Brazil, Russia, India, China, and South Africa are the emerging economies that make up the BRICS countries. These countries formally announced a partnership in 2009. In the same year, they created their first annual summit, which was held in Russia. It can be argued that these countries came together because of their perceived dissatisfaction due to what they believe is their limited influence in such international organizations as the World Bank and the International Monetary Fund. The BRICS countries further integrated their economies by trading with their own currencies and proposing the creation of a BRICS development bank, which would rival the World Bank.
Brazil, Russia, India, China, and South Africa, otherwise known as the BRICS countries discussed the possibility a few weeks ago of setting up a foreign-exchange reserve pool and a currency-swap arrangement in case a financial crisis breaks out in the West.
The BRICS countries decided to come together three years ago, because they were tired of being pushed around by the West, especially the U.S.
BRICS represent over 40% of the world’s population and 20% of the world’s gross domestic product (GDP). However, they are growing their portion of world GDP faster than the West, which means that, in just a few short years, the BRICS countries are going to represent a lot more than 20% of the world’s GDP.
Considering their growth rates and their prominence now in the world, the BRICS countries have grown up; they are not the little brothers the U.S. and the rest of the world can just push around: they are pushing back.
Earlier this year, the pushback came in the form of studying the proposal of the creation of a BRICS countries’ development bank that would offer an alternative to the U.S.-dominated World Bank.
Of course, should such a bank be created, it would need to be denominated in a reserve currency outside of the U.S. dollar and the euro, so that loans could be issued in that reserve currency to developing countries around the world and within the BRICS countries themselves.
Since the financial crisis in Europe continues to escalate, the BRICS countries decided they do not want to get caught—like they did during the Lehman crisis—without liquidity in their banking system, … Read More