BRICS news raises questions about global financial markets: potential investment opportunities and geopolitical impacts.
Recent developments regarding the BRICS have aroused significant interest among analysts and experts in geopolitics and finance. This has generated multiple questions about the future of global financial markets. What are the possible prospects to consider?
What is BRICS and why is it so globally important?
Before examining the subject further, it is necessary to provide a detailed definition of BRICS, a widely discussed but often poorly understood term. BRICS is an acronym that identifies a group of emerging countries: Brazil, Russia, India, China and South Africa. It is a geopolitical entity that brings together nations characterized by some common characteristics, such as the aspiration to play a more influential role in world politics. The BRICS countries are often seen as having high potential for economic growth, although that potential has not always translated into real economic expansion. The group was officially formed in 2006, with the first meeting of heads of state and government held in 2009, with the aim of promoting economic and political cooperation among its members.
BRICS members seek to create an environment independent of trade protectionism, as evidenced by the presence of the BRICS Development Bank, a multilateral financial institution that provides finance for infrastructure and development projects within member countries. As a result of this situation, some Western economies are concerned that BRICS may pose a threat to the world order, unconventionally. However, theoretically, the BRICS does not constitute an actual military or political alliance, as its members retain full independence in various aspects.
While not an entirely linear comparison, some see BRICS as a kind of replica of the Western G7, bringing together the world’s major advanced economies to discuss economic, political and global security issues. It is important not to confuse the G20, which is a broader forum that includes the world’s major economies, including G7 members. It also includes other countries such as China, India, Brazil, Russia and South Africa, which are also BRICS members.
In terms of political and economic values, Western countries tend to align more closely with the US-dominated international order and major international financial institutions, such as the International Monetary Fund (IMF) and the World Bank . Conversely, BRICS countries often seek to promote greater diversity and a more meaningful role for emerging countries in the international system.
The latest BRICS news scares analysts
Recent rumors regarding the expansion in the number of BRICS countries, which appear to be aiming in part at the global powerhouse of Western economies, are raising concerns about social, political and economic developments that could derive from this eventuality at a historical moment such as the present one. Many expect Saudi Arabia, Indonesia, United Arab Emirates, and Egypt to join the group, while the request for of Ethiopia is still uncertain. Such a decision could and should be made at the August leadership meeting, hosted by South Africa, and would mark the implementation of a long-awaited expansion plan. Currently, as many as 25 countries are interested in joining the group, generating more and more interest in the matter.
Although currently least developed countries are commonly referred to, the term "emerging markets" also refers to countries that have strong development prospects, such as many African countries. Considering just Brazil, Russia, India, China, and South Africa, the BRICS nations currently account for over 42% of the world’s population. Although they are not yet highly developed countries and do not contribute predominantly to the world gross domestic product, their weight has steadily grown over the past 20 years, to the detriment of the G7 countries.
What could this mean for the global financial markets?
This type of dynamic could attract investment from outside economies, providing diversification opportunities for global investors and directly influencing the global distribution of investments. This could gradually reduce the dependence on Western markets. This development could further stimulate the growth of the BRICS countries, creating new commercial opportunities and having a significant impact on international relations from a geopolitical point of view.
However, it is important to note that these consequences may take a long time to materialize. The United States still remains the global economic and financial center of reference, and Europe is strictly dependent on decisions made across the ocean. As a result, a drastic and sudden change in world order, as some conspiracy theorists claim, is unlikely to occur.
Furthermore, it is difficult to imagine a rapid de-dollarization process, considering the global size and importance of the US capital market. Similarly, the expansion of BRICS, especially with the inclusion of Saudi Arabia, could initiate a geopolitical trend with potential impacts on global economic and financial dynamics. Bloomberg Economics says a third of the world’s gross domestic product is generated by non-democratic nations, which raises some concerns.
In conclusion, it is important to carefully evaluate the implications of these developments, taking into account the time required for their effective manifestation. The global balance of power still remains largely influenced by Western economies, and any (rare) significant changes will require a gradual and complex process.
Original article published on Money.it Italy 2023-07-06 17:10:00. Original title: BRICS in espansione: cosa potrebbe comportare per i mercati finanziari globali?
