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  Félix Peña

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The leading role of the BRICS in the design of the new global economic architecture

by Félix Peña
January 2011

English translation: Isabel Romero Carranza


There are different approaches to the issue of global governance. One of them is related with the classic tension between order and anarchy in the international system. Another approach deals with the unequal effects that result from the organization of production in trans-national value chains. Yet another approach, which will be favored in this opportunity, refers to the ability of the international system to generate solutions for the relevant issues of the global economic agenda that, due to their scope, can only be tackled effectively by the group of nations. These issues are the result of the globalization of the economy. Among others, we can mention those linked with climate-change, trade and currency "wars", the global regulation of financial markets and the creation of favorable conditions for the economic and social development of all nations.

The shifts in world power have gradually eroded the capacity of the existing international institutions to generate effective systemic responses to the relevant issues of the global economic agenda. It has become increasingly difficult to gather the sufficient critical mass of power for decisions to have an impact on reality. Thus, the problem is associated with the relation of power between nations. Garnering the necessary measure of power in order to adapt the institutions that rule global economic governance will be no easy task. Hence the growing importance of the mechanisms that enables to bring together a critical mass of power to turn possible the process of creation of new ground rules for the international economy, the review of the existing international institutions and the safeguard of their proper functioning. They represent different modalities of coalitions of nations that, at the same time, reflect different international sub-systems.

In this perspective, the role that the BRICS might be able to play after South Africa was invited to join the original group, formed by Brazil, Russia, India and China should be analyzed. It has strong challenges ahead. Among others, being able to uphold that the members speak on behalf of their respective regions.

There are at least three possible approaches to the issue of global governance. We will look more closely into the third one. Firstly, global governance is related with the classic tension between order and anarchy, which in its most extreme version refers to the alternation between peace and war in the relations between nations, such as was put forward by Raymond Aron in his classic book "Paix et Guerre entre les Nations" (Calmann-Lévy, 1962). This is a tension that has had, in the history of the yet non-globalized world, epicenters of regional geographic scope. In these epicenters the connectivity and, in particular, the physical proximity between sovereign political units have intensified the tension originated from the perception of opposed interests, which many times have led to conflict and even armed confrontation between neighbors. Since the World War Two and, especially due to the collapse of physical distances resulting from the technological changes in communications and transport, the chain reactions caused by regional conflicts have often turned them global. Thereof, in this first approach, global governance is related with the existence of institutions and rules that, due to their effectiveness and legitimacy, ensure the prevalence of an international order that neutralizes the tendencies towards the use of force between nations.

There are indeed other possible approaches to global governance. One of these refers to unequal effects resulting from the organization of production in transnational value chains (on this regard refer to the first chapter of the book published by Cattaneo, Gereffi and Staritz, mentioned as recommended reading of this newsletter). On the one hand, the transnational productive networks contribute to accelerate the transmission of the impact of the economic and financial crisis between countries, even distant ones, such as was evinced in the years 2008 and 2009. This was a crisis with visible effects still present in many countries, calling for certain reserve in the diagnosis of its defeat. On the other hand, precisely due to the connectivity and chain effects that they generate between the different economic systems at a trans-national scale, the proliferation of such productive networks increases the interest of the countries in avoiding a worsening of the crisis through the policies applied to defend themselves. This is almost the opposite of what happened during the Great Depression of the 1930s. The ease of contagion generates a collective interest in answers that preserve global governance in the face of any trend towards a "run for your life" attitude. At the same time, in certain way, it promotes favorable reflexes to the idea of an effective global economic order.

Another possible approach -the one that we are going to focus on-, is related with the capacity of the international system to articulate solutions for those relevant issues of the global economic agenda that, due to their scope, can only be tackled effectively by the group of all nations. This means that it is not possible for these to be faced successfully solely by one country or a limited group of countries. They are the result of the globalization of the economy. Among others, we can mention the issues related with climate-change, the trade and currency "wars", the global regulation of the financial markets and the creation of conditions that are favorable for the social and economic development of all nations. It is precisely in view of this reality of the globalization of world economy that marked systemic deficiencies may be observed.

In fact, the shifts in world power during the last decades (on this regard refer to the stimulating book by Fareed Zakaria, "The Post-American World, Norton, New York-London 2008), have gradually eroded the ability of the existing international institutions to generate effective systemic responses to the most relevant economic issues of the global agenda. These are institutions that were created after the last World War. It is not an easy task now to adapt them to the new geography of world power. And those originated in the economic and financial domain as informal work mechanisms between the most developed nations -such as the G7- have also shown their inadequacies when the financial crisis of 2008 and its notorious economic implications became evident. They led to resort to the G20 which, however, has been unable to pass the efficiency and international legitimacy test.

Thus, it has become difficult to gather around a single international negotiating table the sufficient critical mass of power that is required for decisions to effectively impact reality. In the presence of every relevant issue of the global economic agenda that demands effective, efficient and legitimate decisions, the fundamental question remains: which countries should be summoned and which countries understand that they should be summoned? (On this regard, refer to the recent article by Mauricio Cárdenas, Luis Carranza and Andrés Velasco -former Finance Ministers of Colombia, Peru and Chile respectively - entitled "With no voice in the G20", proposing the alternating participation of their countries in the G20, on and also on page 15 of El Cronista newspaper from Friday 31 December, 2010).

The scattering of world power in multiple relevant centers -nations and organized regions- is complicating the task of redesigning the international institutions of a new global economic architecture. The existing ones were born at a time when it was clear who held the most power, which was enough to be acknowledged as the maker of rules at world level. As many times before, the answer emerged from war. This accounts, for example, for agreements such as Bretton Woods. It also explains why it can be an illusion to pretend to reproduce a similar scenario now, something like the "other Bretton Woods" demanded in recent years by renowned economists. The failed attempts, between l918 and 1939, to create international institutions that made the world governable, remind us how difficult it is to achieve viable agreements in a multi-polar and heterogeneous context without a previous enforced definition of which country or countries can effectively guarantee international order.

The problem is, then, at the level of power relations between nations. It will not be an easy task to add up the necessary concentration of power in order to adapt the institutions that make global economic governance possible. Not only has the international system become globalized, it tends to be more multi-centric as well. Several other factors also help turn it heterogeneous in terms of values, memories, perceptions and visions. This means that it is potentially more ungovernable.

From there the growing importance of mechanisms that enable to summon a sufficient critical mass of power to make possible a process of creation of new international rules, the revision of the existing international institutions (such as the United Nations or the world financial institutions) or to insure their proper functioning (such as in the case of the World Trade Organization). Such mechanisms can be facilitated by the agreement that may be achieved in those formal or informal ambits of regional scope, such as the European Union, or trans-regional, such as the BRIC group.

In certain way they all represent diverse modalities of coalitions of nations that, at the same time, reflect the different international subsystems. These are coalitions of a variable geometry adapted to the main issues of the regional, trans-regional, international or global agenda and that lead to its formation. They can even be coalitions with superposed memberships. A country may be member of different coalitions at the same time, depending on its relative relevance in different international subsystems.

The joint work of the coalitions of nations towards common goals has been frequent in the history of international relations. Often these have their expression in informal groups with little institutionalization. Other times they result in formal agreements that originate international agencies or regional communities. Additionally, other of their objectives can be to reflect the interests of a group of countries in international trade negotiations, for example within the framework of the GATT or, currently, the WTO, (on this regard see the book by Amrita Narlikar, "International Trade and Developing Countries. Bargaining Coalitions in the GATT & WTO", Routledge, 2003), or to have a greater impact in the definition of new international institutions, or the transformation of the existing ones. The latter is precisely the case of the BRIC group which will be discussed further. The invitation extended to South Africa on December 23, 2010 by the government of China, on behalf of the whole members, to join the group, plus the fact that the third Summit will take place next April in Beijing, might grant this informal mechanism of nations a special relevance in the process of redefining the institutions for global economic governance

Such inclusion may be perceived as a decision for the advantage of all five countries and more political than economic in scope. The four current partners would gain in representativeness, especially for the actions aimed at promoting the reform of the international institutions that they consider have been overcome by the new realities of world power and, in particular, of the United Nations, including its Security Council. The new partner, South Africa, would gain prominence and prestige, especially in its own region, which could become more attractive for international investments. However, it is still too early to predict if the expected benefits will effectively materialize.

The decision to invite South Africa would have been encouraged by China. However, when announced, it was clear that it was on behalf of all members. At least two of them, Brazil and Russia, hastened to welcome South Africa to the group. (On the invitation see;;;;;

The invitation was desired by South Africa, although it was not expected at the moment it happened. President Zuma had negotiated to enter the BRIC when he visited Beijing last August. He had done likewise with his colleagues in the three other countries. However, up until three days before the actual invitation took place, the result of his negotiations remained uncertain. The international press speculated which country would be the next to be invited to this exclusive club. Even in Africa, Nigeria considered it fulfilled the necessary requirements. Other countries that were mentioned were South Korea, Turkey and Indonesia, to name a few.

After this addition, the original acronym will change to BRICS, or to BRICSA to be more precise, at least at the level of multilateral economic diplomacy. In its origins it had an economic purport. It gradually acquired a symbolic scope. It reflected the great emerging economies that had the capacity to influence the design of a new map of global economic competition. Membership to this group began to symbolize prestige. Some considered that a new brand-name had been coined, one that was attractive for investors avid of opportunities aside from those offered by the OECD. In any case, it also gave fame to Goldman Sachs, the financial institution that invented the creature.

It was Jim O'Neill, then Chief of Global Economic Research at Goldman Sachs, who launched the idea of the BRIC in 2001 (see Global Economics Paper N° 66, November 2001, on or click here). At that time, the 9-11 attacks had shocked the world. The sense of the original concept was merely economic. It tried to identify nations whose markets, due to their size and growth potential, could become a driving force in the global economy of the future. Their population represents 40% of the world's inhabitants, with a strong growth of urban population and a middle class income. Their economies could surpass in size those of the G7 by the beginning of 2030. Furthermore, as per Goldman Sachs, the leading role in the global economy of the four member countries would lead to the reorganization of the international forums of economic decision-making and even to the incorporation of new members to the G7 (the club of the most developed nations).

The idea struck, markets bought it and the acronym became a trademark with media impact. Thrilled by its initial success, O'Neill later updated and even expanded on the idea. He was the mastermind behind one of the following publications by Goldman Sachs where he held that, actually, it would be necessary to add more countries to the original group of four. (See Global Economics Paper N° 153, March 2007, on o click aquí). The idea of the N11 was thus proposed. According to it, due to their probable performance in terms of their contribution to global economic growth, other economies needed to be taken into account in order to fully grasp the future international global scenario. These were Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. South Africa and Argentina were not included.

Since then, the issue of the number and the name of the countries to be considered as the relevant global economic players has been the subject of much debate. This reflects a more essential problem: which and how many countries would be able to represent the interests of those other countries not invited to the global decision-making process. A recent study by BBVA Research (on or click aquí; and also on: or click aquí) considers that the original Goldman Sachs idea has been surpassed. It differentiates between two different types of countries that deserve to be considered due to their potential for economic growth. On the one hand, it identifies what are called the "eagles" (emerging economies that lead global growth and that in the next ten years will top the average of the G7 economies: China, India, Brazil, Indonesia, South Korea, Russia, Mexico, Egypt, Taiwan and Turkey). On the other hand, it identifies those countries that are in the "waiting list" or the "nest" and which have conditions to soar like the "eagles" (Thailand, Poland, Nigeria, South Africa, Colombia, Argentina, Malaysia, Vietnam, Bangladesh, Peru and Philippines). It also adds, maybe rightfully so, that unlike the BRICs, the concept of "eagles" is a dynamic one since the list will require periodical revision and updating, taking into account the continuous evolution of global economy and of the respective countries.

In fact, many countries have questioned the economic relevance given to the BRICs, (for example see the article by David Rothkopf in "Foreign Policy": Even though between the years 2000 and 2008 the four members of the group represented approximately 50% of the world's economic growth, and that percentage is estimated to grow to 61% by 2014, a significant portion of that contribution is originated by China and India. At the same time, China represents 50% of the GDP of the countries of the group. Also under question is the density of common interests existing between them, without overlooking, additionally, the potential for conflict that can be seen at the bilateral relations among some of the members. All this generates the impression of being in the presence of a phenomenon that, in the measure that it is considered as a whole, can have an illusory media component.

Nevertheless, the idea of the BRICs has transcended the economic plane and its initial layout. In fact, it has turned into the name of an informal forum of nations that aspire to influence the definitions required to guarantee global governance. It has acquired, thus, a clear geopolitical sense and has been incorporated to the growing constellation of international coalitions of variable geometry that characterize the current global scenario, among which the G20 stands out.

The new economic dimension of the BRICs was made clear two years ago when the member countries started to meet at the highest political level. The first Summit took place in Yekaterinburg, Russia, in April, 2009. It had been preceded yearly since 2006 by the meetings of the Foreign Affairs Ministers on occasion of each of the UN General Assemblies in New York. The second Summit was held in Brasilia, on April 15 of last year. The third will be precisely in Beijing next April (for more information go to

After the first Summit the Chancellor of Brazil at that time, Celso Amorim, pointed out in the newspaper Folha de Sao Paulo that the four countries had decided to expand the agenda for joint action: "seeking to strengthen politically as a block to help balance and democratize the international order of the beginning of this Century". He also pointed at the necessary reform of the United Nations: "to postpone indefinitely the reform, including that of the Security Council, will aggravate the risk of the erosion of its authority".

The importance for this group of the necessary institutional transformations required to guarantee global governance in all the relevant areas of the international agenda of the beginning of this Century becomes evident in the Declaration resulting from the Brasilia Summit. It reaffirmed the support to a multi-polar world order that is fair and democratic, based on international law, equality, mutual respect, cooperation, coordinated action and the collective decisions of all countries. In particular, it expressed a firm commitment to a multi-lateral diplomacy, with the UN performing a central role in the management of global challenges and threats. On this regard, it stressed the need for a broad reform of the United Nations Organization to make it more effective, efficient and representative. It also pointed out the importance they assign to the position of India and Brazil in international affairs and supported their aspirations to perform a more relevant role in the UN.

Maybe it is in the light of such Declaration that the whole political implication of the addition of South Africa to the group of four countries makes full sense. On this regard, it is also relevant that this year the countries of the new BRICS will all be members of the Security Council, together with Germany. The declaration published by Itamaraty after the invitation made to Jacob Zuma to participate in the upcoming Beijing Summit, highlights this fact. It also reminds us that Brazil, India and South Africa are already part of another informal group called IBAS (on this topic refer to the information on

Originally conceived as an informal geopolitical space aimed at influencing the reformulation of the formal mechanisms of international governance, the original BRIC is enhanced by the fact that South Africa provides and African dimension which was previously lacking. South Africa is the largest economy of the region. At the same time Africa as a whole is acquiring a clear global economic relevance.

However, South Africa's economic dimension is small compared to that of the BRICs, in terms of population, GDP and share in world trade. If we consider its addition to the informal inter-regional group only on the basis of economic criteria, those who believe that South Africa is far from being the ideal candidate might be right. Its GDP for example is just a fourth of Russia's. Even the father of the original idea, Jim O'Neill, pointed it out in his declarations after the invitation to Jacob Zuma was made public (for his declarations go to However, to a certain degree, it is considered that it reflects the growing Chinese interest in increasing its presence in Africa in terms of trade, investments and cooperation for development (on this regard see

Additionally, South Africa has an undeniable projection in Africa, whose population will reach 1.5 billion in 2030. Its membership in the BRICS group is perceived as something that will promote its leading role in African development. At the same time, China already has a special economic presence in South Africa. In fact, it is China's main African partner both in trade and direct investments.

If the new BRICS aspires to have a meaningful participation in global economic governance and in the reform of international institutions such as the UN -which would seem the immediate goal for this year-, it faces strong challenges ahead. It has strong challenges ahead. Among others, being able to uphold that the members speak on behalf of their respective regions. The legitimacy of such representation is crucial for its effectiveness. And it is a still greater challenge for the two countries that aspire to represent the interests of complex regions, with strong differences of all kinds and with a lower degree of institutionalization than that achieved in the European geographic space. This is the case of Brazil in South America and of South Africa in Africa.

Recommended Reading:

  • Alonso, Paula, "Jardines secretos, legitimaciones públicas. El Partido Autonomista Nacional y la política argentina de fines del siglo XIX", Edhasa, BsAs 2010.
  • Baumann, Renato, "Regional Trade and Growth in Asia and Latin America: the importance of Productive Complementarity", ECLAC/Brasil, November 2010, en: or click here.
  • Baumann, Renato (org), "O Brasil e os demais BRICs. Comercio e Política", CEPAL-IPEA, Brasilia 2010, en: or click here.
  • Blair, Tony, "A Journey", Hutchinson, London 2010.
  • Cattaneo, Olivier; Gereffi, Gary; Staritz, Cornelia (editors), "Global Value Chains in a Postcrisis World. A development perspective", The World Bank, Washington 2010.
  • Eco, Umberto, "El cementerio de Praga", Lumen - Sudamericana, BsAs 2010.
  • Fundación Standard Bank, "Las negociaciones comerciales y su impacto en la internacionalización de empresas", Instituto de Comercio Internacional de la Fundación Standard Bank, Manual Didáctico sobre Comercio Internacional N° 3, Buenos Aires, diciembre 2010.
  • Lehmann, Fabrice; Lehmann, Jean-Pierre, "Peace and Prosperity Through World Trade. Achieving the 2019 Vision", ICC-Cambridge University Press, Cambridge 2010.
  • Ospina, William, "En busca de Bolívar", Grupo Editorial Norma, Bogotá 2010.
  • Peña, Félix, "Reasons for an optimistic future view of trade and Latin America", en Lehmann, F. and Lehmann J-P. (Cambridge University Press, Cambridge 2010).

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information. |

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