After successfully hosting the World Cup, Brazil is busy hosting another major international event – a two-day BRICS summit starting today. The group, which is comprised of the emerging powers -- Brazil, Russia, India, China and South Africa – is gaining in importance on the global stage and the latest summit is especially important as it is expected to move forward on a number of crucial issues on the agenda since its formation. India’s newly elected Prime Minister Narendra Modi is in Brazil to attend the summit, and this is his second foreign trip after assuming power – the first being to Bhutan, India’s tiny neighbour.
High on the agenda of the summit are final discussions on the creation of two financial institutions that could reshape the global economic landscape – the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA). The NDB is meant to function along the lines of the World Bank by financing infrastructure and sustainable development projects through a $100bn fund. The new bank, which will probably have its headquarters in Shanghai, is expected to open in 2016 with an initial capital of $50bn, contributed in equal parts by each country. Other states, banks and multilateral institutions wishing to do business with the bank will have to be approved by the BRICS, which will retain a controlling interest. The CRA would strive to protect member states from financial shocks and reduce their dependence on western institutions such as the International Monetary Fund (IMF) and the World Bank.
Much has been written about the possibilities of BRICS. There were huge expectations that it would serve as a counterbalance to other Western-dominated world bodies because BRICS member states are huge economies and have the resources to make a difference. They comprise forty-six percent of the world’s population and account for more than eighteen percent of the global gross domestic product. The current world financial bodies like the IMF and World Bank are loathed for their unfair and stringent policies like austerity measures, and crisis-stricken economies which seek their help accuse them of complicating and worsening their crises through the bitter medicine it prescribes.
At the same time, there are warnings of caution. Its member states aren’t a unified bloc in the real sense. For example, China and India are not friendly states and have ongoing border disputes and disparate interests which are bedeviling their relations. The true success of the body would depend on their ability to overcome these differences and pursue a common agenda to create an alternative system that is more equitable and helpful for other emerging and poor countries of the world.
The BRICS has the ability to make a positive impact on the current global financial structure.