BRICs Discuss Alternative to Dollar

By Marcela Canavarro, Contributing Reporter

RIO DE JANEIRO – The emerging economies of BRIC – Brazil, Russia, India and China – have met at an official summit in an attempt to increase their influence in a world in transition. A key topic was the urgency to find an alternative to the US Dollar as international currency.

The BRICs produce 15% of the world’s gross domestic product (GDP) and have more than 40% of the global population. They continued a pattern of economic growth in 2008 and now hold 40% of international currency and gold reserves.

The meeting, held in Russia last week, revealed an attempt to overcome internal differences in an effort to convert economical power into geopolitical influence. Before creating policies that will potentially create a new world order, discrepancies within BRIC itself must be overcome.

Economics aside, member countries have quite a few similarities. The acronym BRIC was created by an economist in 2001, before the group was founded. Jim O’Neill first used the term to give a name to four fast-growing economies poised to become the world’s richest by 2050.

China and other BRICs have invested in US dollars for years, holding a reserve that has kept them at a good position in the current crisis. China’s President Hu Jintao sent a clear message: BRICs want the US to avoid a depreciation of their reserves. Recent American policies have included measures that decreased dollar value.

“I’m very worried and want to send this message to the USA: I hope the country will honor its words, maintain its credibility and insure the safety of Chinese assets,” declared China’s President Hu Jintao.

BRICs hold the majority of all dollars outside the US and could change their policies to stimulate a supranational pack of currencies for global trade – which potential experts have been discussing for years. The outcome would be a decrease in US dollar value and a depreciation of the countries’ international reserves.

“We’ll be witnessing the emergence of a new supranational currency used for international settlements,” affirmed Russia’s President Dmitry Medvedev.

Brazil and China have already signed bilateral agreements with Argentina to use local currencies to pay for imported-exported goods.

Changing the dollar paradigm was the most important theme at the summit, though articles and editorials inside Brazil made a reluctant prognosis on a short-term agreement.

“Chinese president Hu Jintao kept silent about the Kremlin’s idea for an alternative currency, which could be a sign of division,” reported Brazilian News Wire ‘Agência Estado‘. “Negotiations about an eventual substitution of US dollars as a reference for international trade didn’t evolve, but it seems it wasn’t abandoned yet,” the article said, highlighting that the Kremlin included the theme on the agenda but it was not posted on the official document after the meeting.

Despite the failure to get short-term results on the currency paradigm, the BRIC summit was an important step to build a new global order within multilateral groups such as G-20 (20 of the world’s strongest economies) in opposition to G-7 traditional dominance, gathering only seven of the most developed countries.

“Which is more relevant to the world today: Italy or China?” asked journalist Miriam Leitão on her blog on O Globo, highlighting that Italy is a member of G-7 but China is not. “The message from this meeting is that the world must change and share the power.”