Yves here. Even though this post stresses the opportunity for BRICS members to play a heftier role in international lending and development programs, it effectively admits BRICS is pretty much nowwhere on this front. The Kazan Declaration of October 2024 did not commit BRICS to developing new institutions. It instead explicitly reaffirmed the IMF as the sovereign bailouter-in-chief. The article explains, “It has not developed sustainable long-term institutions that could challenge the existing system.” It also describes conflicts among the biggest players that impede developing new funding mechanisms.
The author points to other BRICS initiatives, such as strengthening regional trade ties, but that is not the same as having a BRICS institutions in addition to the (admitted to be not very effective) New Development Bank. Instead, the author recommends that small and middle sized states lobby for greater influence in existing financial institutions.
That is not likely to get very far. As Africa Watch explains:
Yesterday [April 23], US Treasury Secretary Scott Bessent delivered an interesting speech in Washington at the Institute of International Finance…
The speech was highly anticipated because there has been chatter about the future of the two Bretton Woods Institutions in the wake of the Trump Shock. That shock has already delivered the unexpected shutdown of U.S.A.I.D and the withdrawal of the US from the World Health Organization (WHO). Many have wondered whether a withdrawal from the IMF and World Bank was also on the cards.
The uncertainty was largely settled with yesterday’s address where Bessent was unequivocal in stating: “Far from stepping back, America […] seeks to expand U.S. leadership in international institutions like the IMF and World Bank.” In other words, the US ain’t going nowhere!
Bessent’s renewed commitment to the IMF (“the Fund”) and World Bank (“the Bank”) does not come as a surprise to me. In the last couple of weeks, I have heard pontifications from eminent social scientists (mostly from the global North) predicting a US withdrawal with certainty. These analyses have struck me as naive.
In my estimation, there are very few, if at all any, multilateral institutions that have delivered a “return on investment” for the US like the Fund and the Bank. This is why Bessent yesterday reaffirmed his country’s commitment to the two institutions.
Unlike other multilateral organizations, the US, on its own, has effective veto power when it comes to the most consequential decisions of the World Bank and the IMF. No other country has this power. And in no other multilateral setting does the US have this singular power. Not even in the UN’s Security Council where the US has to contend with the veto powers of the other four permanent members
The underlying issue, which is seldom acknowledged, is the despite their greater GDP and population heft, BRICS nations are much poorer. The poor do not good bankers make. You need a financial surplus to be able to make loans. Although neither chart is on target (BRICS is now bigger, its chart includes forecasts through 2029), the disparity in GDP per capita is os great as to make the point:
By Heena Makhija, an independent foreign policy analyst who specializes in the study of International Organizations, Multilateralism, India at the UN, and Global Norms. Originally published by Observer Research Foundation; cross posted from InfoBRICS
Donald Trump’s return to office saw the United States (US) withdrawing from its multilateral commitments and announcing plans to increase tariffs on exports, fueling the possibility of a trade war. Even in a multipolar world, the US remains the largest shareholder in multilateral financial institutions such as the World Bank and a shift in policy will have implications for institutions as well as markets. The fragility of the existing global financial system also revives the opportunity for non-Western-led entities such as BRICS to strengthen their position as a counterbalancing actor.
Addressing Altered Global Dynamics: BRICS to BRICS Plus
The Bretton Wood institutions, a product of the West, often adopted a callous approach towards the needs of the developing world. A study of 81 developing countries between 1986 to 2016 showcases the negligible impact of the International Monetary Fund (IMF)’s structural ‘conditional’ loans on the recipient states. The gap paved the way for ‘minilateral’ financial groupings such as G77, where developing countries collaborated at the global level. The formation of ‘BRICS’ emerged from the rapid rise of economies such as Brazil, Russia, China, India, and South Africa, and their significance in global financial governance.
The gap paved the way for ‘minilateral’ financial groupings such as G77, where developing countries collaborated at the global level.
Since its inception, BRICS has adapted to the evolving global economic realities to counter the post-war narrative. In the aftermath of the 2008 Financial Crisis, at its first summit, BRICS member countries committed to advancing the “reform of international financial institutions, so as to reflect changes in the global economy”. In 2023, acknowledging the need for expansion, BRICS further invited six emerging economies—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates—to join the bloc at the 15th BRICS Summit.
Challenge of Pivoting
At the 2024 Summit, Prime Minister Modi highlighted the significance of economic cooperation and expansion—the ‘BRICS’ economy now stood at the value of more US$ 30 trillion dollars. The membership expansion is relevant, but the institution has been facing severe criticism for failing to address the financial concerns of the Global South and merely being a symbolic association—more statements, less substance.
Firstly, BRICS institutionalised itself through the Annual Leaders’ Summit and ambitious initiatives such as the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA). However, due to its tepid growth over the years, BRICS gives an impression of being a short-term, single-issue response to the financial crisis. It has not developed sustainable long-term institutions that could challenge the existing system. For instance, NDB’s focus on the needs of emerging economies through quick loans, competitive lending rates, and use of local currency was touted as its differentiating factor from the Western-dominated institutions. Yet, NDB’s local currency lending remains low. NDB’s regulatory “country system approach” towards infrastructure projects has also been condemned for leaving the task of monitoring to local agencies.
The five founding members have equal voting shares, and even with its expansion, they are designated to hold no less than 55 percent of the voting rights.
Secondly, geopolitical developments involving the primary shareholders—Russia’s invasion of Ukraine and the turbulent India–China bilateral relations—tend to cast a shadow on consensus-based financial groupings as national interest takes precedence. The five founding members have equal voting shares, and even with its expansion, they are designated to hold no less than 55 percent of the voting rights. BRICS’ influence and its potential to bring about global institutional reforms have been hindered by a lack of consensus among its ‘politically polarised’ members and rising geopolitical tensions. The 2024 Fitch Ratings also highlight a concerning tilt towards China, citing the construction of NDB’s headquarters in Shanghai and the push to replace the dollar with yuan— both of which have raised concerns among other member countries. Given these contradictions, BRICS must pivot and consolidate itself as a ‘balanced’ alternative to the existing multilateral financial institutions.
Towards a Multilateral Financial Institution: Scope for BRICS
As its geopolitical balancing act, other members like India cultivated closer economic ties with the US. Trump and Modi’s recent meeting led to the “US–India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology) which included a bold new goal for bilateral trade—“Mission 500”, aiming to double total bilateral trade to US$500 billion by 2030 alongside fostering partnerships such as the QUAD. Yet, on the institutional multilateral front, BRICS still exists as a comprehensive multilateral platform for promoting the financial interests of developing countries through greater South-South cooperation—it would be shortsighted to underestimate the economic influence of a non-Western-led initiative.
Several key arguments support the potential of BRICS, from its market share to its institutional capabilities. First, the member countries have a fair shot at enhancing economic cooperation through strong intra-regional trade given the geographical proximity. BRICS’ exports witnessed an increase from US$ 493.9 billion in 2001 to US$ 4651.6 billion in 2021. The 10 member nations account for almost 40 percent of crude oil—production and exports; and one-quarter of the global GDP. Second, at the last summit in Kazan, 34 countries officially applied for membership including resource-rich and fast-growing economies such as Azerbaijan, Bangladesh, Indonesia, Senegal, Thailand, and Vietnam, among others. Structurally, BRICS might be an intergovernmental organization (IGO), but it does not suffer from supranational characteristics common to others such as the IMF and the World Trade Organisation. BRICS is a state-led process—it has the advantage of partial institutionalisation and a summit-based approach. Unlike its counterparts, such as the G7 and G20, BRICS is also willing to expand and this flexibility has attracted other developing countries who find it easier to negotiate at decentralised forums. Third, although the progress has been gradual, NDB has had some noteworthy successes—membership expansion, credit rating, and issuance of RMB bonds. NDB’s General Strategy for 2022–2026 further prioritises cohesive action and institutional assistance to member states to support their international commitments on the SDGs and Paris Agreement. BRICS also diversified its mandate to foster cooperation in areas of energy, transport, information and communication technology (ICT), and tourism.
NDB’s General Strategy for 2022–2026 further prioritises cohesive action and institutional assistance to member states to support their international commitments on the SDGs and Paris Agreement.
The backlash faced by BRICS for its inability to establish a global institutional model also stems from a reductionist understanding of seeing it as a replacement for existing structures. BRICS’ objective was not to replace, but to provide a counter coalition to emerging economies and address the disparity. As its membership increases, BRICS will move towards establishing a lobby of emerging and middle powers advocating for greater representation and reforms in the global financial institutions. While there are valid concerns that bilateral tensions within the group—such as strategic disagreements—could impact its functionality, these concerns need not dominate its agenda. Such differences can coexist with collaborative efforts on multilateral financial initiatives.
The way forward, thus, lies in de-hyphenating and focusing on BRICS as an economic coalition rather than a political alliance—it is possible to build multilateral consensus, especially in non – traditional areas such as sustainable development, climate, and inclusive growth. As the world grapples with the possibility of another global financial turmoil, BRICS, despite its challenges, might be the closest the Global South will get to establishing a functional multilateral financial institution.
I don’t know what ‘de-hyphenating’ means in this context, but the last para as I understand the outcome of Kazan, is exactly what is planned.
Banking is expensive theft.
Stealing from the future our children and grandchildren, for the sake of the present additional growth that is wasted, by design, to further enslave those who labour.
Houses that last 30 years or so instead of hundreds. Light bulbs that last 1000 hours. This has gone on for a century.
Banks fund wars. Soaking off the brave so as to ensure domination.
You’ll never get a loan with that belief system. You want a freebie for others to eat your risks.
There is such a thing as the time value of money.
Future dollars are worth less than present dollars.
That’s before getting to credit risk (borrower not having the dough to repay or choosing to cheat the lender)
If you want to borrow, you have to pay interest. This is not hard to understand unless you don’t want to understand it.
Uh. That is not how banking works.
If I can increase my company profit if I borrow money where the total cost (that is rent) is less then that increase in profit then I’d be stupid to not borrow. That is the easy case, I can also pick a time horizon and if my total increased profit to that point is more then the cost of loaning money I’d be stupid to not borrow.
So why does borrowing cost? Risk, there is always a chance the loan can’t be repaid. And opportunity costs, the money for a loan can’t be invested somewhere else to make a profit.
Borrowing is only wrong if it is just for keeping up with the Joneses (when doing personal loans) or non investment purposes (when a company does it) and both are choices made by the entity doing the borrowing not the bank. A bank should not care about why money is loaned unless it is specifically stated in their mission statement that they for example do not support war industries.
As for housing lasting only 30? That has always been the norm if you build with wood. It is a cycle of 20 to 30 years where you end up replacing most of exposed parts of the house. Or you don’t, tear it down after 30 to 40 years and build a new one in place since that can be cheaper, especially after 40 years no maintenance where you might have to replace interior walls as well due to neglect.
1 000 hour light bulbs have always been a the standard for incandescent light bulbs, which isn’t too strange seeing that the operating principle is heat thin metal wire until it starts melting/vaporizing. Before led lamps if you wanted longer you needed fluorescent lamps (at least 6 000 hours but usually 15 000+). Led lamps do 20 000 hours minimum, expected life expectancy 30 000 hours (and cost less electricity to use).
Finally banks do not fund wars, governments do. Even if it is the US where the army has been used as corporate enforcer that army (and those corporate enforcement wars) has been, and still is, funded by taxation, even if that tax is still to be collected. Graft & corruption are not the same.
From everything I’ve read, BRICS was only about economic alliance, never political. In the Sudan conflict, UAE & Russia are nominally on ‘opposite sides’. It has always posited developing optional ‘alternatives’, not ‘replacements’, to the Western financial systems. Just giving emerging/developing countries other options to consider, as the IMF, WB, Swift etc are no longer the ‘only games in town’. Eg. China has always maintained it doesn’t want to hold a “reserve currency” either, the Triffin Dilemma is a cautionary tale.
I have only just ordered Kathleen Tysons latest book “MultiCurrency Mercantilism”, so cannot comment myself, but from reviews, some interesting concepts are arising.
Thank you. Enjoy.
Kathleen and I have worked on operational resilience with the Bank of England, her former employer, and belong to the same City guild.
She’s a good egg.Other than being a passionate believer in and doer for multilateralism, the other reasons why you don’t see Kathleen in print and on air are she marches for Palestine regularly, volunteers weekly at a food bank and doesn’t suffer neo-liberal and neo-con fools, not even gladly.
Not living in the world of finance, I wasn’t familiar with Kathleen Tyson… until today.
https://m.youtube.com/watch?v=p7VxdW7UHU0
Thank you.
Kathleen is well worth keeping an eye on.
I’m taking the viewpoint that BRICS does not have to challenge western institutions. It is like a smaller version of the UN that is getting larger and larger. And because of who they take in and the requirement that none of them are allowed to sanction another country, that it forms an organization where deals can be made and business done. Infrastructure can be integrated between countries and new standards made. And you don’t have countries like the US, UK, France. etc, throwing spanners into the works as they are not part of it. They have no voice there. It is also a way to bypass the compromised SWIFT system and even bypass the dollar. As I said, it does not have to challenge western institutions. It just has to keep on building while those institutions start to fail and fall into disuse. And BRICS will be there to pick up the pieces.
I hate to sound harsh, but BRICS boosterism is hard to take. The UN has proven to be ineffective and was never intended to be much of an economic organization.
Tell me how that vision works out when a lot of Global South countries have 1997 Asian stye crises. Indonesia and Thailand had food riots. There are still quite a few abandoned real estate developments from back then where the plot hasn’t been cleared, so you have a surprising number of ugly concrete partly completed apartment blocks. They actually needed the horrible IMF bailouts, because the alternatives were worse. Jomo who is a firm developing country advocate, was predicting crises across the Global South even before the Trump tariffs.
It’s my contention that no matter how badly run some of those countries are run, it does not help when the west acts to deliberately sabotage and keep those countries on the bottom rung of development. A Trump official came out and said that this was the aim recently. And then there is the work of the IMF in places like South America and where it ignored the advice of its staff and forced those countries to adopt policies that would sink their countries deeper into the mire. The book “Confessions of an Economic Hit Man” laid it all out and that book was written way back in 2004-
https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
So tell me why the Kazan Declaration signed up for more of the same? You are shooting the messenger. BRICS is unserious about changing the situation.
The point of the Kazan Declaration was to get the US to see that they are cooperating with western institutions like the IMF and so forth and not challenging them. Sometimes you win by being the party that makes less mistakes and not sabotaging yourself. If you take the long view, they just have to build themselves up and let western institutions self destruct – with Trump being an accelerant here. or so I believe.
Sorry that is not what commentators said at the time. China wants a China dominated system. India does not. That alone is enough to stymie new arrangements.
This has nothing to do with long games v. the West and everything to do with divisions within BRICS.
As I have said repeatedly, any new set of monetary arrangements (and that does not mean bi-lateral trade, that is an established practice) entails a surrender of national sovereignity to new supranational organizations. That contradicts the BRICS raison d’etre of multipolarity, which = more, not less, national sovereignity.
I have a different interpretation of what they are setting out to do. They want to change the existing structures from within, not create new ones to do the same job. they believe’ in time’ that it is inevitable as long as enough countries work together. ‘In time’ is the concept that is very difficult for most westerners to understand, I include myself, because of the short-termism endemic in everything we do.
An example today, the signing by Trump of the ‘mineral deal’ , which is just a scrap of worthless paper , but he had to be seen to sign something.
See the new post on the minerals deal. I beg to differ.
The agreement has the effect of committing the US to the survival of Ukraine, and will also throw a spanner in dealings with Russia when Russia gets to the point where it can impose terms or otherwise have de facto control of rump Ukraine.
And you appear not to have read even the top of the post. Global South countries cannot take over the governance of the IMF or the World Bank. The US has a de facto veto.
So, are you saying that in relative terms, BRICS still offers more sovereignty to Global South than IMF or World Bank?
From where I’m looking at, any form of international collaboration is limiting national sovereignty (at least in the existentialist sense). Some forms of that collaboration just are way, way more neo-colonialist than others.
I don’t like sounding harsh, but all of this “I want a pony” thinking about BRICS is extremely frustrating. It is unhelpful to the BRICS project.
BRICS has no alternative to the IMF or World Bank. Its members would have to sacrifice considerable national sovereignity to create their own. That is why none is even under discussion now.
If BRICS is to be more than a talking shop and a forum to create regional alliances (which exist already, see the SCO and ANSEAN among others), its members have to be prepared to give up some sovereignity. There is no way to square this circle.
“The UN has proven to be ineffective”. This feels like the use of passive voice, when the correct description would be “The US has made the UN ineffective” due to its veto power. Because sometimes, at the vote count, it looks like the US against the World…
And of course, in the IMF and World Bank, voting is even more rigged in the favour of the US.
My feeling is that BRICS is waiting in the wings, preparing, fortifying (at least China and Russia, which are not completely taken over by oligarchs and political power is above), for the slow decomposition of the US power, which will be undermined from within.
As an example of abandoned real estate, an episode of “Mysteries of the Abandoned” featured the
Sathorn Unique Tower.
I don’t doubt BRICS can come up with systems that protect their elite and corporations from sanctions.
The article summarized a number of concerns, but I’ll pose some additional ones as questions:
Where did BRICS stand when Operation Car Wash was happening in Brazil? What would it take for BRICS as an organization to counter something like that (assuming they wanted to counter it)?
Why do some of Putin’s economic advisors hail from the same Western institutions that deal in the exploitation of the global south? And exactly when and how does its SMO end?
Has South Africa managed to kick its neoliberal economic prescriptions for its economy?
Can China be concerned about more than all those exports?
How much control does India have over its oligarchs?
Seeing how the West likes to roll, what becomes of the smaller players within the organization without security guarantees? And the jury is still out on what happens in Iran.
This is shifting the grounds of the argument. The post has nothing to do with sanctions. It has to do with new BRICS financial institutions for lending (as in for development and rescues). 99
Yes, I’m just pointing out what seems to be the priority.
perhaps the game plan of BRICS is to hope that the West self-implodes.
I would agree this is not much of a plan but it is somewhat probable based on the incompetence of the current batch of leaders.
The current geopolitical issues between, India and Pakistan on Kashmir and India and China on their borders would seem to make any true advancement impossible.
The BRICS lack an overarching power like the West has with the United States.
What does self-implosion entail?
Does it mean personal consequences for the establishment and the end to their failing upwards?
Or do they ease their way into other global institutions and leave the masses in their respective countries floundering?
I would view it as failure for the establishment. What comes next, not sure
https://aurelien2022.substack.com/p/do-you-believe-in-magic
I for one appreciate the BRICS boosterism, TINA is hard to take.
But I understand that Yves isn’t here to provide me with hope, but only to provide us all with her best analysis.
Thanks but the boosterism is impeding serious action in a very big way. This is not TINA but giving a realistic depiction of the obstacles.