South America Is Upping Its Bet on BRICS

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: The BRICS grouping mulls expansion ahead of its annual summit, a U.S. congressional delegation visits the region, and far-right politician Javier Milei wants to change how Argentina does business.

Alongside the president of Brazil, the president of Bolivia and a delegation from Argentina are preparing to travel to Johannesburg, South Africa next week for the BRICS summit, the annual gathering of the group comprised of Brazil, Russia, India, China, and South Africa. The buildup to this year’s summit has attracted an especially high degree of international attention, in part due to speculation over whether Russian President Vladimir Putin would attend in person, and in part because of the growing ranks of countries that have expressed interest in joining the group.

Putin will only attend virtually. But officials from other countries who hope to join the group—for instance, those of Argentina and Bolivia—will be there in person. Host country South Africa says that over 40 nations have expressed interest in joining, including Saudi Arabia, Indonesia, and the United Arab Emirates.

Since the group’s founding in 2009, BRICS member countries have had their share of disagreements, but they’ve continued to hold meetings on a wide range of issues, including health governance, business, and agriculture, under the shared belief that economic and political ties among the group will help lead the transition to a world in which the United States is no longer a hegemonic power.

When Russia invaded Ukraine last February, Western countries tried urgently to convince the rest of the world to follow their lead and distance themselves economically and politically from Moscow. But most countries in the global south opted out of this isolation campaign for a mix of reasons, including economic concerns, the history of proxy violence that many of them experienced during the Cold War, and a dissatisfaction with perceived double standards for which countries get punished for breaking the rules of the international system.

The Western campaign to rally support for Ukraine has channeled over $100 billion in direct aid to the country and flexed the influence of NATO and the West as a pole of global power. But at the same time, the burgeoning interest in BRICS membership is an endorsement of what BRICS has long touted as its goal: a multipolar world order.

A keystone BRICS achievement was the 2015 founding of the New Development Bank (NDB). In contrast with the World Bank, developing countries have a much larger voting share in the NDB, and some loans are made in local currencies rather than U.S. dollars. In May, NDB President Dilma Rousseff, the former president of Brazil, said the bank aimed to make 30 percent of its loans in currencies of member countries between the years 2022 and 2026. Nondollar loans “protect borrowers from fluctuations in the value of the U.S. dollar,” economist Daniel Sousa of Brazil’s Ibmec University told Foreign Policy.

The appeal of the NDB in part reflects member countries’ critiques of major multilateral financial institutions, but it also exists to fill a funding gap. The World Bank and other similar banks, even when added together, aren’t big enough to fund all of the projects that lower- and middle-income countries require to meet the climate crisis and other development needs, Boston University Global Development Policy Center’s Rebecca Ray told Foreign Policy.

A 2021 estimate found that Latin America and the Caribbean would need $2.2 trillion in infrastructure investment to meet the U.N. Sustainable Development Goals by 2030, but last year the World Bank approved only around $70 billion across the entire world, and not all of it for infrastructure, Ray observed. “The sheer scale of the demand is far beyond what any one source of financing can fill.”

The fallout of Russia’s invasion of Ukraine created problems for the bank. It had to freeze new projects in Russia due to international sanctions and even so was downgraded by credit ratings institution Fitch for its financial exposure to Russia. After these setbacks, raising dollars on international markets has become more expensive for the NDB, Reuters reported.

One way of responding to the challenge is to increase the operational use of nondollar currencies. According to Sousa, this also helps insulate against potential future sanctions by the United States, which has increasingly weaponized the dollar as part of its foreign policy in recent decades.

Bangladesh, Egypt, the United Arab Emirates, and Uruguay have recently joined the ranks of the NDB. And just like the broader BRICS group, the bank is currently in talks with further potential new members. But while the NDB has been open to expansion for years, membership in the political club has been harder to come by.

New interest has prompted fierce debate within BRICS, precisely because the goals of the group are far broader and less-defined than those of the NDB. The Getulio Vargas Foundation’s Oliver Stuenkel wrote for Foreign Policy in June that in their quest for nonalignment, Brazil and India are wary of admitting members that have pursued anti-Western foreign policies, such as Iran, Syria, and Venezuela. Beijing, on the other hand, has long hoped to expand the bloc “and slowly transform [it] into a China-led alliance.”

India’s foreign minister said Wednesday that New Delhi had an “open mind” toward expansion, but that new members must meet certain unspecified criteria. Defining those criteria are on the agenda for next week’s summit, as are peace proposals for the war in Ukraine and the use of additional nondollar currencies, Brazil’s foreign ministry said Wednesday.

What’s clear is that with increased interest in both the NDB and the BRICS political club, more countries are betting on the possibility of a more evenly distributed map of global power. Juan Gabriel Tokatlian of Argentina’s Torcuato Di Tella University and Monica Hirst of Brazil’s National Institute for Science and Technology Studies wrote recently in International Politics and Society that in the global south, “there is a growing perception that de-dollarization is a step towards a multipolar world.”

Sunday, Aug. 20: Guatemala holds a presidential runoff election. Ecuador holds snap general elections and a referendum on whether oil drilling should be allowed in Yasuní National Park.

Tuesday, Aug. 22 to Thursday, Aug. 24: South Africa hosts the BRICS summit.

Police officers put boxes with evidence collected by prosecutors from the Public Ministry at the headquarters of the Semilla party inside a patrol in Guatemala City on July 21.Johan Ordonez/AFP via Getty Images

High-stakes votes. On Sunday, Ecuadorians will vote in the first round of presidential elections, and Guatemalans will vote in their presidential runoff. Soaring tensions have accompanied both contests.

This week, Ecuador experienced its third targeted killing of a politician this campaign season. Gunmen came on Aug. 14 for Pedro Briones, a local organizer for the left-wing Citizen Revolution movement. The shooters were not immediately identified. Last week’s killing of anti-corruption presidential candidate Fernando Villavicencio, who was vocal about naming the bosses of drug gangs destabilizing the country, also remains unsolved.

In Guatemala, prosecutors tried to suspend the party of anti-corruption candidate Bernardo Arévalo on what have been widely denounced as trumped-up charges, but were eventually overruled. This comes after years of efforts by the country’s entrenched political elite—including politicians, as well as the judges and prosecutors who are friendly to them—to squash pro-transparency reformers and the independent press. International actors, including the United States, have pressed Guatemalan authorities to allow Sunday’s vote to proceed. U.S. Acting Deputy Secretary of State Victoria Nuland Victoria Nuland met with Guatemala’s foreign minister to emphasize the importance of free and fair elections and recognizing their results.

Democrats fly south. Five U.S. members of Congress are traveling to Brazil, Chile, and Colombia this week to meet with senior political leaders as well as civil society leaders of movements for housing rights and racial justice. It’s not the first such delegation to visit Latin America during the Biden administration: Last month, a group of lawmakers, three Republicans and one Democrat, visited Brazil, Colombia, and Panama to discuss Chinese influence in the region, organized crime, and migration.

This week’s delegation is from the progressive wing of the Democratic Party. They pitched their outreach as the basis for shifting U.S. foreign policy in the region away from “a Cold War mentality that prioritizes ideological alignment over shared commitments to democracy and freedom,” Rep. Joaquin Castro (D-Texas) said in a statement. In Brazil, the group spoke at length with officials involved in investigating Brasilia’s Jan. 8, 2023 capitol riot. Rioters there were subject to swifter legal consequences than their U.S. counterparts.

While U.S. policy toward Latin America has historically prioritized relationships with right-wing governments—a product of its free-market orientation and vestiges of Cold War anti-communist sentiment—this has begun to shift under U.S. President Joe Biden.

Still, this week’s congressional delegation has argued there is room for improvement. They called for increased cooperation on climate and racial justice as well as addressing the economic roots of northward migration. The delegation leader, Rep. Alexandra Ocasio-Cortez (D-N.Y.), documented the trip in detail on Instagram and wrote that migration often appears in U.S. media as simply a border crisis story when “many people are fleeing consequences that have large contributions from U.S. policy.”

Brazil’s Barbie backlash. A documentary series in Brazil that looks at the long career of one of the country’s most famous television stars, Xuxa Meneghel, has sparked new conversations about how a thin, blonde, white woman was held up as the standard of beauty in a mostly Black country. The New York Times reported this week that although Meneghel “was Brazil’s Barbie,” she has since expressed regret over how she impacted the self-image of young girls.

Meneghel’s height of fame was in the 1980s and 1990s, and during and after that period Brazil’s plastic surgery rates rose to become the highest in the world, “with many going under the knife while still in their teens.” Reflecting on those beauty standards, Meneghel said, “Today, we know it’s wrong.”

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Argentine congressman and presidential candidate for La Libertad Avanza Alliance Javier Milei delivers a speech during the closing of his campaign for the Aug. 13 primary elections, at the Movistar Arena in Buenos Aires on Aug. 7. Luis Robayo/AFP via Getty Images

In Argentina, far-right anarcho-capitalist lawmaker Javier Milei emerged from last Sunday’s presidential primaries as the candidate to beat, a radical shift in a political landscape that has been dominated by left-wing and right-wing coalitions for the past twenty years. Annual inflation in the country stands at over 110 percent, which Milei blames on both of those groups.

While polls have suggested for months that Milei’s popularity was growing beyond his hard-right base, the primary—which is mandatory for Argentine voters—provided the first clear estimation of Milei’s support ahead of the October general elections: He won 30 percent of the votes, the most of any candidate from the participating coalitions.

Milei styles himself as a far-right outsider candidate in the mold of Bolsonaro and former U.S. President Donald Trump. He calls climate change a “socialist lie,” opposes abortion—which is legal in Argentina—aims to ease civilian access to guns, and has downplayed the severity of Argentina’s military dictatorship. His flagship proposal is to dollarize Argentina’s economy, a prospect widely criticized by economists for its potential to further destabilize the country.

If Milei becomes president with low congressional support—as the primary results suggest—he would be unable to pass the laws necessary to implement dollarization, Eurasia Group analyst Luciano Sigalov told Foreign Policy. Even without Congress, however, he could still eliminate controls on the official exchange rate and on the amount of money that flows in and out of the country in a kind of “scorched earth strategy,” risking a plunge in the value of the peso and a rush to withdraw money from the country, Sigalov said.

While some Latin American countries —namely Ecuador—have had relatively successful experiences with dollarization, Sigalov said success requires greater political consensus than Milei would likely have. Argentina would also need dollars in its central bank in order to dollarize, which Buenos Aires sorely lacks. Case in point, it’s paying back its loans to the International Monetary Fund in Chinese yuan due to a dollar shortage.

In the coming months, Argentines will further scrutinize the platforms of Milei, the traditional opposition candidate Patricia Bullrich, and government candidate Sergio Massa. Bullrich, who was the farther right of the potential opposition candidates and who supports a partial dollarization of Argentina’s economy, now faces the task of differentiating herself from Milei. Massa faces the task of explaining his track record as Argentina’s economy minister to voters who have chosen to hit the political panic button.