The Brics group of emerging markets — Brazil, Russia, India and China, with South Africa added later — has gone from a slogan dreamed up at an investment bank to a real-world club that also controls a major development bank. It once might have seemed ironic to see Communist Party-ruled China embrace the Wall Street conceit. But now countries of all political stripes, including Iran and Saudi Arabia, are clamouring to join, setting up potential friction at the club’s Aug 22–24 summit in Johannesburg.
1. How did Bric(s) get started?
“Bric” was coined in 2001 by economist Jim O’Neill, then at Goldman Sachs Group, to draw attention to strong growth rates in Brazil, Russia, India and China. It was intended as an optimistic thesis for investors amid market pessimism following the terrorist attacks in the US on Sept 11 that year.
The four nations took the idea and ran with it. Their rapid growth at the time meant they had shared interests and common challenges. They were already cooperating in forums like the World Trade Organization and felt their influence in a US-dominated world order would be greater if their voices were combined.
The first meeting of Bric foreign ministers was organised by Russia on the sidelines of the United Nations General Assembly in 2006. The group held its first leaders’ summit in 2009. South Africa was invited to join at the end of 2010, extending membership to another continent.
2. What does Brics do?
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The biggest concrete achievements have been financial. The countries agreed to pool US$100 billion of foreign currency, which they can lend to each other during emergencies. That liquidity facility became operational in 2016. They founded the New Development Bank — a World Bank-inspired institution that has approved more than US$30 billion of loans for projects like water and transport infrastructure since it began operations in 2015. (South Africa borrowed US$1 billion in 2020 to plan to discuss the feasibility of a common Brics currency this year.
Economically, Brazil and Russia’s natural resources and farm products make them natural partners for Chinese demand. India and China have weaker trade connections with each other, partly due to political rivalries and an acrimonious border dispute.
Like other multilateral forums such as the Group of Seven, the annual Brics summits and dozens of other lower-level meetings produce joint statements that proclaim broad agreement, but lack specifics. The biggest obstacle there is that the countries have diverging interests on major political and security issues — including relations with the US — and different governing systems and ideologies.
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3. Who’s in charge?
Economically, China’s gross domestic product is more than twice the size of all four other members combined. In theory, that should give it the most sway. In practice, India — which recently surpassed China in population — has been a counterweight.
To take two examples: Brics has not formally endorsed China’s big development push called the Belt and Road Initiative (BRI), partly because India objects to BRI infrastructure projects in disputed territory held by Pakistan, its neighbour and arch rival.
On the New Development Bank, there’s no dominant shareholder: Beijing agreed to the equal holdings advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and now, Brazil’s former president Dilma Rousseff.
4. Is Russia still a member?
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Yes, Russia has remained a Brics member despite its invasion of Ukraine in 2022. That year’s Brics leaders summit was held online, and Putin participated. The other Brics countries have adopted a broadly neutral stance toward the war, viewing it as more of a regional issue than a global crisis.
However, the war has changed Russia’s relations with Brics institutions. The New Development Bank quickly froze Russian projects and Moscow has not been able to access dollars via the Brics shared foreign currency system.
Essentially, with US sanctions piling up, other Brics countries prioritised ongoing access to the dollar-based financial system over helping Russia. The South African government has been grappling with what to do if Putin shows up for the August summit, since the International Criminal Court indicted him for war crimes and has issued an arrest warrant.
5. How does it differ from things like the G-20 or Global South?
Generally speaking, Brics is similar to clubs such as the Group of 20 in representing a move toward a more multipolar world and away from one dominated by the US since the end of the Cold War, as exercised through clubs like the G-7 and World Bank. Other multilateral groupings arguably gaining influence as part of the trend include Opec, the Shanghai Cooperation Organization, the Southern Common Market (Mercosur), and the African Union.
“Global South” is not a club at all but a term that has gained currency in recent years to refer to relatively poor countries, also referred to sometimes as developing or emerging. It’s typically contrasted with a “Global North” composed of the US, Europe and some wealthy countries in Asia and the Pacific. But the relationship between the two concepts isn’t straightforward. For example, the European Union, firmly part of the Global North, could gain more influence in a multipolar world. China considers itself a developing country, although its status as the world’s second-largest economy with a large middle class makes that classification an awkward fit. The G-7 invited Brazil, India and Indonesia to attend its leaders summit this year, in what officials said was an attempt to reach out to the Global South.
6. Who wants to join and why?
China, which has been seeking to raise its profile on the global stage and counter Western influence, initiated the conversation about expansion when it chaired the group last year, triggering concern among other members that their own influence could be diluted. The proposal will be a main focus at this year’s summit, according to Anil Sooklal, ambassador from South Africa, which is chairing.
At least 19 countries have expressed an interest and, of those, 13 have formally asked to join, including Saudi Arabia and Iran, he said in an interview. Others that have expressed interest include Argentina, the United Arab Emirates, Algeria, Egypt, Bahrain and Indonesia, along with two nations from East Africa and one from West Africa that Sooklal did not identify. For new entrants, being part of Brics could expand their diplomatic influence and open up lucrative trade and investment opportunities.
7. Are there still Brics funds or is the concept dead as an investment strategy?
There’s still intense interest in emerging markets among investors. But while a nice idea two decades ago, Brics is largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories. Except for India, the Brics have underperformed their emerging markets peers over the last five years, according to Bloomberg Intelligence. US-led sanctions have made Russia uninvestable, and segments of China — especially technology companies — have also been sanctioned or face potential investment bans.
China also is a maturing economy, increasingly separated from other emerging markets and facing a structural slowdown. Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago, while South Africa’s has been subjected to years of rolling power blackouts because the state utility cannot produce enough electricity to meet demand. India is still a growth story that investment banks now compare with China 10 or 15 years ago, though it is unclear if it can follow China’s manufacturing-led model. — Bloomberg Quicktake
