Here is the (feasible?) plan of the BRICS against the US dollar
To counter the dollar, the BRICS say they intend to issue 30 percent of loans in national currencies. Brazil's Lula is a big believer in de-dollarization, but is it achievable? Facts, numbers and insights
The anti-Western bloc of the BRICS launches its challenge to the US and the dollar by announcing, through the mouth of the Russian Foreign Minister Lavrov, a significant expansion of its membership and committing, through its Ndb bank, to issue 30% of its loans in local currencies. But, as IMF data shows, the challenge to a dollar still hegemonic in global foreign exchange reserves and trade is all uphill.
The words of Minister Lavrov
According to Russian Foreign Minister Sergej Lavrov, the number of countries interested in joining the BRICS and the SCO – organizations pursuing emancipation from the US-led world order and the domination of the dollar – is reportedly increasing and has reached last year share 22.
In a speech to the heads of departments of his ministry, Lavrov said, as reported by Tass , that the number of these countries "has grown significantly in the last two years, including the first year of the special military operation".
The list of these countries would include, according to the Minister, Egypt, Saudi Arabia, the United Arab Emirates, Indonesia, Argentina and a certain number of African countries. These are nations which, added Lavrov, "play a really important role in their regions".
As also reported by Start Magazine. the latest country to queue up to join the BRICS is Tunisia , a country that is conducting arduous negotiations with the IMF to obtain a 1.9 billion dollar loan to keep an economy in a state of growing difficulty afloat . Even in Tunis they think it is appropriate to go elsewhere.
The promise of Dilma Roussef, head of the Ndb
Since 2014, the Geopolitical Economy portal recalls, the BRICS have had their own bank, the New Development Bank, whose headquarters are in Shanghai.
The institution was set up with the intention of serving as an alternative to the World Bank, which by statute is always led by an American, and to its neoliberal conception of economic issues which often leads it willingly to demand, in exchange for its loans , drastic reform conditions.
The goal of emancipating ourselves from the hegemony of the USA and its currency was recently made explicit by the new president of the NDB Dilma Roussef, the former President of Brazil whose mandate at the head of the BRICS bank was inaugurated a few days ago in the presence of her successor and mentor Lula.
Interviewed by the Chinese broadcaster CGTN , the President made unequivocal statements regarding the need for the BRICS to advance dedollarisation, such as the one in which she stated that 30% of the Bank's loans will be issued in local currency.
"It is necessary – Roussef said during the interview – to find ways to avoid risks related to foreign currency reserves and other issues such as being dependent on a single currency such as the dollar".
“The good news – added the new president – is that we are seeing many countries choosing to trade using their currency. China and Brazil, for example, have agreed to trade in the renminbi and the Brazilian real."
“As Ndb we are committed to pursuing precisely this strategy. The bank will have, in the period between 2022 and 2026, to make 30% of its loans in local currencies, so 30% of our loans will be financed with the currencies of our member countries".
Lula's commitment
Supporting Roussef's mandate and his demanding objectives is the Brazilian President Lula , who not by chance attended the inauguration ceremony of the NDB President herself.
As reported by the Financial Times , on the occasion of her recent visit to China, Lula made statements that were fully in line with those of her ex-dolphin.
"Every night", were the words of the Brazilian President, "I wonder why all countries should base their trade on the dollar".
“Why can't we trade in our own currencies?” asked the socialist leader. “Who decided that the dollar would become the (global trade) currency after the disappearance of the gold standard?”
It's still. "Why can't a bank like the BRICS have a currency to finance trade relations between Brazil and China and between Brazil and other countries?".
The Dominance of the Dollar and the Rise of the Yuan
We do not know at the moment whether the challenge launched by the BRICS will actually be able to erode or even supplant the dominance of the dollar.
What is certain is that, if one looks at the trend in global currency reserves, the goal seems very far away. As Il Sole24ore points out, citing data from the International Monetary Fund, the dollar today represents 58.36% of global banks' global reserves, against 20.47% for the euro and just 2.69% for the yuan.
However, by thoroughly probing the IMF data, we can glimpse an incipient trend that would seem to agree with Lula & co. In Brazil, for example, the yuan has recently become the second largest reserve currency with 5.4% of the total, overtaking the euro.
Crushed by the grip of Western sanctions, Russia has also moved in this direction, bringing its reserves in yuan to 17% of the total.
As also emerges from the UBS annual survey, the percentage of central banks that invest or are interested in investing in yuan rose to 85% in 2022.
A similar story is told by transaction volumes on the global foreign exchange market. Citing data from the Bank for International Settlements, Il Sole24ore notes a constant growth in recent years in the weight of the yuan, which has gone from zero in 2007 to the current 7% of the global total.
The same goes for global trade, where the dominance of the dollar, which accounts for 87% of the total, is challenged by a rising yuan which now accounts for 3% of the total.
The challenge of the Brics is therefore open, even if, at least for now, it remains all uphill.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/brics-dedollarizzazione/ on Sat, 22 Apr 2023 05:45:55 +0000.