MARY ROSE M.

PASTORFIDE

BSA-2

Towards de-dollarization: BRICS advances alternative to US-dominated

financial system
Website Source: https://peoplesdispatch.org/2023/04/07/towards-de-dollarization-brics-
advances-alternative-to-us-dominated-financial-system/
 Towards de-dollarization: BRICS advances alternative to US-dominated
financial system

REFLECTION/EVALUATION

In my own perspective, de-dollarization initiatives and the development of an

alternative to the US-dominated financial system by the BRICS (Brazil, Russia, India, China,
and South Africa) nations are noteworthy developments that could have an impact on both
global economics and geopolitics.

On an economic basis, dedollarization initiatives by nations like the BRICS could

diversify their reserves of currencies and lessen their reliance on the US dollar. This could
be achieved by encouraging trade and investment in local currencies, developing regional
payment systems, and setting up alternative financial institutions like the New Development
Bank (NDB) and the Contingent Reserve Arrangement (CRA), which were started by the
BRICS nations. This might increase stability in global trade and finance while potentially
lowering the risks related to US dollar value fluctuations. From a geopolitical perspective,
this action may put in jeopardy the US dollar's supremacy as the world's reserve currency,
which has long supported US economic and geopolitical influence. It might alter the
dynamics of international economic governance and tip the power balance in favor of
developing nations. But it's important to keep in mind that de-dollarization is a difficult
process that calls for extensive coordination and cooperation between the BRICS countries
and other countries interested in a different type of financial system. Any move away from
the US dollar as the predominant reserve currency would likely encounter a number of
challenges, including worries about currency currency conversion, liquidity, and acceptance
among investors.

In general, although the de-dollarization movement and the BRICS countries'

initiatives to advance a financial system that is not dominated by the US have the potential to
have an impact on global economics and geopolitics, the results and success of such
initiatives remain unclear and would require mindful monitoring and evaluation in the coming
years.
IMPACT TO INTERNATIONAL BUSINESS

The news that the BRICS (Brazil, Russia, India, China, and South Africa) advancing
a de-dollarization alternative to the US-dominated financial system could have a number of
impacts on international business. Here are some potential effects:

1. Diversification of Reserve Currencies: If the BRICS countries are successful in

developing a financial system that is not dominated by the US, it may result in a
diversification of the reserve currencies that are used in international trade. The US dollar
currently rules international trade and finance, and many nations use it as their reserve
currency. However, if BRICS nations create a workable substitute, it might cause a shift
toward other currencies, like the Chinese yuan or the Russian ruble, which might have an
effect on the world's foreign exchange markets and change how trade and investment are
conducted internationally.

2. Reduced Dependence on US Dollar: BRICS nations' dedollarization initiatives may help

them become less reliant on the US dollar for international trade. As a result, there may be
less risk exposure to fluctuations in the value of the US dollar as well as the possibility of US
government sanctions and other financial limitations. This might give the BRICS nations
more financial freedom and adaptability in their trade and investment dealings abroad.

3. Geopolitical Implications: The BRICS countries' efforts to dedollarize their economies

may also have geopolitical effects. It might threaten the US's hegemony over the world
financial system and tip the scales in favor of the BRICS nations, which could have an effect
on geopolitical dynamics and relationships. It might also have an impact on the policies and
influence of world financial organizations like the World Bank and the International Monetary
Fund (IMF), which are presently ruled by the US and its allies.

4. Business Opportunities: The development of an alternative financial system by the

BRICS nations may open up new business prospects. It might result in the creation of brand-
new financial products, payment methods, and investment avenues to meet the demands of
nations looking for alternatives to the US-centric financial system. Businesses and investors
may be given the chance to enter new markets, diversify their holdings, and adjust to shifting
global financial dynamics as a result.

5. Risks and Uncertainties: BRICS countries' dedollarization efforts may also cause risks
and uncertainties in the world financial system. Changes to current financial flows,
investment patterns, and trade relationships could make the transition to a new financial
system difficult and complex. Issues like transparency, regulation, and governance could
also pose risks to the long-term viability and credibility of the alternative financial system.
While adjusting to potential changes in the global business environment, companies and
investors would need to carefully navigate these risks and unanticipated events.

In conclusion, the news that BRICS advancing a de-dollarization alternative to the

US-dominated financial system may have significant effects on international business,
including the possibility of reserve currency diversification and decreased reliance on the US
dollar, as well as geopolitical implications, business opportunities, risks, and uncertainties.
For businesses and investors to make wise decisions and adjust to potential changes in the
global financial landscape, monitoring and analyzing the developments in this area will be
crucial.

CONNECTION/APPLICATION

The news about BRICS advancing an alternative to the US-dominated financial

system through de-dollarization can have several connections or applications to the
international monetary environment.

De-dollarization efforts by the BRICS nations have the potential to change the
makeup of the world's reserve currencies. The US dollar is currently the main reserve
currency in use in global commerce and finance. The Chinese yuan or the Russian ruble, for
example, could end up serving as potential reserve currencies if the BRICS nations are
successful in advancing an alternative financial system. Regarding the dynamics of
exchange rates, the availability of liquidity, and the coordination of monetary policy among
central banks, this might have an impact on the international monetary environment. Also, It
might be possible for BRICS nations to have more control over their monetary policy if they
create a strong alternative to the US-dominated financial system. Currently, nations with
sizable US dollar reserves may be susceptible to the US Federal Reserve's monetary policy
decisions, which may have an effect on their domestic economies. Alternative reserve
currencies, however, may give BRICS nations more freedom to implement their own
monetary policies and run their domestic economies in accordance with their own needs and
priorities.

International payment system innovation may be sparked by the BRICS nations'

development of an alternative financial system. This could entail the creation of new
settlement systems, clearing mechanisms, and payment channels that are intended to make
transactions involving alternative currencies easier. By increasing payment options,
decreasing reliance on US dollar-based payment systems, and opening up new
opportunities for cross-border transactions, this could potentially have an impact on the
international monetary environment. Also, the BRICS countries' efforts to dedollarize their
economies may have geopolitical repercussions that affect the global monetary system. It
might put the US's hegemony over the world financial system in jeopardy, which might have
an effect on alliances, dynamics, and relationships in the geopolitical sphere. The stability
and predictability of the global monetary environment may be affected, and central banks
and financial institutions may need to modify their monetary policies and strategies as a
result. In addition, fnancial stability may be affected by modifications to the global monetary
system brought on by BRICS countries' de-dollarization initiatives. The international
monetary environment may become less stable if there are uncertainties, risks, and potential
disruptions brought on by the transition to a new financial system. To ensure financial
stability and resilience in the changing global monetary landscape, central banks and
financial regulators may need to carefully evaluate and manage these risks.

In summary, the news about BRICS advancing an alternative to the US-dominated

financial system through de-dollarization can have various connections or applications to the
international monetary environment, ranging from potential shifts in global reserve currency
dynamics and monetary policy autonomy, to international payment system innovation,
geopolitical implications, financial stability considerations, and multilateral monetary
cooperation. Monitoring and analyzing the developments in this area will be important for
policymakers, central banks, and financial institutions to navigate potential changes in the
international monetary landscape.