The BRICS group of China, India, Russia, Brazil and South Africa announces its expansion to include Argentina and five other countries. Will they be able to issue a currency that competes with the dollar, as some claim?

It’s highly unlikely. The dollar dominates the international financial market for two reasons: the US is the largest economy in the world and does not restrict the entry and exit of capital. 58% of world reserves are in dollars, 21% in euros, 6% in yen and 5% in sterling. In Chinese yuan only 3% despite the fact that China is responsible for 15% of world trade.

Brics: ‘light’ or hard version?

If China grows again in spectacular fashion, which is doubtful today, and opens up its economy, the yuan could displace the dollar; Today, due to its poor economic timing, investors are abandoning the yuan. The pound sterling was the main reserve currency until World War II, from which Great Britain emerged weakened. But for the foreseeable future, the dollar will continue to be king.

BRICS considers itself marginalized from world governance and wants to change it, with a more important role for itself. After all, they gather approximately half of the world’s population.

BRICS is right. Without consulting the rest of the battered world, the US central bank raises US interest rates to control inflation. In 1981, the rate rose to 20% and bankrupted almost all of Latin America, including Ecuador.

BRICS challenges the dollar

Today, global governance, understood as the UN, the IMF, the World Bank, the WTO and other organizations, is carried out by the G7, a block consisting of the USA, Canada, Japan, Germany, France, Italy, the United Kingdom and the European Union (until December, chaired by Spain). Russia was part of the G7, then the G8, but was kicked out in 2014 after the first invasion of Ukraine.

BRICS considers itself marginalized from governing the world and wants to change it…

Washington’s opinion is decisive in the G7. In addition, Washington is the guarantor of Europe’s security as the leader of NATO, today revitalized after 30 years of decline due to the second Russian invasion of Ukraine. In Asia, given the belligerent tone taken by China’s foreign policy, Washington is in the process of assembling a NATO counterpart with Japan, South Korea and Australia as the main members.

The BRICS cannot cooperate with each other the way the G7 can. China and India, the two largest in terms of population, economy and growth, only agree that they want a greater role in governing the world, but they are rivals. Beijing would veto India becoming a permanent member of the UN Security Council. They also maintain a border dispute. In 2020, 20 Indian soldiers were killed in what New Delhi called a Chinese attack.

There is already a broader forum, the G20, which brings together the G7, the original five BRICS and seven other major countries, including Argentina and Mexico. Their next summit will be this month in New Delhi. But his agenda focuses on general issues such as global warming, food security, the fight against corruption.

As the world changes, so will governance. The current system reflects the global reality after World War II. Until then, India, Indonesia, Vietnam and almost all of Africa were colonies. But there is still no how and when. (OR)