Summary: How an Expansion of BRICS Could Change Global Business by Steve Odland, Dana Peterson and Lori Esposito Murray

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In January 2024, the BRICS alliance – Brazil, Russia, India, China and South Africa – welcomes Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates into its fold. These additions expand the geographical, economic and political footprint of the coalition. In this informative episode of the Conference Board’s CEO Perspectives podcast, economists Steve Odland, Lori Esposito Murray and Dana Peterson discuss the evolution of the BRICS and the significant impacts the new formation will have on trade, energy and finance.

Take-Aways

• The BRICS alliance seeks to disrupt the existing global economic and geopolitical order in trade, currencies and military power.
• China’s economic and military strength make it the group’s definitive leader.
• “BRICS+” will further strengthen the bloc’s control over global trade and GDP, placing Western nations at a strategic disadvantage.

Summary

The BRICS alliance seeks to disrupt the existing global economic and geopolitical order in trade, currencies and military power.

In 2007, Russian president Vladimir Putin delivered a fiery address at the Munich Security Conference, accusing the US and Western economies of hegemony in the areas of economic, military and geopolitical activities. This speech set in motion the formation of the BRICS alliance – Brazil, Russia, India, China and South Africa.

“Putin was very interested in developing a counter to the G-7.”

These five nations set out to provide a strategic and tactical alternative to the G-7 nations and end the US dollar’s dominance as the world’s reserve currency. The BRICS do not exist as a formal compact or treaty; rather, they operate as a loosely knit association to advance the group’s global interests.

“Among the BRICS, and now the expanded BRICS, trade is a very important piece of what is happening in their relations.”

Initially formed in 2009 as a geopolitical alliance focused on diplomacy, the group expanded its agenda to bolster trade, develop a military and security alliance, and demonstrate economic and political power. The planned expansion of the union to include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates strategically positions “BRICS+” to advance these initiatives.

China’s economic and military strength make it the group’s definitive leader.

Russia served as the catalyst for the BRICS, but China has emerged as the dominant entity. Due to its robust economic marketplace, developing countries seek to become trading partners with China: More than 40 nations indicated a desire to join the BRICS partnership, and more than 20 countries have officially applied for membership. China stands to benefit from the BRICS+ association as it expands its geopolitical, commercial and tactical footprint through its Belt and Road initiative.

“Six new members will become members in 2024, a really significant group of nations, particularly in the global South, rising powers regionally.”

With the BRICS+ geographical presence in Asia, South America, Africa and the Middle East, the bloc wants to divide the West. The group is working to diminish the power of the US dollar by conducting trade in their respective sovereign currencies, including China’s renminbi, India’s rupee and Argentina’s peso.

“BRICS+” will further strengthen the bloc’s control over global trade and GDP, placing Western nations at a strategic disadvantage.

The BRICS+ expansion carries with it enormous ramifications for the world economy, as it fundamentally changes the landscape. Before the addition of the six new members, the BRICS accounted for 32% of worldwide GDP. Post-BRICS+, that share rises to 37%. In contrast, the G-7 controls 30% of global GDP.

“One of the goals [of the BRICS+] is to increase the share of GDP they have a say over and control over, then they certainly accomplish that with adding on the expansion economies.”

In trade flows, the BRICS account for 19% of nominal imports and exports; with BRICS+, it’s 22%. In comparison, the G-7 percentage of global trade stands at 31%. BRICS+ will attain greater control of important products such as commodities, energy, food and rare earth metals. China’s proximity to Taiwan puts the global semiconductor portfolio at risk, as Taiwan accounts for 90% of global chip supply. Concern has also arisen in the West that Russia, China and Iran pose a miliary risk to the global economy and may spur greater nuclear proliferation.

“Thinking about a business and a multinational, I think this [the BRICS+ alliance] is something that should be on their radar, as something to watch and also strategize around.”

In this challenging environment, global corporations must be nimble during what could become a “new Cold War era.” Companies should expect higher costs of doing business, and should, at the same time, prepare to deal with stranded assets in BRICS+ nations.

About the Podcast

Steve Odland is the president and CEO of The Conference Board, Inc., where Dana Peterson is chief economist and Lori Esposito Murray is president of the Committee for Economic Development.