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New bank underscores BRICS unity
The BRICS New Development Bank was established Tuesday with an initial capital of $50 billion shared equally by the five BRICS countries. The Contingent Reserve Arrangement was also launched with an initial fund of $100 billion. The development bank's headquarters will be in Shanghai. Its first president will be from India, the first chair of the board of directors from Brazil and the first chair of the board of governors from Russia. The bank will have an African regional branch in South Africa.
The idea of a BRICS bank was first mooted by India. The five countries reached a consensus at last year's BRICS summit and the bank has been launched this year. The fast pace and its implications have created waves in the West. This landmark event shows that BRICS countries have turned from a forum to an entity and may signal a new beginning for global strategic trends.
The five emerging powers from four continents have formed a financial group. Prior to that, the world's financial power was held firmly by Americans and Europeans.
Without exception, Western opinions have all been centered on the deep-rooted discrepancies among the five BRICS nations. They didn't expect that the wishes and ability of the five countries to overcome these discrepancies were so strong.
Has the world's financial pattern changed? We cannot say this yet, but the old pattern in which the World Bank and the International Monetary Fund dominated the field will face competition from now on.
The BRICS bank not only forms a new financing channel, but also will display the democracy and equality that the old financial pattern lacks most.
Western opinions have tried to drive a wedge among BRICS countries and have speculated about China's hegemonic ambition to dominate the institution. The successful launch of the bank has dealt a heavy blow to them.
Western elites have expressed opinions on emerging countries with a biased mentality, which makes their views detached from reality.
That Shanghai is chosen to site the bank headquarters is good news. Shanghai is becoming a new geographic and financial center in the 21st century. It unites the development momentum of the whole of China and is a major international metropolis in the Western Pacific. It is bound to be an outstanding host city.
On the other hand, the opening of the BRICS bank will provide a new driving force for Shanghai.
China's reform and opening-up in the past 30 years have created huge potentials for this city, while the stage where it can display its strength is relatively small. The BRICS bank is a timely opportunity which will broaden the scope of Shanghai and boost its influence.
China is the most outstanding country among all the emerging powers. The launch of the BRICS bank with Shanghai as its headquarters is a testament to China's national strength, diplomatic capabilities and strategic position. The confidence of all the emerging countries will be boosted. The five nations used to be earthen BRICS, and with the development bank, they will truly become gold BRICS.
Source:Global Times Published: 2014-7-17
BRICS Agree on $50 Billion Bank With Something for Everyone;
The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, according to a statement issued at a summit in Fortaleza, Brazil.
Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund and the World Bank, where BRICS countries have been seeking more say. The measures coincide with a slowing of economic growth in the five countries to about 5.4 percent this year from 10.7 percent in 2007, according to economists surveyed by Bloomberg.
“The BRICS are gaining political weight and demonstrating their role in the international arena,” Brazilian President Dilma Rousseff said after a signing ceremony.
Until the eve of the summit, India and South Africa had vied with China to host the headquarters of the bank, dubbed the New Development Bank. The administration of Indian Prime Minister Narendra Modi gave in after it was reminded that his country’s previous administration had agreed to Shanghai as the bank’s headquarter, according to an Indian official, who requested not to be named because the talks were not public.
Shared Out
Russia’s Finance Minister Anton Siluanov told reporters that the BRICS decided in favor of Shanghai because the city offers better infrastructure, opportunities to capture private funding, and is home to more investors than the competitors.Each member country got something out of the deal. The first chairperson of the Board of Governors will be from Russia, while the first chairperson of the Board of Directors will be Brazilian. South Africa will establish an African regional center for the bank, which may not get off the ground for another two years, according to Carlos Cozendey, secretary for international affairs at Brazil’s Finance Ministry.
Unlike the IMF and World Bank, which are managed by Europeans and Americans, the BRICS bank “is quite democratic,” Brazilian Finance Minister Guido Mantega told reporters.
Each member country has the right to withdraw different amounts from the joint currency reserves, according to a statement from Brazil’s central bank. China can withdraw half the amount it earmarks or $20.5 billion. Brazil, Russia, and India may withdraw the same amount they commit or $18 billion, while South Africa can tap $10 billion, twice its contribution.
“It’s a type of insurance policy, speculators looking for weaker countries without backup, will run because those countries will have sufficient solidity to face a currency problem,” said Mantega.
Aiding Development
The BRICS have evolved from the original term coined in 2001 by then Goldman Sachs Group Inc. economist Jim O’Neill to describe the growing weight of the largest emerging markets in the global economy. In 2011, South Africa joined to give the BRICS a broader geographic representation.Even with slowing economic growth in BRICS countries, there are still plenty of opportunities for business, and the newly-created development bank will help those opportunities become reality, said Jorge Gerdau Johannpeter, chairman of Brazilian steelmaker Gerdau SA.
“The bigger the financing possibilities, the bigger the chances of implementing projects,” Gerdau told reporters at the summit.
The biggest winner among the BRICS and its newly created bank may be South Africa, as it stands to gain financial expertise, investment and trade, said Colin Coleman, the Johannesburg-based head of Goldman Sachs Group Inc. in sub-Saharan Africa, who attended the BRICS Business Council meeting.
Greatest Benefit
“Arguably we have the greatest amount to benefit because we’re partnering diplomatically and otherwise with some of the world’s most important emerging-market economies,” Coleman said in a phone interview.While BRICS trade ministers in a joint communique yesterday said that member countries stood by the World Trade Organization’s Bali agreement, Brazil’s Trade Minister Mauro Borges said he understood India had certain concerns about its implementation and that the BRICS countries didn’t intend to forge a common stance on the issue.
BRICS share of world exports rose to 16 percent in 2011, from 8 percent in 2001.
Russia also proposed at the summit in the northeastern coastal city of Fortaleza the creation of an Infrastructure Fund during the summit, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, told reporters today. The fund could start up as early as next year, he said
.- Bloomberg
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