Are BRICS Back?

Question: I hadn’t heard much about BRICs for some time, yet recently they’re back in the news. Can you talk about this group of countries and what it may mean for the United States?

Answer: The BRIC acronym came about in 2001 referencing Brazil, Russia, India, and China. At the time many of the largest commodity-exporting emerging markets were taking advantage of China’s strong economic growth and insatiable demand for food and natural resources pushing commodity prices and growth in these countries into supercharged mode. In 2010, South Africa was added to the original group changing it to BRICS. 

During the last BRICS’ meeting held in South Africa from August 22 to August 24, 2023, more than forty countries expressed interest in joining the BRICS group of nations. The group indicated that beginning in 2024 just six new nations will be accepted into the coalition. These will be Saudi Arabia, Ethiopia, Egypt, Argentina, Iran, and the United Arab Emirates.

Although initially counterintuitive, the expansion of this group of countries is actually an opportunity for the United States. Healthy competition is a good thing. A group of countries challenging the supremacy of the US globally can be viewed as positive rather than a threat to US supremacy in the global economy. We’ll need to up our game to remain competitive.

BRICS is an informal organization with no charter or funds to finance its activities. According to their website, the aim is to “promote peace, security, development and cooperation.” The grouping of power among these countries relies on whoever is in power in each specific member country meaning that it will be challenging to maintain focus on their objectives. Not having funds to finance activities makes the groups’ commitment to challenging the US on the global stage potentially less meaningful as well. The instability of each of these countries may reduce any collective overall power.

For those countries that may have had issues growing on their own, the expansion of BRICS may be a good long-term idea. Watching the internal issues facing each of these countries individually when making policy decisions confirms the thought that grouping them together may not be such a threat because economic growth doesn’t trickle down to the majority of these countries’ citizens. One of the top reasons for this is massive corruption on many levels. Economic instability, high inflation, and historical unrest continue to keep these countries poor while others have grown.

There is talk that BRICS could create a multi-country common currency to alleviate all their problems. The instability of each of these countries’ exchange rates relative to the US dollar, especially with the case of Argentina, highlights that creating a common BRICS currency would not likely solve their financial problems. Even the Europeans who created the Euro more than two decades ago have had to realize that having a common currency is not the solution, especially if there is no fiscal or other shared union between countries.

To think that the BRICS group of countries, or any transformation or expansion of these nations could improve upon what Europe has done with the Euro or what the US dollar has done, is likely folly, meaning I believe that there is no long-term implication for the global economy and/or real changes to markets. It’s highly unlikely that there is potential for BRICS and any expansion of this group to have meaningful impact on the global economy, US economy, and financial markets. 

Even when combined, BRICS nations appear to lack the political stability to command economic confidence or conviction to create a currency. The main consideration for the new countries joining BRICS is to explore alternative political and economic relationships if rapport weakens with the United States. Stay focused and plan accordingly. 

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Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. The opinions expressed are those of the writer as of November 18, 2023, but not necessarily those of Raymond James and Associates, and subject to change at any time based on market conditions and other factors. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. 

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certification requirements.” This article was provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041.

Email darcie.guerin@raymondjames.com. Website: www.raymondjames.com/Darcie.