Goldman Sachs economist Jim O’Neill in 2001 wrote a research paper on the economies of four large countries — Brazil, Russia, India and China — that were not a part of the G-7 or the western controlled economy. He coined the term “BRIC” to describe them.
Years later, the same four countries, along with South Africa, formed a loose economic alliance and the term was expanded to BRICS, according to the Council on Foreign Relations.
There is no formal agreement between the countries, but there is a coordinated effort between its members to share economic and diplomatic policies. There have also been efforts to undermine western economic dominance and the over reliance on the U.S. dollar.
BRICS has expanded. Egypt, Ethiopia, Iran, the United Arab Emirates and Indonesia have joined the coalition and it is now known as BRICS+.
Ryan Loy, extension agricultural economist with the University of Arkansas System Division of Agriculture, said BRICS+ aim is to “leverage the increase in their combined gross domestic product, or GDP, and global share in commodity production and trade to reduce its reliance on the U.S. dollar.”
“What those countries produce altogether accounts for about 25% of the global world output,” he said. “The combined GDP now is nearly exactly the same as that of the United States, which has really steadily lost GDP share since about 2000.”
BRICS+ could have a significant impact on global agriculture markets and it will have a direct impact on U.S. and Arkansas ag sectors. These nations combined produce about 44% of the world’s grain, 33% of the total wheat and rice exports in the world, and about 25% of the global corn exports, Loy said.
“Currently, a significant portion of international debt instruments are issued in U.S. dollars and must be repaid in U.S. dollars, and a majority of global trades are settled in U.S. dollars,” Loy said. “What they’re trying to do is remove the U.S. dollar as the global standard and safe-haven currency.”
One BRICS+ member in particular, Brazil, has risen as a rival to U.S. agriculture, aided by infrastructure improvements and other help from China and Russia. Brazil is the major competitor for U.S. soybeans imported by China and recently, “they just overtook us in cotton,” Loy said. “In 2008, the United States had about 44% of the global cotton share.”
In 2024, the U.S. share of the world cotton trade had shrunk to 26%, while Brazil surged to 30%. Brazil’s agricultural strength is the key.
“This BRICS idea doesn’t work without Brazil,” he said.
To move away from the dollar, China has increased its gold reserves, but the only reason they’re able to do this is because they have Brazil that can produce hard commodities cheaply and effectively, he said.
In the wake of the United States’ 2018 trade war with China during the first Trump administration and the effects of the pandemic, China reduced its reliance on U.S.-grown commodities and shifted its focus and investment toward Brazil.
“Brazil has now become China’s leading partner for soybeans and corn, and the U.S. is going to struggle to regain that market share due to the geopolitical relationship that exists,” he said.
In addition to being Brazil’s customer, China has also “sent billions of dollars’ worth of infrastructure improvements to Brazil,” Loy said. “They’re trying to create that old Silk Road again, to make trade easy.”
However, Brazil would do well to avoid what could be seen as China’s “debt trap diplomacy,” according to Loy.
China has invested heavily in Sri Lanka, a country that defaulted on its foreign loans in 2022. In late 2023, the island nation reached an agreement with the Export-Import Bank of China to restructure its $4.2 billion in debt.
“That could easily happen in South America,” Loy said.
For the U.S., managing inflation and adjusting the U.S. money supply remains critical for economic stability. Tariffs and the threat of tariffs are a threat to that balance, he added.
India makes the coalition a player in the rice market.
“India is the world’s leading exporter of rice,” Loy said, noting that the country put the brakes on exports in an effort to ensure domestic supplies of the staple grain. “The world price for rice went up because supply dwindled, but now that India has come back into the game, it’s really a rollercoaster of prices for rice.”
Arkansas grows more rice than any state in the nation, including half of the national long-grain rice. Domestic long-grain rice exports, however, have dipped about 7% during the past 15 years. About 43% of the long-grain rice grown in the U.S. was exported last year, down from 50% in 2010.
Russian fuel, fertilizers, and wheat have smaller, indirect effects on the U.S. However, Russia has invested a significant amount in Brazil’s energy and mining sectors and is now shifting its focus to infrastructure and fertilizer companies, Loy said.
“The bottom line is that the emergence of the BRICS+ trading bloc has the potential to diminish demand for Arkansas and U.S. exports,” he said. “This shift may continue the trajectory of lower commodity prices and increased competition, which would pose severe economic challenges for Arkansas farmers that are already price squeezed from rising input costs.”
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