The Brics economic group, consisting of Brazil, Russia, India, China, and South Africa, is discussing the possibility of expanding its membership and promoting the use of local currencies for trade settlement, with aims to challenge the dominance of the US dollar, but analysts believe that the greenback is unlikely to lose its status as the international reserve currency.
Brazil's President, Luiz Inacio Lula Da Silva, announced at the BRICS Summit that the economic alliance will officially abandon the US dollar for trade settlements, aligning with de-dollarization efforts and expanding to include six additional countries by 2024.
The BRICS summit is aiming to reduce reliance on the U.S. Dollar, as the coalition confirms new members including UAE, Egypt, Ethiopia, Saudi Arabia, and Argentina, and discusses the possibility of a new payment system and currency backed by gold.
The BRICS grouping, which includes South Africa, will not replace international payment systems like SWIFT, but rather consider creating one that strengthens trade in local currencies.
The BRICS, a bloc of emerging market nations, has expanded its membership to include Saudi Arabia, Iran, Egypt, Argentina, Ethiopia, and the United Arab Emirates (UAE), with the goal of building a fair, just, inclusive, and prosperous world; however, experts question whether BRICS can effectively compete with the West given their differing priorities, and the ambition of creating a common BRICS currency to rival the dollar is unlikely to materialize due to competing interests and priorities among member states.
With major oil exporters joining BRICS, analysts suggest that the adoption of local currencies for trade among BRICS countries, rather than the US dollar, is becoming more natural, potentially reducing transaction costs and weakening the role of the petrodollar.
The BRICS summit focused on increasing the use of local currencies for trade, but there were no discussions about a digital currency; however, three non-BRICS countries also announced plans to use local currencies instead of the dollar for cross-border trade.
BRICS is considering making local currencies the only accepted form of payment for oil and gas settlements, which could potentially shift global power from the West to the East.
The BRICS nations are divided on the issue of de-dollarization, as statements from the bloc's leaders indicated, despite discussions about the creation of a common currency to rival the US dollar.
The BRICS alliance is considering the creation of a 'single unit account' as an alternative currency to the US dollar, in order to settle cross-border transactions without depending on a single currency or local currencies.
Developing countries, including members of the BRICS and ASEAN alliances, are actively seeking to reduce their dependency on the US dollar and promote their local currencies for global trade, with a total of 21 countries officially agreeing to ditch the US dollar in 2023.
Creating a BRICS currency backed by gold is considered nonsensical by a former Bank of America strategist, as it would essentially be another gold derivative and would weaken individual currencies within the group.
The BRICS bloc, including countries like India, China, and Russia, is slowly reducing its dependency on the US dollar and using their local currencies for trade, which could potentially weaken the US dollar's position as the dominant global currency.
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