Brazil bets on a block that never generated great achievements

The Brics, an economic bloc made up of Brazil, Russia, India, China and South Africa “have never achieved anything since they started to meet”. This was the diagnosis made recently by the creator of the Brics idea, economist Jim O’Neill, who coined the term in 2001 when he worked for the investment fund Goldman Sachs. He gave an interview to the newspaper Financial Times last week. For Brazil, the scenario is no different. Participation in the block, in practice, has been irrelevant.

Although the Brics account for nearly 40% of the global population and a fifth of international trade, being part of the group has not generated major benefits for Brazil over the past 13 years. At most, the bloc has been functioning as one of several sources of financing available to the country.

A People’s Gazettethe president of the Brazilian Foreign Trade Association, José Augusto Castro said that the big importers of commodities Brazilian companies are BRICS countries, but this consumption does not happen through the bloc. “It is a fact that Brazil has gained great strength worldwide as an exporter of commoditytions, but with Brics or without Brics, China would be importing the same thing from Brazil – it already imported before its creation. Nothing has changed. To say that the Brics opened up the market? It also did not open the market”, he points out.

Banco dos Brics was the great (and only) concrete achievement of the Bloc

For specialists, so far the Brics have only generated two concrete results: the creation of the New Development Bank (NDB), also called the Bank of the Brics, and the Contingent Reserve Arrangement (CRA). They were created to face the World Bank and the International Monetary Fund (IMF), but have much lower resource allocations than rival institutions.

Headquartered in the city of Shanghai, China, and currently chaired by former Brazilian president Dilma Rousseff (PT), Banco dos Brics was founded in 2015 and announced a year earlier during the Brics Summit in Fortaleza.

When created, the intention was for its members to have access to funds to fund public or private infrastructure and sustainable development projects. In other words, it is an international financing bank.

Currently, in addition to the five member countries of the bloc, Bangladesh, United Arab Emirates, Egypt and Uruguay are also part of the NDB. Over the years, the organization has approved funding of US$32.8 billion for 96 projects – including Brazil.

The Contingency Reserve Arrangement (CRA) was initially announced with a fund of US$ 100 million, with the aim of providing additional liquidity protection to member countries during balance of payments problems. The CRA serves as a support in situations of real or potential pressure on the balance of payments in the short term. That is, it can help countries in difficulty, as the IMF does, but without the same fiscal austerity demands that bother populist presidents.

Banco dos Brics financed projects and helped Brazil during the pandemic

As already revealed by the Ministry of Foreign Affairs, the bank’s initial subscribed capital was US$ 50 billion, with authorized capital reaching US$ 100 billion, distributed in equal shares among the first five member countries (Brazil, Russia, India , China and South Africa).

This year alone, Brazil approved funding through the NDB for two infrastructure projects. The sum of the two adds up to US$ 320 million [cerca de R$ 1,5 bilhões]which the Brazilian government will return in reais to the organization.

In all, counting financing made to Brazilian coffers between 2016 and those approved this year, the NDB has already transferred US$ 5.58 billion to initiatives and projects in Brazil. In 2022 alone, under the management of then-president Jair Bolsonaro (PL), the government borrowed US$ 690 million [cerca de R$ 3,7 bilhões] in loans with the international institution.

Still during the Covid-19 crisis, in July 2020, Brazil asked Banco dos Brics for the sum of US$ 1 billion to pay the costs of the Auxílio Brasil and the Bolsa Família. Six months later, in December of the same year, the country asked for another US$ 1 billion to help provide credit to entrepreneurs during the coronavirus pandemic.

Member countries do not work for the bloc to gain strength

For José Augusto, it is a fact that the bloc has had little effect since its creation and the reason for this is the few efforts of the member countries. “The first thing is the Brics is not a formally built block. It was born from a set of letters that only then was built a formal block”, he explains.

Founded in 2001, Jim O’Neill combined the initials of Brazil, Russia, India and China in an article, citing them as emerging countries on the rise in finance. Since then, specialists have started to refer to these with the acronym BRIC. It was only in 2009 that these nations actually became a bloc – South Africa (South Africa, in English) which became the last letter of the acronym in 2011.

“The countries that are part of the bloc today, which were theoretically pre-selected because they had a certain economic similarity, did not make much effort to make the Brics more powerful”, points out the president of the AEB.

In parallel to this, the expert points out that China has still used its economic power to benefit from the few decisions of the bloc, such as the inclusion of new countries in the group and the end of the use of the dollar for negotiations between member countries.

“This happens because China is the major financier of the Brics and, naturally, it will make some demands that will benefit it. good intentions, but few effective actions with a concrete effect”, analyzes Castro.

But that situation can change, not necessarily for the better. Last year, when China was in the rotating presidency of the Brics, Beijing and Moscow began to press for the Brics to stop being just an economic bloc and assume a political character. The purpose of the change is to use the bloc to diplomatically confront the United States and its allies in the G7, the group of seven largest democratic economies on the planet.

With the economic war between Beijing and Washington and the international isolation imposed by the G7 on Russia, due to the invasion of Ukraine, Chinese and Russians decided to go on the offensive.

Chinese autocrat Xi Jinping arrived at the BRICS Summit this week selling the image of leader of emerging countries. His biggest political victory at the meeting will be to pave the way for more member countries to join the bloc.

Brazil will be in a delicate situation with the expansion of the Brics

Representatives of the bloc’s five member countries have been meeting in the city of Johannesburg, South Africa, since Tuesday (22) to discuss the possibility of including new members. According to information from the Ministry of Foreign Affairs of Brazil, the institution received formal requests from 22 countries interested in joining the group.

José Augusto Castro says that this expansion could further increase the bloc’s difficulties.

“When I see this movement from different countries to join the Brics, I ask myself: if the ‘first Brics’, the original one, is not yet consolidated and does not even have a well-defined way of working, how will it include new countries? conception, this would be like increasing the problems, because not even original problems were solved, it would only be adding more”, he points out.

The nature of the nations listed for inclusion in the group also concerns the specialist. Many are violent dictatorships and others are failing economies. “Countries like Cuba, Venezuela and Argentina will certainly only bring problems, not solutions. These countries have nothing to add, even trade is small”, criticizes Castro.

For the president of the AEB, the Brics need to “think big”. “China is big, India is big and Brazil can be big, not like China today, but it can be even bigger, and all these countries quoted to join the group are very small compared to Brazil, China and India”.

If the expansion intended by Xi Jinping really materializes, Brazil will be in a tight spot. In addition to losing importance within the bloc, the country will find itself in an anti-liberal group that is being prepared to antagonize the Western powers under the orders of the Chinese president.