On the 6th (local time), the BRICS (Brazil, Russia, India, China, South Africa) summit opened in Rio de Janeiro, Brazil, while discussions about the so-called Borderless Cross-Border Payment Initiative (BCBPI) continue to stagnate. This agenda has been mentioned at every conference for the past decade, but no substantial progress is expected this time either.
According to Bloomberg News that day, BRICS announced in a joint statement at the summit that it directs finance ministers and central bank governors of member countries to resume discussions on the BCBPI concept. They have been considering alternatives such as establishing their own payment systems and developing currencies to reduce reliance on the dollar in trade.
The cross-border payment system was first mentioned at the BRICS summit 10 years ago, in 2015. Since the United States excluded Iran from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in 2012, BRICS member countries have consistently addressed related agendas. Last October, BRICS also published a report explaining the BCBPI ahead of a summit in Kazan, Russia.
However, despite being re-discussed at each meeting, the establishment of the BCBPI has yet to see substantial change. The assessment is that a combination of various issues, including a significant gap in the level of Central Bank systems among major member countries, lack of system infrastructure, security issues, and conflicts over expense sharing, has left it in a state of stagnation.
In particular, the reality that many of the currencies among BRICS member countries are non-convertible currencies that cannot be freely exchanged internationally and that some members like Russia and Iran are under international sanctions poses significant constraints for building a common system. Additionally, skepticism arises about the practicality of introducing a high-cost integrated system, given that the proportion of bilateral trade among member countries is already high.
However, recent criticism has emerged that BRICS is missing the opportunity to redefine international finance, as President Donald Trump publicly pressured the Federal Reserve (Fed) by imposing reciprocal tariffs, causing the dollar value to decline rapidly. In fact, this year, the dollar has recorded its worst early-year performance since 1973, and awareness of crisis around U.S. assets is gradually rising.
At this meeting, BRICS emphasized that it would continue to pursue inclusive growth through expanding the use of local currencies, diversifying funding sources, and strengthening trade cooperation. Particularly, under the perception that high-interest rates and a tight global financial market are exacerbating the liability risks of emerging countries, BRICS intends to establish a new multilateral guarantee institution (BMG) to boost the creditworthiness of member countries and the Global South.
Recently, President Donald Trump warned BRICS member countries that he would impose tariffs of up to 100% on countries that reduce dollar payments. However, it appears that this threat has not had a substantial impact on the discussions about establishing the BCBPI. According to Bloomberg, there is a strong recognition within BRICS that "for now, gradually expanding payment infrastructure among local currencies is a more realistic goal than a shared currency concept."
Tatiana Logitu, head of the International Relations Division of the Brazilian Ministry of Finance, said, "One way to reduce transaction costs in trade is to use more local currencies," adding that "direct exchange rate markets should be established between the yuan and real (Brazil), real and rupee (India), and real and rand (South Africa)."
Meanwhile, this meeting is the second regular summit after BRICS expanded beyond the existing five member countries—Brazil, Russia, India, China, and South Africa—with a total of 10 countries participating. However, the absence of Chinese President Xi Jinping and Russian President Vladimir Putin, along with the attendance of prime ministers or crown princes from Egypt, Iran, and the United Arab Emirates (UAE), has raised concerns about its diminished status compared to the past.