Yaroslav Lissovolik is the Founder of BRICS+ Analytics – a think-tank that explores the potential of the BRICS+ format in the global economy. Previously he worked as chief economist and head of research in Deutsche Bank Russia, the Eurasian Development Bank as well as Sberbank. He also worked as an Advisor to Russia’s Executive Director in the International Monetary Fund. In the beginning of 2017 he developed the BRICS+ concept based on the model of economic cooperation among the regional integration blocks of BRICS economies. In the same year he also advanced the R5 initiative that targeted greater use of BRICS national currencies and the creation of a common BRICS reserve currency.
- Dr. Lissovolik, this year South Africa holds the chair in the BRICS block and it has declared that its main priority is the closer cooperation between Africa and the BRICS alliance. What do you think the BRICS economies can do to support African development?
In my view the best contribution that the BRICS can deliver to African development is to coordinate a BRICS+ reduction in import barriers to African economies. This would go a long way towards contributing to the success of the African Continental Free Trade Area (AfCFTA). Some of the BRICS economies have import tariff rates in excess of 30% in the agricultural sector so there is sizeable scope for improving market access for African countries coming from the BRICS economies. But it is also the capability of BRICS to coordinate via BRICS+ a wider scale trade liberalization for Africa that comprises the bulk of the Global South that also matters.
A reduction in import duties and other barriers on a scale of BRICS+, meaning comprising not just the BRICS core, but also their regional partners, would significantly reinforce the market openness effect for Africa. If Russia or Brazil decide on a coordinated reduction in import barriers for the AfCFTA, this will trigger (due to their modalities of their trade policy) the liberalization of markets vis-à-vis Africa from their partners from the respective regional integration blocks – the Eurasian Economic Union and MERCOSUR. This is what I refer to as the BRICS+ multiplier of trade openness for Africa.
- The key theme in the upcoming summit will be the expansion of the BRICS core. What possible scenarios do you see unfolding in the coming meetings?
Attention is mostly focused on the expansion of the BRICS core and hardly any attention is accorded to the possible modalities of the BRICS+ format. With respect to the core, the BRICS are likely to unveil the main criteria for the expansion of the core, which may include among other things the economic weight of the candidate countries in their respective regions. There may be several additions to the core, such as Saudi Arabia and Indonesia, in the coming years. But a sizeable expansion in the core has its limitations and more weight in the expansion process will likely be channeled into the BRICS+ track.
As regards the BRICS+ format, apart from the formation of a group of partner countries that have either applied or shown interest in cooperating with the block, there is a need to create a platform for regional integration arrangements led by the BRICS economies. Each BRICS core member is a key player in their respective regional trade blocks – India in BIMSTEC, Russia in the Eurasian Economic Union, South Africa in the African Union and the AfCFTA, Brazil in MERCOSUR, and China in the Shanghai Cooperation Organization (SCO). All these regional blocks have already featured in the outreach activities of BRICS, with a common platform for these arrangements being named BEAMS (from the first letters of the respective regional blocks). Such a platform would be capable of coordinating large-scale initiatives in the sphere of trade and investment, including a coordinated BRICS+ openness of markets with respect to the AfCFTA.
- Is there scope for Western participation in a BRICS+ format? Are there ways to build communication lines between say the G7 countries and BRICS?
I think that it is possible to expand the communication lines between the BRICS and the G7, but most likely in terms of the sequencing of their outreach the BRICS will opt to prioritize the South-South format of BRICS+, before proceeding to extend the outreach to developed economies. My proposal in this respect since 2018 has been the creation of a BRICS++ platform that would provide scope for Western regional development institutions to participate in the discussions with their BRICS+ counterparts. If the BRICS+ since 2017 has been reserved by China for promoting economic cooperation across the Global South, a BRICS++ platform can focus initially on bringing in development institutions with Western participation such as the EBRD, ADB, AIIB as well as regional integration blocks such as RCEP. As the format takes greater traction via pragmatic initiatives in the sphere of development financing in areas such as green and digital development, there may be scope to expand it to include invitations of some of the Western leaders and regional blocks to the BRICS++ summits.
- Another focus theme in the summit is the discussion of the use of national currencies and the possibility of a common BRICS currency. How far are the core members of the group likely to advance this agenda?
I do believe that a BRICS currency is very much a feasible project, certainly such modifications of the R5 (one of the current names for the common BRICS currency) as an accounting unit or a reserve currency would be quite straightforward to implement. What is more debatable is what kind of a currency to settle international transactions the BRICS could advance – even here in terms of technicalities and mechanics there are quite credible proposals coming most recently from Brazil’s Paulo Nogueira Batista, former Vice-President of the New Development Bank. Most of the doubts voiced with respect to the common currency project relate not even so much to the technical feasibility, but rather the lack of political support from within BRICS.
With respect to the summit, I expect that the BRICS are likely to announce their plans to assess the prospects of the creation of such a currency, possibly with the academic circles and think-tanks from the BRICS economies being asked to explore these issues. The actual decision is unlikely in my view in the next several years until there is a firm consensus among all core BRICS members on the expediency of such a course of action. At the earliest such a decision appears to be within reach during Brazil’s presidency in BRICS in 2025.
- There is a lot of euphoria about the planned expansion of the BRICS block and the launching of a common currency, but what are the risks and challenges facing the BRICS?
Challenges abound for the BRICS and indeed the discussions surrounding the BRICS expansion and the common currency suggest that agreement is not always easy to reach on critical issues that matter for the future of the block and the global economy. But apart from the problems in reaching the needed consensus, there is a broader problem that was in part referred to recently by Jim O’Neill, namely that there is a lack of focus on pragmatic themes that matter for the economy and markets. This is not just about the common currency, but also about the trade liberalization within BRICS and the broader BRICS+, the possibility of creating pragmatic platforms of cooperation among the regional development institutions where BRICS countries are members. Too much effort has been expended at times on secondary issues that have no bearing on the economy, markets or global governance.
And losing time in adopting crucial decisions may be costly, when global economic risks are high. Most BRICS economies are facing economic growth headwinds, with China still to exhibit a more emphatic post-COVID recovery. Economic stability is also challenging due to intensifying EM exchange rate volatility amid higher interest rates in the US. And then there are challenges and risks associated with innovation and technological development arising partly from the lack of momentum within the BRICS themselves as well as due to sanctions, protectionism and other restrictions emanating from the advanced economies.
- If the expansion of BRICS progresses further in the coming years, could it be that BRICS+ emerges as a platform for a new round of globalization in the world economy?
Indeed, despite the challenges and risks, BRICS if expanded to the BRICS+ and BRICS++ formats could attain the scale to serve as an important platform for a revitalized globalization effort. It could work more closely with the G20 as well as with the Bretton Woods institutions such as the IMF and the World Bank in rendering the new the new round of globalization more inclusive and balanced. Regional integration arrangements and their development institutions could also become important drivers in this globalization effort, with BRICS+ having the capability of creating a new layer of global governance that is represented by regionalism, i.e. coordination mechanisms for regional blocks and their development institutions. But before these grand plans are to materialize, BRICS needs to deliver on some of the most pressing issues for the global economy and for Africa – these themes include greater market access vis-à-vis the Global South and greater effectiveness for the BRICS institutions such as the New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA).