Information Bulletin of the BRICS Trade Union Forum

Monitoring of the economic, social and labor situation in the BRICS countries
Issue 44.2023
2023.10.30 — 2023.11.05
International relations
Foreign policy in the context of BRICS
Joining the BRICS bouquet? (Присоединение к букету БРИКС?) / Pakistan, November, 2023
Keywords: brics+

The BRICS, aimed at fostering collaboration among Brazil, Russia, India, China, and South Africa, is currently broadening its scope. The conference in Johannesburg from August 22 to 24 extended invitations to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to become members of BRICS.

The question regarding Pakistan's potential membership in BRICS is evidence of the significance of BRICS. The alliance has garnered significant global recognition, prompting many nations to express their aspirations to join its ranks.

The BRICS members collectively surpass the G7 in purchasing power parity, encompassing around 27 percent of the Earth's land surface, 42 percent of the worldwide population, and 33 percent of the global GDP. All original five constituent nations of the BRICS alliance also participate in the G20. The current situation is quite intriguing.

According to the chair of the 2023 summit in South Africa, a significant number of nations, estimated to be around 36, have expressed their interest in becoming members of BRICS. These countries include Iran, Saudi Arabia, the United Arab Emirates, Argentina, Algeria, Bolivia, Indonesia, Egypt, Ethiopia, Cuba, the Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan. These nations saw BRICS as a viable substitute for the conventional Western-centric financial industry that relies on the US Dollar. The BRICS nations are currently considering the possibility of introducing a new currency that is backed by gold. This initiative aims to provide an alternative to the dominant position of the US Dollar, which many developing countries favour.

Hence, Pakistan cannot remain detached from these developments and alternative options. Given Pakistan's existing involvement in the One Belt One Road Initiative and the CPEC, it would be advisable for Pakistan to contemplate the prospect of joining the BRICS alliance. The citizens of Pakistan express dissatisfaction at the absence of an invitation for their country to participate in the Johannesburg Summit and its exclusion from the BRICS Plus initiative. On August 25, the Foreign Office spokesperson addressed the inquiries by indicating that Pakistan will carefully assess the recent developments and decide on future involvement with the organization. She expressed, "Pakistan strongly advocates for the principles of multilateralism." Given the circumstances, it would be logical for Pakistan to consider membership in the expanded BRICS, an emerging global organization representing countries in the Global South.

Pakistan's non-participation in the high-level development conversation preceding the BRICS summit hosted by China was also observed last year. A total of 24 countries were in attendance. India, a member of the BRICS alliance, impeded the participation of Pakistan. At that particular juncture, the Foreign Office articulated its aspiration for the forthcoming involvement of the organization to be grounded in the principle of "inclusivity." This year, Pakistan was not invited to attend the summit, unlike nearly 30 other countries, primarily from the Global South, who were included. However, Pakistan was invited to a seminar before the summit, during which Senator Mushahid Hussain expressed Pakistan's interest in joining BRICS Plus.

The strained relationship between India and Pakistan is regrettable yet comprehensible. The government of India has frequently utilized Pakistan to garner support in Hindu-majority regions by capitalizing on the perceived danger of cross-border terrorism. It might be inferred that in the event of Pakistan seeking BRICS membership, India would have likely expressed opposition.

Pakistan must disengage from being categorized as part of a certain interest group or as an alliance member when making autonomous decisions. The current paradigm no longer adheres to the dichotomy of "with or without us" but instead embraces the concept of inclusivity, wherein the involvement of all states characterizes the new normal. Therefore, the necessity of the current era is evident. States left behind will ultimately experience self-directed condemnation over an extended period. Another problem that hampers the potential for Pakistan's inclusion in BRICS is its precarious economic condition, further compounded by political instability, violent extremism, and inadequate law enforcement. The member nations of the BRICS alliance will assert their position against Indian objections after they ascertain that Pakistan possesses substantial contributions to make. Undoubtedly, Pakistan occupies a vital position within the enlarged economic geography of the BRICS nations. Pakistan can be a significant hub, facilitating connectivity between South, Western, and Central Asia.

The era characterized by countries aligning themselves with ideological blocs during the Cold War has concluded. India is a member of the BRICS alliance and concurrently serves as the host country for the G20 summit in New Delhi. The USA and most European countries have implemented sanctions against Russia in response to the situation in Ukraine. However, it is noteworthy that these countries engaged in diplomatic interactions with Russian President Vladimir Putin during a meeting in New Delhi. However, this assertion does not hold for developing nations as they heavily depend on Western economies for their sustenance. Based on historical precedent, it can be seen that emerging nations have often faced punitive measures for engaging in behaviors that are perceived as detrimental to the interests of more powerful states.

Pakistan must disengage from being categorized as part of a certain interest group or as an alliance member when making autonomous decisions. The current paradigm no longer adheres to the dichotomy of "with or without us" but instead embraces the concept of inclusivity, wherein the involvement of all states characterizes the new normal. Therefore, the necessity of the current era is evident. States left behind will ultimately experience self-directed condemnation over an extended period. In order to facilitate this process, Pakistan must prioritize enhancing its domestic economy and deliberate the possibility of embracing east-west connectivity, synergizing with existing north-south connectivity.
                How BRICS Became a Club That Others Want to Join (Как БРИКС стал клубом, к которому хотят присоединиться другие) / United States, November, 2023
                Keywords: brics+, expert_opinion
                United States

                The BRICS group of emerging market nations — Brazil, Russia, India, China and South Africa — has gone from a slogan dreamed up at an investment bank two decades ago to a real-world club that controls a multilateral lender. Now it's undergoing an enlargement that would pair some of the planet's largest energy producers with some of the biggest consumers among developing countries, potentially enhancing the group's economic clout in a US-dominated world.

                1. How did BRICS get started?

                "BRIC" was coined in 2001 by economist Jim O'Neill, then at Goldman Sachs Group Inc., to draw attention to strong economic growth rates in Brazil, Russia, India and China. The term was intended as an optimistic scenario for investors amid market pessimism following the terrorist attacks in the US on Sept. 11 that year. The four nations took the concept and ran with it. Their rapid growth at the time meant they had shared interests and challenges, and combining their voices could increase their influence. The first meeting of BRIC foreign ministers was organized 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 in 2010, adding another continent and the letter "S." In August, invitations were extended to Saudi Arabia, Iran, the United Arab Emirates, Argentina, Ethiopia and Egypt to join in 2024.

                2. What does BRICS do?

                The biggest achievements of the group have been financial. The countries agreed to pool $100 billion of foreign currency reserves, 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 almost $33 billion of loans — mainly for water, transport and other infrastructure projects — since it began operations in 2015. (South Africa borrowed $1 billion in 2020 to fight the Covid-19 pandemic.) By comparison, the World Bank Group committed $70.8 billion to partner countries in fiscal 2022. Suggestions that the BRICS countries adopt a common currency haven't gained traction. But its expansion to incorporate major fossil fuel producers gives it more scope to challenge the dollar's dominance in oil and gas trading by switching to other currencies, a concept referred to dedollarization. Diverging interests have made it hard for them to agree on how to tackle some other pressing global issues, such as climate change.

                3. How have trade relations changed?

                Trade between the bloc's five existing members surged 56% to $422 billion between 2017 and 2022. Economically, the natural resources and farm products of Brazil and Russia make them natural partners for Chinese demand. India and China have weaker trade connections with each other, partly due to their geopolitical rivalry and an acrimonious border dispute.

                4. Who's in charge?

                For most of the time BRICS has existed, China's gross domestic product has been more than twice the size of the four existing members combined. In theory, that should give it the most sway. In practice, India, which recently surpassed China in population, has been a counterweight. BRICS hasn't formally endorsed China's big push to build infrastructure abroad, called the Belt and Road Initiative. That's partly because India objects to such projects in disputed territory held by Pakistan, its neighbor and archrival. The New Development Bank has no dominant shareholder: Beijing agreed to the equal holdings for each member advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and two Brazilians, most recently former President Dilma Rousseff.

                5. Is Russia still a member despite its invasion of Ukraine?

                Yes. 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 hasn't been able to access dollars via the BRICS shared foreign currency system. Essentially, with US sanctions piling up, other BRICS countries prioritized ongoing access to the dollar-based financial system over helping Russia. Putin participated in the Johannesburg summit in August by video conference, sparing the South African government from having to decide whether to execute an arrest warrant for alleged war crimes issued by the International Criminal Court.

                6. How does BRICS differ from other multilateral groups?

                It's similar to clubs such as the Group of 20 big industrialized and emerging economies in promoting a move toward a more "multipolar" world and away from the post-Cold War dominance of the US, as exercised through structures like the tighter-knit Group of Seven and the International Monetary Fund. Other groupings arguably gaining influence as part of the trend include OPEC, the Shanghai Cooperation Organization, the Southern Common Market (Mercosur), and the African Union. In a similar vein, the Global South has become an increasingly popular way to refer to developing or emerging economies, though it's not an actual club. It's typically contrasted with a Global North composed of the US, Europe and some wealthy countries in Asia and the Pacific. But the relationships aren't straightforward. For example, the European Union, firmly part of the Global North, could gain more influence in a multipolar world. China still considers itself a developing country, which brings some trade benefits, 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 in 2023, in what officials said was an attempt to reach out to the Global South.

                7. What was the impetus for expansion?

                The push was largely driven by China, which has sought to increase its global clout, but had the backing of Russia and South Africa. India was concerned a bigger BRICS would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West. South African President Cyril Ramaphosa, who hosted the August summit, said a consensus was reached on expansion and more phases would follow, but didn't elaborate. As of late October, it wasn't clear if all six invitees would actually join come Jan. 1. According to Bloomberg Economics, an expanded BRICS would also mean more say for the alliance in world affairs and may lead to a different type of global economy. That's because in comparison to the G-7, the BRICS are less market-oriented.

                What Bloomberg Economics Says...

                "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."

                — Ziad Daoud, chief emerging market economist

                8. 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-market peers over the last five years, according to Bloomberg Intelligence. US-led sanctions have put Russia off limits for most foreign investors, and some sectors in 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 can't 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's unclear if it can follow China's manufacturing-led model.
                              Investment and Finance
                              Investment and finance in BRICS
                              Intra BRICS Trade Now 37% Of Global Total (Торговля внутри БРИКС сейчас составляет 37% мирового объема торговли) / China, November, 2023
                              Keywords: trade_relations

                              The five current members of the BRICS group increased trade by 56% from 2017 to 2022, reaching some US$422 billion worth of turnover last year, according to Bloomberg.

                              BRICS currently comprises Brazil, Russia, India, China, and South Africa, but will be joined by Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE this coming January. The decision to accept the new members was made during the group's August summit in Johannesburg.

                              According to Bloomberg analysts, the expanded group will represent nearly half of global output by 2040, doubling the share of the Group of Seven (G7), which consists of the US, Canada, UK, France, Italy, Germany, and Japan.

                              Earlier this year, Russian President Vladimir Putin claimed that BRICS already outpaced the G7 states in terms of the purchasing power parity (PPP) of their populations. Analysts project the combined gross domestic product (GDP) of the expanded BRICS in terms of PPP to amount to about US$65 trillion. This would push the group's share of global GDP up from the current 31.5% to 37%. In comparison, the share of the G7 is currently around 29.9%.

                              Originally formed largely for the purpose of highlighting investment opportunities among members, the group has become instrumental in building a new "multipolar" world order that will help give a stronger voice to the Global South. Other countries who have expressed interest in joining include Algeria, Indonesia, Nigeria and Turkiye.

                                            The Dollar's Dominance Is Shakier Than Ever (Доминирование доллара более шаткое, чем когда-либо) / USA, November, 2023
                                            Keywords: economic_challenges

                                            BRICS has growing currency leverage despite internal divisions.

                                            In the months before August's gathering of BRICS leaders in South Africa, rumors of a new BRICS currency swirled—only to fail to manifest at the summit itself. But don't confuse a single summit's headlines with evidence of a trend.

                                            The wake of the BRICS summit splashes into a world much riper for de-dollarization now than it was even six months ago. BRICS, now BRICS+ due to the admission of new members, deserves only partial credit. In the last six months, tectonic shifts in China's economy and in Washington have cleared the path for de-dollarization—an open route that BRICS+ can now step into.

                                            BRICS+ may bring the global south's economic statecraft from the 20th to the 21st century. In the 20th century, non-Western economic blocs, such as OPEC, gained geopolitical power through their control over the supply of specific economic commodities, such as oil. In the 21st century, non-Western economic blocs, such as BRICS+, can gain influence over the West through several economic channels at once. Twentieth-century oil embargoes may seem passe, even puny, relative to the 21st-century trade and financial actions that BRICS+ could theoretically now manage.

                                            You can preview these new tools of economic statecraft in the composition of the admitted members who expanded the bloc from BRICS to BRICS+.

                                            With Egypt, Ethiopia, and Saudi Arabia, BRICS+ can disrupt world trade not just in oil, but in everything. These three countries encircle the Suez Canal and effectively turn it into a BRICS+ lake. The canal is a key artery of the world economy. Some 12 percent of all global trade runs through the canal, which runs from the Mediterranean into the Red Sea. And it is the Red Sea that BRICS+ now encircles. Embanked by Egypt on the west and Saudi Arabia to the east, the Red Sea may not have beaches in landlocked Ethiopia, but Ethiopia is a regional power in East Africa. It has influence over the other East African countries, like Sudan and Somalia, that fill out the rest of the Red Sea's western shore. If you wanted to weaponize the Suez's importance in global trade, you'd have admitted Egypt, Ethiopia, and Saudi Arabia. BRICS admitted Egypt, Ethiopia, and Saudi Arabia.

                                            The admission of Saudi Arabia also broadens the economic leverage at the disposal of BRICS+ in financial holdings. Saudi Arabia owns more than $100 billion in U.S. government bonds. BRICS+ countries now own more than $1 trillion in Uncle Sam's bonds by a comfortable margin. And the amount of U.S. government holdings understates the influence that Saudi Arabia's money grants it over the U.S. and Europe. The Saudis turn money into geopolitical power by buying influential private organizations such as "the entire sport of professional golf," a recent purchase of Riyadh's.

                                            The new membership of BRICS+ also represents a range of commodities that offers a spectrum of power both now and in the future. Iran, Saudi Arabia, and the United Arab Emirates—among the new BRICS+ members—are also fossil fuel exporters. Meanwhile, countries such as Brazil, China, and Russia are significant producers of the metals and rare earths that the energy transition will depend on.

                                            The history of OPEC is a story of cooperation on issues of shared economic interests between even countries literally at war with each other. In the 1980s, through OPEC, Iran and Iraq cooperated on setting oil prices even while each targeted the other side's oil production facilities, including tankers at sea, and killed hundreds of thousands of its people. There are understandable doubts that countries like China and India can cooperate on issues of shared interest because of areas of conflict on other issues, like their shared border.

                                            But if Iran and Iraq could cooperate on shared economic interests within OPEC in the 20th century as a war that included "some of the most brutal conventional warfare in modern history" raged on their shared border, in the 21st century, China and India can cooperate within BRICS+ to advance shared economic interests even as skirmishes fought with clubs instead of guns erupt along their shared border.

                                            If OPEC was powerful in the 20th century, BRICS+ is now set to be more than a little more powerful in the 21st century. But for the prospects of de-dollarization, the story gets even better. Any BRICS+ push toward de-dollarization will benefit from developments in Beijing and Washington that have little to do with BRICS or BRICS+.

                                            A case for skepticism about the efficacy of some version of BRICS moving the ball forward on de-dollarizing, or much of anything, once came from the relative enormity of China's economy. After all, China's economy is 2.3 times the size of the rest of the original BRICS and 1.7 times the rest of BRICS+ in terms of GDP. That gives other countries grounds to fear BRICS could just be a new chance for China to treat other developing countries as its subordinates. With China's rate of economic growth slowing to the point that it may even be shrinking, however, that changes. A smaller Chinese economy means a more balanced BRICS. And a more balanced BRICS is one that more believably serves shared interests rather than those of a domineering China. That's a gift to BRICS+.

                                            Meanwhile, in Washington, skepticism about how closely dollar hegemony matches U.S. national interests is growing. In June, the U.S. Senate confirmed a man who views dethroning the dollar as good for the United States as the chairman of the White House's Council of Economic Advisers. That could make Joe Biden's White House the second in a row to see skepticism about the benefits of dollar hegemony reach the Oval Office.

                                            Breaking tradition with past U.S. presidents, Donald Trump touted the benefits of a weak dollar as a means of reducing the trade deficit. That matters for de-dollarization's outlook. If official Washington regards preserving the dollar's role in the global economy as a vital U.S. national interest, it could threaten to impose the type of penalties, like financial sanctions or even military action, on countries that took steps towards de-dollarization. If it does, that could plausibly prevent de-dollarization from actually happening. If it won't, then one more roadblock in de-dollarization's path crumbles, clearing the way for BRICS+ to continue down the path.

                                            At the summit, Brazilian President Luiz Inácio Lula da Silva also announced a working group to study a "reference currency" for a common BRICS+ trade currency. That means BRICS+ is working on the rational next step toward a shared trade currency. A reference currency, broadly speaking, refers to a way of coordinating how the national currencies of BRICS+ members convert into the shared trade currency. A reference currency could be a defined basket of national currencies, like the International Monetary Fund's Special Drawing Rights.

                                            Once that basket is defined, the exchange rate between the national currency and the shared trade currency becomes a function of the market price of one national currency relative to the others in the basket. Another way of establishing a reference currency would be to link the shared trade currency's price to a quantity, say an ounce, of a commodity, such as gold. In that case, gold serves as the reference currency. The price of gold in terms of the national currency then determines how much national currency you need to buy the shared trade currency. Either approach is possible, as are others. The working group will need to hammer out those details.

                                            If BRICS+ prioritize dethroning the dollar more than many suspect, you'd expect it to surprise the world, as it did, with a role for Argentina. That's because it is hard to imagine Argentina looking like a globally attractive economic partner unless you're really into the de-dollarization of trade. Its economy isn't even growing. Its history of hyperinflation is so bad that its economists become national celebrities. But one thing that Argentina does have is an agreement with Brazil to, in bilateral trade, replace dollars with what amounts to a new currency.

                                            The BRICS+ nations do not need to wait until a shared trade currency meets the technical conditions typical of a global reserve currency before they swing their newly enlarged economic wrecking ball at the dollar. These conditions include things like a currency's use in trade by parties from third countries, like the yuan in its budding use for trade between Russia and countries besides China. But those technical conditions are of greater interest to Western wonks than BRICS+ governments. And dominant currencies get no exemption from the principle that it is easier to destroy than create. If BRICS+ does roll out a shared currency, in all probability, it'd almost certainly be doing so before Western economists say it's ready. But that does not mean that it wouldn't do it.

                                            The BRICS+ states do not even necessarily need to have a shared trade currency to chip away at King Dollar's domain. If BRICS+ demanded that you pay each member in its own national currency in order to trade with any of them, the dollar's role in the world economy would go down. There would not be a clear replacement for the dollar as a global reserve. A variety of currencies would gain in importance.

                                            That could put the U.S. dollar in a position like the British pound in the 19th century. Asked to identify a single national currency as the global reserve of the era, commentators tend to name the pound. When today's economists construct measures of "monetary system dominance," however, for decadelong stretches of the 19th century, Britain never surpasses 50 percent.

                                            That was also true of the pound in its waning days as a global reserve in the early 20th century: It never surpassed 50 percent of official foreign exchange reserves. If the dollar came to retain a plurality but not majority of reserves, some would say it retained its reserve status. But that'd be a change. Even if King Dollar technically remained on the throne, it'd herald a new era of rising monetary anarchy under his watch.

                                            If King Dollar could speak to those who expected BRICS to announce its slaying at the August summit, it might use a popular saying: The rumors of my death have been greatly exaggerated. That may have been true this time. Rumors of the dollar's death were exaggerated in the buildup to the August BRICS summit. In the time since, though, conditions in Washington and Beijing appear to be conspiring to make the dollar's vulnerability to BRICS+ greater than it was even six months before.

                                            If the dollar died, then, it may end up like Mark Twain, who originated the saying with his response to a premature publication of his obituary in 1897. When the rumor circulated a second time, in 1910, Twain really had died. Rumors of the death of the dollar as a global reserve may have been exaggerated in the leadup to August's summit. This time around, however, the rumors of its death may be no exaggeration.

                                                          Political Events
                                                          Political events in the public life of BRICS
                                                          South Africa says it benefits from hosting BRICS Summit (ЮАР заявляет, что ей выгодно проведение саммита БРИКС) / China, November, 2023
                                                          Keywords: summit

                                                          JOHANNESBURG, Nov. 1 (Xinhua) -- The benefits South Africa gets from hosting the 15th BRICS Summit outweigh the costs that the country paid in preparing for the conference, the country's Department of International Relations and Cooperation (DIRCO) said Wednesday.

                                                          "The list of benefits South Africa gained is endless. Key, among many priorities that South Africa set for itself during the summit, was to strengthen the partnership between BRICS and African countries. In this regard, BRICS leaders reiterated their support for the African Union's Agenda 2063; in particular, they supported the operationalization of the African Continental Free Trade Area through economic and financial cooperation between BRICS and African countries," the DIRCO said in a statement.

                                                          The DIRCO's statement came as the Democratic Alliance, an opposition political party in the country, issued a statement saying South Africa spent 180 million rands (about 9.7 million U.S. dollars) on the "BRICS talk show."

                                                          "While it is true that just over 100 million rands, as reported by DIRCO, was contributed toward the successful hosting of the BRICS Summit, the economic benefits to the City of Johannesburg far outweigh the 100 million rands DIRCO contributed," the statement said.

                                                          Other objectives include South Africa leveraging its political and economic relations with BRICS members to address its challenges of poverty, unemployment and inequality through increased intra-BRICS trade, investment, tourism, capacity building, and technology transfers, the DIRCO said.

                                                          BRICS is the acronym for an emerging-market cooperative mechanism that includes Brazil, Russia, India, China and South Africa. During the group's summit held in August in South Africa, BRICS leaders agreed to invite six countries, namely Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates, to join the group. Their full membership will take effect on Jan. 1, 2024. ■

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