Charles-Henry Monchau

Chief Investment Officer

Who are the BRICS?

The term BRICS refers to the coming together of five countries with vast territories: Brazil, Russia, India, China and South Africa.

The acronym first appeared in 2001 following the publication of a Goldman Sachs report written by Jim O'Neill. The involvement of an investment bank in the birth of the BRICS is not insignificant since the evidence of the tremendous growth potential of these countries has subsequently generated huge investment flows into the equity and bond markets of these countries. It should be noted that the invasion of Ukraine by Russia has led many asset managers to remove the "R" from B(R)ICS.

But let's get back to the genesis and mechanics of the BRICS. Although the term was used at the very beginning of this century, it was mainly from 2011 onwards, with the regular holding of summits and the entry of South Africa, that the BRICS became an official group.

Indeed, the BRICS group has since then taken the form of a full-fledged diplomatic conference, giving rise to an annual summit, taking place in turn in each of the five states. The purpose of these summits is to affirm the major place of these countries on the international scene, and to showcase their economic and political weight, particularly in relation to other states or groups of states such as the United States or the European Union.

The BRICS group is not a free trade bloc. However, members coordinate on trade issues and have established a supranational bank, the New Development Bank (NDB), which finances infrastructure loans. Established in 2014, the bank aims to provide alternative lending mechanisms to the IMF and World Bank structures, which members felt were too U.S.-centric. The Asian Infrastructure Investment Bank (AIIB) was created by China around the same time and for the same reasons. Both NDB and AIIB are triple A or double A rated and capitalized at US$100 billion. The shares of the NDB are held equally by each of the five members. In total, the BRICS group, as it currently exists, represents more than 40% of the world's population and nearly a quarter of global GDP. 

The GDP figure is expected to double to 50% of global GDP by 2030. An expansion of the BRICS could accelerate this process.


While the West would like to see the major developing countries distance themselves from Russia (and turn the BRICS into the BICS), Moscow obviously sees things in a completely different light. 

In early November 2022, Russian Foreign Minister Sergey Lavrov said that more than a dozen countries have officially applied to join the BRICS group, following the group's decision earlier this year to allow entry to new members. 

Lavrov said Algeria, Argentina and Iran have all applied, while Saudi Arabia, Turkey, Egypt and Afghanistan are already known to be interested, as is Indonesia, which hosted the last G20 summit in Bali.

According to Silk Road Briefing, other likely candidates for membership are Kazakhstan, Nicaragua, Nigeria, Senegal, Thailand and the United Arab Emirates. All of these countries had their finance ministers present at the BRICS expansion dialogue meeting held in May 2022.

Proposed BRICS Expansion 


Source: Silk Road Briefing

The “BRICS-coin”

The strength and intensity of trade within the BRICS+ bloc could be enhanced by the creation of a new currency or the equivalent of a Special Drawing Right (SDR). 

Last summer, Vladimir Putin said that the BRICS were developing a new reserve currency based on a basket of currencies (the BRICS coin?). This is not the first time this project has been mentioned, as BRICS countries have already started to integrate more local currencies for payments in their bilateral trade. For example, India and Russia held discussions over the summer to accept their RuPay and Mir payment systems.

Economists see this new currency proposal as an opportunity to emancipate themselves from the West and particularly the U.S. It is a way for the BRICS (and its future members) to remedy the perception of American hegemony over the IMF and to allow the BRICS to build their own sphere of influence and monetary unity within their group.

Another advantage is to create an alternative to the US dollar as a reserve currency. The speed with which Western countries and their allies froze Russian foreign exchange reserves following the invasion of Ukraine undoubtedly surprised Moscow. Russia's central bank has indeed admitted as much and there is no doubt that some BRICS

countries, including China, have taken note of the speed and latitude with which the US Treasury has acted. As a result, the BRICS nations seem to be voicing the need for an alternative reserve currency equivalent to the IMF's SDR (Special Drawing Rights). The IMF SDR is not a currency in itself. Rather, it is a basket of claims on major reserve currencies such as the dollar, euro, pound, yen and renminbi.

Zoltan Pozsar, a strategist at Credit Suisse, has highlighted a very interesting feature of the future "BRICS coin": the weight in the new international reserve currency basket. Pozsar quoted Sergei Glazyev, a member of the National Financial Council of the Russian Central Bank and Minister for Integration and Macroeconomics of the Eurasian Economic Commission: "If [a nation] reserves part of [its] natural resources to support the new economic system, [its] respective weight in the currency basket of the new currency unit will increase accordingly, which will provide that nation with greater currency reserves and credit capacity. In addition, bilateral swap lines with trading partner countries would provide them with adequate financing for co-investment and trade financing”.

Commodities are expected to play a major role in the coming decades 

The importance attributed to commodities in the constitution of the basket of currencies of a possible "BRICS corner" highlights the strategic role that natural resources will play in the decades to come. 

As we have seen in 2022, the world's major powers must secure their access to energy resources (oil, natural gas, etc.). Unlike Europe, the United States is self-sufficient. On the other hand, superpowers such as China and India are net energy importers. The expansion of the BRICS will strengthen their strategic collaboration with OPEC+. And not only in terms of importing raw hydrocarbons. It is a question here of implementing a real strategy of emancipation from the West. Thus, Chinese capital is being deployed in OPEC countries to develop their refining and processing capacities towards higher value-added products. Petrochemical companies located in the West (including in Europe) could lose market share and make the import of petrochemicals even more expensive (with the known consequences on inflation...)

But the urgency to secure raw materials does not only concern energy. At the beginning of 2022, Indonesian President Widodo (an OPEC member since 1962) called for the creation of an OPEC-type cartel for the metals needed to manufacture batteries for electric vehicles. On November 3, 2022, Canada ordered three Chinese companies to withdraw from lithium mining. In simple terms, this frantic race for raw materials is leading to the creation of strategic alliances and to reflexes of nationalism on the part of states, all of which aim to control access to natural resources.

Do the "BRICS+" and the "BRICS-coin" have a chance to thrive? 

must of course agree - or at least be able to discuss and negotiate its terms. What is the current situation? 

The great Eurasian powers - China and Russia - are linked by a "special relationship" and the two giants have good relations with each of the great Middle Eastern powers. There is also a strategic partnership between China and Iran. Relations between Latin American countries and Eurasia, but also the Middle East, seem to be in good shape. India and Russia have developed their trade relations in 2022 following the sanctions against Russia.

Then there is the question of relations within the Middle East. Both Saudi Arabia and Iran have applied not only to the BRICS+ but also to the Shanghai Cooperation Organization (SCO), the equivalent of an eastern NATO. Relations between Riyadh and Tehran have been very tense for years.

But the prospects of the BRICS+ and other SCO are shifting the lines. The Financial Times recently revealed that the foreign ministers of Saudi Arabia and Iran have engaged in friendly talks, which would give further impetus to the various strategic and economic alliances mentioned above. 

This is simply a continuation of the East-West divide discussed in these very columns last year (see our focus note from September 21, 2022: "The East-West divide"). The objective for the Eastern (and Southern) powers is clearly to emancipate themselves from the West, whether in terms of economic exchanges, currency, or geostrategy. In conflict situations (including cold wars), the "enemies of my enemies" can become "friends". A maxim that could accelerate the birth of the BRICS+...and the BRIC-coin.


What could be the consequences of an enlarged BRICS and a "BRICS-coin" on the macroeconomic and financial markets?

The countries that make up this alliance could of course benefit from it. Whether it is the countries exporting raw materials (Brazil, South Africa, Saudi Arabia) or the countries that have an obligation to secure access to resources (China, India, Turkey).

On the other hand, the West could suffer the consequences of such an alliance. First of all, greater difficulty in accessing and processing natural resources could create upward pressure on raw materials and therefore create imported inflation. Second, the creation of an alternative reserve currency to the dollar could dry up investment in G7 government bonds by the countries making up the expanded BRICS. The coming years promise to be both fascinating and full of uncertainty.

Sources: Silk Road Briefing (Chris Devonshire-Ellis), Crédit Suisse (Zoltan Pozsar),


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