Our recent analysis of the prospects of greater economic cooperation in the Southern Hemisphere has been driven to a significant degree by the mounting geopolitical risks to the North of the equator. At the same time, as we also argued in recent publications, there are a number of commonalities across the economies of the region that improve the prospects of greater economic cooperation. The current trends in the world economy associated with regionalization and the importance of supply-chain resilience are likely to drive greater coordination across the largest economies in the region with respect to key economic policy areas. We proceed to explore some of the economic commonalities that could serve as a basis for this constructive coordination across the Southern Hemisphere.
The most critical of commonalities across the largest economies of the region is the importance of the mineral resource endowments that form a prominent part of the commodity export specialization of these countries in global markets. The largest economies of the region feature among the global leaders in terms of reserves, production and exports of some of the key minerals. In particular, Chile is one of the global leaders in the cooper segment, Indonesia – nickel, South Africa – gold and platinum, Australia – iron ore. Argentina together with Chile play a crucial role in the supply of lithium (as part of the so-called “Lithium Triangle”) that serves as a key component for the EV industry.
Another facet (in part perhaps related to the mineral resource endowment and specialization factor) to the region’s positioning in the world economy is the high level of wealth/income inequality. In particular, African economies to the south of the equator exhibit a high degree of income differentiation, with South Africa having the highest level of income inequality as well as regional inequality in the world (the country’s Gini coefficient reaches more than 0.6 according to the World Bank). Latin American economies are also among the world’s most unequal in terms of income distribution, with Southern Hemisphere economies such as Brazil exhibiting some of the highest rates of inequality in terms of the Gini coefficient (more than 0.5 according to the World Bank) both regionally and globally. Indonesia on some counts is also considered to be among the regional leaders in ASEAN in terms of wealth/asset differentiation[1], while Australia’s relatively subdued level of income inequality by global standards has witnessed notable increases in recent years[2].
Other common vulnerabilities include high indebtedness, with Argentina grappling with a whole series of debt crises in the past several decades. Brazil despite its relatively strong growth performance in recent years continues to exhibit elevated debt levels, with general government gross debt reaching 91.4% of GDP in 2025[3]. The latter indicator was more than 77% of GDP in South Africa and more than 97% of GDP in Mozambique.
What the nexus of the resource dependency, high debt levels and high levels of income inequality implies is that there is a strong commonality in the region with respect to the developmental goals and paradigms that need to target greater economic diversification and inclusivity. In terms of the macroeconomic policy mix, the combination of high income inequality, resource dependency and high debt argues in favor of adopting rigorous frameworks of fiscal rules (that place limits on fiscal deficits and debt levels) as well as provisions for launching sovereign wealth funds (SWFs). As we noted in our earlier publications, some of the economies of the Global South such as South Africa could greatly benefit from the creation of a sovereign wealth fund due to the possibility to enforce greater transparency and efficiency in the use of the proceeds from exports of mineral resources[4].
For all the major economies of the Southern Hemisphere, economic diversification away from resource dependency argues in favor of developing the services sector, with logistical/transportation connectivity, most notably focused on the maritime connectivity across the Hemisphere, becoming a crucial gateway for the mitigation of resource dependency risks. Other services segments for diversification include human capital development areas such as health care and education. The modernization of the financial sector via greater financial inclusion could form yet another crucial platform for economic diversification that also contributes to reducing income/wealth inequality. A development strategy focused on digital economic development in the region – including through the advancement of digital economic accords (DEAs) – could contribute towards greater inclusivity and the taming of the distance divides between the main land masses of the Southern Hemisphere.
Another important consideration for the Southern Hemisphere is the relationship between the region’s two largest economies – Brazil and Australia. It may be evaluated through the prism of a contrast effect with the Northern Hemisphere, where the relations between the two largest economic powers – US and China – are becoming increasingly antagonistic. As is the case in the North and the South, the two largest economies are represented by an advanced and a developing economy – with the developed economy (US) in the lead in the North (in terms of GDP levels at market exchange rates) and Brazil as a developing economy being the greater heavyweight in the Southern Hemisphere compared to Australia. And while China and the US had periods of thawing relations (the peak was during Obama’s tenure, when US-China relations were elevated to the level of a “cooperative partnership”[5]), the overall dynamics mostly moved downhill throughout the past decade.
In contrast, relations between Brazil and Australia evolved in an increasingly constructive fashion in recent periods, culminating in a strategic partnership between these economies in 2012. Brazil is Australia’s largest trading partner in South America, but most of the trade flows of both countries are oriented towards the Northern Hemisphere and the overall intensity of bilateral trade flows remains well below potential. With considerations of sectoral and geographic trade diversification looming large for both economies, there may be room to consider wider ranging economic agreements, including in the e-commerce/digital economy sphere, targeting trade and investment liberalization.
Overall, the geography of the Southern Hemisphere is more conducive towards a cooperative arrangement among the largest economic powers and regions compared to the North. The main landmasses in the South may be represented by a triad of South America, South Africa and the Southeast Asia-Oceania connection as represented by Indonesia and Australia. These three parts of the Hemisphere are separated by sizeable distances that are broadly equal to each other (“a southern tripod” for the globe):
- Santiago to Durban = 9.2 thousand km
- Durban to Canberra = 10.3 thousand km
- Santiago to Canberra = 11.3 thousand km
On the other hand, instead of a potentially cooperative troika arrangement in the South, Northern geography inherently exhibits a tenser duopoly between North America and Eurasia. The latter is more akin to a setting that is conducive to rigid competition as exemplified by the dynamics around the Arctic and the standoffs between the maritime powers of the advanced world and the inland developing regions of Eurasia. The rivalry between the two large landmasses and higher population density create more scope for migration, sizeable spillover effects/externalities and geopolitical tensions.
In effect, the large distances across the landmasses of the Southern Hemisphere may produce the illusory effect of weaker trade potential compared to the North, but the latter is more divided by geopolitics, land borders and the burden of history. In reality, the geometry of economic space in the Southern Hemisphere is more favorable for building closer ties across regions, with oceanic basins reducing the scope for border/state separation and creating direct, lower cost (compared to inland transportation) linkages[6]. In this respect, the Southern part of the globe is more suited for cross-continental/horizontal East-West alliances, serving as a potential foundation for bringing together the continental blocs of the Global South such as SADC/AfCFTA, Mercosur and ASEAN[7].
While the creation of a community for the economies of the Southern Hemisphere would boost the development of horizontal/East-West logistical and trade corridors in the region, it would also open up the possibilities to co-integrate the expanding partnership with other sizeable blocs with a pragmatic trade liberalization agenda. One of the potential candidates in this case could be the Regional Comprehensive Economic Partnership (RCEP), in which Indonesia and Australia participate as full-fledged members. Another possibility could be the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), whose membership includes Southern Hemisphere economies such as Chile, Australia and Peru.
In the end, the economic priorities in the Southern Hemisphere are uniquely aligned – whether in terms of the economic exigencies of modernization or ecological needs and priorities. At the same time the geo-economic conditions of the Southern Hemisphere potentially render the region a unique platform for facilitating inter-continental economic integration across the main regions of the Global South as well as bridging the North-South divide via building closer economic ties between the developed economies of the South Pacific and developing economies in Southeast Asia and Latin America. Amid the rising geopolitical tensions globally, the Southern Hemisphere may position itself as a key reservoir of new liberalization initiatives and a region with a pragmatic economic cooperation agenda.
[1] https://rsisinternational.org/journals/ijriss/articles/factors-affecting-income-inequality-in-indonesia/#:~:text=Over%20the%20past%2020%20years,which%20around%20USD%20527.36%20billion.
[2] https://www.aihw.gov.au/reports/australias-welfare/income-and-income-inequality
[3] https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD
[4] https://brics-plus-analytics.org/revisiting-the-case-for-a-south-african-sovereign-wealth-fund/
[5] https://www.fmprc.gov.cn/eng/gjhdq_665435/3376_665447/3432_664920/3434_664924/202406/t20240612_11426020.html
[6] This is what was meant by Petr Savitskiy, who argued that “the Ocean is unified, the Continent is divided”: https://globalaffairs.ru/articles/geoekonomika-i-nasledie-evrazijczev/
[7] All three regional blocs of the developing world that may build the foundations of the “integration of integrations” alliance in the Southern Hemisphere – SADC/SACU, Mercosur, ASEAN – have a Southern element in their official names.
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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