BRASILIA, Brazil
The leaders of the BRICS countries have signed a “Fortaleza Declaration”, creating a new $100 billion BRICS development bank and a currency reserve fund which will act as counterweights to western-led institutions the International Monetary Fund and World Bank.
Brazilian President Dilma Rousseff said in a speech following the agreement on Tuesday that the bank would be based in Shanghai, and have an Indian CEO and a regional office based in South Africa.
Rousseff said: "I believe the BRICs have made great strides towards creating institutions that will benefit emerging and developing countries.
“The bank will contribute resources to guarantee investments in infrastructure.”
Initial capital for the bank will be $50 billion, paid in equal share of $10 billion by each BRICS member – Brazil, Russia, India, China and South Africa.
Rousseff added that the currency reserve would help safeguard emerging economies from volatility caused by expansionary monetary policy of the United States, which has in the past depreciated the currency of developed countries to the detriment of emerging economies.
- 'Falling short'
The two biggest existing multilateral economic entities, the IMF and the World Bank, are headquartered in Washington DC, and the creation of a BRICS bank is likely to be interpreted as a challenge to US-led Western economic influence over emerging markets.
Developing countries have long complained the IMF and the World Bank, founded after the Second World War, have been reluctant to consider reform.
According to Marcos Troyjo, co-director of Columbia University’s BRIClab, the established institutions fall short of providing either the attention or the resources to fulfill the needs of the developing world.
Troyjo told Anadolu Agency: “Not only are funds and personnel insufficient; the governance rules that still guide these long-standing agencies reflect a global power structure reminiscent of the second half of the 1940s.
“They have certainly not been brought up to date to tackle the 21st-century development challenges of a world where dynamic growth for the global economy comes mostly from emerging markets.”
The creation of the bank may go some way to addressing criticisms leveled at the BRICS grouping.
- 'Shared goals'
Since the group began meeting formally in 2006, many have argued that the countries have little in common.
João Castro Neves, senior Latin America analyst at the Eurasia Group, says this is in some respects true, but the countries do have shared goals regarding economic structure.
Castro Neves told AA: “The great challenge for this group is to show the world a reason to be together, given that the common dominator amongst the five members is thin, in terms of specific interests.
“But the few areas where there is overlap among the five are on economic structure, institutional financial structure.”
Castro Neves said that, as well as providing practically useful resources for investment and development, the new BRICS bank represents a way of showing the IMF and World Bank that, if they are not willing to reform, the BRICS countries are serious about creating their own financial entities.
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