But the Contingency Reserve Arrangement (CRA), the BRICS countries’ monetary fund, will also be unbalanced in the composition of its resources, leading to the possible reproduction of these inequalities.
The CRA and a development bank will be formally established at the Sixth BRICS Summit, to be held in
The reserve fund will have
These percentages reflect the size of each country’s economy. However, participation in the
This is the big difference between the NDB and the
This aspect of the NDB is also very different from the CRA, where
Negotiations have been under way to create the development bank and the monetary mechanism since 2012, and now only a legal review is required before they are signed by the five BRICS leaders in
BRIC, an acronym coined in 2001 by U.S. economist Jim O’Neill for the four emerging powers that are changing the shape of the world, began to hold meetings of heads of state and government in 2009, forming “a coalition” that was joined by
“It is not a bloc” that adopts common policies for trade and other sectors, Brazilian diplomats said in response to critical observations about the discrepancies between the countries in different economic or political international forums.
The huge countries, or “whale-economies,” are getting to know each other and have expanded their dialogue. They have “a positive role in democratising international relations,” GraÇa
Cooperation between the five countries is already ongoing in more than 30 areas, and their societies are also interacting through business and academic forums and other means, said
But the cement that binds the BRICS together is their aspiration to wield more power in international economic bodies. “The structure of power and privileges” of the global financial and political system “has remained set in stone” since 1945, and will have to change “to adjust to present reality,” he said.
The blocking of a proposed reform of the
The CRA is being formed in the context of persistent after-effects of the 2008 financial crisis and the “systemic imbalances in the global economy, perpetuated by the monetary policies of advanced economies, such as
With the “monetary safety net,” BRICS will be signalling “lesser levels of dependence on
Moreover, it will not necessarily prevent potential intra-BRICS strife, as
But the BRICS institutions are not seeking to substitute for or confront the IMF or the
The IMF’s resources total
In the Chiang Mai Initiative, a similar mechanism adopted by the
The NDB, already known as the
Its starting capital of
The Indian government, for instance, estimates that
However, new sources of funding are important because Indian infrastructure projects are facing serious liquidity challenges, as they are over-dependent on banking sector finance due to “the non-existence of a robust corporate bond market,” said Sharan in
“South Africa has a lot to gain,” as the NDB will focus on large infrastructure projects, a common problem amongst all the BRICS, and can offer long-term financing which is often difficult to obtain, particularly from the private sector, Wood said.It will also support project preparation, like surveying work, which often needs to be done before financing for the project can be accessed.
The NDB is authorised to double its funds, but its key importance is that co-financing projects acts as a catalyst, by reducing the risk and cost burden for other lenders and so attracting resources from private investors and national and multilateral development banks around the world, according to Wood and the Brazilian diplomats.
With additional reporting from
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