A group of world leaders is meeting at the BRICS summit in Johannesburg, South Africa this week. BRICS is a group of five countries with emerging economies that want to instate their own world economic and trade systems and has discussed creating a new currency. Dozens of other countries want to join the group – but what is BRICS?
What is BRICS?
The acronym, which was originally BRIC, was coined in 2001 by Goldman Sachs analyst Jim O’Neill, who wrote a paper on emerging economies. O’Neill said Brazil, Russia, India and China – the countries that make up the acronym BRIC – had GDP growth that would exceed that of the G7 countries.
The G7 countries— the U.S., Canada, France, Germany, Italy, Japan and the U.K. – are a group of the world’s advanced economies.
O’Neill found that at the end of 2000, Brazil, Russia, India and China accounted for about 23.3% of world GDP. He expected the BRIC countries’ GDP would increase and said the G7 countries should consider adding BRIC representatives to the group.
The four original countries formed an informal group in 2006 as allies that contribute to the world economy. In 2011, South Africa joined the group, and so the acronym became BRICS.
Leaders from BRICS countries meet annually and this year’s summit in Johannesburg, South Africa is expected to be the biggest, with 69 leaders invited.
The group aims to reshape the political economic landscape to benefit themselves and they have created the BRICS Business Council, the Contingent Reserve Agreement, which provides short-term liquidity support, and the New Development Bank, which supports development projects in BRICS countries.
This year’s summit will take place Aug. 22–24 and will focus on reducing global reliance on the U.S. dollar.
Is BRICS creating a new currency?
BRICS countries aim to create new economic and trade systems separate from the U.S.-led Western systems, according to the group.
At this year’s summit, the group is discussing de-dollarization, “aiming to reduce the reliance on the U.S. dollar and promote the use of national currencies in international trade.”
The reason for this? The U.S. dollar affects other currencies. When the U.S. economy strengthens, so does the dollar – but that weakens other currencies, according to the Associated Press. For example, last year, $1 USD could get about 110 yen. Now, $1 USD is worth 143 yen.
BRICS has discussed ways to expand trade between their countries as a way to rely less on the dollar, according to the AP.
Russia and China are especially eager to weaken America’s standing in the world economy and at a June meeting of BRICS countries, South Africa’s Naledi Pandor said the bloc’s New Development Bank would look for alternatives “to the current internationally traded currencies,” according to the AP.
But while the group has considered creating its own currency as part of the solution that is not on the agenda for the summit, the group says.
The group first started discussing a new currency after the U.S. imposed sanctions on Russia in the wake of that country’s invasion of Ukraine. “A common currency among BRICS nations could lead to the establishment of stronger economic ties and new geopolitical alliances, further solidifying their position as a rising power de-dollarization coalition,” the group said.
What countries want to join BRICS?
More than 40 countries have said they want to join BRICS and 22 have submitted applications. “This growing coalition is a testament to the increasing influence of BRICS in the international arena and its potential to shape the future of global finance,” the group said.
Iran, Argentina, Saudi Arabia, United Arab Emirates, Kazakhstan, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, Algeria, Democratic Republic of Congo, Comoros and Gabon are among the countries that have said they are interested in joining BRICS, Reuters reports.
These countries hope that by joining they will have more economic benefits than under the current Western economic and trade model.