By Adina Moloman
Sources: www.businessweek.com, Financial Times
South Africa recently hosted the fifth BRICS Summit at the Durban International Convention Centre. The summit concluded with a new project: to create their own development bank and crisis fund.
BRICS countries (Brazil, Russia, India, China, and South Africa) account for more than 40 percent of the world’s population, $4.4 trillion in currency reserves that represents 40% of the worlds total foreign-exchange reserves and 25 per cent of global GDP.
These growing developing nations are looking to create an institution to manage their own fund as a challenge to European Union and United States that mostly dominate policymaking at the World Bank and the International Monetary Fund. With this plan, their actions are indeed becoming increasingly political.
The project is not a simple one, it might take a while in order to reach an agreement on how such institutions would be financed, governed, what role this institution would play, the role of shareholders, its location etc.
There are many development banks and organizations already in place (the African Development Bank, the Asian Development Bank, and the Inter-American Development Bank), which will probably be easier and faster to offer assistance or loans on a bilateral basis but maybe the project of its own development bank would weaken these other institutions. BRICS countries co-operate on a bilateral basis and are increasing their trade with one another, but they differ economically (China’s economy is still larger than those of the other three combined).
China became, the world’s largest exporter and also become the largest market for the fast-industrializing countries of East Asia.
Basically all have emerged as preferred locations for manufacturing and services outsourcing and all have a rapidly growing consumer base. This is raising the question: should Mexico join? Last year Mexico registered record donations to the International Monetary Fund in order to support its economy with a special emphasis on those manufacturing in Mexico.