Business Brief: BRICS and the balance of power

Good morning, Chris is off sick so I’ll be steering the ship today – I’m Sierra, usually in the back seat, editing newsletters at The Globe. I am accepting chicken soup recipes on behalf of our usual captain at [email protected].

Moscow has been pushing for another expansion of the fast-growing BRICS group, an intergovernmental organization of emerging-market states, which now represents nearly 35 per cent of the world’s GDP. The Globe’s Geoffrey York takes a closer look at the balance of power as the BRICS summit gets started today. But first: Spending on cybercrime recovery is soaring, and the changing the nature of pharmacies as a business.

In the news

• The cost of cybercrime: Last year, companies spent $1.2-billion recovering from cybersecurity incidents. That’s more than double what was spent two years earlier, according to Statistics Canada data.
• The business of pharmacies: Provinces are giving pharmacists a more prominent place in the health system, and some analysts see the new powers as a revenue driver for major chains.
• The rules of green spending: The Canadian Sustainability Standards Board promised to issue its first climate disclosure rules in December (but regulators and governments will decide if and when they will be compulsory).

Happening today

• Earnings for Canadian companies such as First Quantum Minerals Ltd. and Canadian National Railway Co. will be coming up. Keep your eye on General Motors, which is set to release its Q3 results, as well as Lockheed Martin.

World

Five things to know about Russia’s hosting of the BRICS summit

The acronym comes from its earliest member – Brazil, Russia, India, China and South Africa – but the group is looking to grow. Today, BRICS countries represent about 45 per cent of the world’s population and 35 per cent of its GDP as measured on a purchasing power parity basis, if Saudi Arabia is included.

1. The summit is symbolic of changes in the global balance of power.

From 1994 to 2008, when I headed The Globe’s bureaus in Moscow and Beijing, I heard a constant refrain from Russian and Chinese idealogues about the need for a new “multipolar world.” This meant, essentially, that the West should be counterbalanced by equally important centres of power in Moscow and Beijing. Today this vision of a multipolar world is beginning to take shape, and BRICS is one of its main vehicles. Russia and China, the two biggest voices in BRICS, are taking advantage of a global shift that has seen Western power and prestige badly dented by the Gaza and Lebanon wars and by the West’s inability to resolve a wave of catastrophic conflicts in Sudan, Ukraine, Congo, West Africa and Ethiopia. As the West declines, many middle powers in the Global South are seeing BRICS as a kind of insurance policy to help them cultivate allies on all sides.

2. For its members and its would-be members, BRICS is a way to weaken Western pressure tactics.

The authoritarian leaders who dominate the BRICS club have always resented Western sanctions. Its latest membership expansion has brought in Iran, which is even more virulently opposed to sanctions because of its own status as a target of those measures. Dozens of other countries have applied to join the BRICS organization at the Russian-hosted summit this week, although they might first become “partners” rather than full members. By uniting against sanctions, and by taking specific steps – such as creating their own international payments systems to ensure that their banking transactions are sanctions-proof – the BRICS members can reduce the effectiveness of Western pressure tactics and ensure that the West is unable to isolate any of them. There is also talk that BRICS could create an alternative institution to compete with the Western-dominated International Monetary Fund (IMF), making it easier for indebted countries to obtain credit with fewer strings attached.

3. Despite many shared interests, it would be a mistake to see BRICS as a homogenous organization.

Several of the key BRICS countries – including Brazil, India, South Africa and the United Arab Emirates – are not nearly as hostile to the West as other members like Iran and Russia. While the BRICS members agree on some issues, there is certainly no coherent foreign policy among them. Much of the bloc’s global impact is from its symbolism, rather than from cohesive policy decisions. There are frequent claims by excited commentators that BRICS will create its own currency to replace the U.S. dollar in international transactions, but this is a highly implausible scenario. Instead, the organization will slowly chip away at the dollar’s dominance in global trade by encouraging more transactions to be conducted in the national currencies of its members.

4. Many of the most important BRICS conversations will be private backroom discussions led by Russian officials.

Moscow is expecting at least 24 countries to send their leaders to the BRICS summit in Kazan, Russia. The formal speeches and events, as usual, will be rather turgid. Russia’s real gains will be in face-to-face negotiations in the back corridors, where it can engage in transactional talks and quid-pro-quo dealmaking. Russia has mastered the art of lavish gift-giving and high-level flattery as diplomatic tools. For months, it has been inviting the cabinet ministers of BRICS countries to travel to Moscow for pre-summit talks and private lobbying. This is a sophisticated influence campaign that could net some useful new friends for President Vladimir Putin.

5. A key country to watch at this summit is Turkey.

In recent weeks, Turkey has become the first NATO member to confirm that it is seeking membership in BRICS. It is perhaps the strongest example of the new wave of middle powers that want to maintain connections in all the major camps: the West, the East, and the South. But if Turkey joins BRICS, even as a “partner” country without full membership, the move could pose a distinct risk to NATO, potentially weakening NATO’s southern flank. This, in turn, would be another step in the decline of the Western-dominated “unipolar” world that Moscow and Beijing have long been fighting against.

Q+A

Charted

Why investors become bearish when the weather gets gloomy

There may be research to help explain the mysterious but remarkably consistent “September effect” – markets seem to crash regularly after school starts up. Evidence, culled by numerous finance scholars over the past three decades, suggests that weather influences investing choices. When it’s sunny, we tend to be less risk averse. On days that are short and dreary, we tend to retreat from equities as if to squirrel away capital gains in a safe place.

Researchers don’t agree that these findings can be turned into an investment strategy. But this chart using data from a 2022 paper published in the Journal of Banking and Finance, visualizes two decades of weather and stock market data (1993 to 2012, in 49 countries) to build out a “global weather-based hedge strategy.” It could theoretically generate annualized returns of more than 15 per cent, or about 13 per cent once transaction costs are factored in.

Morning markets

Overseas, the pan-European STOXX 600 was down 0.75 per cent in morning trading. Britain’s FTSE 100 fell 0.68 per cent, Germany’s DAX dropped 0.35 per cent and France’s CAC 40 slid 0.74 per cent.

In Asia, Japan’s Nikkei closed 1.39 per cent lower, while Hong Kong’s Hang Seng inched 0.1 per cent higher.

The Canadian dollar traded at 72.30 U.S. cents.