Written by Daniel Lara-Agudelo, GEI Associate
From July 8-9, the heads of government of Brazil, Russia, India, China, and South Africa met in the city of Ufa, Republic of Bashkortostan, Russis, for the 7th BRICS Summit. At the event they discussed some of the economic and political issues that have been affecting their respective countries in recent years and how they could work together towards solving them. The group’s ever-increasing influence in international affairs means that whatever it was they were talking about, the world was listening.
As of 2015, the BRICS nations contained an estimated 2,972,915,000 people or 40% of the entire world population. Furthermore, that same year they accounted for $16.924 trillion in GDP (nominal), a figure that is nearly equal to that of the United States and one that has continued to grow steadily for quite some time. Some researchers even predict that their rapid economic growth will allow the BRICS to surpass the G7 by the middle of the century. All of this suggests that the decisions made at the Summit have an impact that transcend the countries that made them.
For the most part, much was accomplished over the two days during which the five nations met – but by far the most important was adding the final touches to the BRICS’ New Development Bank or NDB. During the Summit it was decided that the bank will have $100 billion and a reserve currency pool worth another $100 billion, and that its headquarters would be in Shanghai with an African regional center being set up in Johannesburg. Its leadership will be appointed using a rotating system; the first president of the bank will be K.V. Kamath, the former chairman of the Indian IT firm Infosys Limited, and the Chairman of the Board of Governors will be Russia’s Minister of Finance, Anton Siluanov. The Chairman of the Board of directors has yet to be determined, however, the BRICS have stated that he, or she, will be from Brazil. These are the main logistical decisions that have been made so far, the BRICS will likely provide updates of the bank’s progress up until it opens for business sometime in the next year.
The idea for this institution first came up in 2013 at the 5th BRICS Summit in Durban, South Africa, and it was consolidated the following year at the 6th BRICS Summit in Fortaleza, Brazil. At the time, the group was frustrated with institutions like the IMF (International Monetary Fund) and the World Bank which, they believed, were too heavily influenced by the West and the dollar. The following statement was made concerning this issue
We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness.
Even though it is unlikely that the NDB will replace its more advanced counterparts, hopefully it will do some good in providing funds so that developing countries can experience more rapid and stable economic growth.
It is important to note that the importance of the bank goes beyond what it does explicitly as a financial institution. The NDB, aside from aiding in the development of other nations, also allows the BRICS to send an important message to the rest of the world about who they are as a group and as individual nations. Overwhelmingly the majority of the criticism that is aimed at the group is focused on the fact that each country is so different from one another. For example, while Brazil, India, and South Africa are democratizing, Russia and China are considered to be authoritative regimes. Such differences, in most situations, make cooperation nearly impossible, but the NDB has shown that this is not the case with the BRICS. Instead, it has shown that they can work as a group to build something, despite not sharing similar goals as players on the world stage. The bank also says that China can be a leader that works for the benefit of others not just itself, and that Russia can overcome the harsh economic sanctions that they are experiencing by aligning with other, non-western entities. Also, that Brazil, India, and South Africa can someday become global economic powers by forming alliances with countries that may seem so unlike themselves.
All in all, even though the New Development Bank will not begin operating until next year it is good that so much work has been put into its establishment so far. This project, and all of those that the BRICS have been working on, proves that cooperation through economics can have a tremendous positive impact on everyone.