BRICS WATCHA Common BRICS Currency to Challenge the U.S. Dollar? “A Very Far-Fetched Notion”: Expert
The BRICS bloc, a group of developing countries seen as seeking to counter the United States and the West, agreed at a summit last week to admit six new countries — Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. The new members will make BRICS a commodities powerhouse, and the group now accounts for 40 percent of the world’s population. It will be tough for group members to get away from the dollar as a reserve currency, however, due to the far greater ease of buying and selling it.
The BRICS bloc, a group of developing countries seen as seeking to counter the United States and the West, agreed at a summit last week to admit six new countries — Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.
The new members will make BRICS a commodities powerhouse, accounting for a substantial portion of global exports of oil, corn, and wheat. BRICS — which stands for Brazil, Russia, India, China, and South Africa — now accounts for 40 percent of the world’s population, a share that will increase when the others join next year.
At the summit, Brazilian President Luiz Inacio Lula da Silva called for the BRICS countries to create a common currency for trade and investment as a way to reduce the dominance of the U.S. dollar. In the days that followed, Russian state media played up the idea of a common BRICS currency and what they told audiences would be the decline of the dollar and of U.S. economic influence.
While BRICS members could make progress on cutting the share of the dollar in their bilateral trade, it will be tougher to get away from it as a reserve currency due to the far greater ease of buying and selling it, Gian Maria Milesi-Ferretti, a senior fellow in the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy, told RFE/RL in an interview on August 29.
Milesi-Ferretti, who previously served as deputy director of the International Monetary Fund’s research department, said that the prospect of a BRICS common currency is scarcely credible, pointing to the wide disparities in the structure of members’ economies, in their level of development, in the openness of their financial markets, and in the management of their currencies.
If the dominance of the U.S. dollar fades substantially in the future, it will likely have more to do with poor management of the U.S. economy, such as ballooning deficits, than with any BRICS efforts to dethrone it, he said.
The following are excerpts from the interview:
RFE/RL: BRICS has been in existence for almost 13 years. How would you compare this bloc to the G7?
Gian Maria Milesi-Ferretti: In my view, the BRICS so far has been more of a talking forum for some of the largest emerging economies rather than a structured entity with a complete commonality of views on the fundamentals of economics.
