The BRICS summit ended with no new currency and all 5 members issuing differing and contradictory commentary on de-dollarization

The BRICS summit wrapped up last Thursday with six new members but not a new currency.

Gianluigi Guercia/Reuters

De-dollarization was a closely watched topic amid the BRICS summit last week.
But BRICS nations appear divided on the issue, as statements from the bloc’s leaders indicated.
The latest SWIFT data showed the USD was used for a record 46% of foreign exchange payments in July.

A group of major emerging economies wrapped up a summit in South Africa last Thursday by welcoming six new members — but without a new dollar-challenging currency.

The summit of Brazil, Russia, India, China, and South Africa or BRICS nations added Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates to its fold. It is the bloc’s first expansion in 13 years as it seeks to be an alternative to Western-led groupings.

While there was talk about the bloc’s possible creation of a common currency to rival the US dollar, that didn’t happen – in fact, chatter from the BRICS nations on the issue was divided, pointing to different opinions that may delay any such development.

As this dollar alternative was being discussed, data from SWIFT showed the greenback was used for a record 46% of foreign exchange payments via the communications system in July.

Here’s what the leaders of five BRICS members said about de-dollarization:

Brazil’s President called for a common BRICS currency

“The creation of a currency for trade and investment transactions between BRICS members increases our payment options and reduces our vulnerabilities,” Brazil’s President Luiz Inacio Lula da Silva said at the summit’s opening plenary session on Wednesday.

The Brazilian leader has been one of the most vocal proponents of alternative trade settlement currencies.

“Why can’t we do trade based on our own currencies?” he said in an April state visit to China, per The Financial Times. “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”

Putin renewed his call to increase the use of local currencies for trade

“We are working to fine-tune effective mechanisms for mutual settlements and monetary and financial control,” said Russian President Vladimir Putin on Tuesday. 

He added that de-dedollarization within the BRICS bloc is “irreversible” and gaining pace.

Putin has been pushing for more trade in local currencies following sweeping sanctions against Russia that have expelled the country from the US dollar-dominated global financial system.

He said at a previous international meeting in July that it was important to establish an “independent financial system” based on local currency trade.

India’s oil minister said it’s difficult to overturn longstanding payment arrangements

“I wish the Indian rupee should be the lead currency in the world. But I’m also a realist,” Hardeep Singh Puri, India’s oil and gas minister, told CNBC on the sidelines of the Business 20 meeting in New Delhi on Friday.

Long-standing payment arrangements are difficult to overturn even if there are arrangements for trade in non-dollar currencies, he added.

But “does that mean that an alternate global currency has come?” Puri asked CNBC. “We heard about decoupling. But these international arrangements, trading arrangements, payment arrangements, these have been in place for a long time.”

India has also been pushing the de-dollarization narrative by touting the use of the rupee for trade.

China’s President Xi promoted reform of the world’s financial systems

China did not comment on the idea of a BRICS common currency, but President Xi Jinping promoted “the reform of the international financial and monetary system” in a speech at the summit.

China has indicated it wants the Chinese yuan to play an outsized global role but hasn’t called for it to replace the dollar.

South Africa’s finance minister dismissed the notion of a BRICS currency

“No one has tabled the issue of a BRICS currency, not even in informal meetings,” Enoch Godongwana told Bloomberg on the sidelines of the bloc’s annual summit in Johannesburg on Thursday.

“Setting up a common currency presupposes setting up a central bank, and that presupposes losing independence on monetary policies, and I don’t think any country is ready for that,” he added to the media outlet.

Instead, South Africa appears to veer toward increasing the bloc’s trade in local currencies.

Back in April, South Africa’s deputy president Paul Mashatile had said the BRICS bloc was looking to reduce its reliance on the US dollar.

The economist who coined the term BRICS slammed the idea altogether

Jim O’Neill, a former Goldman Sachs economist who first gave the BRICS bloc its name, has slapped down the idea of a common BRICS currency.

“It’s just ridiculous,” he told the Financial Times in an August interview. “They’re going to create a BRICS central bank? How would you do that? It’s embarrassing almost.”

O’Neill pointed to the political gulf between rivals China and India as a key stumbling block to de-dollarization.

“It’s a good job for the west that China and India never agree on anything, because if they did, the dominance of the dollar would be a lot more vulnerable,” O’Neill told the FT.

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