Climbing the Value-Added Ladder: BRICS and the Upgrading of Southern Countries in Global Value Chains

Abstract

A key factor that motivates cooperation among states in the Global South, and acts as glue for South-South cooperation, is a shared vision of prosperity. Historically, Southern scholars have studied this prosperity from the perspective of climbing up the value-added ladder, i.e., shifting from agriculture and export of commodities, to industrialization and export of sophisticated goods. I analyze whether deepening engagements with BRICS enable countries in the Global South to climb the ladder and upgrade their position in global value chains. I show that Southern countries’ domestic absorptive capacity moderates the relationship between cooperation and upgrading, and I identify four mechanisms and two critical perspectives that shape this moderation. Using a balanced panel of 92 Southern countries spanning the period 1996 to 2023, I built a fixed-effects model with the export complexity index (proxy for upgrading) as a function of non-primary export volume per GDP (proxy for engagements) and HDI (proxy for domestic absorptive capacity). I found that whether BRICS engagements result in positive impact on upgrading, it is moderated by the host country’s absorptive capacity. At high absorptive capacities, a country may prosper from BRICS engagements more than they do with other blocs, although at low absorptive capacities such engagements correlate with possible ‘poverty trap’-like scenarios. I believe these findings have important ramifications for the trajectory of Southern development, and that Southern policymakers will find these useful to navigate through the current and changing world order.