Browsing: BRICS

BRICS currency, vision or pipe dream

China presently has the largest sum of foreign exchange reserves in the world. When its over US$ 3 trillion in reserves is added to the reserves of the other BRICS member states the questions as to why they cannot issue their own currency start to grow louder.

Talks of a common currency fizzled out as more pressing national and international matters eclipsed the idea. This year 2022 has seen renewed calls for a common reserve currency emerge once again. This time Russia is leading the call for the creation of a reserve currency that will be an alternative to the United States dollar as a mechanism for the settlement of international transactions.

Russia’s motive for making such a call is obvious, the country has been at war with Ukraine since February 2022. This aggression against Ukraine has earned Russia some of the most stringent economic sanctions in history. What has been the greatest pain point is that Russia has lost access to at least half of its foreign exchange reserves since the beginning of its war with Ukraine.

According to Statista, agriculture contributes at least 4% of the annual value added to the gross domestic product of Brazil. It accounts for at least 9% of the people who are employed and able to work. On the face of it reading numbers 4% and 9% seem like they are nominal until one considers the sheer size of the country of Brazil in terms of land mass. Brazil is one of the largest countries in the world in terms of land area. It sits on no less than 8.5 million square kilometres.

Of this land mass, approximately a third is used for agriculture. For perspective’s sake, Brazil is the fifth largest country in the world after Russia, Canada, China, and the United States. The Brazilian Report states that all the countries that make up the European Union would fit inside Brazil’s borders!

To bring the perspective much closer to home, the land mass Brazil sits on is reportedly seven times larger than South Africa. Zimbabwe would fit twenty-two times into Brazil’s land mass, and Kenya would fit 15 times into the South American country. The country is large. The land it uses for agriculture purposes alone would be larger than some countries and continents.

In terms of the economic outlook for India, opinions are divided given the headwinds facing the global economy presently, like the cost-push inflation from increases in food prices and soaring energy costs brought on by the Russia-Ukraine conflict. Deloitte, the global consulting and accounting firm, is optimistic about the economic growth prospects of India. It is projected that the Asian country will remain the fastest growing economy in the world, with growth projected to come in at between 7.1% to 7.6% in the years 2022 to 2023 and 6% to 6.7% in the years 2023 to 2024.

How has India managed to bullet-proof its economy to the extent that it has managed to register economic growth within a context of slowing global economic growth? According to Deloitte, India is primarily a domestic demand-driven economy, with consumption and investments contributing to 70% of the economic activity.

According to the Reserve Bank of India (RBI) analysis of 10,000 listed companies, businesses have seen a steady net profit-to-sales growth over the past year and are sitting on piles of cash. This fact highlighted by the global accounting firm is a key contrast with African economies, which tend to be driven by factors other than domestic demand. African economies generally suffer from a disproportionate dependence on foreign demand to drive economic growth.

The current large-scale transition of the global economy, principally triggered by the current conflict between Ukraine and Russia as well as the standoff between China and the United States, creates a multipolar world map with new centres of power.

Brazil, Russia, India, China, and South Africa, also known as the BRICS nations, have enhanced industrial and financial might and are pushing for a seat at the global new power axis table. These nations are essential participants in international markets for products, services, and money, having a considerable, sometimes decisive, effect on how the global economy operates.