Market News

By Mike Cohen

(Bloomberg) -- The BRICS group of emerging-market powers — the acronym stands for Brazil, Russia, India, China and South Africa — has gone from a slogan dreamed up at an investment bank two decades ago to a real-world club that controls a multilateral lender. Comprising 10 member states, it pairs several major energy producers with some of the biggest consumers among developing countries. The group has been increasing its ranks, enhancing its economic clout in a US-dominated world. 

Who are the new members of BRICS?

The bloc expanded in early 2024 to include Iran, the United Arab Emirates, Ethiopia and Egypt. Saudi Arabia was also announced as a new member, though the kingdom has yet to take a final decision on whether to join. Argentinian President Javier Milei, who took office in December 2023 and is steering his country’s geopolitical alignment toward the US and away from China and Brazil, declined a membership invitation. In November 2024, Turkey said it had been granted “partner-country status,” short of its expectation that it would gain full admission. A number of other countries have also been offered such second-tier membership, which would come without voting rights. The group agreed by consensus to admit Indonesia in January 2025, according to Brazil’s government. Nations still seeking to join include Malaysia and Thailand. 

What is the impetus for expansion? 

The push has been driven largely by China, now the world’s pre-eminent industrial power, which is trying to boost its global clout. South Africa and Russia have backed the expansion. India was initially hesitant because it was concerned that a bigger BRICS would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West — although both eventually agreed to an enlargement. For new members, BRICS offers the potential for easier access to financing from its wealthier members, and a political venue independent of Washington’s influence. 

What does a larger BRICS mean for the world?

The addition of major fossil-fuel producers may give the bloc more scope to challenge the dollar’s dominance in oil and gas trading by switching to other currencies, a concept referred to as dedollarization. That prospect has drawn the ire of US President-elect Donald Trump, who said any nation that abandons the greenback can forget about selling anything to America and find another “sucker” to trade with. 

Analysts at Bloomberg Economics say the expansion of BRICS is “more about politics and less about economics.” Beijing is trying to build an alternative world order by pulling southern hemisphere countries into its economic orbit in a challenge to US hegemony. The enlarged alliance may become a stronger counterweight to the Group of Seven industrialized nations — the US, Canada, France, Germany, Italy, Japan and the UK. Russian President Vladimir Putin, isolated by the US and its allies over his war in Ukraine, is also keen to see Washington’s global influence recede. 

Other groupings that are already promoting a move toward a more “multipolar” world — and away from the post-Cold War dominance of the US — include OPEC, the Shanghai Cooperation Organization, the Southern Common Market (Mercosur), and the African Union. 

What does BRICS do?

The biggest achievements of the group have been financial. The countries agreed to pool $100 billion of foreign-currency reserves, which they can lend to each other during emergencies. That liquidity facility became operational in 2016. They also founded the New Development Bank, a World Bank-inspired lending institution that has approved almost $33 billion of loans since it began operations in 2015, mainly for water, transport and other infrastructure projects. By comparison, the World Bank committed $117.5 billion to partner countries in fiscal 2024. 

How did BRICS get started? 

“BRIC” was coined in 2001 by economist Jim O’Neill, then at Goldman Sachs Group Inc., to draw attention to strong economic growth rates in Brazil, Russia, India and China. The term was intended as an optimistic scenario for investors amid market pessimism following the terrorist attacks in the US on Sept. 11 that year. The four nations took the concept and ran with it. Their rapid growth at the time meant they had shared interests and challenges, and combining their voices could increase their influence. The first meeting of BRIC foreign ministers was organized by Russia on the sidelines of the United Nations General Assembly in 2006. The group held its first leaders’ summit in 2009. South Africa was invited to join in 2010, adding another continent and the letter “S.” 

Who’s in charge?  

For most of the time BRICS has existed, China’s gross domestic product has been more than twice the combined economic output of the four other members prior to the expansion. In theory, that should give it the most sway. In practice, India, which recently surpassed China in population, has been a counterweight. BRICS didn’t formally endorse China’s big push to build infrastructure abroad, called the Belt and Road Initiative. That’s partly because India objected to such projects in disputed territory held by Pakistan, its neighbor and archrival. The New Development Bank has no dominant shareholder: Beijing agreed to the equal holdings for each member advocated by New Delhi. The bank is headquartered in Shanghai, but has been led by an Indian and two Brazilians, most recently former President Dilma Rousseff. 

Did Russia’s invasion of Ukraine affect the group? 

The other BRICS countries have adopted a broadly neutral stance toward the war, viewing it as more of a regional issue than a global crisis. However, the war changed Russia’s relations with BRICS institutions. The New Development Bank quickly froze Russian projects, and Moscow hasn’t been able to access dollars via the BRICS shared foreign-currency system. Essentially, with US sanctions piling up, other BRICS countries prioritized ongoing access to the dollar-based financial system over helping Russia. 

Moscow has proposed changes to cross-border payments between BRICS countries, a system that would circumvent the global financial system and help sanction-proof its own economy. The alternatives include developing a network of commercial banks that can conduct such transactions in local currencies as well as establishing direct links between central banks, a report prepared by the Russian Finance Ministry, the Bank of Russia and Moscow-based consultancy Yakov & Partners shows. It also envisions the creation of centers for mutual trade in oil, gas, grain, gold and other commodities. 

Are investors still interested in BRICS?

There’s still interest in emerging markets. But BRICS is largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories. US-led sanctions have put Russia off limits for most foreign investors, and some sectors in China — especially technology companies — have also been sanctioned or face potential investment bans. 

China also is a maturing economy, increasingly separated from other emerging markets and facing a structural slowdown. Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago. South Africa’s economy has been hamstrung by rolling power blackouts and logistics snarls, although it’s recently made some tentative progress in tackling those problems. India is still a growth story that investment banks compare with China 10 or 15 years ago, though it’s unclear if it can follow China’s manufacturing-led model. 

--With assistance from Greg Sullivan.