BRICS leaders join hands for ‘mini-IMF’

July 16, 2014 - 6:25:34 am
FROM LEFT: Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma during the opening event of the 6th Summit of the BRICS in Fortaleza, Brazil, yesterday.

FORTALEZA: Leaders of the BRICS group of emerging powers yesterday created a Shanghai-based development bank and a reserve fund seen as counterweights to Western-led financial institutions.

The leaders of Brazil, Russia, India, China and South Africa  (BRICS) agreed to launch the institutions to finance infrastructure projects and head off future economic crises. “These initiatives show that, despite our diversity, our countries are committed to a solid and productive association,” Brazilian President Dilma Rousseff said at a summit in the northeastern seaside city of Fortaleza.

Russian President Vladimir Putin hailed the agreements as “a very powerful way to prevent new economic difficulties.”

The five emerging nations first unveiled their plans last year. The New Development Bank aims to rival the Washington-based World Bank while the reserve is seen as a “mini-IMF.”

BRICS leaders have pressed for reform of the International Monetary Fund to give developing countries more voting rights. “The IMF urgently needs to review its distribution of voting power in order to reflect the unquestionable weight of emerging countries,” Rousseff said.

The development bank will have initial capital of $50bn that could rise to $100bn, funded equally by each nation. To ease worries of any nation getting more power than the other, BRICS leaders agreed to put the bank’s headquarters in Shanghai. The first president will be Indian while the first board chair will hail from Brazil. An Africa Regional Centre will be based in South Africa.

The bank will help emerging and developing nations mobilise resources for infrastructure and sustainable development projects, the summit declaration said.

The Contingent Reserve Arrangement will have $100bn at its disposal to head off potential economic volatility linked to the United States exiting its stimulus policy. China is expected to make the biggest contribution, $41bn, followed by $18bn each from Brazil, India and Russia and $5bn from South Africa.

The summit comes as the economies of some BRICS countries, which together represent 40 percent of the world population and a fifth of the global economy, are cooling down, with Russia and Brazil expecting just 1 percent growth this year.

Experts say the new bank and fund will give the group the backbone of a formal organisation.

The talks in Fortaleza will open a series of marathon summits and bilateral meetings in Brazil.

Chinese President Xi Jinping met ahead of the summit with India’s new Hindu nationalist Prime Minister Narendra Modi, who described their first face-to-face talk as a “very fruitful meeting.” 

For Putin, who visited Argentina and Cuba before coming to Brazil, the trip gives him a chance to hammer home his calls for a “multipolar” world amid tensions with the West over the Ukraine crisis.

The meetings give Putin his first international summit since being kicked out of the G8 group of industrialised nations over the Ukraine crisis.

The United States is threatening to impose new economic sanctions on Russia over accusations that it is backing pro-Moscow separatist rebels in eastern Ukraine.

The BRICS summit declaration voiced “deep concern” over the situation in Ukraine and called for “comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved, with a view to finding a peaceful political solution.”

After Wednesday’s BRICS-South America summit, Xi will launch the China-Latin America forum on Thursday, highlighting Beijing’s growing interests in a region perceived as the backyard of the United States. AFP

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