July 24, 2024

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How BRICS is redefining global trade and how it will benefit Costa Rica

How BRICS is redefining global trade and how it will benefit Costa Rica

Andrey Calderon

Geostrategic Analyst,

International Trade Specialist

In an ever-evolving geopolitical scenario, new regionalisms are reshaping global economic dynamics, and the BRICS group (Brazil, Russia, India, China, and South Africa), today expanded to include Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. Positioned at the forefront of that change. A clear example of this initiative is Russia’s recent proposal for a stable payment platform among the BRICS countries. Russia, in its meeting with its counterparts, highlighted the importance of reducing dependence on the US dollar and promoting alternative payment systems that strengthen the financial autonomy of these developing countries.

The Russian Ministry of Finance announced plans to launch BRICS Bridge, a platform to allow cross-border payments between member states. The move is part of the process of de-dollarization of the global economy, which has been strengthening in response to Western sanctions policy. The initiative aims to increase the speed and accessibility of financial transactions, as well as guarantee the stability of payments. In addition, the platform can operate independently of third-party controls, using digital financial assets (DFAs) issued by the central banks of BRICS members, linked to the national currencies of those states.

At the same time, within the framework of the ‘BRICS Dialogue with Developing Countries’ conference held within the framework of the Russian President in the Russian city of Nizhny Novgorod on June 11; Thailand formalized its desire to join the BRICS organization, seeking to take advantage of the economic and political opportunities offered by the alliance. The addition of new members reinforces BRICS’ relevance as an important grouping in the global economy and underlines its attractiveness to developing countries as an alternative to Western-dominated financial structures.

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This phenomenon of new regionalism is particularly relevant for countries in the Global South, which see alliances such as BRICS as an opportunity to diversify their commercial and financial relations. The creation of stable tariff bases and the enlargement of the group are examples of how BRICS seeks to provide a fair and balanced framework for international trade, away from traditional economic and political biases. Another sign of this change is the recent termination of the petrodollar agreement between Saudi Arabia (now a BRICS member) and the US after 50 years, which allows Saudi Arabia to sell oil in different currencies, accelerating the process of dollarization. Saudi Arabia decided not to renew the “petrodollar” contract that expired on June 9. The agreement, signed in 1974 with Henry Kissinger as its architect, created an agreement that Saudi oil exports would be paid for in US dollars. The alliance integrated the currency into a global currency in the energy sector and placed the Saudis at the top of the oil trade and export pyramid.

For Costa Rica, these geoeconomic dynamics present both challenges and opportunities. As a country that relies heavily on international trade, Costa Rica could benefit from exploring new avenues of cooperation with BRICS countries. The diversification of its export markets and the adoption of alternative payment systems strengthen the country’s economic position and reduce its vulnerability to global economic fluctuations and the dependence and concentration of business dynamics along the Euro-Atlantic axis, which is currently exposed to more volatile geopolitical factors. Furthermore, the integration of modern technology platforms to facilitate and improve payment procedures can give Costa Rica a competitive advantage in the international market.

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In short, BRICS-led new regionalisms are redefining the rules of the game in the global economy. Costa Rica, like other countries in the Global South, must carefully evaluate these trends and consider how to take advantage of the opportunities arising from these emerging alliances to ensure sustainable and equitable development in the future.