The Rise of the South: Can BRICS Weaken the Dominance of the IMF and World Bank?

Who would have expected that the BRICS nations could rise as the potential rival of the G7 countries, the World Bank and the IMF combined? But that once seemingly distant possibility now has real prospects which could change the political equilibrium of world politics.

BRICS is an acronym for Brazil, Russia, India, China and South Africa. It was supposedly coined by the Chief Economist of Goldman Sachs in 2001, as a reference to the world’s emerging economies. It was then known as BRIC, with the ‘S’ added later, when South Africa formally joined the group in 2010.

BRIC’s first official summit took place in 2009. Then, the discussion seemed largely abstract. However, not until 2014 did BRICS begin taking serious steps towards greater integration, when the nascent alliance, now including South Africa, launched the New Development Bank with seed money of $50 billion. This decision meant that the group was now ready to take its first practical steps in challenging the dominance of the West over international monetary institutions, namely the World Bank and the IMF.

The geopolitical global conflict, thus shifts, resulting from the Russia-Ukraine war, however, proved to be the driving force behind the massive expansion underway at BRICS, especially as financially powerful countries began showing interest in the initiative. They include Argentina, UAE, Mexico, Algeria and, particularly, Saudi Arabia.

Recent financial reports suggest that BRICS is already the world’s largest gross domestic product (GDP) bloc in the world, as it currently contributes 31.5% to the global GDP, ahead of the G7, which contributes 30.7%.

One of the greatest opportunities, and challenges, facing BRICS now is its ability to expand its membership base while maintaining its current growth. The issue of helping new members maintain economic and political independence is particularly vital.

The IMF and World Bank are notorious for stipulating their monetary support of countries, especially in the Global South, on political conditions. This position is often justified under the guise of human rights and democracy, though is entirely related to privatization and opening markets for foreign investors – read western corporations.

As BRICS strengthens, it will have the potential to help poorer countries without pushing a self-serving political agenda, or indirectly manipulating and controlling local economies.

As inflation is hitting many western countries, resulting in slower economic growth and causing social unrest, nations in the Global South are using this as an opportunity to develop their own economic alternative. This means that groups like BRICS will cease being exclusively economic institutions. The struggle is now very political.

For decades, the US’s greatest weapon has been its dollar which, with time, ceased being a normal currency per se, to become an actual commodity. Wars have been fought to ensure countries, like Iraq and Libya, remain committed to the dollar. Following the US invasion of Iraq in March 2003, Baghdad returned to selling its oil in US dollars. This struggle over the dominance of the dollar was also painfully felt in Venezuela which has the world’s largest oil reserve, yet was reduced to abject poverty for attempting to challenge the supremacy of Washington its currency.

Though it will take time, the process of lessening the reliance on US dollars is now in full swing.

On March 30, Brazil and China announced a trade agreement that would allow them to use the two countries’ national currencies, the yuan and the reais, respectively. This step shall prove consequential, for it will encourage other South American countries to follow suit. But that move was neither the first, nor will it be the last of its kind.

One of the main decisions by finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) following their March 30-31 meeting in Indonesia is to reduce their reliance on the US dollar. They agree to “reinforce financial resilience … through the use of local currency to support cross-border trade and investment in the ASEAN region.” This too is a game-changer.

The BRICS countries, in particular, are leading the charge and are set to serve as the facilitator of rearranging the world’s economic and financial map.

While the West is busy trying to keep its own economies afloat, it remains wary of the changes underway in the Global South. Washington and other western capitals are worried. They ought to be.

Following a meeting between US President Joe Biden and 40 African leaders at the White House last December, it was clear that African countries were not interested in taking sides in the ongoing war in Ukraine. Consequently, US Vice President Kamala Harris flew to Africa on March 26 to meet African leaders, with the sole purpose of pushing them away from China and Russia. That effort is likely to fail.

A perfect illustration of Africa’s refusal to abandon its neutrality is the press conference between Harris and President of Ghana, Nana Akufo-Addo, on March 28. “There may be an obsession in America about Chinese activity on the continent, but there is no such obsession here,” Akufo-Addo told reporters.

To argue that BRICS is a purely economic group is to ignore a large part of the story. The timing of BRICS’ expansion, the stern political discourse of its members, potential members and allies, the repeated visits by top Russian and Chinese diplomats to Africa and other regions in the Global South, etc., indicate that BRICS has become the South’s new platform for geopolitics, economy and diplomacy.

The more successful BRICS will become, the weaker western hegemony over the South will grow. Though some western politicians and media insist on downplaying BRICS’ role in shaping the new world order, the change seems to be real and irreversible.

Dr. Ramzy Baroud is a journalist, author and the Editor of The Palestine Chronicle. He is the author of six books. His latest book, co-edited with Ilan Pappé, is ‘Our Vision for Liberation: Engaged Palestinian Leaders and Intellectuals Speak Out’. His other books include ‘My Father was a Freedom Fighter’ and ‘The Last Earth’. Baroud is a Non-resident Senior Research Fellow at the Center for Islam and Global Affairs (CIGA). His website is www.ramzybaroud.net