BRICS: Foundation, Expansion, and Key Initiatives Explained for UPSC SSC

Origin and Evolution

The term 'BRIC' was first coined in 2001 by Jim O'Neill, an economist at Goldman Sachs. He used it to describe the four rapidly developing economies of Brazil, Russia, India, and China. These nations were identified as having significant potential to become dominant global economic powers. The idea was initially an economic concept, not a formal political grouping.

The first formal meeting of BRIC leaders took place in Yekaterinburg, Russia, on June 16, 2009. This marked the beginning of their cooperation as a political and economic bloc. South Africa was invited to join the group in December 2010, and it officially became a member on April 14, 2011. With South Africa's inclusion, the acronym changed to 'BRICS'. This expansion brought in a major African economy, increasing the group's geographical representation and influence.

Objectives and Principles

BRICS aims to promote peace, security, development, and cooperation globally. Its core principles include non-interference in the internal affairs of sovereign states and mutual equality. The group seeks to reform global financial and economic institutions to reflect the growing influence of emerging markets. It advocates for a more representative and equitable international order.

BRICS countries work together on various issues, including economic cooperation, trade, investment, and sustainable development. They also address global challenges such as climate change, terrorism, and food security. The group provides a platform for its members to coordinate positions on multilateral forums like the United Nations and the G20, amplifying their collective voice on the world stage.

New Development Bank

One of BRICS' most significant initiatives is the establishment of the New Development Bank (NDB). The NDB was formally agreed upon at the 6th BRICS Summit in Fortaleza, Brazil, in July 2014. It began operations in 2015, with its headquarters located in Shanghai, China. The NDB's primary purpose is to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.

The NDB has an initial authorized capital of US$100 billion. Each founding member (Brazil, Russia, India, China, South Africa) contributed an equal share to its initial capital. The bank provides loans, guarantees, equity participation, and other financial instruments. It focuses on sectors like clean energy, transport infrastructure, water and sanitation, and digital infrastructure. The NDB is seen as an alternative to existing Western-dominated financial institutions like the World Bank and the International Monetary Fund.

Contingent Reserve Arrangement

Another key initiative is the BRICS Contingent Reserve Arrangement (CRA). The CRA was also established at the 6th BRICS Summit in Fortaleza in July 2014, alongside the NDB. It became operational in 2015. The CRA is a framework for providing protection against global liquidity pressures. It aims to strengthen the financial stability of BRICS member countries.

The CRA has an initial total committed resources of US$100 billion. China committed US$41 billion, Brazil, India, and Russia each committed US$18 billion, and South Africa committed US$5 billion. This arrangement serves as a self-managed pool of foreign currency reserves. It helps members cope with short-term balance of payments pressures and provides a safety net in times of financial crisis, complementing the role of the International Monetary Fund.

Recent Expansion and Future

BRICS has recently undergone a significant expansion. At the 15th BRICS Summit in Johannesburg, South Africa, in August 2023, six new countries were invited to join the bloc. These countries are Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. Their full membership became effective on January 1, 2024. This expansion nearly doubled the number of member states, significantly increasing BRICS' global economic and geopolitical footprint.

The inclusion of these new members, particularly major oil producers like Saudi Arabia, UAE, and Iran, enhances BRICS' influence in global energy markets. It also brings in diverse economies from Latin America, Africa, and the Middle East. This expansion reflects a growing interest among developing nations in multilateral platforms that offer alternatives to traditional Western-led groupings. The future of BRICS involves further strengthening economic cooperation, promoting trade in local currencies, and advocating for a more multipolar world order.

Important Keywords Explained

Jim O'Neillperson

A British economist, formerly chairman of Goldman Sachs Asset Management. He is credited with coining the acronym 'BRIC' in 2001, identifying Brazil, Russia, India, and China as four rapidly growing economies that would collectively dominate the global economy by 2050. His concept highlighted the shift in global economic power.

New Development Bank (NDB)organization

An international financial institution established by the BRICS states. Its purpose is to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries. Headquartered in Shanghai, it began operations in 2015 and is seen as an alternative to the World Bank and IMF.

Contingent Reserve Arrangement (CRA)concept

A framework established by the BRICS countries in 2014 to provide protection against global liquidity pressures. It is a self-managed pool of foreign currency reserves that helps member countries cope with short-term balance of payments pressures and provides a safety net in times of financial crisis, complementing the IMF.

Fortaleza Declarationconcept

The declaration issued at the 6th BRICS Summit held in Fortaleza, Brazil, in July 2014. This summit was pivotal as it led to the signing of the agreement establishing the New Development Bank (NDB) and the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA). It outlined the group's commitment to a more inclusive global financial architecture.

Additional Facts & Context

• BRICS countries represent over 40% of the world's population.
• The combined GDP of BRICS nations accounts for over 25% of the global GDP.
• The NDB has approved over 90 projects with a total portfolio of US$33 billion by 2022.
• The 15th BRICS Summit in August 2023 was hosted by South Africa in Johannesburg.
• The NDB has admitted Bangladesh, UAE, Uruguay, and Egypt as new members beyond the BRICS founding nations.