The recent BRICS summit in Kazan, Russia, painted a picture that was far from inspiring. Five autocrats and three democratically elected leaders joining forces to support a dictator unable to leave his country due to an International Criminal Court warrant for war crimes. What started as a promising group in 2006 with Brazil, Russia, India, and China, and later South Africa in 2010, has now shifted focus towards promoting Russia and China as leaders of the Global South. The latest summit in Kazan aimed to challenge the dominance of the US dollar in global trade and finance by introducing a new currency issued by the BRICS.
- The BRICS Summit Expansion:
Instead of expanding to include large, democratic emerging economies like Mexico, Nigeria, and Indonesia, the BRICS welcomed autocracies such as Egypt, Ethiopia, Iran, and the United Arab Emirates. This move raised eyebrows as these nations do not hold a prominent position in the world economy. - The Lula Factor:
Brazilian President Luiz Inácio Lula da Silva, a key proponent of challenging the dollar’s supremacy, was unable to attend the summit due to health reasons. His vision of introducing a common currency with Argentina within the Mercosur trading bloc seems to be a distant dream. -
Challenges of Introducing a New Currency:
There are several hurdles in replacing the dollar with a BRICS currency. The stability of the proposed currency known as R5 and the issue of trade imbalances between nations pose significant challenges. -
Role of a Currency:
A currency must act as a unit of account, a medium of exchange, and a store of value. These fundamental roles play a crucial part in determining the suitability of a currency for global trade and finance. -
Impact of Trumpian Antics and Geopolitical Tensions:
Recent global events, such as the Trump administration’s actions and the geopolitical tensions surrounding Russia’s invasion of Ukraine, have shaken the confidence in the US dollar as the global reserve currency.
In conclusion, while the dream of replacing the US dollar with a BRICS currency may seem appealing in theory, the practical challenges and geopolitical realities paint a different picture. The dominance of the dollar is deeply rooted in its stability, predictability, and trustworthiness, factors that are not easily replicated. As the world navigates through shifting geopolitical landscapes and economic uncertainties, the role of currencies and institutions will continue to evolve.
