Argentina Chuckles at BRICS as Russia takes over its Chairmanship

Russia takes over the rotating chairmanship of BRICS (Brazil, Russia, India, China and South Africa) from January 2024. It has already planned a comprehensive range of activities including in politics, security, economy, culture, education and sports, and to tackle outstanding pertinent questions adopted at the 15th BRICS Summit held in Johannesburg, South Africa. Russia plans to explore innovative ideas that would further the goals of BRICS especially in the changing geopolitical world.

Foreign Minister Sergey Lavrov’s interview with RIA Novosti and Rossiya 24 TV on current foreign policy issues on December 28 re-emphasized Russia’s BRICS chairmanship has a global dimension, its members has doubled following the 15th summit in August 2023. Starting from January 1, Russia needs to bring the new members (Argentina, Egypt, Iran, the United Arab Emirates, Saudi Arabia and Ethiopia) up to speed, but as part of the BRICS+.  The economy and finance matter the most.

The debate over de-dollarization and BRICS payment systems, finding alternatives to IMF and World Bank, and the expansion of BRICS topped the agenda at the three-day summit where the leaders of the emerging economies held meetings. During that summit, the BRICS countries clearly outlined the goal (spearheaded by Brazilian President Luiz Inácio Lula da Silva) for central banks and finance ministers to submit recommendations concerning alternative payment systems.

According to Lavrov, Brazilian President Luiz Inácio Lula da Silva suggested using alternative means of payment for all Latin America. But in addition to this regional initiative, he has a global proposal. It is being developed by BRICS. By the next summit in Kazan in October 2024, ministries of finance and central banks should present such a proposal. The issue is about securing and protecting the global economy from the United States. It has imposed its model of globalization on everyone, and many people fell for it. Market economy, fair competition, inviolability of property, and presumption of innocence were introduced by the West as global values.

The BRICS summit participants set a clear goal and made a clear demand: give BRICS members and other developing countries that have lifted themselves up economically and financially quotas at the IMF and the World Bank that reflect their real economic weight. This is one unique case of the United States corrupting its own principles of fair competition. Moving towards a fairer economic order cannot be stopped, therefore the new pathways have to headed by BRICS.

Many view the dollar as an instrument for suppression, widely used for political and economic manipulation. The US dollar, which has become a tool to exert influence, is used to undermine the legitimate competitive positions of countries from different regions, to interfere in internal affairs, and to change regimes. Some people claim there are rigorous, data-driven research and broad-ranging evidence.

In the context of emphasis on the global majority, BRICS has been voicing for global peace as well as practical development geopolitical partners, especially in the Global South. In an attempt to strengthen its central position, Russia expresses readily to expand BRICS under its fold in 2024. It, therefore, intends to ultimately identify the way ahead, to reshape the economic landscape and create a geopolitical balance over the next decades.

South Africa’s President Cyril Ramaphosa told BRICS Foreign Ministers: “We have tasked our foreign ministers to further develop the BRICS partner-country model and a list of prospective partner countries and report by the next summit 2024” in Kazan, in the Russian Federation. Taking over BRICS at a crucial time especially when the world is facing a myriad of economic and geopolitical challenges, but at the same time Russia is seemingly vociferous on increasing the bloc’s numerical strength. It is highly satisfying that the BRICS countries have been closely coordinating their remarkable efforts on current international and regional matters. Now, it banks hope on newcomers from Africa, Asia and Latin America.

Reports, however, already indicated that from from Jan. 2024  Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates will officially become full members of emerging economies bloc BRICS, which stand for Brazil, Russia, India, China and South Africa.

There are no laid-down principles for admitting new members, but the five BRICS countries have to reach an agreement on the guiding principles, standards, criteria and procedures of the BRICS expansion process, which has been under discussion for quite a while. In the case of the first first group (six new members), a consensus on the first phase of this expansion process, and was followed further by phases of consultations. BRICS simply value the interest of other countries in building a partnership with BRICS.

In fully-fledged pursuit of  the collective tasks such as allowing ascension of the six new members in January, Argentina has been forth and back, expeditious oscillating over BRICS membership, with its final decision to join. Geographically, Argentina is a country in the southern half of South America. It shares borders with Chile, Bolivia, Uruguay and Brazil. In these several years, it has experienced significant political turmoil and democratic reversals, and worse, full-scale economic melt-down. It has vast natural resources in energy and agriculture. The estimated population stands at 47.5 million, while reports further show a diversified industrial base, and an export-oriented agricultural sector, the economy of Argentina is Latin America’s third-largest. Despite this, it currently has a considerable troubling economic weaknesses for decades.

In 2023, the inflation reached 102.5% among the highest inflation rates in the world. Approximately 43% of the Argentina’s population lives below the poverty line as of 2023. To deter it and support the peso, the government imposed foreign currency control. Argentina settled its long-standing debt default crisis in 2016 with the so-called vulture funds after the election of Mauricio Macri, allowing Argentina to enter capital markets for the first time in a decade. The government of Argentina defaulted on 22 May 2020 by failing to pay a $500 million bill by its due date to its creditors. Negotiations for the restructuring of $66 billion of its debt continue, as the new government took over the administration during the fourth quarter 2023.

Economist Steve Kamin wrote in December 2023 under the article headline ‘Sooner or later, Argentina should dollarize’ posted to American Enterprise Institute website. On December 10, Javier Milei took office as new President of Argentina. Javier Milei ran on a platform that included drastic government spending cuts, elimination of the central bank, and replacement of the peso with the dollar – that is, dollarization. More recently, Milei has backed away from dollarization in favor of more conventional stabilization measures, but the question of whether or not Argentina should dollarize remains open.

In his argument, Kamin believes that Argentine should dollarize, if not now, then soon. Dollarization is an extreme solution, but to an extreme problem. Argentine inflation is running at over 140 percent, Argentina defaulted against its private creditors in 2020 and will be hard put to repay its $44 billion debt to the International Monetary Fund (IMF), and the economy is set to enter a steep recession.

More to the point, Argentina has been lurching in and out of recession, hyperinflation, financial crisis, and default for the past four decades. There are many reasons for this, but they all boil down to persistent, large fiscal deficits financed by some combination of borrowing from foreigners and printing money.

As a BRICS Plus participant country, Argentina has on several occasions expressed its interest in joining this mechanism. The former Argentine president, Alberto Fernández, considered that BRICS represents for Argentina “an excellent alternative for cooperation in the face of a world order that has been working for the benefit of a few.”

That has, most probably and temporarily changed. As latest developments show late December 2023, the new Argentinian President Javier Milei announced that his country would not join the China and Russia-led BRICS trading bloc, dealing a major blow to the trade group’s ambitions. In a letter to the leaders of each member state, (South African Cyril Ramaphosa, Russian President Vladimir Putin, Chinese President Xii Jinping, Brazilian President Luiz Inacio Lula da Silva, and Indian Prime Minister Narendra Modi), Milei wrote that he did not consider it “appropriate at this time” to join BRICS.

“I would like to highlight my government’s commitment to enhancing bilateral ties with your country, especially with regard to boosting trade and investment. While looking forward to meeting with you, I avail myself of this opportunity to extend my respects to you,” his letter said. The letters said that the foreign policy of the new Argentine authorities “differs in many ways from the previous government’s policy” and “some decisions taken by the previous administration will be reviewed. In this regard, I would like to inform you that it does not seem currently feasible for Argentina to join BRICS as a full member on January 1, 2024,” the letter concluded.

However, Javier Milei insisted he would meet with each of the BRICS leaders and discuss plans to “intensify bilateral ties” and increase trade and investment on bilateral basis with BRICS members. Research shows that China and Brazil are Argentina’s two biggest trading partners. The group aims to break up Western hegemonic dominance in the international economic landscape, but China largely dominates the bloc, accounting for more than 70% of the combined GDP of the member states.

In the meanwhile, Russian Ambassador to Buenos Aires Dmitry Feoktistov confirmed, after initial contact with the Argentinian authorities, including the president, the vice president and the foreign minister, the officials are ready to maintain dialogue with Russia, ready to interact and promote relations with a focus on trade, economic and investment cooperation. According to the United Nations database on international trade shows that Russia exported goods valued at $450 million to Argentina, while Argentina exports to Russia was $679.98 million.

In the same context, the Diplomat magazine (October 13, 2023) wrote “Argentina is indebted to China. In the case of the swap line with Argentina, China provides liquidity and, consequently, assumes the credit risk associated with Argentina’s borrowing. If Argentina encounters difficulties in repaying the swap, China could potentially incur losses due to exchange rate risk.”

In contrast, Argentina’s exports to China have fluctuated between 2014 and 2022, and it maintains a trade deficit with China, despite its swap line doubling since its initiation. Moreover, research has suggested that the trade effects on currency swap agreement partner countries not participating in the Belt and Road Initiative are less pronounced. For Argentina, its exports to China, which is its second-largest buyer, constitute a crucial source of consistent revenue. This income is vital for replenishing the country’s depleted reserves and achieving the financial goals established with the IMF.

Bilateral relations between the Argentine Republic and the Republic of India, have existed for decades. Argentina has an embassy in Delhi and a Consulate General in Mumbai whilst India has an embassy in Buenos Aires. Both countries are members of G20, Group of 24 and Group of 77. The current bilateral trade between India and Argentina was worth $1.8 billion. India exported $574 million worth of goods to Argentina.

South Africa and Argentina have relations. President Mauricio Macri visited Pretoria in 2018, while South African President Cyril Ramaphosa interacted with Argentine Foreign Minister Jorge Faurie, on his arrival to Argentina to attend the G20 Summit in Buenos Aires. Both maintain relations only for a potential cooperation at the multilateral level.

Rejection of BRICS is “optimization of using time” in the first instance for Argentinian authorities, Foreign Minister Diana Mondino also noted in remarks, answering a question of a LN+ television reporter late December. “If participating in all organization, then when there will be time to work,” she added.

Argentina’s decision on BRICS membership has sparked debates and discussions around the world. While BRICS adore the principle of mutual respect, explicitly outlined in their joint communiques, a number of leaders used extremely slandering phrases for Argentina. For instance, Venezuelan President Nicolas Maduro criticized the decision of his Argentine counterpart Javier Milei to refuse the country’s accession to BRICS.

Nicolas Maduro had already harshly criticized the neoliberal political program and plans of the newly elected President of Argentina. “By excluding Argentina from BRICS, Javier Milei is acting against the Argentines. This is one of the most clumsy and stupid things that Miley has done against Argentina,” Maduro said in a traditional interview with Le Monde diplomatique newspaper on January 1, adding that such a decision “takes Argentina back to the 19th century.”

Russian Foreign Minister Sergey Lavrov, speaking at the meeting of the United Russia party’s Commission on International Cooperation and Support for Compatriots Abroad, stressed that agreements with such a large group of developing countries will give greater weight, and expressed disappointment that “Argentina has taken time out to think it over but Latin American countries have a strong interest in our group. The accession of new members will make its work more multifaceted.”

Russian President Vladimir Putin understands why the new Argentine authorities decided to switch to the dollar, but warned that “this is a significant loss of sovereignty.”

“Everyone knows the idea of the newly elected President of Argentina to switch to the dollar within the country. This is the sovereign decision of each country, but in Argentina, inflation, as far as I know, is at 143%,” Putin said during his annual televised Direct Line question-and-answer session with Russian citizens.

He recalled that the previous Argentine leaders spoke of many problems with the return of borrowed funds that Buenos Aires had previously received from various sources, and that “if today’s leadership in Argentina sees no other way out of the country’s well-known financial and economic problems, that is their prerogative. But this is definitely a significant loss of sovereignty.”

Historically, the first meeting of the group began in St Petersburg in 2005. It was originally Russia, India and China, but as time passed on it transformed into BRIC. China, with its large population of 1.5 billion, was added.

BRIC was founded in 2009 by Brazil, Russia, India and China and held its inaugural summit in Yekaterinburg, Russia. Then, Brazil and subsequently South Africa joined later, which is why now it is referred to as BRICS. South Africa became a full-fledged member in 2011 after China invited it to join as a “bridgehead to Africa,” thus setting the precedence, the simple condition for ascending unto the group. At some point, the West, headed by the United States, has the structured instruments and possibility to negotiate new models of international economic and other relations, based on new international treaties that ensure equality of all states. Many political leaders, experts and researchers have also acknowledged the fact that the developing countries desirously seeking multipolar system, the developed north has to address problems of the less developed world. The main thing, for BRICS, is that the process of searching for new models, to curb the dominance of the United States in all spheres of international relations. The current formation process is, primarily, to connect BRICS to middle income and middle power countries in Asia, Africa and Latin America.

Today, BRICS will considerably change by aggregate population and by percentage of the global economy. The addition now means that the BRICS economic bloc will cumulatively control at least 30 percent of the global GDP with China leading the pack with a GDP of $19.3 trillion, followed by India at $3.7 trillion, Brazil $2.1 trillion, Russia at $2 trillion, Saudi Arabia $1.0 trillion and Argentina at $0.6 trillion.

The United Arab Emirates has a GDP of $0.4 trillion, with South Africa and Egypt commanding $0.4 trillion each, Iran $0.36 trillion while Ethiopia closes the list with a GDP of $0.15 trillion. Put together, the expanded BRICS bloc boasts a combined GDP valued at $30.51 trillion, representing 30 percent of the global economy.