As Canadians get preoccupied with daily news, wild fires and ongoing inflation, one substantial development is going on at the moment, potentially endangering Canadian and western economy to it’s core. Do you worry about Canadian economy and Canadian high cost of living? If yes, than BRICS should be a familiar word just because it can change how we live here in this country.
In an increasingly interconnected world, international alliances play a pivotal role in shaping global dynamics. BRICS, an acronym for Brazil, Russia, India, China, and South Africa, represents a significant coalition of emerging economies that has captured the attention of the international community. Formed with the aim of fostering cooperation, addressing common challenges, and promoting economic development, BRICS has implications that extend beyond its member nations. This article explores what BRICS is, the countries that comprise it, and the potential economic effects it could have on Canada and Canadians.
BRICS is an association of five major emerging economies from different continents. It originated in 2001 as “BRIC” when Brazil, Russia, India, and China began holding annual meetings to discuss mutual interests and concerns. South Africa joined the group in 2010, transforming it into BRICS. These nations, collectively representing a significant portion of the world’s population and economic output, sought to establish a platform for dialogue, cooperation, and coordination on various global issues.
BRICS Objectives and Agendas
The BRICS nations share several common objectives:
- Economic Cooperation: BRICS aims to promote economic growth, development, and cooperation among member nations through various initiatives, including trade and investment agreements.
- Geopolitical Influence: By uniting countries from diverse regions, BRICS enhances its members’ collective influence in international forums, allowing them to advocate for their interests on a global stage.
- Sustainable Development: The BRICS nations are committed to addressing environmental and sustainability challenges through joint efforts and the exchange of best practices.
- Financial Stability: BRICS discussions often revolve around reforming global financial institutions to better represent the interests of emerging economies.
Economic Implications for Canada
While Canada is not a member of BRICS, the organization’s activities can have indirect economic effects on the country:
- Trade Opportunities: BRICS nations represent rapidly growing markets with immense consumer bases. As these economies expand, Canadian businesses may find opportunities to export goods and services to these countries.
- Commodity Exports: Many BRICS countries are resource-intensive economies. Increased demand from BRICS nations for commodities like oil, minerals, and agricultural products could positively impact Canadian exporters in these sectors.
- Investment Potential: Canada could attract foreign direct investment from BRICS nations seeking opportunities in sectors such as energy, technology, and infrastructure.
- Diversification: Engaging with BRICS economies allows Canada to diversify its trading partners and reduce dependency on traditional markets.
- Collaboration: Collaborating with BRICS on global challenges like climate change, cybersecurity, and sustainable development can foster international goodwill and enhance Canada’s reputation as a responsible global actor.
More Nations to Join BRICS
Beside Brasil, Russia, India, China and South Africa, Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE have been invited to join the grouping of top emerging economies in January 2024. The statement claimed that the six were chosen after “BRICS countries reached consensus on the guiding principles, standards, criteria and procedures of the BRICS expansion process” but did not go into further depth regarding the precise criteria.
China recently played a role that would typically have been played by a nation like the United States in the restoration of relations between Saudi Arabia and Iran.
India and the UAE recently agreed to trade in Indian rupees and Emirati dirhams rather than US dollars.
End of US Dollar as World Currency
BRICS has publicly criticized the use of “unilateral sanctions” against nations and the US dollar’s continued dominance in international trade. Creating chances for BRICS members to trade more easily with one another using local currencies is one of the goals of the projected expansion.
Recent BRICS summits have become accustomed to challenging the US and “the West.” The BRICS were initially envisioned by Goldman Sachs as a way to track the economic development of a diverse group of nations (the BRICS collectively account for about 40% of the world’s population and a quarter of its GDP), but they gained geopolitical significance when Russia took the initiative to bring together the original four members in 2009, with South Africa joining in 2011 (adding the S to BRICS). The subject of how the rest of the world – specifically the nations of Asia, Africa, and Latin America – are aligning with existing and growing international powers has come to the forefront due to rising geopolitical tensions. The BRICS nations are now trying to take advantage of this opportunity to grow the association of non-Western nations and to shape it as a rival to the US-led political and economic institutions, spurred on by China and Russia.
BRICS is all about pushing global “de-dollarization,” and early this year Brazil even broached the concept of a BRICS currency amid the rising battle for access and influence in the “Global South.” An important part of creating a new global economic order is seen to be overthrowing the dollar’s hegemony, not least since several BRICS nations have been vulnerable to Western economic sanctions.
The BRICS group reiterated its commitment to enhancing possibilities for utilizing local currencies for commerce between bloc members, despite the fact that such ideas currently appear unduly ambitious. Since beginning its conflict with Ukraine, Russia has moved a significant portion of its commerce to the renminbi, which now represents 16% of its export payments. In South Africa, the BRICS bank has issued its first rand bond, and by October, it intends to issue its first rupee bond. Why does Brazil require the dollar in order to conduct business with China or Argentina, recently questioned Brazilian President Lula da Silva? “We may transact in our money,” he said, adding that the BRICS bank is a more equitable economic organization than International Monetary Fund.
Since the US is by far Canada’s greatest trading partner, the value of the Canadian dollar is strongly correlated with that of the US dollar. For the majority of Canadians, this is indeed how their currency is regularly valued. The impact on US markets, if the US dollar were to be replaced or even marginalized in part, would most likely upset the Canadian economy.
On the other side, a declining dollar might increase the value of the loonie since it is mathematically possible and because the Canadian dollar’s value is tightly correlated with commodities, such as precious metals. In order to get ready for the introduction of their new currency, the BRICS have brought back a significant amount of the gold they had stored abroad and started a gold and precious metal buying frenzy. They will need to hold enough of their new currency to make a significant impact as a method of settlement in international trade if it is truly backed by gold and precious metals. Canada ranks sixth in the world for gold deposits and exports gold, which accounted for more than $20 billion in sales last year. If BRICS currency is successful that could mean the rise of Canadian dollar.
It will increase the price of other Canadian exports and may hurt domestic manufacturing, which will have an impact on jobs and productivity.
Which brings us to another likely result for Canada related to the BRICS currency: If the new money from the emerging markets succeeds in dethroning the dollar as the world’s reserve currency, destabilizing the global economy while strengthening the Loonie, the Bank of Canada may seize the opportunity to put into practice its long-planned experiment with digital currency. In the not too distant future, a digital currency from Canada might be unveiled and marketed as the solution to all of society’s problems.
We have already witnessed how the federal government was prepared to suspend bank accounts in order to stop what it deemed to be “undesirable” behaviour during the Covid-19 vaccine demonstrations. This would only be made simpler by a digital currency, particularly if it led to the eventual abolition of cash. Of course, the Bank of Canada asserts that this will never occur, but they have previously broken their word much too frequently to be believed.
BRICS serves as a testament to the evolving landscape of international relations and the increasing influence of emerging economies. While Canada is not a member of BRICS, the organization’s goals and activities can have a ripple effect on the Canadian economy. The economic opportunities stemming from trade, investment, and cooperation with BRICS nations can contribute to Canada’s growth and development. As BRICS continues to shape global discussions and policies, Canada has the potential to leverage its connections with these economies for mutual benefit while contributing to the broader objectives of international cooperation and prosperity. Because BRICS is the opposition of International Monetary Foundation and US dollar as dominant world currency, Canada will most likely oppose BRICS policies and as such less trade with BRICS nations will very probably effect Canadian economy and Canadian standard of living.
Therefor Canada must develop its own micro economy where Canadians will be buying and trading locally, making Canada more self sufficient.