Brazil to propose embryo of Brics currency at summitThe summit that will take place in South Africa this week between the leaders of Brazil, China, Russia, South Africa and India (Brics) will try to close an agreement to accelerate the process of transformation of the international scenario and consolidate the alliance as an unavoidable player in the diplomacy and geopolitics.
In his participation, President Luiz Inácio Lula da Silva will bring up the idea of initiating studies to establish a reference unit among the five currencies of the bloc. The goal is that, once the work is done, the alliance can later establish whether there is space to create a currency that will allow trade to be carried out without going through the dollar.
The first step towards this, however, would be the establishment of a kind of value reference unit. The Brazilian project already has the explicit support of Russians and is seen with sympathy by China.
As Brazil assumes the presidency of the BRICS in 2025, one of the possibilities is that the studies would be finished by then and that, then, it would be up to the Brazilian government to announce the results of this initiative.
The Brazilian government, however, rejects the idea that it will open a front of opposition to the dollar. It is, according to Brasília, just thinking about new alternatives for the world.
In the wake of the transformations that the Brics want to promote, this is a strategic chapter for trade between the five economies to take place preferably in local currencies.
In the future, this would reduce the use of the dollar and dependence on the US currency. As diplomats point out, this is not a financial issue. But a geopolitical position of enormous proportions.
For the American government, the reduction of the dollar's role does not only mean a loss of hegemony. Part of the unilateral sanctions applied by the US is on the financial system, given the dominant presence of the dollar. A country, therefore, can be asphyxiated only by being prevented from using US currency.
But if a shadow financial system is created with alternative currencies, the White House's power to impose sanctions is radically reduced.
In a seminar promoted this weekend by the South Africans, the Brazilian Paulo Nogueira Batista Jr. highlighted how this is used.
"There has been an instrumentalization of the dollar as a weapon. That is, the use of the national / international currency and the Western financial system to target hostile countries or countries seen as such," he said.
"Venezuela, Iran, Afghanistan and, to a large extent, Russia were targets of sanctions and punitive measures that could only be applied because the dollar and the US financial system occupy the position they occupy in the world", said the economist.
According to him, the case of Russia is "unprecedented". "After the invasion of Ukraine, the US and its European allies put a freeze on Russian reserves invested in dollars and euros, worth around $300 billion, roughly half of Russia's net international assets," he said.
"Evidently, the use and abuse of the dollar's privileged position leads to a loss of legitimacy of the prevailing international monetary system. This has caused an erosion of confidence in the dollar - and confidence is an indispensable requirement for any currency. In a sentence: the The United States is today the main enemy of the dollar as a world currency", he warned.
For him, a propitious environment for discussions on the reform of the monetary system and the de-dollarization of international transactions was "created by the US itself".
Currency name: R5The Brazilian even designed what could be the path to a bloc currency. According to him, "the matter is complex, at the same time financial and political".
But at least one candidate for the coin's name already exists. Aleksei Mozhin, Russian executive director of the IMF, noted that the currencies of the five countries all start with the letter "R" - real, ruble, rupee, renminbi and rand. His suggestion, therefore, is that the possible new currency be called R5.
According to Nogueira Batista, the R5 would start as a unit of account, taking the form of a basket of five currencies. "The weights of the five currencies would roughly reflect the relative weights of the five economies," he said.
The renminbi would carry the most weight in the basket, followed by the rupee, then the real and the ruble, with the rand having a lower weight.
"The Chinese currency could, to give an illustrative example, represent 40% of the basket; the Indian currency, 25%; the Russian and Brazilian currencies, 15% each; and South Africa, 5%", he explained.
In a first step, the R5 could be used as a unit of denomination for certain transactions and official accounting records, in addition to being adopted to replace the dollar in the internal accounting of the financial mechanisms created by the bloc.
Both the Brazilian government and the economist point out that none of this means that the R5 has a physical existence or that a BRICS Central Bank is created. "The objective would not be to create a single currency that would replace the five national currencies", clarified the economist.
In retreat, BRICS leaders try to redefine the world's geopolitical mapBut the currency is not the only issue on the agenda. If the hegemony in the last 200 years has been on the axis between Europe and the USA, the bloc will make it clear even during the summit and in its final declaration that the system is outdated, that reforms are urgent and that there will be no more room for international decisions without the presence of the Brics.
In addition to the currency issue, two other topics will be on the meeting's agenda.
- The expansion of the BRICS
- A common position on the reform of international bodies
Together, these points mean a shift in the tectonic plates in international politics as rarely seen in decades and the realization that a new relationship of strength has come to exist between the emerging countries and the Western powers.
But, for now, there is no consensus on how each of the points will be dealt with and, in a retreat restricted to the leaders, the hope is that an agreement will be reached.
The retreat is organized to take place on Tuesday night (22nd), in Johannesburg. Only leaders will be allowed to enter, accompanied by their respective chancellors and an extremely limited number of assistants.
Vladimir Putin, the Russian leader, will not travel to South Africa, facing the risk of being arrested on account of an indictment by the International Criminal Court. But, in the retreat and in the debates, he will participate by videoconference, while his chancellor, Sergey Lavrov, will be at the meeting in person.
TensionSources among the Brics negotiators reveal that China's idea was that there would be no negotiation during the summit. Xi Jinping, Chinese president, is known for his "imperial" presence at events and always wants decisions to have already been taken before his participation.
But both Brazil and South Africans, with former unionist leaders, are comfortable being in retreat to negotiate a political settlement. Among foreign diplomats, there is a fear that Lula and Ramaphosa will end up winning.
Expansion and confrontation with ChineseBut another heated debate promises to be the expansion of the bloc. Over the past few months, negotiators have worked out different scenarios for what an expansion of the alliance could look like. The idea was spearheaded by China, in an effort to expand its influence and, in the view of certain groups within the Brazilian government, an offensive to instrumentalize the Brics.
With the bloc full of its allies, China could expand its power in the international debate, in decisions in international organizations and even in setting the agenda for debates at the UN.
For Brazil, this is a scenario that does not necessarily serve its interests. The fear in the Itamaraty is of a loss of national leadership among the emerging countries and the risk that the bloc becomes hostage to Beijing's strategic goals.
For this reason, in recent months, Itamaraty has insisted on defending the establishment of criteria that should be used for the entry of new members, as well as a regional balance. The objective was to allow Brazil's South American allies to take part, counterbalancing the arrival of Chinese allies.
What are the possible scenarios:
- New members of the Brics must first be members of the NDB, the bank of the Brics
- Bloc should favor the entry of members who are already part of the G20
On the table, there is the possibility that expansion will take place to include three to five new members. But that is only if there is consensus and criteria. In total, 22 countries have expressed interest in joining the alliance.
Risk of weakening Brazil's candidacy on the Security CouncilBut Chinese influence is not Brazil's only concern. One of the fears is that, with a greater number of members, the historic candidacy of Brazilians, Indians and South Africans for permanent seats on the UN Security Council will be weakened by internal competition between emerging countries.
Today, China is seen by Brazil as a government that does not want the expansion of the Security Council and that, behind the scenes, works against this idea. With the emerging bloc doubling in size and with Chinese allies, however, the doubt is whether the Brazilian candidacy would not end up being affected.
Another fear is that, without criteria, governments that organize future summits invite disputed regions to the table. For 2024, the presidency of the bloc will be Russia and nothing prevents Putin, to demonstrate his power, from inviting the leaders of Donetsk to the event.
Whatever the decision, it will redefine the borders between the powers and, on the part of the emerging powers, make it clear that the existence of a new bloc will challenge the supremacy established by Europe and the USA since the 18th century.
https://noticias.uol.com.br/colunas/jamil-chade/2023/08/21/brasil-vai-propor-embriao-de-moeda-dos-brics-em-cupula.htm
