BRICS a shift in the international economic order?

Among a number of developments across the globe, the fourth annual summit of BRICS was held in New Delhi on 29 March, 2012.  The BRICS is an acronym referring to a newly-emerged economic alliance of Brazil, Russia, India, China and South Africa, which was formed initially as ‘BRIC’ with four emerging economies in 2008. Prior to this, the plan to form the economic alliance was formalized during a meeting of the foreign ministers of Brazil, Russia, India and China which was held in New York in 2006. The first summit of the BRIC, hence, was held in Yekaterinburg, Russia, on 16 June, 2009. South Africa joined the grouping during the third annual summit of BRIC in 2011, modifying the acronym to BRICS.

Representing the four continents, Asia, Africa, Europe and Latin America, straddling almost a quarter of the globe’s land area and comprising more than 40 percent of global population, the five economies are not only considered growing at a fast pace but also enjoy substantive power playing position in their respective regions and a political clout at international level. The foremost objective of this grouping is to alter the international financial architecture by introducing an alternative international financial order to the already existing financial system dominated by the West, especially the United States. However, the BRICS leaders also aim to work together towards global security and stability while dealing with all the pressing political, economic and environmental problems at global as well as regional levels.

The grouping is believed to have emerged in response to the decades-long political, economic and strategic dogmatism of the United States and the West at global level. Essentially, the idea of the BRICS as a grouping was evolved in the backdrop of the shift in international financial regime following the Asian economic crisis of 1997, when Group of Seven (G-7) formed the Group of Twenty (G-20) comprising China, Russia, India, Brazil and South Africa among others.

‘We are committed to advance the reform of international financial institutions, so as to reflect changes in the world economy. The emerging and developing economies must have a greater voice and representation in international financial institutions. We also believe that there is a strong need for a stable, predictable and more diversified international monetary system’, said the joint declaration at the end of the first summit in 2009. Four years on, the grouping has not yet made great strides or has not grown exponentially in terms of its institutional mechanism but it has surely strengthened its footings as an alliance setting forth its future agenda clearly.

The fourth summit was held under the overarching theme of ‘BRICS Partnership for Global Stability, Security and Prosperity’ and the 50-point joint declaration adopted at the conclusion of the summit declared:

‘BRICS is a platform for dialogue and cooperation amongst countries that represent 43 percent of the world’s population, for the promotion of peace, security and development in a multi-polar, inter-dependent and increasingly complex, globalizing world. We envision a future marked by global peace, economic and social progress and enlightened scientific temper. We stand ready to work with others, developed and developing countries together, on the basis of universally recognized norms of international law and multilateral decision-making, to deal with the challenges and the opportunities before the world today. Strengthened representation of emerging and developing countries in the institutions of global governance will enhance their effectiveness in achieving this objective.’

Also, the joint declaration took the first step towards promoting trade in local currency, and also agreed to work towards creating a new development bank on the lines of the World Bank. ‘The development banks of the five countries signed a master agreement on extending credit facilities in the local currency and the BRICS multilateral letter of credit confirmation facility agreement. The master agreement is aimed at reducing the demand for fully convertible currencies for transactions among BRICS nations, thereby reducing the transaction costs of intra-BRICS trade.’

From a geo-strategic perspective, all the BRICS states dominate their geographical regions and are prominent in terms of sizeable defense expenditures with China now emerging as the nation second only to the United States in defense spending.’ The BRICS countries have indigenous defense production capabilities and enjoy fairly reasonable strategic dominion which clearly exhibits the accumulated strength of the grouping and also indicate towards the future role the BRICS can play collectively at international level. It is in this view and also in line with the theme of this year’s summit that the grouping while expressing its concern over Iranian nuclear issue, recognized Iran’s right to peaceful uses of nuclear technology and called for the resolution of the issue through political and diplomatic means. The declaration also called for an immediate end to violence and violation of human rights in Syria.

The grouping, which is not yet recognized by western powers, especially the US, has drawn both criticism and support in different circles in home countries and across the globe. BRICS as a grouping has tremendous potential of playing a significant role in international politics and financial decisions. However, before concurring to the grouping’s claimed potential of altering the international financial order few intra-BRICS realities ought to be taken into account. Apart from being collaborators in areas of mutual interests, some of the BRICS states are strategic competitors as well. ‘Russia and India are considered as potential hindrances to China’s greater aim of regional supremacy. Also, Russia, India and Brazil envision multipolar global architecture for future course of international politics. On the other hand, China favours bipolar arrangement. China has also opposed India’s bid for a permanent seat in the United Nations Security Council.’ Still, the grouping requires greater cohesiveness in terms of the diplomatic and political relationship among its members particularly, a comprehensive strategic reconciliation between China and India appears indispensible in order to achieve meaningful cooperation based on partnerships and mutual benefits among BRICS promoting prosperity at global level.