Russia Direct organized a round table on the future of the BRICS, bringing diplomats, investors, experts and academics together at the Russian Embassy in Washington to discuss the new challenges facing the world’s developing economies.

The leaders of the BRICS countries during the summit in Ufa, Russia, Thursday, July 9, 2015. Photo: AP

One of the most relevant questions for developing economies around the world is to find an alternative to Western financial and economic institutions, which are not always responsive to their interests and developmental needs, especially during times of crisis. Can global groups like the BRICS (Brazil, Russia, India, China and South Africa) contribute to addressing current and future economic challenges? 

This was one of the problems discussed at the Russia Direct event “BRICS 2.0 and the Metamorphosis of Globalization," which took place on Nov. 12 in the Russian Embassy in Washington, D.C. The event brought together high-profile diplomats, officials and investors such as Russian Ambassador to the U.S. Sergey Kislyak, who described the BRICS as “a phenomenon on the international economic scene” that aims at promoting “cooperation between our countries” and “the stability of these countries in the future.”

Live stream of the RD event 'BRICS 2.0 and the Metamorphosis of Globalization'

During the event, the participants of the discussion discussed the current and future agenda of the BRICS, as well as their relationship with the West and, particularly, with the United States.

Even though the BRICS attracted a great deal of global attention and brought about much excitement in 2010, now it is not the case. There is more indifference from the West toward this group of countries, Marcos Troyjo, professor at Columbia University and co-founder and co-director of BRICLab, said during the discussion.

“Today, in the West and, particularly, in the United States, [the concept of] BRICS is from Mars,” said Troyjo.

The West’s disappointment in the BRICS probably comes from the overhyped excitement about this group five years ago, when Brazil, Russia, India and China “adapted very well to the period of deep globalization” after the end of the Cold War and, in fact, were good “inhabitants of that ecosystem.”

However, the dramatic global changes after the 2008-2009 crisis resulted in more restrictions and trade protectionism. “The ecosystem of deep globalization has been replaced by a more restricted atmosphere,” said Troyjo, who describes this as “the period of de-globalization.”

Given the domestic problems facing countries such as Russia and China, for the BRICS to be successful economically, they will have to adapt to a new geopolitical environment, which Troyjo describes as “an era of re-globalization.” According to him, the BRICS countries will have to adjust to a new framework of global affairs, the new geopolitics.

Russian Ambassador to the U.S. Sergey Kislyak, left, talking about the BRICS challenges during Russia Direct's event "BRICS 2.0 and the Metamorphosis of Globalization." Photo: Russia Direct

To what extent this new re-globalization will be effective depends on the BRICS’ ability to find common ground and adopt new trade frameworks, shaped by the new geometries of the U.S.-initiated Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP). Adapting to the age of talent, with its emphasis on creativity, innovation and intellectual capital, is also important for the BRICS to succeed, according to Troyjo.  

During the discussion, Cynthia Roberts, associate professor at City University of New York and adjunct associate professor at Columbia University, made the point that the BRICS are “suffering” from the protectionism of many developing countries and their fellow countries as well. 

Roberts argues that the U.S. is dismissive toward the BRICS because of its concern about the rise of China and other emerging countries. However, the world’s financial institutions should adjust to the new reality despite all the difficulties and challenges that the multipolar world, with its numerous multilateral institutions, presents.

Read the Q&A with Fyodor Lukyanov: "The BRICS may be non-Western but they are not anti-Western"

Meanwhile, Aleksei Mozhin, executive director for Russia at the International Monetary Fund (IMF), believes that the bonds between the BRICS countries are so strong, they have nothing to do, but to cooperate in the current situation, regardless of the fact many in the U.S. (including journalists) tend to present the BRICS in a very pessimistic light.

“It’s not the matter of whether we like each other or not – we simply have no choice but to cooperate with one another,” he said, adding that the 2008 global financial crisis severely undermined credibility and trust in the wisdom of international financial institutions and the economics profession in general, in the capability of rich countries to tackle the crisis.

The emergence of the BRICS in 2009 was in part a response to the world’s economic and financial challenges, according to Mozhin. Likewise, Roberts agrees that the global financial crisis and the U.S. played a role in spurring the growth of the BRICS. According to her, the emerging economies did not receive adequate representation in the voting power of the world’s main financial institutions.

Meanwhile, echoing Troyjo’s idea of re-globalization, David Dollar, senior fellow at the Brookings Institution, believes that the BRICS might bring about a new wave of globalization and more trade, but they have to tackle one challenge: their economic differences and misbalances, which might create tension within the BRICS.

These countries are “different from each other” on many ways. One of the major misbalances in the BRICS is the size of China’s economy, he said during the round table. The rest of the BRICS participants, including “the fast-growing India,” are much smaller economically. This is important to keep in mind, given China’s initiatives to integrate trade and investment in Eurasia: the Silk Economic Road and the One Belt - One Road project.

Given the fact that Chinese economic influence is disproportionate as a result of its intensive growth strategy, this does create some tensions inside the group, Dollar warns. However, with the economic slowdown, recent turbulence in China’s financial markets and consequent drop in import demand, China’s growth appetite is diminishing.  

Drew Guff, managing director at Siguler & Guff, a multi-strategy private equity investment firm that invested in the BRICS markets, looks at the BRICS economic challenges in the context of the changes in the energy market.

Download Russia Direct's Report: "BRICS 2.0 and the Metamorphosis of Globalization"

With China’s economic slowdown, the drop in oil prices has affected the BRICS and brought about more challenges. For example, China has decreased demand for imports and energy, which weakens China’s positions and contributes to resolving the problem of imbalances among the BRICS members.  

In addition, Guff points out the advantages of the BRICS market, which he describes as “incredibly concentrated.” It is less expensive to invest in the BRICS market, he said, making it attractive to some Western investors.