BRICS: The World's New Banker?
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BRICS: The World's New Banker?


The BRICS (Brazil, Russia, India, China and South Africa) bloc has begun planning its own development bank and a new bailout fund which would be created by pooling together an estimated $240 billion in foreign exchange reserves, according to diplomatic sources. To get a sense of how significant the proposed fund would be, the fund would be larger than the combined Gross Domestic Product (GDP) of about 150 countries, according to Russia and India Report.

Many believe the BRICS countries are interested in creating these institutions because they are increasingly dissatisfied by Western dominated institutions like the World Bank and the International Monetary Fund (IMF). For example, although the European debt crisis has allowed BRICS countries to push for more influence at the IMF, they currently only hold about a combined 11% of the Fund’s voting shares. By way of comparison, the U.S. holds a 16.75% voting share, allowing it to veto any major decision, which require an 85% supermajority, while the United Kingdom and France both have larger voting shares than any of the BRIC countries singularly.

The new institutions were first discussed in March during the 4th BRICS summit in New Delhi. A subsequent special working group was set up by the BRICS in June to hash out the details. If all goes to plan, the proposed development bank and bailout mechanism will be formally established at the 5th BRICS summit in Durban, South Africa in March 2013.

In setting up the development bank, the BRICS would be mounting a challenge to global institutions like the World Bank and the European Bank for Reconstruction and Development, which attach political conditions to the low-interest loans they disburse to developing countries. In contrast, the BRICS development bank is expected to offer non-conditional loans at a higher interest rate. At the same time, it has been suggested that the BRICS bank could augment the World Bank by funding projects in industries that the World Bank does not, such as biofuels, large dams and nuclear power plants, which don’t meet the World Bank’s environmental standards.

The proposed bailout mechanism, on the other hand, could act as an alternative to global financial institutions like the International Monetary Fund. If so, the bailout fund could also significantly enhance the BRICS countries international stature and influence. At the same time, this bloc is reportedly considering linking the bailout fund partially or in whole to the IMF or another Bretton Woods institution, much as ASEAN+3 decided to do in establishing the Chiang Mai Initiative, a similar pooled fund designed to inject liquidity into markets and minimize the impact of external shocks.  Earlier this year the Chiang Mai Initiative boosted the size of its fund to $240 billion, the same amount as the BRICS are said to be considering.

One potential stumbling block the BRICS face is deciding what currency(s) to use for the mutual fund and development bank. For a while now, China has been pushing for its currency, the yuan, to be added to the Special Drawing Rights (SDR), which is the IMF’s international reserve asset based on a basket of currencies. China is likely to view the BRICS institutions as an avenue in which to boost the international statue of its currency. Accordingly, it is likely to advocate including the yuan as one of the currencies the proposed institutions will use. The other member states, however, are similarly likely to resist Chinese pressure in this area, and instead push for using the U.S. dollar or the IMF’s SDR, which includes the euro, Japanese yen, British pound sterling, and the U.S. dollar.

Tom F
December 15, 2012 at 11:32

So a few poker mates who occasionally prod each other with sharp sticks decided to get into the fishery business. Just wait until one of them wants to play goldfish (forget the debt) whilst another want play shark (arm and a leg). Popcorn time :-)

December 11, 2012 at 18:36

BRICS is not chasing for supremacy. They are fighting to destroy the U.S unipolar world order and create a democratic and rational multipolar world order not dominated by any single power. We all must support the just agenda of BRICS.

December 10, 2012 at 04:54

BRICS=Block of Rogue states In Chase for Supremacy :o

Be Way
November 30, 2012 at 22:06

If America is that great, why is it facing nightmare with daunting insurmountable debts that never seem to go away.   The Americans can spend all their times debating, blaming and cursing others for their own problems but at the end, it's a matter of time the greatest crook in the whole planet will be roasted and be done with it.

November 30, 2012 at 21:06

Can someone please ask Indian PM (Manmohan Singh) to provide money for adequate infrastructure development for his own country first (India) than participating in these high profile international money games. Lets just be realistic.

April 1, 2014 at 10:55

He already has , 1.2 trillion dollars till 2017, about 2 trillion after that, do your research

November 30, 2012 at 18:26

"I love Vladimir Putin he has done great for his country and cant help but feel this is his brain child."
You are correct. Vladimir Putin was the planner of the BRIC political bloc which first met in 2006 in order to initiate plans to transform world order from unipolar to multipolar. 

The Shanghai Cooperation Organisation, despite the name, also began as a russian project, it was modelled after the "Asian security system" of Leonid Brezhnev.
The Soviet Union's Asian Collective Security Proposal

BRIC and SCO are basically old Soviet projects re-launched by Russia after the cold war in order to thwart the U.S, after U.S began their own projects in the 90s(Nato expansion, ABM system etc) to expand and lock in their unipolar hegemonic system.
Gorbachev, Not O'Neill, Deserves BRIC Credit

The U.S unipolar world is due to the collapse of the USSR, Gorbachev was the one who ushered in the unipolar world. Now Russia must atone for Gorbachev's geopolitical mistakes by creating a new multipolar world.

November 29, 2012 at 20:52

I hope those people will be extra careful. Whether its million, or billions, the money rightfully belongs to taxpayers not those bushy-tailed high strutting peacock politicians. Remember, fools go where angels fear to tread.

November 29, 2012 at 16:20

I think this is great and for my country SA to be part of it makes me even happier and proud. I agree that the US has dominated the money market for too long and it is time for countries to start phasing them out. The US is to risky to count on with their currupt banking institutions and political strings used to stage coups and overthrow governments. Further the US is a sinking ship and its sinking fast, the faster this gets finalised and sealed the better. I think we should also stop buying any US oil in dollar and should be buying from Iran for gold or from Russia and pay in ruble, rand or what we have tons off :"GOLD". I love Vladimir Putin he has done great for his country and cant help but feel this is his brain child. I'll hopefully see you in Durbz in March then.. :)

November 29, 2012 at 16:01

A new development bank sounds  like a nice idea on paper, but wait until they try to make it work in reality. Politics will always find its way into money. These four countries will eventually encounter friction among themselves, which will undermine their efforts to fully replace Western institutions.

November 29, 2012 at 14:16

240 billion $ is chump change …. The U.S./Feds can print 1 trillion $ or more in a few days and overwhelm those BRICS puny piggy bank …. good luck.

November 29, 2012 at 04:08

good luck, you can have the reposnibility for keeping the world runnning.  MOst of us Americans are tired of it.  You want to be the big boy, go right ahead.

Matthew Hall
November 29, 2012 at 02:59

We will replace American World domination with our own! If you thought America was awful you ain't seen nothing yet! We will out dominate the world in everyway. We will be more ruthless, unprincipled, and self-serving than the U.S. could have ever even hoped to be!

Matthew Hall
November 28, 2012 at 23:52

240 billion DOLLARS…that says it all.

November 28, 2012 at 21:30

US-lapdog, India, 'in the loop' with uncontrollables (Russia/China) – akin to UK keeping US interests secure in the EU. Same game. One winner.

November 27, 2012 at 13:42

I hope there will be more projects like these in the future designed to destroy the U.S unipolar hegemonic system by the BRICS.
There is also the SCO bank and special account.
SCO to set up a development bank

SCO speeding up establishment of special account

Iran proposes to create joint bank with D8 countries


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