A long-discussed cross-border payment system aimed at facilitating transactions among the ten member nations will be among the key topics at the BRICS summit meeting in Brazil this week. Although previous efforts were stalled by technical concerns, the looming threat of tariffs from the Trump administration has brought the issue back to the forefront.
Leaders are expected to recommit to exploring deeper trade integration within the bloc. The BRICS Cross-Border Payments Initiative (BCBPI) was first proposed in 2015, but technical hurdles have hindered significant progress. Key issues still to be ironed out include payment mechanisms, currency usage, infrastructure implementation, cost-sharing arrangements, and security protocols. Some member countries’ central bank systems remain unprepared for cross-border integration, and the presence of several nonconvertible currencies further complicate the process.
“There’s no real governing body between them they could use to build an infrastructure to replace Swift and dollar-denominated transactions,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “Add to that you’d basically have China running the show, and the fact that building shared infrastructure with Russia raises a lot of red flags with the U.S., and the case becomes questionable.”
Fighting Back Against Tariffs
The burgeoning global trade war has renewed interest in the topic. The dollar’s plunge in value has created opportunities for emerging markets, and the U.S. tariffs provide an incentive for the BRICS countries—which also include Brazil, India, China, and South Africa—to reduce trade barriers among themselves. However, they have stopped short of introducing a common currency.
“We are not envisioning creating a BRICS currency in the foreseeable future,” Brazil’s Ambassador to India, Kenneth Felix Haczynski da Nobrega, told The Hindu. “What we are envisaging is stimulating businesses of BRICS countries to adopt local currencies as an option for conducting trade.”
Competing with SWIFT and the Dollar
One of their goals is to establish an alternative to the SWIFT cross-border network, which currently operates under U.S. oversight. In addition to creating a multi-currency system that facilitates trade among BRICS participants, the BCBPI has also been touted as a means to challenge the global dominance of the U.S. dollar.
Last year, BRICS expanded to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates. The countries in the bloc now account for more than half of the world’s population, giving them significant clout in international trade. However, the expansion will also make cross-border agreements more complex and difficult to achieve.
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