BRICS Bank

13 May

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The five emerging nations of Brazil, Russia, India, China and South Africa (BRICS) recently gathered in Durban, SA to complete the first cycle of Brics summits. The overriding result of these summits which began in 2009 is the objective to set up their own Brics institutions, most notably a development bank. The BRICS development bank would compete with the distinctly western, Bretton Woods ideologies established in the IMF and World Bank. 

Chen Yaun veteran of the China development bank is responsible for organising the BRICS Bank to become more than an ideology. However as of yet there is no clear new initiative and the bank looks set to follow already established dichotomy of economic aid and development. Many argue rather than revolutionising the process the diversity of these nations means they do not have “enough in common and enough shared goals to function effectively as a counterweight to the west” (New York Times, 2013). However these nations do have a united experience of resisting the west, through their common rejection of the neoliberal development model. This is perhaps most noted in China but is also prevalent in the other member states, often enabling their rapid development, rather than inhibiting economic growth.

All these nations have frequently called for reform within the IMF and World Bank due to their development experiences, but their objections remain ignored. Such an alliance would also heighten China’s influence in places outside their current reach, within countries that already have strong ties with other nation members. Although South Africa is a recent addition to the group and doesn’t quite match up to the economic capabilities of China or the others, it does enable greater access to Africa’s valuable and highly sought resources.

 

Such an alliance could create greater influence especially for China within other countries and long standing institutions such as the IMF and World Bank. The current unipolar global organisation around the US appears ever more vulnerable; perhaps a new world order is likely to emerge in the not too distant future. However the BRICS bank alone is unlikely to create sustained changes to the discourse on global development aid.

Sources

http://www.guardian.co.uk/global-development/2013/apr/09/brics-bank-critical-questions-oecd

http://www.forbes.com/sites/laursonpieler/2013/04/22/a-brics-bank-no-thanks-the-imf-and-world-bank-are-bad-enough/

http://www.guardian.co.uk/commentisfree/2013/apr/02/brics-challenge-western-supremacy

http://www.nytimes.com/2013/03/27/world/africa/brics-to-form-development-bank.html?_r=0

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4 Responses to “BRICS Bank”

  1. ja11g12 May 14, 2013 at 10:49 pm #

    This is a great way for both China and the other BRICS countries to begin to increase their influence within the global community and begin to spread their own ideas around the world. Within the BRICS only China, Russia and India hold any real power, and India holds less than Russia and China. This would be a good platform for them to prove that they are capable at being at the fore front of global politics.

  2. aa29g11 May 15, 2013 at 9:57 am #

    With the hope of establishing a new financial system to compete with the IMF and the World Bank, the BRICs countries already have the financial power to do so, but it is whether it will run efficiently. Since the 2009 meeting in Russia there has been talk that the bank will establish a new financial background to implement financial friendly policies. Yet, the lack of information makes it difficult to gauge what the bank will and will not do, and therefore difficult to judge the kind of impact it is likely to have on global development.

    If successful it will, First, it will respond to developing countries needs as opposed to the priorities of the lending institution. Second, it will fill any current gaps in financing, including access to finance for small and medium enterprises. Finally, it will finance infrastructure projects in places normally neglected by the private sector, and infrastructure projects to support an increased standard of living for all.

    The issue will be convincing other countries to leave the already established institutions in order to join the BRICS.

  3. timhaythorne May 15, 2013 at 11:58 am #

    One of the main advantages the BRICS relationship brings to China, and a main disadvantage to the US, is the use of RMB in bilateral and multilateral trade, instead of the dollar. This reduces transaction costs and brings more financial stability to China’s great influence in global trade.

    These advantages have even brought to the fore talk of a currency union, like that of the Eurozone. This could bring each nation huge advantages, as China and India trade their industrial production output for the natural resources of Brazil, Russia and South Africa. However, there is also a huge element of risk involved, as exhibited by the shortcomings of the Euro in the financial crisis.

    For China, this risk is perhaps greater, as for now it is the most stable of the five economies. Alongside this, the political instability across all five nations could potentially cause mass disruption in international relations. Disagreement could cause economic unrest among the five economies, and political union could create greater friction with the West.

    However, in terms of opportunities presented, the doorway in to Africa, for China, is a great one. In the same way that the West has exploited China’s upward surge over the past three decades, China could now exploit Africa’s immanent economic blossom.

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