August 18, 2023: Global News Roundup
Speculation swirls in lead up to BRICS summit in South Africa
Next week, from August 22-24, world leaders are gathering for the 15th annual BRICS summit in Johannesburg, South Africa. Given the geopolitical and global economic turbulence of the past several years, as well as the growing political and economic strength of BRICS members (BRICS = Brazil, Russia, India, China, South Africa), it is no surprise that this year’s meeting has garnered significant international interest and media coverage.
The theme of the 2023 summit is: “BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development and Inclusive Multilateralism.” According to Victoria O’Regan, writing for South Africa’s Daily Maverick, “The BRICS bloc accounts for more than 42% of the world’s population, 30% of its territory, 23% of global GDP, and 18% of global trade.”
(Image: BRICS Foreign Ministers meeting. Cape Town, South Africa. 1 June 2023. From the official BRICS 2023 summit media gallery, here).
Invitations to the summit and to “meet the BRICS leaders in outreach sessions” were extended to 67 leaders across the Global South, Regan’s article continued, including Iranian President Ebrahim Raisi, who is expected to attend and whose invitation has generated some international controversy owing to Iran’s alliance with Russia and tense relations with the US and Europe: “South Africa’s Minister of International Relations and Cooperation, Naledi Pandor… has insisted that Raisi’s likely attendance at the BRICS Summit does not mean the block is becoming pro-Russian or anti-Western.”
The political drama around invitations to the summit actually extends back to June when French President Macron apparently requested an invitation. The request was denied. According to Reuters, Russian Deputy Foreign Minister Sergei Ryabkov said Macron “would be an inappropriate guest”: "Clearly, leaders of states that pursue such a hostile and unacceptable policy towards us, discussing with such emphasis and conviction that Russia should be isolated on the international stage, and share the common NATO line on inflicting a so-called strategic defeat on us - such a leader is an inappropriate BRICS guest. And we are not hiding this approach of ours, we have told our colleagues from South Africa. We expect that our point of view will be fully accepted,” Ryabkov was quoted as saying.
Chinese President Xi Jinping, Brazilian President Lula da Silva, South African President Cyril Ramaphosa, and Indian Prime Minister Narendra Modi are also attending, though Russian President Vladimir Putin is not. Following international pressure earlier this summer on President Ramaphosa to arrest the Russian president if he attended the summit in person, Putin ultimately decided to attend the forum remotely, sending Foreign Minister Sergei Lavrov to represent Russia instead. At issue was a warrant issued for Putin by the International Criminal Court (ICC) alleging war crimes related to the illegal deportation of children from Ukraine. South Africa is a member of the ICC and the government is obligated to arrest Putin if he comes to the country. Whether or not Ramaphosa would have actually arrested Putin in the end has been a matter of some debate, particularly given that Russia would likely have seen any arrest as an act of war.
As for the summit’s agenda, there is broad speculation that the BRICS are going to introduce some kind of program related to currencies and/or international payments. I’ve seen suggestions that they are planning to introduce a common BRICS currency (seems unlikely to me at this time, but anything is possible), as well as speculation about a new trade settlement system that permits easier cross-border trade in local currencies, reducing use of the US dollar (seems more likely). The wildcard is how gold might fit into the picture, if at all, given central bank gold stockpiling among BRICS governments and speculation from some quarters that the BRICS are going to try to collapse the dollar through some kind of gold-backed (digital?) currency system.
Along these lines, and speaking to the growing importance of local currency trade and investment for the BRICS, the New Development Bank (NDB, formerly the BRICS Bank, a competitor to the Western-led IMF and World Bank headquartered in Shanghai and lead currently by former Brazilian President Dilma Rousseff), just issued its first set of bonds in a non-dollar currency this week, offering up US$77.9 million worth of NDB bonds denominated in South African rand. "NDB is seeking to increase its presence in the local capital markets of its member countries, to fund its robust portfolio of local currency loans. The proceeds will be used to fund infrastructure and sustainable development projects in South Africa and the successful outcome sets the benchmark for future issuances by NDB," said Leslie Maasdorp, NDB Vice-President and Chief Financial Officer, according to TASS.
The organization has also strongly signaled that it will be discussing admitting new members, with more than 40 having already expressed interest. Among the most geopolitically provacative potential new members are Egypt (a leading recipient of US economic and military aid, but which is interested in local currency trading amidst an ongoing economic crisis and dollar shortage), Iran (a staunch US rival), Saudi Arabia (a major recipient of US economic and military aid and traditional US ally which has recently made moves to distance itself from the West), Argentina (which just recently experienced an election shock, with an anti-BRICS and pro-US candidate Javier Milei winning a plurality of the votes), and Nigeria (which leads the US-backed ECOWAS alliance that is opposing the recent military coup in Niger). While BRICS membership (or non-membership) does not it itself imply a strict reversal of older loyalties and alliances, it does signal a commitment from that country to align itself more closely with the BRICS countries and organization in the future.
If you’d like to learn more about the history of the BRICS, the webpage for the upcoming summit contains a brief discussion and timeline, here.
Image: Prof Anil Sooklal, South Africa's BRICS Sherpa meeting with DG Li Kexin, director-General of the Department of International Economic Affairs of MFA China, 4 June 2023, Durban, South Africa. From the official BRICS 2023 summit media gallery, here).
Things I’m keeping an eye on:
1. The Whole World Debt Crisis (check out my March article from Dollars & Sense for more on this): As I’ve discussed previously, this debt crisis isn’t just unfolding in low- and middle-economy economies like Argentina, Turkey, Zambia, and Sri Lanka. The world’s biggest and wealthiest economies are also increasingly mired in stagflationary debt and financial crises. This week, following its recent downgrade of US government debt and related municipal bonds, Fitch announced it was considering downgrades of 10 US banks, including JP Morgan Chase. Yields on long-term US government debt (10Y bonds) reached their highest levels since 2007 in yesterday’s trading. The Financial Times notes that, “The sell-off in bonds — yields rise as prices fall — was mirrored in European markets, where UK 10-year gilt yields hit their highest level since 2008 and Germany’s equivalent hit levels not seen since 2011.” Also this week, China’s real estate debt crisis, which I covered last year in the context of expanding mortgage boycotts, continues to unfold, with real estate giant Evergrande filing for bankruptcy protection in US court yesterday (read more recent coverage of China’s real estate crisis here).
2. Food prices: The FAO’s food price index ticked up 1.3% in August, driven mostly by increases in the price of vegetable oils, wheat and rice, staple foods for large swaths of the world’s population. While such price increases hit the world’s poorest people hardest, traditionally wealthy economies are also struggling with continued food price inflation. Earlier this month, the Bank of England warned that food prices will remain high for the rest of the year. In Canada, “grocery prices remain elevated”, up 8.5% in July year-on-year.