 |
| BRICS: The Illusion of a New World Order |
The myth of BRICS as a formidable challenge to the existing global order. It exposes the alliance's internal divisions, economic vulnerabilities, and dependence on Western financial systems.
Chapter 1 - Introduction and Overview of BRICS:
BRICS is the alliance of Brazil, Russia, India, China, and South Africa, along with other countries that have recently joined, including Egypt, Ethiopia, the United Arab Emirates, Saudi Arabia, and even Iran. These countries represent one-third of Earth's surface, almost half of the world's population, and 30% of global GDP. But that's not all - the list of countries considering membership extends from Mexico onwards.
We're talking about a massive alliance that will have an increasing influence on the global political landscape and whose share of the world economy is already larger than that of the G7. We're dealing with the biggest rival to the US bloc, and note that it's not just us saying this. The BRICS group has the clear intention of ending Washington's dominance over the world. Their goal? Nothing less than destroying Uncle Sam's strongest weapon - the dollar.
To this end, BRICS has two secret tactics. The first is a very catchy acronym - BRICS, can't get better than that - and the second is... nothing. That's it. A memorable acronym is all that BRICS is in practice, and to be honest, that's also why they haven't changed the name despite accepting more members than the original five.
Yes, yes, I know, but wait a minute - didn't you just tell us that they make up half of the world's population and that their economy already surpasses that of the G7? Yes, that's all true. The countries that make up BRICS are large in every respect. The problem is that the alliance is all smoke and mirrors - it doesn't really exist. They're like Maseratis - a fancy name but no great engine.
They're a group of countries that meet once a year, say how much they love each other, complain about how bad the US is, and that's it. Then they go home and continue living their lives as if nothing happened.
Chapter 2 - History and Origin of BRICS:
The first thing you need to know is that the BRICS states didn't begin as an alliance at all. On the contrary, the name comes from this man you see on the screen, Jim O'Neill, an analyst at Goldman Sachs. O'Neill essentially needed a marketing term to sell investments in four countries that he thought could be very profitable but otherwise had nothing in common - and remember this detail because it will become important later.
So he simply took the initial letters of each country (South Africa was naturally left out at this point), and here's the thing - the name caught on, and for some reason, Brazil, Russia, India, and China decided to turn this catchy name into an alliance, or at least the attempt at an alliance. A few years later, South Africa joined, and you know the rest of the history. Many media outlets, and now also YouTubers who foresaw disaster, began predicting the dominance of this US counterpart.
The problem now is that almost 20 years have passed - yes, 20 years - and can you name any joint achievement of BRICS? I can't either. If we were to ask this question to anyone involved, the answer would almost certainly always be the same: the New Development Bank (NDB) is the alliance's biggest initiative, if not the only one.
The idea was to create an investment bank like the World Bank or the International Monetary Fund, but naturally outside of US influence. You must know that the IMF has the same reputation in many countries as the boogeyman - an ultra-capitalist and ruthless organization that indebts poor countries so they have to sell themselves to the United States at bargain prices.
But yes, when it comes to asking for money, all governments extend their hand. Its counterpart, the New Development Bank, would instead be an institution dedicated to investing in projects that would lift these countries out of poverty by adapting to their finances and customs.
Chapter 3 - The New Development Bank (NDB):
This bank, for example, provides some of its loans in local currency, so countries have a lifeline when the dollar strengthens. Additionally, it wouldn't demand austerity policies from countries receiving investments to ensure they can pay for them, or anything similar. And unlike IMF loans, these would be much more democratic and transparent. However, I think you can already imagine the whole speech - dreams and roses.
But what exactly happened with this bank? Initially, everything seemed to run smoothly - its credit rating was AA+, the second-highest rating, and it granted loans worth 12 billion US dollars, mainly for energy and transport infrastructure. But of course, nothing is as rosy as it seems.
First of all, the 12 billion dollars they've lent in their entire history is less than what the World Bank lends in a single year. In fact, this bank is smaller than the AIIB (Asian Infrastructure Investment Bank), a Chinese bank that does exactly the same thing but focuses on investments in Asian countries. Doesn't that seem strange to you? I mean, that the big joint project is smaller than a similar project of a single member country? It seems a bit like a bluff.
But that's not all - actually, the size of the bank is the least of its problems. Remember that credit rating of AA+? Well, when they borrowed 1.2 billion dollars last year, the interest they had to pay increased fivefold compared to the previous year. Yes, you heard right - nowadays, to return to the previous comparison, their financing costs are 30% higher than those of the World Bank.
And all this explains why lending has been completely frozen for several years, and even more so after Russia's invasion of Ukraine. Since Russia is one of the most important BRICS members, after the outbreak of war and international sanctions, not even BRICS allies wanted anything to do with it. So they slowed down their investments in a bank where Russia is so strongly represented. And of course, considering that Russia is set to take over the chairmanship of the bank next year... well, what can I say - investors aren't exactly excited about the bank.
But wait, there's more - remember the idea of making loans democratic and transparent? As it turns out, the democratic part isn't so important. The original members of the bank hold 55% of the capital, which means that in practice, they can veto anything that benefits the weaker members. And as for transparency - well, that looks similar. There's consensus that their loans are much more opaque than those of the IMF.
Chapter 4 - Internal Conflicts and Challenges:
Now, what if I told you that the problems with the BRICS states existed long before the war in Ukraine? Since its founding in 2016, the NDB has used dollars for its transactions. Moreover, two-thirds of all the money they have for raising capital is in dollars. Once again, this is not what you would expect from a bank that has come to overthrow the US system - it's like opening a coffee shop to sell coffee that you previously bought at Starbucks.
Now that you know this, I'm sure you won't be surprised by the words of O'Neill, the man who invented the BRIC acronym: "The NDB has been quite disappointing so far, almost anonymous." If we're focusing so much on the history of the NDB, it's because it very well summarizes the three main problems of the BRICS alliance:
- Very little capital - a sign that the alliance isn't very serious
- Internal conflicts, like the one they now have with Russia
- Enormous dependence on the dollar, Wall Street, and other Western institutions
But if you'd like, let's take a closer look at the internal conflicts, because you shouldn't believe for a second that Russia is the only problem. Far from it. Apart from Russia, for obvious reasons, the founding members' dissatisfaction with China is growing - not that it was ever insignificant. More than half of Indians and Brazilians have a negative opinion of the country, and this should surprise no one.
Since China began to slow down its economy, Xi Jinping's territorial ambitions have only grown larger, and news like this is becoming more frequent: "China says more Indian troops at Himalayan border won't ease tensions." Come on, the Chinese and Indians have even had skirmishes between soldiers with sticks and stones.
And as for the rest of the countries, well, you can imagine. In the last 10 years, China has played the role of sugar daddy to many developing countries, but many of the projects it has invested in have become absolute disasters. And the Chinese economy is no longer able to cope with such failures, so it's withdrawing its investments from many countries. On this channel, we've already told you how China is abandoning Africa, and let's not even talk about the recent BRICS additions.
While it's true that tensions between Saudi Arabia and Iran have eased thanks to China, does anyone really believe they will achieve the level of cooperation needed to overthrow the US and Europe? Ultimately, this alliance has a major problem - it unites countries with completely different models. India and Brazil are two very proud democracies, the exact opposite of China and Russia, not to mention India's alliances with the American bloc - Apple is moving all its factories there from China, and India is also involved in military partnerships like the Quad, which are direct rivals of China.
And the political model isn't the only thing that counts - economic performance is also completely unequally distributed. Since 2008, China has grown by 140% while South Africa, for example, has seen a decline of 4%. This has increased China's economic weight from half to 75%.
Chapter 5 - The Role of the Dollar and Future Prospects:
And that brings us directly to the last major problem of BRICS - their inability to challenge the dollar. Politicians like Lula da Silva were very enthusiastic about the idea of BRICS challenging the dollar, but let's be honest - in practice, any joint monetary policy coordinated against the USA means that each country's currencies would be subordinated to the Chinese Yuan.
Nevertheless, we don't want to withhold a fact from you - the Yuan makes up only 3% of global foreign exchange reserves, compared to the dollar alone at 60% and the euro at another 20%. China is still far from displacing Uncle Sam, and don't think we've cherry-picked one indicator - no matter what we look at, the Yuan is basically an irrelevant currency in international markets.
And note that this isn't because the Yuan is rarely used - on the contrary, it's a widely used currency. Countries hold Yuan for only two reasons: either to import goods from China or to convert them into dollars. In both cases, they try to get rid of them as quickly as possible.
When you add the fact that the Chinese Communist Party still maintains a large part of control over the banking system instead of letting the Yuan's price fluctuate in the market, it's simply impossible for it to become the world's reserve currency. To give you an idea, according to an OECD study, the Yuan is undervalued by 20-25%. In other words, the government artificially lowers the price of their currency to promote exports.
And that's another thing - it's not just that China can't make the Yuan the world's reserve currency, it's that it doesn't want to. The Chinese model is based on a weak currency to favor the industrial sector and achieve a very positive balance of payments - in other words, a currency that serves exports.
The US is exactly the opposite - thanks to a strong dollar, which has been particularly strong since Carter and then Reagan began their high-interest rate policy, the manufacturing sector is much smaller than it should be, and the country imports far, far more than it exports. In other words, the US damages their own industry to have a strong currency that, in return, is so highly valued and used by the rest of the world - a model diametrically opposed to the Chinese one.
So does anyone really believe that China will make a 180-degree turn in its policy and that the other countries will give up their monetary sovereignty? Most likely not. But even if this were to happen, the problems wouldn't be solved. Take Argentina, for example - they approached BRICS during its last expansion, but the alliance was short-lived when a grumpy man arrived at the Casa Rosada with shouting and a chainsaw, and the honeymoon was soon over.
What happened in Argentina could very well happen in countries like Brazil - Lula might be enthusiastic about the idea, but Brazil is a democracy, and the next Bolsonaro might not be so enthusiastic. For all these reasons, South Africa made things very, very clear at the last BRICS meeting: "BRICS currency was never under discussion," says South African Finance Chief.
To give us an idea of how much trust they have in each other, Vladimir Putin had to join this meeting via Zoom, literally out of fear of being arrested and handed over to the International Court of Justice. In short, BRICS (or BRICS Plus as they're now called) is a group of countries with completely different, if not directly opposing, political and economic models. They have never started a single successful joint initiative and certainly don't pose the slightest threat to the dollar. Ultimately, the BRICS states have only agreed on a name with lots of marketing, but otherwise, it's all smoke and mirrors.
 |
| The role of the dollar and future prospects |
#BRICS #NewWorldOrder #Geopolitics #GlobalEconomy #InternationalRelations #China #Russia #India #Brazil #SouthAfrica #Geostrategy #EconomicPower #PoliticalInfluence #GlobalPolitics #WorldOrder #InternationalFinance