Brazilian President Lula da Silva meets with his counterpart, Chinese President Xi Jinping. Photo: El Ciudadano.
By Mauricio Becerra Rebolledo – Jul 20, 2023
The potential creation of a new currency for BRICS countries would shift the focus away from the US dollar as trade transaction currency. The ambitious proposal, together with Dilma Rousseff’s inauguration as president of the BRICS bank, the New Development Bank, promise to be an alternative to the conditional investment loans of the World Bank and the IMF.
In September 2006, at the UN General Assembly, the foreign ministers of Brazil, China, Russia and India began to outline what would become a major trade and monetary support agreement. In 2010, during a meeting of the presidents of these countries in Brasilia and a year later in China, what is now known as the BRICS was ratified and began to take shape, with South Africa joining the group. Initially the BRICS countries showed their willingness to engage in closer dialogue with each other, but over the years the agenda began to include broader international cooperation and, above all, economic and financial partnerships in strategic sectors such as energy, agriculture, and scientific and technological development.
Brazilian President Luiz Inácio Lula da Silva’s visit to China in April to his counterpart Xi Jinping was more than just another step in this integration process. In addition to signing important trade and financing agreements, they announced that the dollar would no longer be used as the currency of exchange and that trade would be conducted in national currencies (Chinese yuan and Brazilian real), constituting a great leap towards the de-dollarisation of the planet.
“I ask myself every night why all countries are forced to do their trade backed by the dollar,” Lula commented, “Why can’t we trade backed by our own currency? Why don’t we invest in innovation? Who decided to make the dollar the currency after the demise of gold as the standard”.
Elvin Calcaño, political scientist at Polititank, told El Ciudadano that “since 1945, after the end of the Second World War, the United States emerged as the great power. The current scheme of global governance of international politics and economics was designed on the basis of its specific interests. As a result, institutions such as the IMF and the World Bank ultimately respond to this design. In this framework, the dollar has always been an instrument of US power in the global sphere. It is used, as we have seen so much lately, as a coercive element to discipline and overwhelm countries that act outside its geo-economic interests through unilateral economic sanctions. Countries such as China, Russia, Brazil, India and others in the BRICS orbit are now trying to get out of this design, based on their interests, which they also have. In the geopolitical sphere, the driving forces are power and concrete interests between the parties. Another thing entirely are the discourses that justify them.”
Calcaño added that “Lula’s trip to China has to be seen in the context of the current Brazilian president’s geopolitical vocation, which he amply demonstrated in his previous two terms in office. Lula, from a left-wing perspective, has a sovereign vision on foreign relations. Given that Brazil is a regional and world economic power with specific global weight, it generates strong repercussions when people like this come to power. On the other hand, it has to be seen in terms of the geopolitical struggle between the US and China. Brazil seeks its own space in the framework of this dispute on the basis of its interests, which tend to be, in many sectors, convergent with China, but divergent with the United States. Finally, Lula’s visit to China, because of what motivates it and the world scenario that frames it, is part of the process of transition towards multipolarity that is already taking place in the world.”
Replacing the United States
In the state of Bahia, a recently closed former Ford car factory will be reopened with Chinese capital under the BYD brand, a firm that will produce electric and hybrid cars. The new Chinese plant reflects the shift in global economic power previously restricted to northern countries.
The agreements signed between Brazil and China mainly concern renewable energy, the automotive industry, agribusiness, information technology, health, and infrastructure. In fact, Lula visited a factory owned by Huawei Technologies, which has been operating in Brazil for 20 years and is currently supplying 5G technology. The Chinese technology firm has suffered a series of boycotts and sanctions in the United States since the Donald Trump era.
China is currently Brazil’s largest trading partner. Bilateral trade during 2022, despite the distance between former president Jair Bolsonaro and the Chinese government, was $170 billion, double the figures exchanged between the United States and Brazil. The trade balance between China and Brazil left a surplus of $30 billion. While the Latin American country exports soybeans, corn, sugar, coffee, meat, and iron, among other products to China, the Asian giant brings manufactured goods to Brazil and generates investments in infrastructure projects.
Brazil and China are also working together to launch satellites, such as the Sino-Brazilian Terrestrial Resources Satellite (Cbers) program, which put six satellites into orbit between 1999 and 2009.
The end of the dollar as trade transaction currency and the potential creation of a new currency for BRICS countries was contested by Thomas Shannon, former US ambassador to Brazil, who argued that the idea could displease the US government.
“When I talk to the United States, I am not worried about what China might think. I am talking about the sovereign interests of my country. Neither am I worried about what the United States thinks when I talk to China. This is how the United States, China, and all countries do it,” was the Brazilian president’s response.
Dilma Rousseff at the head of the BRICS bank
Another important step for Brazil was to assume the rotating presidency of the BRICS bank, the New Development Bank (NDB). The position was occupied by economist and former president Dilma Rousseff at an event held at the bank’s Shanghai headquarters and attended by Lula.
The NDB was established in 2014 and has since approved US$32.8 billion in financing for 96 infrastructure and sustainable development projects in 9 countries, including Bangladesh, Egypt, United Arab Emirates, and Uruguay, in addition to BRICS countries.
Brazil’s efforts to promote Rousseff indicates an interest in establishing a solid relationship as well as providing Brazil and other countries in the region with alternatives that are free from the conditions of neoliberal economic reforms imposed by the World Bank and International Monetary Fund (IMF) loans.
Bruno Lima Rocha, political scientist and professor of international relations, believes that Brazil, through the NDB, will seek Latin America as its geopolitical and economic home. Brazil’s relations with China and BRICS will be a very important aspect of Lula’s foreign policy in his third term in office. The analyst told El Ciudadano, “It is not by chance that Dilma was appointed president of the BRICS bank. If Brazil holds the BRICS directive and can thereby establish a collateral system of guarantees for Brazil’s integrated customs currency with Argentina as an experiment to advance international trade on an intra-Latin American level without going through the dollar, I believe that the BRICS will operate as the fundamental axis of this concept of development, even if it is not sustained, at least it will be sovereign.” Another scenario of the BRICS is on the global scale, where Brazil and South Africa are entering an expanded triangulation of Russia, India and China as junior partners. The Eurasian economic axis is much more developed than in the Western economies, such as Australia, New Zealand, and Japan.
Lula’s choice is related to both his political experience, having been imprisoned in a trial without evidence pushed by the United States and brought to trial by former judge Sergio Moro, and to the possibilities of his government, conditioned internally by a parliament in which he does not have a majority and the neoliberal policies of a Central Bank that was made independent by Bolsonaro.
Lima Rocha comments, “we must understand that this potential of the BRICS was one of the most important external drivers of the Obama administration’s Bridges Project that resulted in the Lavajato lawfare and brought down Dilma at the beginning of her second term in office. One could say that the scale of the BRICS challenge was fueled by Washington.”
He adds that Rousseff’s role is crucial. “Dilma’s presence in the NDB is fundamental to promoting the semiconductor industry, and developing international links in which Brazil is more than just a seller of grains or minerals.” This is at the macro level. Additionally, the BRICS bank and the Eurasian economic axis supplement each other without needing others. China, India, Russia and even Pakistan can produce everything a modern 21st century society needs. Putting in place a cutting-edge industry that can compete with the economic and financial axis run by SWIFT, for example, will have to be an important part of the BRICS policy.
Dilma Rousseff Begins Term as President of BRICS’ New Development Bank
Pierre Lebret, a political scientist and MA in international relations at the Sorbonne, stresses that China and Brazil are important trading partners. He considers it important “that the countries of the South organize themselves, regain their voice and become key players on the global stage. The war in Ukraine is reordering the global geopolitical map. That is why this visit was important, the return of Lula has opens a new phase which will lay the foundations for integration, for promotion of a multipolar world”.
Lebret adds that “South-South cooperation will be strengthened, particularly in the framework of the BRICS. The South must also act to avoid scenarios of confrontation between powers. The past has shown us that such scenarios have very serious economic, social and political consequences for the peoples of the South. I also think it is important for Brazil to act on the global stage without losing sight of Latin America, so that Latin American integration itself has a chance to prosper.”
For Elvin Calcaño, the appointment of Dilma Rousseff as head of the BRICS bank “is a clear step towards a global geo-economy outside the hegemony of the dollar. Fundamentally through the convergence of emerging and consolidated powers that, outside the Western orbit dominated by the Anglo-Saxon North Atlantic axis, are moving towards other world economic designs.”
(Progressive International)
BLA
