What is BRICS, Why Was It Created & It's Impact on The USD in the Short, Mid and Long Term....

Today, we try to explore the significance and origins of BRICS—a coalition that has reshaped the global economic landscape. BRICS, comprising Brazil, Russia, India, China, and South Africa, was established to address the shifting dynamics of international power and foster cooperation among emerging economies.

The inception of BRICS can be traced back to the early 2000s when the world witnessed a gradual shift from a unipolar to a multipolar order. The traditional dominance of Western powers began to wane, highlighting the need for emerging economies to unite and amplify their voices on the global stage.

Why was BRICS created?

1. Economic Cooperation: One of the primary motivations behind BRICS was to enhance economic collaboration among member countries. By pooling resources and expertise, these nations aimed to create a platform for sustainable development and mutual growth.
2. Political Influence: BRICS was also a response to the need for greater representation in global governance. The founding members recognized that the existing institutions, such as the IMF and World Bank, did not adequately reflect the interests of developing nations. Through BRICS, they sought to challenge this status quo and advocate for reforms that would give emerging economies a stronger voice.
3. Cultural Exchange: Beyond economics and politics, BRICS was envisioned as a platform for cultural dialogue and understanding. The diversity of its member states offers a rich tapestry of cultures, histories, and perspectives, promoting mutual respect and collaboration.
4. Addressing Global Challenges: In an increasingly interconnected world, BRICS recognizes the importance of collective action in addressing global challenges such as climate change, poverty, and inequality. By working together, these nations can develop innovative solutions that benefit not only their populations but the world as a whole.

How was BRICS created?

The journey began in 2001 when economist Jim O'Neill coined the term "BRIC" to describe the emerging economies of Brazil, Russia, India, and China. The first formal meeting of BRIC took place in 2009, marking a significant step toward institutionalizing this collaboration. South Africa joined in 2010, expanding the coalition's reach and influence.

Since its formation, BRICS has established various mechanisms for cooperation, including the New Development Bank, which finances infrastructure projects and sustainable development initiatives. The annual summits provide a platform for leaders to discuss pressing global issues and strategize on collective action.

In conclusion, BRICS was created out of a shared vision for a more equitable and multipolar world. It stands as a testament to the power of collaboration among emerging economies. As we move forward, let us recognize the importance of unity, dialogue, and cooperation in addressing the complex challenges we face today.

The BRICS coalition—comprising Brazil, Russia, India, China, and South Africa—has emerged as a significant player in the global economic landscape. As these nations strengthen their ties and pursue greater economic cooperation, the implications for the U.S. dollar, long regarded as the world's primary reserve currency, are profound. This article explores my perspective on the potential impacts of BRICS on the dollar in the short, mid, and long term.

Short-Term Impact

In the short term, the rise of BRICS has already begun to challenge the dollar's dominance. Several factors contribute to this shift:

1. Increased Trade in Local Currencies: Member countries are increasingly conducting trade in their local currencies, reducing reliance on the dollar. For example, China and Russia have expanded their bilateral trade agreements that bypass the dollar, allowing for transactions in yuan and rubles. This trend is likely to gain momentum as more nations join BRICS or seek partnerships with member countries.
2. Geopolitical Tensions: Rising geopolitical tensions, particularly between the U.S. and Russia or China, have prompted some countries to seek alternatives to the dollar. Sanctions and trade restrictions have accelerated discussions around de-dollarization, leading to increased interest in BRICS as a viable alternative economic bloc.
3. Emerging Market Investment: As BRICS nations promote investment opportunities among themselves, they may attract capital flows away from dollar-denominated assets. This could lead to short-term volatility in the dollar's value as investors reassess their portfolios.

Mid-Term Impact

In the mid-term, the influence of BRICS on the dollar may become more pronounced, reflecting deeper structural changes in the global economy:

1. Establishment of New Financial Institutions: The creation of the New Development Bank (NDB) by BRICS is a significant step toward providing financing alternatives to the World Bank and IMF. As these institutions gain credibility and offer competitive terms, they could challenge the dollar's role in international finance.
2. Diversification of Reserves: Central banks in BRICS countries and other emerging markets may begin to diversify their foreign exchange reserves away from the dollar. This shift could lead to a gradual decline in the dollar's share of global reserves, impacting its status as the world's primary reserve currency.
3. Strengthening Economic Ties: As BRICS countries deepen their economic integration, they may create a more substantial economic bloc capable of influencing global trade patterns. This could further diminish the dollar's preeminence in international trade, particularly if other nations follow suit in forming similar alliances.

Long-Term Impact

Looking ahead, the long-term implications of BRICS for the dollar could be transformative:

1. Potential for a Multi-Currency World: If BRICS successfully promotes the use of alternative currencies for trade and investment, we could see the emergence of a multi-currency world. This scenario would dilute the dollar's dominance and create a more balanced global financial system.
2. Geopolitical Realignments: As BRICS expands and potentially includes more emerging economies, the geopolitical landscape may shift significantly. Countries may align themselves with BRICS to counterbalance U.S. influence, further eroding the dollar's standing.
3. Innovation in Digital Currencies: The rise of digital currencies and central bank digital currencies (CBDCs) could also play a role in reshaping the dollar's future. If BRICS countries develop and adopt their digital currencies for international trade, it could further challenge the dollar's supremacy.

Conclusion

The impact of BRICS on the dollar in the global economy is a multifaceted issue that will unfold over time. While short-term changes are already visible, the mid and long-term implications could redefine the dollar's role in international finance. As BRICS continues to evolve and strengthen its position, the global economic landscape may witness a significant shift towards a more multipolar financial system, with the dollar's dominance increasingly challenged. The future remains uncertain, but one thing is clear: the rise of BRICS is a development that warrants close attention from policymakers, investors, and economists alike.

Disclaimer....

This article is purely the author's perspective on BRICS which may be speculative in nature based on his personal understanding. The author requests you to conduct your own research to authenticate your understanding. The information contained in this article is for general information purposes only. Any reliance you place on such information is strictly at your own risk as the information is speculative as there are many unknown variables that could change with time. The information is generic and is not intended to constitute legal or financial advice. We encourage you to seek assistance from a trusted financial, legal advisor or other for professional advice. The author refuses to take any responsibility, damages or liability from any source that has chosen to act upon the generic information provided in this article.

About The Author

Mr. Raj Sukheja is an Award Winning, Published Author and a Specialist in Finance , Raising of Capital, M&A and Business Consulting with over 4 Decades of Business, Finance and International Consulting Experience and has supported 100's of Projects Worldwide. He is currently the CEO of Red Mammoth Ventures LLP., based out of Mumbai, India and Consults Globally. His free training videos on Business are available @sotruebusiness channel on youtube.com He can be reached at email [email protected] for specific queries. His profile is available on linkedin.com

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