BRICS

BRICS’ De-Dollarization Agenda Has a Long Way to go

Published

2 months ago

October 27, 2024

Staff

The BRICS nations’ ambition to establish a viable alternative to the U.S. dollar for international trade, often referred to as the “de-dollarization” agenda, faces formidable hurdles despite high-level support from member states. Leaders, including Russia’s Vladimir Putin and China’s Xi Jinping, have signaled their desire to create a payment system independent of the dollar. But experts warn that the road to a functional alternative remains fraught with technical and political challenges.

At the recent BRICS summit, discussions centered on establishing an alternative to SWIFT, the dominant international payment network from which Russia was excluded following its 2022 invasion of Ukraine. Putin highlighted the need for a secure framework that would allow BRICS countries—Brazil, Russia, India, China, and South Africa—to conduct trade in their national currencies. Yet, independent analysts remain skeptical about the feasibility of such a system emerging in the near future.

Eva Seiwert, an analyst at the Mercator Institute for China Studies, observed that the Kazan Declaration, which encapsulated the summit’s outcomes, remained noncommittal. The declaration mentioned the BRICS Cross-Border Payments Initiative (BCBPI), a system intended to foster currency settlements within the group, but made clear that participation would be “voluntary and non-binding.” The absence of binding commitments has raised questions about the group’s political will and readiness to pursue a full-fledged alternative payment network.

One of the most significant technical obstacles to de-dollarization is the issue of currency fluctuations. Gopal Tripathy, head of Treasury at Jana Small Finance Bank in Bengaluru, noted that any alternative payment system would need a mechanism for managing exchange rate volatility. If BRICS were to use the dollar as a reference currency, it would compromise the entire purpose of distancing itself from dollar reliance, Tripathy argued. Furthermore, even if BRICS members adopt such a system, companies outside the bloc could struggle with transaction difficulties, as most global businesses remain deeply intertwined with dollar-based financial systems.

Moreover, while India and China have successfully conducted trade with Russia using local currencies, expanding this model to other BRICS members would require a more robust and interoperable infrastructure. Without a reliable and resilient financial framework, there is little assurance that BRICS members can replicate such arrangements consistently or at scale, especially in sectors where cross-border transactions are essential.

The BRICS plan has not gone unnoticed in Washington. U.S. Treasury Secretary Janet Yellen warned that continued economic sanctions could drive BRICS and other nations toward non-dollar financial networks, potentially accelerating de-dollarization efforts. In her testimony before the House Financial Services Committee in July, Yellen noted that an increased reliance on sanctions might push more countries to seek alternative transaction methods. Yet, she tempered her concerns by pointing out the unique strengths of the U.S. financial system, including its deep liquidity, strong legal framework, and capital market freedoms—advantages that BRICS would struggle to replicate.

Beyond sanctions, other geopolitical tensions also feed into BRICS’ desire to decrease dependency on the dollar. The growing rift between the U.S. and both China and Russia has incentivized these nations to fortify their economic alliances and explore pathways to more autonomous financial systems. However, consensus on de-dollarization within BRICS remains elusive, as evidenced by differing stances on a shared BRICS currency.

Brazil has proposed issuing a unified BRICS currency, an idea that underscores the group’s ambition for greater financial independence. However, this proposal has not gained traction among the other members, who are wary of the economic compromises it would entail. The New York-based Council on Foreign Relations highlighted the complexities, pointing out that a shared currency would necessitate a banking union, a fiscal union, and substantial macroeconomic convergence—requirements that would be exceedingly difficult to achieve across such a diverse group.

Many economists doubt whether a BRICS currency could ever gain the stability and global trust needed for widespread adoption. For one, the economic policies of BRICS nations are often divergent, reflecting the unique priorities of each member state. In addition, the economic stability of BRICS members varies widely; while China and India are growing economic powerhouses, South Africa faces significant financial and structural challenges. These disparities would likely impede efforts to establish a stable and widely trusted BRICS currency, at least in the short term.

While the BRICS countries are making strides toward de-dollarization, the journey remains daunting. Analysts argue that despite BRICS’ shared goals, the lack of technical infrastructure, internal economic cohesion, and a robust governance framework make it unlikely that the group will soon develop a viable alternative to SWIFT or the dollar. Instead, the BRICS bloc may prioritize incremental measures, such as increased bilateral trade in local currencies, to gradually reduce dollar dependency.

For now, the dollar remains entrenched as the world’s reserve currency, supported by its widespread acceptance, the stability of U.S. institutions, and an extensive financial network that provides liquidity and security unparalleled by other currencies. Until BRICS can construct an integrated financial ecosystem with similar strengths, its de-dollarization agenda is likely to remain aspirational.

Related Topics:Africa BRICS Dollar Featured Gopal Tripathy Russia SWIFT U.S Vladimir Putin Xi Jinping

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Russia Considers Ethiopia as Key Player in BRICS

BRICS

Unlocking Somaliland: A New Dawn for Investment and Opportunity

Published

4 weeks ago

November 23, 2024

Staff

Somaliland is emerging as a beacon of potential, rich in untapped resources and poised for a transformative future. With its strategic location, stable governance, and a wealth of natural assets, this region is quickly becoming an attractive destination for foreign investors. As President Abdirahman Mohamed Abdullahi Irro leads the charge for Somaliland’s recognition on the global stage, the time is ripe for international investors, particularly from dynamic economies like USA, to engage with this promising territory.

Somaliland’s landscape is dotted with significant reserves of oil and various minerals, including gypsum, limestone, salt, and iron ore. The promise of these natural resources presents a unique opportunity to catalyze economic growth and job creation. By investing in sustainable extraction technologies, foreign investors can not only harness these resources but also contribute to the development of local economies, laying the groundwork for a prosperous future.

Situated along the Gulf of Aden, Somaliland enjoys a prime geographic advantage, serving as a natural hub for trade that connects Africa with the Middle East and beyond. This strategic position makes it an ideal location for logistics and commerce, further enhancing its appeal to potential investors. Coupled with a youthful population eager to adapt and innovate, Somaliland offers a workforce that is primed to meet the demands of various sectors, including technology and agriculture.

To effectively attract foreign investment, Somaliland must embrace the power of storytelling—crafting a narrative that resonates with prospective investors. This story should highlight the region’s vision for growth, showcasing local entrepreneurs who have thrived against all odds. By sharing these success stories, Somaliland can illustrate its resilience and potential, inviting investors to join in its journey.

The cultural richness of Somaliland is another key facet of this narrative. The warmth and hospitality of its people are a vital part of the experience, making the region an inviting place for businesses to establish roots and foster meaningful connections. As Somaliland strives for international recognition, it is crucial to underline the political stability and governance structures that have allowed it to maintain peace and security, making it a more attractive locale for investment.

To further bolster interest from global investors, Somaliland could benefit from the establishment of a dedicated investment promotion agency—a one-stop shop to provide tailored support and information about investment opportunities. This initiative could include the development of a robust digital presence through social media and targeted outreach, ensuring the narrative of Somaliland’s potential reaches audiences far and wide.

Hosting international investment forums presents another avenue for engagement, inviting business leaders from around the world, especially from tech sector, to explore opportunities firsthand. Networking events can facilitate connections that ignite collaborations and encourage dialogue about Somaliland’s investment potential.

In particular, the tech industry stands poised to thrive in Somaliland. Companies in fields like agritech, health tech, and fintech can find fertile ground for innovation and growth. By providing customized incentives, such as tax breaks and partnership models with local businesses, Somaliland can create an inviting atmosphere for investment.

A collaboration with international organizations can further lend credibility to Somaliland’s efforts. Partnerships with influential entities such as the World Bank or the African Development Bank can enhance visibility and provide a sense of security for potential investors, showcasing a commitment to sustainable practices and innovation.

At its core, the story of Somaliland is one of resilience and opportunity. As President Irro’s government embarks on this new chapter, global investors—especially those from UK, and EU—are invited to discover the vast resources and investment opportunities that await. This is more than just a financial decision; it is a chance to forge connections with a community eager for growth, innovation, and partnership.

As the world turns its gaze toward Somaliland, join in unlocking the full potential of this extraordinary region. Together, investors and Somaliland can build a promising future, establish a unique narrative of success, and elevate Somaliland on the global stage as a vibrant hub for investment and development. Now is the time to be part of this transformative journey.

BRICS

Russia Considers Ethiopia as Key Player in BRICS

Published

2 months ago

October 30, 2024

Staff

In a recent statement, Russian Ambassador to Ethiopia, Evgeny Terekhin, underscored Ethiopia’s emerging influence within the BRICS alliance, viewing the East African nation as a key contributor to the bloc’s evolving agenda. This assessment follows Ethiopia’s inaugural participation in the 16th BRICS Summit held in Kazan, Russia, where Ethiopian Prime Minister Abiy Ahmed led a high-level delegation, signaling Ethiopia’s commitment to the group’s vision of a more equitable global order.

Terekhin, speaking to the Ethiopian News Agency (ENA), noted that Ethiopia’s entry into BRICS brings fresh momentum, given the country’s strategic position in East Africa and its role in regional stability and economic integration. “Ethiopia’s participation will significantly contribute to the collective development of the bloc,” Terekhin remarked, emphasizing that Ethiopia’s balanced approach on international issues aligns well with BRICS’ goals.

As BRICS, which includes Brazil, Russia, India, China, and South Africa, expands its influence in global economics and politics, the ambassador observed that Ethiopia could leverage the alliance to bolster its economic ambitions. With BRICS already accounting for nearly one-third of the global economy and half of the world’s population, Ethiopia’s inclusion strengthens its appeal to other nations seeking alternatives to traditional economic frameworks dominated by Western economies.

Ethiopia’s delegates participated in critical discussions on topics ranging from equitable trade policies to infrastructure and development funding, ensuring that the nation’s economic interests and broader policy priorities were well-represented. This new diplomatic chapter could further catalyze Ethiopia’s economic growth, with access to resources, investment, and markets provided by BRICS, according to Terekhin.

Prime Minister Abiy’s focus on fostering Ethiopian self-reliance and resilience aligns with BRICS’ approach to mutual development and people-centered growth. The bloc’s commitment to sustainable development, in particular, provides a strategic platform for Ethiopia, a country with ambitious economic targets yet vulnerable to environmental and resource challenges.

The ambassador’s optimism also speaks to BRICS’ plans to deepen cooperation on economic and social issues, potentially offering Ethiopia a pathway to address its internal development challenges while strengthening ties within the Global South. Currently, more than 30 countries have expressed interest in joining BRICS, highlighting its growing significance as a counterweight to Western-led financial systems and signaling a shift toward a more multipolar global economic order.

With its unique mix of resources, strategic alliances, and regional influence, Ethiopia is positioned to be both a beneficiary and an active contributor to BRICS’ evolving narrative. As the alliance broadens its impact, the involvement of nations like Ethiopia may help bridge divides within the Global South, reinforcing BRICS’ mission to shape a more balanced global system.