BRICS: advantages for business

The creation of the BRICS interstate association (short for Brazil, Russia, India, China, South Africa), initiated in 2006, has become one of the most important geopolitical events at the dawn of the new millennium. In a short time, the association has become a significant factor in world politics and economics.

What is BRICS and how does it work

The total area of BRICS is 39,746,220 km2 (about 26.7% of the world's land area), and the total population is estimated at about 3.21 billion people (41.5% of the world's population). Four of the five members are among the ten largest countries in the world in terms of population, area and GDP. Today, the share of the "five" accounts for almost a third of global GDP at PPP (in 2018, the BRICS surpassed the G7 by this indicator — 44 trillion US dollars —). The countries of the "five" have vast reserves of natural resources. The export growth rate of the BRICS countries exceeded the global average.

The first BRICS meeting took place on September 20, 2006 at the 61st session of the UN General Assembly in New York. It was attended by the Foreign Ministers of Russia, Brazil, China and the Minister of Defense of India, who agreed to develop multifaceted cooperation between the four countries.

May 16, 2008 in Yekaterinburg (Russia) the first meeting of the heads of the foreign affairs departments of the union states took place. A fundamentally important step in the formation of the association was made on July 9, 2008, when on the sidelines of the G8 summit a separate meeting of the leaders of Brazil, Russia, India and China was held in Toyako (Japan).

BRICS summits are held annually:

• I BRICS Summit (Yekaterinburg, Russia, June 16, 2009)
• II BRICS Summit (Brazilia, Brazil, April 15—16, 2010)
• III BRICS Summit (Sanya, China, April 13—14, 2011)
• IV BRICS Summit (New Delhi, India, 28—29 March 2012)
• V BRICS Summit (Durban, South Africa, 26—27 March 2013)
• VI BRICS Summit (Fortaleza and Brasilia, Brazil, 15—16 July 2014)
• VII BRICS Summit (Ufa, Russia, 8—10 July 2015)
• 8th BRICS Summit (Goa, India, 15—16 October 2016)
• IX BRICS Summit (Xiamen, China, September 4—5, 2017)
• X BRICS Summit (Johannesburg, South Africa, 25—27 July 2018)
• XI BRICS Summit (Brazilia, Brazil, November 13—14, 2019)
• XII BRICS Summit (online, 21—23 July 2020)
• XIII BRICS Summit (New Delhi, India, September 9, 2021)
• XIV BRICS Summit (Beijing, China, 23—24 June 2022)
• XV BRICS Summit (South Africa, 22—24 August 2023)
• XVI BRICS Summit (Kazan, Russia scheduled for August 2024).

The declaration adopted in the summer of 2022 emphasized the development of the BRICS+ format, including cooperation with developing countries. The Declaration includes a wide range of issues, such as strengthening cooperation within the BRICS countries, recommendations for reforming the main bodies of the UN and the activities of the WTO. The issues of global governance and more active participation of developing and least developed countries (especially Africa) in global processes were also considered.

Several paragraphs of the declaration were devoted to questions:

• the mechanism of the Contingent Reserve Pool,
• active development of cooperation between countries on the New Industrial Revolution,
• frame exchange increase,
• Expansion of membership of the New Development Bank.

All this indicates that the BRICS is gaining momentum and is striving to build a whole system of its own intergovernmental organizations as opposed to the existing pro-Western ones.

The five BRICS countries already contribute more to global GDP than the industrialized countries of the G7. According to the data of the British company Acorn Macro Consulting published at the end of March 2023, the BRICS association currently provides 31.5% of global GDP, while the share of the G7 (Canada, France, Germany, Italy, Japan, the UK and the USA) has fallen by the global economy up to 30%. It is expected that by 2030 the BRICS will generate more than 50% of global GDP, but the proposed expansion into the BRICS+ format by joining a number of large countries will allow reaching the level of half of the world production of goods and services much earlier.

Over time, BRICS has evolved into a multidisciplinary strategic partnership based on three key pillars:

• policy and security,
• economics and finance,
• culture and humanitarian ties

Relations between BRICS partners are built on the basis of equality and mutual respect, as well as the principles of openness, pragmatism, solidarity, non-direction against third parties.

The chairmanship of the BRICS is carried out by the participating state during the calendar year on a rotational basis. All decisions are made by consensus. More than a hundred meetings are held annually, of which about 20 — ministerial level. Interaction is developing between city administrations, business, academic and scientific circles, and civil society.

BRICS expansion

On June 27, 2022, Argentina and Iran applied to join the BRICS, and Algeria also joined them. A multi-year agreement on comprehensive cooperation was signed with Iran, and with Argentina — "One Belt, One Road" agreement. On July 14, 2022, the President of the International BRICS Forum, Purnimu Anand, announced the desire of Turkey, Egypt and Saudi Arabia to become members of the BRICS.

As of January 1, 2023, the following countries that are preparing to submit applications intend to become BRICS members: Tajikistan, Mexico, Thailand, Indonesia, Bangladesh, Nigeria, Syria and Greece. The United Arab Emirates, Venezuela, Belarus, Tunisia, Bahrain, Nicaragua, Malaysia, Uruguay, Ethiopia, Fiji, Afghanistan, Sudan, Pakistan, Zimbabwe, Senegal, Cambodia, Uzbekistan and Kazakhstan speak of their interest. At the moment, they are observers and analyze the interaction of existing economies with each other.

As of January 1, 2024, BRICS expanded to 5 countries — new full-fledged members: Egypt, Iran, UAE, Saudi Arabia, Ethiopia. Argentina withdrew its application to join after the change of president.

BRICS map as of January 1, 2024. Note:  BRICS member countries ,  countries that have applied to join the BRICS  and  countries that want to join the BRICS .

BRICS: focus on the economy

Since its first summit in June 2009, BRICS has established itself as an institution of global economic governance and a full-fledged mechanism for strategic and current interaction on key issues of world politics and economics. There are more than 50 own formats of cooperation. Agenda of the Five includes more than 20 areas of interaction. The BRICS leaders agreed on more than 660 specific decisions. Despite the fact that critics often refer to the BRICS as a political association, almost 160 commitments (25%) were made in the field of economy, trade and finance. The growing role of the BRICS in global economic governance is determined by the collective economic power of the "five", the contribution to the reform of international economic institutions, the impact on the transformation of the international monetary and financial system.

An important result of the interaction between the BRICS countries was the launch of the New Development Bank (NDB) with headquarters in Shanghai and the BRICS Contingent Reserve Pool with a total amount of funds of 200 billion US dollars. The NDB should become an analogue of the International Monetary Fund and the World Bank. Through the NDB, 44 investment projects were approved for a total of $12.2 billion. In 2018, the African Regional Center of the NDB was opened in South Africa, in 2019 a similar structure was established in Brazil. In May 2022, the bank announced the establishment of a representative office in India to finance development projects in India and Bangladesh. A Contingent Reserve Agreement (CRA) was also signed, which provides for the creation of a reserve fund of $100 billion if countries have problems accessing global liquidity.

The BRICS single currency and the abandonment of the dollar

Russian President Vladimir Putin confirmed BRICS plans to create its own currency for international trade instead of the dollar, which will be implemented on the basis of a basket of currencies of all member countries of the union. A new artificially created currency can be based on the currencies of the participating countries in terms of GDP (then it will be 70% dependent on the yuan), or in terms of exports from a particular country (China's share is about 63%).

Russian Foreign Minister Sergey Lavrov announced that in August 2023, at the summit in South Africa, the BRICS countries will discuss in detail the future common currency.

By 2022, all BRICS countries, except South Africa, have developed their own independent national payment systems, similar to the SWIFT global banking network, and independent networks of retail bank cards, so as not to depend on American Visa and Mastercard. There was also an idea to create a common payment system BRICS Pay.

Connecting these national payment systems to an alternative cross-border payment system will allow the entire payment life cycle to bypass the global US dollar-denominated system entirely, notes CFR scholar Zongyuan Zoe Liu. BRICS Pay System — the only contactless payment system that connects the BRICS national payment systems with an integrated payment platform. With BRICS Pay, conversion to US dollars and US banks is no longer required. The BRICS Pay system will also allow members to reduce their dependence on international payment organizations such as SWIFT, Visa and Mastercard.

Entering business into the BRICS markets

As part of the BRICS, events have been created and are taking place to develop business and enter the international markets of the countries of the union.

For technology companies and start-ups, the — "Open BRICS" from the Moscow Innovation Cluster, which was first held in October 2022 in Moscow. The program helped prepare for entering the international level, and the most active participants had the opportunity to present their projects to potential investors from the BRICS countries.

The organizers invited technology companies from the capital with a focus on business development in new foreign markets. During the course of the program, startups learned how to design business development scenarios in the BRICS countries, adjust product lines and develop sales models. Experts helped optimize logistics and build new distribution chains, identify a network of potential partners and rebuild internal business processes.

At "Open BRICS" Speakers from China, India, Brazil, South Africa and Iran spoke for the participants, as well as practical work with trackers, pitching, networking with representatives of the technology business and venture funds, investors and business angels.

One of the Open BRICS participants shared his conclusions on how to start a business in the BRICS countries and what you should pay attention to at the start. Andrey Konshin (founder of the tracking and consulting studio Sputnik Moment):

1. The cost of making a mistake when choosing a target market is incredibly high. Teams are forced to be guided by very conditional criteria when choosing a target market, therefore, with each new investment in international business, it is necessary to check that this has not lost its meaning.
2. Despite the fact that many companies diligently study target countries on the Internet, everyone agrees that one trip on a business trip will bring more information than hours of surfing the net.
3. In foreign markets, it is not enough to come up with a product that will have a market competitive advantage and will cover the needs of customers. You need a product that will have non-market advantages in the target market. For example, geopolitical.

In May 2022, Moscow also hosted the GO BRICS conference.

In the format of panel discussions and thematic sessions, participants:

• discussed the digitalization of the global market and opportunities for cooperation with India, China, South America, the Middle East and Africa;
• received advice on finding clients, investors, Russian and foreign partners to bring their own products to foreign markets or conclude contracts with local manufacturers;
• meet innovative Russian companies that have successfully scaled software, hardware, IT products and technological developments to the BRICS countries.

As part of the "GO BRICS" conference leading market experts and startup founders told how to adapt Russian technologies for foreign clients and make them part of foreign startup ecosystems.

Thus BRICS — it is a global player in the global economic arena. Buying or selling your business in the BRICS countries is an easier and more cost-effective way to enter international markets, as business in these countries will develop rapidly. However, before making such a purchase or sale, a thorough analysis and assessment of all risks and opportunities should be carried out, and this work should be entrusted to the appropriate specialists. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).