BRICS+: cracks in the façade?
The BRIC acronym first appeared in 2001, coined by an economist to identify the group of countries formed by Brazil, Russia, India and China, and destined to supplant the G7 in terms of wealth generation in the 21st century. It was not before 2009 that the outline of a union began to emerge between these four countries in the form of diplomatic summits. South Africa joined the club shortly thereafter in 2011, with the name expanded to BRICS. The group is a diverse mix on many levels including political regime, the degree of development and ambitions on the international stage. Yet its members have one common goal – to represent an attractive alternative to the global order inherited from the Second World War and led by the US.
Today, the BRICS+ group of countries has overtaken the G7 in terms of GDP, represents close to half the global population, and often more than half of the production and reserves of the world’s commodities.
This club, which has spawned a development bank with limited resources – the New Development Bank or NDB –, is characterised first and foremost by an annual summit. The last of these was held at the end of October in the Volga basin, in Kazan in Russia. Did anything important emerge?
China and India found a diplomatic solution to the conflict along the length of their Himalayan border, but the key takeaway remains the expansionary trend of this club. With the addition of four new members – Egypt, Ethiopia, Iran and the United Arab Emirates – at the beginning of 2024, BRICS+ continues to grow, raising the risk of even greater diversity, which could potentially further restrict its ambitions. There are many countries knocking on the door, as evidenced by the thirty-odd invited countries that were present in the Tatarstan capital.
The BRICS target remains intact: freedom from the yoke of the US and therefore from the greenback, on the financial front. The implementation of a payment system independent from the SWIFT[1] network remains on the agenda. Implementation of BRICKS PAY would be a means of circumventing the international sanctions to which Russia and Iran are subject. But it still seems a pipe dream given the complexity of putting it into effect faced with the hegemony of the US dollar as the king of international trade. Christine Lagarde, the European Central Bank President expressed her scepticism on the matter stating, “I am unlikely to see the renminbi displacing the dollar in my lifetime”.
In economic terms, the BRICS+ countries have delivered on their promise, representing the main driver of global growth for the last 25 years. On stock markets, it’s quite a different story. Since 2009 and the foundation of the group, the index calculated by MSCI has risen by just 3.6% per annum, whereas the index for G7 countries has grown 3.5 times faster, at 12.4% per annum[2]. The index for the founding countries today represents just 5% of global stock market capitalisation, whilst that of the G7 countries represents a whopping 81%[3]!
Economic performance does not always translate into stock market success. The quality of governance, individual and collective freedoms, the presence of checks and balances, stable government and a real ability to innovate are some of the other factors that support stock market performance. On these issues, the cracks in the BRICS+ group are clearly visible.
Final version of 31 October 2024 – Clément Inbona, Fund Manager, LFDE