What are the BRICS+ multipliers?

The current paradigm of BRICS core expansion and the creation of a “partnership belt” presents clear short-term opportunities (in the form of an enlarged platform with a greater weight on the international arena), but is fraught with longer term challenges (need for clear selection criteria, mounting difficulty of arriving at a consensus). The one approach that may harbor greater economic dividends, while being somewhat more flexible than the current approach to BRICS expansion, is the “integration of integrations”, namely the BRICS+ cooperation between the regional integration arrangements of BRICS economies and their regional development institutions. Such a paradigm offers what we refer to as “BRICS+ multipliers” across a range of areas of economic cooperation among developing countries, including in trade, investment, stabilization/anti-crisis policies, in the financial sphere as well as in the representation of developing economies within the BRICS+ platform as well as more broadly on the international arena.

In the trade sphere the BRICS+ multiplier is predicated on the fact that BRICS-5 economies have their priority regional integration blocs and conduct their trade policy (the majority of the five BRICS economies) through their respective regional integration arrangements – Brazil via MERCOSUR, Russia via the Eurasian Economic Union (EAEU) and South Africa via the South African Customs Union (SACU) as well as the African Continental Free Trade Area (AfCFTA) once it becomes fully operational. Accordingly, a trade liberalization agenda within BRICS inherently takes on a wider, BRICS+ format, due to the need to engage the respective regional partners from the integration blocs led by BRICS economies. When Brazil or Russia embark on a more open trade policy via-a-vis African countries (perhaps vis-à-vis the entire AfCFTA bloc) they also need to get their regional partners from MERCOSUR and EAEU on board.  The number of economies that open up their markets in this process is effectively expanded by the number of regional partners in the respective blocs. Such a path to trade liberalization through the “BRICS+ trade multiplier” is particularly appealing given the lack of liberalization impulses from the WTO and the rising protectionism across the global economy.

In the investment sphere, the BRICS+ format that involves the regional development arrangements of the Global South (regional development banks and regional financing arrangements where BRICS countries are members) can generate multiplier effects by raising the potential GDP growth rates of core BRICS economies and their neighboring partners via regional connectivity projects. This greater regional connectivity financed by regional development banks along with BRICS institutions such as the New Development Bank (NDB) may also boost the long-term trade potential between BRICS and their regional partners, laying thus the foundations for stronger intra-regional growth impulses and multiplier effects across the main geographies of the Global South.   

There may also be substantial multiplier effects associated with BRICS anti-crisis stimuli that if coordinated and amplified via regional integration arrangements and regional development institutions may generate a far more powerful multiplier effect on demand in the main regions of the Global South. The original stimuli coming from the core BRICS economies may boost demand in the respective neighboring partners via the regional integration linkages and may be amplified by coordinated investments in the region via the co-financing of investment projects by regional and national development institutions. Higher demand in the regional partners in turn expands the scope for further export-led growth impulses from the core BRICS economies.

In the financial sphere, there could also be “multiplier effects” associated with spreading the use of national currencies of BRICS+ countries and de-dollarization from the level of core BRICS economies to their respective regional blocs and regional partners. The creation of new payment systems and platforms that are predicated on the use of national currencies need to be grounded in the BRICS+ format that brings together the respective regional integration arrangements and regional development institutions – the latter in turn may also generate further increases in the use of national currencies in their financing operations.

Finally, one may also invoke a BRICS+ multiplier pertaining to the representation of the Global South, particularly small economies, on the international arena in international organizations (as part of the BRICS+ grouping) and economic cooperation platforms. The one-by-one expansion in the BRICS core membership is a process that is likely to be slow and fraught with contradictions over which economies are to get an early ticket into the club. In contrast, the approach that brings regional integration arrangements of the Global South together is far more expeditious and inclusive in that it provides an equal access of developing economies to the BRICS+ platform, whether they are heavyweights or small economies. The “integration of integrations” BRICS+ track thus avoids the pitfalls of BRICS turning into yet another “elitist club” like the G7 or the G20. We have already written extensively on this “representation BRICS+ multiplier” in our earlier publications and would note again that such a BRICS+ approach in terms of its inclusivity would be superior to any other global or regional platform:

The operation of the above BRICS+ multipliers may reinforce each other if trade liberalization within such a BRICS+ framework is combined with targeted stimulus and investment undertaken by the regional integration arrangements of the Global South together with the respective regional development institutions. Thus far the BRICS approach has been to invite representatives of regional blocs to BRICS+ summits, with no clear roadmap being delineated on how trade, investment and financial cooperation is to evolve across the regional blocs and regional development institutions of the Global South. The lack of progress in moving towards forming such a BRICS+ platform (BRICS+ as a concept and as a key BRICS initiative were launched 7 years ago in 2017) as well as the scarcity of academic research on how such a BRICS+ approach could impact the Global South limits the scale of economic dynamism and vitality that the BRICS project could deliver to the developing world.

Yaroslav Lissovolik, Founder, BRICS+ Analytics

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