New BRICS World Currency And Trade Alliance Might Be Dead Before Getting Started Amid Disagreement And US Dollar Still Used In 90% Of All Trade
An audacious call from Brazil President Luiz Inacio Lula da Silva for the BRICS nations to establish a shared currency has been met with skepticism.
Addressing a packed audience during the 2023 BRICS Summit in Johannesburg, South Africa, Silva argued that a common currency would insulate these nations — Brazil, Russia, India, China and South Africa — from the tumultuous waves of dollar exchange rate shifts.
But the idealistic vision is riddled with logistical conundrums, stemming from the profound economic, political and geographic differences that characterize the five nations. While Silva champions shared currency as a safeguard against vulnerabilities and an enhancement to payment options, other BRICS leaders demonstrate varying degrees of enthusiasm, if any.
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Despite some initial concerns, the BRICS alliance has had little effect on the U.S. economy. The S&P 500 is up 17% so far this year. And the Nasdaq Stock Market (NASDAQ) has grown a record 40.87% year to date.
South Africa seemed unprepared for the currency discussion, stating it wasn’t on its summit agenda. India’s stance was more definitive, with its foreign minister rejecting the notion entirely. In contrast, Russian President Vladimir Putin hinted at an inclination toward increased trade in national currencies. Meanwhile, China’s President Xi Jinping maintained a diplomatic silence on the currency issue, focusing instead on advocating for the “reform of the international financial and monetary system.”
Such a colossal undertaking wouldn’t be purely economic; it would bear profound political implications. As South African Reserve Bank Gov. Lesetja Kganyago elucidated, this endeavor would necessitate a banking and fiscal union, macroeconomic convergence and the establishment of a centralized bank. Trade imbalances, particularly with China being the principal trading partner for all BRICS nations, pose a substantial challenge.
While BRICS leaders have expressed a desire to reduce their reliance on the U.S. dollar, its domination is indisputable. Notwithstanding its drop to a 20-year low in official FX reserves in late 2022, the U.S. dollar remains paramount in global trade, featuring in nearly 90% of global forex dealings.
As these discussions unfold, the intricacies of implementing such a system remain a colossal challenge. The real question is whether these nations, with their diverse agendas and priorities, can truly unite under a single currency banner.
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This article New BRICS World Currency And Trade Alliance Might Be Dead Before Getting Started Amid Disagreement And US Dollar Still Used In 90% Of All Trade originally appeared on Benzinga.com
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