BRICS: Moving towards a new global balance of power

Recent years have been marked by significant upheavals: the pandemic, rising inflation, tightening financial conditions, protectionism, emerging conflicts... These shifts have reshaped globalization, driving the relocation of value chains and compelling major economies to adapt.

Against this backdrop, the 16th BRICS summit took place in Kazan, Russia. In addition to the group’s original members (Brazil, Russia, India, China, and South Africa), 13 new countries joined the bloc (Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, Uzbekistan, and Vietnam), all united by shared concerns.

“The expansion signals BRICS’ progression towards a more inclusive system of multilateral cooperation, promoting closer economic and political collaboration among its members,” notes MAPFRE Economics, MAPFRE’s research arm.

The summit underscored a shared goal: redefining international relations to empower emerging economies through financial, commercial, and institutional initiatives. The proposals, outlined in the Kazan Declaration, advocate for reforms in global institutions and the establishment of a more multipolar, equitable governance system. Key objectives include restructuring the United Nations Security Council and international financial organizations to better represent the Global South and amplify the voice of developing countries in global decision-making.

Russian President Vladimir Putin also proposed the creation of a grain exchange to help stabilize prices and strengthen food security, reducing reliance on markets dominated by the West.

Currency, payment system, and a development bank

One of the objectives of the summit was to identify ways to reduce dependency on the U.S. dollar in international transactions, aiming to mitigate the impact of Western sanctions. The proposal includes promoting the use of local currencies in trade among BRICS countries.

China’s renminbi, increasingly used in international commerce, is a potential candidate, though its likelihood of fully replacing the dollar remains uncertain. Gonzalo de Cadenas Santiago, Deputy General Manager at MAPFRE Economics, explains that this trend should be analyzed from three perspectives: foreign exchange reserves, global trade, and financial transactions.

On the first point, De Cadenas Santiago notes a reduction in the dollar’s share of global reserves, possibly due to the rapid interest rate increases over the past two years. Nevertheless, the American currency continues to dominate both international trade and financial transactions.

The Kazan summit also highlighted the need for an independent payment system as a response to the dollar’s dominance in the SWIFT system, often used as a geopolitical pressure tool. Russia’s removal from SWIFT in 2022, following its initial attacks on Ukraine, demonstrated how the dollar’s dominance “allows the United States significant control over global capital flows,” according to MAPFRE Economic Research.

Another key strategy under consideration by the BRICS countries is to expand the role of the New Development Bank (NDB), established in 2015, as a means to reduce reliance on the dollar. MAPFRE Economics emphasizes that the NDB “intends to broaden its membership and strengthen its financial capacity by diversifying investment sources, enabling it to better meet the needs of developing nations.” “The bloc’s goal is to position the NDB as a catalyst for economic growth and stability, with a focus on sustainable projects that benefit both BRICS members and their partners in the Global South,” they say.