Brics is dragging its feet on alternative payment system

Progress on Brics’ cross-border payments system has stalled, despite a decade of discussions, Bloomberg reported yesterday. Leaders reaffirmed their commitment to continue talks on the initiative during the Brics summit in Brazil, but acknowledged the slow pace amid the challenges of a rapidly changing global trade environment.

SOUND SMART- Brics Pay is a financial system that, if developed, would allow Brics nations to trade directly with one another using their own local currencies, instead of relying on the USD. The system’s goal is to create an independent financial network that is separate from the US-dominated Swift system.

A window of opportunity: The USD has its worst start to a year since 1973, pressured by US President Donald Trump’s trade policies and critiques of the Federal Reserve, creating a potential opening for alternatives.

So, what’s the hold-up? For one, the technical execution is complex, involving decisions on payment mechanisms, currencies, infrastructure, and cost-sharing. This is compounded by the unpreparedness of some member nations’ central banks to integrate, alongside serious security concerns over a unified system. Some members have also questioned if the substantial setup and maintenance costs of this unified system are justified when compared to existing bilateral trade arrangements.

Political realities aren’t helping as well, with the bloc’s recent expansion to 10 members complicating decision-making. Existing international sanctions on members like Russia and Iran, coupled with the use of several non-convertible currencies within the bloc also present additional obstacles.

Parallel discussions on investment and finance are taking place: Brics is also working on expanding local currency financing to reduce trade financing costs, Tatiana Rosito, secretary for international relations at Brazil’s Finance Ministry, told Bloomberg. However, discussions around a new investment platform — reducing dependence on hard currency financing — have also stalled due to the complexity of the proposals and the need for further technical dialogue.

The US hangs more tariffs over the bloc: Trump threatened an additional 10% tariff on any country aligning with what he calls “Anti-American” Brics policies, rattling global trade with even more uncertainty. This follows his December threat of 100% tariffs if Brics nations ditched the USD in bilateral trade, a move that paradoxically spurred the bloc’s interest in developing alternative local payment systems.

MARKETS THIS MORNING-

Asian markets are modestly inching up in early trading, despite Trump’s new tariff announcements. The Shanghai Composite and Hong Kong’s Hang Seng are both up 0.2%, while Japan’s Nikkei remained virtually unchanged. Meanwhile, Wall Street futures are mostly in the red.

THE CLOSING BELL: TADAWUL-

The TASI closed up 0.3% yesterday on turnover of SAR 5.6 bn. The index is down 5.9% YTD.

In the green: Tourism Enterprise (+9.6%), Ayyan Investment (+4.3%) and Sumou Real Estate (+4.2%).

In the red: Miahona (-3.4%), Umm Al-Qura Cement (-3.2%) and Saudi Kayan (-2.3%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.8% yesterday on turnover of SAR 24 mn. The index is down 12.8% YTD.

In the green: Al Rasheed (+10.5%), Almohafaza (+10%) and Natural Gas Distribution (+9.1%).

In the red: Ghida Alsultan (-8%), Dkhoun (-5.0%) and Tam Development (-3.6%).