The BRICS alliance is looking to challenge the U.S. dollar by using native currencies to settle cross-border transactions. BRICS is also convincing other developing countries to end their dependency on the U.S. dollar and trade in local currencies. The idea has seen a bit of success, as a handful of trades have been settled without the dollar. So will the BRICS countries abandon the dollar completely and rely on local currencies? In this article, we will highlight the consequences BRICS countries could encounter if they ditch the U.S. dollar for trade.
Will the BRICS Countries Abandon the U.S. Dollar?
Technically, the BRICS alliance can abandon the U.S. dollar, but it comes at a hefty price. India and Brazil are well aware of the price they have to pay and the consequences they will have to face, but China and Russia are prepared for it.
If BRICS abandons the U.S. dollar, the alliance would face the risk of a diplomatic fallout across Western countries. The move could add strain to all diplomatic and economic ties with the West, leading to trade disputes. Developing countries like India, Brazil, and South Africa are mindful of the consequences, but China and Russia have nothing to lose. China and Russia are already facing economic alienation, so changes in trade disputes don’t matter.
The BRICS countries of India, Brazil, and South Africa have closer ties with the U.S. and other Western allies, with trade agreements worth billions of dollars. The move will potentially impact foreign exchange markets and lead to job cuts in the IT and other technological sectors.
Therefore, the risk is too high, and India and Brazil are aware of the possible consequences. The move could impact their growing economies and cause them to go backward if they ditch the U.S. dollar. In conclusion, BRICS has every right to end reliance on the U.S. dollar, but the price is too heavy to carry.