Brazilian President Luiz Inácio Lula da Silva announced, on August 12, 2025, in São Paulo, an ambitious proposal to create a common currency for the BRICS bloc, comprising Brazil, Russia, India, China, South Africa, and new members such as Egypt, Iran, United Arab Emirates, Saudi Arabia, and Ethiopia. The initiative, unveiled during an interview, aims to reduce reliance on the U.S. dollar in trade among member countries, especially after the dollar hit R$5.3870, its lowest value since June 2024. The proposal comes amid trade tensions with the United States, fueled by threats of 10% tariffs on BRICS products from U.S. President Donald Trump. Lula highlighted the need to strengthen the bloc’s economic integration, citing a 2004 agreement with Argentina that allowed transactions in reais and pesos as a viable example. Brazil, which assumed the BRICS presidency in 2025, plans to lead discussions to make the currency feasible, despite technical and geopolitical challenges.
Lula’s proposal is not only economic but also geopolitical, aiming for a more balanced global financial system. The idea of a BRICS currency gained prominence at the July 2025 Rio de Janeiro summit, reflecting the desire to reduce U.S. influence in international trade.
- Main goal: Facilitate BRICS internal transactions without dollar conversion.
- Economic context: The real’s 3.7% appreciation against the dollar strengthens the proposal.
- Global reaction: Leaders like Xi Jinping and Narendra Modi support it but call for technical studies.
- Challenges: Financial integration and internal rivalries hinder implementation.
Progress under Brazil’s leadership
Brazil’s 2025 BRICS presidency places it at the forefront of negotiations for a common currency. During the July 2025 Rio summit, Lula emphasized that the currency is not meant to replace the dollar globally but to create an alternative system for intra-bloc trade. The proposal gained momentum with the dollar’s drop to R$5.3870, reflecting the real’s strength and the push for greater economic autonomy. The BRICS Development Bank, led by former President Dilma Rousseff, will be key in funding studies and projects to support the initiative.
Brazil plans to present a detailed plan at the next summit, focusing on a compensation system based on local currencies or a unit backed by gold and national currencies. However, implementation requires complex agreements, such as a unified payment mechanism.
- Initial timeline: Technical discussions in 2025, with a prototype planned for 2026.
- Internal support: Brazil seeks consensus with new members like Saudi Arabia and Egypt.
- External obstacles: U.S. sanctions and tensions between China and India.
Tensions with the U.S. and Trump’s reaction
Threats from U.S. President Donald Trump have intensified the BRICS currency debate. In posts on Truth Social, Trump announced tariffs of up to 10% on BRICS products, calling the bloc “anti-American.” He justified the measures as a defense of the dollar’s hegemony, which accounts for about 90% of global transactions. Lula dismissed direct negotiations with Trump but vowed to retaliate through the World Trade Organization (WTO) to protect Brazilian interests.
Trump’s stance reflects concerns about losing U.S. economic influence. Economists note that the dollar’s devaluation, coupled with sanctions on countries like Russia and Iran, has spurred the bloc to seek alternatives. China, for instance, already conducts 20% of its oil trade in yuan, while India pursues deals in rupees.
History of BRICS dedollarization
The discussion on reducing dollar dependency is not new. Since 2022, U.S. sanctions on Russia have fueled BRICS debates. In 2023, during a visit to China, Lula questioned: “Who decided the dollar would be the trade currency after the end of the gold standard?” The 2024 Kazan summit in Russia introduced the concept of a currency called “Unit,” backed by gold and national currencies, as a symbolic step.
Brazil has advocated for bilateral agreements as an alternative. In 2023, it signed a deal with China to use reais and yuan in trade, cutting conversion costs. The 2004 Argentina agreement, allowing local currency transactions, is often cited as proof of feasibility. However, a common currency requires greater financial integration, a challenge given the bloc’s economic disparities.
- First steps: Bilateral agreements already reduce dollar use by 20% in BRICS trade.
- Euro inspiration: The European single currency is a reference but requires years of planning.
- Internal rivalries: Conflicts between China and India hinder consensus.
- Gold’s role: A gold-backed currency could boost confidence in the new unit.
Technical barriers to a BRICS currency
Implementing a common currency faces significant hurdles. Economists highlight the need for a unified banking system and clear rules for issuance and governance. BRICS economies vary widely: China is the world’s second-largest economy, while Ethiopia faces economic crises. This disparity complicates creating a stable currency. Geopolitical rivalries, such as tensions between China and India, further challenge multilateral agreements.
The BRICS Development Bank, under Dilma Rousseff’s leadership, already funds projects in local currencies like reais and yuan, but its capacity is limited compared to institutions like the World Bank. A currency backed by gold or a basket of national currencies requires consensus on who controls issuance, a sensitive issue for countries with strict monetary policies.
Alternatives to the dollar in global trade
Beyond a common currency, BRICS explores other ways to reduce dollar reliance. Bilateral agreements, like the 2023 Brazil-China deal, enable trade in local currencies, lowering conversion costs. China seeks to expand yuan use in oil trade with Saudi Arabia, while India negotiates rupee-based deals with the UAE. These efforts reflect a global trend: in 2023, 20% of oil trade was conducted in alternative currencies.
The real’s appreciation and the dollar’s fall to R$5.3870 bolster Brazil’s position in the debate. However, the dollar still dominates 90% of global transactions and 59% of foreign exchange reserves, according to the Bank for International Settlements. Fragmentation of currency reserves, driven by U.S. policies, may accelerate alternatives, but the transition will be gradual.
- Bilateral agreements: Brazil and China use reais and yuan in 15% of their trade.
- Oil trade: China and Saudi Arabia negotiate in yuan, challenging the dollar.
- Dollar dominance: The U.S. currency remains central to global transactions.
- External risks: U.S. sanctions may limit dedollarization progress.
Brazil’s role in the BRICS agenda
With the 2025 BRICS presidency, Brazil aims to solidify its role as a mediator. Lula stressed that the BRICS currency is a step toward a “multipolar world” with fewer economic asymmetries. The country plans to strengthen the BRICS Development Bank, which funds infrastructure and sustainability projects. The 2025 summit will also address issues like hunger and climate change, reinforcing the bloc’s relevance.
New members, such as Saudi Arabia and the UAE, could expand BRICS’ influence, which accounts for 39% of the global economy and 48.5% of the world’s population. However, Brazil’s reliance on dollar reserves (80% of its international reserves) limits its ability to lead a radical shift. Lula remains optimistic, stating: “If it fails, someone will have to convince me I’m wrong.”
