Reshaping Global Finance: BRICS' Ambitious Push to Dethrone the Dollar

Brazil is leading the charge to reduce the BRICS economic bloc's reliance on the US dollar, championing the use of national currencies in trade among member states. This initiative, aimed at reshaping how BRICS nations conduct international trade, is expected to gain momentum during Brazil's upcoming chairmanship of the group in 2025. However, the expanded BRICS bloc, which now includes new members, faces complex challenges in its de-dollarisation efforts.

Challenging the Dollar's Dominance: BRICS' Audacious Plan

Diversifying Currency Options

The BRICS nations, comprising Brazil, Russia, India, China, and South Africa, have long been vocal about the need to reduce their vulnerability to the dominance of the US dollar. This sentiment has only intensified as the bloc expands to include new members, such as Egypt, the United Arab Emirates, Ethiopia, Iran, and Saudi Arabia. The upcoming Kazan summit will be the first to include these new members, introducing new dynamics and potential obstacles to the de-dollarisation efforts.Eduardo Paes Saboia, Brazil's Foreign Affairs Secretary for Asia and the Pacific, has highlighted his country's stance, stating that the issue of reducing reliance on the US dollar "has already been considered at meetings of finance ministers and heads of central banks" of BRICS nations. This indicates a concerted effort to explore alternative payment systems and currency options within the bloc.

Championing National Currencies

Brazilian President Luiz Inácio Lula da Silva has long been a vocal advocate for creating alternatives to the US dollar. At the 2023 BRICS summit in South Africa, Lula stressed the need to reduce vulnerabilities of member states tied to dollar dominance. This sentiment is echoed by former president Dilma Rousseff, who is now the chief of the Shanghai-based New Development Bank. Rousseff revealed the lender's intention to "use national currencies for investing in the private sector of the economies of member states."This push for the use of national currencies in trade and investment among BRICS nations represents a significant shift in the global financial landscape. It aligns with recent statements from other BRICS officials, such as Russian Foreign Minister Sergey Lavrov, who has indicated that a report on options for creating alternative payment platforms for settlements between member countries will be prepared for the Kazan summit.

Navigating Complexities and Divisions

However, Brazil's broader position on the matter is more nuanced. Sources within the Brazilian government indicate that while the country supports exploring alternatives, implementation must be carefully considered. The approach is described as pragmatic, balancing ambition with economic realities, and walking a tightrope not to damage important ties with the West.Moreover, BRICS faces internal divisions that could hinder its de-dollarisation efforts. The ongoing border disputes between India and China have led to India rejecting the use of Chinese currency in bilateral transactions. Additionally, Chinese banks have grown wary of providing yuan liquidity to their Russian counterparts since early 2024, reportedly scaling back assets in the country amid fears of US secondary sanctions stemming from Moscow's invasion of Ukraine.The rifts within the bloc extend beyond economic matters. Brazil's own animosity against Venezuelan President Nicolas Maduro in the wake of his disputed re-election and Saudi Arabia's apparent reluctance to fully engage with BRICS, evidenced by its decision to send only its foreign minister to the Kazan summit, do not bode well for a smooth expansion this year.

A Critical Test of Diplomatic Prowess

As Brazil gears up to steer the BRICS agenda, its careful push for de-dollarisation is shaping up to be more than just an economic initiative. It represents a critical test of the country's diplomatic prowess and its ability to navigate the complex geopolitical landscape to shape the future of global finance beyond the Global South.The success or failure of BRICS' de-dollarisation efforts will have far-reaching implications, not only for the member states but for the global financial system as a whole. Brazil's leadership in this endeavor will be closely watched, as the country seeks to redefine the rules of the game and challenge the long-standing dominance of the US dollar.