poorer, mainly due to political differences and an ongoing border dispute.

Furthermore, the BRICS group focused their efforts on regional issues, such as the situation in Libya, Syria, Afghanistan, Iran and the latter’s internal nuclear issue. At the same time, they worked together to resolve conflicts, combat drug trafficking and promote the development of information and communication technologies.

The BRICS have faced challenges from conflicting interests in key political and security issues, including relations with the United States. However, differences in the governance systems and ideologies of member countries have complicated the definition of common positions on pressing global issues, such as climate change. We elaborate on these political issues below, to define not only what BRICS is, but what it can actually be in the future.

The role of Russia and China

Going deeper into the group dynamics, one begins to glimpse internal conflicts and complications, which will probably only multiply with the entry of new countries in 2024.

Currently, tensions are mainly concentrated between India and China.

China’s GDP is more than double that of the four current members combined. In theory, this should give it the most weight. In practice, India has overtaken it in terms of population, acting as a counterweight. The BRICS, then, has not formally endorsed the Belt and Road Initiative, which should provide a major boost to China’s development. This is partly because India is opposed to the infrastructure projects in the territory disputed by its neighbour and rival Pakistan. 

There is another power that sees its primacy threatened: Russia. Since Putin’s country led the formation of the group almost 20 years ago, much has changed: over time he has drained its finances and, above all, the consent and freedom of its citizens.

This crisis culminated in the Russian-Ukrainian war, which the other governments tried to ignore, dismissing it as a regional issue. However, the war changed Russia’s relations with the BRICS institutions. The New Development Bank quickly froze Russian funds and Moscow was unable to access dollars through the alliance’s shared foreign currency system. In essence, as US sanctions piled up, the other member countries prioritised access to the dollar-based financial system over helping Russia. As a consequence, Putin attended the Johannesburg summit via video conference, thus avoiding the South African government having to decide whether to execute an arrest warrant for alleged war crimes issued by the International Criminal Court.

Establishing what BRICS is, therefore, is not easy: it cannot yet be said that it is concretely challenging the world order or that they have a ready alternative to Western primacy. Moreover, the expansion of the members and their internal diversity makes it difficult to find common traits to help us define them. Only in time will we discover the significance and influence of this group.