During a time of year known for accepting invitations, Argentina turned one down—a hand-delivered invitation from Chinese President Xi Jinping to join a select group of nations known as the BRICS.
On November 30, Diana Mondino, who is now the Foreign Minister in Javier Milei’s new administration, issued a short but powerful statement on social media: “No ingresaremos a los BRICS.”
This intergovernmental organization currently accounts for more than 40% of the world’s population and a quarter of the global economy, and Argentina wasn’t the only country to receive an invitation for its expansion. In 2024, the group will double in size, with five new members: Egypt, Ethiopia, Iran, Saudia Arabia, and the United Arab Emirates.
With repercussions from trade to natural resources, BRICS is an area to watch for global business in the year ahead, in Latin America and beyond. Here’s a brief overview of things to know.
The promise of an economic lifeline
Goldman Sachs chief economist Jim O’Neill coined the acronym BRIC in 2001. It became an informal four-nation club of Brazil, Russia, India, and China in 2009, then added its S, South Africa, a year later.
Member nations meet annually, with chairmanship rotating across nations each year. Nations apply for membership and are voted in. Over 40 nations from Kazakhstan to the Democratic Republic of the Congo have recently expressed interest in joining. Two big reasons why are capital and trade.
“We open up possibilities of joining new markets, of consolidating existing markets, of raising investment coming in, of creating jobs, and raising imports,” Alberto Fernandez, Argentina’s outgoing president, said in August 2023.
For a nation with 40 percent poverty and $44 billion in debt to the International Monetary Fund (IMF), all of this presents a compelling value proposition. Indeed, two incoming BRICS members face economic struggles of their own. Egypt is the IMF’s second-largest debtor, and Ethiopia is struggling to revive its economy after a two-year civil war.
Administrative realities
Yet BRICS has “long been criticized for failing to live up to its grand ambitions.” An August 2023 Reuters article pointed out that “the regularly repeated desire of its member states to wean themselves off the dollar, for example, has never materialized. And its most concrete achievement, the New Development Bank, is now struggling in the face of sanctions against Russia.”
Furthermore, BRICS is a consensus-based organization. For an action to take hold, all members must agree, from Russia and Iran to India, Brazil, and South Africa.
If you’re thinking “Good luck with all that,” you’re not alone. “Without a shared ideology and clear overarching goal, it is likely that the addition of six new members may instead make BRICS a more divided group, Helena Legarda with the Mercator Institute for China Studies noted.
Two tangible takeaways
Yet there are a few things the expanded group is likely to deliver on: access to energy and an amplified global voice.
With the addition of Saudi Arabia, Egypt, and the UAE, BRICS nations will represent 43% of the world’s oil production, with major global oil producers near the Suez Canal, Strait of Hormuz, Bab-al Mandab Strait, and other critical trade corridors.
BRICS expansion also taps into another kind of power: a larger say in global affairs. M. Taylor Fravel, director of MIT’s Security Studies Program, sees BRICS as a way for member nations “to enhance their heft vis-a-vis the world’s most advanced industrialized economies.”
BRICS leaders have repeatedly called for greater representation in international institutions such as the IMF and World Bank. And in the recent years of the pandemic, issues such as food security, health, and international payment mechanisms have gained prominence and spurred dissatisfaction. Especially as the Global South grows economically and gains security influence, there’s been a drive for new ways of doing things.
“The slew of applications to join the BRICS is clearly a symptom of a deeper malaise,” a global memo by the Council on Foreign Relations declared. “The BRICS forum is one of the various platforms on which member countries try to promote their vision of the word, especially for their participation with better conditions in the global economy.”
Argentina’s BRICS-less future
So, did the Milei administration make the right decision in November?
Importantly for a nation $40 billion in debt to the IMF and shut out of many of the world’s capital markets, turning down BRICS membership shuts off one important source of financing.
“The New Development Bank only has around $12 billion that it can distribute to member countries,” Andres Arauz, a former Ecuadorian minister of knowledge, pointed out to Al Jazeera. “But the BRICS nations themselves have trillions of dollars in reserves and a lot of liquidity available to help Argentina refinance its debts.”
But Milei’s administration has been courting capital from a variety of other sources. Soon after his victory in the runoff election, he was on a plane to New York and Washington to meet with officials of the Biden administration and former US president Bill Clinton. And the new year kicked off with plans to meet with a delegation from the IMF about restructuring the country’s debt.
In terms of energy, turning down a coalition that includes top oil and gas producers Saudi Arabia and the UAE could be seen as a bold move. Yet Argentina is perfectly capable of pursuing such partnerships through alternative channels, doubling down on domestic fossil fuels extraction, —or all of the above.
Then there’s China to consider. How will declined BRICS membership impact a deep and growing trade relationship spanning multiple sectors?
While Milei boldly declared during his campaign that “I will not push or promote relationships with dictatorships, communists, those who have no regard for peace, or don’t hold democratic values,” he has also emphasized that business people are free to trade with whomever they want, Voice of America’s coverage of the situation noted.
“As president, Milei can be expected to adopt a pragmatic stance. He has already signaled that economic ties with China would not be affected, the Carnegie Endowment for International Peace wrote soon after the election.
To BRICS or not to BRICS: the 2024 question
As BRICS expansion makes an impact from Africa to the Middle East and beyond, Latin America remains a region to watch.
In its efforts to resurrect the Mercosur trade bloc, Brazilian President Lula Da Silva was a strong proponent for bringing Argentina into BRICS. Now Brazil remains the lone Latin American representative among growing contingencies from Africa and the Middle East.
“The number of joiners will dilute Brazil’s leverage within the group,” according to International Institute for Strategic Studies analyst Irene Ma. On the flip side, BRICS has not ruled out even more expansion, and other Latin American nations, like Bolivia, have made their interest known.
But BRICS membership is just one of many conduits for global standing and economic growth. As Argentina explores a BRICS-less future in the year ahead, a nation on the other side of the world has already forged such a path.
“With the world’s fourth largest population and a major emerging economy in Southeast Asia, Indonesia was invited to join the BRICS on multiple occasions,” the Council on Foreign Relations observed. “Indonesian President Joko Widodo attended the Johannesburg summit and said that Indonesia largely shares the group’s priorities and interests. However, the president made it clear there is currently no urgency for Indonesia to join.”
Argentina’s pragmatic reality: Multiple routes to global markets
There’s really no urgency or imperative for Argentina to join BRICS either. The nation already has several regional, bilateral, and multilateral trade agreements in place and includes among its main trading partners countries including as China, the United States, Germany, and India.
Despite Argentina’s economic challenges, sizable foreign direct investment continues, especially in energy sector initiatives like the Vaca Muerta shale reserve. Members of the new government have been actively meeting with other nations about opportunities, investments, and economic cooperation—from traveling the world to talk about lithium and technology to meeting with representatives from Brazil and Taiwan. And Milei’s own schedule at Davos was packed with meetings with the movers and shakers of the world’s economy.
“We want to have as many commercial relationships with as many countries in the world as possible,” Mondino told the Financial Times.
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