Brazil’s Nogueira Batista Presents Proposal for BRICS Currency to Valdai Club Meeting

Oct. 4, 2023, (EIRNS)—Paulo Nogueira Batista, a highly-respected Brazilian economist who served as Vice President of the BRICS New Development Bank from 2015-2017, delivered a very sharp speech on Oct. 3 at the Valdai Club Dialogue meeting in Sochi, Russia, which both reiterated his sound proposal for creating a BRICS-linked new currency to issue development credit, which he first made in remarks at the Aug. 22-24 BRICS summit in Johannesburg, South Africa, as well as attacking the mistakes of the past which led to years of inactivity of the BRICS New Development Bank (NDB) and Contingent Reserve Agreement (CRA). His speech also serves to put into proper focus the strategic significance of the policy fight currently underway in Russia around the role of the Russian Central Bank.

Nogueira summarized his own Johannesburg proposal as follows: “Since the U.S. dollar (and the euro) can no longer be fully trusted, it is natural that de-dollarization should proceed, probably in a gradual manner. A BRICS currency could be an important step in that direction.” He said that this new currency could be a unit of account used by the NBD and the CRA, made up of the five BRICS currencies, dubbed the R5. “I presented a paper at a recent seminar in Johannesburg, ahead of the BRICS leaders’ 2023 summit, in which I sketched out a possible road map....

“It is enough to quickly recapitulate a few basic points: 1) The R5 or R5+ need not be a physical currency, it can be digital. 2) The new currency would not replace the currencies of the BRICS countries but would circulate alongside them, being used mainly for international transactions. 3) The BRICS central banks would continue to exist as now, fulfilling all the functions of a monetary authority. 4) An Issuing Bank would need to be created, in charge of issuing the new currency and putting it into circulation.”

He then turned to the key question of credit creation:

“Could the currency be backed in some way? Not by gold or other commodities, given the instability of their prices. One approach would be to back the R5+ by bonds guaranteed by the BRICS countries. The Issuing Bank would also be in charge of issuing the guaranteed R5+ bonds, at different maturities and interest rates. The currency could be freely convertible into these bonds. This arrangement would be a financial expression of the guarantee that the BRICS would give to the new currency.... Loans by the NDB and currency swaps by the CRA could be denominated and paid in R5+. The NDB would also issue bonds in R5+.”

This approach of giving backing to a new currency by using it to issue credit for productive investments, is the only viable alternative to the London-controlled speculative dollar.