by Mario Lettieri and Paolo Raimondi * –
The forthcoming summit of the heads of state and government of the BRICS countries could mark a decisive turning point towards a more accentuated multipolar process in world politics and the economy. It will be held on August 22-24 in Johannesburg, South Africa and will also feature a large group of nations from the Global South. There are already 13 nations that have officially applied to be part of it. 6 others who have expressed their interest in participating.
One of the central points in the work program is the creation of a new currency in order to encourage trade and investment, within the group and with other emerging countries, without having to use the dollar. Without, therefore, having to submit to the control and influence of an external power and without having to pay a tax for the “service”.
It’s not about creating a circulating currency, like the euro. The BRICS are aware that there is a long way to go for this goal. Instead, they are analyzing the steps necessary for the creation of a currency of account, as the Ecu was used in Europe in the years that preceded the Euro. They have been studying the European experience of the ECU for a long time. And the European Union, inexplicably, seems to ignore this historic step.
To prepare for the summit, a meeting of the BRICS foreign ministers was held in Cape Town in recent days, with the participation of representatives of 15 other countries. Naledi Pandor, South African Foreign Minister reiterated the group’s intention to continue working on the feasibility of a common currency.
In his message, the president of South Africa, Cyril Ramaphosa, responded to all the considerable pressure exerted by the USA and Great Britain, reiterating that “we want to seize the opportunity to promote the interests of our continent which has been plundered, devastated and exploited by other nations and for this reason today we want to build solidarity together with the BRICS”. It is a very important passage if one relates to the creation of the African Continent Free Trade Area (AFCFTA) which is actually discussing the possibility of creating a new monetary unit of account to favor trade within Africa.
To overcome submission to the dollar and dependence on the dominant Swift network, the BRICS are studying their own global payments system. It is not a question of replacing it completely, but of adding an alternative one to escape, if necessary, the conditioning and effects of the sanctions.
According to the IMF, in 2022 the BRICS exceeded the G7’s GDP by 4% if calculated through the measure of the ppp, purchasing power parity, i.e. taking into account the cost of living and inflation. In the same year their trade surplus was 387 billion dollars, which also favored the increase of their gold reserves.
It should be noted that the Fed’s increase in interest rates increases the value of the dollar on the currency markets but devalues the currencies of the countries of the southern hemisphere, and therefore increases their debt. The diversification of monetary reserves is, in fact, another topic on the BRICS agenda. It is a policy also favored by the central banks of the so-called Global South which are increasing the weight of gold in their reserves, to the detriment of the dollar. The general demand and purchases of gold by central banks have grown enormously. This is leading to an increase in gold production and a possible revaluation of the value of gold reserves.
For his part, the Brazilian president Lula da Silva, on the occasion of the Unasur conference, the Latin American economic and political community, said he “dreams that the BRICS have its own currency, like the European Union has the euro”. Addressing the other Latin American countries, he stated that “we should deepen our South American identity also in the monetary sphere, through more efficient compensation mechanisms and the creation of a common unit of exchange, reducing dependence on extra-regional currencies”.
In turn, Dilma Rousseff, the new president of the New Development Bank, the bank of the BRICS, highlighted the importance of the recent oil deals in renminbi between China and Saudi Arabia. Rousseff said: “I think in today’s world there is a growing trend to promote trade using local currencies. There are several prominent examples. For example, the oil market is a relevant sector with respect to currency exchange. Countries in the Global South are increasingly using local currencies for commercial payments.”.
In conclusion, it should be recognized that a unipolar world with a single dominant currency clashes with a real multipolar economy.