Brazil fears the dollar: BRICS countries rely on digital payment solutions to become independent from Western financial systems

Brazil fears the dollar: BRICS countries rely on digital payment solutions to become independent from Western financial systems

Brazil and the BRICS countries: A step away from the dollar

Brazil, which currently holds the presidency of the BRICS countries, plays a crucial role in promoting digital payment solutions. The aim is to reduce dependence on Western financial systems such as SWIFT and develop a more independent approach to international financial transactions.

Digital payment solutions to strengthen financial autonomy

Inspired by the Brazilian Pix system, which enables direct transactions, Brazil is planning a new payment system that will minimize dependence on the US dollar. This initiative aims to accelerate financial transactions between BRICS countries and challenge historically significant dominances, such as that of the US dollar. BRICS, which includes Brazil, Russia, India, China and South Africa, has positioned itself as a major player in global trade under its expanded membership that also includes countries such as Iran and Saudi Arabia.

Independent clearing and custody systems

The Brazilian government intends to establish an independent clearing and custody system for member countries. This strategy has the potential to significantly change the dynamics of global trade and strengthen the financial autonomy of the BRICS countries. Among the models being discussed is a system that allows for fast, direct transactions without excessive bureaucratic hurdles, but remains tied to national fiat currencies.

Support for Russia and the vision for BRICS Pay

Russia has strongly supported the initiative to create digital settlements. Russian Foreign Minister Sergei Lavrov has stressed that Brazil is playing a leading role in discussions on cross-border digital payments. The creation of a BRICS reinsurance company and a cross-border payment infrastructure is also being considered.

A central element of the initiative is BRICS Pay, a decentralized financial messaging system that has been in operation since 2018 and allows member states to conduct transactions in their local currencies, bypassing traditional financial intermediaries. This strengthens transaction security and reduces costs.

Challenges and political tensions

Although the BRICS countries are making progress towards digital payment systems, there are also hurdles to overcome. Not all players are ready to give up their dependence on the dollar. Former US President Donald Trump threatened the BRICS countries with high import tariffs if such a step was taken. This highlights the political and economic tensions that a transition to a less dollar-centric global economy could bring.

Conclusion

Brazil and the BRICS countries are on the threshold of a new era of financial transactions that could potentially redefine the global economic order. By implementing innovative digital payment systems, they strive to promote financial independence and reduce dependence on the US dollar. The coming developments in this area will be crucial for the future dynamics of international trade.