Move Over, IMF: BRICS Bank Aims to Rewrite the Rules of Development

BY Ana Swanson, Shrey Verma JULY 11, 2014

On July 15, the action in Fortaleza will shift from the football pitch to the political high table. The seaside city that has hosted many of this year’s FIFA World Cup games is scheduled to hold the 2014 BRICS Summit, where leaders from Brazil, Russia, India, China, and South Africa will meet to establish a long-awaited development bank that aims to balance the influence of the IMF and World Bank.

Called “New Development Bank,” the BRICS Bank is expected to foster greater financial and development cooperation between emerging markets. The plans have yet to be finalized, but reports say each of the BRICS countries may contribute $10 billion in initial capital to the entity, which will have a maximum value of $100 billion. The bank will also establish a $100 billion reserve fund, with China contributing $41 billion, Brazil, Russia and India giving $18 billion each, and South Africa contributing $5 billion.

The term “BRIC” was coined in 2001, essentially as a marketing term for Goldman Sachs, and the group has long been derided for its lack of a coherent stance on major economic and political issues. But the establishment of the development bank, a historic challenge to the Western-dominated international system, shows the five emerging economies are taking their partnership seriously. The accomplishment appears that much more significant when viewed against the backdrop of the United States’ continued failure to endorse IMF reforms.

The BRICS – a group that represents more than 40% of the world’s population, about a quarter of global output, and nearly all of the world’s current growth – looks set to regain its geopolitical “mojo.” http://foreignpolicy.com/2014/07/11/move-over-imf-brics-bank-aims-to-rewrite-the-rules-of-development/