The BRICS bloc—now expanded to 11 members controlling 40% of global oil reserves and 75% of rare earth materials—is at a pivotal moment. Amid geopolitical realignments and calls for systemic change, its push to reform the IMF and diversify away from the U.S. dollar presents both risks and opportunities for investors in emerging market debt (EMD) and local currency bonds. Here’s why this shift matters and how to position portfolios accordingly.

The IMF Reform Agenda: A Catalyst for Institutional Change

BRICS has long demanded reforms to international financial institutions to increase the voting power of developing nations. As of June 2025, progress remains incremental, but the bloc’s growing clout—now representing 40% of the global population—has amplified its leverage. Key developments include:

Voting Rights: BRICS members continue to advocate for overhauling IMF quota formulas to reflect GDP at purchasing power parity (PPP), which would boost their collective voting share. Contingent Reserve Arrangement (CRA): Brazil’s efforts to operationalize the $100 billion liquidity facility, designed as an alternative to IMF emergency loans, could reduce reliance on Western-backed institutions.

The implications? A more equitable IMF could stabilize emerging economies, reducing the risk of balance-of-payments crises and lowering spreads on sovereign debt.

Currency Diversification: Beyond the Dollar

The bloc’s push to reduce dollar dependency is accelerating. Intra-BRICS trade in local currencies now exceeds $200 billion annually, with China and Russia leading the way in ruble-yuan energy transactions. The New Development Bank (NDB) has approved over $39 billion in infrastructure projects since 2015, often financed in local currencies.

For investors, this means:
– Lower Currency Risk: Local currency bonds in markets like Brazil, India, and South Africa may offer better hedging as central banks prioritize stability.
– Diversification Gains: Exposure to BRICS currencies (BRL, INR, RUB) reduces correlation with the dollar, a critical hedge as the Fed’s rate cycle wanes.

Strategic Investment Opportunities

Local Currency Bonds:
Brazil’s 10-year NTN-B (inflation-linked bonds) yield over 10%, while India’s 10-year G-Sec offers ~6.8%. These instruments benefit from central banks’ tightening cycles and reduced external debt reliance.

Emerging Market Corporate Debt:
Companies in sectors like green energy (e.g., China’s LONGi Solar) and infrastructure (Brazil’s NDB-backed projects) are increasingly issuing in local currencies.

Currency Carry Trades:
The South African rand (ZAR) and Russian ruble (RUB) offer high carry returns (ZAR: ~12% 12-month forward points), though geopolitical risks demand hedging.

Risks to NavigateGeopolitical Friction: Russia’s war in Ukraine and U.S. sanctions remain wildcards. A BRICS unified payments system could face U.S. pushback, as seen in Trump-era tariff threats. Internal Disparities: China’s economic dominance strains consensus. India’s resistance to a common currency and Brazil’s fiscal challenges highlight governance risks. The Bottom Line: A Long-Term Play

BRICS reforms and currency diversification are not panaceas but structural shifts. Investors should:
1. Dial into local currency debt via ETFs like the iShares J.P. Morgan EM Local Currency Bond ETF (LEMB), which tracks a basket including Brazil, India, and South Africa.
2. Target idiosyncratic opportunities: South Africa’s rand-denominated bonds could benefit from its inclusion in the NDB’s green finance initiatives.
3. Stay vigilant: Monitor geopolitical developments and the NDB’s progress in operationalizing the CRA—success here could redefine liquidity support for emerging economies.

Historically, a tactical approach to LEMB has shown promise. Buying five days before Federal Reserve rate cuts and holding for 60 days delivered a 32.1% cumulative return from 2020 to 2025, outperforming a passive buy-and-hold strategy by 5.6 percentage points. While volatility was higher (with a standard deviation of 8.5% versus 6.5% for buy-and-hold), the strategy’s 11.2% average annual return highlights potential for active management during Fed easing cycles.

The BRICS bloc’s evolution from a loose coalition to a systemic challenger is far from smooth. Yet, for investors willing to parse the noise, its reforms and currency initiatives offer a rare chance to profit from the rebalancing of global economic power.

In the decades ahead, the question isn’t whether the dollar’s dominance will erode—it’s how quickly. BRICS is writing the playbook.

—
Andrew Ross Sorkin