The BRICS nations — the so-called emerging market economies of Brazil, China, India, Russia and South Africa — are holding a two-day summit in Brazil, starting in the northeastern city of Fortaleza, and on Wednesday in the central capital Brasilia.
The bank’s headquarters location, however, has been the subject of some squabbling ahead of signing the deal.
The ‘New Development Bank’ is intended to compete with the World Bank to finance the BRICS’ enormous infrastructure projects.
Total initial capital is to be 50 billion dollars (they favour dollars; it’s around 37 billion euros). Each country contributes an equal cut.
As a cushion for possible monetary crises, each member will support a reserve fund totalling $100bn. China will throw in 41, Russia, India and Brazil 18 each, and South Africa five billion.
China wants to house this in Shanghai. President Xi Jinping has taken some pains to try to reassure his partners that the giant Communist People’s Republic will not bend the bank to serve its interests to the others’ detriment.
The Asian colossus grows steadily in power, as Russia and Brazil’s economies, notably, are losing some of their vigour, posting one percent growth this year.
Still, together the BRICS account for 40 percent of the world’s population, and a significant ballast of the planet’s GDP, according to Goldman Sachs analyst Cui Li, Managing Director of China Macro Research: “As the biggest emerging markets, they will still be quite important. The last few years, the BRICS still contributed close to half of global growth. So they’re very important entities.”
The BRICS summit also provides a prestige podium for Russian President Vladimir Putin, who has been isolated by the leading industrialised countries because he annexed Ukraine’s Crimea region.
Yet the stark economic and political differences between the BRICS countries has made it difficult for the group to turn rhetoric to concrete action in coordinating policies.
The summit is an annual diplomatic meeting.