An Introduction To The New BRICS Members and 2023 BRICS Summit Analysis
The expanded BRICS now possesses 37% of global GDP. I discuss the new members demographics, the implications for global trade and the potential for consequential United Nations reform.
The 2023 BRICS summit in South Africa has now finished, with the development highlight being the invitation extended by the current BRICS members – Brazil, Russia, India, China, and South Africa – to invite a further six nations to join them. Invitations have been issued to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. All had previously expressed a desire to join the bloc and had sent official applications to do so. These countries will likely take up their membership of BRICS and begin to actively participate within the coming six months.
Western media has criticized the BRICS as being a disparate group, lacking any commonality. However, most are significant members of their own regional trade blocs; and are probably best thought of as individual legs supporting an increasingly stable chair.
BRICS Trade Commonality & Integration
Each of the original BRICS and the newcomers are the lead nation in their respective backyards and a major economic force within their regional Free Trade Areas. This is evidenced as follows:
Brazil: Mercosur
China: RCEP
To these we can now add:
Saudi Arabia & UAE:Gulf Cooperation Council & GAFTA
Iran: The EAEU with Iran also being a key component of the INSTC transport network linking the Middle East to Central and South Asia.
Argentina: Mercosur being the blocs 2nd largest economy after Brazil
What An Expanded BRICS Means
What these developments basically mean is that the BRICS have now added a trade majority influence in South America, the Middle East, and have further cemented trade with continental Africa on top of what they already had. It’s a completely logical, globally encompassing trade grouping, and essentially renders the G20 at least partially obsolete.
An Introduction To The New BRICS Members
A basic introduction to each of the new BRICS members is as follows:
ARGENTINA
GDP: USD491.5 billion
GDP Per Capita: USD10,730
2023 Projected Growth Rate: -1.6%
Population: 46 million
Argentina is an agricultural economy and major global supplier. It is the second largest member of the Latin American Mercosur trade bloc which also includes Brazil, Paraguay, and Uruguay and which has additional trade agreements with most other LatAm nations. Mercosur also has trade agreements with India and the Southern African Customs Union, which includes Botswana, Eswatini, Lesotho, Namibia and South Africa. Argentina’s major trade partners include Brazil, followed by China, the United States, Germany, Chile, Paraguay, Vietnam, and Germany. Argentina is expected to move out of recession next year.
EGYPT
GDP: USD404 billion
GDP Per Capita: USD3,880
2023 Expected Growth Rate: 4.2%
Population: 104 million
Egypt is an energy and agricultural play, with important exports including petroleum and petroleum products, followed by raw cotton, cotton yarn, and textiles. Raw materials, mineral and chemical products, and capital goods are also exported. Among agricultural exports are rice, onions, garlic, and citrus fruit. Egypt is a member of the Greater Arab Free Trade Zone which also includes Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the UAE and Yemen. Egypt is also a member of the African Continental Free Trade Agreement (AfCFTA) which is in the process of reducing tariffs to zero on 95% of all intra-African trade. It is the largest economy in continental Africa.
Egypt is a dialogue partner to the Shanghai Cooperation Organisation which includes China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan as full members, while Afghanistan, Armenia, Azerbaijan, Bahrain, Belarus, Cambodia, Kuwait, Maldives, Mongolia, Myanmar, Nepal, Saudi Arabia, Sri Lanka, Turkiye, Turkmenistan, Qatar and the United Arab Emirates are all in various status as SCO dialogue partners and observers. Egypt’s most important trading partners include China, the United States, Italy, Germany, and the Gulf Arab countries.
ETHIOPIA
GDP: USD111.3 billion
GDP Per Capita: USD925
2023 Expected Growth Rate: 5.8%
Population: 120 million
Ethiopia, in the Horn of Africa, is a rugged, landlocked country split by the Great Rift Valley. It is the sixth largest economy in continental Africa, fuelled by a flourishing agricultural and manufacturing sector. Ethiopia’s main products are coffee, oil seeds, vegetables, and gold.
However, Ethiopia’s northernmost region of Tigray is at the center of a civil conflict involving ethno-regional militias, the federal government, and the Eritrean military that has attracted the concern of humanitarian groups and external actors since November 2020. Russia’s Wagner Group are providing military support. The United States is backing the Eritrean militia.
As one of the fastest-growing economies, Ethiopia also has a burgeoning middle class. It is a member of the South-East African COMESA and the pan-African AfCFTA trade agreements, while a renewal of its WTO membership is pending. Ethiopia’s membership of COMESA gives it free trade access to Burundi, Comoros, the DR Congo, Djibouti, Egypt, Eswatini, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia and Zimbabwe. COMESA in total includes about 640 million people and has a GDP of about USD918 billion.
IRAN
GDP: USD231.5 billion
GDP Per Capita: USD2,760
2023 Expected Growth Rate: 2.5%
Population: 85 million
Iran has the equivalent of over 1.2 trillion barrels of oil and gas and is the largest holder of hydrocarbon reserves in the world. Heavily sanctioned by the United States and Europe over plans for it to develop nuclear power plants (the West fears these could be used to make nuclear weapons capable of hitting Israel), Iran is however a member of OPEC, which also includes Algeria, Congo, Ecuador, Equatorial Guinea, Gabon, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the UAE and Venezuela. It is also about to become a full member of the Shanghai Cooperation Organisation which includes China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan as full members, while Afghanistan, Armenia, Azerbaijan, Bahrain, Belarus, Cambodia, Egypt, Kuwait, Maldives, Mongolia, Myanmar, Nepal, Saudi Arabia, Sri Lanka, Turkiye, Turkmenistan, Qatar and the United Arab Emirates are all in various status as SCO dialogue partners and observers.
Iran has recently stated it will link its energy supply chains to SCO members electricity networks, and is the main transit focus for the International North-South Transportation Corridor (INSTC) which links trade from Europe, Russia, Turkiye, the Caucasus and Central Asia through to markets in East Africa, the Middle East and South Asia.
Iran has a Free Trade Agreement with the Eurasian Economic Union (EAEU) which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Its main trade partners are China, UAE, India, Turkiye, Russia and Germany. It is a key transit country for the International North-South Transportation Corridor (INSTC) which links Russia, Central Asia, the Middle East and South East Asia and which is expected to be fully operational by late 2024 once on-going infrastructure developments have been completed.
SAUDI ARABIA
GDP: USD833.5 billion
GDP Per Capita: USD23,600
2023 Expected Growth Rate: 1.9%
Population: 35 million
Saudi Arabia possesses around 17% of the world’s proven petroleum reserves. Apart from petroleum, the Kingdom’s other natural resources include natural gas, iron ore, gold, and copper. It is a member of OPEC, which also includes Algeria, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the UAE and Venezuela, as well as the Arab Trade Zone which also includes Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Sudan, Syria, Tunisia, the UAE and Yemen.
Saudi Arabia is also a member of the Gulf Cooperation Council (GCC) a regional, intergovernmental, political, and economic union comprising Bahrain, Kuwait, Oman, Qatar, and the UAE. The GCC currently has a Free Trade Agreement with Singapore and is negotiating FTA with China and India.
Saudi Arabia is additionally a dialogue partner of the Shanghai Cooperation Organisation and has made in known it wishes to become a full member. The SCO also includes China, India, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan as full members, with Iran about to join them, while Afghanistan, Armenia, Azerbaijan, Bahrain, Belarus, Cambodia, Egypt, Kuwait, Maldives, Mongolia, Myanmar, Nepal, Sri Lanka, Turkiye, Turkmenistan, Qatar and the United Arab Emirates are all in various status as SCO dialogue partners and observers. Saudi Arabia’s main trade partners are the UAE, China, India and Singapore. The Kingdom signed off a US$400 billion strategic investment plan with China earlier this year. Current GDP growth rates are somewhat lower than expected due to OPEC cutting oil production quantities.
UNITED ARAB EMIRATES
GDP: USD36 billion
GDP Per Capita: USD36,300
2022 Growth Rate: 3.8%
Population: 10 million
The United Arab Emirates (UAE) is among the world’s ten largest oil producers. About 96% of the country’s roughly 100 billion barrels of proven oil reserves are located in Abu Dhabi, ranking 6th worldwide. The UAE is a member of OPEC, which also includes Algeria, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, and Venezuela, as well as the Arab Trade Zone which also includes Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, and Yemen.
It is also a member of the Gulf Cooperation Council (GCC) a regional, intergovernmental, political, and economic union comprising Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia. The GCC currently has a Free Trade Agreement with Singapore and is negotiating FTA with China and has recently signed trade agreements with Cambodia, Israel, and India with several others pending.
The UAE is a dialogue partner to the Shanghai Cooperation Organisation which includes China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan as full members, while Afghanistan, Armenia, Azerbaijan, Bahrain, Belarus, Cambodia, Kuwait, Maldives, Mongolia, Myanmar, Nepal, Saudi Arabia, Sri Lanka, Turkiye, Turkmenistan, and Qatar are all in various status as SCO dialogue partners and observers.
The United Arab Emirates’ economy is highly dependent on the exports of oil and natural gas (40% of total exports). Other exports include pearls and other precious metals and stones (28%), machinery, sound recorders and parts (9%) and transport vehicles (6%). The electric vehicle industry is also becoming centred in part around the UAE. The Emirates largest trade partners are Saudi Arabia, Iraq, India, and Switzerland.
Original BRICS Leaders Reactions
The host of the BRICS 2023 summit, South African President Cyrill Ramaphosa said at the end of the summit in Johannesburg that “We value the interest of other countries in building a partnership with BRICS. Other expansions will follow in the future after the core countries agree on criteria for membership.”
Indian Prime Minister Modi said that “Adding new members will further strengthen BRICS and give it a new impetus”, while Russian President Vladimir Putin stated that “We will continue what we started – expanding BRICS’ influence throughout the world.”
Brazil’s Lula stated that said he was in favor of other countries joining the alliance, mentioning Indonesia as a potential new member. He later added in a speech that new partners would help BRICS increase its relevance on an international scale.
China’s Xi Jinping said that “The expansion of BRICS will inject new vitality into the group’s cooperation mechanism” while also announcing an upcoming launch of a USD10 billion special fund aimed at bolstering global development for the group.
The New BRICS Demographics
In total, this expanded BRICS now increases its share of global GDP from 32% to 37% on a PPP basis. The difference between nominal GDP and PPP GDP is that nominal GDP is measured in absolute units (usually the USD). This tells how much value, in one currency, an economy produces in one year.
But, since things cost differently in different places, and USD exchange rates constantly move, nominal GDP data doesn’t reveal how much actual wealth people based in other economies actually have. The PPP measurement uses a basket of goods and tells economists how much locals globally need to spend to purchase the same basket. As concerns the BRICS, their share of global GDP based upon a common basket of goods (actual purchasing power) represents 37% of all global production. The G7 share of global trade is currently 30% based on PPP values.
Meanwhile, as can be seen, an expanded BRICS including the new entrants is a significant global trade bloc. To this can be added the significance of the Shanghai Cooperation Organisation, which will also to some extent mirror the new BRICS grouping in terms of influence – the difference being that the BRICS is a trade bloc while the SCO focusses more on regional security. Policies between the two appear certain to be intertwined in future.
It should again be noted that this expanded BRICS platform effectively brings together an additional 69 countries into the immediate new BRICS orbit because of their lead relationships in Mercosur, GCC, COMESA and so on. Adding in members of the SCO not already involved with BRICS or related trade blocs would include another three countries: Mongolia, Nepal, and Turkmenistan.
BRICS Currency & USD Trade Issues
There was a lot of interest in this subject prior to the summit, however it was not part of the overall agenda. That said, BRICS leaders have requested their respective Finance Ministers and Central Bank Governors to identify measures to reduce their reliance on the US dollar in trade, and to report back next year, according to Ramaphosa. “There is a global momentum for the use of local currencies, alternative financial arrangements, and alternative payments systems,” he said.
Brazil’s Lula had floated the concept of a BRICS common currency as a unit of trade. I explored the issues concerning the development of BRICS digital currencies and the paths that need to be taken to develop an alternative currency here.
Further BRICS Expansion
Brazilian President Lula has already stated he feels that Indonesia would be a primary candidate for BRICS inclusion. If so, it would be the first ASEAN bloc member to be formally accepted. I discussed Indonesia’s desire to join the bloc here.
Thailand is another ASEAN nation wanting to join, although the current political situation there is somewhat changeable at present. Other potential members include Nigeria – BRICS doesn’t have an African West coast presence at present; Bangladesh and Uruguay, which have both already joined the BRICS New Development Bank, and possibly Kazakhstan, with the BRICS not yet having a full Central Asia member either.
Summary
The implications of this expanding BRICS have very specific and wide-ranging implications for future global trade flows and cross-border investment. Detractors will point out that the BRICS is not an ‘official’ – meaning institutionalised – trade bloc, however at this stage of development, being more flexible means the BRICS can make agreements on a faster, consensual basis and sort out the institutional structures later. Indeed, this loose structure may well be quite deliberate, as it means the BRICS as a grouping is harder to pin down. In terms of dealing with the West, this is essentially a ‘divide and conquer’ strategy as there is no specific BRICS secretariat. It means that the BRICS as a group cannot be sanctioned.
This doesn’t mean that the BRICS aren’t putting into place institutional structures, because they are. The BRICS New Development Bank is an obvious example, but there are many others, with their roles specifically stated with the BRICS 2023 Summit Official Declaration.
What is also noticeable about this brand-new BRICS policy document is the emphasis placed on reform of existing global institutions – including the United Nations, World Bank, IMF, WTO, WHO and others. How the BRICS will deal with this is via a democratic platform within the UN. As I pointed out, with the new BRICS expansion, the members have quite specific trade influence over another 69 countries. China has signed up 147 nations to its Belt and Road Initiative. These votes will be increasingly used to influence a restructuring of the United Nations and its related institutions.
This also means that the days of the G7 – a rich man’s economic club – will increasingly be seen as anachronistic, even obscene. The 2023 BRICS summit appears to have delivered what it said it would – the beginnings of an irreversible global change to a multipolar, as opposed to unipolar world trade structured society.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates. He can be reached at asia@dezshira.com
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