The potential creation of a new currency for BRICS countries would shift the focus away from the US dollar as the trade transaction currency. The ambitious proposal, together with Dilma Rousseff’s inauguration as president of the BRICS bank, the New Development Bank, promise to be an alternative to the conditional investment loans of the World Bank and the IMF.
The following is an excerpt of a piece originally published in April, shortly after Lula da Silva’s visit to China. You can read the full article here.
In September 2006, on the occasion of a UN General Assembly , the foreign ministers of Brazil, China, Russia, and India began to outline what would be a grand trade and monetary support agreement. In 2010, at a meeting of the presidents of these countries in Brasilia and a year later in China, it was ratified and began to shape what is now known as the BRICS , a nucleus to which South Africa was added.. Although at first they demonstrated the will to produce greater dialogue between the member countries, over the years the agenda began to contemplate a broader agreement at the international level and, above all, economic and financial associations in strategic sectors such as energy, agriculture and scientific and technological development.
The visit to China made last week by Brazilian President Luiz Inácio Lula da Silva to his colleague Xi Jinping was more than one more step in this integration process. In addition to important commercial and financing agreements signed, the abandonment of the dollar as an exchange currency and trade with national currencies (Chinese yuan and Brazilian real) was announced, which constitutes a great leap towards the de-dollarization of the planet.
“Every night I wonder why all countries are forced to do their trade backed by the dollar – Lula commented – Why can’t we do our trade backed by our currency? Why don’t we bet on innovation? Who decided that the dollar was the currency?, after the disappearance of gold as parity”.
Elvin Calcaño , a political scientist at Polititank , commented to El Ciudadano that “since 1945, after the end of World War II, the United States remained the great power. And it was thus that, based on their specific interests, the current global governance scheme on international politics and economics was designed. Hence institutions such as the IMF and World Bankthat respond to that design ultimately. In this framework, the dollar has always been an instrument of power for the United States in the world sphere. Used, as we have seen so much lately, as a coercive element to discipline and overwhelm, through unilateral economic sanctions, those countries that act outside their geoeconomic interests. Countries like China, Russia, Brazil, India and others in the BRICS orbit are now trying to get out of that design. From their interests that also have them. In the geopolitical sphere, what moves is power and specific interests between the parties. Another thing is the justifying speeches”.
Calcaño added that “Lula’s trip to China must be seen in the context of the geopolitical vocation of the current president of Brazil; which he amply showed in the previous two terms of his government. Lula, from a leftist perspective, has a sovereign vision of foreign relations. Which, being Brazil a regional and world economic power of global weight, generates strong repercussions when such characters come to power. On the other hand, you have to look at it in terms of the geopolitical struggle between the United States and China. Brazil seeks its own space within the framework of this dispute based on its interests; which tend to be, in many sectors, convergent with China, but divergent with the United States. Finally, this visit by Lula to China, for what motivates it and the world scenario that frames it,
Replacing the United States
In the state of Bahia, an old Ford car factory that was recently closed will be reopened with Chinese capital from the BYD brand, a firm that will produce electric and hybrid cars. The new Chinese plant accounts for the change in global economic powers, previously restricted to the countries of the north of the world.
The agreements signed between Brazil and China mainly concern renewable energy, the automotive industry, agribusiness, information technology, health and infrastructure. In fact, Lula visited the Huawei Technologies factory, which has been operating in Brazil for 20 years and currently supplies 5G technology. The Chinese technology firm since the time of Donald Trump has suffered a series of boycotts and sanctions in the United States.
China is currently Brazil’s main trading partner. Bilateral trade during 2022, despite the distance between former president Jair Bolsonaro and the Chinese government, was $170 million dollars, which doubles the figures exchanged between the United States and Brazil. The trade balance between China and Brazil left a surplus of US$ 30 billion (R$ 157 billion). If on the one hand the Latin American country exports to China soybeans, corn, sugar, coffee, meat and iron, among other products; the Asian giant brings manufactured products to Brazil and generates investments in infrastructure projects.
Brazilians and Chinese are also working together to launch satellites, such as those corresponding to the Sino-Brazilian Terrestrial Resources Satellite (Cbers) program, which between 1999 and 2009 has put six devices into orbit.
The end of the dollar as a currency for commercial transactions and the potential creation of a new currency for the BRICS countries was contested by the former US ambassador to Brazil, Thomas Shannon, who argued that the idea could upset the US government.
“When I go to talk to the United States I am not worried about what China might think. I am talking about the sovereign interests of my country. When I come to speak in China, neither do I. I worry about what the United States thinks. This is how the United States, China and all countries do it” – was the response of the Brazilian president.
Dilma Rousseff at the Head of the BRICS Bank
Another important step for Brazil was assuming the rotating presidency of the BRICS bank, New Development Bank (NDB), a position that began to be held by the economist and former president Dilma Rousseff, an event held at the agency’s headquarters in Shanghai and attended by Lula.
The NDB was created in 2014 and since then it has approved US$32.8 billion in financing for 96 infrastructure and sustainable development projects in 9 countries, including Bangladesh, Egypt, the United Arab Emirates and Uruguay, in addition to the BRICS countries.
Rousseff’s promotion by Brazilian diplomacy reflects the interest in establishing a solid relationship, which would allow Brazil and other countries in the region to have more alternatives and without conditions of neoliberal reforms of the economy, conditions set by loans from the World Bank and the International Monetary Fund (IMF).
The political scientist and professor of international relations, Bruno Lima Rocha, believes that Brazil, through the NDB, will seek Latin America as its geopolitical and economic place. “Brazil’s relations with China and with the BRICS are going to be a very important point of Lula’s foreign policy in his third term – the analyst commented to El Ciudadano – It is not by chance that Dilma is indicated to be president of the BRICS bank. If Brazil has the position of the BRICS leadership to make a collateral system of guarantees for the integrated customs currency of Brazil with Argentina as an experiment to advance international trade at an intra-Latin American level without going through the dollar, I believe that the BRICS will operate as the fundamental axis of this notion of development, if not sustained it is at least sovereign.
Lula’s bet is related both to his political experience, having been imprisoned in a trial without evidence pushed by the United States and raised by former judge Sergio Moro, and to the possibilities of his government, internally conditioned by a parliament in which he does not have a majority and the neoliberal policies of a Central Bank empowered by Bolsonaro.
Lima Rocha comments on the matter that “it is necessary to understand that this possibility of the BRICS was one of the most important external push factors for the Bridges Project of the Obama government that resulted in the Lavajato lawfare and brought down Dilma at the beginning of her second government. It can thus be said that the size of the BRICS challenge was fueled by Washington.
The analyst adds that Rousseff’s role will be paramount. “Dilma’s presence in the NDB will be essential to boost the semiconductor industry, operate international chains where Brazil does not enter only as a seller of grains or minerals. This on a macro level. On the other hand, the bank of the BRICS and the Eurasian economic axis complements itself without needing the others. China, India, Russia and even Pakistan can produce everything a modern 21st century society needs. And this has to be an important part of the BRICS policy to put a leading industry to compete with the economic and financial axis that SWIFT manages, for example”.
For his part, Pierre Lebret, political scientist and Master in international relations from La Sorbone, highlights that China and Brazil are important trading partners. He considers it important “that the countries of the South organize themselves, have a voice again and are key players on the global scene. The war in Ukraine is reordering the global geopolitical map. That is why this visit is important, Lula’s return opens a new stage and clearly this must allow the establishment of the bases for integration, for the promotion of a multipolar world”.
Lebret adds that “South-South cooperation will be strengthened, particularly within the framework of the BRICS. The South must also act to avoid scenarios of confrontation between powers. The past shows us that this type of scenario has very serious economic, social and political consequences for the peoples of the South. I also believe that it is important for Brazil to act on the global scene without ceasing to think about Latin America, so that Latin American integration itself has a chance to prosper”.
For Elvin Calcaño, the appointment of Dilma Rousseff at the head of the BRICS bank “is a clear step towards a global geo-economy outside the hegemony of the dollar. Fundamentally from the convergence between emerging and consolidated powers that, outside the western orbit dominated by the Anglo-Saxon North Atlantic axis, are moving towards other designs of world economy”.
Lula’s Peace Club
One year into the Russia-Ukraine war, China put up a 12-point peace proposal . For his part, Lula since he began his round of meetings with leaders, such as Joe Biden, Emmanuel Macron and Olaf Scholz, made the end of the conflict an important point of conversation.
In the meeting held with Xi Jinping, Lula, in addition to criticizing the shipment of arms to the war, returned with his proposal that a group of neutral countries mediate in the peace negotiations between Russia and Ukraine. “It is necessary to constitute a group of countries willing to find the way to make peace. That is to say, I talked about it with the Europeans, I already talked about it with the Americans”- the Brazilian president maintained.
Regarding the shipment of arms, Lula commented that those who deliver arms to Ukraine are “fomenting the war.” She argued that “America must stop encouraging war and start talking about peace. It is necessary for the European Union to start talking about peace, so that we can convince Putin and Zelensky that peace is in everyone’s interest and that war for now only interests both of us.”
The political scientist Pierre Lebret comments that “Lula has always been characterized by carrying out humanist, progressive projects, by implementing policies to fight against hunger and poverty. This war is taking root in the collective mind as an ongoing conflict, and is a threat to global stability. A peaceful outcome is an imperative, and for this reason an initiative like the one being proposed by the Brazilian president must be highly considered, firstly, because the civilian populations are paying too high a price, secondly because it is a war that has a global impact, and thirdly because the nuclear risk is still valid. The Brazilian mediation proposal with other countries not involved in the conflict seems to be an opportunity that neither Russia, nor Ukraine, nor Europe should reject”.
The Game to Two Sides of Lula
At the beginning of March, Lula spoke with Volodymyr Zelensky by videoconference , who took the opportunity to invite him to Kiev, to which the Brazilian president replied that he was willing to go to the Ukrainian capital at an appropriate time, adding that the return of peace would facilitate said meeting.
On that occasion, Lula expressed his readiness for any effort to bring together a group of nations willing to talk with both parties to the conflict. A few weeks earlier, breaking the tradition of abstaining in the conflict between Russia and Ukraine, Brazil voted in favor of a resolution condemning Moscow for the invasion of Ukraine, approved by 141 countries, 7 against and 33 abstentions. On the occasion, Lula stressed that “Brazil defends the territorial integrity of Ukraine.”
Brazil was the only BRICS country, along with India, Russia, China and South Africa, to vote against Russia . While India, China and South Africa abstained.
Despite his position in said vote, Lula’s two-sided game also implies having contacts with Russia. For that, he sent his main adviser on foreign relations , his former foreign minister Celso Amorín , to visit France and Russia recently.
Starting this Monday, Brazil also received the visit of the Russian Foreign Minister, Sergei Lavrov , who anticipated his visit to Latin America by publishing a letter in newspapers such as Folha de São Paulo in which he argued about the urgency of defending a multipolar world .
A few days ago, Lula told reporters at the Planalto presidential palace that “this war has gone too far” and urged China to play an active role in the peace negotiations.
“What does Putin want? He can’t keep the Ukrainian land. Perhaps the Crimea will not be discussed, but what he recently invaded is going to have to be rethought ”- Lula said and then added that“ Zelensky cannot have everything he thinks he may want either ”.
However, the peace proposal put forward by Lula was not well received by the Ukrainian authorities. The foreign spokesman, Oleg Nikolenko, although he appreciated “the efforts of the Brazilian president to find a way to stop the Russian aggression”, maintained the position of unrestricted respect for the Ukrainian sovereign territory and the recovery of Crimea as a condition for the end of the conflict.
Subsequently, the Ukrainian president, Volodymyr Zelensky , reinforced his position against peace. Through a video he maintained that “the world should know: respect and order will return to international relations only when the Ukrainian flag returns to Crimea.”
This recent Sunday Lula returned to the subject. “I think the construction of the war was easier than the way out of the war will be,” she said.
He then added that “President Putin does not take the initiative to stop. Zelensky does not take the initiative to stop. Europe and the United States end up contributing to the continuity of this war. I think we have to sit at a table and say enough is enough, let’s talk because the war has never brought and will never bring benefits”.
Similarly, Western countries are pressing for Brazil to limit its participation in the new BRICS bloc. For this Lula invited by the Japanese minister Fumio Kishida to visit Hiroshima, where the next meeting of the G-7, which brings together the richest economies in the world, will take place between May 19 and 21. Although it is not the first time that Lula has attended these meetings, having already participated in 2004 and 2009, the invitation responds to an effort by the United States and Europe to undermine the new multipolar pact.
Lula is also expected to take advantage of this occasion and the next scheduled visits to Portugal, Spain and the United Kingdom to promote the peace proposal.
This article was first published by Progressive International.