Evolution of South-South Trade: Reshaping Global Supply Chains and Independent Liquidity Circuits in 2026

By 2026, the global economy has entered a new phase: instead of a single world market, three economic blocs are forming. This is described by economists Esther Boros and Tamás Ginter in their work "A Three-Bloc Structure of the World Economy" (2026), published in the Financial and Economic Review.

This process began to accelerate in 2025, when the United States imposed sweeping tariffs on goods from many countries. Trade and financial barriers have grown even between former allies. As a result, companies are restructuring supply chains based not on economic efficiency but on political allegiance — a phenomenon termed "friend-shoring."

According to expert estimates, such fragmentation costs the global economy $213–307 billion annually and adds 0.2–0.3 percentage points to global inflation. These figures are based on a World Economic Forum (WEF) report.

Reconfiguration of Logistics and Commodity Flows

This macroeconomic shift is clearly visible in two key corridors.

1. Asia–Latin America Corridor. Traditionally, this route was monopolized by agricultural product shipments to Asia. In 2026, the structure has changed: the Asian technology sector has created sustained demand for critical minerals — lithium, copper, cobalt — essential for battery and electronics production.

McKinsey forecasts point to a shortage of these metals over the next decade, intensifying competition for access to Latin American resources. Return flows now include finished EV infrastructure: Chinese electric vehicles and solar energy components are actively heading to Brazil and Chile.

2. Asia–Africa Corridor. The transformation is following a path of creating new production capacities. Large-scale investments in port infrastructure and special economic zones are making Africa a new manufacturing hub.

3. Major infrastructure projects are reshaping commodity flows:

• Lobito Corridor (railway network from Angola to the DRC and Zambia);

• Trans-Guinean Railway.

Thanks to these, container lines now go direct, bypassing European hub ports. Africa already supplies nearly one-third of global shipments of key battery minerals — lithium, cobalt, and platinum group metals.

Rising demand for these metals and other critical raw materials is launching a new commodity supercycle. It creates enormous opportunities for exporters but simultaneously requires them to be flexible in managing currency risks.

4. Capricorn Bi-Oceanic Corridor (Brazil – Paraguay – Argentina – Chile) reduces transit by 15 days and lowers freight costs by 40%.

These corridors are used not only for exchanging raw materials for finished goods, as in the old North–South model. In 2026, Global South countries are building self-sufficient ecosystems: they are not merely buying technology but creating their own value-added chains.

For example, 42 developing countries (Argentina, Brazil, India, Indonesia, Korea, Malaysia, Mexico, Nigeria, and others) signed the GSTP agreement. Members produce and sell a wide range of goods:

Within GSTP, nearly a quarter of member-country exports are traded. Tariffs have been reduced on 651 items. A second example is the agreement between Singapore and Mercosur, the South American trade and economic bloc comprising Argentina, Brazil, Paraguay, and Uruguay.

Singapore lowers tariffs on 95.8% of goods from Mercosur, including agribusiness products (soybeans, meat, grains). Mercosur allows 90.8% of imports from Singapore (machinery, optics, electronics). This arrangement opens access to a market of 270 million people in South America.

As a result of a similar agreement between the UAE and Mauritius, the latter opens 99% of goods from the Emirates, while the UAE opens 97% of goods from Mauritius (pharmaceuticals, ICT services). The agreement has been in effect since April 2025. It transforms the island nation into a strategic hub for investments into Africa.

Financial Infrastructure: Clearing Outside the Dollar System

Despite the trend toward de-dollarization, dollar-denominated settlements still dominate the global financial system in 2026, but they are slow, expensive, and vulnerable. Transfer fees in emerging markets can reach 8%, and payments get stuck in banks for weeks.

Dollar dependence also creates political risks: the United States can at any time restrict access to settlement systems for countries it deems unfriendly. This is a serious danger for countries not belonging to the "American bloc."

As a result, Global South countries are actively building their own payment systems, switching to national currencies and digital assets (CBDCs, stablecoins) to insulate trade from external shocks and reduce costs.

The flagship example of alternative infrastructure is the mBridge (Multi-CBDC Bridge) project from the BIS. It is a distributed ledger technology (DLT) platform where the central banks of China, Hong Kong, Thailand, the UAE, and Saudi Arabia allow commercial banks to conduct cross-border payments directly, without a chain of intermediaries and SWIFT.

The platform uses atomic settlements: money and delivery data are synchronized in a single transaction; the payment occurs instantly after delivery confirmation and cannot be reversed. This eliminates settlement risk and automatically reduces dependence on the dollar and SWIFT.

Beyond mBridge, Global South countries actively use bilateral swap lines — agreements between central banks to exchange currencies at fixed rates. This allows commercial banks to access needed currency directly, without buying dollars, and to settle in local currencies. The share of such settlements within BRICS has already exceeded 65%.

At the same time, wholesale central bank digital currencies (wholesale CBDC) — digital equivalents of national currencies for interbank settlements — are developing. They operate on DLT, making transfers instantaneous (T+0) and eliminating settlement risk.

Together, these instruments create a solid foundation for an independent financial system where South-South trade is not tied to the dollar, the euro, or SWIFT.

Bridging the Trade Finance Gap via RWA and DLT

Thus, we see that trade among developing countries is growing rapidly, yet funding for it is insufficient. According to the UN Trade and Development (UNCTAD) report, the Global South accounts for 42% of global GDP and 44% of global exports, but its share in international investment is significantly lower.

The situation is complicated by the fact that banks in developed countries impose excessively strict compliance checks (KYC/AML). As a result, small and medium-sized enterprises in Africa and Latin America often cannot obtain financing for export contracts.

Smart contracts and tokenization of real-world assets (RWA) offer a way to address this problem. Institutional funds from Asia and the Middle East can directly finance export contracts of suppliers from Africa and Latin America, bypassing Western banks.

An example is the AWARP project, which is building digital financial infrastructure for emerging markets, primarily for Southeast Asian countries (ASEAN bloc). In May 2026, it attracted strategic investment from Animoca Brands, a global leader in digital assets and blockchain technology.

Project participants plan to issue tokens backed by real assets: minerals, renewable energy, and data centers. This will allow investors from around the world to invest in these projects, while local companies gain access to financing.

Settlements are based on stablecoins — digital coins pegged to the dollar. They enable instant payments, without banks and without currency exchange losses. Thus, local producers connect to global liquidity and can sell their goods and services worldwide without excess intermediaries.

Executive Summary for CFOs of Multinational Corporations

The growing volume of trade among developing countries (South–South Trade) compels finance chiefs to reassess corporate cash management. If all revenue continues to be held in dollars or euros, the corporate treasury will lose money on intermediary bank fees. In 2026, using new digital settlement systems (CBDC) and asset tokenization platforms (RWA) becomes a prerequisite for preserving margins when operating in emerging markets.

Companies that are early adopters of these tools will gain a competitive advantage through lower transaction costs, faster settlement speeds, and access to new markets.

FAQ: Frequently Asked Questions

How can corporate treasuries manage local currency volatility risks in direct settlements with Asian counterparties? Regional hedging instruments and digital derivatives are used. The mBridge project allows settlements in local currencies, fixing the exchange rate at the time of the transaction via the atomic settlement mechanism. This reduces the currency risk inherent in direct settlements without using the dollar as an intermediary currency.

In which jurisdiction are commercial disputes under smart contracts resolved for transactions between Africa and Asia, if the contract does not rely on English law? Smart contracts typically include an arbitration clause selecting a neutral jurisdiction — most often Singapore, the UAE, or Switzerland. In 2026, developing countries are actively harmonizing rules of origin and trade standards through agreements like GSTP and bilateral arrangements, simplifying dispute resolution.

Do international export credit agencies (ECAs) cover political risks for settlements via DLT platforms in national currencies? Yes, but coverage is limited and requires negotiation. ECAs of BRICS countries and regional development banks (e.g., Asian Development Bank) are actively adapting their policies for transactions using DLT and local currencies. Coverage typically depends on the credit rating of the importing country and the structure of the specific transaction, including the availability of sovereign guarantees.