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The BRICS countries, meeting in Durban this week, are inching towards an alternative to the dollar bloc. Brazil and China said on Tuesday that they will use their own currencies for trade and the five nations are still working on creating a rival to the World Bank. Despite flawed policies, the group is a useful counterweight in the global economy.
Summits involving Brazil, Russia, India and China have been held annually since 2009, with South Africa joining the gathering of leading emerging nations in 2011. Between them, the five countries boast nearly half the world's population, and their trade in goods and services totalled $6.8-trillion (U.S.) in 2011, 15 per cent of the global total, according to United Nations figures. That's enough to give the grouping serious heft, and the summits seek to increase co-operation, hoping to balance Western economic power and the so-called Washington consensus approach to policy.
The Sino-Brazilian deal provides for up to $30-billion of the pair's $75-billion in bilateral trade to be denominated in their domestic currencies, removing it from the dollar trade zone. Finance officials didn't get as far as some had hoped on the establishment of a BRICS infrastructure bank, but it remains on the agenda.
The BRICS economies have domestic interest rates considerably higher than the West's and budget deficits mostly far smaller. They suffer from significant flaws, including oversized state sectors and in some cases massive corruption. But the flaws are different from those of the developed world, and therefore they are unlikely to become critical at the same time.
The big differences between the individual BRICS, their fierce independence and a dose of mutual suspicion are likely to limit integration – issues such as how a development bank should be funded are contentious. And structural problems are likely to prevent them reaching their full economic potential. Yet with the European Union, the United States and Japan all growing slowly and pursuing similar monetary and fiscal policies, even a loose alliance with a different approach should be helpfully stabilizing in the event of an economic crisis.