The original BRICS members – Brazil, Russia, India, China, and South Africa – share a vision of a more multipolar world order, in which developing countries have a greater say in global affairs.
A multipolar world is a world in which there are multiple centers of power, rather than just one. No single country or bloc of countries can dominate the others.
BRICS countries believe that the current world order, led by the United States, gives Western countries an unfair advantage.
The idea of a multipolar world gained a lot of attention in recent years, encouraging six additional members – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates – to join the BRICS coalition.
Their mission is to challenge the prevailing global order dominated by the United States, a system they perceive as heavily biased in favor of Western powers. More importantly, to instill a world order that’s not just centered around a few powerful nations but one where every country has a voice and influence on the global stage.
The rise of BRICS and the multipolar world is seen by some investors as a threat to the USD hegemony, while others remain unconvinced.
In this article, we explore the significant influence held by the six new BRICS members, an influence that many investors overlook. And finally, we examine what this means for the U.S. dollar, gold, and the global balance of power.
BRICS: A Vision For A Multipolar World
There has been a great deal of media commentary following the BRICS summit in South Africa on August 22nd. Many people are underestimating the upcoming additions of the six new BRICS countries – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, which full membership will take effect on January 1st, 2024.
Currently, there are five nations. Next year, there will be eleven. In the near future, this number could be as many as twenty. At that point, the scales will completely tip.
What many have missed however, is that all the BRICS countries – including the coming additions of the six new BRICS members – possess significant trade influence on up to 84 countries within their own backyards with a collective GDP of USD 83.5 Trillion.
Let’s explore the value that each country brings to the table.
Argentina is a founding member of Mercosur, a major trade bloc in South America. The bloc also includes Brazil, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname. Venezuela was a member until 2017, when it was suspended due to political and economic turmoil.
Mercosur has a combined population of 284 million people and a GDP (PPP) of USD 5.195 trillion. This makes it the third-largest free trade bloc in the world, after the European Union and the North American Free Trade Agreement (NAFTA).
Egypt is the second-largest country in the Greater Arab Free Trade Agreement (GAFTA), after Saudi Arabia. GAFTA is a trade bloc that includes 17 Arab countries in the Middle East and North Africa.
The other members of GAFTA are Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen.
GAFTA has a combined population of about 440 million people and a GDP (PPP) of about USD 7.9 trillion. This makes it the largest free trade bloc in the Arab world.
Ethiopia is the second-most populous country in Africa, with over 110 million people. It is also the sixth largest economy in Africa, with a GDP (PPP) of about USD 91 billion.
Ethiopia is a member of the Common Market for Eastern and Southern Africa (COMESA), which is a trade bloc of 21 African countries. COMESA aims to promote trade and economic integration among its members.
Ethiopia is also a member of the African Continental Free Trade Agreement (AfCFTA), which is a free trade agreement between 54 African countries. The AfCFTA aims to create a single market for goods and services in Africa.
Iran is a major regional power with a population of 85 million and a GDP (PPP) of USD 1.692 trillion. However, it is heavily sanctioned by the West, which has limited its trade and economic growth.
Despite the sanctions, Iran has been working to improve its trade links with other countries. It has a Free Trade Agreement with the Eurasian Economic Union and is a member of the Shanghai Cooperation Organization.
Iran is also a key player in the International North-South Transportation Corridor (INSTC), which is a trade route that connects Iran to Russia, India, and Europe.
The INSTC is expected to come into full operational use in 2024. It is cheaper and faster than the Suez Canal routes, which could make Iran a major hub for trade between Europe and Asia.
Additionally, Iran is currently improving its regional ties, especially with Saudi Arabia. This is a positive development, as it could help reduce tensions in the region.
Saudi Arabia and the United Arab Emirates
Saudi Arabia and the United Arab Emirates are two of the richest countries in the world, with a combined GDP (PPP) of over USD 3 trillion. They are also important members of the Gulf Cooperation Council (GCC), a trade bloc of six Arab countries in the Persian Gulf.
The GCC has a population of over 56 million people and is a major economic and political force in the Middle East. It is likely to play an increasingly important role in the global economy in the years to come.
The GCC countries have CEPA trade agreements with India, Israel, and Singapore and have been working to diversify their economies away from oil and gas. They are investing in tourism, manufacturing, and other sectors. They are also negotiating free trade agreements with other countries, such as Australia, Chile, China, and the UK.
The GCC is a strategic location for trade and investment. It is located at the crossroads of Europe, Asia, and Africa. It is also home to a number of important ports and airports.
BRICS GDP Surpasses G7
The original five BRICS countries have a combined GDP that already exceeds that of the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States). Once the six new members join the BRICS in 2024, the gap between the two blocs is only going to widen.
The expanded BRICS will have a combined GDP (PPP) of roughly USD 65 trillion, which is around 37% of the global economy. In comparison, the G7’s share of the global economy is currently around 29.9%.
The addition of new members to the BRICS will further diversify the bloc’s economy and give it a stronger voice on the global stage. These countries are all major economies, and they bring a wealth of experience and expertise to the BRICS.
The expansion of the BRICS is a sign of the growing economic power of the developing world. It is also a challenge to the traditional dominance of the G7 countries. The BRICS is poised to become a major force in the global economy, and its expansion is only going to accelerate its rise.
The Future Of The USD And Gold In A BRICS-Led World
For two generations of investors, geopolitics did not matter in a unipolar world. The actions of central banks were far more important than the actions of heads of states. However, with the rise of the BRICS countries, geopolitics could become important once again.
The BRICS countries have been working to develop their own financial systems and to use their own currencies more in international trade. This could lead to a decline in the use of the US dollar and could also increase the demand for gold as an alternative reserve asset.
Read our in-depth analysis on gold here: Gold Price Soars To All-Time-Highs
The key point about the expansion of BRICS is the trade and development potential that it brings. With the bloc about to be expanded to eleven members, this actually increases the overall geographic reach of the BRICS to 84 countries because of their respective additional free trade agreements with other countries.
If further BRICS expansions arise, then this will tilt the current balance of power, as the world will be marching one step closer to achieving a fair multipolar system.
Ultimately, investors who want to thrive in the markets in the coming years need to stay vigilant and pay attention to geopolitics. Understanding the political risks that could impact the markets is vital for investors who need to be prepared to adjust their portfolios accordingly.
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